Overview

We are a pharmaceutical company developing therapeutics utilizing our proprietary long-term drug delivery platform, ProNeura , for the treatment of select chronic diseases for which steady state delivery of a drug provides an efficacy and/or safety benefit. We have been transitioning to a commercial stage enterprise since May 25, 2018 when we reacquired Probuphine (buprenorphine) implant , or Probuphine, from our former licensee. Probuphine is the first product based on our ProNeura technology approved in the U.S. and Canada for the maintenance treatment of opioid use disorder, or OUD, in eligible patients. Since the reacquisition, we have been implementing a strategic plan focused on building a new foundation in support of an effective U.S. product relaunch targeting select OUD market segments best suited for Probuphine. Importantly, this included the establishment of a small experienced commercial team and the engagement of new strategic partners to facilitate the product order and distribution process in order to expand patient access to treatment with Probuphine.

ProNeura consists of a small, solid rod made from a mixture of ethylene-vinyl acetate, or EVA, and a drug substance. The resulting product is a solid matrix that is placed subdermally in the inside part of the upper arm in a short physician office-based outpatient procedure, and is removed in a similar manner at the end of the treatment period. The drug substance is released continuously through the process of diffusion-controlled dissolution, resulting in a steady rate of release (generally similar to intravenous administration), thereby avoiding the fluctuating peak and trough levels of oral dosing that often pose problems in many disease settings. We believe that our ProNeura long term drug delivery platform has the potential to be used in the treatment of other chronic conditions where maintaining stable, around the clock blood levels of a medication may benefit the patient and improve medical outcomes. While our primary focus is on the commercialization of Probuphine, we are also engaged in research and development efforts on a product pipeline based on this platform technology.

Probuphine

Probuphine, our first marketed product based on our ProNeura drug delivery technology, is a six-month buprenorphine implant for the maintenance treatment of opioid addiction in patients who have achieved and sustained prolonged clinical stability on a dose of up to 8 mg per day of oral buprenorphine, a patient population that represents approximately 25% of oral buprenorphine prescriptions. Treatment with Probuphine requires a healthcare provider to be trained and certified under the Probuphine Risk Evaluation and Mitigation Strategy, or REMS, program to insert a set of four implants (each approximately the size of a one-inch matchstick), sub-dermally in the patient’s upper arm under local anesthetic during a short (about 15 minutes) in-office procedure. After insertion, Probuphine delivers buprenorphine continuously for six months. Thereafter, the implants are removed and can be replaced with a new set of implants in the opposite arm.

The development and commercialization rights to Probuphine for the U.S. and Canada were originally licensed to Braeburn Pharmaceuticals, Inc., or Braeburn, in December 2012 and, following U.S. Food and Drug Administration, or FDA, approval in May 2016, Braeburn commenced a commercial launch during the first quarter of 2017. Progress was slow and we received royalty revenues of approximately $215,000 for the year ended December 31, 2017. In early 2018, Braeburn substantially reduced its field sales force and medical liaison personnel following its receipt of a complete response letter from the FDA for its weekly and monthly depot injection products. Anticipating a negative impact on Probuphine sales in the U.S., we began discussions for the return of the commercialization rights to Titan and on May 25, 2018, we entered into an agreement under which we received a $1 million payment from Braeburn, all of the Probuphine inventory and Braeburn’s undertaking to provide certain transition services through the end of 2018.

During the latter half of 2018, we engaged the services of key consultants with expertise in launching and commercializing specialty pharmaceutical products, such as Probuphine, to fully understand Braeburn’s product launch activities and its subsequent failure in the market. Based on feedback from key opinion leaders and these consultants, we believe that access to care for patients with Probuphine was negatively impacted by issues related to the complexity, timing and amount of reimbursement to patients and their doctors from insurance providers, as well as the restrictive requirements of the REMS program. Notwithstanding the enormity of the opioid addiction epidemic in our country, the hurdles to penetrating the market and growing sales of Probuphine have been considerable. We believe that a more focused commercialization strategy is necessary for success. This includes re-segmenting target customer markets and focusing on the following;

In addition, it is essential to improve access to reimbursement by third party payors which requires engaging the services of large specialty pharmacy organizations with pre-established relationships with the third-party payor plans. We also believe that Probuphine will benefit from the trend of opioid addiction treatment’s move towards extended release formulations of buprenorphine, such as one month depot injections, the first of which was approved by the FDA at the end of 2017. The availability of one month depot injection formulations should enable clinicians and patients to become accustomed to longer duration procedure-oriented treatments, which in turn may lead to increased use of Probuphine during the maintenance treatment stage.

To implement the Probuphine relaunch, we undertook an equity financing in late September 2018 and engaged Dane Hallberg as our Chief Commercial Officer the following month. By the end of 2018, we had retained a small experienced sales and marketing team and began to address the product supply chain issues, notably the third-party payor pre-approval process and the logistics and distribution system, both of which have negatively impacted the product’s acceptance and uptake. This has included identifying the need for a better centralized logistics service (referred to as a ‘hub’) that can service the combined process of product ordering and pre-approval by payors, as well as the expansion of the specialty pharmacy network to accelerate the pre-approval process and improve product distribution. In March 2019, we engaged the services of AllianceRx Walgreens Specialty Pharmacy, which we expect will help alleviate bottle necks in the third-party payor approval and product shipment process and are seeking to expand this network with a few additional large specialty pharmacies. We have also chosen AppianRx as our new hub which will be operational in early second quarter 2019. We believe that the engagement of AppianRx will lead to significant improvements in the automation and streamlining of the product supply chain process.

We are also committed to commencing two Phase 4 clinical studies with Probuphine during 2019 that were required by the FDA approval letter. One study will provide safety and pharmacokinetic information on both the implantation of Probuphine to a previously used anatomical site, as well as an alternate site, such as the abdomen. The second study is a registration study to evaluate the incidence of implant protrusion, migration and breakage during the treatment with Probuphine. We have been in discussions with the FDA regarding study design and protocol, and expect to commence the first study during the second quarter of 2019.

Probuphine received approval from the Canadian Health Authority in April 2018, and our licensee, Knight Therapeutics, Inc., or Knight, commenced its product launch in late October 2018. Knight is marketing Probuphine as a specialty product that, in addition to the typical benefits, can address some of the key needs in the Canadian market, particularly in providing buprenorphine maintenance treatment to OUD patients in rural communities where access to a clinic for frequent visits to fill prescriptions is not possible.

In March 2018, we entered into a purchase agreement with Molteni Farmaceuticci of Italy, or Molteni, pursuant to which Molteni acquired the European intellectual property related to Probuphine, including the Marketing Authorization Application, or MAA, that had been submitted to the European Medicines Agency, or EMA, in November 2017 and the exclusive right to commercialize the Titan supplied Probuphine product in Europe, as well as certain countries of the Commonwealth of Independent States, the Middle East and North Africa. We have been assisting Molteni in the MAA review process and during the second quarter of 2018 we had meetings with the rapporteur and co-rapporteur regulatory review teams to present our strategy and to address specific questions posed by these regulatory agencies. Together with Molteni, we have provided responses to all of the EMA’s questions and expect that the final recommendation of the EMA on the Probuphine MAA and potential approval to occur during the second quarter of 2019.  

ProNeura Continuous Drug Delivery Platform

Our ProNeura continuous drug delivery system consists of a small, solid rod made from a mixture of ethylene-vinyl acetate, or EVA and a drug substance. The resulting product is a solid matrix that is placed subdermally, normally in the inside part of the upper arm in a short physician office-based procedure and is removed in a similar manner at the end of the treatment period. The drug substance is released continuously through the process of diffusion-controlled dissolution. This results in a continuous, steady rate of release generally similar to intravenous administration. We believe that such long-term, almost linear release characteristics are desirable as they avoid the fluctuating peak and trough levels of oral dosing that often poses problems in a range of disease settings.

The ProNeura platform was developed to address the need for a simple, practical method to achieve continuous long-term drug delivery, and, depending on the characteristics of the compound to be delivered, can potentially provide treatment on an outpatient basis over extended periods of up to 12 months. We believe that the benefits of this technology have been demonstrated by the clinical results seen to date with Probuphine, and, in addition, that the development and regulatory process have been affirmed by the FDA approval of this product. We have demonstrated the feasibility of the ProNeura platform with small molecules, hormones, and bio-active peptides. The delivery system works with both hydrophobic and hydrophilic molecules. We have also shown the flexibility of the platform by experimenting with the release characteristics of the EVA implants, layering the implants with varying concentrations of drug, and generating implants of different sizes and porosity to achieve a desired delivery profile. Formulation development is conducted at a dedicated pilot plant established by Titan at the South West Research Institute, or SWRI, in San Antonio, Texas that includes cGMP manufacturing and testing capabilities. We also receive support services from the vast array of SWRI groups with expertise in manufacturing and material sciences. The facilities are compliant with both FDA and Drug Enforcement Agency, or DEA, requirements enabling us to work with controlled substances, and the manufacturing scale is ideal for product development during non-clinical and clinical testing stages. 

Our Product Pipeline

Our goal is to expand our product pipeline using the ProNeura implant platform. We have been opportunistically evaluating other drugs for use with this technology, focusing on drugs where conventional treatment may be adversely impacted by fluctuating blood drug levels and/or poor patient compliance, and where existing therapeutic compounds have sufficient potency to be effective at low doses. With our resources focused on commercialization of Probuphine, further development of the ProNeura platform is currently being limited to non-clinical product development activity that is funded by external grants or other partners.

ProNeura-Ropinirole for Parkinson’s Disease

Parkinson’s disease, or PD, is a disease of the central nervous system characterized by the loss of dopaminergic neurons, which leads to increasing activity in the brain region that influences movement and motor function. According to the Parkinson’s Disease Foundation, more than one million people in the U.S. suffer from PD, and this number is projected to double by 2030. Early stage PD patients are treated with daily doses of drugs designed to replace dopamine in the brain. However, these therapeutics typically lose their benefits after several years of chronic treatment and trigger serious side effects. About one-third of the treated patients develop motor response fluctuations and/or drug-induced dyskinesias within three to five years of treatment, and these symptoms are present in almost all patients after 10 to 12 years. Clinical and nonclinical research indicates that these motor side effects arise from the pulsatile dopaminergic stimulation resulting from current oral treatment. Continuous dopaminergic stimulation, or CDS, by subcutaneous infusion has been shown to palliate these motor complications, as well as to delay or prevent the onset of dyskinesias. We believe our ProNeura drug delivery technology provides a clinically-validated platform to safely and conveniently provide CDS for several months from a single treatment. Further, the subdermal placement of these implants eliminates many of the device-related complications associated with existing treatment modalities.

Based on these principles we designed an implant to deliver the drug ropinirole and conducted appropriate non-clinical studies, including a non-clinical study in an MPTP Parkinsonian primate model and demonstrated that a sustained non-fluctuating plasma level of ropinirole could be delivered safely for several months following implantation and could control PD symptoms without triggering dyskinesias in severely lesioned primates. Following further optimization of the implant and completion of the Investigational New Drug application, or IND, enabling non-clinical studies, we submitted the IND application to the FDA in early 2017 and it was cleared in August 2017 for commencement of the proposed Phase 1/2 clinical study. The trial is an open-label, sequential, dose escalation study that will enroll approximately 20 subjects with idiopathic Parkinson's disease. The primary objectives are to characterize the pharmacokinetic profile of the ropinirole implants, to evaluate their safety and tolerability, and to explore potential signals of efficacy using established disease-specific assessment scales. The first patient in the first cohort of the Phase 1/2 clinical study was treated in early October 2017 and in July 2018 the Data Safety Monitoring Board, or DSMB, completed a review of the data from the first cohort of patients and recommended that the trial continue with enrollment of the second cohort of patients . However, we chose to postpone further activity in this clinical study in order to focus our limited resources on commercialization of Probuphine. We do not anticipate further progress with this study until sufficient funds are available to support this program, either from a partner or future revenues from Probuphine.

Other ProNeura Product Feasibility Programs

Further development of the ProNeura platform has been limited to non-clinical product development activity that is funded by external grants and/or other partners.

We have conducted a feasibility assessment of a subcutaneous implant using our proprietary ProNeura sustained release technology to administer an opioid antagonist. We believe that a product able to deliver non-fluctuating, therapeutic levels of a mu-opioid receptor antagonist continuously for up to six months may be ideally suited for the prevention of opioid relapse and overdose in patients who have gone through a detoxification program. In September 2018, we were awarded a grant by the National Institute for Drug Addiction, or NIDA, in support of this program. The grant provides for approximately $2.67 million in funding during the first year and approximately $6.08 million during the second year subject to the terms and conditions specified in the grant, including our fund matching obligation in the amount of approximately $1.33 million during the first year. Funding during the second year is also subject to satisfactory progress of the project and the availability of funds to NIDA, although, as recently communicated by NIDA, it does not include any company fund matching obligations.

We are collaborating with the Walter Reed Army Institute of Research, or WRAIR, and SWRI in the early non-clinical evaluation of the ProNeura platform in malaria prophylaxis. The early data from this collaboration is encouraging and has been presented by the WRAIR staff at several conferences, and WRAIR has now received additional funding from the Department of Defense to continue the program with additional non-clinical testing of the atovaquone and proguanil implant formulations in large animal studies. WRAIR is also pursuing additional grant funding for testing other compounds that have shown promise as a prophylactic treatment for malaria and we will collaborate with WRAIR and SWRI as needed for the preparation of these implant formulations that, if successful, could be available to us for potential commercialization.

During 2018, in collaboration with J.T. Pharmaceuticals, we conducted initial non-clinical testing for the development of a novel kappa opioid receptor agonist implant for the treatment of chronic pain. Based on this early work, we have collaborated on a National Institute of Health, or NIH, grant application and further development in 2019 will be possible only if the grant is approved. If successfully developed, this product would offer a potential non-addictive opioid analgesic for the treatment of chronic pain.

We have also conducted initial formulation studies and early in vitro testing for the potential development of an implant with a currently approved peptide for the treatment of adult type 2 diabetes mellitus. Additionally, in 2017 we completed early non-clinical development focused on formulation optimization of an implantable triiodothyronine (T3) product for the treatment of hypothyroidism. Any further development in these programs will depend on availability of additional funds through grants and/or interest from partners.

Agreements

Braeburn

In December 2012, we entered into a license agreement, or the Braeburn Agreement, with Braeburn pursuant to which we granted Braeburn an exclusive right and license to commercialize Probuphine in the United States of America and its territories, including Puerto Rico, and Canada. Under the Braeburn Agreement, as subsequently amended, Braeburn made a non-refundable up-front license fee payment of $15.75 million in 2012 and a milestone payment of $15 million upon FDA approval of the NDA in May 2016. The agreement also entitled us to royalties on net sales of Probuphine ranging in percentage from the mid-teens to the low twenties. In February 2016, Braeburn entered into a Distribution and Sublicense Agreement, or the Knight Agreement, with Knight pursuant to which it granted Knight exclusivity to commercialize and distribute Probuphine in Canada.

On May 25, 2018, we entered into a Termination and Transition Services Agreement, or the Transition Agreement, with Braeburn pursuant to which we regained all rights to the commercialization and clinical development of Probuphine granted under the Braeburn Agreement and, in addition to $1 million and all available inventory of Probuphine, Braeburn agreed to provide assistance to Titan through December 28, 2018 to help ensure that patients and their doctors continued to have support and access to this treatment. As part of the Transition Agreement, we assumed a significant number of Braeburn’s commercial contracts relating to the commercialization of Probuphine in the U.S., including the Knight Agreement.

Knight

Under the Knight Agreement, as amended in August 2018, we granted Knight an exclusive license to commercialize Probuphine in Canada as well as a right of first negotiation in the event we intend to license our right to commercialize any of our other products in Canada. We are entitled to receive royalty payments from Knight on net sales of Probuphine in Canada ranging in percentage from the low-teens to the mid-thirties. In addition, we will be the exclusive supplier of Probuphine to Knight subject to a supply agreement between us and Knight. During the term of the Knight Agreement, we may not commercialize any product in Canada containing buprenorphine that is intended for a treatment duration of six months or more.

Unless earlier terminated, the initial term of the Knight Agreement will expire on the 15th anniversary of the date of the first commercial sale of Probuphine for opioid addiction in Canada, which occurred during the fourth quarter of 2018. If Probuphine is approved for another indication in Canada after the fifth anniversary of the first commercial sale of Probuphine for opioid addiction in Canada, we must negotiate in good faith whether to extend the initial term. After the initial term, the Knight Agreement will automatically renew for two-year periods until either party provides the other party with written notice of its intent not to renew at least 180 days prior to the expiration of the initial term or then-current term. We or Knight may terminate the Knight Agreement in the event that (i) either party determines in good faith that it is not advisable for Knight to continue to commercialize Probuphine in Canada as a result of a bona fide safety issue, (ii) the other party has filed for bankruptcy, reorganization, liquidation or receivership proceedings, or (iii) the other party materially breached the agreement and has not cured such breach within a specified time period. In addition, subject to certain exceptions and requirements, we may terminate the Knight Agreement (i) if Knight discontinues the commercial sale of Probuphine for a period of at least three months and fails to resume sales within the specified cure period, or (ii) in the event that Knight commences any legal proceedings seeking to challenge the validity or ownership of any of our patents related to Probuphine.

In the event of termination, among other things, Knight shall (i) cease commercialization of Probuphine in Canada, (ii) transfer title to all current and pending regulatory submissions and regulatory approvals for Probuphine to us and (iii) pay any royalty payments generated by Knight’s sales of Probuphine in Canada due to us.

Molteni

On March 21, 2018, we entered into and on August 3, 2018 amended an Asset Purchase, Supply and Support Agreement, or the Purchase Agreement, with Molteni pursuant to which Molteni acquired the European intellectual property related to Probuphine, including the MAA under review by the EMA, and will have the exclusive right to commercialize the Titan supplied Probuphine product in Europe, as well as certain countries of the Commonwealth of Independent States, the Middle East and North Africa, or the Molteni Territory. We received an initial payment of €2.0 million ($2,448,000) for the purchased assets and an additional payment of €950,000 ($1,107,000) upon execution of the amendment. We will receive the following additional potential payments totaling up to €2.5 million (approximately $2,850,000) upon the achievement of certain regulatory and product label milestones, including: an aggregate of €1.0 million of milestone payments upon approval of the product reimbursement price in certain key countries, provided that the payments, which are subject to a 50% reduction if the EMA marketing authorization is not received on or prior to September 30, 2019, shall not be payable in the event such authorization is not received on or prior to March 31, 2020. Additionally, Titan is entitled to receive earn-out payments for up to 15 years on net sales of Probuphine in the Molteni Territory ranging in percentage from the low-teens to the mid-twenties.

The Purchase Agreement provides that Titan will supply Molteni with semi-finished product (i.e., the implant and the applicator) on an exclusive basis at a fixed price through December 31, 2019, with subsequent price increases not to exceed annual cost increases to Titan under its current manufacturing agreement and for the purchase of the active pharmaceutical ingredient.

Molteni will be prohibited from marketing a Competitor Product (as defined in the Purchase Agreement) in the Territory for the five year period following approval of the MAA. Thereafter, Molteni will be required to pay Titan a low single digit royalty on net sales by Molteni of any Competitor Product.

On March 21, 2018, we entered into an agreement, or the Loan Agreement, which amended and restated our prior loan agreement with Horizon Technology Finance Corp., or Horizon. Under the Loan Agreement, Horizon assigned $2,400,000 of the $4,000,000 outstanding principal balance of the loan to Molteni and Molteni was appointed collateral agent and assumed majority and administrative control of the debt. Molteni has the right to convert its portion of the debt into shares of our common stock at a conversion price of $7.20 per share and is required to effect this conversion of debt to equity if we complete an equity financing resulting in gross proceeds of at least $10,000,000 at a price per share of common stock in excess of $7.20 and repay the $1,600,000 principal balance of Horizon’s loan amount.

In consideration of Molteni’s entry into the Purchase Agreement and the Loan Agreement, on March 21, 2018, we entered into an agreement with Molteni. or the Rights Agreement, pursuant to which, as amended, we agreed to (i) issue Molteni seven-year warrants to purchase 90,000 shares of our common stock at an exercise price of $7.20 per share, (ii) provide Molteni customary demand and piggy-back registration rights with respect to the shares of common stock issuable upon conversion of its loan and exercise of its warrants, (iii) appoint one member of Titan’s board of directors if Mr. Seghi Recli is not then serving on the board and (iv) provide board observer rights to Molteni if it has not designated a board nominee, as well as certain information rights. The board designation, observer and information rights will terminate at such time as Molteni ceases to beneficially own at least one percent of our outstanding capital stock (inclusive of the shares issuable upon conversion of its note and exercise of its warrants).

In connection with the August 2018 amendment to the Purchase Agreement, Molteni made a convertible loan to us of €550,000 (approximately $642,000) upon submission of the response to the 120-day letter from EMA on September 14, 2018 in accordance with the amendment. The convertible loan will convert automatically into shares of our common stock upon the issuance by the EMA of marketing approval for Probuphine at a conversion price per share equal to the lower of (i) $3.42 (the closing price on the loan funding date) and (ii) the closing price on the conversion date. In the event the EMA has not granted marketing approval by December 31, 2019, the loan will become due and payable, together with accrued interest at the rate of 9.5% plus the amount by which the one-month LIBOR exceeds 1.1%.

Intellectual Property

Our goal is to obtain, maintain and enforce patent protection for our product candidates, formulations, processes, methods and any other proprietary technologies, preserve our trade secrets, and operate without infringing on the proprietary rights of other parties, both in the United States and in other countries. Our policy is to actively seek to obtain, where appropriate, the broadest intellectual property protection possible for our current product candidates and any future product candidates, proprietary information and proprietary technology through a combination of contractual arrangements and patents, both in the United States and abroad. However, patent protection may not afford us with complete protection against competitors who seek to circumvent our patents.

We also depend upon the skills, knowledge, experience and know-how of our management and research and development personnel, as well as that of our advisors, consultants and other contractors. To help protect our proprietary know-how, which may not be patentable, and for inventions for which patents may be difficult to enforce, we currently rely and will in the future rely on trade secret protection and confidentiality agreements to protect our interests. To this end, we require all of our employees, consultants, advisors and other contractors to enter into confidentiality agreements that prohibit the disclosure of confidential information and, where applicable, require disclosure and assignment to us of the ideas, developments, discoveries and inventions important to our business.

In June 2010, the United States Patent and Trademark Office (“USPTO”) issued a patent covering methods of using Probuphine for the treatment of opiate addiction. Titan is the owner of this patent which claims a method for treating opiate addiction with a subcutaneously implanted device comprising buprenorphine and EVA, a biocompatible copolymer that releases buprenorphine continuously for extended periods of time. This patent will expire in April 2024. A U.S. continuation application is currently pending which includes claims related to Probuphine for the treatment of pain.  Related patents covering use of Probuphine with the continuous delivery technology for the treatment of opiate addiction have also been issued in Australia, Canada, Europe, India, Japan, Mexico, New Zealand, and Hong Kong. On March 21, 2018, we executed the Purchase Agreement with Molteni whereby the European intellectual property covering Probuphine, including the European patent, was acquired by Molteni. Patents covering certain dopamine agonist implants, including ropinirole implant, have already been issued or allowed in the United States, Europe, Japan, China, Australia, Canada, South Korea, Mexico, New Zealand, South Africa, Israel and Hong Kong.

We have filed additional patent applications for a heterogeneous implant designed with some unique properties that may provide benefits to the structural integrity of the implants and potentially enhance drug delivery. Corresponding patents have been granted in the US, Australia, Europe, Japan, South Korea, Mexico, Singapore, and South Africa, while applications remain pending in Canada, Hong Kong, and India.

Future court decisions or changes in patent law might materially affect the patents or patent applications, including, but not limited to, their expiration dates.

Competition

The pharmaceutical and biotechnology industries are characterized by rapidly evolving technology and intense competition. Many companies, including major pharmaceutical companies and smaller specialized biotechnology companies, are engaged in the development and commercialization of therapeutic agents designed for the treatment of the same diseases and disorders that we target. Many of our competitors have substantially greater financial and other resources, larger research and development staff and more experience in the regulatory approval process. Moreover, potential competitors have or may have patents or other rights that conflict with patents covering our technologies.

With respect to Probuphine, there are currently no other six-month implant formulations of buprenorphine on the market or in development. The primary competition it faces comes from Indivior, PLC (formerly the pharmaceutical business of Reckitt Benckiser Group, PLC), which markets globally a sublingual buprenorphine product (tablet and film formulations under the trade name Subutex and Suboxone) for the treatment of opioid dependence that currently holds the dominant market share of global sales. Indivior recently received FDA approval for a one month depot injection (tradename Sublocade) that became commercially available in the first quarter of 2018. Probuphine also faces competition from two additional proprietary daily dose formulations that have been approved by the FDA; the first is a sublingual tablet with the trade name of Zubsolv marketed by Orexo and the second is a buccal patch with the trade name of Bunavail marketed by Bio Delivery Sciences International. Several generic sublingual tablet formulations of buprenorphine similar to Suboxone and Subutex were approved by the FDA and have recently entered the opioid addiction treatment market. Other forms of buprenorphine are also in development by other companies, including intramuscular and intradermal one-week and one-month depot injections which, if approved, will also compete with our product. One additional depot formulation licensed to Braeburn has received tentative FDA approval that restricts marketing of the product in the U.S. until potentially November 2020. Alkermes, Inc. also markets Vivitrol ® , a one-month depot injection of naltrexone as a maintenance treatment for opioid dependent patients who have successfully gone through a detoxification process and achieved abstinence.

If successfully developed and approved for commercialization, our ProNeura ropinirole product for PD will face competition primarily from numerous daily dose dopamine agonist treatments currently in use that provide symptom relief from disease related immobility, as well as the complications associated with long-term levodopa therapy (e.g. dyskinesias, tolerance). Approved products in the U.S. in addition to Requip XL®, which is marketed by GlaxoSmithKline, include Apokyn® (US WorldMeds LLC), Parlodel® (Novartis Pharmaceuticals Inc.), Mirapex ER® (Boehringer Ingelheim Pharmaceuticals Inc.) and Neupro® (UCB Inc.). There is a strong need for products providing continuous, stable, long term delivery of dopamine and dopamine agonists and the FDA recently approved a product called Duodopa®, the first and only treatment delivered via catheters directly into the duodenum that is capable of providing 16 continuous hours of carbidopa and levodopa for treatment of motor fluctuations in advanced PD. Duodopa is marketed globally by Abbvie. Also, we are aware of products in mid-stage clinical development that are capable of short to medium-term subcutaneous and subdermal delivery of levodopa/carbidopa using pumps.

Manufacturing

The manufacturing of Probuphine has primarily been conducted at DPT Laboratories, Inc., or DPT, and we have expanded the manufacturing facility at this contract manufacturer to establish commercial scale capability to support the market launch of Probuphine and ongoing demand. We have entered into a commercial manufacturing agreement with DPT that governs the terms of the production and supply of Probuphine. We are responsible for the manufacture and supply of Probuphine as needed by Knight for Canada and to Molteni for the Molteni Territory.

To date, we have obtained the supply of bupenorphine from Teva Pharmaceuticals, Inc., or Teva, under a commercial supply agreement similar to the one with DPT.

We are in the process of qualifying a new EVA manufacturer which will provide a second source of the material. The vendor that used to sterilize the Probuphine implants indicated that it will no longer sterilize Schedule III controlled substances, including Probuphine. While we have qualified another sterilization vendor and transitioned to a new sterilization process, we cannot guarantee that such services will be available indefinitely. Our use of these and other single-source suppliers of raw materials, components and finished goods exposes us to several risks, including disruptions in supply, price increases, late deliveries and an inability to meet customer demand. This could lead to customer dissatisfaction, damage to our reputation or customers switching to competitive products. Any interruption in supply could be particularly damaging to our ability to develop and commercialize Probuphine.

Finding alternative sources for these raw materials, components and finished goods would be difficult and in many cases entail a significant amount of time, disruption and cost. Any disruption in supply from any single-source supplier or manufacturing location could lead to supply delays or interruptions which would damage our business, financial condition, results of operations and prospects.

Sales and Marketing

Prior to Titan’s reacquisition of Probuphine commercialization rights in May 2018, Braeburn had sole responsibility for sales and marketing the product within the United States and, through Knight, in Canada. Commencing in June 2018, we began the process of transitioning to a commercial enterprise by engaging the services of key consultants with expertise in launching and commercializing specialty pharmaceutical products, such as Probuphine. Our goal was to fully understand the hurdles encountered by Braeburn in the prior product launch activities. Based on feedback from key opinion leaders and these consultants, we believe that access to care for patients with Probuphine was negatively impacted by issues related to the complexity, timing and amount of reimbursement to patients and their doctors from insurance providers, as well as the restrictive requirements of the REMS program. We also believe that the broad marketing strategy that was initially undertaken reflected an incomplete understanding of the market and did not provide the requisite systems to support the reimbursement process and patient and physician education.

In order to lay the groundwork for increased utilization of Probuphine, we believe it is necessary to streamline the product ordering, distribution and reimbursement processes, to support patients and providers seeking access to treatment, and to develop a more focused commercialization strategy. In October 2018 we engaged the services of Dane Hallberg, who has extensive experience in launching specialty products in the U.S. market, as Chief Commercial Officer. In November 2018, Titan established a promotional review committee (“PRC”) to ensure all Probuphine promotional materials are in compliance with FDA regulations and to support submissions to the FDA’s Office of the Prescription Drug Promotion (OPDP).

Over the last few months we have established pharmaceutical foundational best practices including, but not limited to, sales compliance training and certification; drafting and implementation of company-wide SOPs; Sunshine Act Reporting; federal and state licensing; and sales and promotional materials creation and review. We have also assembled a small sales and marketing team with responsibilities that include regional sales oversight, medical science liaison services, strategic product and brand recognition development, and REMS program management. We have also retained a medical access specialist to address third-party payor coverage and to improve the product distribution system.

Along with establishing the internal team, we have engaged key external services to support these functions, including public relations, product branding and advertising capabilities. We have also engaged AppianRx as our new hub and are working closely with them to establish more efficient systems for product ordering and third party payor pre-approval. We believe that the positive impact of an automated and streamlined product supply chain process will be realized in the second quarter of 2019

We have recently engaged the services of AllianceRx Walgreens Specialty Pharmacy, which we expect to help alleviate bottlenecks in the third-party payor approval and product shipment process, and we hope to add additional large specialty pharmacies to the network in the near future. We have made good progress in establishing a strong foundation for our commercial activities, as well as re-engaging the medical community to consider using Probuphine as an option for the long term maintenance treatment of OUD, all of which lays the ground work for further progress in the market place during the second half of 2019.

While our overall market strategy for the relaunch of Probuphine targets four market segments, we have focused initially on physicians who are already prescribing Probuphine, while in the longer term our plan is to expand our efforts to address three additional market segments.

High Probuphine-prescribing physicians with long-term recovery oriented treatment programs

While there are currently approximately 52,000 buprenorphine certified healthcare providers in the U.S., approximately 90% of prescriptions for treating the 600,000 – 700,000 patients treated with oral buprenorphine are written by approximately 6,000 providers. Moreover, while over 2,500 healthcare providers were previously trained and certified to administer Probuphine, to date less than 200 have prescribed the treatment.

Our initial focus has been on the top tier of Probuphine prescribers to facilitate the growth of their businesses through increased utilization of the product. Utilizing some of the successful Probuphine practices, in the medium to longer term, we plan to establish centers that will provide sites for referrals from other health care providers. In addition, when our new hub, AppianRx, is operational in the second quarter, we expect to see improvement in the complexity of the supply chain and reimbursement process. In the longer term, some top tier Probuphine providers will also engage in investigator sponsored research which has the potential to generate new and clinically meaningful data, some of which will help us assess the potential for label expansion. We will also seek to partner with buprenorphine advocacy groups that can facilitate patient-healthcare provider location matching and broaden patient outreach.

Residential Treatment Facilities and Veterans Administration Hospitals

There are currently numerous residential addiction treatment facilities in the U.S. reflecting a large potential patient population who can benefit from Probuphine. These facilities have mostly relied on 12 step programs with the goal of complete and sustained abstinence while avoiding any MAT. However, the success of such programs has not withstood scrutiny, as it has been increasingly recognized that a very high percentage of patients with opiate addiction ultimately relapse. Consequently, the use of MAT as part of the management of OUD has been increasing, and is expected to rise substantially in the near term. Our plan is to establish alliances with a few large programs.

We believe that the Veterans Administration Hospitals present another opportunity for the use of Probuphine. Addiction to opiates is a problem among the veterans, however the ability to treat patients through the VA system is hampered by limited facilities and medical resources. We are exploring programs to train staff at the VA hospitals in the use of Probuphine for long term maintenance treatment which will help in reducing the frequency of visits to the clinic and better utilize available resources.

Academic institutions with addiction treatment and training programs

There are an increasing number of academic addiction medicine training programs that treat OUD patients. At the end of October 2018 we conducted a training seminar for 40+ Nurse Practitioner students at Drexel University who were interested in pursuing careers in addiction medicine and nearing completion of their degree program. This seminar was similar to the Probuphine certification training program and provided these nurses with an opportunity to get familiar with Probuphine. We plan to form alliances with institutions that already have the necessary trained personnel and equipment for doing small procedures, and facilitate the introduction and/or increased use of Probuphine for appropriate patients. This will also serve to introduce Probuphine to the next generation of addiction specialists. In the longer term, we expect that KOLs at some of these sites will initiate investigator sponsored studies which can generate clinically meaningful data while helping us assess the potential for label expansion.

Criminal Justice System

It is estimated that of the 2.3 million people currently confined in U.S. correctional facilities, approximately 25% suffer from OUD. Currently, less than 1% of U.S. prisons and jails allow access to medication for OUD due largely to the risk of misuse and diversion of sublingual formulations (pills, film), However, new research published by JAMA Psychiatry has demonstrated benefits of buprenorphine during incarceration and upon release. In Rhode Island, a recent study found that opioid overdose deaths dropped by nearly 2/3 when MAT was provided to all state inmates. A few criminal justice programs have begun to utilize medications in order to address jail overcrowding and recidivism related to OUD.

Our goal is to initially establish pilot projects with a few select criminal justice programs, with the goal of generating meaningful data that potentially supports the use of Probuphine in this setting. The first pilot program has been initiated within the Nevada criminal justice system which has commenced to establish procedures and processes for the introduction of MAT within its system. We will monitor progress and continue to work with the Nevada criminal justice system to introduce Probuphine for maintenance therapy when eligible stable patients are available later in the year.

REMS Program

As a condition to the FDA’s approval of Probuphine, we are required to maintain the Probuphine REMS program, with the goal of mitigating the risk of complications of migration, protrusion, expulsion and nerve damage potentially associated with its improper insertion and removal, and also the risks of accidental overdose, misuse and abuse. The REMS program requires training for healthcare providers who prescribe, insert and remove Probuphine implants and provide patient counseling. The distribution of Probuphine is restricted to those healthcare providers who have completed the training and have received certification under the Probuphine REMS. Accordingly, we have established a REMS management team to monitor all aspects of the REMS program requirements along with the medical sales liason, or MSL, team to conduct the REMS training sessions for the certification of health care providers to prescribe and/or insert and remove Probuphine. The MSL team also provides on-going in-market technical support to assist heath care providers developing expertise with the Probuphine insertion and removal procedures.

Government Regulation

Government authorities in the United States at the federal, state and local level and in other countries extensively regulate, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution, post-approval monitoring and reporting, marketing and export and import of drug products. Generally, before a new drug can be marketed, considerable data demonstrating its quality, safety and efficacy must be obtained, organized into a format specific to each regulatory authority, submitted for review and approved by the regulatory authority.

U.S. drug development

In the United States, the FDA regulates drugs and devices under the Food, Drug and Cosmetics Act, or FDCA. Drugs and devices are also subject to other federal, state and local statutes and regulations. Products composed of both a drug product and device product are deemed combination products. If marketed individually, each component would be subject to different regulatory pathways and reviewed by different centers within the FDA. A combination product, however, is assigned to a center that will have primary jurisdiction over its regulation based on a determination of the combination product’s primary mode of action, which is the single mode of action that provides the most important therapeutic action. In the case of some of our product candidates, we expect the primary mode of action to be attributable to the drug component of the product, which means that the FDA’s Center for Drug Evaluation and Research would have primary jurisdiction over the premarket development, review and approval. The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources. Failure to comply with the applicable U.S. requirements at any time during the product development process, approval process or after approval, may subject an applicant to administrative or judicial sanctions. These sanctions could include, among other actions, the FDA’s refusal to approve pending applications, withdrawal of an approval, a clinical hold, untitled or warning letters, product seizures, total or partial suspension of production or distribution injunctions, fines, refusals of government contracts, restitution, disgorgement, or civil or criminal penalties. Additionally, a manufacturer may need to recall a product from the market. Any agency or judicial enforcement action could have a material adverse effect on us.

The nonclinical and clinical testing and approval process requires substantial time, effort and financial resources, and we cannot be certain that any approvals for our product candidates will be granted on a timely basis, if at all.

The data required to support an NDA is generated in two distinct development stages: nonclinical and clinical. For new chemical entities, the nonclinical development stage generally involves synthesizing the active component, developing the formulation and determining the manufacturing process, as well as carrying out non-human toxicology, pharmacology and drug metabolism studies in the laboratory, which support subsequent clinical testing. These nonclinical tests include laboratory evaluation of product chemistry, formulation, stability and toxicity, as well as animal studies to assess the characteristics and potential safety and efficacy of the product. The conduct of the nonclinical tests must comply with federal regulations, including GLPs. The sponsor must submit the results of the nonclinical tests, together with manufacturing information, analytical data, any available clinical data or literature and a proposed clinical protocol, to the FDA as part of the IND. An IND is a request for authorization from the FDA to administer an investigational drug product to humans. Some nonclinical testing may continue even after the IND is submitted, but an IND must become effective before human clinical trials may begin. The central focus of an IND submission is on the general investigational plan and the protocol(s) for human trials. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA raises concerns or questions regarding the proposed clinical trials, including concerns that human research subjects will be exposed to unreasonable health risks, and places the IND on clinical hold within that 30-day time period. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. The FDA may also impose clinical holds on a drug candidate at any time before or during clinical trials due to safety concerns or non-compliance. Accordingly, we cannot be sure that submission of an IND will result in the FDA allowing clinical trials to begin, or that, once begun, issues will not arise that could cause the trial to be suspended or terminated.

The clinical stage of development involves the administration of the drug candidate to healthy volunteers or patients under the supervision of qualified investigators, generally physicians not employed by or under the trial sponsor’s control, in accordance with GCPs, which include the requirement that all research subjects provide their informed consent for their participation in any clinical trial. Clinical trials are conducted under protocols detailing, among other things, the objectives of the clinical trial, dosing procedures, subject selection and exclusion criteria and the parameters to be used to monitor subject safety and assess efficacy. Each protocol, and any subsequent amendments to the protocol, must be submitted to the FDA as part of the IND. Further, each clinical trial must be reviewed and approved by an independent institutional review board, or IRB, at or servicing each institution at which the clinical trial will be conducted. An IRB is charged with protecting the welfare and rights of trial participants and considers such items as whether the risks to individuals participating in the clinical trials are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the informed consent form that must be provided to each clinical trial subject or his or her legal representative and must monitor the clinical trial until completion. There are also requirements governing the reporting of ongoing clinical trials and completed clinical trial results to public registries.

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 so long as the clinical trial is conducted in compliance with GCP and FDA is able to validate the data through an onsite inspection if the agency deems it necessary.

Clinical trials

Clinical trials are generally conducted in three sequential phases that may overlap, known as Phase 1, Phase 2 and Phase 3 clinical trials.

Post-approval trials, sometimes referred to as Phase 4 clinical trials, may be conducted after initial marketing approval. These trials are used to gain additional experience from the treatment of patients in the intended therapeutic indication. In certain instances, the FDA may mandate the performance of Phase 4 clinical trials as a condition of approval of an NDA.

Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA. Written IND safety reports must be submitted to the FDA and the investigators within 15 calendar days for serious and unexpected suspected adverse events, finding from other studies or animal or in vitro testing that suggests a significant risk for human subjects, and any clinically important increase in the rate of a serious suspected adverse reaction over that listed in the protocol or investigator brochure. Additionally, a sponsor must notify the FDA of any unexpected fatal or life-threatening suspected adverse reaction within 7 calendar days. Phase 1, Phase 2 and Phase 3 clinical trials may not be completed successfully within any specified period, if at all. The FDA or the sponsor may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB's requirements or if the drug has been associated with unexpected serious harm to patients. Additionally, some clinical trials are overseen by an independent group of qualified experts organized by the clinical trial sponsor, known as a data safety monitoring board or committee. This group provides authorization for whether or not a trial may move forward at designated check points based on access to certain data from the trial.

Pursuant to the Cures Act, the manufacturer of an investigational drug for a serious disease or condition is required to make available, such as by posting on its website, its policy on evaluating and responding to requests for individual patient access to such investigational drug. This requirement applies on the later of 60 calendar days after the date of enactment of the Cures Act or the first initiation of a Phase 2 or Phase 3 trial of the investigational drug.

Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information about the chemistry and physical characteristics of the drug as well as finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the drug candidate and, among other things, the sponsor must develop methods for testing the identity, strength, quality and purity of the final drug product. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the drug candidate does not undergo unacceptable deterioration over its shelf life.

NDA and FDA review process

The results of the nonclinical studies and clinical trials, together with other detailed information, including extensive manufacturing information and information on the composition of the drug and proposed labeling, are submitted to the FDA in the form of an NDA requesting approval to market the drug for one or more specified indications. The FDA reviews an NDA to determine, among other things, whether a drug is safe and effective for its intended use and whether the product is being manufactured in accordance with cGMP to assure and preserve the product's identity, strength, quality and purity. FDA approval of an NDA must be obtained before a drug may be offered for sale in the United States.

In addition, under the Pediatric Research Equity Act, or PREA, an NDA or supplement to an NDA must contain data to assess the safety and efficacy of the drug for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The FDA may grant deferrals for submission of pediatric data or full or partial waivers.

The FDA reviews all NDAs submitted before it accepts them for filing and may request additional information rather than accepting an NDA for filing. The FDA must make a decision on accepting an NDA for filing within 60 days of receipt. Once the submission is accepted for filing, the FDA begins an in-depth review of the NDA. Under the goals and policies agreed to by the FDA under Prescription Drug User Fee Act, or PDUFA, for drugs that do not contain a new chemical entity the FDA has 10 months from the receipt date in which to complete its initial review of a standard NDA and respond to the applicant, and six months from the receipt date for a priority NDA. For drugs containing a new chemical entity, these 10 and six month review timeframes are from the filing date of an NDA. The FDA does not always meet its PDUFA goal dates for standard and priority NDAs, and the review process is often significantly extended by FDA requests for additional information or clarification.

After the NDA submission is accepted for filing, the FDA reviews the NDA to determine, among other things, whether the proposed product is safe and effective for its intended use, and whether the product is being manufactured in accordance with cGMP to assure and preserve the product's identity, strength, quality and purity. Before approving an NDA, the FDA will conduct a pre-approval inspection of the manufacturing facilities for the new product to determine whether they comply with cGMPs. The FDA will not approve the product unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. In addition, before approving an NDA, the FDA may also audit data from clinical trials to ensure compliance with GCP requirements. Additionally, the FDA may refer applications for novel drug products or drug products which present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions. The review and evaluation of an NDA by the FDA is extensive and time consuming and may take longer than originally planned to complete, and we may not receive a timely approval, if at all.

After the FDA evaluates an NDA, it may issue an approval letter or a Complete Response Letter. An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications. A Complete Response Letter indicates that the review cycle of the application is complete and the application is not ready for approval. A Complete Response Letter usually describes all of the specific deficiencies in the NDA identified by the FDA. The Complete Response Letter may require additional clinical data and/or an additional pivotal Phase 3 clinical trial(s), and/or other significant and time-consuming requirements related to clinical trials, nonclinical studies or manufacturing. If a Complete Response Letter is issued, the applicant may resubmit the NDA addressing all of the deficiencies identified in the letter, withdraw the application, or request an opportunity for a hearing. Even if such data and information is submitted, the FDA may ultimately decide that the NDA does not satisfy the criteria for approval. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differently than we interpret the same data.

There is no assurance that the FDA will ultimately approve a drug product for marketing in the United States and we may encounter significant difficulties or costs during the review process. If a product receives marketing approval, the approval may be significantly limited to specific diseases and dosages or the indications for use may otherwise be limited, which could restrict the commercial value of the product. Further, the FDA may require that certain contraindications, warnings or precautions be included in the product labeling or may condition the approval of the NDA on other changes to the proposed labeling, development of adequate controls and specifications, or a commitment to conduct post-marketing testing or clinical trials and surveillance to monitor the effects of approved products. For example, the FDA may require Phase 4 testing which involves clinical trials designed to further assess a drug's safety and efficacy and may require testing and surveillance programs to monitor the safety of approved products that have been commercialized. The FDA also may place other conditions on approvals including the requirement for a risk evaluation and mitigation strategy, or REMS, to assure the safe use of the drug. A REMS could include medication guides, physician communication plans, or elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. Any of these limitations on approval or marketing could restrict the commercial promotion, distribution, prescription or dispensing of products. Product approvals may be withdrawn for non-compliance with regulatory requirements or if problems occur following initial marketing. As a condition to the FDA's approval of Probuphine, Braeburn was required to put the Probuphine REMS in place.

505(b)(2) approval process

Section 505(b)(2) of the FDCA provides an alternate regulatory pathway to FDA approval for new or improved formulations or new uses of previously approved drug products. Specifically, Section 505(b)(2) was enacted as part of the Drug Price Competition and Patent Term Restoration Act of 1984, commonly referred to as the Hatch-Waxman Amendments, and permits the filing of an NDA where at least one or more of the investigations relied upon by the applicant for approval were not conducted by or for the applicant and for which the applicant has not obtained a right of reference or use from the person by or for whom the investigations were conducted. The applicant may rely upon the FDA's prior findings of safety and effectiveness for a previously approved product or on published scientific literature, in support of its application. The FDA may also require 505(b)(2) applicants to perform additional trials to support the changes from the previously approved drug and to further demonstrate the new drug's safety and effectiveness. The FDA may then approve the new product candidate for all or some of the labeled indications for which the referenced product has been approved, as well as for any new indication sought by the Section 505(b)(2) applicant.

Expedited development and review programs

The FDA has a Fast Track program that is intended to expedite or facilitate the process for reviewing new drugs that meet certain criteria. Specifically, new drugs are eligible for Fast Track designation if they are intended to treat a serious or life-threatening condition and demonstrate the potential to address unmet medical needs for the condition. Fast Track designation applies to the combination of the product and the specific indication for which it is being studied. Any product submitted to the FDA for marketing, including under the Fast Track program, may be eligible for other types of FDA programs intended to expedite development and review, such as priority review. A product is eligible for priority review if it has the potential to provide safe and effective therapy where no satisfactory alternative therapy exists or offers a significant improvement in the treatment, diagnosis or prevention of a disease compared to marketed products. Additionally, a drug may be eligible for designation as a breakthrough therapy if the drug is intended, 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 drug may demonstrate substantial improvement over existing therapies on one or more clinical development. Fast Track designation, priority review, and breakthrough designation do not change the standards for approval but may expedite the development or approval process.

Pediatric trials

The Food and Drug Administration Safety and Innovation Act, or FDASIA, which was signed into law on July 9, 2012, amended the FDCA to require that a sponsor who is planning to submit a marketing application for a drug that includes a new active ingredient, new indication, new dosage form, new dosing regimen or new route of administration submit an initial Pediatric Study Plan, or PSP, that includes within 60 days of an end-of-Phase 2 meeting or as may be agreed between the sponsor and the FDA. The initial PSP must include an outline of the pediatric study or studies that the sponsor plans to conduct, including study objectives and design, age groups, relevant endpoints and statistical approach, or a justification for not including such detailed information, and any request for a deferral of pediatric assessments or a full or partial waiver of the requirement to provide data from pediatric studies along with supporting information.

Post-marketing requirements

Following approval of a new product, a pharmaceutical company and the approved product are subject to continuing regulation by the FDA, including, among other things, monitoring and recordkeeping activities, reporting to the FDA of adverse experiences with the product, providing the FDA with updated safety and efficacy information, product sampling and distribution requirements and complying with promotion and advertising requirements, which include, among others, standards for direct-to-consumer advertising, restrictions on promoting drugs for uses or in patient populations that are not described in the drug's approved labeling (known as "off-label use"), limitations on industry-sponsored scientific and educational activities and requirements for promotional activities involving the internet. Any distribution of prescription drug products and pharmaceutical samples must comply with the U.S. Prescription Drug Marketing Act, or the PDMA, a part of the FDCA.

In the United States, once a product is approved, its manufacture is subject to comprehensive and continuing regulation by the FDA. The FDA regulations require that products be manufactured in specific approved facilities and in accordance with cGMP. We rely, and expect to continue to rely, on third parties for the production of clinical and commercial quantities of our products in accordance with cGMP regulations. Drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMP and other laws. Discovery of previously unknown problems with a product or the failure to comply with applicable FDA requirements can have negative consequences, including adverse publicity, judicial or administrative enforcement, warning letters from the FDA, mandated corrective advertising or communications with doctors, and civil or criminal penalties, among others. Newly discovered or developed safety or effectiveness data may require changes to a product's approved labeling, including the addition of new warnings and contraindications, and also may require the implementation of other risk management measures.

Also, new government requirements, including those resulting from new legislation, may be established, or the FDA's policies may change, which could delay or prevent regulatory approval of our products under development. Changes in statutes, regulations, or the interpretation of existing regulations could impact our business in the future by requiring, for example: (i) changes to our manufacturing arrangements; (ii) additions or modifications to product labeling; (iii) the recall or discontinuation of our products; or (iv) additional record-keeping requirements. If any such changes were to be imposed, they could adversely affect the operation of our business.

Orange book listing

Section 505 of the FDCA describes three types of marketing applications that may be submitted to the FDA to request marketing authorization for a new drug. A Section 505(b)(1) NDA is an application that contains full reports of investigations of safety and efficacy. A Section 505(b)(2) NDA is an application in which the applicant, in part, relies on investigations that were not conducted by or for the applicant and for which the applicant has not obtained a right of reference or use from the person by or for whom the investigations were conducted. Section 505(j) establishes an abbreviated approval process for a generic version of approved drug products through the submission of an Abbreviated New Drug Application, or ANDA. An ANDA provides for marketing of a generic drug product that has the same active ingredients, dosage form, strength, route of administration, labeling, performance characteristics and intended use, among other things, to a previously approved product. Limited changes must be preapproved by the FDA via a suitability petition. ANDAs are termed "abbreviated" because they are generally not required to include nonclinical and clinical data to establish safety and efficacy. Instead, generic applicants must scientifically demonstrate that their product is bioequivalent to, or performs in the same manner as, the innovator drug through in vitro, in vivo, or other testing. The generic version must deliver the same amount of active ingredients into a subject's bloodstream in the same amount of time as the innovator drug and can often be substituted by pharmacists under prescriptions written for the reference listed drug.

In seeking approval for a drug through an NDA, including a 505(b)(2) NDA, applicants are required to list with the FDA certain patents having claims that cover the applicant's product and method of use. Upon approval of an NDA, each of the patents listed in the application for the drug is then published in Approved Drug Products with Therapeutic Equivalence Evaluations, also known as the Orange Book. These products may be cited by potential competitors in support of approval of an ANDA or 505(b)(2) NDA.

Any applicant who files an ANDA seeking approval of a generic equivalent version of a drug listed in the Orange Book or a 505(b)(2) NDA referencing a drug listed in the Orange Book must make patent certifications to the FDA that (1) no patent information on the drug or method of use that is the subject of the application has been submitted to the FDA; (2) the patent has expired; (3) the date on which the patent has expired and approval will not be sought until after the patent expiration; or (4) the patent is invalid or will not be infringed upon by the manufacture, use, or sale of the drug product for which the application is submitted. The last certification is known as a paragraph IV certification. Generally, the ANDA or 505(b)(2) NDA cannot be approved until all listed patents have expired, except where the ANDA or 505(b)(2) NDA applicant challenges a listed patent through a paragraph IV certification or if the applicant is not seeking approval of a patented method of use. If the applicant does not challenge the listed patents or does not indicate that it is not seeking approval of a patented method of use, the ANDA or 505(b)(2) NDA application will not be approved until all of the listed patents claiming the referenced product have expired.

Federal law provides a period of five years following approval of a drug containing no previously approved active ingredients during which ANDAs for generic versions of those drugs cannot be submitted, unless the submission contains a Paragraph IV challenge to a listed patent, in which case the submission may be made four years following the original product approval. Federal law provides for a period of three years of exclusivity during which the FDA cannot grant effective approval of an ANDA based on the approval of a listed drug that contains previously approved active ingredients but is approved in a new dosage form, route of administration or combination, or for a new use; the approval of which was required to be supported by new clinical trials conducted by, or for, the applicant.

U.S. marketing exclusivity

Marketing exclusivity provisions under the FDCA can also delay the submission or the approval of certain marketing applications. The FDCA provides three years of marketing exclusivity for an NDA, or supplement to an existing NDA, if new clinical investigations, other than bioavailability studies, that were conducted or sponsored by the applicant are deemed by the FDA to be essential to the approval of the application, for example for new indications, dosages or strengths of an existing drug. This three-year exclusivity covers only the modification for which the drug received approval on the basis of the new clinical investigations and does not prohibit the FDA from approving abbreviated new drug applications, or ANDAs, for drugs containing the active agent for the original indication or condition of use. During the exclusivity period, the FDA may not accept for review an ANDA or a 505(b)(2) NDA submitted by another company for another drug based on the same active moiety, regardless of whether the drug is intended for the same indication as the original innovator drug or for another indication, where the applicant does not own or have a legal right of reference to all the data required for approval. However, an application may be submitted after four years if it contains a certification of patent invalidity or non-infringement to one of the patents listed with the FDA by the innovator NDA holder. Three-year and five-year exclusivity will not delay the submission or approval of a full NDA. However, an applicant submitting a full NDA would be required to conduct or obtain a right of reference to all of the nonclinical studies and adequate and well-controlled clinical trials necessary to demonstrate safety and efficacy. Pediatric exclusivity is another type of regulatory market exclusivity in the United States. Pediatric exclusivity, if granted, adds six months to existing exclusivity periods and patent terms. This six-month exclusivity, which runs from the end of other exclusivity protection or patent term, may be granted based on the voluntary completion of a pediatric trial in accordance with an FDA-issued "Written Request" for such a trial.

Drug enforcement administration regulation

Because Probuphine is subject to the Controlled Substances Act, or CSA, we must comply with various requirements set forth by that legislation, as amended, its implementing regulations and as enforced by the DEA. The CSA imposes various registration, record-keeping and reporting requirements, procurement and manufacturing quotas, labeling and packaging requirements, security controls, prescription and order form requirements and restrictions on prescription refills for certain kinds of pharmaceutical products. A principal factor for determining the particular requirements of the CSA applicable to a product, if any, is its actual or potential abuse profile. A product may be listed as a Schedule I, II, III, IV or V controlled substance, with Schedule I presenting the highest perceived risk of abuse and Schedule V presenting the least. The active ingredient in our product, buprenorphine, is a Schedule III controlled substance and under various restrictions, including, but not limited to, mandatory written prescriptions and a labeling statement informing patients that selling or giving away Probuphine is against the law. In addition, under the Drug Addiction Treatment Act, which amended the CSA, use of Probuphine in the treatment of opioid addiction is limited to physicians who meet certain qualifying requirements, and who have notified the Secretary of Health and Human Services, or HHS, of their intent to prescribe or dispense the product for the treatment of opioid addiction and have been assigned a unique identification number that must be included on every prescription. The HHS regulates the number of patients that physicians can treat with buprenorphine for opioid addiction and recently increased this number from a maximum of 100 patients to 275 patients for qualified physicians.

Annual registration is required for any facility that manufactures, distributes, dispenses, imports or exports any controlled substance. The registration is specific to the particular location, activity and controlled substance schedule. For example, separate registrations are needed for import and manufacturing, and each registration will specify which schedules of controlled substances are authorized. Separate registrations also are required for separate facilities.

The DEA typically inspects a facility to review its security measures prior to issuing a registration and on a periodic basis. Required security measures include background checks on employees and physical control of inventory through measures such as vaults and inventory reconciliations. Records must be maintained for the handling of all controlled substances, and periodic reports made to the DEA. Failure to maintain compliance with applicable DEA requirements can result in administrative, civil or criminal enforcement action. The DEA may seek civil penalties, refuse to renew necessary registrations or initiate administrative proceedings to revoke those registrations. In some circumstances, violations could result in criminal proceedings.

Other regulatory matters

Manufacturing, sales, promotion and other activities following product approval are also subject to regulation by numerous regulatory authorities in addition to the FDA, including, in the United States, the Centers for Medicare & Medicaid Services, other divisions of the Department of Health and Human Services including the Office of the Inspector General, the United States Department of Justice, the Consumer Product Safety Commission, the Federal Trade Commission, the Occupational Safety & Health Administration, the Environmental Protection Agency and state and local regulatory authorities. In the United States, sales, marketing and scientific/educational programs must also comply with state and federal fraud and abuse laws. These laws include the federal Anti-Kickback Statute, which makes it illegal for any person, including a prescription drug manufacturer (or a party acting on its behalf) to knowingly and willfully solicit, receive, offer, or pay any remuneration that is intended to induce the referral of business, including the purchase, order, or prescription of a particular drug, for which payment may be made under a federal healthcare program, such as Medicare or Medicaid. Violations of this law are punishable by up to five years in prison, criminal fines, administrative civil money penalties and exclusion from participation in federal healthcare programs. In addition, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively the ACA, among other things, amended the intent requirement of the federal Anti-Kickback Statute. A person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it. Moreover, the ACA provides that the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act.

The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, created new federal criminal statutes that prohibit among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private third-party payors, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare offense, and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. Like the federal Anti-Kickback Statute a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.

The civil monetary penalties statute imposes penalties against any person or entity that, among other things, is determined to have presented or caused to be presented a claim to a federal health program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent. Also, many states have similar fraud and abuse statutes or regulations that may be broader in scope and may apply regardless of payor, in addition to items and services reimbursed under Medicaid and other state programs. Additionally, to the extent that any of our product candidates, if approved, are sold in a foreign country, we may be subject to similar foreign laws.

HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and their implementing regulations, including the final omnibus rule published on January 25, 2013, mandates, among other things, the adoption of uniform standards for the electronic exchange of information in common healthcare transactions, as well as standards relating to the privacy and security of individually identifiable health information, which require the adoption of administrative, physical and technical safeguards to protect such information. Among other things, HITECH makes HIPAA's security standards directly applicable to business associates, defined as independent contractors or agents of covered entities that create, receive or obtain protected health information in connection with providing a service for or on behalf of a covered entity. HITECH also increased the civil and criminal penalties that may be imposed against covered entities and business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorney's fees and costs associated with pursuing federal civil actions. In addition, certain state laws govern the privacy and security of health information in certain circumstances, some of which are more stringent than HIPAA and many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts. Failure to comply with these laws, where applicable, can result in the imposition of significant civil and criminal penalties.

If our operations are found to be in violation of any of such laws or any other governmental regulations that apply to us, we may be subject to penalties, including, without limitation, administrative, civil and criminal penalties, damages, fines, disgorgement, contractual damages, reputational harm, diminished profits and future earnings, the curtailment or restructuring of our operations, exclusion from participation in federal and state healthcare programs and individual imprisonment, any of which could adversely affect our ability to operate our business and our financial results. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management's attention from the operation of our business.

European Union drug development

In the European Union, our future products may also be subject to extensive regulatory requirements. As in the United States, medicinal products can only be marketed if a marketing authorization from the competent regulatory agencies has been obtained.

Similar to the United States, the various phases of nonclinical and clinical research in the European Union are subject to significant regulatory controls. Although the EU Clinical Trials Directive 2001/20/EC has sought to harmonize the EU clinical trials regulatory framework, setting out common rules for the control and authorization of clinical trials in the EU, the EU Member States have transposed and applied the provisions of the Directive differently. This has led to significant variations in the member state regimes. Under the current regime, before a clinical trial can be initiated it must be approved in each of the EU countries where the trial is to be conducted by two distinct bodies: the National Competent Authority, or NCA, and one or more Ethics Committees, or ECs. Under the current regime all suspected unexpected serious adverse reactions to the investigated drug that occur during the clinical trial have to be reported to the NCA and ECs of the Member State where they occurred.

The EU clinical trials legislation is currently undergoing a revision process mainly aimed at harmonizing and streamlining the clinical trials authorization process, simplifying adverse event reporting procedures, improving the supervision of clinical trials and increasing their transparency.

European Union drug review and approval

In the European Economic Area, or EEA, which is comprised of the 28 Member States of the European Union plus Norway, Iceland and Liechtenstein, medicinal products can only be commercialized after obtaining a Marketing Authorization, or MA. There are two types of marketing authorizations:

The Community MA is issued by the European Commission through the Centralized Procedure, based on the opinion of the Committee for Medicinal Products for Human Use, or CHMP, of the European Medicines Agency, or EMA, and is valid throughout the entire territory of the EEA. The Centralized Procedure is mandatory for certain types of products, such as biotechnology medicinal products, orphan medicinal products and medicinal products containing a new active substance indicated for the treatment of AIDS, cancer, neurodegenerative disorders, diabetes, auto-immune and viral diseases. The Centralized Procedure is optional for products containing a new active substance not yet authorized in the EEA, or for products that constitute a significant therapeutic, scientific or technical innovation or which are in the interest of public health in the EU.

National MAs, which are issued by the competent authorities of the Member States of the EEA and only cover their respective territory, are available for products not falling within the mandatory scope of the Centralized Procedure. Where a product has already been authorized for marketing in a Member State of the EEA, this National MA can be recognized in another Member States through the Mutual Recognition Procedure. If the product has not received a National MA in any Member State at the time of application, it can be approved simultaneously in various Member States through the Decentralized Procedure. Under the Decentralized Procedure an identical dossier is submitted to the competent authorities of each of the Member States in which the MA is sought, one of which is selected by the applicant as the Reference Member State, or RMS. The competent authority of the RMS prepares a draft assessment report, a draft summary of the product characteristics, or SPC, and a draft of the labeling and package leaflet, which are sent to the other Member States (referred to as the Member States Concerned) for their approval. If the Member States Concerned raise no objections, based on a potential serious risk to public health, to the assessment, SPC, labeling, or packaging proposed by the RMS, the product is subsequently granted a national MA in all the Member States (i.e., in the RMS and the Member States Concerned).

Under the above described procedures, before granting the MA, the EMA or the competent authorities of the Member States of the EEA make an assessment of the risk-benefit balance of the product on the basis of scientific criteria concerning its quality, safety and efficacy.

Rest of the world regulation

For other countries outside of the European Union and the United States, such as countries in Eastern Europe, Latin America or Asia, the requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary from country to country. In all cases the clinical trials must be conducted in accordance with GCP requirements and the applicable regulatory requirements and the ethical principles that have their origin in the Declaration of Helsinki. If we fail to comply with applicable foreign regulatory requirements, we may be subject to, among other things, fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions and criminal prosecution.

Reimbursement

Sales of Probuphine and any other product candidates we may successfully develop will depend, in part, on the extent to which such products are covered by third-party payors, such as government health programs, commercial insurance and managed healthcare organizations. In the United States no uniform policy of coverage and reimbursement for drug products exists. Accordingly, decisions regarding the extent of coverage and amount of reimbursement to be provided for any products will be made on a payor by payor basis. As a result, the coverage determination process is often a time-consuming and costly process that will require our licensees to provide scientific and clinical support for the use of our product to each payor separately, with no assurance that coverage and adequate reimbursement will be obtained.

Third-party payors are increasingly reducing reimbursements for medical products and services. Additionally, the containment of healthcare costs has become a priority of federal and state governments, and the prices of drugs have been a focus in this effort. The U.S. government, state legislatures and foreign governments have shown significant interest in implementing cost-containment programs, including price controls, restrictions on reimbursement and requirements for substitution of generic products. Adoption of price controls and cost-containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit our ability to generate sales and royalty revenue. If third-party payors do not consider our products to be cost-effective compared to other available therapies, they may not cover our products after approval as a benefit under their plans or, if they do, the level of payment may not be sufficient to allow our products to be sold on a profitable basis. Decreases in third-party reimbursement for our products or a decision by a third-party payor to not cover our products could reduce physician usage of the products and have a material adverse effect on our results of operations and financial condition.

The Medicare Prescription Drug, Improvement, and Modernization Act of 2003, or the MMA, established the Medicare Part D program to provide a voluntary prescription drug benefit to Medicare beneficiaries. Under Part D, Medicare beneficiaries may enroll in prescription drug plans offered by private entities that provide coverage of outpatient prescription drugs. Unlike Medicare Part A and B, Part D coverage is not standardized. Part D prescription drug plan sponsors are not required to pay for all covered Part D drugs, and each drug plan can develop its own drug formulary that identifies which drugs it will cover and at what tier or level. However, Part D prescription drug formularies must include drugs within each therapeutic category and class of covered Part D drugs, though not necessarily all the drugs in each category or class. Any formulary used by a Part D prescription drug plan must be developed and reviewed by a pharmacy and therapeutic committee. Government payment for some of the costs of prescription drugs may increase demand for products for which we receive marketing approval. However, any negotiated prices for our products covered by a Part D prescription drug plan will likely be lower than the prices that might otherwise be obtained. Moreover, while the MMA applies only to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policy and payment limitations in setting their own payment rates. Any reduction in payment that results from the MMA may result in a similar reduction in payments from non-governmental payors.

Reimbursement for injectable and implantable medications that are administered by a healthcare provider generally require a J-Code for the drug itself. Braeburn submitted its application for a permanent J-Code for Probuphine in June 2016. On November 1, 2016, the U.S. Centers for Medicare & Medicaid Services, or CMS, released a final rule that assigned a specific J-Code for Probuphine beginning January 1, 2017. Separate reimbursement codes are required for the Probuphine insertion and removal procedures. Braeburn had also applied for “G” codes for the Probuphine insertion and removal procedures, and in November 2017 the CMS approved specific codes and a reimbursement schedule for the physician office setting and the hospital outpatient setting. These G codes became effective on January 1, 2018. The timeline for the creation of the various procedural reimbursement pathways will vary based on the required governmental process or market needs for accurately tracking and reimbursing for the delivery of Probuphine and related procedural services.

In addition, in some foreign countries, the proposed pricing for a drug must be approved before it may be lawfully marketed. The requirements governing drug pricing vary widely from country to country. For example, the European Union provides options for its member states to restrict the range of medicinal products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. A member state may approve a specific price for the medicinal product or it may instead adopt a system of direct or indirect controls on the profitability of the company placing the medicinal product on the market. There can be no assurance that any country that has price controls or reimbursement limitations for pharmaceutical products will allow favorable reimbursement and pricing arrangements for any of our products. Historically, products launched in the European Union do not follow price structures of the United States and generally prices tend to be significantly lower.

Affordable Care Act and other reform initiatives

In the United States and some foreign jurisdictions, there have been, and likely will continue to be, a number of legislative and regulatory changes and proposed changes regarding the healthcare system directed at broadening the availability of healthcare, improving the quality of healthcare, and containing or lowering the cost of healthcare.

For example, in March 2010, the ACA was enacted in the United States. The ACA includes measures that have significantly changed, and are expected to continue to significantly change, the way healthcare is financed by both governmental and private insurers. There have been judicial and Congressional challenges to the ACA, and we expect such challenges and amendments to continue in the future. Other legislative changes have been proposed and adopted in the United States since the ACA was enacted and there has been increasing legislative and enforcement interest in the United States with respect to specialty drug pricing practices.

We cannot predict what healthcare reform initiatives may be adopted in the future. Further federal, state and foreign legislative and regulatory developments are likely, and we expect ongoing initiatives to increase pressure on drug pricing. Such reforms could have an adverse effect on anticipated revenues from product candidates and may affect our overall financial condition and ability to develop product candidates.

Employees

As of December 31, 2018, we had 23 full-time employees.