A.
|
Selected Financial Data.
|
The following table summarizes our consolidated financial data
as of the dates and for the periods indicated. The consolidated financial statement data as of January 31, 2016 and 2015 and for the years ended January 31, 2016, 2015 and 2014 have been derived from our consolidated financial statements,
as presented at the end of this Annual Report, which have been prepared in accordance with IFRS, as issued by the IASB, and as adopted by the European Union and audited in accordance with the standards of the Public Company Accounting Oversight
Board (United States). The consolidated financial statement data as at and for the year ended January 31, 2013 has been derived from our consolidated financial statements, which are not presented herein, which have also been prepared in
accordance with IFRS as issued by the IASB, and as adopted by the European Union and audited in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Our consolidated financial statements are prepared and presented in pounds sterling, our presentation currency. Solely for the convenience of
the reader our consolidated financial statements as of and for the year ended January 31, 2016 have been translated into U.S. dollars at £1.00 to $1.4184 based on the certified foreign exchange rates published by Federal Reserve Bank of
New York on January 29, 2016. Such convenience translation should not be construed as a representation that the pound sterling amounts have been or could be converted into U.S. dollars at this or at any other rate of exchange, or at all.
Our historical results are not necessarily indicative of the results that may be expected in the future. The following selected consolidated
financial data should be read in conjunction with our audited consolidated financial statements included at the end of this Annual Report and the related notes and Item 5, Operating and Financial Review and Prospects below.
Selected Consolidated Income Statement Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended January 31,
|
|
|
|
2016
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
|
(in thousands, except per share data)
|
|
Other operating income
|
|
$
|
2,058
|
|
|
£
|
1,451
|
|
|
£
|
2,148
|
|
|
£
|
1,844
|
|
|
£
|
1,895
|
|
Operating loss
|
|
|
(28,617
|
)
|
|
|
(20,176
|
)
|
|
|
(12,711
|
)
|
|
|
(6,709
|
)
|
|
|
(4,577
|
)
|
Finance income
|
|
|
42
|
|
|
|
30
|
|
|
|
51
|
|
|
|
9
|
|
|
|
11
|
|
Income tax credit
|
|
|
4,337
|
|
|
|
3,058
|
|
|
|
1,297
|
|
|
|
607
|
|
|
|
341
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss for the period
|
|
|
(24,238
|
)
|
|
|
(17,088
|
)
|
|
|
(11,363
|
)
|
|
|
(6,093
|
)
|
|
|
(4,225
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per ordinary share from continuing operations
|
|
$
|
(0.41
|
)
|
|
£
|
(0.29
|
)
|
|
£
|
(0.29
|
)
|
|
£
|
(0.30
|
)
|
|
£
|
(0.27
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding (in thousands)
|
|
|
59,102
|
|
|
|
59,102
|
|
|
|
39,599
|
|
|
|
20,510
|
|
|
|
15,809
|
|
Selected Consolidated Balance Sheet Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of January 31,
|
|
|
|
2016
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
|
(in thousands)
|
|
Cash and cash equivalents
|
|
$
|
23,125
|
|
|
£
|
16,304
|
|
|
£
|
11,265
|
|
|
£
|
2,030
|
|
|
£
|
3,379
|
|
Working capital
(1)
|
|
|
1,909
|
|
|
|
1,346
|
|
|
|
163
|
|
|
|
(804
|
)
|
|
|
(722
|
)
|
Total assets
|
|
|
35,565
|
|
|
|
25,076
|
|
|
|
19,396
|
|
|
|
7,295
|
|
|
|
4,377
|
|
Accumulated losses reserve
|
|
|
(67,151
|
)
|
|
|
(47,343
|
)
|
|
|
(30,255
|
)
|
|
|
(45,183
|
)
|
|
|
(39,090
|
)
|
Total equity
|
|
$
|
29,974
|
|
|
£
|
21,133
|
|
|
£
|
14,966
|
|
|
£
|
4,762
|
|
|
£
|
2,851
|
|
(1)
|
We define working capital as trade and other receivables (including current tax receivables) less current liabilities.
|
Exchange Rate Information
The table
below shows the period end, average, high and low exchange rates of U.S. dollars per pound sterling for the periods shown. The exchange rate on May 6, 2016 was £1.00 to $1.444. The rates set forth below are provided solely for your
convenience and may differ from the actual rates used in the preparation of our consolidated financial statements included in this Annual Report.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period End
(1)
|
|
|
Average
(2)
|
|
|
Low
|
|
|
High
|
|
|
|
($ per pound sterling)
|
|
Fiscal Year Ended January 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
|
1.575
|
|
|
|
1.608
|
|
|
|
1.530
|
|
|
|
1.669
|
|
2013
|
|
|
1.586
|
|
|
|
1.593
|
|
|
|
1.536
|
|
|
|
1.628
|
|
2014
|
|
|
1.645
|
|
|
|
1.572
|
|
|
|
1.484
|
|
|
|
1.661
|
|
2015
|
|
|
1.503
|
|
|
|
1.634
|
|
|
|
1.502
|
|
|
|
1.717
|
|
2016
|
|
|
1.418
|
|
|
|
1.518
|
|
|
|
1.417
|
|
|
|
1.588
|
|
|
|
|
|
|
Month Ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November 2015
|
|
|
1.504
|
|
|
|
1.519
|
|
|
|
1.504
|
|
|
|
1.543
|
|
December 2015
|
|
|
1.475
|
|
|
|
1.498
|
|
|
|
1.475
|
|
|
|
1.521
|
|
January 2016
|
|
|
1.418
|
|
|
|
1.439
|
|
|
|
1.417
|
|
|
|
1.469
|
|
February 2016
|
|
|
1.393
|
|
|
|
1.429
|
|
|
|
1.387
|
|
|
|
1.458
|
|
March 2016
|
|
|
1.438
|
|
|
|
1.425
|
|
|
|
1.395
|
|
|
|
1.451
|
|
April 2016
|
|
|
1.463
|
|
|
|
1.432
|
|
|
|
1.408
|
|
|
|
1.463
|
|
May 2016 (through May 6, 2016)
|
|
|
1.444
|
|
|
|
1.452
|
|
|
|
1.444
|
|
|
|
1.467
|
|
(1)
|
In the event that the period end fell on a day for which data are not available, the exchange rate on the prior most recent business day is given.
|
(2)
|
The average of the noon buying rate for pounds sterling on the last day of each full month during the relevant year or each business day during the relevant month indicated.
|
B.
|
Capitalization and Indebtedness
|
Not applicable.
C.
|
Reasons for the Offer and Use of Proceeds
|
Not applicable.
Our business has significant risks. You should consider carefully the
risks described below, together with the other information contained in this Annual Report, including our financial statements and the related notes. If any of the following risks occur, our business, financial condition, results of operations and
future growth prospects could be materially and adversely affected.
- 2 -
Risks Related to our Financial Position and Need for Additional Capital
We have incurred significant losses since our inception. We expect to incur losses for at least the next several years and may never generate profits
from operations or maintain profitability.
Since inception, we have incurred significant operating losses. Our net loss was
approximately £17.1 million for the year ended January 31, 2016, £11.3 million for the year ended January 31, 2015 and £6.1 million for the year ended January 31, 2014. As of January 31, 2016, we
had an accumulated deficit of £47.3 million. To date, we have financed our operations primarily through issuances of our ordinary shares and American Depositary Shares, or ADSs, and development funding and other assistance from government
entities, philanthropic,
non-government
and not for profit organizations and patient advocacy groups for our product candidates. We have devoted substantially all of our efforts to research and development,
including clinical trials. We have not completed development of any drugs. We expect to continue to incur significant expenses and increasing operating losses for at least the next several years. The net losses we incur may fluctuate significantly
from quarter to quarter and year to year. We anticipate that our expenses will increase substantially in connection with conducting clinical trials for our lead product candidates, ezutromid (formerly SMT C1100) for the treatment of patients with
Duchenne muscular dystrophy, or DMD, and ridinilazole (formerly SMT19969) for the treatment of patients with
Clostridium difficile
infection, or CDI, and seeking marketing approval for ezutromid and ridinilazole in the United States and the
European Union, as well as other geographies. In addition, if we obtain marketing approval of ezutromid or ridinilazole, we expect to incur significant sales, marketing, distribution and outsourced manufacturing expense, as well as ongoing research
and development expenses.
In addition, our expenses will increase if and as we:
|
|
|
continue the research and development of a potential optimized formulation of ezutromid, internally developed second generation utrophin modulators, and future generation modulators that we are developing in
collaboration with the University of Oxford;
|
|
|
|
seek to identify and develop additional product candidates;
|
|
|
|
seek marketing approvals for any product candidates that successfully complete clinical development;
|
|
|
|
ultimately establish a sales, marketing and distribution infrastructure and scale up external manufacturing capabilities to commercialize any product candidates for which we receive marketing approval;
|
|
|
|
acquire or in-license other product candidates and technology;
|
|
|
|
maintain, expand and protect our intellectual property portfolio;
|
|
|
|
hire additional clinical, regulatory and scientific personnel;
|
|
|
|
expand our physical presence in the United States; and
|
|
|
|
add operational, financial and management information systems and personnel, including personnel to support our product development and planned future commercialization efforts.
|
Our ability to generate profits from operations and remain profitable depends on our ability to successfully develop and commercialize drugs
that generate significant revenue. Based on our current plans, we do not expect to generate significant revenue unless and until we obtain marketing approval for, and commercialize, ezutromid for the treatment of DMD or ridinilazole for the
treatment of CDI. This will require us to be successful in a range of challenging activities, including:
|
|
|
successfully initiating and completing clinical trials of ezutromid for the treatment of DMD and ridinilazole for the treatment of CDI;
|
|
|
|
obtaining approval to market ezutromid for the treatment of DMD and ridinilazole for the treatment of CDI;
|
- 3 -
|
|
|
protecting our rights to our intellectual property portfolio related to ezutromid and ridinilazole;
|
|
|
|
contracting for the manufacture of clinical and commercial quantities of ezutromid and ridinilazole;
|
|
|
|
negotiating and securing adequate reimbursement from third-party payors for ezutromid and ridinilazole; and
|
|
|
|
establishing sales, marketing and distribution capabilities to effectively market and sell ezutromid and ridinilazole in the United States and the European Union, as well as other geographies.
|
We may never succeed in these activities and, even if we do, may never generate revenues that are significant enough to generate profits from
operations. Even if we do generate profits from operations, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to generate profits from operations and remain profitable would decrease the value of our
company and could impair our ability to raise capital, expand our business, maintain our research and development efforts, diversify our product offerings or continue our operations. A decline in the value of our company could also cause you to lose
all or part of your investment.
Our limited operating history may make it difficult for you to evaluate the success of our business to date and to
assess our future viability.
Our operations to date have been limited to organizing and staffing our company, developing and
securing our technology, raising capital and undertaking preclinical studies and clinical trials of our product candidates. We have not yet demonstrated our ability to successfully complete development of any product candidates, obtain marketing
approvals, manufacture a commercial scale product, or arrange for a third party to do so on our behalf, or conduct sales and marketing activities necessary for successful product commercialization. Consequently, any predictions you make about our
future success or viability may not be as accurate as they could be if we had a longer operating history.
Assuming we obtain marketing
approval for any of our product candidates, we will need to transition from a company with a research and development focus to a company capable of supporting commercial activities. We may encounter unforeseen expenses, difficulties, complications
and delays and may not be successful in such a transition.
We will need substantial additional funding. If we are unable to raise capital when
needed, we could be forced to delay, reduce or eliminate our product development programs or commercialization efforts.
We expect
our research and development expenses to increase substantially in connection with our ongoing activities, particularly as we initiate and continue clinical trials of ezutromid for the treatment of DMD and ridinilazole for the treatment of CDI,
continue our research activities and initiate preclinical programs for future product candidates. In addition, if we obtain marketing approval for ezutromid, ridinilazole or any of our future product candidates, we expect to incur significant
commercialization expenses related to product sales, marketing, distribution and manufacturing. Furthermore, we expect to continue to incur additional costs associated with operating as a public company in the United States in addition to in the
United Kingdom. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce or eliminate
our research and development programs or any future commercialization efforts. Because of our need to raise additional capital to continue to fund our future operations, the significant losses and negative cash flows from operations that we have
incurred since inception, and our accumulated deficit and limited cash resources, our independent registered public accounting firm has included an explanatory paragraph in its report on our financial statements for the year ended January 31,
2016, about our ability to continue as a going concern.
We believe that our existing cash and cash equivalents will be sufficient to
enable us to fund our operating expenses and capital expenditure requirements for our major programs through the end of our fiscal year ending
- 4 -
January 31, 2017. We estimate these capital resources will be sufficient to enable us to report the first set of
24-week
muscle biopsy data from the
first group of patients from our PhaseOut DMD clinical trial which is expected in January 2017, complete and report top line data from our Phase 1 clinical trial evaluating a potential optimized formulation of ezutromid which we expect to report in
the third quarter of 2016, and complete and report top line data from our exploratory clinical trial of ridinilazole compared to fidaxomicin which we expect to report in the second half of 2016. We do not expect our existing capital resources will
allow us to complete our PhaseOut DMD clinical trial.
We have based the foregoing estimate on assumptions that may prove to be wrong, and
we could use our capital resources sooner than we currently expect. This estimate assumes, among other things, that we do not obtain any additional funding through grants and clinical trial support or through new collaboration arrangements. Our
future capital requirements will depend on many factors, including:
|
|
|
the progress, costs and results of clinical trials of ezutromid for DMD and ridinilazole for CDI;
|
|
|
|
the scope, progress, costs and results of preclinical development, laboratory testing and clinical trials for our potential optimized formulation of ezutromid, internally developed second generation utrophin modulators,
and future generation modulators that we are developing in collaboration with the University of Oxford;
|
|
|
|
the number and development requirements of other future product candidates that we pursue;
|
|
|
|
the costs, timing and outcome of regulatory review of ezutromid, ridinilazole and our other future product candidates;
|
|
|
|
the costs and timing of commercialization activities, including product sales, marketing, distribution and manufacturing, for any of our product candidates that receive marketing approval;
|
|
|
|
subject to receipt of marketing approval, revenue received from commercial sales of ezutromid, ridinilazole or any of our other future product candidates;
|
|
|
|
the costs and timing of preparing, filing and prosecuting patent applications, maintaining and protecting our intellectual property rights and defending against any intellectual property-related claims;
|
|
|
|
our ability to establish and maintain collaborations, licensing or other arrangements and the financial terms of such arrangements;
|
|
|
|
the extent to which we acquire or invest in other businesses, products and technologies;
|
|
|
|
the rate of the expansion of our physical presence in the United States; and
|
|
|
|
the costs of operating as a public company in the United States and in the United Kingdom.
|
Conducting preclinical testing and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete, and we
may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived
from sales of products that we are not planning to have commercially available for several years, if at all. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives. In addition, we may seek
additional capital due to favorable market conditions or strategic considerations, even if we believe that we have sufficient funds for our current or future operating plans. Additional financing may not be available to us on acceptable terms, or at
all.
Our independent registered public accounting firm has included an explanatory paragraph relating to our ability to continue as a going concern
in its report on our audited financial statements included in this Annual Report.
Our report from our independent registered
public accounting firm for the year ended January 31, 2016, by reference to note 1 to our financial statements appearing at the end of this Annual Report, includes an
- 5 -
explanatory paragraph describing our losses and negative cash flows from operations, as well as our accumulated deficit and limited cash resources, and stating that we will require additional
capital to fund our future operations. If we are unable to obtain sufficient funding, our business, prospects, financial condition and results of operations will be materially and adversely affected and we may be unable to continue as a going
concern. If we are unable to continue as a going concern, we may have to liquidate our assets and may receive less than the value at which those assets are carried on our audited financial statements, and it is likely that investors will lose all or
a part of their investment. If we seek additional financing to fund our business activities in the future and there remains substantial doubt about our ability to continue as a going concern, investors or other financing sources may be unwilling to
provide additional funding to us on commercially reasonable terms or at all.
Raising additional capital may cause dilution to our investors,
restrict our operations or require us to relinquish rights to our technologies or product candidates.
Until such time, if ever, as
we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, collaborations, strategic alliances, grants and clinical trial support from government entities, philanthropic,
non-government and not for profit organizations and patient advocacy groups, debt financings, and marketing, distribution or licensing arrangements. We do not have any committed external source of funds other than £0.1 million in funding
that we are eligible to receive under our award funding agreement with the Wellcome Trust and £0.6 million of funding that we are eligible to receive under our agreement with Innovate UK, in each case subject to satisfying specified
criteria. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that
adversely affect your rights as an equity holder. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital
expenditures or declaring dividends or other distributions.
If we raise additional funds through collaborations, strategic alliances or
marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be
favorable to us. If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or
grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Risks Related to the Development
and Commercialization of our Product Candidates
We depend heavily on the success of our lead product candidates, ezutromid, which we are
developing for the treatment of DMD, and ridinilazole, which we are developing for the treatment of CDI. All of our other programs are still in the discovery or candidate optimization stage. If we are unable to commercialize ezutromid and
ridinilazole, or experience significant delays in doing so, our business will be materially harmed.
We have invested a significant
portion of our efforts and financial resources in the development of ezutromid for DMD and ridinilazole for CDI, both of which are still in early clinical development. Our ability to generate product revenues, which may not occur for several years,
if ever, will depend heavily on the successful development and commercialization of ezutromid and ridinilazole. The success of each of these product candidates will depend on a number of factors, including the following:
|
|
|
successful completion of clinical development;
|
|
|
|
receipt of marketing approvals from applicable regulatory authorities;
|
|
|
|
establishing commercial manufacturing arrangements with third-party manufacturers;
|
|
|
|
obtaining and maintaining patent and trade secret protection and regulatory exclusivity;
|
|
|
|
protecting our rights in our intellectual property portfolio;
|
- 6 -
|
|
|
establishing sales, marketing and distribution capabilities;
|
|
|
|
launching commercial sales of ezutromid or ridinilazole, as applicable, if and when approved, whether alone or in collaboration with others;
|
|
|
|
acceptance of ezutromid or ridinilazole, as applicable, if and when approved, by patients, the medical community and third-party payors;
|
|
|
|
effectively competing with other therapies; and
|
|
|
|
maintaining a continued acceptable safety profile of ezutromid or ridinilazole, as applicable, following approval.
|
If we do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to
successfully commercialize ezutromid or ridinilazole, which would materially harm our business.
If clinical trials of our product candidates fail
to demonstrate safety and efficacy to the satisfaction of the U.S. Food and Drug Administration, or the FDA, or the European Medicines Agency, or the EMA, or do not otherwise produce favorable results, we may incur additional costs or experience
delays in completing, or ultimately be unable to complete, the development and commercialization of ezutromid, ridinilazole or any other product candidate.
In connection with obtaining marketing approval from regulatory authorities for the sale of any product candidate, we must complete preclinical
development and then conduct extensive clinical trials to demonstrate the safety and efficacy of our product candidates in humans. Clinical testing is expensive, difficult to design and implement, can take many years to complete and is uncertain as
to outcome. A failure of one or more clinical trials can occur at any stage of testing. The outcome of preclinical testing and early clinical trials may not be predictive of the success of later clinical trials, and interim results of a clinical
trial do not necessarily predict final results. In particular, the small number of patients in our early clinical trials may make the results of these clinical trials less predictive of the outcome of later clinical trials. The design of a clinical
trial can determine whether its results will support approval of a product, and flaws in the design of a clinical trial may not become apparent until the clinical trial is well advanced or completed. We have limited experience in designing clinical
trials and may be unable to design and execute a clinical trial to support marketing approval. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product
candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval of their products.
For example, in 2009, we assigned certain technology relating to our DMD program to BioMarin DMD Regulator Limited, or BioMarin. BioMarin
conducted a Phase 1 clinical trial of a prior formulation of ezutromid in 48 healthy adult volunteers. Subjects in this clinical trial achieved low systemic exposure of the drug, and there was variability in systemic exposure across subjects.
Following this clinical trial of a prior formulation of ezutromid, BioMarin elected not to continue development of our assigned technology, citing pharmaceutical and pharmacokinetic challenges. In public statements, BioMarin indicated that it had
concluded that the likelihood of achieving a therapeutic effect in DMD patients was highly unlikely. In 2010, BioMarin transferred the assets, and all commercialization rights, back to us. In our first Phase 1b clinical trial of ezutromid in DMD
patients, patients also had variable levels of ezutromid in the blood plasma following dosing, which we believe was potentially due to the impact of diet on absorption of ezutromid. In 2015, we reported top-line data from our second Phase 1b
clinical trial of ezutromid in DMD patients, which we refer to as our Phase 1b modified diet trial, in which patients followed specific dietary guidance that recommended balanced proportions of fat, protein, and carbohydrates and dosing with a glass
of whole milk. In our Phase 1b modified diet trial, while following specific dietary guidance, all of the patients in the trial achieved plasma levels of ezutromid that may be sufficient to modulate the production of utrophin protein and possibly
result in clinical benefit. Nonetheless, while the results of our completed clinical trials to date suggest that diet may impact absorption of ezutromid, other disease related factors, such as abnormal gastrointestinal physiology, or other factors
such as the level of activity of the liver
- 7 -
enzyme CYP1A, may impact the absorption profile of DMD patients. Accordingly, it is possible that we will be unable to achieve plasma levels of ezutromid that are expected to bring therapeutic
benefit in future clinical trials, and, in such a case, we will likely not be able to successfully complete the development of, obtain marketing approval for or commercialize this product candidate.
In addition, in our first Phase 1b clinical trial of ezutromid in DMD patients, patients experienced a statistically significant reduction in
creatine kinase, or CK, and other enzyme markers of muscle damage following treatment with ezutromid. Although this was not a placebo controlled study and there may be other factors that influenced the results, we believed the lower levels of CK and
the other enzymes compared to baseline potentially indicate a reduction in muscle damage and may be evidence of ezutromid activity. However, in our Phase 1b modified diet trial, we did not observe a change in the levels of CK when patients received
ezutromid as compared to when patients received a placebo. Likewise, we may not observe changes in levels of CK or other enzyme markers of muscle damage in longer-term clinical trials.
If we are required to conduct additional clinical trials or other testing of ezutromid or ridinilazole or any other product candidate that we
develop beyond those that we contemplate, if we are unable to successfully complete our clinical trials or other testing, if the results of these clinical trials or tests are not positive or are only modestly positive or if there are safety
concerns, we may:
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be delayed in obtaining marketing approval for our product candidates;
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not obtain marketing approval at all;
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obtain approval for indications or patient populations that are not as broad as we intended or desired;
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obtain approval with labeling that includes significant use or distribution restrictions or safety warnings, including boxed warnings;
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be subject to additional post-marketing testing requirements or restrictions; or
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have the product removed from the market after obtaining marketing approval.
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If we experience any of a
number of possible unforeseen events in connection with our clinical trials, potential marketing approval or commercialization of our product candidates could be delayed or prevented.
We may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our ability to receive
marketing approval or commercialize our product candidates, including:
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clinical trials of our product candidates may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical trials or abandon product development programs;
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the number of patients required for clinical trials of our product candidates may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate or participants may drop out of these
clinical trials at a higher rate than we anticipate;
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we may be unable to enroll a sufficient number of patients in our clinical trials to ensure adequate statistical power to detect any statistically significant treatment effects;
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our third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all;
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regulators, institutional review boards or independent ethics committees may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site;
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we may have delays in reaching or fail to reach agreement on acceptable clinical trial contracts or clinical trial protocols with prospective trial sites;
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we may have to suspend or terminate clinical trials of our product candidates for various reasons, including a finding that the participants are being exposed to unacceptable health risks;
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regulators, institutional review boards or independent ethics committees may require that we or our investigators suspend or terminate clinical research for various reasons, including noncompliance with regulatory
requirements or a finding that the participants are being exposed to unacceptable health risks;
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the cost of clinical trials of our product candidates may be greater than we anticipate;
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the supply or quality of our product candidates or other materials necessary to conduct clinical trials of our product candidates may be insufficient or inadequate; and
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our product candidates may have undesirable side effects or other unexpected characteristics, causing us or our investigators, regulators, institutional review boards or independent ethics committees to suspend or
terminate the clinical trials.
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Our product development costs will increase if we experience delays in testing or marketing
approvals. We do not know whether any preclinical tests or clinical trials will begin as planned, will need to be restructured or will be completed on schedule, or at all. Significant preclinical or clinical trial delays also could shorten any
periods during which we may have the exclusive right to commercialize our product candidates or allow our competitors to bring products to market before we do and impair our ability to successfully commercialize our product candidates and may harm
our business and results of operations.
Because we are developing ezutromid for the treatment of a disease in which there is little clinical
experience, there is increased risk that the outcome of our clinical trials of ezutromid will not be favorable.
There is currently
only one approved therapy for the treatment of DMD, and this therapy treats DMD caused by a specific genetic mutation known as nonsense mutations. DMD caused by nonsense mutations affects approximately 13% of all DMD patients. Data on the natural
clinical progression of DMD remains limited despite the recent publication of data from natural history studies on DMD patients. This has resulted in limited clinical trial experience for the development of drugs to treat DMD. In particular,
regulatory authorities in the United States and European Union have not issued definitive guidance as to how to measure and achieve efficacy. As a result, the design and conduct of clinical trials for DMD is subject to increased risk.
In the last few years, a test of the distance walked by a patient in six minutes, commonly referred to as the six minute walk test, has been
used as an endpoint in several clinical trials of product candidates for patients with DMD. It is viewed by U.S. and European regulators as the only primary outcome measure for DMD trials. We may nonetheless experience setbacks with our clinical
trials for ezutromid or the clinical trials for our future product candidates for DMD because of the limited clinical experience in this indication. For example, regulators have not yet established what change in the distance walked in the six
minute walk test is required to be demonstrated in a clinical trial of a DMD therapy in order to signify a clinically meaningful result or obtain marketing approvals. As a result, we may not achieve the pre-specified endpoint with statistical
significance in clinical trials of ezutromid or of our other future product candidates for DMD, which would decrease the chance of obtaining marketing approval for ezutromid or our other future product candidates for DMD.
Our focus on utrophin modulation as a potential treatment for DMD is unproven, and we do not know whether we will be able to develop any products of
commercial value for this indication.
Our scientific approach for treating DMD focuses on the discovery and development of
utrophin modulators. There is no marketed drug that relies on utrophin modulation whereby the production of utrophin is maintained to compensate for the lack of dystrophin for the treatment of DMD or any other indication. As a result, we may not be
able to replicate the results of our preclinical studies in our clinical trials of ezutromid, and our focus on targeting utrophin modulation may not result in the discovery and development of commercially viable drugs that safely and effectively
treat DMD or other muscle-wasting disorders.
Moreover, we have not yet identified the level of utrophin modulation and associated
production of utrophin needed to provide a clinical benefit to DMD patients. In our two completed Phase 1b clinical trials of ezutromid,
- 9 -
we observed variable plasma levels of drug among patients. Although only a proportion of patients in each trial had plasma concentrations exceeding the concentration level that, based on the
results of our preclinical studies, corresponds to a 50% increase in utrophin expression, we believe that all the patients may still have achieved plasma levels of ezutromid sufficient to modulate the production of utrophin to a lesser extent and
possibly result in clinical benefit. This belief is based in part on the work of Professor Kay Davies and her research group at the University of Oxford, in which the continued expression of utrophin protein in the transgenic lines of an
mdx
mouse, even at levels just above those in a normal
mdx
mouse, had a meaningful, positive effect on muscle performance. Nonetheless, we do not know whether utrophin modulation has been achieved, and if it has, whether the level of utrophin
modulation and production in fact resulted in a clinical benefit for these patients.
If we experience delays or difficulties in the enrollment of
patients in our clinical trials, our receipt of necessary marketing approvals could be delayed or prevented.
We may not be able to
initiate or continue clinical trials for our product candidates, including our ongoing and planned clinical trials of ezutromid and ridinilazole, if we are unable to locate and enroll a sufficient number of eligible patients to participate in these
clinical trials. DMD is a rare disease with a relatively small patient population, which could result in slow enrollment of clinical trial participants. Because we expect that our current and planned clinical trials for DMD will be limited to boys
in a specified age range and with a certain level of physical ability only, the number of patients eligible for our clinical trials is even smaller. Further, there are only a limited number of specialist physicians that treat DMD patients, and major
clinical centers are concentrated in a few geographic regions. CDI is an acute infection that requires rapid diagnosis. For our clinical trials of ridinilazole, we need to identify potential patients, test them for CDI and enroll them on the
clinical trial within a 24-hour period. In addition, our competitors in both DMD and CDI have ongoing clinical trials for product candidates that could be competitive with our product candidates, and patients who would otherwise be eligible for our
clinical trials may instead enroll in clinical trials of our competitors product candidates.
Patient enrollment is affected by
other factors, including:
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severity of the disease under investigation;
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eligibility criteria for the clinical trial in question;
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perceived risks and benefits of the product candidate under study;
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approval of other therapies to treat the indication that is being investigated in the clinical trial;
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efforts to facilitate timely enrollment in clinical trials;
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patient referral practices of physicians;
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the ability to monitor patients adequately during and after treatment; and
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proximity and availability of clinical trial sites for prospective patients.
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Enrollment
delays in our clinical trials may result in increased development costs for our product candidates, which would cause the value of our company to decline and limit our ability to obtain additional financing. Our inability to enroll a sufficient
number of patients in our ongoing and planned clinical trials of ezutromid and ridinilazole or any of our other clinical trials would result in significant delays or may require us to abandon one or more clinical trials altogether.
If serious adverse or inappropriate side effects are identified during the development of ezutromid or ridinilazole or any other product candidate, we
may need to abandon or limit our development of that product candidate.
All of our product candidates are in clinical or
preclinical development and their risk of failure is high. It is impossible to predict when or if any of our product candidates will prove effective or safe in humans or will receive marketing approval. If our product candidates are associated with
undesirable side effects or have
- 10 -
characteristics that are unexpected, we may need to abandon their development or limit development to certain uses or subpopulations in which the undesirable side effects or other characteristics
are less prevalent, less severe or more acceptable from a risk-benefit perspective. Many compounds that initially showed promise in clinical or earlier stage testing have later been found to cause side effects or other safety issues that prevented
further development of the compound.
Even if ezutromid or ridinilazole or any other product candidate receives marketing approval, it may fail to
achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success.
If ezutromid, ridinilazole or any of our other future product candidates receive marketing approval, such products may nonetheless fail to gain
sufficient market acceptance by physicians, patients, third-party payors and others in the medical community. If these products do not achieve an adequate level of acceptance, we may not generate significant product revenues or any profits from
operations. The degree of market acceptance of our product candidates, if approved for commercial sale, will depend on a number of factors, including:
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the efficacy and potential advantages compared to alternative treatments or competitive products;
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the prevalence and severity of any side effects;
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the ability to offer our product candidates for sale at competitive prices, including in the case of ridinilazole, which we expect, if approved, will compete with vancomycin and metronidazole, both of which are
available in generic form at low prices, and the recently launched antibiotic, fidaxomicin;
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convenience and ease of administration compared to alternative treatments;
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the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;
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the strength of marketing and distribution support;
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the availability of third-party coverage and adequate reimbursement;
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the timing of any such marketing approval in relation to other product approvals;
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support from patient advocacy groups; and
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any restrictions on concomitant use of other medications.
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Our ability to negotiate, secure
and maintain third-party coverage and reimbursement may be affected by political, economic and regulatory developments in the United States, the European Union and other jurisdictions. Governments continue to impose cost containment measures, and
third-party payors are increasingly challenging prices charged for medicines and examining their cost effectiveness, in addition to their safety and efficacy. These and other similar developments could significantly limit the degree of market
acceptance of ezutromid or ridinilazole or any of our other future product candidates that receive marketing approval.
If we are unable to
establish sales and marketing capabilities or enter into agreements with third parties to market and sell our product candidates, we may not be successful in commercializing ezutromid or ridinilazole or any other product candidate if and when such
product candidates are approved.
We do not have a sales or marketing infrastructure and have no experience in the sale or
marketing of pharmaceutical products. To achieve commercial success for any approved product, we must either develop a sales and marketing organization or outsource these functions to third parties. If ezutromid receives marketing approval, we
intend to commercialize it initially in the United States and Europe with our own focused, specialized sales force. Outside of the United States and Europe, we plan to evaluate the potential for utilizing collaboration, distribution and other
marketing arrangements with third parties to commercialize ezutromid. We may determine to commercialize ridinilazole directly in the United States and Europe with our own specialized
- 11 -
sales force or seek third-party collaborators for the development and commercialization of ridinilazole. There are risks involved with establishing our own sales and marketing capabilities and
entering into arrangements with third parties to perform these services. For example, recruiting and training a sales force is expensive and time-consuming and could delay any product launch. If the commercial launch of a product candidate for which
we recruit a sales force and establish marketing capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses. This may be costly, and our investment would be lost if
we cannot retain or reposition our sales and marketing personnel.
Factors that may inhibit our efforts to commercialize our products on
our own include:
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our inability to recruit, train and retain adequate numbers of effective sales and marketing personnel;
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the inability of sales personnel to obtain access to or persuade adequate numbers of physicians to prescribe any future products;
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the lack of complementary products to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies with more extensive product lines; and
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unforeseen costs and expenses associated with creating an independent sales and marketing organization.
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If we enter into arrangements with third parties to perform sales and marketing services, our product revenues or the profitability of these
product revenues to us are likely to be lower than if we were to market and sell any products that we develop ourselves. In addition, we may not be successful in entering into arrangements with third parties to sell and market our product candidates
or may be unable to do so on terms that are acceptable to us. We likely will have little control over such third parties, and any of them may fail to devote the necessary resources and attention to sell and market our products effectively. If we do
not establish sales and marketing capabilities successfully, either on our own or in collaboration with third parties, we will not be successful in commercializing our product candidates.
We face substantial competition, which may result in others discovering, developing or commercializing products before or more successfully than we do.
The development and commercialization of new drug products is highly competitive. We face competition with respect to our current
product candidates and any products we may seek to develop or commercialize in the future from major pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies worldwide.
There is currently no approved therapy for the treatment of DMD applicable to all DMD patients that seeks to alter the progression of the
disease. Corticosteroids are the current standard of care for DMD patients, although these are symptomatic treatments that do not address the underlying cause of DMD. PTC Therapeutics, Inc. is developing ataluren (Translarna
TM
), which is a small molecule that enables formation of functional dystrophin in DMD patients with nonsense mutations. DMD caused by nonsense mutations affects approximately 13% of all DMD patients.
The European Commission has granted conditional approval for ataluren in Europe, and PTC is commercializing ataluren in several European countries. Other biopharmaceutical companies, including BioMarin Pharmaceutical Inc., following their recent
acquisition of Prosensa Holding N.V., and Sarepta Therapeutics, Inc., are developing treatments for DMD based on exon-skipping approaches. We believe that there are exon-skipping therapies currently in clinical development to address four of these
exons and that skipping of these exons would treat in the aggregate less than one-third of all DMD patients. A number of other companies are pursuing alternative therapeutic approaches for the treatment of DMD, including Pfizer, Inc. and
Bristol-Myers Squibb Company, which are pursuing an approach based on muscle tissue growth through myostatin inhibition. For more information, see BusinessCompetition in this Annual Report. We believe that our approach of utrophin
modulation has the potential to treat the entire population of DMD patients, unlike other DMD approaches that also seek to alter the progression of the disease but only address subsets of the total DMD population. We expect the price that we will
charge for ezutromid, if approved, will reflect its status as an orphan drug that will be directed at a smaller population of patients.
- 12 -
Several pharmaceutical and biotechnology companies have established themselves in the market for
the treatment of CDI, and several additional companies are developing products for the treatment of CDI. The current standard of care for CDI is treatment with the broad spectrum antibiotics vancomycin and metronidazole, both of which are available
in generic form in the United States. Generic antibiotic therapies typically are sold at lower prices than branded antibiotics and generally are preferred by managed care providers of health services. The antibiotic fidaxomicin (Dificid
TM
in the United States and Dificlir
TM
in Europe), which is marketed in the United States by Cubist Pharmaceuticals, Inc., or Cubist, a wholly owned
subsidiary of Merck & Co., Inc. and in Europe by Astellas Pharma Inc., was recently approved for treatment of CDI in the United States and the European Union. Other antibiotics in late-stage clinical trials include cadazolid, which is being
developed by Actelion Pharmaceuticals Limited and is currently in Phase 3 clinical development and surotomycin, which was originally developed by Cubist and later acquired by Merck. Merck reported that it had received unfavorable efficacy data from
a Phase 3 clinical trial for surotomycin in August 2015. A number of other approaches for the treatment of CDI are in development, including monoclonal antibodies, a vaccine and fecal biotherapy. For more information, see
BusinessCompetition in this Annual Report.
Potential competitors also include academic institutions, government
agencies and other public and private research organizations that conduct research, seek patent protection and establish collaborative arrangements for research, development, manufacturing and commercialization. Our commercial opportunity could be
reduced or eliminated if our competitors develop and commercialize products that are more effective, safer, have fewer or less severe side effects, are approved for broader indications or patient populations, or are more convenient or less expensive
than any products that we develop and commercialize. Our competitors may also obtain marketing approval for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position
before we are able to enter the market.
We believe that many competitors are attempting to develop therapeutics for the target
indications of our product candidates, including academic institutions, government agencies, public and private research organizations, large pharmaceutical companies and smaller more focused companies.
Many of our competitors may have significantly greater financial resources and expertise in research and development, manufacturing,
preclinical testing, conducting clinical trials, obtaining approvals from regulatory authorities and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more
resources being concentrated among a smaller number of our competitors. Smaller and other early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These
third parties compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to or
necessary for our programs.
Even if we are able to commercialize ezutromid, ridinilazole or any other product candidate that we develop, the
product may become subject to unfavorable pricing regulations, third-party reimbursement practices or healthcare reform initiatives, which would harm our business.
The regulations that govern marketing approvals, pricing, coverage and reimbursement for new drug products vary widely from country to country.
Current and future legislation may significantly change the approval requirements in ways that could involve additional costs and cause delays in obtaining approvals. Some countries require approval of the sale price of a drug before it can be
marketed. In many countries, the pricing review period begins after marketing or product licensing approval is granted. In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after
initial approval is granted. As a result, we might obtain marketing approval for a product in a particular country, but then be subject to price regulations that delay our commercial launch of the product, possibly for lengthy time periods, and
negatively impact the revenues we are able to generate from the sale of the product in that country. Adverse pricing limitations may hinder our ability to recoup our investment in one or more product candidates, even if our product candidates obtain
marketing approval.
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Our ability to commercialize ezutromid, ridinilazole or any other product candidate successfully
also will depend in part on the extent to which coverage and adequate reimbursement for these products and related treatments will be available from government health administration authorities, private health insurers and other organizations.
Government authorities and other third-party payors, such as private health insurers and health maintenance organizations, decide which medications they will pay for and establish reimbursement levels. A primary trend in the E.U. and U.S. healthcare
industries and elsewhere is cost containment. Government authorities and other third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications. Increasingly, third-party payors are
requiring that drug companies provide them with predetermined discounts from list prices and are challenging the prices charged for medical products. We cannot be sure that coverage and reimbursement will be available for ezutromid, ridinilazole or
any other product that we commercialize and, if coverage and reimbursement are available, the level of reimbursement. Reimbursement may impact the demand for, or the price of, any product candidate for which we obtain marketing approval. Obtaining
and maintaining adequate reimbursement for ezutromid may be particularly difficult because of the higher prices typically associated with drugs directed at smaller populations of patients. In addition, third-party payors are likely to impose strict
requirements for reimbursement of a higher priced drug. If reimbursement is not available or is available only to limited levels, we may not be able to successfully commercialize any product candidate for which we obtain marketing approval.
There may be significant delays in obtaining coverage and reimbursement for newly approved drugs, and coverage may be more limited than the
purposes for which the drug is approved by the applicable regulatory authority. Moreover, eligibility for coverage and reimbursement does not imply that any drug will be paid for in all cases or at a rate that covers our costs, including research,
development, intellectual property, manufacture, sale and distribution expenses. Interim reimbursement levels for new drugs, if applicable, may also not be sufficient to cover our costs and may not be made permanent. Reimbursement rates may vary
according to the use of the drug and the clinical setting in which it is used, may be based on reimbursement levels already set for lower cost drugs, and may be incorporated into existing payments for other services. Net prices for drugs may be
reduced by mandatory discounts or rebates required by government healthcare programs or private payors and by any future relaxation of laws that presently restrict imports of drugs from countries where they may be sold at lower prices than in the
United States. In the United States, third-party payors often rely upon Medicare coverage policy and payment limitations in setting their own reimbursement policies. In the European Union, reference pricing systems and other measures may lead to
cost containment and reduced prices. Our inability to promptly obtain coverage and adequate reimbursement rates from both government-funded and private payors for any approved products that we develop could have a material adverse effect on our
operating results, our ability to raise capital needed to commercialize products and our overall financial condition.
Governments outside the
United States tend to impose strict price controls, which may adversely affect our revenues, if any.
In some countries,
particularly the member states of the European Union, the pricing of prescription pharmaceuticals is subject to governmental control. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt
of marketing approval for a product. In addition, there can be considerable pressure by governments and other stakeholders on prices and reimbursement levels, including as part of cost containment measures. Political, economic and regulatory
developments may further complicate pricing negotiations, and pricing negotiations may continue after reimbursement has been obtained. Reference pricing used by various E.U. member states and parallel distribution, or arbitrage between low-priced
and high-priced member states, can further reduce prices. In some countries, we may be required to conduct a clinical trial or other studies that compare the cost-effectiveness of our product candidate to other available therapies in order to obtain
or maintain reimbursement or pricing approval. Publication of discounts by third-party payors or authorities may lead to further pressure on prices or reimbursement levels within the country of publication and other countries. If reimbursement of
our products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our business could be adversely affected.
- 14 -
Product liability lawsuits against us could cause us to incur substantial liabilities and to limit
commercialization of any products that we may develop.
We face an inherent risk of product liability exposure related to the
testing of our product candidates in human clinical trials and will face an even greater risk if we commercially sell any products that we may develop. If we cannot successfully defend ourselves against claims that our product candidates or products
caused injuries, we will incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:
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reduced resources of our management to pursue our business strategy;
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decreased demand for any product candidates or products that we may develop;
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injury to our reputation and significant negative media attention;
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withdrawal of clinical trial participants;
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significant costs to defend the related litigation;
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substantial monetary awards to clinical trial participants or patients;
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increased insurance costs; and
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the inability to commercialize any products that we may develop.
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We have separate product
liability insurance policies that cover each of our clinical trials. These policies each provide coverage of up to £5.0 million in the aggregate for clinical trials, or portions thereof, conducted in Europe and up to $5.0 million in the
aggregate for clinical trials, or portions thereof, conducted in the United States. The insurance policies covering our clinical trials in the United States are also subject to a per claim deductible. The amount of insurance that we currently hold
may not be adequate to cover all liabilities that we may incur. We will need to increase our insurance coverage when and if we begin commercializing ezutromid, ridinilazole or any other product candidate that receives marketing approval. Insurance
coverage is increasingly expensive. We may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise.
If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could
have a material adverse effect on the success of our business.
We are subject to numerous environmental, health and safety laws
and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. Our operations currently, and may in the future, involve the use of hazardous and flammable
materials, including chemicals and medical and biological materials, and produce hazardous waste products. Even if we contract with third parties for the disposal of these materials and wastes, we cannot eliminate the risk of contamination or injury
from these materials. In the event of contamination or injury resulting from our use of hazardous materials or disposal of hazardous wastes, we could be held liable for any resulting damages, and any liability could exceed our resources.
Although we maintain workers compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees
resulting from the use of hazardous materials, this insurance may not provide adequate coverage against potential liabilities. We also maintain liability insurance for some of these risks, but our policy has a coverage limit of
£5.0 million per occurrence.
In addition, we may incur substantial costs in order to comply with current or future
environmental, health and safety laws and regulations. These current or future laws and regulations may impair our research, development or production efforts. Failure to comply with these laws and regulations also may result in substantial fines,
penalties or other sanctions.
- 15 -
We may expend our limited resources to pursue a particular product candidate and fail to capitalize on
product candidates that may be more profitable or for which there is a greater likelihood of success.
Because we have limited
financial and managerial resources, we focus on specific product candidates. As a result, we may forego or delay pursuit of opportunities with other product candidates that later prove to have greater commercial potential. Our resource allocation
decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and future research and development programs and product candidates may not yield any commercially viable
products.
We have based our research and development efforts for DMD on utrophin modulators, including ezutromid, a potential optimized
formulation of ezutromid, our second generation utrophin modulators and future generation utrophin modulators, and for CDI on ridinilazole. Notwithstanding our large investment to date and anticipated future expenditures in proprietary technologies
that we use in the discovery of product candidates for DMD and CDI, we have not yet developed, and may never successfully develop, any marketed drugs using this approach. As a result of pursuing the development of product candidates using our
proprietary technologies, we may fail to develop product candidates or address indications based on other scientific approaches that may offer greater commercial potential or for which there is a greater likelihood of success. Research programs to
identify new product candidates require substantial technical, financial and human resources. These research programs may initially show promise in identifying potential product candidates, yet fail to yield product candidates for clinical
development.
If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may
relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product
candidate.
Risks Related to our Dependence on Third Parties
Use of third parties to manufacture our product candidates may increase the risk that we will not have sufficient quantities of our product candidates or
products or such quantities at an acceptable cost, which could delay, prevent or impair our development or commercialization efforts.
We do not own or operate manufacturing facilities for the production of clinical or commercial supplies of our product candidates. We have
limited personnel with experience in drug manufacturing and lack the resources and the capabilities to manufacture any of our product candidates on a clinical or commercial scale. We currently rely on third parties for supply of the active
pharmaceutical ingredients, or API, in our product candidates. Our strategy is to outsource all manufacturing of our product candidates and products to third parties.
We do not currently have any agreements with third-party manufacturers for the long-term clinical or commercial supply of any of our product
candidates. We currently engage a single third-party manufacturer to provide clinical material of the API and fill and finish services for the final drug product formulation of ezutromid that is being used in our clinical trials. A second
third-party clinical supplier is responsible for the labelling and shipping of the final drug product to the clinical trial sites. We are engaged with a different drug product supplier to provide final drug product of the optimized formulation of
ezutromid that is being evaluated in our ongoing Phase 1 clinical trial. For ridinilazole, we engage two other third-party manufacturers to provide clinical material of the API and fill and finish services to supply final drug product that is used
in our on-going clinical trials. A third supplier is engaged to provide packaging, labelling and distribution services for the ongoing Phase 2 clinical trial. We may be unable to conclude agreements for commercial supply with third-party
manufacturers, or may be unable to do so on acceptable terms.
Even if we are able to establish and maintain arrangements with third-party
manufacturers, reliance on third-party manufacturers entails additional risks, including:
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reliance on the third party for regulatory compliance and quality assurance;
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the possible breach of the manufacturing agreement by the third party;
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the possible misappropriation of our proprietary information, including our trade secrets and know-how; and
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the possible termination or nonrenewal of the agreement by the third party at a time that is costly or inconvenient for us.
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Third-party manufacturers may not be able to comply with current good manufacturing practice, or cGMP, regulations or similar regulatory
requirements outside the United States. Our failure, or the failure of our third-party manufacturers, to comply with applicable regulations could result in sanctions being imposed on us, including fines, injunctions, civil penalties, delays,
suspension or withdrawal of approvals, license revocation, seizures or recalls of product candidates or products, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect supplies of our product
candidates.
Our product candidates and any products that we may develop may compete with other product candidates and products for access
to manufacturing facilities. There are a limited number of manufacturers that operate under cGMP regulations and that might be capable of manufacturing for us.
If the third parties that we engage to manufacture product for our preclinical tests and clinical trials should cease to continue to do so for
any reason, we likely would experience delays in advancing these clinical trials while we identify and qualify replacement suppliers and we may be unable to obtain replacement supplies on terms that are favorable to us. In addition, if we are not
able to obtain adequate supplies of our product candidates or the drug substances used to manufacture them, it will be more difficult for us to develop our product candidates and compete effectively.
Our current and anticipated future dependence upon others for the manufacture of our product candidates may adversely affect our future profit
margins and our ability to develop product candidates and commercialize any products that receive marketing approval on a timely and competitive basis.
We rely on third parties to conduct our clinical trials and those third parties may not perform satisfactorily, including failing to meet deadlines for
the completion of such clinical trials.
We do not independently conduct clinical trials for our product candidates. We rely on
third parties, such as contract research organizations, clinical data management organizations, medical institutions and clinical investigators, to perform this function. Any of these third parties may terminate their engagements with us at any
time. If we need to enter into alternative arrangements, it would delay our product development activities.
Our reliance on these third
parties for clinical development activities reduces our control over these activities but does not relieve us of our responsibilities. For example, we remain responsible for ensuring that each of our clinical trials is conducted in accordance with
the general investigational plan and protocols for the clinical trial. Moreover, the FDA requires us to comply with standards, commonly referred to as Good Clinical Practice, or GCP, for conducting, recording and reporting the results of clinical
trials to assure that data and reported results are credible and accurate and that the rights, integrity of data and confidentiality of clinical trial participants are protected. We also are required to register ongoing clinical trials and post the
results of completed clinical trials on a U.S. government-sponsored database, www.ClinicalTrials.gov, within certain timeframes. Failure to do so can result in fines, adverse publicity and civil and criminal sanctions. Similar GCP and transparency
requirements apply in the European Union. The U.S. National Institutes of Health also recently announced plans to require sponsors to post results of clinical trials for unapproved products, including unfavorable results in clinical trials for
unapproved uses of approved products.
Furthermore, third parties that we rely on for our clinical development activities may also have
relationships with other entities, some of which may be our competitors. If these third parties do not successfully carry out their contractual duties, meet expected deadlines or conduct our clinical trials in accordance with regulatory
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requirements or our stated protocols, we will not be able to obtain, or may be delayed in obtaining, marketing approvals for our product candidates and will not be able to, or may be delayed in
our efforts to, successfully commercialize our product candidates. Our product development costs will increase if we experience delays in testing or obtaining marketing approvals.
We also rely on other third parties to store and distribute drug supplies for our clinical trials. Any performance failure on the part of our
distributors could delay clinical development or marketing approval of our product candidates or commercialization of our products, producing additional losses and depriving us of potential product revenue.
Our ability to identify and develop future generations of utrophin modulators depends on our strategic alliance with the University of Oxford. If we
fail to maintain our current strategic relationship with the University of Oxford, our business prospects may be materially adversely affected.
We have formed a strategic alliance with the University of Oxford pursuant to which we acquired an exclusive option to license intellectual
property that is generated as part of our research in utrophin modulation. The goal of our strategic alliance with the University of Oxford is to identify and develop future generations of utrophin modulators that will include new mechanisms that
could complement ezutromid and our second generation modulators. We rely on this strategic alliance and the University of Oxford to help identify and develop future generations of utrophin modulators. The continuation of a good relationship with the
University of Oxford is important to our discovery and research efforts in this area. If our relationship with the University of Oxford deteriorates, if the University of Oxford fails to devote sufficient resources to the strategic alliance or if
the University of Oxford challenges our option to license any intellectual property generated as part of the strategic alliance, our business prospects could be materially adversely affected.
We may depend on collaborations with third parties for the development and commercialization of some of our product candidates. If those collaborations
are not successful, we may not be able to capitalize on the market potential of these product candidates.
Although we are
evaluating our options to maximize the commercial opportunity for ridinilazole, including the relative merits of retaining commercialization rights for ourselves, our preference is to seek a third-party collaborator for ridinilazole. In addition,
although we expect to commercialize ezutromid ourselves in the United States and Europe, we plan to evaluate the potential for utilizing collaboration, distribution and other marketing arrangements with third parties to commercialize ezutromid in
other geographies. Moreover, we may seek third-party collaborators for development and commercialization of any future product candidates.
Our likely collaborators for any marketing, distribution, development, licensing or broader collaboration arrangements include large and
mid-size pharmaceutical companies, regional and national pharmaceutical companies and biotechnology companies. We are not currently party to any such arrangement for ezutromid or ridinilazole. However, if we do enter into any such arrangements with
any third parties in the future, we will likely have limited control over the amount and timing of resources that our collaborators dedicate to the development or commercialization of our product candidates. Our ability to generate revenues from
these arrangements will depend on our collaborators abilities and efforts to successfully perform the functions assigned to them in these arrangements.
Collaborations involving our product candidates would pose numerous risks to us, including the following:
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collaborators have significant discretion in determining the efforts and resources that they will apply to these collaborations and may not perform their obligations as expected;
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collaborators may deemphasize or not pursue development and commercialization of our product candidates or may elect not to continue or renew development or commercialization programs based on clinical trial results,
changes in the collaborators strategic focus, including as a result of a sale or disposition of a business unit or development function, or available funding, or external factors such as an acquisition that diverts resources or creates
competing priorities;
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collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a product candidate, repeat or conduct new clinical trials or require a new
formulation of a product candidate for clinical testing;
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collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our products or product candidates if the collaborators believe that competitive products are
more likely to be successfully developed or can be commercialized under terms that are more economically attractive than ours;
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a collaborator with marketing and distribution rights to multiple products may not commit sufficient resources to the marketing and distribution of our product relative to other products;
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collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary information in such a way as to invite litigation that could jeopardize or invalidate our intellectual
property or proprietary information or expose us to potential litigation;
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collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability;
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disputes may arise between the collaborator and us as to the ownership of intellectual property arising during the collaboration;
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we may grant exclusive rights to our collaborators, which would prevent us from collaborating with others;
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disputes may arise between the collaborators and us that result in the delay or termination of the research, development or commercialization of our products or product candidates or that result in costly litigation or
arbitration that diverts management attention and resources; and
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collaborations may be terminated and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable product candidates.
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For example, in 2009, we assigned certain technology relating to our DMD program to BioMarin. BioMarin conducted a Phase 1 clinical trial of a
prior formulation of ezutromid in 48 healthy adult volunteers. In this clinical trial, subjects achieved low systemic exposure of the drug and there was variability of systemic exposure across subjects. Following this clinical trial of a prior
formulation of ezutromid, BioMarin elected not to continue development of our assigned technology, citing pharmaceutical and pharmacokinetic challenges. In public statements, BioMarin indicated that it had concluded that the likelihood of achieving
a therapeutic effect in DMD patients was highly unlikely. In 2010, BioMarin transferred the assets, and all commercialization rights, back to us.
Collaboration agreements may not lead to development or commercialization of product candidates in the most efficient manner or at all. If a
collaborator of ours were to be involved in a business combination, the continued pursuit and emphasis on our product development or commercialization program could be delayed, diminished or terminated.
If we are not able to establish additional collaborations, we may have to alter our development and commercialization plans.
Our product development programs and the potential commercialization of our product candidates will require substantial additional cash to fund
expenses. For some of our product candidates, we may decide to collaborate further with pharmaceutical and biotechnology companies for the development and potential commercialization of those product candidates.
We face significant competition in seeking appropriate collaborators. Whether we reach a definitive agreement for a collaboration will depend,
among other things, upon our assessment of the collaborators resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborators
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evaluation of a number of factors. Those factors may include the design or results of clinical trials, the likelihood of approval by regulatory authorities, the potential market for the subject
product candidate, the costs and complexities of manufacturing and delivering such product candidate to patients, the potential of competing products, the existence of uncertainty with respect to our ownership of technology, which can exist if there
is a challenge to such ownership without regard to the merits of the challenge; and industry and market conditions generally. The collaborator may also consider alternative product candidates or technologies for similar indications that may be
available to collaborate on and whether such a collaboration could be more attractive than the one with us for our product candidate. We may also be restricted under future license agreements from entering into agreements on certain terms with
potential collaborators. Collaborations are complex and time-consuming to negotiate and document. In addition, there have been a significant number of recent business combinations among large pharmaceutical companies that have resulted in a reduced
number of potential future collaborators and changes to the strategies of the combined company.
We may not be able to negotiate
collaborations on a timely basis, on acceptable terms, or at all. If we are unable to do so, we may have to curtail the development of a product candidate, reduce or delay its development program or one or more of our other development programs,
delay its potential commercialization or reduce the scope of any sales or marketing activities, or increase our expenditures and undertake development or commercialization activities at our own expense. If we elect to increase our expenditures to
fund development or commercialization activities on our own, we may need to obtain additional capital, which may not be available to us on acceptable terms or at all. If we do not have sufficient funds, we may not be able to further develop our
product candidates or bring them to market and generate product revenue.
If we fail to comply with our obligations in our funding arrangements with
third parties, we could be required to repay the grant funding we have received or grant to these third parties rights under certain of our intellectual property.
We have received grant funding for some of our development programs from philanthropic, non-government and not for profit organizations and
patient advocacy groups pursuant to agreements that impose development and commercialization diligence obligations on us. If we fail to comply with these obligations, in certain instances the applicable organization could require us to repay the
grant funding we have received with interest or grant to the organization rights under certain of our intellectual property, which could materially adversely affect the value to us of product candidates covered by that intellectual property even if
we are entitled to a share of any consideration received by such organization in connection with any subsequent development or commercialization of the product candidates.
Risks Related to our Intellectual Property
If we
are unable to obtain and maintain patent protection for our technology and products, or if the scope of the patent protection is not sufficiently broad, our competitors could develop and commercialize technology and products similar or identical to
ours, and our ability to successfully commercialize our technology and products may be adversely affected.
Our success depends in
large part on our ability to obtain and maintain patent protection in the United States and other countries with respect to our proprietary technology and products. We seek to protect our proprietary position by filing patent applications in the
United States, in Europe and in certain additional foreign jurisdictions related to our novel technologies and product candidates that are important to our business. This process is expensive and time-consuming, and we may not be able to file and
prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent
protection. Moreover, if we license technology or product candidates from third parties in the future, these license agreements may not permit us to control the preparation, filing and prosecution of patent applications, or to maintain or enforce
the patents, covering the licensed technology or product candidates. These agreements could also give our licensors the right
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to enforce the licensed patents without our involvement, or to decide not to enforce the patents at all. Therefore, in these circumstances, these patents and applications may not be prosecuted or
enforced in a manner consistent with the best interests of our business.
The patent position of biotechnology and pharmaceutical
companies generally is highly uncertain, involves complex legal and factual questions and has in recent years been the subject of much litigation. As a result, the issuance, scope, validity, enforceability and commercial value of our patent rights
are highly uncertain. Our pending and future patent applications may not result in patents being issued which protect our technology or products, in whole or in part, or which effectively prevent others from commercializing competitive technologies
and products. Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of our patents, narrow the scope of our patent protection or make enforcement more difficult or
uncertain.
The laws of foreign countries may not protect our patent rights to the same extent as the laws of the United States. For
example, European patent law restricts the patentability of methods of treatment of the human body more than U.S. law does. In addition, for the foregoing reasons, we may not pursue or obtain patent protection in all major markets or may not obtain
protection that enables us to prevent the entry of third parties into the market.
Assuming the other requirements for patentability are
met, currently, the first to file a patent application is generally entitled to the patent. However, prior to March 16, 2013, in the United States, the first to invent was entitled to the patent. Publications of discoveries in the
scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. Therefore, we cannot know
with certainty whether we were the first to make the inventions claimed in our U.S. patents or pending U.S. patent applications, or that we were the first to file for patent protection of such inventions outside the United States or, since
March 16, 2013, within the United States.
Moreover, we may be subject to a third party preissuance submission of prior art to the
U.S. Patent and Trademark Office, or the USPTO, or become involved in opposition, derivation, reexamination, reissue, inter partes review, post grant review, interference proceedings or other patent office proceedings, court litigation or
International Trade Commission proceedings, in the United States or elsewhere, challenging our patent rights or the patent rights of others. An adverse determination in any such submission, proceeding or litigation concerning our patent rights could
reduce the scope of or prevent the enforceability of, or invalidate, our patent rights, allowing third parties to commercialize our technology or products, or equivalent or similar technology or products, and so to compete directly with us, without
payment to us, or, where such proceedings involve third-party patents, result in our inability to manufacture or commercialize products without infringing third-party patent rights. In addition, if the breadth or strength of protection provided by
our patents and patent applications is threatened or narrowed by operation of any of the foregoing, such an event could dissuade companies from collaborating with us to license, develop or commercialize current or future product candidates.
Even if our patent applications issue as patents, they may not issue in a form that will provide us with adequate protection to prevent
competitors from competing with us or otherwise to provide us with any competitive advantage. Our competitors may be able to circumvent our owned or licensed patents by developing similar, improved or alternative technologies or products in a
non-infringing manner.
For example, although ridinilazole is protected by a U.S. composition of matter patent that recites hydrated forms
of ridinilazole and a pharmaceutically acceptable excipient, and a method of treatment patent for
Clostridium difficile
associated disease, patent protection is not available for composition-of-matter claims that only recite the active
pharmaceutical ingredient for ridinilazole without limitation to its use. Because ridinilazole lacks composition-of-matter protection for its active pharmaceutical ingredient, competitors will, subject to obtaining marketing approval, be able to
offer and sell products with the same active pharmaceutical ingredient so long as these competitors do not infringe any other issued patents that would otherwise cover the drugs usage,
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methods of treatment using the drug, drug formulations, drug dosage forms and the like. Moreover, method-of-treatment patent claims are more difficult to enforce than composition-of-matter claims
for reasons including off-label sale, potential divided infringement issues and use of the subject compound in non-infringing manners. Physicians are permitted to prescribe an approved product for uses that are not described in the products
labeling. Although off-label prescriptions may infringe our method-of-treatment patents, the practice is common across medical specialties and such infringement is difficult to prevent or prosecute. Off-label sales would limit our ability to
generate revenue from the sale of our product candidates, if approved for commercial sale. In addition, if a third party were able to design around our dosage-form and formulation patents and create a different formulation and dosage form that is
not covered by our patents or patent applications, we would likely be unable to prevent that third party from manufacturing and marketing its product.
In addition, other companies may attempt to circumvent any regulatory data protection or market exclusivity, such as orphan drug exclusivity
in the United States, which we obtain under applicable legislation, which may require us to allocate significant resources to preventing such circumvention. Legal and regulatory developments in the European Union and elsewhere may also result in
clinical trial data submitted as part of a marketing authorization application becoming publicly available. Such developments could enable other companies to use our clinical trial data to assist in their own product development and to obtain
marketing authorizations in the European Union and in other jurisdictions. Such developments may also require us to allocate significant resources to prevent other companies from circumventing or violating our intellectual property rights. Our
attempts to prevent third parties from circumventing our intellectual property and other rights may ultimately be unsuccessful. We may also fail to take the required actions or pay the necessary fees to maintain our patents.
The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our owned and licensed patents may
be challenged in the courts or patent offices in the United States and abroad. Such challenges may result in loss of exclusivity or in patent claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit our
ability to stop others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of our technology and products. Future changes in U.S. statutory or case law beyond our control could
affect some or all of the foregoing possibilities. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such
candidates are commercialized. This could be the case even after giving effect to patent term extensions and data exclusivity provisions preventing third parties from relying on clinical trial data filed by us for regulatory approval in support of
their own applications for such approval. As a result, our patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.
We may become involved in lawsuits or other enforcement proceedings to protect or enforce our patents or other intellectual property, which could be
expensive, time-consuming and potentially unsuccessful.
Competitors may infringe our patents, trademarks, copyrights or other
intellectual property. To counter infringement or unauthorized use, we may be required to file claims, which can be expensive and time-consuming. Any claims we assert against perceived infringers could provoke these parties to assert counterclaims
against us alleging that we infringe their intellectual property or that our patent and other intellectual property rights are invalid or unenforceable, including for anti-trust reasons. As a result, in a patent infringement proceeding, a court or
administrative body may decide that a patent of ours is invalid or unenforceable, in whole or in part, or may construe the patents claims narrowly and so refuse to stop the other party from using the technology at issue on the grounds that our
patents do not cover the competitor technology in question. Even if we are successful in a patent infringement action, the unsuccessful party may subsequently raise antitrust issues and bring a follow-on action thereon. Antitrust issues may also
provide a bar to settlement or constrain the permissible settlement terms. Further, settlement agreements in the pharmaceutical sector are the subject of ongoing review by the antitrust authorities in the European Union.
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Third parties may initiate legal proceedings alleging that we are infringing their intellectual property
rights, the outcome of which would be uncertain and could have a material adverse effect on the success of our business.
Our
commercial success depends upon our ability and the ability of our collaborators to develop, manufacture, market and sell our product candidates and use our proprietary technologies without infringing the intellectual property and other proprietary
rights of third parties. There is considerable intellectual property litigation in the biotechnology and pharmaceutical industries, and we may become party to, or threatened with, future adversarial proceedings or litigation regarding intellectual
property rights with respect to our products and technology, including interference, derivation, inter partes review, reexamination, reissue or post-grant review proceedings before the USPTO. The risks of being involved in such litigation and office
proceedings may also increase as our product candidates approach commercialization, and as we gain greater visibility as a publicly traded company in the United States. Third parties may assert infringement claims against us based on existing or
future intellectual property rights and so restrict our freedom to operate. Third parties may also seek injunctive relief against us, whereby they would attempt to prevent us from practicing our technologies altogether pending outcome of any
litigation against us. We may not be aware of all such intellectual property rights potentially relating to our product candidates prior to their assertion against us. For example, we have not conducted an in-depth freedom-to-operate search or
analysis for ezutromid or ridinilazole. Any freedom-to-operate search or analysis previously conducted may not have uncovered all relevant patents and pending patent applications, and there may be pending or future patent applications that, if
issued, would block us from commercializing ezutromid or ridinilazole. Thus, we do not know with certainty whether ezutromid, ridinilazole or any other product candidate or our commercialization thereof, does not and will not infringe any third
partys intellectual property.
If we are found to infringe a third partys intellectual property rights, or in order to avoid
or settle litigation, we could be required to obtain a license to enable us to continue developing and marketing our products and technology. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even
if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors access to the same technologies as are licensed to us, and could require us to make substantial payments. Absent a license, we could be forced, including
by court order, to cease commercializing the infringing technology or product. In addition, we could be found liable for monetary damages, including treble damages and attorneys fees if we are found to have willfully infringed a patent or
other intellectual property right. A finding of infringement could prevent us from commercializing our product candidates or force us to cease some of our business operations, which could materially harm our business. Claims that we have
misappropriated the confidential information or trade secrets of third parties, or claims that we derived our inventions from another, could have a similar negative impact on our business.
We may be subject to claims by third parties asserting that we or our employees have misappropriated their intellectual property, or claiming ownership
of what we regard as our own intellectual property.
Many of our employees were previously employed at universities or other
biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although we try to ensure that our employees do not use the proprietary or otherwise confidential information or know-how of others in their work for us,
we may be subject to claims that we or these employees have without authorization used or disclosed intellectual property, including trade secrets or other proprietary or confidential information, of any such employees former employer.
Litigation may be necessary to defend against these claims.
In addition, while we typically require our employees and contractors who may
be involved in the development of intellectual property to execute agreements assigning such intellectual property to us and agreeing to cooperate and assist us with securing and defending our intellectual property, we may be unsuccessful in
executing such an agreement with each party who in fact develops intellectual property that we regard as our own. Our and their assignment agreements may not be self-executing or may be breached, and we may be forced to bring claims against third
parties, or defend claims they may bring against us, to determine the ownership of what we regard as our intellectual property.
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If we fail in prosecuting or defending any such claims, in addition to paying monetary damages,
we may lose valuable intellectual property rights or personnel. Even if we are successful in prosecuting or defending against such claims, litigation could result in substantial costs and be a distraction to management.
Intellectual property litigation could cause us to spend substantial resources and could distract our personnel from their normal responsibilities.
Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to
incur significant expenses, and could distract our technical and management personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or
developments. If securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our ADSs and ordinary shares. Such litigation or proceedings could substantially increase our
operating losses and reduce the resources available for development, sales, marketing or distribution activities. We may not have sufficient financial or other resources to adequately conduct such litigation or proceedings. Some of our competitors
may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources. Accordingly, costs and lost management time, as well as uncertainties resulting from the initiation and
continuation of patent litigation or other proceedings, could have a material adverse effect on our ability to compete in the marketplace.
If we
are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.
In addition
to seeking patents for some of our technology and products, we also rely on trade secrets, including unpatented know-how, technology and other proprietary and confidential information, to maintain our competitive position. We seek to protect these
trade secrets, in part, by entering into non-disclosure and confidentiality agreements with parties who have access to them, such as our employees, corporate collaborators, outside scientific collaborators, contract manufacturers, consultants,
advisors and other third parties. However, we cannot guarantee that we have executed these agreements with each party that may have or have had access to our trade secrets or that the agreements we have executed will provide adequate protection. Any
party with whom we have executed such an agreement may breach that agreement and disclose our proprietary or confidential information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. Enforcing a
claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some courts inside and outside the United States are less willing or unwilling to
protect trade secrets. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent them, or those to whom they communicate it, from using that technology or information to
compete with us. If any of our trade secrets, particularly unpatented know-how, were to be obtained or independently developed by a competitor, our competitive position would be harmed.
Risks Related to Regulatory Approval and Marketing of our Product Candidates
Even if we complete the necessary clinical trials, the marketing approval process is expensive, time-consuming and uncertain and may prevent us from
obtaining approvals for the commercialization of some or all of our product candidates. If we are not able to obtain, or if there are delays in obtaining, required regulatory approvals, we will not be able to commercialize our product candidates,
and our ability to generate revenue will be materially impaired.
Our product candidates, including ezutromid and ridinilazole, and
the activities associated with their development and commercialization, including their design, testing, manufacture, safety, efficacy, recordkeeping, labeling, storage, approval, advertising, promotion, sale and distribution, are subject to
comprehensive regulation by the FDA and by comparable authorities in other countries. Failure to obtain marketing approval for a product candidate will prevent us from commercializing the product candidate. We have not received approval to market
ezutromid, ridinilazole or any of our other future product candidates from regulatory authorities in any jurisdiction.
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We have only limited experience in filing and supporting the applications necessary to obtain
marketing approvals for product candidates and expect to rely on third-party contract research organizations to assist us in this process. Securing marketing approval requires the submission of extensive preclinical and clinical data and supporting
information to regulatory authorities for each therapeutic indication to establish the product candidates safety and efficacy. Securing marketing approval also requires the submission of information about the product manufacturing process to,
and inspection of manufacturing facilities by, the regulatory authorities. Regulatory authorities may determine that ezutromid, ridinilazole or any of our other future product candidates are not effective or only moderately effective, or have
undesirable or unintended side effects, toxicities, safety profiles or other characteristics that preclude us from obtaining marketing approval or that prevent or limit commercial use.
The process of obtaining marketing approvals is expensive, may take many years, if approval is obtained at all, and can vary substantially
based upon a variety of factors, including the type, complexity and novelty of the product candidates involved. Changes in marketing approval policies during the development period, changes in or the enactment of additional statutes or regulations,
or changes in regulatory review for each submitted product application, may cause delays in the approval or rejection of an application. Regulatory authorities have substantial discretion in the approval process and may refuse to accept any
application or may decide that our data are insufficient for approval and require additional preclinical, clinical or other studies. In addition, varying interpretations of the data obtained from preclinical and clinical testing could delay, limit
or prevent marketing approval of a product candidate. Any marketing approval we ultimately obtain may be limited or subject to restrictions or post-approval commitments that render the approved product not commercially viable. If we experience
delays in obtaining approval or if we fail to obtain approval of our product candidates, the commercial prospects for our product candidates may be harmed and our ability to generate revenues will be materially impaired.
Our failure to obtain marketing approval in jurisdictions other than the United States and Europe would prevent our product candidates from being
marketed in these other jurisdictions, and any approval we are granted for our product candidates in the United States and Europe would not assure approval of product candidates in other jurisdictions.
In order to market and sell ezutromid, ridinilazole and our other future product candidates in jurisdictions other than the United States and
Europe, we must obtain separate marketing approvals and comply with numerous and varying regulatory requirements. The approval procedure varies among countries and can involve additional testing. The time required to obtain approval may differ from
that required to obtain FDA or EMA approval. The regulatory approval process outside the United States and Europe generally includes all of the risks associated with obtaining FDA and EMA approval. In addition, some countries outside the United
States and Europe require approval of the sales price of a drug before it can be marketed. In many countries, separate procedures must be followed to obtain reimbursement. We may not obtain marketing, pricing or reimbursement approvals outside the
United States and Europe on a timely basis, if at all. Approval by the FDA or the EMA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one regulatory authority outside the United States and
Europe does not ensure approval by regulatory authorities in other countries or jurisdictions or by the FDA or the EMA. We may not be able to file for marketing approvals and may not receive necessary approvals to commercialize our products in any
market. Marketing approvals in countries outside the United States and Europe do not ensure pricing approvals in those countries or in any other countries, and marketing approvals and pricing approvals do not ensure that reimbursement will be
obtained.
Our ability to obtain and maintain conditional marketing authorizations in the European Union is limited to specific circumstances and
subject to several conditions and obligations. A failure to renew any conditional approval that we obtain prior to full approval for the applicable indication would prevent us from continuing to market our products.
Conditional marketing authorizations based on incomplete clinical data may be granted for a limited number of listed medicinal products for
human use, including products designated as orphan medicinal products under
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E.U. law, if (1) the risk-benefit balance of the product is positive, (2) it is likely that the applicant will be in a position to provide the required comprehensive clinical trial
data, (3) unmet medical needs will be fulfilled and (4) the benefit to public health of the immediate availability on the market of the medicinal product outweighs the risk inherent in the fact that additional data are still required.
Specific obligations, including with respect to the completion of ongoing or new studies, and with respect to the collection of pharmacovigilance data, may be specified in the conditional marketing authorization. Conditional marketing authorizations
are valid for one year and may be renewed annually, if the risk-benefit balance remains positive, and after an assessment of the need for additional or modified conditions. Even if we obtain conditional approval for ezutromid for the treatment of
DMD or ridinilazole for the treatment of CDI, we may not be able to renew such conditional approval.
Even if we obtain marketing approvals for our
product candidates, the terms of approvals and ongoing regulation of our products may limit how we manufacture and market our products and compliance with such requirements may involve substantial resources, which could materially impair our ability
to generate revenue.
Even if marketing approval of a product candidate is granted, an approved product and its manufacturer and
marketer are subject to ongoing review and extensive regulation, including the requirement to implement a risk evaluation and mitigation strategy or to conduct costly post-marketing studies or clinical trials and surveillance to monitor the safety
or efficacy of the product. We must also comply with requirements concerning advertising and promotion for any of our product candidates for which we obtain marketing approval. Promotional communications with respect to prescription drugs are
subject to a variety of legal and regulatory restrictions and must be consistent with the information in the products approved labeling. Thus, we will not be able to promote any products we develop for indications or uses for which they are
not approved. In addition, manufacturers of approved products and those manufacturers facilities are required to ensure that quality control and manufacturing procedures conform to cGMP, which include requirements relating to quality control
and quality assurance as well as the corresponding maintenance of records and documentation and reporting requirements. We and our contract manufacturers could be subject to periodic unannounced inspections by the FDA to monitor and ensure
compliance with cGMP.
Accordingly, assuming we receive marketing approval for one or more of our product candidates, we and our contract
manufacturers will continue to expend time, money and effort in all areas of regulatory compliance, including manufacturing, production, product surveillance and quality control. If we are not able to comply with post-approval regulatory
requirements, we could have the marketing approvals for our products withdrawn by regulatory authorities and our ability to market any future products could be limited, which could adversely affect our ability to achieve or sustain profitability.
Thus, the cost of compliance with post-approval regulations may have a negative effect on our operating results and financial condition.
Any
product candidate for which we obtain marketing approval will be subject to strict enforcement of post-marketing requirements and we could be subject to substantial penalties, including withdrawal of our product from the market, if we fail to comply
with all regulatory requirements or if we experience unanticipated problems with our products, when and if any of them are approved.
Any product candidate for which we obtain marketing approval, along with the manufacturing processes, post-approval clinical data, labeling,
advertising and promotional activities for such product, will be subject to continual requirements of and review by the FDA and other regulatory authorities. These requirements include, but are not limited to, restrictions governing promotion of an
approved product, submissions of safety and other post-marketing information and reports, registration and listing requirements, cGMP requirements relating to manufacturing, quality control, quality assurance and corresponding maintenance of records
and documents, and requirements regarding the distribution of samples to physicians and recordkeeping.
The FDA and other federal and
state agencies, including the Department of Justice, closely regulate compliance with all requirements governing prescription drug products, including requirements pertaining to
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marketing and promotion of drugs in accordance with the provisions of the approved labeling and manufacturing of products in accordance with cGMP requirements. The FDA and DOJ impose stringent
restrictions on manufacturers communications regarding off-label use and if we do not market our products for their approved indications, we may be subject to enforcement action for off-label marketing. Violations of such requirements may lead
to investigations alleging violations of the Food, Drug and Cosmetic Act and other statutes, including the False Claims Act and other federal and state health care fraud and abuse laws as well as state consumer protection laws. Our failure to comply
with all regulatory requirements, and later discovery of previously unknown adverse events or other problems with our products, manufacturers or manufacturing processes, may yield various results, including:
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litigation involving patients taking our products;
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restrictions on such products, manufacturers or manufacturing processes;
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restrictions on the labeling or marketing of a product;
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restrictions on product distribution or use;
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requirements to conduct post-marketing studies or clinical trials;
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warning or untitled letters;
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withdrawal of the products from the market;
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refusal to approve pending applications or supplements to approved applications that we submit;
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fines, restitution or disgorgement of profits or revenues;
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suspension or withdrawal of marketing approvals;
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damage to relationships with any potential collaborators;
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unfavorable press coverage and damage to our reputation;
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refusal to permit the import or export of our products;
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injunctions or the imposition of civil or criminal penalties.
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Non-compliance by us or any
future collaborator with regulatory requirements regarding safety monitoring or pharmacovigilance, and with requirements related to the development of products for the pediatric population, can also result in significant financial penalties.
Similarly, failure to comply with regulatory requirements regarding the protection of personal information can also lead to significant penalties and sanctions.
Non-compliance with E.U. requirements regarding safety monitoring or pharmacovigilance, and with requirements related to the development of
products for the pediatric population, can also result in significant financial penalties. Similarly, failure to comply with the European Unions requirements regarding the protection of personal information can also lead to significant
penalties and sanctions.
Fast track designation by the FDA may not actually lead to a faster development or regulatory review or approval process.
If a drug is intended for the treatment of a serious or life threatening condition and the drug demonstrates the potential to
address unmet medical need for this condition, the drug sponsor may apply for FDA fast track designation. The FDA has granted fast track designation for ridinilazole. However, a fast track designation does not ensure that ridinilazole will receive
marketing approval or that approval will be granted within any particular timeframe. We may also seek fast track designation for ezutromid or other future product candidates. Even if the
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FDA grants fast track designation, we may not experience a faster development process, review or approval compared to conventional FDA procedures. In addition, the FDA may withdraw fast track
designation if it believes that the designation is no longer supported by data from our clinical development program. Fast track designation alone does not guarantee qualification for the FDAs priority review procedures.
Priority review designation by the FDA may not lead to a faster regulatory review or approval process and, in any event, does not assure FDA approval of
our product candidates.
If the FDA determines that a product candidate offers major advances in treatment or provides a treatment
where no adequate therapy exists, the FDA may designate the product candidate for priority review. A priority review designation means that the goal for the FDA to review an application is six months, rather than the standard review period of ten
months. Because the FDA designated ridinilazole as a qualified infectious disease product, or QIDP, ridinilazole also will receive priority review. We may also request priority review for ezutromid or other future product candidates. The FDA has
broad discretion with respect to whether or not to grant priority review status to a product candidate, so even if we believe a particular product candidate is eligible for such designation or status, the FDA may decide not to grant it. Moreover, a
priority review designation does not necessarily mean a faster regulatory review process or necessarily confer any advantage with respect to approval compared to conventional FDA procedures. Receiving priority review from the FDA does not guarantee
approval within the six-month review cycle or thereafter.
We may not be able to obtain orphan drug exclusivity for our product candidates. If our
competitors are able to obtain orphan drug exclusivity for their products that are the same drug as our product candidates, or can be classified as a similar medicinal product within the meaning of E.U. law, we may not be able to have competing
products approved by the applicable regulatory authority for a significant period of time.
Regulatory authorities in some
jurisdictions, including Europe and the United States, may designate drugs for relatively small patient populations as orphan drugs. The FDA has granted orphan drug designation to ezutromid for the treatment of DMD, and the EMA has designated
ezutromid as an orphan medicinal product. Generally, if a product with an orphan drug designation receives the first marketing approval for the indication for which it has such designation, the product is entitled to a period of market exclusivity,
which, subject to certain exceptions, precludes the EMA from accepting another marketing application for a similar medicinal product or the FDA from approving another marketing application for the same drug for the same indication for that time
period. The applicable market exclusivity period is seven years in the United States and ten years in the European Union. The E.U. exclusivity period can be reduced to six years if a drug no longer meets the criteria for orphan drug designation,
including if the drug is sufficiently profitable so that market exclusivity is no longer justified.
In the European Union, a
similar medicinal product is a medicinal product containing a similar active substance or substances as contained in a currently authorized orphan medicinal product, and which is intended for the same therapeutic indication. For a drug
such as ezutromid, the FDA defines same drug as a drug that contains the same active moiety and is intended for the same use. Obtaining orphan drug exclusivity for ezutromid for DMD, both in the United States and in Europe, may be
important to the product candidates success. If a competitor obtains orphan drug exclusivity for and approval of a product with the same indication as ezutromid before we do and if the competitors product is the same drug or a similar
medicinal product as ours, we could be excluded from the market.
Moreover, even if we obtain orphan drug exclusivity for ezutromid for
DMD, we may not be able to maintain it. For example, if a competitive product that is the same drug or a similar medicinal product as our product candidate is shown to be clinically superior to our product candidate, any orphan drug exclusivity we
have obtained will not block the approval of such competitive product. In addition, orphan drug exclusivity will not prevent the approval of a product that is the same drug as our product candidate if the FDA finds that we cannot assure the
availability of sufficient quantities of the drug to meet the needs of the persons with the disease
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or condition for which the drug was designated. Finally, even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because
different products can be approved for the same condition.
Our relationships with customers, healthcare providers and professionals and third-party
payors will be subject to applicable anti-kickback, fraud and abuse and other healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future
earnings.
Healthcare providers, physicians and third-party payors play a primary role in the recommendation and prescription of
any product candidates, including ezutromid or ridinilazole, for which we obtain marketing approval. Our future arrangements with customers, healthcare providers and professionals and third-party payors may expose us to broadly applicable fraud and
abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we market, sell and distribute our products for which we obtain marketing approval. Restrictions under
applicable federal and state healthcare laws and regulations, include, and are not limited to, the following:
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The federal healthcare anti-kickback statute prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to
induce or reward either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made under federally funded healthcare programs such as Medicare and Medicaid. This statute has
been broadly interpreted to apply to manufacturer arrangements with prescribers, purchasers and formulary managers, among others. Several other countries, including the United Kingdom, have enacted similar anti-kickback, fraud and abuse, and
healthcare laws and regulations.
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The federal False Claims Act imposes civil penalties, including civil whistleblower or
qui tam
actions, against individuals or entities for knowingly presenting, or causing to be presented, to the federal
government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government. The government and
qui tam
relators have brought False Claims Act
actions against pharmaceutical companies on the theory that their practices have caused false claims to be submitted to the government. There is also a separate false claims provision imposing criminal penalties.
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The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, imposes criminal and civil liability for executing
a scheme to defraud any healthcare benefit program and also imposes obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information.
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HIPAA also imposes criminal liability for knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement in connection with the delivery of or payment for
healthcare benefits, items or services.
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The federal Physician Sunshine Act requirements under the Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and Education Reconciliation Act of 2010, referred to together as the
Affordable Care Act, require manufacturers of drugs, devices, biologics and medical supplies to report to the Department of Health and Human Services information related to payments and other transfers of value made to or at the request of covered
recipients, such as physicians and teaching hospitals, and physician ownership and investment interests in such manufacturers. Payments made to physicians and research institutions for clinical trials are included within the ambit of this law.
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Analogous state laws and regulations, such as state anti-kickback and false claims laws, may apply to sales or
marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers, and some state laws require
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pharmaceutical companies to comply with the pharmaceutical industrys voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government in addition
to requiring drug manufacturers to report information related to payments to physicians and other health care providers or marketing expenditures.
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Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve
substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and
regulations. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, exclusion
from government funded healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of our operations. Exclusion, suspension and debarment from government funded healthcare programs would significantly impact our ability
to commercialize, sell or distribute any drug. If any of the physicians or other providers or entities with whom we expect to do business are found to be not in compliance with applicable laws, they may be subject to criminal, civil or
administrative sanctions, including exclusions from government funded healthcare programs.
Recently enacted and future legislation may increase the
difficulty and cost for us to obtain marketing approval of and commercialize our product candidates and affect the prices we may obtain.
In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes
regarding the healthcare system that could prevent or delay marketing approval of ezutromid, ridinilazole or any of our other future product candidates, restrict or regulate post-approval activities and affect our ability to profitably sell any
product candidates, including ezutromid or ridinilazole, for which we obtain marketing approval.
In the United States, the Medicare
Prescription Drug, Improvement, and Modernization Act of 2003, or Medicare Modernization Act, changed the way Medicare covers and pays for pharmaceutical products. The legislation expanded Medicare coverage for drug purchases by the elderly and
introduced a new reimbursement methodology based on average sales prices for physician administered drugs. In addition, this legislation provided authority for limiting the number of drugs that will be covered in any therapeutic class. Cost
reduction initiatives and other provisions of this legislation could decrease the coverage and price that we receive for any approved products. While the Medicare Modernization Act applies only to drug benefits for Medicare beneficiaries, private
payors often follow Medicare coverage policy and payment limitations in setting their own reimbursement rates. Therefore, any reduction in reimbursement that results from the Medicare Modernization Act may result in a similar reduction in payments
from private payors.
In March 2010, President Obama signed into law the Affordable Care Act, a sweeping law intended to broaden access to
health insurance, 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, impose new taxes and fees on the health industry
and impose additional health policy reforms. Effective October 1, 2010, the Affordable Care Act revised the definition of average manufacturer price for reporting purposes, which could increase the amount of Medicaid drug rebates to
states. Further, the new law imposes a significant annual fee on companies that manufacture or import branded prescription drug products.
There have been multiple attempts through legislative action and legal challenge to repeal or amend the Affordable Care Act. Although the U.S.
Supreme Court in
King v. Burwell
upheld the use of subsidies to individuals in federally facilitated health care exchanges on June 25, 2015, which ultimately did not disrupt significantly the implementation of the Affordable Care Act, we
cannot predict whether other current or future efforts to repeal or amend these laws will be successful, nor can we predict the impact that such a repeal or amendment would have on our business and operations, or on our results of operations. In
addition, there are numerous steps required to implement the Affordable Care Act, and implementation remains ongoing. Congress
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also has enacted, and may continue to seek, legislative changes that alter, delay, or eliminate some of its provisions. On February 1, 2016, the Centers for Medicare and Medicaid Services
released a long-awaited new rule, the Medicaid Program Covered Outpatient Drug Final Rule, effective April 1, 2016, implementing various provisions related to covered outpatient drugs, including revising the calculation of
average manufacturer price and addressing other issues relating to Medicaid price reporting and reimbursement. These and other changes contribute to the uncertainty of the ongoing implementation and impact of the Affordable Care Act;
they also underscore the potential for additional reform going forward. Certain provisions of enacted or proposed legislative changes may negatively impact coverage and reimbursement of healthcare items and services. We cannot assure that the
Affordable Care Act, as currently enacted or as amended in the future, will not adversely affect our business and financial results and we cannot predict how future federal or state legislative or administrative changes relating to healthcare reform
will affect our business.
Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and
promotional activities for pharmaceutical products. We cannot be sure whether additional legislative changes will be enacted, or whether 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. In addition, increased scrutiny by the U.S. Congress of the FDAs 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 European Union, similar political, economic and regulatory
developments may affect our ability to profitably commercialize our products. In addition to continuing pressure on prices and cost containment measures, legislative developments at the European Union or member state level may result in significant
additional requirements or obstacles that may increase our operating costs.
We are subject to anti-corruption laws, as well as export control laws,
customs laws, sanctions laws and other laws governing our operations. If we fail to comply with these laws, we could be subject to civil or criminal penalties, other remedial measures and legal expenses, which could adversely affect our business,
results of operations and financial condition.
Our operations are subject to anti-corruption laws, including the U.K. Bribery Act
2010, or Bribery Act, the U.S. Foreign Corrupt Practices Act, or FCPA, and other anti-corruption laws that apply in countries where we do business and may do business in the future. The Bribery Act, FCPA and these other laws generally prohibit us,
our officers, and our employees and intermediaries from bribing, being bribed or making other prohibited payments to government officials or other persons to obtain or retain business or gain some other business advantage. We may in the future
operate in jurisdictions that pose a high risk of potential Bribery Act or FCPA violations, and we may participate in collaborations and relationships with third parties whose actions could potentially subject us to liability under the Bribery Act,
FCPA or local anti-corruption laws. In addition, we cannot predict the nature, scope or effect of future regulatory requirements to which our international operations might be subject or the manner in which existing laws might be administered or
interpreted.
We are also subject to other laws and regulations governing our international operations, including regulations administered
by the governments of the United Kingdom and the United States, and authorities in the European Union, including applicable export control regulations, economic sanctions on countries and persons, customs requirements and currency exchange
regulations, collectively referred to as the Trade Control laws.
There is no assurance that we will be completely effective in ensuring
our compliance with all applicable anti-corruption laws, including the Bribery Act, the FCPA or other legal requirements, including Trade Control laws. If we are not in compliance with the Bribery Act, the FCPA and other anti-corruption laws or
Trade Control laws, we may be subject to criminal and civil penalties, disgorgement and other sanctions and remedial measures, and legal expenses, which could have an adverse impact on our business, financial condition, results of operations and
liquidity. Likewise, any investigation of any potential violations of the Bribery Act, the FCPA, other anti-corruption laws or Trade Control laws by U.K., U.S. or other authorities could also have an adverse impact on our reputation, our business,
results of operations and financial condition.
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Risks Related to Employee Matters and Managing Growth
Our future success depends on our ability to retain our chief executive officer and other key executives and to attract, retain and motivate qualified
personnel.
We are highly dependent on the principal members of our executive and scientific teams, including Glyn Edwards, our
Chief Executive Officer, Erik Ostrowski, our Chief Financial Officer, Dr. Ralf Rosskamp, our Chief Medical Officer, Dr. Jonathon Tinsley, our Chief Scientific Officer, DMD, and Dr. Richard Vickers, our Chief Scientific Officer,
Antimicrobials. Although we have formal employment agreements with each of our executive officers, these agreements do not prevent our executives from terminating their employment with us at any time. We do not maintain key person
insurance on any of our executive officers. The unplanned loss of the services of any of these persons could materially impact the achievement of our research, development and commercialization objectives.
Recruiting and retaining qualified scientific, clinical, manufacturing and sales and marketing personnel, including in the United States where
we plan to continue to expand our physical presence, will also be critical to our success. We may not be able to attract and retain these personnel on acceptable terms given the competition among numerous biotechnology and pharmaceutical companies
for similar personnel. We also experience competition for the hiring of scientific and clinical personnel from universities and research institutions. In addition, we rely on consultants and advisors, including scientific and clinical advisors, to
assist us in formulating our research and development and commercialization strategy. Our consultants and advisors may be employed by employers other than us and may have commitments under consulting or advisory contracts with other entities that
may limit their availability to us.
We expect to expand our development, regulatory and sales and marketing capabilities, and as a result, we may
encounter difficulties in managing our growth, which could disrupt our operations.
We expect to experience significant growth in
the number of our employees and the scope of our operations, particularly in the areas of drug development, regulatory affairs and sales and marketing. To manage our anticipated future growth, we must continue to implement and improve our
managerial, operational and financial systems, expand our facilities and continue to recruit and train additional qualified personnel. Due to our limited financial resources and the limited experience of our management team in managing a company
with such anticipated growth, we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel. The physical expansion of our operations may lead to significant costs and may divert our
management and business development resources. Any inability to manage growth could delay the execution of our business plans or disrupt our operations.
Our employees may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements, which could
cause significant liability for us and harm our reputation.
We are exposed to the risk of employee fraud or other misconduct,
including intentional failures to comply with FDA or Office of Inspector General regulations or similar regulations of comparable non-U.S. regulatory authorities, provide accurate information to the FDA or comparable non-U.S. regulatory authorities,
comply with manufacturing standards we have established, comply with federal and state healthcare fraud and abuse laws and regulations and similar laws and regulations established and enforced by comparable non-U.S. regulatory authorities, report
financial information or data accurately or disclose unauthorized activities to us. Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and
serious harm to our reputation. It is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in
protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws, standards or regulations. If any such actions are instituted against us, and we are not successful in defending
ourselves or asserting our rights, those actions could have a significant impact on our business and results of operations, including the imposition of significant fines or other sanctions.
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Risks Related to Ownership of our American Depositary Shares and Ordinary Shares
The prices of our ADSs and ordinary shares may be volatile and fluctuate substantially, which could result in substantial losses for holders of our ADSs
and ordinary shares.
The market prices of our ADSs on the NASDAQ Global Market and of our ordinary shares on AIM may be volatile
and fluctuate substantially. The stock market in general and the market for smaller pharmaceutical and biotechnology companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular
companies. As a result of this volatility, holders of our ADSs and ordinary shares may not be able to sell their ADSs or ordinary shares at or above the price at which they were purchased. The market price for the ADSs and ordinary shares may be
influenced by many factors, including:
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the success of competitive products or technologies;
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results of clinical trials of ezutromid, ridinilazole and any other future product candidate that we develop;
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results of clinical trials of product candidates of our competitors;
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changes or developments in laws or regulations applicable to ezutromid and ridinilazole and any other future product candidates that we develop;
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developments or disputes concerning patent applications, issued patents or other proprietary rights;
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the recruitment or departure of key personnel;
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the level of expenses related to any of our product candidates or clinical development programs;
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actual or anticipated changes in estimates as to financial results, development timelines or recommendations by securities analysts;
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variations in our financial results or those of companies that are perceived to be similar to us;
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changes in the structure of healthcare payment systems;
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market conditions in the biotechnology and pharmaceutical sectors;
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general economic, industry and market conditions;
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the trading volume of ADSs on the NASDAQ Global Market and of our ordinary shares on AIM; and
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the other factors described in this Risk Factors section.
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The dual listing of our ordinary
shares and the ADSs may adversely affect the liquidity and value of the ADSs.
Our ADSs are traded on the NASDAQ Global Market, and
our ordinary shares are listed on AIM. The dual listing of our ordinary shares and the ADSs may dilute the liquidity of these securities in one or both markets and may adversely affect the maintenance of an active trading market for the ADSs in the
Unites States. The price of the ADSs could also be adversely affected by trading in our ordinary shares on AIM. Although our ordinary shares are currently listed on AIM, we may decide at some point in the future to delist our ordinary shares from
AIM, and our ordinary shareholders may approve such delisting. We cannot predict the effect such delisting of our ordinary shares on AIM would have on the market price of the ADSs on the NASDAQ Global Market.
Securities traded on AIM may carry a higher risk than shares traded on other exchanges that may impact the value of your investment.
Our ordinary shares are currently traded on AIM. Investment in equities traded on AIM is perceived by some to carry a higher risk than an
investment in equities quoted on exchanges with more stringent listing requirements, such as the London Stock Exchange, New York Stock Exchange or the NASDAQ Stock Market. This is because AIM imposes less stringent corporate governance and ongoing
reporting requirements than those
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other exchanges. In addition, AIM requires only semi-annual, rather than quarterly, financial reporting. You should be aware that the value of our ordinary shares may be influenced by many
factors, some of which may be specific to us and some of which may affect AIM-listed companies generally, including the depth and liquidity of the market, our performance, a large or small volume of trading in our ordinary shares, legislative
changes and general economic, political or regulatory conditions, and that the prices may be volatile and subject to extensive fluctuations. Therefore, the market price of our ordinary shares underlying the ADSs may not reflect the underlying value
of our company.
Substantial future sales of our ordinary shares or the ADSs in the public market, or the perception that these sales could occur,
could cause the price of the ADSs to decline significantly, even if our business is doing well.
Sales of a substantial number of
our ordinary shares or ADSs in the public market could occur at any time. These sales, or the perception in the market that these sales could occur, could cause the market price of our ADSs and ordinary shares to decline. The ordinary shares held by
our major shareholders are available for sale and are not subject to contractual and legal restrictions on resale. If any of our directors, officers or major shareholders seek to sell substantial amounts of our ADSs or ordinary shares, particularly
if these sales are in a rapid or disorderly manner, or other investors perceive that these sales could occur, the market price of our ADSs and ordinary shares could decrease significantly.
Holders of ADSs may not have the same voting rights as the holders of our ordinary shares and may not receive voting materials in time to be able to
exercise their right to vote.
Except as provided in the deposit agreement relating to the ADSs, holders of the ADSs will not be
able to exercise voting rights attaching to the ordinary shares evidenced by the ADSs. Holders of the ADSs will have the right to instruct the depositary with respect to the voting of the ordinary shares represented by the ADSs. If we tell the
depositary to solicit your voting instructions, the depositary is required to endeavor to carry out your instructions. If we do not tell the depositary to solicit your voting instructions (and we are not required to do so), you can still send
instructions, and, in that case, the depositary may, but is not required to, carry out those instructions. You may not receive voting materials in time to instruct the depositary to vote, and it is possible that you, or persons who hold their ADSs
through brokers, dealers or other third parties, will not have the opportunity to exercise a right to vote.
As a foreign private issuer, we are
exempt from a number of rules under the U.S. securities laws and are permitted to file less information with the Securities and Exchange Commission than U.S. companies. This may limit the information available to holders of the ADSs.
We are a foreign private issuer, as defined in the rules and regulations of the Securities and Exchange Commission, or the SEC,
and, consequently, we are not subject to all of the disclosure requirements applicable to companies organized within the United States. For example, we are exempt from certain rules under the U.S. Securities Exchange Act of 1934, as amended, or the
Exchange Act, that regulate disclosure obligations and procedural requirements related to the solicitation of proxies, consents or authorizations applicable to a security registered under the Exchange Act. In addition, our officers and directors are
exempt from the reporting and short-swing profit recovery provisions of Section 16 of the Exchange Act and related rules with respect to their purchases and sales of our securities. Moreover, we are not required to file periodic
reports and financial statements with the SEC as frequently or as promptly as U.S. public companies. Accordingly, there may be less publicly available information concerning our company than there is for public companies organized in the United
States.
As a foreign private issuer, we will continue to file an annual report on Form 20-F within four months of the close of each
fiscal year ending January 31 and reports on Form 6-K relating to certain material events promptly after we publicly announce these events. However, because of the above exemptions for foreign private issuers, our shareholders will not be
afforded the same protections or information generally available to investors holding shares in public companies organized in the United States.
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As a foreign private issuer, we are not subject to certain NASDAQ corporate governance rules applicable to
public companies organized in the United States.
We rely on a provision in the NASDAQ Stock Markets Listed Company Manual
that allows us to follow English company law in general and the U.K. Companies Act 2006 in particular with regard to certain aspects of corporate governance. This allows us to follow certain corporate governance practices that differ in significant
respects from the corporate governance requirements applicable to U.S. companies listed on the NASDAQ Stock Market.
For example, we are
exempt from regulations of the NASDAQ Stock Market that require listed companies organized in the United States to:
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have a majority of the board of directors consist of independent directors;
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require non-management directors to meet on a regular basis without management present;
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adopt a code of conduct and promptly disclose any waivers of the code for directors or executive officers that should address certain specified items;
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have an independent compensation committee;
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have an independent nominating committee;
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solicit proxies and provide proxy statements for all shareholder meetings;
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review related party transactions; and
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seek shareholder approval for the implementation of certain equity compensation plans and issuances of ordinary shares.
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As a foreign private issuer, we are permitted to follow home country practice in lieu of the above requirements. Accordingly, our shareholders
may not have the same protections afforded to shareholders of companies that are subject to these NASDAQ Stock Market requirements.
In
accordance with our NASDAQ Stock Market listing, our Audit Committee is required to comply with the provisions of Section 301 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, and Rule 10A-3 of the Exchange Act, both of which
are also applicable to U.S. companies listed on the NASDAQ Stock Market. Because we are a foreign private issuer, however, our Audit Committee is not subject to additional requirements of the NASDAQ Stock Market applicable to listed U.S. companies,
including an affirmative determination that all members of the Audit Committee are independent, using more stringent criteria than those applicable to us as a foreign private issuer.
We may lose our foreign private issuer status in the future, which could result in significant additional costs and expenses.
As a foreign private issuer we are not required to comply with all the periodic disclosure and current reporting requirements of
the Exchange Act and related rules and regulations. Under SEC rules, the determination of foreign private issuer status is made annually on the last business day of an issuers most recently completed second fiscal quarter and, accordingly, the
next determination will be made with respect to us on July 31, 2016.
In the future, we would lose our foreign private issuer status
if a majority of our ordinary shares (including those represented by ADSs) are owned by U.S. shareholders and a majority of our shareholders, directors or management are U.S. citizens or residents and we fail to meet additional requirements
necessary to avoid loss of foreign private issuer status. The regulatory and compliance costs to us under applicable U.S. securities laws as a U.S. domestic issuer may be significantly higher than our current regulatory and compliance costs. If we
are not
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a foreign private issuer, we will be required to file periodic reports and registration statements on U.S. domestic issuer forms with the SEC, which are more detailed and extensive than the forms
available to a foreign private issuer. For example, the annual report on Form 10-K requires domestic issuers to disclose executive compensation information on an individual basis with specific disclosure regarding the domestic compensation
philosophy, objectives, annual total compensation (base salary, bonus, equity compensation) and potential payments in connection with change in control, retirement, death or disability, while the annual report on Form 20-F permits foreign private
issuers to disclose compensation information on an aggregate basis. We will also have to report our results under U.S. Generally Accepted Accounting Principles, rather than under International Financial Reporting Standards, as a domestic registrant.
We will also have to mandatorily comply with U.S. federal proxy requirements, and our officers, directors and principal shareholders will become subject to the short-swing profit disclosure and recovery provisions of Section 16 of the Exchange
Act. We may also be required to modify certain of our policies to comply with corporate governance practices required for U.S. domestic issuers. Such conversion and modifications will involve additional costs. In addition, we may lose our ability to
rely upon exemptions from certain corporate governance requirements of the NASDAQ Stock Market that are available to foreign private issuers.
We
are an emerging growth company, and the reduced disclosure requirements applicable to emerging growth companies may make the ADSs less attractive to investors.
We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and may remain
an emerging growth company until January 31, 2021 or such earlier time that we are no longer an emerging growth company. For so long as we remain an emerging growth company, we are permitted and intend to rely on exemptions from certain
disclosure requirements that are applicable to other public companies that are not emerging growth companies. These exemptions include:
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not being required to comply with the auditor attestation requirements in the assessment of our internal control over financial reporting;
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not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditors report providing
additional information about the audit and the financial statements;
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reduced disclosure obligations regarding executive compensation; and
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exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
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We expect to continue to take advantage of some or all of the available exemptions. We cannot predict whether investors will find the ADSs
less attractive if we rely on these exemptions. If some investors find the ADSs less attractive as a result, there may be a less active trading market for the ADSs and the market price of the ADSs may be more volatile.
In addition, the JOBS Act also provides that an emerging growth company can take advantage of an extended transition period for complying with
new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of
this exemption and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.
We incur increased costs as a result of operating as a company with ADSs that are publicly traded in the United States, and our management is now
required to devote substantial time to new compliance initiatives.
As a company with ADSs that are publicly traded in the United
States, and particularly after we are no longer an emerging growth company, we have incurred and will continue to incur significant legal, accounting and other expenses that we did not previously incur. In addition, the Sarbanes-Oxley
Act, the Dodd-Frank Act,
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the listing requirements of the NASDAQ Stock Market and other applicable securities rules and regulations impose various requirements on public companies, including establishment and maintenance
of effective disclosure and financial controls and corporate governance practices. Our management and other personnel devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations increase our legal and
financial compliance costs and make some activities more time-consuming and costly.
However, for as long as we remain an emerging growth
company, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies as described in the preceding risk factor. We may remain an emerging growth
company until January 31, 2021, although if the market value of our share capital held by non-affiliates exceeds $700 million as of any July 31 before that time or if we have annual gross revenues of $1 billion or more in any
fiscal year, we would cease to be an emerging growth company as of January 31 of the applicable year. We also would cease to be an emerging growth company if we issue more than $1 billion of non-convertible debt over a three-year period.
If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial
results or prevent fraud. As a result, shareholders could lose confidence in our financial and other public reporting, which would harm our business and the trading price of the ADSs.
Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate
disclosure controls and procedures, are designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail to meet our reporting obligations. In addition,
any testing by us conducted in connection with Section 404 of the Sarbanes-Oxley Act, or Section 404, or any subsequent testing by our independent registered public accounting firm, as and when required, may reveal deficiencies in our
internal controls over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to our financial statements or identify other areas for further attention or improvement. Inferior internal
controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of the ADSs.
Pursuant to Section 404, we are required to furnish a report by our management on our internal control over financial reporting. However,
as an emerging growth company, we will not be required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm until we are no longer an emerging growth company. To
achieve compliance with Section 404 within the prescribed period, we are engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging. In this regard, we will need to continue
to dedicate internal resources, potentially engage outside consultants and adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate,
validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for internal control over financial reporting. Despite our efforts, there is a risk that we will not be able to
conclude that our internal control over financial reporting is effective as required by Section 404. This could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.
We cannot assure you that we will not be classified as a passive foreign investment company for any taxable year, which may result in adverse U.S.
federal income tax consequence to U.S. holders.
Based on our estimated gross income, the average value of our gross assets and the
nature of our business, we do not believe that we were a passive foreign investment company, or PFIC, for U.S. federal income tax purposes for our tax year ended January 31, 2016 and do not expect to be a PFIC during our tax year
ending January 31, 2017. A corporation organized outside the United States generally will be classified as a PFIC for U.S. federal income tax purposes in any taxable year in which at least 75% of its gross income is passive income or on average
at least 50% of the gross value of its assets is attributable to assets that produce passive income or
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are held for the production of passive income. Passive income for this purpose generally includes dividends, interest, royalties, rents and gains from commodities and securities transactions. Our
status in any taxable year will depend on our assets and activities in each year, and because this is a factual determination made annually after the end of each taxable year, there can be no assurance that we will not be considered a PFIC for the
current taxable year or any future taxable year. The market value of our assets may be determined in large part by reference to the market price of the ADSs and our ordinary shares, which fluctuates and which may fluctuate considerably given that
market prices of biotechnology companies have been especially volatile. If we were to be treated as a PFIC for any taxable year during which a U.S. holder held the ADSs, however, certain adverse U.S. federal income tax consequences could apply to
the U.S. holder. See Item 10.E Taxation.
U.S. investors may have difficulty enforcing civil liabilities against our Company, our
directors or members of senior management and the experts named in this Annual Report.
Our directors and some of the experts named
in this Annual Report are non-residents of the United States, and all or a substantial portion of the assets of such persons are located outside the United States. As a result, it may not be possible to serve process on such persons or us in the
United States or to enforce judgments obtained in U.S. courts against them or us based on civil liability provisions of the securities laws of the United States. Further, there is doubt as to whether English courts would enforce certain civil
liabilities under U.S. securities laws pursuant to judgments of U.S. courts based upon these civil liability provisions. In addition, awards of punitive damages in actions brought in the United States or elsewhere may be unenforceable in the United
Kingdom. An award for monetary damages under the U.S. securities laws would be considered punitive if it does not seek to compensate the claimant for loss or damage suffered and is intended to punish the defendant. The enforceability of any judgment
in the United Kingdom will depend on the particular facts of the case as well as the laws and treaties in effect at the time. The United States and the United Kingdom do not currently have a treaty providing for recognition and enforcement of
judgments (other than arbitration awards) in civil and commercial matters.
The rights of our shareholders may differ from the rights typically
offered to shareholders of a U.S. corporation.
We are incorporated under U.K. law. The rights of holders of ordinary shares and,
therefore, certain of the rights of holders of ADSs, are governed by U.K. law, including the provisions of the Companies Act 2006, and by our Articles of Association. These rights differ in certain respects from the rights of shareholders in typical
U.S. corporations.
Holders of ordinary shares and ADSs may not receive a return on their ordinary shares or ADSs other than through the sale of
their ordinary shares or ADSs.
Under current U.K. law, a companys accumulated realized profits must exceed its accumulated
realized losses (on a non-consolidated basis) before dividends can be paid. Therefore, we must have distributable profits before issuing a dividend. We have not paid dividends in the past on our ordinary shares. We intend to retain earnings, if any,
for use in our business and do not anticipate paying any cash dividends in the foreseeable future. Accordingly, other than through the sale of our shares, our shareholders are unlikely to receive a return in the foreseeable future.
Holders of our ADSs may not receive distributions on our ordinary shares represented by the ADSs or any value for them if it is illegal or impractical
to make them available to such holders.
The depositary for the ADSs has agreed to pay to holders of our ADSs or distribute the
cash dividends or other distributions it or the custodian receives on our ordinary shares or other deposited securities after deducting its fees and expenses. Holders of our ADSs will receive these distributions in proportion to the number of our
ordinary shares their ADSs represent. However, in accordance with the limitations set forth in the deposit agreement, it may be unlawful or impractical to make a distribution available to holders of our ADSs. We have
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no obligation to take any other action to permit the distribution of the ADSs, ordinary shares, rights or anything else to holders of the ADSs. This means that holders of our ADSs may not receive
the distributions we make on our ordinary shares or any value from them if it is unlawful or impractical to make them available to such holders. These restrictions may have a material adverse effect on the value of our ADSs.
Our executive officers, directors and principal shareholders maintain the ability to control or significantly influence all matters submitted to
stockholders for approval.
As of April 15, 2016, our executive officers, directors and principal shareholders beneficially
owned, in the aggregate, ordinary shares and ADSs representing approximately 48.91% of our outstanding share capital. As a result, if these shareholders were to choose to act together, they would be able to control or significantly influence all
matters submitted to our shareholders for approval, as well as our management and affairs. For example, these persons, if they choose to act together, would control or significantly influence the election of directors and approval of any merger,
consolidation or sale of all or substantially all of our assets. This concentration of voting power could delay or prevent an acquisition of our company on terms that other holders of ADSs and ordinary shares may desire.
In addition, and in accordance with the terms of our articles of association, our board is also in the process of implementing a classified
board structure such that not all members of the board are elected at one time. Because our board of directors is responsible for appointing the members of our management team, this structure may frustrate or prevent any attempts by our shareholders
to replace or remove our current management by making it more difficult for shareholders to replace members of our board of directors.
We are
exposed to risks related to currency exchange rates.
We conduct a significant portion of our operations outside of the United
Kingdom. Because our financial statements are presented in pounds sterling, changes in currency exchange rates have had and could have a significant effect on our operating results when our operating results are translated into U.S. dollars.
Exchange rate fluctuations between local currencies and the pound sterling create risk in several ways, including the following: weakening of the pound sterling may increase the pound sterling cost of overseas research and development expenses and
the cost of sourced product components outside the United Kingdom; strengthening of the pound sterling may decrease the value of our revenues denominated in other currencies; the exchange rates on non-sterling transactions and cash deposits can
distort our financial results; and commercial pricing and profit margins are affected by currency fluctuations.
We have broad discretion in the use
of our cash and cash equivalents and may not use them effectively.
Our management has broad discretion in the use of our cash and
cash equivalents and could spend our cash in ways that do not improve our results of operations or enhance the value of our ADSs and ordinary shares. The failure by our management to apply these funds effectively could result in financial losses
that could have a material adverse effect on our business, cause the market price of the ADSs and ordinary shares to decline and delay the development of our product candidates.
Item 4:
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Information on the Company
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A.
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History and Development of the Company
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We were founded in 2003 and are a public limited
company incorporated under the laws of England and Wales with the Registrar of Companies of England and Wales, United Kingdom. Our principal office is located at 85b Park Drive, Milton Park, Abingdon, Oxfordshire, OX14 4RY, and our telephone number
is +(44) 1235 443 939. Our U.S. operations are conducted by our wholly-owned subsidiary Summit Therapeutics Inc., a Delaware corporation. Our ordinary shares have traded on AIM, which is a sub-market of the London Stock Exchange, since October,
2004, under the symbol SUMM and our American Depositary Shares have traded on the NASDAQ Global Market since March 2015, under the symbol SMMT.
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Our website address is www.summitplc.com. The information contained on, or that can be accessed
from, our website does not form part of this Annual Report. Our agent for service of process in the United States is C T Corporation System, 111 Eighth Avenue, New York, New York 10011.
In the three-year period ended January 31, 2016, we have invested a total of £0.1 million in equipment and facilities.
Overview
We are a biopharmaceutical company focused on the discovery, development and commercialization of novel medicines for indications for which
there are no existing or only inadequate therapies. We are conducting clinical programs focused on the genetic disease Duchenne muscular dystrophy, or DMD, and the infectious disease
Clostridium difficile
infection, or CDI.
Duchenne Muscular Dystrophy
Our
lead DMD product candidate is ezutromid (formerly SMT C1100), an orally administered small molecule. We expect to commence enrollment and dosing of patients in a Phase 2 clinical trial of ezutromid in patients with DMD during the second quarter of
2016. This trial is designed to evaluate the potential benefits of longer-term dosing of ezutromid by measuring a number of endpoints related to muscle health and muscle function, along with monitoring the safety and tolerability of long-term
exposure to ezutromid. We refer to this Phase 2 clinical trial as PhaseOut DMD, a Phase 2 proof of concept clinical trial. We expect to report data periodically during this trial with the first set of 24-week muscle biopsy data from the first group
of patients enrolled expected to be reported in January 2017. Our DMD program is based on utrophin modulation, an approach to treating DMD that is independent of the underlying mutations in the dystrophin gene that cause the disease. We are a leader
in the field of utrophin modulation, an approach that we believe has the potential to address the entire population of DMD patients. Other DMD approaches, such as exon-skipping and suppression of nonsense mutations, only address subsets of this
population. The U.S. Food and Drug Administration, or the FDA, has granted orphan drug designation to ezutromid for the treatment of DMD, and the European Medicines Agency, or the EMA, has designated ezutromid as an orphan medicinal product.
DMD is one of the most common and the most severe form of muscular dystrophy. DMD predominantly affects males and results in the progressive
wasting of muscles throughout the body. The disease typically results in death by the time DMD patients reach their late twenties. Individuals with DMD are unable to produce dystrophin, a protein essential for maintaining healthy muscle function.
Utrophin is a naturally occurring protein that is functionally and structurally similar to dystrophin. Utrophin plays an active role in
the development of new muscle fibers, in particular during fetal development, and in repairing damaged muscle fibers. Utrophin production is down regulated, or switched off, in the late stages of gestation and can switch on and off as needed to
repair damaged muscle. We believe that our approach of utrophin modulation can be used to maintain the production of utrophin in all skeletal muscles, including the diaphragm, and the heart to compensate for the lack of dystrophin in DMD patients,
thereby restoring and maintaining healthy muscle function. This approach to treating DMD is independent of the underlying dystrophin gene mutation, and we believe has the potential to treat the entire population of DMD patients.
To date, we have conducted three Phase 1 clinical trials of ezutromid. We completed a Phase 1 clinical trial of ezutromid in healthy
volunteers in 2012, a Phase 1b clinical trial of ezutromid in DMD patients in May 2014 and another Phase 1b clinical trial of ezutromid in DMD patients in September 2015. The second Phase 1b clinical trial of ezutromid in DMD patients that evaluated
the impact of diet on plasma levels of the drug. We refer to this second Phase 1b as our Phase 1b modified diet trial. In all of our Phase 1 trials, ezutromid was well tolerated at all doses tested with no serious adverse events reported. We hold
exclusive worldwide commercialization rights for ezutromid for all indications.
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In addition to the PhaseOut DMD clinical trial for ezutromid, we are also evaluating in a Phase 1
clinical trial a potential optimized formulation of ezutromid. We are also currently pursuing a broad utrophin modulator technology program to develop second and future generation utrophin modulator product candidates. This development is being
undertaken as part of a strategic alliance with research groups at the University of Oxford.
Clostridium difficile Infection
Our lead CDI product candidate is ridinilazole (formerly SMT19969), an orally administered small molecule antibiotic. We reported positive
top-line results from a Phase 2 clinical trial of ridinilazole in November 2015 and reported additional data in April 2016. Ridinilazole is designed to selectively target
Clostridium difficile
bacteria without causing collateral damage to the
gut flora and thereby reduce CDI recurrence rates, which is the key clinical issue in this disease. The FDA has designated ridinilazole as a qualified infectious disease product, or QIDP, and the FDA granted ridinilazole fast track status in July
2015. In 2013, the Centers for Disease Control and Prevention of the U.S. Department of Health and Human Services, or CDC, highlighted CDI as one of three pathogens that pose an immediate public health threat and require urgent and aggressive
action.
CDI is a bacterial infection of the colon that produces toxins causing inflammation of the colon and severe diarrhea. CDI can
also result in more serious disease complications, including pseudomembranous colitis, bowel perforation, toxic megacolon and sepsis. CDI typically develops following the use of broad spectrum antibiotics that can cause widespread damage to the
natural gut flora and allow overgrowth of
Clostridium difficile
bacteria. CDI represents a serious healthcare issue in hospitals, long-term care homes and, increasingly, in the wider community. A study published in 2012 in
Clinical
Infectious Diseases
, a peer reviewed journal published by the Infectious Diseases Society of America, estimated that CDI-related acute care costs total $4.8 billion per year in the United States alone.
We completed a Phase 1 clinical trial of ridinilazole in healthy volunteers in 2013. In this Phase 1 clinical trial, ridinilazole was
highly selective for total
clostridia
bacteria with minimal impact on the other gut flora of subjects, which was consistent with the results of our preclinical studies of ridinilazole. In November 2015, we reported top-line results from our
double blind, randomized, active controlled Phase 2 clinical trial that evaluated ridinilazole compared to the current standard of care, vancomycin, for the treatment of CDI. The Phase 2 clinical trial exceeded its primary endpoint of
non-inferiority, with ridinilazole achieving statistical superiority over vancomycin in sustained clinical response, or SCR. The statistical superiority was driven by a large numerical reduction in recurrent disease compared with vancomycin.
Preliminary analysis of the data from our Phase 2 clinical trial of ridinilazole also showed ridinilazole to be highly preserving of the gut microbiome compared to patients who received vancomycin, who experienced substantial damage to the gut
microbiome which for many patients persisted during the 30-day post-treatment period. Ridinilazole was well tolerated at all doses tested in both the Phase 1 and Phase 2 clinical trials. We hold exclusive worldwide commercialization rights for
ridinilazole for all indications.
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Our Product Development Pipeline
The following table summarizes our product development pipeline. We are also developing an earlier stage pipeline of second and future
generation utrophin modulators for the treatment of DMD.
Our Strategy
Our goal is to become a fully integrated biopharmaceutical company focused on the discovery, development and commercialization of novel
medicines for indications for which there are no existing or only inadequate therapies, with a current focus on DMD and CDI. The key elements of our strategy to achieve this goal are:
Rapidly advance the development of our lead product candidates, ezutromid for DMD and ridinilazole for CDI.
We are focusing our resources and business efforts primarily on rapidly advancing the development of ezutromid for the treatment of DMD and
ridinilazole for the treatment of CDI. We believe that there is significant market potential for each of these product candidates. We also believe that the orphan drug designation of ezutromid and the QIDP and fast track designations of ridinilazole
may expedite the regulatory review process for each of these product candidates and potentially provide market protection benefits. We expect to commence enrollment and dosing of patients in PhaseOut DMD at trial sites in the United Kingdom during
the second quarter of 2016 and at trial sites in the United States during the third quarter of 2016. This Phase 2 clinical trial is expected to evaluate the benefits of longer-term dosing of ezutromid by measuring a number of endpoints related to
muscle health and muscle function, including levels of utrophin protein in muscle fibers and levels of muscle fiber regeneration from muscle biopsies, changes in muscle inflammation and fat infiltration through the use of magnetic resonance imaging,
or MRI, the distance walked during the six minute walk test and the North Star Ambulatory Assessment, a test of motor functions. We expect to report data periodically during this trial with the first set of 24-week muscle biopsy data from the first
group of patients enrolled expected to be reported in January 2017. We reported top-line data from our double blind, randomized, active controlled Phase 2 clinical trial that evaluated ridinilazole compared to vancomycin for the treatment of CDI in
November 2015. The primary endpoint of the trial was exceeded with ridinilazole achieving statistical superiority over vancomycin in sustained clinical response, with this superiority being driven by a large numerical reduction in recurrent disease
compared to vancomycin. We are undertaking activities required to advance ridinilazole into Phase 3 clinical trials and, as detailed below, evaluating our options to maximize the commercial potential of ridinilazole.
Maintain and expand our leadership in the field of utrophin modulation.
We are developing ezutromid as the first of a new class of drugs called utrophin modulators. Utrophin modulation is an approach to treating DMD
that is independent of the underlying dystrophin gene mutation. Our
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co-founder and scientific advisor, Professor Kay Davies at the University of Oxford, discovered utrophin and then developed the concept of utilizing utrophin modulation as a treatment potentially
applicable to all DMD patients. Our DMD program was founded to develop and commercialize drugs for DMD using this approach to treatment. We plan to apply and enhance our existing knowledge, experience and proprietary rights to maintain and expand
our leadership in the field of utrophin modulation. For example, in addition to the PhaseOut DMD clinical trial for ezutromid, we are also evaluating in a Phase 1 clinical trial a potential optimized formulation of ezutromid. We are also currently
pursuing a broad utrophin modulator technology program consisting of internally developed second generation utrophin modulators designed to include improved pharmacokinetic properties and a pipeline of novel, future generation utrophin modulators
with potential new mechanisms that we are developing in collaboration with the University of Oxford.
Commercialize ezutromid for DMD in the United
States and Europe with our own specialty commercial team.
We hold exclusive worldwide commercialization rights for ezutromid for
all indications. If ezutromid receives marketing approval, we intend to commercialize it initially in the United States and Europe with our own focused, specialized sales force that we plan to establish. We believe that medical specialists treating
DMD are sufficiently concentrated that we will be able to effectively promote ezutromid with a targeted sales team in these and potentially other key territories. We also believe that our relationships with patient advocacy groups will strengthen
our ability to market ezutromid. Outside of the United States and Europe, we plan to evaluate the potential for utilizing collaboration, distribution and other marketing arrangements with third parties to commercialize ezutromid.
Maximize the commercial potential of ridinilazole.
We hold exclusive worldwide commercialization rights for ridinilazole for all indications. We are evaluating our options to maximize the
commercial opportunity for ridinilazole. We may seek third-party collaborators for the development and commercialization of ridinilazole. Although our preference is to seek a third-party collaborator, we also intend to continue to evaluate the
relative merits of retaining commercialization rights for ourselves or seeking funding from government entities and philanthropic, non-government and not for profit organizations. In this evaluation, we expect to consider factors such as the
anticipated development costs required to achieve marketing approval, the sales and marketing resources required in each territory in which we receive approval, the relative size of the market opportunity in such territory, the particular expertise
of the third party and the proposed financial terms of the arrangement.
Seek additional governmental and other third party grants and support.
We have obtained development funding and other assistance from government entities, philanthropic, non-government and not for
profit organizations and patient advocacy groups for our product candidates. For example, we have received grant funding and clinical trial support from Innovate UK and several DMD organizations, including groups based in the United States, such as
the Muscular Dystrophy Association, Parent Project Muscular Dystrophy, Charleys Fund, Cure Duchenne, Foundation to Eradicate Duchenne and the Nash Avery Foundation, and groups based in the United Kingdom, such as Joining Jack. The Wellcome
Trust Limited provided funding for our recently completed Phase 2 clinical trial of ridinilazole. We plan to continue to encourage these types of organizations to provide additional funding and support for our development programs.
Duchenne Muscular Dystrophy Overview
Duchenne muscular dystrophy is one of the most common and the most severe form of muscular dystrophy. DMD is a fatal disease that results in
progressive wasting of muscles throughout the body. DMD is caused by different genetic mutations affecting the dystrophin gene on the X-chromosome, and therefore predominately affects males. As a result of these genetic mutations, DMD patients are
unable to produce dystrophin, a protein essential for maintaining healthy muscle function. Over time, the muscles of DMD patients deteriorate and are infiltrated by fat and scar tissue, which is referred to as fibrosis, leading to the loss of
ambulation, loss of respiratory and cardiac function and ultimately death.
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Based on prevalence data published in July 2015 by Orphanet, a publicly available reference
portal for information on rare diseases and orphan drugs, we estimate that there are approximately 50,000 DMD patients in the developed world and 250,000 DMD patients globally. According to an article published in 2013 in the peer reviewed journal
Muscle & Nerve
, approximately one in every 5,000 males is born with DMD. All ethnic groups are generally susceptible to DMD at approximately the same rates. Approximately two-thirds of DMD cases are due to inherited mutations, with
the remainder being the result of spontaneous mutations in the dystrophin gene in patients with no familial history of the disease.
DMD
is typically diagnosed in patients who are between two and seven years of age. The onset of the physical symptoms can be difficult to recognize, but early indicators of disease due to muscle weakness include difficulty walking or jumping, frequent
falling over and becoming fatigued more easily. A preliminary diagnosis is typically made by measuring blood plasma levels of the enzyme creatine kinase, or CK. CK levels in DMD children are often ten to 100 times higher than CK levels in non-DMD
children. A diagnosis of DMD is then confirmed through genetic testing using blood cells or muscle biopsy. In the United States and Europe, there are a number of newborn screening studies that can diagnose DMD at birth, although these tests are not
yet routinely performed.
Initially, DMD affects the skeletal muscles in the arms, legs and trunk. By around 12 years of age, most DMD
patients will need to use a wheelchair on a regular basis. Significant loss of skeletal muscle function takes place during the teenage years, and, while greater assistance is needed for activities involving arms, legs or trunk, most patients will
retain use of their fingers, allowing them to write or use computers. Symptoms of scoliosis, or curvature of the spine, may also develop due to loss of trunk muscle function.
In the later stages of disease progression, life threatening heart and respiratory conditions become common. The function of the diaphragm and
muscles responsible for the mechanical aspects of breathing deteriorates, leading to shortness of breath and build-up of fluid in the lungs and requiring ventilation at night and eventually on a 24-hour basis. DMD patients also develop
cardiomyopathy, or enlarged hearts. The failure of the cardiac and respiratory systems typically leads to death by the time DMD patients reach their late twenties.
Current DMD Treatments and Development Approaches
There is currently no approved therapy for the treatment of DMD applicable to all DMD patients that seeks to alter the progression of the
disease. Corticosteroids are prescribed to DMD patients from a young age to help treat symptoms of the disease. However, long-term use of corticosteroids is associated with severe side effects and concerns over weight gain. Other treatments to
manage the symptoms of the disease include regular physiotherapy, surgery and mechanical support, such as wheelchairs and leg braces, and dietary supplements. The FDA recognizes the unmet medical need in DMD, the devastating nature of the disease
for patients and their families and the urgency to make new treatments available. The FDA publicly stated in October 2014 that it remains committed to working with all companies to expedite the development and approval of safe and effective drugs to
treat this disease. The Director of the FDAs Center for Drug Evaluation and Research also stated in a speech in July 2014 that the agency was willing to explore the use of all potential pathways for approval of DMD drugs, including accelerated
approval, as appropriate. In June 2015, the FDA issued draft guidance on developing drugs for the treatment of DMD and related dystrophinopathies.
There are different approaches in development for the treatment of DMD, some of which seek to alter the progression of the disease by
targeting the underlying genetic cause and others that seek to provide symptomatic relief. One approach that seeks to alter the progression of the disease involves targeting the specific genetic mutations known as nonsense mutations. Nonsense
mutations create a premature stop signal in the translation of the genetic code and prevent the production of functional dystrophin protein. DMD caused by nonsense mutations affects approximately 13% of all DMD patients. Other disease modifying
treatment approaches for DMD are based on a scientific approach known as exon-skipping. Exons are organic molecules known as nucleotides within the DNA strand that the cellular machinery translates to make truncated but functional protein.
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In a sub-population of DMD patients, synthesis of the dystrophin protein is disrupted because of mutations that may be due, among other things, to deleted exons. Exon-skipping technology seeks to
allow the production of a truncated but still functional dystrophin protein. According to an article published in 2009 in the peer reviewed journal
Human Mutation
, skipping of the ten most common exons would treat in aggregate approximately
41% of all DMD patients. We believe that there are exon-skipping therapies currently in clinical development to address four of these exons and that skipping of these would treat in aggregate less than one-third of all DMD patients. A number of
other treatments being developed seek to alleviate the symptoms of DMD. These include promotion of muscle tissue growth based on myostatin inhibition, anti-inflammatory and anti-fibrotic drugs, treatments to improve respiratory function, and gene
therapy based approaches.
Our Utrophin Modulation Approach for the Treatment of DMD
Our Approach
We believe that our
approach of utilizing utrophin modulation for DMD has the potential to slow or stop the progression of DMD in all patients with the disease. Utrophin is a naturally occurring protein that is functionally and structurally similar to dystrophin. The
aim of utrophin modulation is to maintain the production of utrophin in all skeletal muscles, including the diaphragm, and the heart to compensate for the lack of dystrophin in DMD patients, thereby restoring and maintaining healthy muscle function.
This approach to treating DMD is independent of the underlying dystrophin gene mutation. As illustrated in the figure below, we believe utrophin modulation has the potential to treat the entire population of DMD patients, unlike other DMD approaches
that also seek to alter the progression of the disease but only address subsets of the total DMD population.
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Further, we believe utrophin modulation could potentially be complementary to potential treatments for DMD
based on other scientific approaches, including approaches that are focused on restoring dystrophin, such as exon-skipping and suppression of nonsense mutations. We also expect that utrophin modulation has the potential to benefit patients with
Becker muscular dystrophy, a milder form of the disease in which the majority of patients produce low levels of shortened dystrophin.
The Role of
Utrophin and Dystrophin in Muscle Fibers
Utrophin and dystrophin are structurally and functionally similar proteins that perform a
critical role in maintaining the proper function of muscle fibers, although at different times and in different settings. The roles of utrophin and dystrophin depend on whether the muscle fibers are mature, in the development stage or in the process
of being repaired and regenerated. As discussed below, dystrophin plays an active role in maintaining the function of mature muscle fibers, while utrophin plays an active role in the development of new muscle fibers and in repairing damaged muscle
fibers.
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Role of Dystrophin in Mature Muscle
Each muscle in the body is made up of bundles of thousands of muscle fibers. Dystrophin and a group of different proteins that bind to
dystrophin, which are called the Dystrophin Associated Protein Complex, are located at specific sites along the entire length of the muscle cell membrane, referred to as the sarcolemma, of every muscle fiber. Dystrophin works by linking the actin
cytoskeleton, which is a part of the muscle fibers contractile apparatus, to the Dystrophin Associated Protein Complex in the sarcolemma. The Dystrophin Associated Protein Complex, in turn, links the sarcolemma to the extracellular matrix,
which binds the bundles of muscle fibers together. This link serves as a molecular shock absorber that helps to maintain stability and elasticity of muscle fibers during contraction and relaxation. In the absence of dystrophin, this linkage is lost
and muscles become damaged, which leads to continual destructive rounds of muscle degeneration and regeneration and ultimately to progressive muscle wasting. The figure below depicts the Dystrophin Associated Protein Complex and illustrates the role
of dystrophin (or utrophin) and the other proteins that make up this complex.
The Role of Dystrophin or Utrophin in the Associated
Protein Complex
Role of Utrophin in Developing Muscle
In both DMD patients and healthy individuals, utrophin and the proteins that comprise the Dystrophin Associated Protein Complex are highly
localized at specific sites along the length of muscle fibers during fetal development. Utrophin production is then down regulated, or switched off, in the late stages of gestation. In the normal muscle fiber of healthy individuals, the production
of dystrophin begins to replace utrophin at these sites in the maturing muscle fiber, eventually fully replacing utrophin. In the muscle fiber of DMD patients, who are unable to produce functional dystrophin to substitute for the down regulating
utrophin, these sites in the muscle fiber become unoccupied, which leads to muscle degeneration as muscles mature.
Role of Utrophin in Regenerating
Muscle
In both DMD patients and healthy individuals, utrophin is localized to the neuromuscular junctions, which connect nerve fibers
and muscles, and myotendinous junctions, which connect tendons and muscles. The other major role of utrophin is to stabilize newly regenerating muscle fibers as part of the natural repair process. After a muscle fiber is damaged, utrophin production
switches on as needed to repair the damaged region and then switches off following successful repair.
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Expected Effect of Utrophin Modulation for DMD
We believe that our approach of utrophin modulation can be used to maintain the production of utrophin in maturing and mature muscle fibers and
compensate for the lack of dystrophin in DMD patients, thereby restoring and maintaining healthy muscle function. The figure below illustrates the transition from utrophin to dystrophin production in the normal muscle fiber of a healthy individual,
the effect of the lack of dystrophin production in the muscle fiber of a DMD patient and the expected effect of utrophin modulation in the muscle fiber of a DMD patient to compensate for the lack of dystrophin production.
Origins of Our Utrophin Modulation Approach
Our co-founder and scientific advisor, Professor Kay Davies at the University of Oxford, discovered utrophin and then developed the concept of
utilizing utrophin as a treatment potentially applicable to all DMD patients. Our DMD program was founded to develop and commercialize drugs for DMD using this approach to treatment. Professor Davies research group at the University of Oxford
developed transgenic lines of an
mdx
mouse that were genetically engineered to continually express utrophin protein. The
mdx
mouse is a naturally occurring animal model that is dystrophin deficient and is the standard disease model for
studies of DMD. In these experiments, the continued expression of utrophin, even at levels just above those in a normal
mdx
mouse, had a meaningful, positive effect on muscle performance.
Our utrophin modulation program uses small molecule drugs that are designed to achieve the same effect seen in the transgenic
mdx
mouse
experiments and to continually express utrophin to protect muscle fibers against DMD.
Ezutromid Overview
Our most advanced utrophin modulator product candidate is ezutromid, an orally administered small molecule.
To date, we have conducted three Phase 1 clinical trials of ezutromid. We completed a Phase 1 clinical trial of ezutromid in healthy
volunteers in 2012, a Phase 1b clinical trial of ezutromid in DMD patients in May 2014 and another Phase 1b clinical trial of ezutromid in DMD patients in September 2015. The second Phase 1b clinical trial of ezutromid in DMD patients evaluated the
impact of diet on plasma levels of the drug. We refer to this second Phase 1b trial as our Phase 1b modified diet trial. Our Phase 1b modified diet trial met its primary objective with patients achieving plasma levels of ezutromid that may be
sufficient to modulate the production of utrophin protein and possibly result in clinical benefit while following specific dietary guidance.
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In all three Phase 1 clinical trials, ezutromid was well tolerated at all doses tested with no
serious adverse events reported.
We are currently conducting a Phase 2 clinical trial of ezutromid in patients with DMD. We refer to this
Phase 2 trial as PhaseOut DMD. We expect to commence enrollment and dosing of patients in PhaseOut DMD at trial sites in the United Kingdom during the second quarter of 2016 and at trial sites in the United States during the third quarter of 2016.
The PhaseOut DMD trial will evaluate the benefits of longer-term dosing of ezutromid by measuring a number of endpoints related to muscle health and muscle function, including levels of utrophin protein in muscle fibers and levels of muscle fiber
regeneration from muscle biopsies, changes in muscle inflammation and fat infiltration through the use of MRI, distance walked during a six minute walk test and the North Star Ambulatory Assessment. We expect to report data periodically during this
trial with the first set of 24-week muscle biopsy data from the first group of patients enrolled expected to be reported in January 2017.
We are currently developing ezutromid as a flavored aqueous suspension for use in our PhaseOut DMD trial, and we believe this formulation is
appropriate for administration to DMD patients, especially children.
We are also developing an optimized formulation of ezutromid that
may be capable of achieving higher plasma levels in all patients treated with ezutromid. In March 2016, we reported interim data from our ongoing Phase 1 dose escalating clinical trial of ezutromid. The interim data from the trial showed that, in
healthy volunteers, one of the two new formulations achieved an over ten-fold increase in plasma levels of ezutromid compared to the current clinical formulation of ezutromid. This formulation was selected to progress into the second part of the
trial and undergo evaluation in patients with DMD. The Phase 1 dose escalating clinical trial is also expected to evaluate higher doses of the new formulation.
The FDA has granted orphan drug designation to ezutromid for the treatment of DMD, and the EMA has designated ezutromid as an orphan medicinal
product. In the United States, if a product with orphan designation receives FDA approval, the FDA will not approve a later product for the same indication that uses the same active ingredient for seven years, unless the later product is shown to be
clinically superior. In the European Union, if an orphan medicinal product receives EMA approval, the EMA will not approve a later product for the same therapeutic indication and with the same method of action for ten years after the orphan
medicinal product receives EMA approval, subject to certain exceptions, including if the later product demonstrates clinical superiority.
Ezutromid
Clinical Development
To date we have completed three Phase 1 clinical trials of ezutromid, which are summarized in the table below.
The design and results of each clinical trial are discussed in more detail further below.
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Trial
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Description
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Duration of
Treatment
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Total No.
of Patients
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No. of Patients
Treated with
Ezutromid
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Phase 1 healthy volunteer trial (Trial 01)
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Double blind, placebo controlled, ascending single and multiple oral dose trial
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10 days
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49
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36
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Phase 1b DMD patient trial (Trial 02)
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Open label, ascending single and multiple oral dose trial
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10 days
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12
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12
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Phase 1b modified diet trial (Trial 03)
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Double blind, randomized, placebo controlled multiple oral dose trial with dietary guidance
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14 days
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12
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12
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Phase 1 Clinical Trial in Healthy Volunteers
In 2012, we completed a double blind, placebo controlled, ascending single and multiple oral dose Phase 1 clinical trial of ezutromid in
healthy volunteers. We conducted this clinical trial at a single site in the United Kingdom under approval from the Medicines and Healthcare products Regulatory Agency, or MHRA, and the
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U.K. Health Research Authority Ethics Review Committee, or the Ethics Review Committee. We enrolled 49 healthy male subjects who were between 18 and 55 years of age. Forty-seven subjects
completed the clinical trial. Two subjects withdrew from the clinical trial for reasons unrelated to ezutromid.
The primary objective of
the clinical trial was to determine the safety and tolerability of single and multiple oral doses of ezutromid in healthy male subjects. The secondary objectives were to determine the single and multiple oral dose pharmacokinetics of ezutromid based
on the concentration of the drug in blood plasma and the effect of fasting on the single oral dose pharmacokinetics of ezutromid.
We
conducted the clinical trial in two parts. Part 1 consisted of an ascending single dose study with a fasted effect evaluation. We evaluated a total of 32 subjects, who were divided into four equal cohorts of eight subjects each. Subjects in the four
cohorts received one of the following doses of ezutromid: 50 mg/kg, 100 mg/kg, 200 mg/kg or 400 mg/kg. Six subjects in each cohort received ezutromid at the specified dose, and two subjects in each cohort received placebo. Each subject in the cohort
receiving ezutromid at a dose of 200 mg/kg received doses under both fasted and fed conditions, while the subjects in the other cohorts received doses under normal, fed conditions, with no special dietary rules. One subject was removed during
Part 1 of the clinical trial prior to dosing in a fasted state after testing positive for drug use.
Part 2 of the clinical trial
consisted of a multiple ascending dose study. We evaluated a total of 16 subjects, who were divided into two cohorts of eight subjects each. In the first cohort, six subjects received 100 mg/kg doses of ezutromid and two subjects received placebo,
in each case administered twice per day for ten days. In the second cohort, six subjects received 200 mg/kg doses of ezutromid and two subjects received placebo, in each case administered twice per day for ten days.
Analysis of Trial Results
We observed
the following results from this clinical trial:
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Ezutromid was Well Tolerated.
In both Part 1 and Part 2 of the clinical trial, ezutromid was well tolerated at all doses tested. The only observed treatment related adverse event was pale stools, which
only occurred at the 200 mg/kg and 400 mg/kg dose levels. The pale stools were attributed to unabsorbed ezutromid passing through the gastrointestinal tract at these higher dose levels. All other adverse events were mild in severity and resolved
without treatment.
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Higher Plasma Concentrations When Ezutromid Dosed with Food.
The dietary state of subjects in the clinical trial had a meaningful effect on systemic exposure. As illustrated in the figure below, after we
administered a single dose of 200 mg/kg of ezutromid to subjects in the 200 mg/kg cohort of Part 1 of the clinical trial, the mean plasma concentration of drug in the blood over time, as determined by quantification of the area under the curve,
in the subjects when they were in a fed state (n = 6) was approximately five times higher than the same subjects when they were in a fasted state (n = 5).
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Targeted Plasma Levels Achieved in All Subjects after Multiple Dosing.
When we administered 100 mg/kg doses of ezutromid twice a day for ten days, the steady state plasma concentration achieved in all
subjects was greater than 0.2 µM (67 ng/mL), which was the concentration that corresponded to a 50% increase in utrophin protein levels in our preclinical studies described in more detail below. The mean blood plasma concentration of ezutromid
in the 12 hours following administration of the final dose is illustrated in the figure below. However, there were differences among subjects, with the amount of time that each subject had plasma concentrations of utrophin protein greater than 0.2
µM ranging from seven to 12 hours following dosing. Utrophin protein has a half-life of three to four weeks, and we believe that a few hours of exposure to ezutromid following regular dosing may lead to an accumulation of utrophin protein in
muscle tissue over time. Subjects receiving 200 mg/kg doses of ezutromid twice a day for ten days did not achieve higher plasma concentrations of ezutromid than subjects receiving 100 mg/kg doses of ezutromid on this dosing schedule. As a result, we
expect that the maximum dose of ezutromid in our future clinical trials will be 100 mg/kg.
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Stable Plasma Levels of Ezutromid When Administered Through Multiple Dosing.
When we administered 100 mg/kg doses of ezutromid twice a day for ten days with meals, all subjects achieved stable, or steady
state, blood plasma concentrations of drug within three to five days after the beginning of dosing. However, we observed differences in plasma concentrations across subjects, which we believe resulted from varying levels of activity of CYP1A, a
liver enzyme that metabolizes ezutromid, in different subjects.
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Initial Phase 1b Clinical Trial in DMD Patients
In May 2014, we completed an open label, ascending single and multiple oral dose Phase 1b clinical trial in patients with DMD. We believe this
clinical trial was the first time a utrophin modulator drug had been administered to DMD patients. We conducted this clinical trial at four sites in the United Kingdom under approval from the MHRA and the Ethics Review Committee. We enrolled 12 boys
with DMD who were between five and 11 years of age.
The primary objective of the clinical trial was to determine the safety and
tolerability of single and multiple oral doses of ezutromid. The secondary objectives were to determine the single and multiple oral dose pharmacokinetics of ezutromid and its metabolites in patients with DMD. In addition, an exploratory objective
of the clinical trial was to quantify potential systemic activity biomarkers.
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We divided the patients into three cohorts of four boys each. Patients in each of the cohorts
received different doses of ezutromid for 11 days. The patients in all of the cohorts were treated in a fed state. The clinical trial protocol provided for the administration of ezutromid within ten minutes after consuming a substantial meal.
Patients in the first cohort received the following doses of ezutromid:
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a single 50 mg/kg dose on day one;
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50 mg/kg doses administered twice per day on days two to ten; and
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a single 50 mg/kg dose on day 11.
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Patients in the second cohort received the following doses
of ezutromid:
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a single 100 mg/kg dose on day one;
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100 mg/kg doses administered twice per day on days two to ten; and
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a single 100 mg/kg dose on day 11.
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Patients in the third cohort received the following doses
of ezutromid:
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a single 100 mg/kg dose on day one;
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100 mg/kg doses administered three times per day on days two to ten; and
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a single 100 mg/kg dose on day 11.
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Analysis of Trial Results
We observed the following results from this clinical trial:
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Ezutromid was Well Tolerated
.
Ezutromid was well tolerated at all doses tested in this clinical trial with no serious adverse events reported. All reported adverse events were mild in severity and
gastrointestinal in nature. In the opinion of the trial investigator, there were no clinically meaningful changes in physical examination, vital signs and hematology or biochemistry parameters in any of the patients. We also did not observe any
issues with patient compliance.
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Patients had Variable Plasma Levels of Ezutromid; Possible Impact from Diet on Absorption of Ezutromid.
We observed variability among patients in all three cohorts in plasma concentrations of ezutromid
after administering multiple daily doses for eleven days. As illustrated in the figure below, the mean blood plasma concentrations of two of the 12 DMD patients, who we refer to as high absorbers, exceeded the target level of 0.2 µM (67 ng/mL)
for several hours following dosing. We determined this target level prior to conducting this clinical trial based on the composite results of our preclinical studies in tissue culture, or
in vitro
preclinical studies, and our preclinical
studies in live animals, or
in vivo
preclinical studies, which indicated that this plasma concentration leads to an increase of approximately 50% in levels of utrophin protein. The mean plasma concentrations of the remaining ten patients, who
we refer to as low absorbers, were less than this target level and similar to the levels achieved by fasted healthy volunteers in our completed Phase 1 clinical trial who had received a single 200 mg/kg dose of ezutromid. Nonetheless, we believe
that the patients who did not achieve the target plasma level in the clinical trial may still have achieved a plasma level of ezutromid sufficient to modulate the production of utrophin and possibly result in a clinical benefit. This belief is based
in part on the work of Professor Davies research group, in which the continued expression of utrophin protein in transgenic lines of an
mdx
mouse, even at levels just above those in a normal
mdx
mouse, had a meaningful, positive
effect on muscle performance.
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We believe that the similarity of ezutromid plasma levels between the majority of DMD patients in this
Phase 1b clinical trial and fasted healthy volunteers in our completed Phase 1 clinical trial may be due to a complex absorption profile in DMD patients that results from patients following low fat, low calorie diets. DMD patients often follow such
diets due to concerns over the consequences of long-term corticosteroid use and potential resulting weight gain. In addition, we believe that other DMD disease-related factors, such as abnormal gastrointestinal physiology, may impact the absorption
profile of DMD patients.
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Patients Experienced a Reduction in CK and Other Enzyme Markers of Muscle Damage.
We observed a reduction compared to baseline in the enzymes CK, aspartate aminotransferase, or AST, and alanine
aminotransferase, or ALT, in over 90% of the patients in the clinical trial during dosing with ezutromid. Other liver associated enzymes, gamma glutamyl transferase, alkaline phosphatase and albumin, showed no meaningful change from baseline over
the same dosing period. The levels of CK, ALT and AST are typically low in healthy people. In DMD patients, however, damage to muscle fibers leads to the release of these enzymes from the muscle and accumulation in the blood. The mean reductions in
CK, ALT and AST were statistically significant as compared to the baseline pre-dose levels (p <0.05). We determine statistical significance based on a widely used, conventional statistical method that establishes the p-value of clinical results.
Typically, a p-value of 0.05 or less represents statistical significance. Following the end of dosing, the levels of these enzymes increased toward pre-dose levels. In addition, the reduction in CK was consistent with the results of a preclinical
in vivo
study that we conducted in the
mdx
mouse model, described in more detail below, in which we observed a reduction in CK following single daily dosing of ezutromid. We did not observe a correlation between the dose level of
ezutromid administered and the degree of change in the levels of these enzymes. Although this was not a placebo controlled study and there may be other factors that influenced the results, we believed at the time that the lower levels of CK, AST and
ALT compared to baseline potentially indicate a reduction in muscle damage and may be evidence of ezutromid activity. We consequently further evaluated this observed reduction in the enzyme markers of muscle damage in our subsequent Phase 1b
modified diet trial. The results of the Phase 1b modified diet trial are described below.
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Phase 1b Modified Diet Clinical Trial
In August and September 2015, we reported results from our Phase 1b modified diet trial in patients with DMD. We conducted this
clinical trial at four sites in the United Kingdom under approval from the MHRA and the Ethics Review Committee. We enrolled a total of 12 boys with DMD who were between five and thirteen years of age.
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The primary objective of this clinical trial was to determine the pharmacokinetics of single and
multiple oral doses of ezutromid in patients with DMD who followed specific dietary guidance that recommended balanced proportions of fat (30%), protein (25%) and carbohydrates (45%) and dosing with a glass of whole milk. We sought to
achieve this dietary balance by requesting that patients, with support from research dietitians and the patients legal guardians, consume a diet containing all of the major food groups, vitamins, minerals and dietary fiber, with a daily
calorie intake that is appropriate for the age and activity level of each patient. The goal of this dietary guidance was to demonstrate an increase in the level of ezutromid in blood plasma compared to the blood plasma levels we observed among DMD
patients in our initial Phase 1b clinical trial. The trial protocol included a number of secondary objectives, including evaluations of the safety and tolerability of single and multiple oral doses of ezutromid; the daily variability in the steady
state pharmacokinetics of ezutromid; and the levels of CK as a potential biomarker of ezutromid activity.
We divided the patients into
three cohorts of four patients each. The cohorts were randomized into three sequential 14-day treatment periods during which each patient in the clinical trial received ezutromid at a dose level of 1,250 mg, ezutromid at a dose level of 2,500 mg or
a placebo. All doses were administered orally with 100 mL of whole milk and with patients having consumed either breakfast or an evening meal depending on the time of day. There was a wash out period, which is a period of time during which patients
received no administration of the drug, of at least 14 days between each of the treatment periods. The clinical trial was blinded as to the order in which patients received the lower dose of drug, higher dose of drug or placebo. The patients in each
cohort were dosed with either ezutromid or placebo as follows:
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a single dose on day one; and
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twice daily doses on days two to fourteen.
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A follow-up safety visit was conducted twelve to
fourteen days after administration of the final dose in the final treatment period. Each patient received specific dietary guidance after which there was a dietary run-in period of at least one week prior to the start of the first treatment period.
Analysis of Trial Results
We
observed the following results from our Phase 1b modified diet trial:
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Modified Diet had a Positive Impact on Plasma Absorption.
In this trial, plasma absorption of ezutromid was increased in patients with DMD who followed specific dietary guidance that provided a balanced
diet of fats, carbohydrates and proteins. Ten of the 12 patients achieved plasma exposure levels above 30 ng/mL for a mean of 14.0 hours in a 22-hour period on day 14 of the trial, with six of these patients achieving levels above 67 ng/mL for a
mean of 8.2 hours in the same 22-hour period on day 14. Plasma levels of 30 ng/mL and 67 ng/mL correlate to an increase in utrophin levels of approximately 30% and 50%, respectively, based on our
in vitro
studies that were undertaken in
myoblast cells from patients with DMD and myotubes from healthy individuals. The remaining two patients achieved maximum plasma exposure levels that exceeded 20 ng/mL. We believe that these two patients also achieved plasma exposure that may be
sufficient to modulate the production of utrophin protein and possibly result in clinical benefit. The plasma exposure levels described above for all 12 patients were achieved after each received twice daily doses of 2,500 mg of ezutromid.
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The impact of adhering to the modified diet on the absorption of ezutromid was further evidenced when we compared the
results of seven patients who participated in our initial Phase 1b clinical trial in 2014 and our Phase 1b modified diet trial. All of these seven patients had increased plasma levels in the Phase 1b modified diet trial as compared to plasma levels
observed in our initial Phase 1b trial. The increase in plasma levels ranged from approximately 100% to nearly 300%.
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Higher Plasma Levels of Ezutromid were Observed on Day 14 Compared to Day 1 in the Majority of
Patients
. In this trial, seven of the 12 patients had higher plasma levels when measuring plasma levels over time and calculating the area under the curve, or AUC, on day 14 compared to day 1. This
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accumulation of drug had not been observed in our previous Phase 1 clinical trial conducted in healthy volunteers or our initial Phase 1b clinical trial conducted in patients with DMD. We expect
to evaluate the impact of longer-term dosing of ezutromid on plasma exposure in future clinical trials, including in our Phase 2 PhaseOut DMD clinical trial.
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Treatment with Ezutromid did not Alter CK Levels, an Enzyme Biomarker of Muscle Damage, Compared to Placebo.
We did not observe a change in the levels of the enzyme CK compared to baseline when patients
were treated with 1,250 mg or 2,500 mg of ezutromid twice a day for 14 days compared to placebo. In our initial Phase 1b clinical trial, in which there was no placebo control, we observed a statistically significant reduction in CK levels compared
to baseline when dosing patients with ezutromid. We believe that the results from our Phase 1b modified diet trial indicate that the reduction in CK levels we observed previously are likely not related to treatment with ezutromid. We plan to
evaluate CK levels, as well as additional biomarkers, over a longer duration of exposure to ezutromid in future clinical trials.
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Ezutromid was Well Tolerated.
Ezutromid was well tolerated at all doses tested in this clinical trial, with no serious adverse events reported. All reported adverse events were mild in severity and
resolved prior to completion of the study. The most common adverse event was pale stools and this was reported by patients in the placebo group and each of the ezutromid treatment groups. In the opinion of the trial investigator, there were no
clinically meaningful changes in physical examination, vital signs and hematology or biochemistry parameters in any of the patients. We also did not observe any issues with patient compliance.
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BioMarin Phase 1 Clinical Trial in Healthy Volunteers
In 2009, we assigned certain technology relating to our DMD program to BioMarin DMD Regulator Limited, or BioMarin. In 2010, BioMarin conducted
a Phase 1 clinical trial of a prior formulation of ezutromid in 48 healthy adult volunteers. The clinical trial was conducted at a single site in the United Kingdom. BioMarin reported that ezutromid was well tolerated by the subjects in this
clinical trial. Subjects in this trial achieved low systemic exposure of the drug, and there was variability in systemic exposure across subjects. Following this clinical trial of a prior formulation of ezutromid, BioMarin elected not to continue
development of our assigned technology, citing pharmaceutical and pharmacokinetic challenges. In public statements, BioMarin indicated that it had concluded that the likelihood of achieving a therapeutic effect in DMD patients was highly unlikely.
In 2010, BioMarin transferred the assets, and all commercialization rights, back to us. As described above, in our Phase 1 clinical trial of ezutromid in healthy volunteers, in which we administered ezutromid as a flavored aqueous suspension, we
were able to achieve our target plasma concentrations in all subjects after multiple dosing.
Ongoing Phase 2 PhaseOut DMD Clinical
Trial
We are conducting PhaseOut DMD, an open-label trial into which we plan to enroll up to 40 ambulatory boys between their
fifth and tenth birthday inclusive who have a genetically confirmed diagnosis of DMD. The enrolled patients must be on stable doses of corticosteroids for a minimum of six months. We are conducting the trial at sites in the United Kingdom after
receiving approval from the MHRA in January 2016 and in the United States after our investigational new drug application was cleared by the FDA in April 2016. We expect to commence enrollment and dosing of patients in PhaseOut DMD at trial sites in
the United Kingdom during the second quarter of 2016 and at trial sites in the United States during the third quarter of 2016. We also are exploring how to enroll into a safety arm of PhaseOut DMD those patients who have participated in
previous clinical trials of ezutromid, but who may not meet the criteria for enrollment into the efficacy arm of PhaseOut DMD.
Each
patient will receive ezutromid at a dose level of 2,500 mg twice daily via oral administration. Patients will receive dietary guidance, consistent with that provided in our Phase 1b modified diet trial, to ensure they are
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receiving balanced proportions of fat, proteins and carbohydrates. At the time of dosing, patients will consume 100 mL of whole milk and will have also recently eaten either breakfast or an
evening meal, depending on the time of day. The trial protocol specifies that there should be a gap of between eight to twelve hours between the breakfast and evening meal doses.
We have designed the PhaseOut DMD trial to evaluate the activity and safety of ezutromid and utrophin modulation and it will consist of the
following four parts:
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Screening and Baseline Stage:
A screening and baseline phase lasts up to 28 days for each patient. During this time, we take a number of baseline measurements. These include MRI analysis of upper leg
muscle, a baseline muscle biopsy, blood samples for pharmacokinetic and enzyme biomarker measurements, and baseline measurements for functional tests, including the six minute walk test and the North Star Ambulatory Assessment.
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Treatment Stage:
The treatment phase for each patient lasts a total of 48 weeks. During the treatment stage, an MRI analysis will be conducted at 12, 24, 36 and 48 weeks of treatment. Blood samples for PK
and enzyme biomarker analysis will be taken at 4, 8, 12, 24, 36 and 48 weeks of treatment. In addition, a portion of the patients will have a second muscle biopsy taken at week 24, with the remaining patients having their second biopsy at week 48.
Functional tests will be performed at 12, 24, 36 and 48 weeks of treatment.
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Safety and Tolerability Follow-up Stage:
After the 48 week treatment phase, each patient will have a 30-day safety and tolerability follow up.
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Trial Extension Phase
: If we observe evidence of beneficial activity related to ezutromid, we plan to seek approval from relevant regulatory authorities to allow all patients to continue to be dosed with a
similar assessment regimen of ezutromid for a further 48 weeks.
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Clinical Trial Objectives
The primary objective of our PhaseOut DMD clinical trial is to investigate changes from baseline in leg muscle health using MRI. Reports in the
peer reviewed literature have shown MRI has potential as a non-invasive biomarker to measure disease progression through measurement of changes in inflammation and fat infiltration in leg muscles. This trial will monitor disease progression after
treatment with ezutromid by measuring changes from baseline in levels of muscle inflammation and fat infiltration in leg muscle during the course of the 48 week trial. We will also investigate if there are any relationships between changes in leg
muscle MRI with blood plasma concentrations of ezutromid, which we will measure at baseline and over the course of the trial.
We also
will investigate in our PhaseOut DMD clinical trial changes in utrophin expression in muscle and muscle fiber regeneration. The muscle biopsies taken during the trial will be used to investigate changes from baseline in utrophin protein expression
and changes in muscle regeneration biomarkers.
The clinical trial is also expected to investigate a number of functional measures. These
will include changes from baseline in distance walked during the six minute walk test, changes from baseline in the North Star Ambulatory Assessment, changes from baseline in a 10 meter run test, and changes from baseline in performance of upper
limbs. We will also monitor changes in a variety of blood biomarkers related to muscle health, including the enzyme CK, during the trial.
We believe that these objectives collectively will enable us to better understand the potential benefits of long-term dosing with ezutromid on
the progression of DMD in a pediatric population. We will also seek to understand if there are any potential relationships between changes in MRI, utrophin expression, muscle fiber regeneration and other assessments of muscle function. This trial
will be the longest period of time that ezutromid has been dosed in patients and will increase the amount of safety and tolerability data for ezutromid.
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We expect to report data periodically during the trial with the first set of 24-week muscle
biopsy data from the first group of patients enrolled expected to be reported in January 2017.
In addition, we continue to evaluate the
timing and design of a larger, placebo-controlled trial of ezutromid.
Ezutromid Preclinical Studies
We have conducted a broad preclinical program for ezutromid in collaboration with Professor Kay Davies and her research group at the University
of Oxford. The preclinical program consists of
in vitro
and
in vivo
studies designed to support the potential of ezutromid to modulate the expression of utrophin protein. The following is a summary of key observations from studies
completed to date:
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Increased Utrophin Levels in DMD Patient Derived Myoblast Cells.
We dosed
in vitro
muscle derived cells called myoblasts from DMD patients with ezutromid. After three days of dosing, we observed a
two-fold mean increase in utrophin protein levels in these myoblast cells as compared to baseline levels.
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Increased Utrophin Protein Expression in Heart, Diaphragm and Other Skeletal Muscles in mdx Mouse.
We dosed
mdx
mice with ezutromid daily for 28 days. Following the 28 days of dosing, we observed
increased mean utrophin protein levels in the diaphragm (p<0.05) and the heart (p<0.01) as compared to untreated
mdx
mice. We also observed an increase in utrophin protein levels in the tibialis anterior, or TA, and extensor digitorum
longus, or EDL, skeletal muscles. We also observed a mean increase in utrophin messenger ribonucleic acid, or mRNA, which is the precursor to utrophin protein. We believe that the good systemic distribution of drug observed in this experiment is
important for DMD therapies that aim to maintain ambulation and prolong life for DMD patients.
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Localized Utrophin Production at the Sarcolemma in mdx Mouse.
In the
mdx
mouse experiment described in the prior bullet, we observed an increase in utrophin protein in the TA and EDL skeletal
muscles of
mdx
mice treated with ezutromid compared to untreated
mdx
mice as evidenced by an observable increase in the number of utrophin positive muscle fibers in these muscles. The increase in utrophin protein was localized at the
sarcolemma, which is the required site of action for utrophin production in muscle. In a separate study in which we forced
mdx
mice to exercise, we observed a similar increase in utrophin positive muscle fibers in the diaphragm and the TA and
EDL muscles, and an increase of utrophin levels within these muscle fibers, of
mdx
mice treated with ezutromid compared to untreated
mdx
mice. We believe that these results are noteworthy because DMD disease pathology is even more
pronounced in the diaphragm and hind-limb muscles of the forced exercise
mdx
mice as compared to sedentary
mdx
mice.
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Reduction in Secondary Markers of DMD in mdx Mouse.
We dosed
mdx
mice with ezutromid daily for 28 days. In this study, we observed a mean 75% reduction in CK levels as compared to untreated
mdx
mice after 15 days, which is the time at which muscle degeneration is at a maximum in this model. We continued to observe lower mean CK levels in the treated
mdx
mice group after 28 days, at which point muscle degeneration
stabilized. Plasma levels of CK, muscle regeneration, inflammation and fibrosis are secondary markers of DMD. We also observed a reduction in the mean level of muscle fiber regeneration in
mdx
mice treated with ezutromid compared to untreated
mdx
mice as evidenced by a reduction in the number of muscle fibers with centrally localized nuclei, which are biomarkers of regeneration. We believe this resulted from the continual expression of utrophin, which protected the dystrophin
deficient muscle fibers, and therefore reduced the amount of muscle regeneration. In addition, following treatment with ezutromid, we observed a mean reduction in overall skeletal muscle inflammation and fibrosis in the
mdx
mice treated with
ezutromid compared to untreated
mdx
mice, which indicates a reduction in muscle fiber damage.
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Protection of Muscle Function in Forced Exercise mdx Mouse
.
We dosed
mdx
mice with
ezutromid daily for 28 days and forced the mice to exercise during this treatment period. As illustrated in the figure below, at the end of dosing the forced exercise
mdx
mice treated with ezutromid demonstrated a
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statistically significant mean increase in protection against exercise-induced forelimb weakness (p<0.05) compared to untreated forced exercise
mdx
mice. We measured forelimb weakness
by the force increment required for the
mdx
mice to lose the strength to grip. The
mdx
mice treated with ezutromid exhibited forelimb strength comparable to that observed in the wild type control mice, which unlike
mdx
mice are
not dystrophin deficient. The untreated
mdx
mice experienced a mean decrease in forelimb strength by the end of the 28 day study. Forcing the
mdx
mouse to exercise worsens the impact of DMD and we believe more closely approximates the
pathology of human DMD patients.
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Target Plasma Concentration to Achieve a 50% Increase in Utrophin Levels
. The composite results from our
in vitro
and
in vivo
preclinical studies indicated that a plasma concentration of
approximately 0.2 µM (67 ng/mL) leads to an increase of approximately 50% in levels of utrophin protein. These plasma concentration findings formed the basis of the target pharmacokinetic level that we have used in our clinical trials of
ezutromid. As noted above, in the experiments performed by Professor Kay Davies, the continued expression of utrophin, even at levels just above those in a normal
mdx
mouse, had a meaningful, positive effect on muscle performance.
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Our Pipeline of Future Generation Utrophin Modulators
We plan to apply and enhance our existing knowledge, experience and proprietary rights to maintain and expand our leadership in the field of
utrophin modulation. In addition to the PhaseOut DMD clinical trial for ezutromid, we are also evaluating in a Phase 1 clinical trial a potential optimized formulation of ezutromid. We are also currently pursuing a broad utrophin modulator
technology program consisting of internally developed second generation utrophin modulators designed to include improved pharmacokinetic properties and a pipeline of novel, future generation utrophin modulators with new mechanisms that we are
developing in collaboration with the University of Oxford. We also are progressing a program to develop biomarkers to measure the effects of our utrophin modulators in treating DMD.
Potential Optimized Formulation of Ezutromid
In our Phase 1b modified diet clinical trial, patients who followed specific dietary guidance of appropriate proportions of fat (30%), protein
(25%) and carbohydrates (45%) had increased plasma levels of ezutromid compared to our prior clinical trials in patients with DMD. Ten of 12 patients in the modified diet trial achieved plasma exposure levels above 30 ng/mL for a mean of
14.0 hours in a 22-hour period on day 14 of the trial, with six of these patients achieving levels above 67 ng/mL for a mean of 8.2 hours in the same 22-hour period on day
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14. Our long-term objective is to develop an optimized formulation of ezutromid capable of achieving higher plasma levels in all patients treated with ezutromid. We are working with third-party
formulation companies, in parallel to the ongoing clinical development program of ezutromid, and have currently identified two potential formulations of ezutromid that we are evaluating in a Phase 1 two-part open label multiple dose clinical trial
in healthy volunteers and patients with DMD.
The Phase 1 trial is divided into two parts. The first part evaluated both of the
formulations in eight healthy volunteers. The second part is evaluating one of these formulations in eight patients with DMD. The primary objective of this clinical trial is to determine the pharmacokinetics of multiple oral doses of the new
formulation of ezutromid. In March 2016, we reported interim data from the Phase 1 clinical trial. In healthy volunteers, one of the two new formulations achieved an over ten-fold increase in plasma levels of ezutromid compared to the current
clinical formulation of ezutromid. This formulation was selected to progress into the second part of the trial and undergo evaluation in patients with DMD.
In the initial dosing period, patients who received a 250 mg fixed dose of the new formulation of ezutromid for seven days achieved plasma
levels of ezutromid similar to those of patients who received a 2,500 mg fixed dose of the current formulation of ezutromid in the Phase 1b modified diet trial. The new formulation of ezutromid was generally well-tolerated in healthy volunteers and
in the patients who received the first dose level of the new formulation of ezutromid. Participants in this trial are also following similar dietary guidance to those in the prior Phase 1b modified diet clinical trial. The Phase 1 clinical trial is
now evaluating higher doses of the new formulation, and we expect to report top-line data from this trial in the third quarter of 2016. We expect to evaluate our options for further development of the new formulation after we have all of the data
from the trial.
Second Generation Utrophin Modulators
We are developing internally a series of second generation utrophin modulators that are structurally related to ezutromid but are designed to
have more favorable pharmacokinetic properties and achieve higher plasma levels of drug at a lower dose.
We have conducted preliminary
preclinical studies on our second generation utrophin modulators and have observed the following:
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Improved Systemic Exposure.
We administered single oral doses of one of our second generation utrophin modulators and ezutromid to rats
in vivo
and observed a ten to 40 fold increase in plasma
concentrations with this second generation modulator as compared to ezutromid.
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Comparable Efficacy Data in mdx Preclinical Studies.
We conducted an
in vivo
study of one of our second generation modulators in the
mdx
mouse model. In this study, we treated a group of
sedentary
mdx
mice for five weeks with a single daily dose of one of our second generation utrophin modulators and compared the group to a control group of untreated sedentary
mdx
mice. In the treated
mdx
mice, we observed
increased utrophin expression and muscle function in amounts that were comparable in each case to those observed in our preclinical testing of ezutromid.
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We are conducting further preclinical efficacy studies and in parallel we are conducting safety and toxicology preclinical studies.
Strategic Alliance with the University of Oxford
In November 2013, as part of our program for the development of additional utrophin modulators, we formed a strategic alliance with the
University of Oxford. Under this alliance, we acquired an exclusive option to license intellectual property that is generated as part of our research in utrophin modulation as part of the alliance. We announced in November 2015 a multi-year
extension of the strategic alliance with the University of Oxford that will run until November 2019, with an option to extend it for a further 12 months. The goal of our
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collaboration with the University of Oxford is to identify and develop future generations of novel utrophin modulators that will include new mechanisms that could complement ezutromid and our
second generation modulators. In December 2015, we reported achievement of the first research milestone as part of the collaboration with the nomination of two series of utrophin modulators for progression into lead optimization studies. These two
series of compounds are structurally distinct from ezutromid, with one series having a potential new utrophin modulation mechanism that appears to be distinct from ezutromid.
Biomarker Program
We believe that
the development of new biomarkers could play an important role in furthering our understanding of the potential benefits of utrophin modulators in treating DMD. A biomarker is a measurable biological or chemical change that is believed to be
associated with the severity or presence of a disease or other physiological state of an organism. We expect our biomarkers will be related to the mechanism of utrophin modulation and will examine other aspects of muscle health, including
inflammation and muscle fiber regeneration. Our biomarker program includes the following:
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quantifying numbers of utrophin positive fibers and levels of utrophin protein in each fiber from muscle biopsies using immunofluorescence and immunohistochemistry;
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evaluating muscle biopsies to quantify numbers of regenerating fibers; and
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developing other serum biomarkers that will quantify muscle damage.
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Clostridium difficile
Infection Overview
Clostridium difficile
Infection is a bacterial infection of the colon that
produces toxins causing inflammation of the colon and severe diarrhea. CDI can also result in more serious disease complications, including pseudomembranous colitis, bowel perforation, toxic megacolon and sepsis. CDI represents a serious healthcare
issue in hospitals, long-term care homes and, increasingly, in the wider community. We estimate there are over one million cases of CDI each year in the United States and Europe, based on an epidemiology report on CDI that was published in 2015 by
Decision Resources, a healthcare research and consulting company. In addition, CDI is responsible for approximately 29,000 deaths per year in the United States, according to a study published in the
New England Journal of Medicine
in 2015. A
separate study published in 2012 in
Clinical Microbiology and Infection
, a peer reviewed journal published by the European Society of Clinical Microbiology and Infectious Diseases, indicated that CDI may be underdiagnosed in approximately 25%
of cases. A study published in
The Journal of Hospital Infection
, a peer reviewed journal published by the Healthcare Infection Society, reported that CDI is two to four times more common than hospital associated infections caused by
methicillin-resistant
Staphylococcus aureus
, a bacterium frequently associated with such infections. The Healthcare Cost and Utilization Project, a family of databases developed through a federal-state-industry partnership sponsored by the
Agency for Healthcare Research and Quality of the U.S. Department of Health and Human Services, reported an approximate 3.5 fold increase in hospital stays associated with CDI between 2000 and 2008. The economic impact of CDI is significant. A
study published in 2012 in
Clinical Infectious Diseases
estimated that acute care costs total $4.8 billion per year in the United States alone.
CDI originates from a bacterium known as
Clostridium difficile
, or
C. difficile
.
C. difficile
sometimes can be a harmless
resident of the gastrointestinal tract. The complex community of microorganisms that make up the natural gut flora usually moderates levels of
C. difficile
. The natural gut flora are an essential part of the normal function of the
gastrointestinal tract and also have wide implications to human health, such as the proper function of the immune system. CDI typically develops following the use of broad spectrum antibiotic agents that can cause widespread damage to the natural
gut flora and allow overgrowth of
C. difficile
. Hypervirulent
C. difficile
strains have also emerged and are frequently associated with more severe disease. In the United States, the hypervirulent strain, ribotype 027, accounts for
approximately one-third of all CDI cases.
The primary clinical issue with CDI is disease recurrence. This is in contrast to other
bacterial threats for which drug resistance is the principal concern. According to an article published in 2012 in the peer reviewed
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journal
Clinical Microbiology and Infection
, up to 25% of patients with CDI suffer a second episode of the infection. The risk of further recurrence rises to 65% after a patient suffers a
third episode of CDI. In addition, each episode of recurrent disease is associated with greater disease severity and higher mortality rates. Recurrent disease is associated with an increased burden on the healthcare system.
In 2013, the CDC highlighted CDI as one of three pathogens that pose an immediate public health threat and require urgent and aggressive
action. In 2012, the Generating Antibiotics Incentives Now Act provisions of the FDA Safety and Innovation Act, or GAIN, became law. The goal of GAIN is to encourage the development of new antibiotics that treat specific pathogens, including
C.
difficile
, which cause serious and life threatening infections.
Current CDI Treatments
Existing treatment options for CDI are limited. The current standard of care for CDI is treatment with vancomycin or off label use of
metronidazole, both of which are broad spectrum antibiotics. Although these antibiotics reduce levels of
C. difficile
, both also cause significant collateral damage to the gut flora as a result of their broad spectrum of activity. This
collateral damage to the gut flora leaves patients vulnerable to recurrent CDI. A review published in 2012 in the peer reviewed journal
International Journal of Antimicrobial Agents
reported recurrence rates of 24.0% for vancomycin and 27.1%
for metronidazole. Metronidazole is frequently used in mild or moderate cases of CDI and has been associated with a number of side effects. The antibiotic fidaxomicin was recently approved in the United States and the European Union, but it has not
been shown to be superior to vancomycin in the treatment of patients with the hypervirulent strain ribotype 027.
Ridinilazole for the Treatment
of CDI
We are developing ridinilazole as an orally administered small molecule antibiotic for the treatment of CDI. Ridinilazole is
designed to selectively target
C. difficile
bacteria without causing collateral damage to the gut flora and thereby reduce CDI recurrence rates. The active ingredient in ridinilazole is a bis-benzimidazole tetrahydrate. We believe, based on
preclinical studies conducted to date, that ridinilazole is part of a novel structural class of antibiotics that is distinct from the major classes of marketed antibacterials.
In November 2015, we reported top-line results from our double blind, randomized, active controlled Phase 2 clinical trial that evaluated
ridinilazole compared to the current standard of care, vancomycin, for the treatment of CDI. The Phase 2 clinical trial exceeded its primary endpoint of non-inferiority, with ridinilazole achieving statistical superiority over vancomycin in
sustained clinical response, or SCR. The statistical superiority was driven by a large numerical reduction in recurrent disease compared with vancomycin. We subsequently reported that preliminary analysis of the data from our Phase 2 clinical trial
also showed ridinilazole to be highly preserving of the gut microbiome compared to patients who received vancomycin, who experienced substantial damage to the gut microbiome which for many patients persisted during the 30-day post-treatment period.
We expect to continue to report further data from this trial at future medical and scientific conferences. We are undertaking activities required to advance ridinilazole into Phase 3 clinical trials. We are also evaluating our options for the future
development and commercialization of ridinilazole. Our preferred option is to seek third-party collaborators but we are continuing to evaluate the relative merits of retaining commercialization rights for ourselves or seeking funding from government
entities and philanthropic, non-government and not for profit organizations.
In February 2015, we initiated an exploratory, open label,
active controlled Phase 2 clinical trial evaluating ridinilazole compared to fidaxomicin for the treatment of CDI. Enrollment and dosing of patients is ongoing and we expect to report top-line results from this clinical trial in the second half of
2016. We expect the results of this clinical trial will help to inform the design of future Phase 3 clinical trials and the commercial positioning of ridinilazole. The FDA has designated ridinilazole as a qualified infectious disease product, or
QIDP. The QIDP incentives are provided through GAIN. The QIDP designation provides for priority review by the FDA,
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eligibility for fast-track status and extension of statutory exclusivity periods in the United States for an additional five years upon FDA approval of the product for the treatment
of CDI. The FDA granted fast track status for ridinilazole in July 2015.
Ridinilazole Clinical Development
Phase 1 Clinical Trial in Healthy Volunteers
In 2013, we completed a randomized, partially blind, placebo controlled Phase 1 clinical trial of ridinilazole in healthy volunteers. We
conducted this clinical trial at a single site in the United Kingdom under approval from the MHRA and the Ethics Review Committee. We enrolled 56 healthy male subjects in the clinical trial who were between 18 and 55 years of age. The primary
objective of the clinical trial was to determine the safety and tolerability of single and multiple ascending oral doses of ridinilazole. The secondary objectives included determining the single and multiple oral dose pharmacokinetics of
ridinilazole, assessing the effect of food on systemic exposure of ridinilazole and assessing the effect of multiple oral doses of ridinilazole on gut flora.
We conducted the clinical trial in two parts. Part 1 consisted of an ascending single dose study and a food effect evaluation study. In Part
1, we evaluated a total of 40 subjects, divided into the following six cohorts:
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four fasted subjects, randomized for three subjects to receive a single 2 mg dose of ridinilazole and one subject to receive placebo;
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four fasted subjects, randomized for three subjects to receive a single 20 mg dose of ridinilazole and one subject to receive placebo;
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eight fasted subjects, randomized for six subjects to receive a single 100 mg dose of ridinilazole and two subjects to receive placebo;
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eight fasted subjects, randomized for six subjects to receive a single 400 mg dose of ridinilazole and two subjects to receive placebo;
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eight fasted subjects, randomized for six subjects to receive a single 2,000 mg dose of ridinilazole and two subjects to receive placebo; and
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eight subjects, randomized for six subjects to receive a single 1,000 mg dose of ridinilazole under fasted conditions and a single 1,000 mg dose under fed conditions, and two subjects to receive two single doses of
placebo on the same dosing schedule. The doses under fed and fasted conditions were separated by a minimum of six days.
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Part 2 of the clinical trial consisted of a multiple dose study. In Part 2, we evaluated a total of 16 subjects, who were divided into the
following two cohorts:
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eight subjects randomized for six subjects to receive 200 mg doses of ridinilazole twice per day for nine days with a single final dose on day ten and two subjects to receive placebo on the same dosing schedule; and
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eight subjects randomized for six subjects to receive 500 mg doses of ridinilazole twice per day for nine days with a single final dose on day ten and two subjects to receive placebo on the same dosing schedule.
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Analysis of Trial Results
We observed the following results in this clinical trial:
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Ridinilazole was Well Tolerated.
Ridinilazole was well tolerated at all doses tested in the
clinical trial. The incidence of adverse events in the clinical trial was low for patients treated with ridinilazole and comparable to the incidence of adverse events for patients receiving placebo. The majority of the adverse events that were
considered to be possibly related to ridinilazole were classified as
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gastrointestinal disorders and were mild in severity and resolved without intervention. One patient withdrew from the clinical trial after suffering from appendicitis on day one. The trial
investigator determined this serious adverse event was unlikely to be related to treatment with ridinilazole.
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Ridinilazole was Retained in the Gastrointestinal Tract.
Ridinilazole was targeted to the gastrointestinal tract, which is the site where CDI infections occur in the body. Systemic exposure was close to or
below the level of detection in both fed and fasted subjects.
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Ridinilazole was Highly Selective for Total Clostridia Bacteria with Minimal Impact on Other Natural Gut Flora.
We measured levels of bacteria in fecal samples from Part 2 of the clinical trial for gut
flora composition on the day prior to commencement of dosing and on days four and nine of drug administration during the clinical trial. As illustrated in the figure below, in both the 200 mg and 500 mg dose cohorts, median levels of key bacteria
groups that comprise the natural gut flora remained relatively constant during this period and did not fluctuate substantially from baseline. The one exception was the total
clostridia
bacterial group. The counts of total
clostridia
decreased from the baseline level to zero by day four of dosing and remained at zero on day nine of dosing.
C. difficile
is a member of the total
clostridia
group. We did not detect any
C. difficile
viable cells or spores in the
fecal samples of any of the healthy volunteer subjects at any point during the clinical trial. Bacteria levels are shown in the figure below on a logarithmic scale, which condenses the wide range of values to a format showing the relative
differences in values. We believe these data, which are consistent with the data from our preclinical studies, support the highly selective antibiotic effect of ridinilazole.
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Phase 2 Clinical Trial in Patients with CDI
In November 2015, we reported top-line results from our randomized, double blind, active controlled, multicenter, Phase 2 clinical trial of
ridinilazole in patients with CDI and subsequently have announced additional data. We have referred to this as our Phase 2 proof of concept clinical trial.
We conducted this clinical trial at approximately 35 sites in the United States and Canada. The trial was conducted under an Investigational
New Drug Application, or IND, that we submitted to the FDA on January 21, 2014. We completed enrollment of 100 patients in this clinical trial in September 2015. The trial randomized patients in a one-to-one ratio to receive either a 200 mg
dose of ridinilazole administered twice per day for ten days or a 125 mg dose of vancomycin administered four times per day for ten days. Patients who received ridinilazole were also administered a placebo twice a day for ten days to ensure the
trial remained blinded.
The primary objective of this clinical trial was to evaluate the efficacy of ten days of dosing with ridinilazole
compared to treatment with vancomycin. The primary efficacy endpoint was non-inferiority on sustained clinical response, or SCR, which is defined as clinical cure based on the resolution of diarrhea at the
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test of cure, or TOC, visit on day 12 and no recurrence of CDI within 30 days after the end of treatment. The secondary efficacy endpoints were investigator assessed clinical response at the TOC
visit and rate of recurrence of CDI within 30 days after the end of treatment. Secondary objectives of this clinical trial were the assessment of the safety and tolerability of ten days of dosing of ridinilazole compared to vancomycin, the plasma
and fecal concentrations of ridinilazole in patients with CDI who received ridinilazole and the health status of CDI patients who received ten days of treatment of ridinilazole compared to patients who received ten days of treatment of vancomycin.
We also assessed the impact of ridinilazole on the gut flora of patients in the clinical trial as one of a number of exploratory objectives.
Our Phase 2 proof of concept trial met its primary endpoint with ridinilazole achieving a SCR rate of 66.7% compared to 42.4% for vancomycin
(non-inferiority margin of 15%, p=0.0004). This also represents statistical superiority of ridinilazole over vancomycin using the pre-specified 90% confidence interval. Ridinilazole achieved a clinical cure rate of 77.8% compared to 69.7% for
vancomycin, and ridinilazole achieved a recurrence rate of 14.3% compared to 34.8% for vancomycin during the 30-day post-treatment period. The primary analysis was conducted on the modified intent-to-treat, or mITT, population (36 patients dosed
with ridinilazole, 33 patients dosed with vancomycin) that comprised patients with CDI confirmed by the presence of free toxin. The results of the mITT population were consistent with the intent-to-treat, or ITT, population (50 patients dosed with
ridinilazole, 50 patients dosed with vancomycin) and the per protocol, or PP, population (31 patients dosed with ridinilazole, 25 patients dosed vancomycin).
In March 2016, we reported preliminary data on the impact ridinilazole and vancomycin had on the gut microbiome of the patients in the trial.
The analysis showed that patients treated with ridinilazole exhibited no further damage to their microbiome during therapy with a proportion of patients showing initial evidence of recovery of key bacterial groups with roles in protecting from CDI.
We observed that vancomycin treated patients suffered substantial damage to their microbiome during treatment and that this damage persisted in many patients during the 30-day post-treatment period. Ridinilazole was generally well tolerated and the
overall adverse event profiles of ridinilazole and vancomycin were comparable.
We expect to report more detailed data from this trial at
medical and scientific conferences during 2016.
Ongoing Phase 2 Exploratory Clinical Trial of Ridinilazole Compared to Fidaxomicin
We have initiated a randomized, open label, active controlled, multicenter Phase 2 clinical trial evaluating ridinilazole compared to
fidaxomicin for the treatment of CDI. In February 2015, we enrolled and dosed the first patient in this clinical trial. This clinical trial will generate further data comparing ridinilazole to fidaxomicin, a recently launched CDI antibiotic, and we
expect the results of this clinical trial will help to inform the design of future Phase 3 clinical trials of ridinilazole and help to inform its commercial positioning. We are conducting this clinical trial at sites in the United Kingdom, and from
the second quarter of 2016, at additional sites in Europe and the United States. We expect to enroll approximately 30 patients in this clinical trial. We expect the trial will randomize patients in a one-to-one ratio to receive either a 200 mg
dose of ridinilazole administered twice per day for ten days or a 200 mg dose of fidaxomicin administered twice per day for ten days. We expect to report top line data from this clinical trial in the second half of 2016.
The primary efficacy objective of clinical this trial is to determine the safety and tolerability of ten days of dosing with 200 mg of
ridinilazole compared to dosing with 200 mg of fidaxomicin. The secondary objectives of the clinical trial are to assess the following:
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the plasma pharmacokinetics of ridinilazole in patients with CDI;
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the qualitative and quantitative effect of ridinilazole and fidaxomicin on gut flora;
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the plasma, urine and fecal concentrations of ridinilazole and its metabolites; and
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the efficacy of ten days of dosing with ridinilazole compared to fidaxomicin for the treatment of CDI.
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The measurement of efficacy will be based on investigator assessed clinical response at the TOC visit, with clinical cure defined as
resolution of diarrhea while on treatment and maintained at the TOC visit, and sustained
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clinical response, defined as clinical cure at the TOC visit and no recurrence of CDI within 30 days after the end of treatment.
CDI Preclinical Data
In a range of
preclinical studies, ridinilazole demonstrated an encouraging profile as a potential antibiotic for the treatment of initial CDI and reduction of CDI recurrence. The following is a summary of key observations from these studies:
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Potency Against C. difficile.
We screened ridinilazole
in vitro
against panels of
C. difficile
clinical isolates from the United States and the United Kingdom. In these studies, ridinilazole
displayed a potent bactericidal effect against all clinical isolates of
C. difficile
, including hypervirulent strains, such as ribotype 027. Ridinilazole was more potent than both vancomycin and metronidazole, and was either equally potent
to, or more potent than, fidaxomicin. We have also tested ridinilazole against a panel of
C. difficile
clinical isolates that maximize the diversity of resistance to key classes of commonly used antibiotics. Ridinilazole did not display
evidence of cross resistance with other classes of key antibiotics in common use.
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Targeted Spectrum of Activity
.
We conducted
in vitro
testing of ridinilazole, vancomycin, metronidazole and fidaxomicin against a wide panel of bacteria that are commonly found in the gut
flora and are necessary for normal function of the gastrointestinal tract and also have wide implications to human health, such as the proper function of the immune system. As illustrated in the figure below, in this study ridinilazole had a minimal
antibiotic effect against these beneficial bacterial groups. Ridinilazole also displayed higher selectivity for
C. difficile
in this study as compared to vancomycin, metronidazole and fidaxomicin and published data for cadazolid, an
antibiotic that is currently in Phase 3 clinical development by another company.
In vitro
potency is measured by determining the concentration of a drug (in micrograms per liter) needed to inhibit the growth of 90% of the bacterial strains
being tested, referred to as a MIC
90
measurement. A high number, typically higher than 256, indicates a weak antimicrobial effect, and a low number, typically less than eight, indicates a
potent antimicrobial effect. We believe that the targeted spectrum of activity for ridinilazole seen in this study compared to the relatively broad spectrum of activity of other antibiotics indicates the potential for ridinilazole to selectively
target
C. difficile
bacteria without causing collateral damage to the gut flora and thereby reduce CDI recurrence rates.
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Profile of Selectivity of Ridinilazole vs. Other CDI Antibiotics
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Protection Against CDI Recurrence.
In a hamster model, we infected one group of hamsters with the hypervirulent CDI strain ribotype 027 and a second group of hamsters with a second CDI strain ribotype 012.
In the United States, the hypervirulent CDI strain ribotype 027 accounts for approximately one third of all CDI cases. We then treated hamsters from each of the two infected groups with different doses of ridinilazole, vancomycin and fidaxomicin for
five days. We evaluated disease recurrence over the 21 days following treatment. In this hamster model, a hamster fatality within the first five days is a result of initial
C. difficile
infection, while a fatality from day six to day 25 is a
result of recurrent disease. As illustrated in the figure below, the hamsters from both infected groups that were treated with two different doses of ridinilazole had survival rates of 90% to 100% against strain ribotype 027 and 80% to 100% against
strain ribotype 012. These survival rates were higher than hamsters treated with vancomycin (0% to 10% survival rates) for both CDI strains, comparable to hamsters treated with two different doses of fidaxomicin against strain ribotype 027 (90% to
100% survival rates) and higher than hamsters treated with two different doses of fidaxomicin against strain ribotype 012 (0% to 40% survival rates). All infection control hamsters received placebo and died by the second day following infection.
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Inhibition of Sporulation
.
In the
in vitro
testing of ridinilazole described above, we treated
C. difficile
cells with different concentrations of ridinilazole and measured the
percentage of spores formed 96 hours after treatment. Untreated cells had a 100% conversion rate into
C. difficile
spores, which are the dormant protected form of the bacteria, after 96 hours. In this study, treatment with ridinilazole
resulted in a meaningful reduction in spore count compared with untreated cells against all strains of
C. difficile
tested. We believe the reduction in sporulation may benefit rates of recurrent disease as the spores are highly resistant to
standard cleaning practices and lead to increased risks of environmental persistence and disease transmission.
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Reduction in Toxin and Inflammation Levels.
In an
in vitro
study, Caco-2 cells, a type of cell found in the colon of humans commonly used in studies of intestinal function, were exposed to
C.
difficile
and then treated with ridinilazole, metronidazole and vancomycin or were untreated to act as a control. Following treatment with ridinilazole, toxin A levels were reduced by 91%, toxin B was not detected and IL-8 levels were reduced by
74%. Metronidazole and vancomycin had minimal effect on toxin A or B concentrations, and IL-8 concentrations were similar to control. Toxins A and B are produced by
C. difficile
to elicit an inflammatory response, including IL-8 release,
which results in the symptoms of the disease including severe diarrhea. We believe that these data indicate that ridinilazole has the potential to reduce the severity of disease symptoms and that it has the potential to be more effective than
current treatment options.
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Concomitant Antibiotic Use
.
In an
in vitro
bacterial culture study, we administered ridinilazole in combination with selected other antibiotics. In this study, concomitant use of antibiotics
had neither a synergistic nor an antagonistic effect on the MIC
90
values of ridinilazole against the
C. difficile
strains tested. We believe these results indicate that concomitant use
of other antibiotics will not diminish the potency of ridinilazole. We believe this is an important finding because a significant portion of CDI patients receive antibiotic treatment for persistent or new infections.
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Low Propensity for Resistance
.
In an
in vitro
study, we treated
C. difficile
bacteria with ridinilazole and assessed the number of resistant bacteria at the end of treatment. We
repeated this process multiple times, with each cycle referred to as a serial passage. We observed that use of ridinilazole resulted in a low frequency of spontaneous mutation and no resistance after 14 serial passages of treatment. We have also
evaluated ridinilazole mutant prevention concentration, or MPC, a measure evaluating the ability of an antibiotic to minimize the development of resistant organisms, against
C. difficile
clinical isolates.
In vitro
results show that
ridinilazole has low MPC values against these isolates, providing further evidence supporting ridinilazoles profile for low resistance development.
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Our Collaborations and Funding Arrangements
University of Oxford
In November
2013, we acquired all of the outstanding equity of MuOx Limited, or MuOx, a spin out of the University of Oxford founded by Professors Stephen Davies and Kay Davies. MuOx is our wholly-owned subsidiary. In connection with that acquisition, we and
MuOx entered into a set of agreements with the University of Oxford and its technology transfer division, Isis Innovation Limited, or Isis, regarding the development of small molecule utrophin modulators. In November 2015, this set of agreements
were extended through November 2019, with an option to extend for a further twelve months.
Research Sponsorship
We have agreed to fund a drug research and discovery program in the University of Oxford laboratories to identify and research utrophin
modulators to treat DMD. The University of Oxford is responsible for conducting this program. Isis has no obligations under the research sponsorship agreement. We refer to the agreement that governs our research sponsorship with the University of
Oxford, which we, the University of Oxford and Isis entered into in November 2013, amended and restated in July 2014 and amended in November 2015, as the research sponsorship agreement. Under the research sponsorship agreement, we have agreed to
fund up to £4.3 million over a six-year research period ending in November 2019. If we exercise our right to extend the research period by an additional year, we have agreed to fund an additional £0.8 million, for a total of
£5.2 million. As of January 31, 2016, we had paid the University of Oxford £1.2 million of this amount.
The
University of Oxford will own all intellectual property arising from the sponsored research, and we have agreed to assign to the University of Oxford any intellectual property arising from the sponsored research that either we or third parties whom
we engage, may create, subject to our exercise of an option to obtain an exclusive license under the intellectual property arising from the sponsored research, as described below.
Either we or the University of Oxford would have the right to terminate the research sponsorship agreement for specified reasons, including
the other partys insolvency or material breach, if the breach remains uncured for a specified period or is uncurable, or our mutual determination, at specified times, that there are valid scientific reasons for terminating the project. The
University of Oxford may also terminate the research sponsorship agreement if we default on more than one payment obligation and do not remedy the failure within a specified period after receiving notice. We may also terminate the research
sponsorship agreement, after a specified period of time if any of the principal investigators is unable or unwilling to continue supervising the sponsored research and the successor proposed by the University of Oxford is not acceptable to us on
reasonable and substantial grounds.
License of Know-How
In November 2013, Isis executed a know-how license agreement with MuOx. We refer to the agreement, which was amended in July 2014, as the
know-how license agreement. In the know-how license agreement, Isis granted MuOx a license under specified know-how, consisting of data and other information associated with specified utrophin modulators and biological screening technology, and all
intellectual property rights pertaining
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to the specified know-how, to research, develop, make, have made, use, have used, import, have imported, export, have exported, and market the licensed know-how and products or processes
resulting from the licensed know-how. We refer to the know-how specified in the know-how license agreement, as Oxfords background know-how. Our rights under Oxfords background know-how in the specified utrophin modulators are exclusive
and sublicenseable. Our rights under Oxfords background know-how in the biological screening technology are initially exclusive, but become non-exclusive in November 2016, and are sublicenseable with Isis consent, which may not be
unreasonably withheld. Our rights are subject to the rights of the University of Oxford, the Muscular Dystrophy Association and the Muscular Dystrophy Campaign, and their respective employees, students and agents, to use and publish Oxfords
background know-how for specified scholarly and academic research and teaching purposes. We have agreed to use commercially reasonable efforts to develop, exploit and market Oxfords background know-how or any compound deriving from
Oxfords background know-how.
The know-how license agreement will remain in effect for at least three years with respect to the
biological screening technology know-how, and otherwise, with respect to each of the compound or biological screening technology know-how, as long as we or our sublicensees are using commercially reasonable efforts to research and develop compounds
derived from that know-how. Either we or Isis would have the right to terminate the know-how license agreement if the other party materially breaches the know-how license agreement and the breach remains uncured for a specified period or is
uncurable. We may terminate the know-how license agreement at our discretion by giving Isis six months prior written notice. Isis may terminate the know-how license agreement on thirty days notice if we fail to use commercially
reasonable efforts to exploit Oxfords background know-how and do not remedy such breach within a specified time, or immediately, if we take specified actions relating to winding up or experience certain insolvency-related events.
Exclusive Option Rights
We refer to the
intellectual property rights arising under the research sponsorship agreement, or arising from research and development of small molecule utrophin modulation conducted by or under the supervision of certain University of Oxford scientists, that is
created or reduced to practice after November 2013 and within a specified time after the expiration or termination of the research sponsorship agreement, as arising IP. Under an option agreement that we, the University of Oxford and Isis entered
into in November 2013 and amended in November 2015, which we refer to, as amended, as the option agreement, Isis granted us an exclusive option to license the arising IP. We paid Isis £10,000 in connection with entering into the amendment to
the option agreement. We may exercise the option within specified periods.
In connection with entering the initial option agreement, we
paid Isis an option fee of a specified amount and issued to Isis warrants to purchase up to 354,090 of our ordinary shares at a purchase price of £0.20 per ordinary share. In connection with the November 2015 amendment, we extended the
period during which Isis may exercise such options to February 2020. The warrants may be exercised based on the achievement of certain research, development and regulatory milestones. In November 2015, we announced the nomination of two series of
new utrophin modulators for progression into lead optimization studies to achieve the first research milestone. This has entitled Isis to subscribe for 50,000 new ordinary one penny shares at an exercise price of 20 pence per share during the three
month period starting November 22, 2016.
If we exercise our option to obtain a license under arising IP, we would be obligated to
pay Isis up to a specified sum in option exercise fees, and Isis will use reasonable efforts to enter into a license agreement as quickly as possible, subject to Isis obtaining all necessary intellectual property assignments and conducting its
internal due diligence procedures.
For any arising IP for which we have exercised the option and that comprises new chemical entities or
compounds, which we refer to as optioned compounds, we would obtain an exclusive, sublicenseable license. We are obligated to pay milestone payments of up to £75,000 upon the achievement of specified development milestones, whether such
milestones occur prior to or after our exercise of the option to obtain an exclusive
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sublicenseable license. Following exercise of such an option we would also be obligated to pay milestone payments upon the achievement of specified regulatory milestones with respect to each
optioned compound. The specified regulatory milestone payment is due each time the specified regulatory milestone is achieved with respect to an optioned compound and, if each optioned compound achieved each regulatory milestone once, we would be
obligated to pay Isis a total of £3.7 million in regulatory milestone payments for each optioned compound.
We would also be
obligated to pay Isis a low single digit royalty of net sales by us, our affiliates or sublicensees of any product containing an optioned compound, which we refer to as a licensed product, subject to specified reductions. Our obligation to pay the
royalty would expire on the later of the expiration of the last valid claim of any licensed patent or patent application claiming the licensed product or 20 years after the date on which we enter the license agreement. We would also be obligated to
pay Isis a low single digit percentage of any payments we receive in connection with granting a sublicense under the licensed arising IP.
If we funded the development of the arising IP for the optioned compounds, through our funding under the research sponsorship agreement or by
funding work at contract research organizations prior to the creation of the arising IP, then the milestone and royalty payments will be reduced to reflect the value that our funding delivered to the arising IP. We and Isis would negotiate such
adjustment in good faith. If we and Isis are unable to agree, an expert will be appointed to make the determination.
For any arising IP
for which we have exercised the option and that does not comprise new chemical entities or compound, which we call enabling IP, we would obtain an exclusive license, which we could sublicense with Isis prior written consent, not to be
unreasonably withheld, delayed or conditioned. We and Isis would negotiate the milestone payments and any other payments that we would be obligated to pay to Isis with respect to enabling IP. If we and Isis are unable to agree, an expert will be
appointed to make the determination.
Any license granted to us under arising IP would be subject to the rights of the University of
Oxford, and any person who at any time worked on the licensed arising IP, to use and publish the arising IP for specified scholarly and academic research and teaching purposes. We would also be obligated to use commercially reasonable efforts to
develop, exploit and market the arising IP licensed to us.
The license agreement would remain in effect as long as we are using
commercially reasonable efforts to develop and market the licensed products, unless terminated earlier by us or Isis, or extended by mutual agreement. Either we or Isis would be permitted to terminate the license agreement at any time if the other
party materially breaches the license agreement and the breach remains uncured for a specified period or the breach is uncurable. We would be permitted to terminate the license agreement for any reason after it has been in effect for three years
upon giving six months prior written notice. Isis would be permitted to terminate the license agreement if we challenge the validity of the licensed patents or patent applications or if we claim that we are no longer obligated to make payments
to Isis under the license agreement because the know-how is unnecessary, or if we take specified actions relating to winding up or experience certain insolvency-related events. Upon termination of the license agreement, we would be obligated to
grant Isis an irrevocable, transferable, non-exclusive license to develop, make, have made, use and market any improvements made by us during the option period, and related intellectual property rights, subject to the payment of a reasonable
royalty.
The option agreement will remain in effect until a specified period of time, sufficient for us and Isis to enter into the
license agreement, after our rights to exercise the options terminate, unless the option agreement is terminated earlier by either Isis and the University of Oxford, or us. Either we, or Isis and the University of Oxford, may terminate the option
agreement at any time if the other materially breaches the option agreement and the breach remains uncured for a specified period or the breach is uncurable, or if the other becomes insolvent. We may also terminate the option agreement, effective on
each anniversary of the effective date of the option agreement, by giving 60 days prior written notice to Isis and the University of Oxford.
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Wellcome Trust
In October 2012, we entered into a translation award funding agreement with the Wellcome Trust Limited, as trustee of the Wellcome Trust, in
order to support a Phase 1 and a Phase 2 clinical trial of ridinilazole for the treatment of CDI. We refer to the translation award funding agreement as the translation award agreement. Under the translation award agreement, we are eligible to
receive up to £4.0 million from the Wellcome Trust, of which we have received £3.9 million. The translation award agreement followed a funding agreement we and the Wellcome Trust entered in October 2009, which we refer to as the
discovery award agreement, under which we received £2.3 million for preclinical development of CDI antibiotics. We refer to any compound or product that is covered by intellectual property rights created under the discovery award
agreement or the translation award agreement, or that is covered by intellectual property rights that we created or to which we had rights prior to October 2009 and that relate to the activities under the discovery award agreement or the translation
award agreement, as the award products. We have agreed to use commercially reasonable efforts to achieve certain development milestones by specified dates.
Development and Commercialization Obligations
Under the translation award agreement, we may, subject to the Wellcome Trusts prior written consent, which will not be unreasonably
withheld or delayed, conduct the development and commercialization of award products. We may conduct these activities, which we refer to as exploitation, ourselves or through our affiliates, licensees and third-party collaborators. We refer to any
intellectual property rights associated with the exploitation as exploitation IP. The Wellcome Trusts consent is contingent on the establishment of a revenue sharing agreement that incorporates the financial terms of the translation award
agreement. We are required to ensure that any results generated by a third party with whom we collaborate or subcontract will be deemed exploitation IP.
If we or our licensees do not develop or commercialize any exploitation IP in specified markets or specified indications within specified
timeframes, the Wellcome Trust is permitted to conduct exploitation of the exploitation IP in those markets or indications. If the Wellcome Trust exercises its exploitation right, we would license or assign to it the appropriate exploitation IP and
grant it non-exclusive, royalty-free licenses to our related background intellectual property, and we would be entitled to receive a portion of the net revenue received by the Wellcome Trust from exercise of its exploitation rights.
We may not allow a lien to be imposed on the exploitation IP or on any intellectual property rights licensed to us that we used for the
clinical trials funded by the Wellcome Trust, except for certain liens arising in the ordinary course of business. We may also not make any material change to the general nature of our business without consent from the Wellcome Trust.
Financial Terms
We may draw down a final
payment in a specified amount after completion of the Phase 2 clinical trial and the Wellcome Trusts receipt of an end of award report, in a form acceptable to the Wellcome Trust, detailing the work done and outcomes of the clinical trials.
Under the terms of the translation award agreement and the terms of the revenue sharing agreement we would enter into with the Wellcome
Trust to permit our exploitation of the exploitation IP or award products, the Wellcome Trust is entitled to a share of the cumulative net revenue that we or our affiliates receive from exploiting the exploitation IP or award products. The Wellcome
Trust would be eligible to receive a tiered portion of the net revenue, ranging from a mid-single digit percentage up to a mid-twenties percentage. Under the translation award agreement, if we, the Wellcome Trust or a third party contributes funding
to further develop the exploitation IP or award products, we and the Wellcome Trust will negotiate in good faith modifications to the net revenue sharing percentage to reflect changes in our respective proportionate development costs for award
products. If we and the Wellcome Trust are unable to agree, an expert will be appointed to make the
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determination. However, we agree not to accept funding to complete the Phase 2 clinical trial, without the Wellcome Trusts consent, if such funding would materially prejudice the Wellcome
Trusts net revenue sharing or exploitation rights. In addition, we would be obligated to pay the Wellcome Trust a milestone in a specified amount if cumulative net revenue exceeds a specified amount.
The revenue sharing agreement would last until the latest of the expiration of the last patent or patent application covering any invention
arising out of our activities under the research and clinical trials funded by the Wellcome Trust or the expiration of any agreement or payment obligations relating to exploitation of the intellectual property rights arising out of our activities
under the research and clinical trials funded by the Wellcome Trust under the translation award agreement. Either we or the Wellcome Trust would have the right to terminate the revenue sharing agreement if the other party materially breaches the
revenue sharing agreement and the breach remains uncured for a specified period or the breach is uncurable, if the other party experiences specified insolvency related events, or if the translation award agreement expires or is terminated.
If we are obligated to withhold tax on the amounts payable to the Wellcome Trust, we agree to pay the Wellcome Trust a greater amount, such
that the Wellcome Trust receives the same amount after the withholding as it would have received without such deduction.
We would be
required to make a full or partial repayment to the Wellcome Trust of the funding we received under the translation award agreement, plus accrued interest, under specified conditions, including our unauthorized use of the award amount, our
fraudulent or willful misconduct, our knowingly withholding material information from the Wellcome Trust, or an acquisition by certain third parties of all or a material part of our business or assets or of a majority of our equity. Upon such a full
repayment, our obligation to share a portion of net revenue with the Wellcome Trust would terminate.
Termination
Unless earlier terminated by the Wellcome Trust, the translation award agreement will terminate on the earlier of our full repayment of the
award amount, plus accrued interest, to the Wellcome Trust following its request for repayment, or the expiration of all payment obligations under the translation award agreement and the revenue sharing agreement. The Wellcome Trust may terminate
the translation award agreement for specified reasons, including our material breach or insolvency related events or the Wellcome Trusts determination that the clinical trials should be terminated due to a serious failure in the progress,
management or conduct of the clinical trials, if we do not remedy such condition within a specified period after receiving notice.
Assignment
We may not, without the Wellcome Trusts prior consent, assign, transfer or declare a trust over the translation award agreement or
otherwise dispose of any of our rights or obligations under the translation award agreement, with such consent not being unreasonably withheld, delayed or conditioned, other than an assignment to our affiliates.
Muscular Dystrophy Association
In
December 2011, we entered into a grant agreement with the Muscular Dystrophy Association, Inc., or MDA, a not for profit corporation based in New York, in order to partially fund a Phase 1 clinical trial of ezutromid to treat DMD. We refer to this
grant agreement with MDA as the MDA grant agreement. To date, we have received the entire amount of MDAs grant to us, or an aggregate of $750,000.
Financial Terms
We refer to small
molecules that can upregulate the utrophin gene, including ezutromid and compounds with similar mechanisms of action to which we have rights, as project compounds. Under the MDA grant
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agreement, we have agreed to make specified milestone payments to MDA during our or our affiliates development and commercialization of pharmaceutical products containing the project
compounds, which we refer to as project products. Because we raised more than a specified aggregate amount of funding, we have paid a specified sum to MDA under the terms of the agreement, which we refer to as the MDA cash infusion milestone
payment.
We have also agreed to pay MDA a specified lump sum amount, less any previously paid MDA cash infusion milestone payment,
following the regulatory approval of any project product for use or sale in the United States or European Union in the treatment of DMD or Becker muscular dystrophy, or BMD, and an additional specified sum upon achievement of a commercial milestone.
We would be obligated to pay MDA a low single digit percentage royalty of worldwide net sales by us, our affiliates or licensees of any project product. If we assign our rights to any of the project compounds or experience specified change in
control events, MDA may require our assignee to assume our obligations under the MDA grant agreement with respect to the assigned rights, or require us to pay MDA the greater of a low single digit percentage of the fair market value of the assigned
rights, or an amount that would give MDA an internal rate of return of a low double digit percentage on its grant to us.
Interruption License
Upon the occurrence of specified events, which we refer to as interruptions, we have agreed to refund to MDA the entire grant amount of
$750,000 plus a low double digit interest on that amount, subject to specified exemptions. An interruption may occur if we or our affiliates cease reasonable research, development and commercialization of project products and cease using diligent
efforts to obtain a third party development and commercialization partner, which require our annual expenditure of a minimum specified amount on such efforts for longer than a specified period. Interruptions may also occur if we license the rights
to develop and commercialize project products to a third party without retaining a right of reversion, and such partner ceases reasonable development and commercialization of project products for longer than a specified period or ceases to sell
project products in the United States or European Union, or if we, upon the reversion of such rights from a third party commercialization partner to us, fail to use reasonable efforts to develop and commercialize project products and cease using
diligent efforts to obtain a third party development and commercialization partner, or, within a specified period from the date of reversion, to license the development and commercialization activities of project products to a third party. In all
such cases, we are exempt from interruption payments in the event of specified scientific failures, including if we fail to achieve primary endpoints for any clinical trial of ezutromid, if the project compounds are unfit for administration to
humans or if we cannot develop a commercial manufacturing process.
We have granted to MDA, effective on the occurrence of such an
interruption, an exclusive, sublicenseable, worldwide, perpetual, irrevocable and royalty-free license under the patent rights, know-how and intellectual property that we control, useful for the project compounds or project products, to research,
develop, manufacture, have manufactured, use, sell, offer to sell, import and export the project compounds and project products for the prevention, treatment, or amelioration of DMD or BMD. We refer to such license as the interruption license. Upon
the effectiveness of the interruption license, we would be obligated to assign to MDA or its designee the regulatory filings, regulatory approvals, and contract rights that we or our affiliates own, and deliver specified know-how, in each case,
relating to project compounds and project products.
MDA acknowledges that if a royalty or other payment is due to any third party from
whom we licensed or acquired the intellectual property licensed to MDA, the interruption license is contingent on MDA or its sublicensee assuming those obligations resulting from their exercise of the interruption license.
Termination
The MDA grant agreement will
continue indefinitely.
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Duchenne Partners Fund
In December 2011, we entered into a grant agreement with the Duchenne Partners Fund, Inc., or DPF, a Delaware limited liability company, in
order to partially fund a Phase 1 clinical trial of ezutromid to treat DMD. We refer to this grant agreement with DPF as the DPF grant agreement. To date, we have received the entire amount of DPFs grant to us, or an aggregate of $500,000.
Financial Terms
We refer to small
molecules that can upregulate the utrophin gene, including ezutromid and compounds with similar mechanisms of action to which we have rights, as project compounds. Under the DPF grant agreement, we have agreed to make specified milestone payments to
DPF during our or our affiliates development and commercialization of pharmaceutical products containing the project compounds, which we refer to as project products. Because we raised more than a specified aggregate amount of funding, we have
paid a specified sum to DPF under the terms of the agreement, which we refer to as the DPF cash infusion milestone payment.
We have also
agreed to pay DPF a specified lump sum amount, less any previously paid DPF cash infusion milestone payment, following the regulatory approval of any project product for use or sale in the United States or European Union in the treatment of DMD or
BMD and an additional specified sum upon achievement of a commercial milestone. We would be obligated to pay DPF a low single digit percentage royalty of worldwide net sales by us, our affiliates or licensees of any project product. If we assign our
rights to any of the project compounds or experience specified change in control events, DPF may require our assignee to assume our obligations under the DPF grant agreement with respect to the assigned rights, or require us to pay DPF the greater
of a low single digit percentage of the fair market value of the assigned rights, or an amount that would give DPF an internal rate of return of a low double digit percentage on its grant to us.
Termination
The DPF grant agreement will
continue indefinitely.
Competition
The biotechnology and pharmaceutical industries are characterized by rapidly advancing technologies, intense competition and a strong emphasis
on proprietary products. While we believe that our technologies, knowledge, experience and scientific resources provide us with competitive advantages, we face potential competition from many different sources, including major pharmaceutical,
specialty pharmaceutical and biotechnology companies, academic institutions, government agencies and private and public research institutions. Any product candidates that we successfully develop and commercialize will compete with existing therapies
and new therapies that may become available in the future.
Many of our competitors may have significantly greater financial resources and
expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. These competitors also compete with us in recruiting and retaining
qualified scientific and management personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs. Smaller or early stage companies
may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies.
Our
commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than any products that we
may develop. Our competitors also may obtain marketing approvals for their
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products more rapidly than we obtain approval for ours. In addition, our ability to compete may be affected because in some cases insurers or other third-party payors seek to encourage the use of
generic products. This may have the effect of making branded products less attractive, from a cost perspective, to buyers.
The key
competitive factors affecting the success of our product candidates are likely to be their efficacy, safety, convenience, price and the availability of coverage and reimbursement from government and other third-party payors.
The competition for ezutromid and ridinilazole includes the following:
Ezutromid
There is currently no
approved therapy for the treatment of DMD applicable to all DMD patients that seeks to alter the progression of the disease. Corticosteroids, such as prednisolone and deflazacort, are the current standard of care for DMD patients, although these are
symptomatic treatments that do not address the underlying cause of DMD, and their use can be associated with severe side effects and concerns over weight gain. Other companies are developing alternative therapeutic approaches to the treatment of
DMD, a number of which are outlined below.
Nonsense mutations.
PTC Therapeutics, Inc., or PTC, is developing ataluren
(Translarna). Ataluren is a small molecule that enables formation of functional dystrophin in DMD patients with nonsense mutations. DMD caused by nonsense mutations affects approximately 13% of all DMD patients. The European Commission has
granted conditional approval for ataluren in Europe, and PTC is commercializing ataluren in several European countries. In October 2015, PTC announced a Phase 3 confirmatory clinical trial of ataluren did not achieve its primary endpoint, and in
February 2016, PTC announced its receipt of a refuse to file letter from the FDA indicating that PTCs New Drug Application for ataluren was not sufficiently complete to permit a substantive review.
Exon Skipping.
BioMarin Pharmaceutical Inc., or BioMarin, following the acquisition of Prosensa Holding N.V. that was completed in
2015, and Sarepta Therapeutics, Inc., or Sarepta, are developing treatments for DMD based on exon-skipping approaches. Exons are organic molecules known as nucleotides within the DNA strand that the cellular machinery translates to make full-length,
functional protein. In a sub-population of DMD patients, synthesis of the dystrophin protein is disrupted because of mutations that may be due, among other things, to deleted exons. Exon-skipping technology seeks to allow the production of a shorter
but still functional dystrophin protein. BioMarins most advanced exon-skipping drug is drisapersen (Kyndrisa). BioMarin completed a rolling NDA submission for drisapersen to the FDA seeking accelerated approval in April 2015. In January
2016, the FDA issued to BioMarin a complete response letter to the NDA for drisapersen which indicated that the review cycle for the application was complete and that the application was not ready for approval in its present form due to
the standard of substantial evidence of effectiveness having not been met. BioMarin submitted a Marketing Authorization Application, or MAA, to the European Medicines Agency, or EMA, for drisapersen, which was validated in June 2015 and remains
under review. Drisapersen targets exon 51 and would be applicable to approximately 13% of all DMD patients. Sareptas most advanced product candidate is eteplirsen (Exondys 51). Sarepta filed its NDA for eteplirsen with the FDA in August
2015, which was reviewed by the FDA in April 2016. Eteplirsen also targets exon 51 and would therefore be applicable to approximately 13% of all DMD patients. BioMarin and Sarepta are also developing other exon-skipping therapies to treat other
genetic mutations. These companies have product candidates in clinical trials that are targeting exon 44, which is applicable to 6% of all DMD patients, exon 45, which is applicable to 8% of all DMD patients, and exon 53, which is applicable to 6%
of all DMD patients. According to an article published in 2009 in the peer reviewed journal
Human Mutation
, skipping of the ten most common exons would treat in the aggregate approximately 41% of all DMD patients. We believe that there are
exon-skipping therapies currently in clinical development to address four of these exons and that skipping of these exons would treat in the aggregate less than one-third of all DMD patients.
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Other DMD approaches.
A number of other companies are pursuing alternative therapeutic
approaches for the treatment of DMD. Tivorsan Pharmaceuticals is developing a recombinant form of biglycan, a protein that is naturally produced in the body and regulates production of utrophin in developing muscle, which is currently in preclinical
development. Askelepios Biopharmaceuticals, Inc. is developing biostrophin, a gene therapy approach that is currently in Phase 1 clinical development. Pfizer, Inc., or Pfizer, and Bristol-Myers Squibb Company, or BMS, are pursuing an approach based
on muscle tissue growth through myostatin inhibition. Pfizer is developing the myostatin inhibitor PF-06252616 and initiated a Phase 2 clinical trial in patients with DMD in December 2014. BMS is developing BMS-986089, a myostatin inhibitor that is
currently in Phase 1 clinical development. Santhera Pharmaceuticals Holding AG completed a Phase 3 clinical trial of its product candidate, idebenone, in 2014 and reported that idebenone
(Raxone
®
/Catena
®
) delayed deterioration in respiratory function. Catabasis Pharmaceuticals, Inc. is developing CAT-1004 as a
non-steroidal, anti-inflammatory drug that is currently in a Phase 1/2 clinical trial. Akashi Therapeutics is developing HT-100, an anti-inflammatory and anti-fibrotic small molecule that aims to reduce fibrosis and inflammation. In February 2016,
Akashi Therapeutics announced that dosing and enrollment into a Phase 1b/2a clinical trial of HT-100 was suspended due to a fatality in the trial.
Ridinilazole
Several
pharmaceutical and biotechnology companies have established themselves in the market for the treatment of CDI, and several additional companies are developing products for the treatment of CDI. We expect that these products will compete with
ridinilazole.
Antibiotics.
The current standard of care for CDI is treatment with the broad spectrum antibiotics vancomycin and
metronidazole, both of which are available in generic form in the United States. Generic antibiotic therapies typically are sold at lower prices than branded antibiotics and generally are preferred by managed care providers of health services. The
antibiotic fidaxomicin (Dificid in the United States, Dificlir in Europe) was recently approved for the treatment of CDI in the United States and the European Union. Fidaxomicin was originally developed by Optimer Pharmaceuticals, Inc.,
which was later acquired by Cubist Pharmaceuticals, Inc., or Cubist. Cubist was recently acquired by Merck & Co., Inc., or Merck. Other antibiotics in late-stage clinical trials for treatment of CDI include cadazolid, which is being
developed by Actelion Pharmaceuticals Limited and is currently in Phase 3 clinical development and surotomycin, which was originally developed by Cubist, and later acquired by Merck. Merck reported that it had received unfavorable efficacy data from
a Phase 3 clinical trial for surotomycin in August 2015.
Other CDI approaches.
A number of other approaches for the treatment of
CDI are in development. Merck is developing the monoclonal antibodies bezlotoxumab, which completed Phase 3 clinical trials in 2015. In January 2016 the FDA accepted for review the Biologics License Application, or BLA, for bezlotoxumab and granted
a priority review. Merck has also filed a MAA with EMA. This antibody neutralizes certain toxins that are produced by
C. difficile
bacteria and would be an adjunctive therapy to antibiotics. Sanofi Pasteur is developing the
vaccine ACAM-CDIFF for primary prevention of CDI. ACAM-CDIFF is likely to be used only in high-risk patients given the difficulty of administering a vaccine to a broad population. Fecal biotherapy aims to recolonize the bacteria that comprise the
natural gut flora and would also be adjunctive therapy to antibiotics. Fecal biotherapy approaches in development include SER-109, which is being developed by Seres Therapeutics, Inc., formerly Seres Health, Inc. and which recently initiated a Phase
2 trial to assess safety and efficacy, and RBX2660, which is being developed by Rebiotix, Inc. and is currently being evaluated in a Phase 2 clinical trial.
Manufacturing
We do not own or operate,
and currently have no plans to establish, manufacturing facilities for the production of clinical or commercial quantities of ezutromid, ridinilazole or for the other compounds that we are evaluating in our DMD program. We currently rely, and expect
to continue to rely, on third parties for the manufacture of our product candidates and any products that we may develop.
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We currently engage a single, third-party manufacturer to provide clinical material of the active
pharmaceutical ingredient, or API, and fill and finish services for the final drug product formulation of ezutromid that is being used in our clinical trials. A second third-party clinical supplier is responsible for the labelling and shipping of
the final drug product to the clinical trial sites. We are engaged with a different drug product supplier to provide final drug product of the optimized formulation of ezutromid that is being evaluated in our ongoing Phase 1 clinical trial. For
ridinilazole, we engaged with two other third-party manufacturers to provide clinical material of the API and fill and finish services to supply final drug product that is used in our ongoing Phase 2 clinical trial. A third supplier is engaged to
provide packaging, labelling and distribution services for the ongoing Phase 2 clinical trial. We obtain the supplies of our API and drug products from these manufacturers pursuant to agreements that include specific supply timelines and volume
expectations.
We obtain the supplies of our product candidates from these manufacturers under master services contracts and specific work
orders. However, we do not have long-term supply arrangements in place. We do not currently have arrangements in place for redundant supply or a second source for API for ezutromid. If any of our current manufacturers should become unavailable to us
for any reason, we believe that there are a number of potential replacements, although we might incur some delay in identifying and qualifying such replacements. We have recently engaged two new third-party manufacturers to supply the API of
ridinilazole and fill and finish services to supply final drug product for use in future clinical trials. We believe these suppliers are suitable for commercial manufacture. We are considering appropriate third-party vendors for clinical packaging,
labelling and distribution of the finalized drug product.
All of our product candidates are organic compounds of low molecular weight and
are referred to as small molecules. We have selected these compounds based on their potential efficacy and safety, although they are also associated with reasonable cost of goods, ready availability of starting materials and ease of synthesis. We
believe that the chemistry for ezutromid and ridinilazole is amenable to scale-up and does not currently require unusual equipment in the manufacturing process. We expect to continue to develop product candidates that can be produced
cost-effectively at contract manufacturing facilities.
Intellectual Property
Our success depends in large part on our ability to obtain and maintain proprietary protection for our product candidates, technology and
know-how, to operate without infringing the proprietary rights of others and to prevent others from infringing our proprietary rights. We strive to protect the proprietary technology that we believe is important to our business by, among other
methods, seeking and maintaining patents, where available, that are intended to cover our product candidates, compositions and formulations, their methods of use and processes for their manufacture and any other inventions that are commercially
important to the development of our business. We also rely on trade secrets, know-how, continuing technological innovation and in-licensing opportunities to develop and maintain our proprietary and competitive position.
As of April 20, 2016, we owned or exclusively licensed a total of nine U.S. patents, five U.S. patent applications, five European patents
and six European patent applications, including original filings, continuations and divisional applications, as well as numerous other foreign counterparts to these U.S. and European patents and patent applications.
Our DMD patent portfolio includes the following granted patents and patent applications that we own or exclusively license:
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two granted U.S. patents covering the composition of matter of ezutromid and combinations of ezutromid with ancillary therapeutic agents, which are scheduled to expire in 2029 and 2030, respectively;
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a granted U.S. patent covering methods of manufacture of ezutromid, which is scheduled to expire in 2029;
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a pending U.S. patent application covering methods of use and the composition of matter of second generation utrophin modulator candidates, which if granted would be scheduled to expire in 2027 (subject to possible
patent term adjustment, or PTA);
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a granted European patent covering the composition of matter of ezutromid that cleared the opposition period in April 2015 with no opposition filed against it at the European Patent Office, and which is scheduled to
expire in 2027; and
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a number of pending patent applications covering formulations of ezutromid, further methods of use of ezutromid and the composition of matter of second generation utrophin modulator candidates.
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Our CDI patent portfolio includes the following granted patents and patent applications that we own or exclusively license:
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a granted U.S. patent covering the use of ridinilazole in the treatment of CDI, which is scheduled to expire in 2029 (subject to possible PTA);
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a corresponding granted European patent covering the use of ridinilazole in the treatment of CDI, which is scheduled to expire in 2029;
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a granted U.S. patent covering hydrates of ridinilazole, which is scheduled to expire in 2029;
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an allowed European divisional application covering hydrates of ridinilazole and pharmaceutical compositions comprising ridinilazole;
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a further pending divisional application with the European Patent Office; and
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two granted U.S. patents, a pending U.S. continuation patent application and a granted European patent covering second generation agents for the treatment of CDI, which is scheduled to expire in 2031.
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While patent protection is not available for composition of matter claims that only recite the API for ridinilazole, protection may be
available for the pharmaceutical compositions comprising ridinilazole as well other forms thereof such as hydrates (and indeed claims have been secured for the latter in both Europe and the U.S.).
The term of individual patents depends upon the legal term for patents in the countries in which they are obtained. In most countries,
including the United States, the patent term is 20 years from the filing date of a non-provisional patent application. In the United States, a patents term may, in certain cases, be lengthened by patent term adjustment, which compensates a
patentee for administrative delays by the U.S. Patent and Trademark Office, or the USPTO, in examining and granting a patent, or may be shortened if a patent is terminally disclaimed over an earlier filed patent.
The term of a U.S. patent that covers a drug, biological product or medical device approved pursuant to a pre-market approval, or PMA, may
also be eligible for patent term extension when FDA approval is granted, provided that certain statutory and regulatory requirements are met. The length of the patent term extension is related to the length of time the drug is under regulatory
review while the patent is in force. The Drug Price Competition and Patent Term Restoration Act of 1984, or the Hatch-Waxman Act, permits a patent term extension of up to five years beyond the expiration date set for the patent. Patent extension
cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval, only one patent applicable to each regulatory review period may be granted an extension and only those claims reading on the approved drug may
be extended. Similar provisions are available in Europe and certain other foreign jurisdictions to extend the term of a patent that covers an approved drug, provided that statutory and regulatory requirements are met. Thus, in the future, if and
when our product candidates receive approval by the FDA or foreign regulatory authorities, we expect to apply for patent term extensions on issued patents covering those products, depending upon the length of the clinical trials for each drug and
other factors. The expiration dates of our patents and patent applications referred to above are without regard to potential patent term extension or other market exclusivity that may be available to us.
In addition to patents, we may rely, in some circumstances, on trade secrets to protect our technology and maintain our competitive position.
However, trade secrets can be difficult to protect. We seek to protect our
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proprietary technology and processes, in part, by confidentiality agreements with our employees, corporate and scientific collaborators, consultants, scientific advisors, contractors and other
third parties. We also seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining physical security of our premises and physical and electronic security of our information technology systems.
Sales and Marketing
In light of our
stage of development, we have not yet established a sales and marketing organization or distribution capabilities. We have retained exclusive worldwide commercialization rights for ezutromid and ridinilazole for all indications in all territories.
If ezutromid receives marketing approval, we intend to commercialize it initially in the United States and Europe with our own focused,
specialized sales force that we plan to establish. We believe that medical specialists treating DMD are sufficiently concentrated that we will be able to effectively promote ezutromid with a targeted sales team in these and potentially other key
territories. We also believe that our relationships with patient advocacy groups will strengthen our ability to market ezutromid. Outside of the United States and Europe, we plan to evaluate the potential for utilizing collaboration, distribution
and other marketing arrangements with third parties to commercialize ezutromid.
We plan to evaluate our options for maximizing the
commercial opportunity for ridinilazole. We may determine to commercialize the product directly in the United States and Europe with our own specialized sales force or seek third-party collaborators for the commercialization of ridinilazole. We
intend to evaluate the relative merits of retaining commercialization rights for ourselves or entering into collaboration arrangements with third parties depending on factors such as the anticipated development costs required to achieve marketing
approval, the sales and marketing resources required in each territory in which we receive approval, the relative size of the market opportunity in such territory, the particular expertise of the third party and the proposed financial terms of the
arrangement.
We also plan to build key capabilities, such as marketing, market access, sales management and medical affairs, to implement
marketing and medical strategies for any products that we market through our own sales organization and to oversee and support our sales force. The responsibilities of the marketing organization would include developing educational initiatives with
respect to approved products and expanding relationships with thought leaders in relevant fields of medicine.
Government Regulation
Government authorities in the United States, at the federal, state and local level, and in other countries and jurisdictions, including the
European Union, extensively regulate, among other things, the research, development, testing, manufacture, quality control, approval, packaging, storage, recordkeeping, labeling, advertising, promotion, distribution, marketing, post-approval
monitoring and reporting, and import and export of pharmaceutical products. The processes for obtaining regulatory approvals in the United States and in foreign countries and jurisdictions, along with subsequent compliance with applicable statutes
and regulations and other regulatory authorities, require the expenditure of substantial time and financial resources.
Review and Approval of Drugs
in the United States
In the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act, or FDCA, and
implementing regulations. The failure to comply with the FDCA and applicable U.S. requirements at any time during the product development process, approval process or after approval may subject an applicant or sponsor to a variety of administrative
or judicial sanctions, including refusal by the FDA to approve pending applications, withdrawal of an approval, imposition of a clinical hold, issuance of warning letters and other types
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of letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement of
profits, or civil or criminal investigations and penalties brought by the FDA and the Department of Justice, or DOJ, or other federal and state governmental entities.
An applicant seeking approval to market and distribute a new drug product in the United States must typically undertake the following:
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completion of preclinical laboratory tests, animal studies and formulation studies in compliance with the FDAs good laboratory practice, or GLP, regulations;
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submission to the FDA of an IND, which must take effect before human clinical trials may begin;
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approval by an independent institutional review board, or IRB, representing each clinical site before each clinical trial may be initiated;
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performance of adequate and well-controlled human clinical trials in accordance with current good clinical practices, or GCP, to establish the safety and efficacy of the proposed drug product for each indication;
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preparation and submission to the FDA of a new drug application, or NDA;
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review of the product candidate by an FDA advisory committee, where appropriate or if applicable;
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satisfactory completion of one or more FDA inspections of the manufacturing facility or facilities at which the product, or components thereof, are produced to assess compliance with current Good Manufacturing
Practices, or cGMP, requirements and to assure that the facilities, methods and controls are adequate to preserve the products identity, strength, quality and purity;
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satisfactory completion of FDA audits of clinical trial sites to assure compliance with GCPs and the integrity of the clinical data;
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payment of user fees and securing FDA approval of the NDA; and
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compliance with any post-approval requirements, including Risk Evaluation and Mitigation Strategies, or REMS, where applicable, and any post-approval studies required by the FDA.
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Preclinical Studies
Preclinical
studies include laboratory evaluation of the purity and stability of the manufactured drug substance or API and the formulated drug or drug product, as well as
in vitro
and animal studies to assess the safety and activity of the drug for
initial testing in humans and to establish a rationale for therapeutic use. The conduct of preclinical studies is subject to federal regulations and requirements, including GLP regulations. The results of the preclinical tests, together with
manufacturing information, analytical data, any available clinical data or literature and plans for clinical trials, among other things, are submitted to the FDA as part of an IND. Some long-term preclinical testing, such as animal tests of
reproductive adverse events and carcinogenicity, may continue after the IND is submitted.
IND and IRB Approval of Human Clinical Trials in Support
of an NDA
Clinical trials involve the administration of the investigational product to human subjects under the supervision of
qualified investigators in accordance with GCP requirements, which include, among other things, the requirement that all research subjects provide their informed consent in writing before their participation in any clinical trial. Clinical trials
are conducted under written study protocols detailing, among other things, the inclusion and exclusion criteria, the objectives of the study, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated. A protocol
for each clinical trial and any subsequent protocol amendments must be submitted to the FDA as part of the IND. An IND automatically becomes effective 30 days
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after receipt by the FDA, unless before that time the FDA raises concerns or questions related to a proposed clinical trial and places the clinical trial on clinical hold. In such a case, the IND
sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. Accordingly, submission of an IND may or may not result in the FDA allowing clinical trials to commence.
In addition to the foregoing IND requirements, an IRB representing each institution participating in the clinical trial must review and
approve the plan for any clinical trial before it commences at that institution, and the IRB must conduct a continuing review and reapprove the study at least annually. The IRB must review and approve, among other things, the study protocol and
informed consent information to be provided to study subjects. An IRB must operate in compliance with FDA regulations. Information about certain clinical trials must be submitted within specific timeframes to the National Institutes of Health for
public dissemination on its ClinicalTrials.gov website.
A sponsor who wishes to conduct a clinical trial outside the United States may,
but need not, obtain FDA authorization to conduct the clinical trial under an IND. If a foreign clinical trial is not conducted under an IND, the sponsor may submit data from the clinical trial to the FDA in support of an NDA or IND so long as the
clinical trial is conducted in compliance with an international guideline for the ethical conduct of clinical research known as the Declaration of Helsinki or the laws and regulations of the country or countries in which the clinical trial is
performed, whichever provides the greater protection to the participants in the clinical trial.
Human clinical trials are typically
conducted in four sequential phases, which may overlap or be combined:
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Phase 1.
The drug is initially introduced into healthy human subjects or, in certain indications such as cancer, patients with the target disease or condition and tested for safety, dosage tolerance,
absorption, metabolism, distribution, excretion and, if possible, to gain an early indication of its effectiveness and to determine optimal dosage.
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Phase 2.
The drug is administered to a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases
and to determine dosage tolerance and optimal dosage.
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Phase 3.
The drug is administered to an expanded patient population, generally at geographically dispersed clinical trial sites, in well-controlled clinical trials to generate enough data to statistically
evaluate the efficacy and safety of the product for approval, to establish the overall risk-benefit profile of the product, and to provide adequate information for the labeling of the product. Phase 3 clinical trials are commonly referred to as
pivotal trials, which typically denotes a trial which presents the data that the FDA or other relevant regulatory agency will use to determine whether or not to approve a drug.
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Phase 4.
Post-approval studies may be conducted after initial marketing approval. These studies are used to gain additional experience from the treatment of patients in the intended therapeutic indication.
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Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA and more
frequently if serious adverse events occur. In addition, IND safety reports must be submitted to the FDA for any of the following: serious and unexpected suspected adverse reactions; findings from other studies or animal or
in vitro
testing
that suggest a significant risk in humans exposed to the drug; and any clinically important increase in the case of a serious suspected adverse reaction over that listed in the protocol or investigator brochure. Phase 1, Phase 2 and Phase 3 clinical
trials may not be completed successfully within any specified period, or at all. Furthermore, the FDA or the sponsor or the data monitoring committee may suspend or terminate a clinical trial at any time on various grounds, including a finding that
the research subjects are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution, or an institution it represents, if the clinical trial is not being conducted in
accordance with the IRBs requirements or if the drug has been associated with unexpected serious harm to patients. The FDA will typically inspect one or more clinical sites to assure compliance with GCP and the integrity of the clinical data
submitted.
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Submission of an NDA to the FDA
Assuming successful completion of required clinical testing and other requirements, the results of the preclinical studies and clinical trials,
together with detailed information relating to the products chemistry, manufacture, controls and proposed labeling, among other things, are submitted to the FDA as part of an NDA requesting approval to market the drug product for one or more
indications. Under federal law, the submission of most NDAs is additionally subject to an application user fee, currently exceeding $2.3 million, and the sponsor of an approved NDA is also subject to annual product and establishment user fees,
currently exceeding $114,000 per product and $585,000 per establishment. These fees are typically increased annually. Certain exceptions and waivers are available for some of these fees, such as an exception from the application fee for drugs with
orphan designation and a waiver for certain small businesses and an exception from the establishment fee when the establishment does not engage in manufacturing the drug during a particular fiscal year.
The FDA conducts a preliminary review of an NDA within 60 calendar days of its receipt and strives to inform the sponsor by the 74
th
day after the FDAs receipt of the submission whether the application is sufficiently complete to permit substantive review. The FDA may request additional information rather than accept an NDA
for filing. In this event, the application must be resubmitted with the additional information. The resubmitted application is also subject to review before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an
in-depth substantive review.
The FDA has agreed to specified performance goals in the review process of NDAs. Under that agreement, 90%
of applications seeking approval of New Molecular Entities, or NMEs, are meant to be reviewed within ten months from the date on which FDA accepts the NDA for filing, and 90% of applications for NMEs that have been designated for priority
review are meant to be reviewed within six months of the filing date. For applications seeking approval of drugs that are not NMEs, the ten-month and six-month review periods run from the date that FDA receives the application. The review
process may be extended by the FDA for three additional months to consider new information or clarification provided by the applicant to address an outstanding deficiency identified by the FDA following the original submission.
Before approving an NDA, the FDA typically will inspect the facility or facilities where the product is or will be manufactured. These
pre-approval inspections cover all facilities associated with an NDA submission, including drug component manufacturing (such as active pharmaceutical ingredients), finished drug product manufacturing, and control testing laboratories. The FDA will
not approve an application unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. Additionally, before
approving an NDA, the FDA will typically inspect one or more clinical sites to assure compliance with GCP.
In addition, as a condition of
approval, the FDA may require an applicant to develop a REMS. REMS use risk minimization strategies beyond the professional labeling to ensure that the benefits of the product outweigh the potential risks. To determine whether a REMS is needed, the
FDA will consider the size of the population likely to use the product, seriousness of the disease, expected benefit of the product, expected duration of treatment, seriousness of known or potential adverse events, and whether the product is a new
molecular entity. REMS can include medication guides, physician communication plans for healthcare professionals, and elements to assure safe use, or ETASU. ETASU may include, but are not limited to, special training or certification for prescribing
or dispensing, dispensing only under certain circumstances, special monitoring, and the use of patient registries. The FDA may require a REMS before approval or post-approval if it becomes aware of a serious risk associated with use of the product.
The requirement for a REMS can materially affect the potential market and profitability of a product.
The FDA is required to refer an
application for a novel drug to an advisory committee or explain why such referral was not made. Typically, an advisory committee is a panel of independent experts, including clinicians and other scientific experts, that reviews, evaluates and
provides a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions.
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Fast Track, Breakthrough Therapy and Priority Review Designations
The FDA is 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 programs are fast track designation, breakthrough therapy designation and priority review designation.
Specifically, the 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 products 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 FDAs 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, Congress enacted the Food and Drug Administration Safety and Innovation Act, or
FDASIA. This law established a new regulatory scheme allowing for 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.
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 FDAs goal for taking action on a marketing application from ten months to six months.
Accelerated Approval Pathway
The FDA may grant accelerated approval to a drug for a serious or life-threatening condition that provides meaningful therapeutic advantage to
patients over existing treatments based upon a determination that the drug has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit. The FDA may also grant accelerated approval for such a drug when the product has
an effect on an intermediate clinical endpoint that can be measured earlier than an effect on irreversible morbidity or mortality, or IMM, and that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical
benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments. Drugs granted accelerated approval must meet the same statutory standards for safety and effectiveness as those
granted traditional approval.
For the purposes of accelerated approval, a surrogate endpoint is a marker, such as a laboratory
measurement, radiographic image, physical sign, or other measure that is thought to predict clinical benefit, but is
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not itself a measure of clinical benefit. Surrogate endpoints can often be measured more easily or more rapidly than clinical endpoints. An intermediate clinical endpoint is a measurement of a
therapeutic effect that is considered reasonably likely to predict the clinical benefit of a drug, such as an effect on IMM. The FDA has limited experience with accelerated approvals based on intermediate clinical endpoints, but has indicated that
such endpoints generally may support accelerated approval where the therapeutic effect measured by the endpoint is not itself a clinical benefit and basis for traditional approval, if there is a basis for concluding that the therapeutic effect is
reasonably likely to predict the ultimate clinical benefit of a drug.
The accelerated approval pathway is most often used in settings in
which the course of a disease is long and an extended period of time is required to measure the intended clinical benefit of a drug, even if the effect on the surrogate or intermediate clinical endpoint occurs rapidly. For example, accelerated
approval has been used extensively in the development and approval of drugs for treatment of a variety of cancers in which the goal of therapy is generally to improve survival or decrease morbidity and the duration of the typical disease course
requires lengthy and sometimes large clinical trials to demonstrate a clinical or survival benefit.
The accelerated approval pathway is
usually contingent on a sponsors agreement to conduct, in a diligent manner, additional post-approval confirmatory studies to verify and describe the drugs clinical benefit. As a result, a drug candidate approved on this basis is subject
to rigorous post-marketing compliance requirements, including the completion of Phase 4 or post-approval clinical trials to confirm the effect on the clinical endpoint. Failure to conduct required post-approval studies, or confirm a clinical benefit
during post-marketing studies, would allow the FDA to withdraw the drug from the market on an expedited basis. All promotional materials for drug candidates approved under accelerated regulations are subject to prior review by the FDA.
The FDAs Decision on an NDA
On the
basis of the FDAs evaluation of the NDA and accompanying information, including the results of the inspection of the manufacturing facilities, the FDA may issue an approval letter or a complete response letter. An approval letter authorizes
commercial marketing of the product with specific prescribing information for specific indications. A complete response letter generally outlines the deficiencies in the submission and may require substantial additional testing or information in
order for the FDA to reconsider the application. If and when those deficiencies have been addressed to the FDAs satisfaction in a resubmission of the NDA, the FDA will issue an approval letter. The FDA has committed to reviewing such
resubmissions in two or six months depending on the type of information included. Even with submission of this additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval.
If the FDA approves a product, it may limit the approved indications for use for the product, require that contraindications, warnings or
precautions be included in the product labeling, require that post-approval studies, including Phase 4 clinical trials, be conducted to further assess the drugs safety after approval, require testing and surveillance programs to monitor the
product after commercialization, or impose other conditions, including distribution restrictions or other risk management mechanisms, including REMS, which can materially affect the potential market and profitability of the product. The FDA may
prevent or limit further marketing of a product based on the results of post-market studies or surveillance programs. After approval, many types of changes to the approved product, such as adding new indications, manufacturing changes and additional
labeling claims, are subject to further testing requirements and FDA review and approval.
Post-Approval Requirements
Drugs manufactured or distributed pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including, among
other things, requirements relating to recordkeeping, periodic reporting, product sampling and distribution, advertising and promotion and reporting of adverse experiences with the product. After approval, most changes to the approved product, such
as adding new indications or other labeling
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claims, are subject to prior FDA review and approval. There also are continuing, annual user fee requirements for any marketed products and the establishments at which such products are
manufactured, as well as new application fees for supplemental applications with clinical data.
In addition, drug manufacturers and other
entities involved in the manufacture and distribution of approved drugs are required to register their establishments with the FDA and state agencies, and are subject to periodic unannounced inspections by the FDA and these state agencies for
compliance with cGMP requirements. Changes to the manufacturing process are strictly regulated and often require prior FDA approval before being implemented. FDA regulations also require investigation and correction of any deviations from cGMP and
impose reporting and documentation requirements upon the sponsor and any third-party manufacturers that the sponsor may decide to use. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality
control to maintain cGMP compliance.
Once an approval is granted, the FDA may withdraw the approval if compliance with regulatory
requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with
manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information; imposition of post-market studies or clinical trials to assess new safety risks; or
imposition of distribution or other restrictions under a REMS program. Other potential consequences include, among other things:
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restrictions on the marketing or manufacturing of the product, suspension of the approval, complete withdrawal of the product from the market or product recalls;
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fines, warning letters or holds on post-approval clinical trials;
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refusal of the FDA to approve pending NDAs or supplements to approved NDAs, or suspension or revocation of product license approvals;
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product seizure or detention, or refusal to permit the import or export of products; or
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injunctions or the imposition of civil or criminal penalties.
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The FDA strictly regulates
marketing, labeling, advertising and promotion of products that are placed on the market. Drugs may be promoted only for the approved indications and in accordance with the provisions of the approved label. The FDA and other agencies actively
enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant liability.
In addition, the distribution of prescription pharmaceutical products is subject to the Prescription Drug Marketing Act, or PDMA, as well as
the Drug Supply Chain Security Act, or DSCA, which regulate the distribution and tracing of prescription drugs and prescription drug samples at the federal level, and set minimum standards for the registration and regulation of drug distributors by
the states. Both the PDMA and state laws limit the distribution of prescription pharmaceutical product samples and impose requirements to ensure accountability in distribution. The DSCA imposes requires to ensure accountability in distribution and
to identify and remove counterfeit and other illegitimate products from the market.
Abbreviated New Drug Applications for Generic Drugs
In 1984, with passage of the Hatch-Waxman Amendments to the FDCA, Congress authorized the FDA to approve generic drugs that are the same as
drugs previously approved by the FDA under the NDA provisions of the statute. To obtain approval of a generic drug, an applicant must submit an abbreviated new drug application, or ANDA, to the agency. In support of such applications, a generic
manufacturer may rely on the preclinical and clinical testing previously conducted for a drug product previously approved under an NDA, known as the reference listed drug, or RLD.
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Specifically, in order for an ANDA to be approved, the FDA must find that the generic version is
identical to the RLD with respect to the active ingredients, the route of administration, the dosage form, and the strength of the drug. At the same time, the FDA must also determine that the generic drug is bioequivalent to the
innovator drug. Under the statute, a generic drug is bioequivalent to a RLD if the rate and extent of absorption of the drug do not show a significant difference from the rate and extent of absorption of the listed drug.
Upon approval of an ANDA, the FDA indicates whether the generic product is therapeutically equivalent to the RLD in its
publication Approved Drug Products with Therapeutic Equivalence Evaluations, also referred to as the Orange Book. Physicians and pharmacists consider a therapeutic equivalent generic drug to be fully substitutable for the
RLD. In addition, by operation of certain state laws and numerous health insurance programs, the FDAs designation of therapeutic equivalence often results in substitution of the generic drug without the knowledge or consent of either the
prescribing physician or patient.
Under the Hatch-Waxman Amendments, the FDA may not approve an ANDA until any applicable period of
non-patent exclusivity for the RLD has expired. The FDCA provides a period of five years of non-patent data exclusivity for a new drug containing a new chemical entity. A new chemical entity is a drug that contains no active moiety that has
previously been approved by the FDA in any other NDA. An active moiety is the molecule or ion responsible for the physiological or pharmacological action of the drug substance. In cases where such exclusivity has been granted, an ANDA may not be
filed with the FDA until the expiration of five years unless the submission is accompanied by a Paragraph IV certification, in which case the applicant may submit its application four years following the original product approval. The FDCA also
provides for a period of three years of exclusivity if the NDA includes reports of one or more new clinical investigations, other than bioavailability or bioequivalence studies, that were conducted by or for the applicant and are essential to the
approval of the application. This three-year exclusivity period often protects changes to a previously approved drug product, such as a new dosage form, route of administration, combination or indication.