Risks Associated with
Product Development and Commercialization
Our business currently depends entirely on the success of lomitapide. We may not be able
to meet expectations with respect to sales of lomitapide and revenues from such sales, or to attain profitability or positive cash flow from operations, in the time periods we anticipate, or at all.
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Our business currently depends entirely on the successful development and commercialization
of our first product, lomitapide. Lomitapide was launched in the U.S. in late January 2013, under the brand name, JUXTAPID™ (lomitapide) capsules, as an adjunct to a low-fat diet and other lipid-lowering treatments, including low-density
(“LDL”) apheresis where available, to reduce low-density lipoprotein cholesterol (“LDL-C”), total cholesterol (“TC”), apolipoprotein B (“apo B”) and non-high-density-lipoprotein cholesterol
(“non-HDL-C”) in patients with homozygous familial hypercholesterolemia (“HoFH”). On July 31, 2013, the European Commission approved lomitapide for marketing in the EU, under the brand name, LOJUXTA™ (lomitapide)
capsules, as an adjunct to a low-fat diet and other lipid-lowering medicinal products with or without LDL apheresis in adult patients with HoFH. We have also filed for marketing approval in certain other countries, and expect to file for marketing
approval in additional countries where, in light of the potential size of the market and other relevant commercial and regulatory factors, it makes business sense to do so. We have not yet generated significant revenues from the sale of lomitapide.
Our ability to meet expectations with respect to sales of lomitapide and revenues from such sales, and to attain profitability and positive cash flow from operations, in the time periods we anticipate, or at all, will depend on a number of factors,
including the following:
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our ability to continue to build market acceptance for lomitapide among healthcare professionals and patients in the U.S., and to gain such market
acceptance in the EU and in other countries, if any, in which lomitapide is ultimately approved;
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the degree to which both physicians and patients determine that the safety and side effect profile of lomitapide are manageable, and that the benefits
of lomitapide in reducing LDL-C levels outweigh the risks, including those risks set forth in the boxed warning and other labeling information for JUXTAPID in the U.S. and in the prescribing information and risk management plan for LOJUXTA approved
in the EU, both of which cite the risk of liver toxicity, and any other risks that may be identified in the course of commercial use;
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the prevalence of HoFH being significantly higher than the historically reported rate of one person in one million, and more consistent with
management’s estimates;
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a safety and side effect profile for lomitapide in commercial use that is not less manageable than that seen in our pivotal trial;
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the degree to which patients are willing to agree to be treated with lomitapide after taking into account the potential benefits, the dietary
restrictions recommended to reduce the risk of gastrointestinal (GI) side effects and the safety and side effect profile; and the long-term ability of patients who use lomitapide to comply with the dietary restrictions, and to tolerate the drug and
stay on the medication;
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the extent to which the diagnosis criteria for HoFH used by physicians in the EU and other countries is similar to that used by physicians in the U.S.;
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the willingness of insurance companies, managed care organizations, other private payers, and government entities that provide reimbursement for
medical costs in the U.S. and EU, and in other countries in which we may receive approval to market lomitapide, to provide reimbursement for lomitapide at the prices at which we offer lomitapide without requiring genotyping or imposing any
additional major hurdles to access;
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our ability to obtain pricing approval required for selling LOJUXTA in the major countries of the EU at price levels that are acceptable to us without
the applicable government agencies or other payers in such countries imposing caps, rebate, risk sharing or other requirements which effectively lower the reimbursement rates for LOJUXTA;
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the level of acceptance by physicians of the efficacy data from our pivotal trial, which is based on the surrogate endpoints of LDL-C lowering, and
which was not designed to show clinical outcome data as to the effect of the LDL-C lowering on cardiac outcomes in HoFH patients;
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the mix of government and private payers providing coverage and reimbursement for JUXTAPID in the U.S.;
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the extent to which the use of annual price caps, impacts the best price (“BP”) of JUXTAPID for purposes of the Medicaid rebate in the U.S.;
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our ability to be able to sell lomitapide on a named patient sales basis or through an equivalent mechanism in certain countries where such sales are
permitted based on U.S. or EU approval, and where such activities are commercially attractive;
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our ability to gain approval of lomitapide outside the U.S. and EU without restrictions that are substantially more onerous or manufacturing
specifications that are more difficult to consistently achieve than those imposed in the U.S. and EU;
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our ability to successfully gain approval of lomitapide in pediatric patients, and to generate revenues from sales in the pediatric indications;
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our ability to manufacture sufficient quantities of each strength of lomitapide to meet demand;
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our ability to obtain patent term extension on our composition of matter patent in the U.S., and other forms of data and marketing exclusivity in the
U.S., the EU and in other key markets;
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our ability to continue to execute effectively on our commercial launch plan and other key activities related to lomitapide in the U.S., and to launch
lomitapide successfully in the EU and in other key markets outside the U.S., and the level of cost required to conduct such activities; and
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our ability to effectively differentiate lomitapide from Kynamro ™ (mipomersen sodium) Injection (“Kynamro”), which is being
commercialized in the U.S. by Genzyme Corporation (“Genzyme”) now part of Sanofi-Aventis (“Sanofi-Aventis”) under a collaboration with Isis Pharmaceuticals, Inc. (“Isis”), and products directed at the PCSK9 gene if
approved or used by physicians for HoFH.
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In addition, we are in the process of filing a variation to our
Marketing Authorization Application for LOJUXTA in the EU to provide additional manufacturing information. We will not be able to distribute lomitapide drug product within the EU until the variation is approved, which we expect to occur in the
third quarter of 2013. There can be no assurance that such approval, if granted, will be not be delayed or conditioned on the provision of additional information or for other reasons.
We may not be able to gain market acceptance for lomitapide.
The
commercial success of lomitapide will depend upon the acceptance of the product by the medical community, including physicians, healthcare payers, and by patients.
Some physicians and patients may determine that the benefits of lomitapide in reducing LDL-C levels do not outweigh the risks, including those risks set forth in the boxed warning for JUXTAPID in the
U.S., and in the prescribing information for LOJUXTA in the EU, both of which warn physicians that lomitapide can cause hepatotoxicity as manifested by elevations in transaminases and increases in hepatic fat, and that physicians are recommended to
measure alanine aminotranferease (“ALT”), aspartate aminotransferase (“AST”), alkaline phosphatase, and total bilirubin before initiating treatment and then ALT and AST regularly during treatment. During the first year of
treatment, physicians must conduct a liver-related test prior to each increase in the dose of lomitapide or monthly, whichever occurs first. After the first year, physicians are required to perform these tests every three months and before increases
in dose. The prescribing information in the EU provides further recommendations for monitoring for hepatic steatosis and the risk of progressive liver disease, including annual imaging for tissue elasticity, and measuring of biomarkers and/or
scoring methods in consultation with a hepatologist.
Because of the risk of liver toxicity, JUXTAPID is available in the U.S.
only through a Risk Evaluation and Mitigation Strategies (“REMS”) program. We certify all qualified healthcare providers who prescribe JUXTAPID and the pharmacies that dispense the medicine. The goals of the REMS program are:
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to educate prescribers about the risk of hepatotoxicity associated with the use of JUXTAPID and the need to monitor patients during treatment with
JUXTAPID as per product labeling; and
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to restrict access to therapy with JUXTAPID to patients with a clinical or laboratory diagnosis consistent with HoFH.
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Similarly, in the EU, we have adopted a risk management plan to help educate physicians on the safety information for LOJUXTA and
appropriate precautions to be followed by healthcare professionals and patients. We expect other countries that may approve lomitapide for use in the treatment of HoFH may require risk management plans that may be similar or more onerous to those
imposed in the U.S. and EU. Physicians may be hesitant to prescribe lomitapide, and patients may be hesitant to take lomitapide, because of the boxed warning or warnings in the prescribing information, the requirements for liver testing and
monitoring or the existence of the REMS program or risk management plan. The prescribing information also describes a number of additional contraindications, warnings, and precautions, including those related to pregnancy and potential adverse
interactions with other drugs, and other potential adverse reactions, that could limit the market acceptance of lomitapide. For example, GI adverse reactions are common with lomitapide, occurring in 27 out of 29 patients in our pivotal trial. We
expect that GI adverse reactions may lead to treatment discontinuation in some patients. To reduce the risk of GI adverse reactions, patients should adhere to a low-fat diet supplying less than 20% of calories from fat and the dosage of lomitapide
should be increased gradually. In the EU, we cannot provide promotional or supportive materials directly to patients. As a result, it may be more difficult to support patients in their efforts to adjust to the recommended dietary restrictions while
taking lomitapide. Patients on lomitapide in the U.S. are also advised not to consume more than one alcoholic drink per day. The LOJUXTA prescribing information in the EU specifies that the use of alcohol during LOJUXTA treatment is not recommended.
These requirements may make it more difficult for a patient to decide to begin therapy or to stay on therapy. As a result, even if a physician prescribes lomitapide, the prescription may not result in a patient beginning therapy or staying on
therapy.
The degree of market acceptance of lomitapide will also depend on a number of other factors, including:
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physicians’ views as to the scope of the approved indication and limitations on use and warnings and precautions contained in the approved
labeling or prescribing information for lomitapide;
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the efficacy and safety of competitive therapies;
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pricing and the perception of physicians and payers as to cost effectiveness;
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the existence of sufficient private payer, government or other third-party coverage or reimbursement; and
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the effectiveness of our sales, marketing and distribution strategies.
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If we are not able to achieve a high degree of market acceptance of lomitapide in the treatment of HoFH, we may not be able to achieve
our revenue goals or other financial goals or to achieve profitability or cash-flow break-even in the time periods we expect, or at all.
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The number of patients suffering from HoFH is small, and has not been established with precision. We
believe that the patient population is significantly larger than the reported prevalence indicates, but our assumptions and estimates may be wrong. If the actual number of patients is smaller than we estimate or if any approval outside the U.S. and
EU is based on a narrower definition of these patient populations, our revenue and ability to achieve profitability and cash-flow break-even will be adversely affected, possibly materially.
There is no patient registry or other method of establishing with precision the actual number of patients with HoFH in any geography.
Medical literature has historically reported the prevalence rate of genotypic HoFH as one person in a million. However, we believe that the prevalence rate of HoFH is higher. The historically reported definition of HoFH used a narrow genotypic
definition of HoFH. At the time the rate was first reported, many of the genetic mutations leading to defects in LDL-receptor function were not characterized, and some mutations remain uncharacterized even today. In addition, many physicians use a
broader definition of HoFH that includes patients diagnosed through phenotypic criteria. In 2010, we commissioned an independent consultant in the healthcare industry to prepare a commercial assessment of the HoFH market for us. In its report, this
consultant estimated that the total number of patients likely to seek treatment with symptoms, signs or laboratory findings consistent with HoFH in each of the U.S. and the EU is approximately 3,000 patients. This consultant’s estimates,
however, included a segment of severe heterozygous familial hypercholesterolemia (“HeFH”) patients whose levels of LDL-C are not controlled by current therapies. These patients may be phenotypically indistinct from HoFH patients.
Lomitapide is indicated in the U.S. and EU solely for HoFH. In the U.S., our prescribing information specifies that the safety and effectiveness of JUXTAPID have not been established in patients with hypercholesterolemia who do not have HoFH. In the
EU, the prescribing information for LOJUXTA specifies that genotyping of patients should be obtained whenever possible, and that other forms of primary hyperlipoproteinemia and secondary causes of hypercholesterolemia (e.g. nephrotic syndrome,
hypothyroidism) must be excluded. We are not permitted to promote lomitapide in the U.S. or the EU for any indication other than HoFH. Our existing and planned applications for marketing approvals of lomitapide outside the U.S. and EU are also
limited to HoFH. As part of the prescriber authorization form under our REMS program in the U.S., the prescriber must affirm that the patient has a clinical or laboratory diagnosis consistent with HoFH. We do not know how many patients in the U.S.
will be determined to have a clinical or laboratory diagnosis consistent with HoFH, and there is no generally accepted and referenced definition of HoFH matching these criteria. However, rare diseases are often found to have a higher than expected
prevalence rate once products available to treat the disease are introduced. We expect this may also be true for HoFH. As a result, we believe that, even if we exclude the patients in the U.S. who have a clinical phenotype consistent with HoFH, but
as to whom the prescriber cannot conclude and affirm that the patient has a clinical or laboratory diagnosis consistent with HoFH, there still may be as many as 3,000 HoFH patients in the U.S. based on our belief that the base prevalence rate may be
higher than our consultant estimated. There is no guarantee that our assumptions and beliefs are correct. The number of patients with HoFH could actually be significantly lower than we expect, and could be closer to the historically reported rates
than to our estimate of 3,000 patients. Ultimately the actual size of the total addressable market in the U.S. will be determined only after we have substantial commercial history selling JUXTAPID and we are able to assess how it is being used
clinically. We believe that the prevalence rate in the EU is likely to be consistent with the prevalence rate in the U.S. We do not know, however, how many physicians or government payers in the key markets in the EU will require genotyping. Not all
of the genetic defects in LDL-C receptor function that result in HoFH have been fully characterized. As a result, not all HoFH patients will be correctly identified where genotyping is used as the sole diagnostic criteria. Consequently, in any
country where genotyping is the sole diagnostic criteria, the number of patients prescribed lomitapide may be substantially lower than we expect. The total addressable HoFH market in the EU and other key markets outside the U.S. will depend
ultimately on how physicians in the EU or in such other markets diagnose HoFH, how lomitapide is used in clinical practice and how government payers define HoFH for reimbursement purposes. If the total addressable market in the U.S. and the EU and
other key markets is smaller than we expect, then it may be more difficult for us to generate revenues and to achieve or maintain profitability.
We have studied lomitapide initially for the treatment of patients with HoFH who are 18 years of age or older. The label for JUXTAPID in the U.S. specifies that the safety and effectiveness of JUXTAPID
have not been established in pediatric patients. The prescribing information for LOJUXTA in the EU specifies that the safety and efficacy of LOJUXTA in children below 18 years of age have not been established and the use of the product in children
is therefore not recommended, and specifies further that no pediatric data are available. We have a post-marketing commitment to the FDA to conduct a juvenile toxicology study in rodents prior to initiating a clinical study of lomitapide in
pediatric patients. The juvenile animal toxicology study will seek to ascertain the impact, if any, of lomitapide on growth and development. If the results of the juvenile animal toxicology study support proceeding forward, we plan to conduct a
clinical trial of lomitapide for the treatment of pediatric HoFH patients. There is no guarantee that the results of the juvenile animal toxicology study will justify proceeding to a study of lomitapide in pediatric patients. In addition, the
pediatric study must be evaluated by the Paediatric Committee of the EMA (PDCO). There is no guarantee that PDCO will permit a pediatric study to proceed in the EU. Even if we conduct a study in pediatric patients, we may not be able to show, to the
satisfaction of the FDA or EMA or regulatory authorities in other countries, that lomitapide is safe and effective in pediatric patients, and we may never receive approval for this indication. The lack of approval to market lomitapide for the
pediatric HoFH population will limit our product revenue potential, and may make it more difficult for us to achieve or maintain profitability.
We do not have regulatory approval for commercial distribution of lomitapide outside the U.S. and EU
We are not permitted to market or sell lomitapide in any other countries outside the U.S. and EU on a commercial basis until we receive
the requisite approval from such countries. In order to market any product outside of the U.S. and EU, we must establish and comply with numerous and varying regulatory requirements of other countries regarding safety and efficacy and governing,
among other things, clinical trials, pricing and distribution of the product. Approval procedures vary among countries, and can involve additional product testing and additional administrative review periods. Regulatory authorities in countries
outside the U.S. and EU are increasingly requiring risk management plans and post-marketing commitments which may be more onerous to those required in the U.S. and EU. The time required to obtain approval in other countries may differ from that
required to obtain FDA or EMA approval. In particular, in many countries outside the U.S., including many of the EU countries, it is required that a product receives pricing and reimbursement approval before the product can be commercialized. This
can result in substantial delays in such countries, and the price that is ultimately approved may be lower than the price for which we expect to offer lomitapide outside the U.S. Marketing and pricing and reimbursement approval in one country does
not ensure such approvals in another. Failure to obtain the approvals necessary to commercialize lomitapide in other countries or any delay or setback in obtaining such approvals would impair our ability to develop foreign markets for lomitapide.
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It is possible that regulatory authorities outside the U.S. and EU may not consider the
efficacy and safety data from our pivotal Phase 3 clinical trial of lomitapide in patients with HoFH or the risk/benefit profile of lomitapide to be sufficient for approval of lomitapide for this indication, or may not consider LDL-C lowering alone
sufficient for approval without demonstrating a beneficial effect on a clinical outcome. It is possible that regulatory authorities outside the U.S. and EU may not agree with our assessment that certain changes made to lomitapide’s physical
parameters and specifications as compared to the material used in the pivotal trial are not clinically meaningful. If regulatory authorities outside the U.S. and EU require additional studies or trials or changes to specifications, we would incur
increased costs and delays in the marketing approval process. For example, Japanese regulatory authorities have required us to conduct two studies prior to our submission of an application for marketing authorization for lomitapide in Japan: a
Phase 1 bridging study of the pharmacokinetic and pharmacodynamic (“PK/PD”) properties of lomitapide in Japanese and Caucasian patients, and, following the outcome of that PK/PD study, a small therapeutic study of lomitapide in
Japanese HoFH patients. The results of the PK/PD study may show that there are differences in the pharmacokinetic or pharmacodynamic effects of lomitapide in Japanese and Caucasian patients, which may cause us to have to develop a new dose strength
for Japanese patients and/or to change the dosing schedule. Any additional work to refine dosing for Japanese patients as a result of the PK/PD study would likely delay the start of the small clinical study in HoFH patients in Japan. There is no
assurance that we will be successful in our efforts to generate the data we need to submit a marketing authorization application in Japan or to achieve regulatory approval in Japan on a reasonable timeline, or at all.
In certain countries where permitted based on U.S. or EU approval of lomitapide, we plan to make lomitapide available on a named patient
sales basis. There is no assurance that this mechanism will be available in any particular country, or that we will pursue such activity even if permitted to do so in a particular country. Even if named patient sales or their equivalent sales are
permitted in a certain country and we elect to make lomitapide available on such basis in such country, there is no guarantee that the country will pay for the product or that we will generate sales or substantial revenue from such sales, if any.
There may also be countries where we choose to make lomitapide available at no cost prior to approval in such country. If named patient sales do not meet our expectations in certain key markets outside the U.S. and EU, we may not be able to meet our
expectations with respect to sales of lomitapide or revenues from such sales in the time periods we anticipate or at all.
As a result
of the side effects observed in the Phase 3 clinical study and other clinical and preclinical studies of lomitapide, the prescribing information for lomitapide in the U.S. and the EU contains significant limitations on use and other important
warnings and precautions, including a boxed warning in the JUXTAPID labeling, and warnings in the LOJUXTA prescribing information, citing concerns over liver toxicity. Lomitapide may continue to cause such side effects or have other properties that
could impact market acceptance, result in adverse limitations in any approved labeling in the U.S. or EU, or delay or prevent marketing approval in territories outside the U.S. and EU.
The prescribing information for lomitapide in the U.S. and the EU contains significant limitations on use and other important warning and
precautions, including a boxed warning in the JUXTAPID labeling, and warnings in the LOJUXTA prescribing information citing concerns over liver toxicity associated with use of lomitapide. Lomitapide can cause elevations in liver transaminases. In
our pivotal trial of lomitapide, 10 of the 29 patients (34%) treated with lomitapide had at least one elevation in ALT or AST greater than or equal to three times the upper limit of normal (“ULN”), including four patients who
experienced liver enzymes greater than or equal to five times the ULN. There were no concomitant clinically meaningful elevations of total bilirubin, international normalized ratio (“INR”), or alkaline phosphatase. Lomitapide also has been
shown to increase hepatic fat, with or without concomitant increases in transaminases. The median absolute increase in hepatic fat during the pivotal trial was 6% after both 26 and 78 weeks of treatment, from 1% at baseline, measured by magnetic
resonance spectroscopy. Hepatic steatosis associated with lomitapide treatment may be a risk factor for progressive liver disease, including steatohepatitis and cirrhosis.
The most common adverse reactions in our pivotal trial of lomitapide were GI adverse reactions, reported by 27 of 29 patients (93%). Adverse reactions reported by greater than or equal to 8 patients
(28%) in the HoFH clinical trial included diarrhea, nausea, vomiting, dyspepsia and abdominal pain. Other common adverse reactions, reported by five to seven (17-24%) patients, included weight loss, abdominal discomfort, abdominal distension,
constipation, flatulence, increased ALT, chest pain, influenza, nasopharyngitis and fatigue.
In a two-year dietary
carcinogenicity study of lomitapide in mice, statistically significant increased incidences of tumors in the small intestine and liver were observed. The relationship of these findings in mice is uncertain with regard to human safety for a number of
reasons, including the fact that they did not occur in a dose-related manner, and liver tumors are common spontaneous findings in the strain of mice used in this study. In a two-year oral carcinogenicity study of lomitapide in rats, there were no
statistically significant increases in the incidences of any tumors, but there can be no assurance that long-term usage of lomitapide in humans will not be determined to cause an increase in tumors.
As part of our post-marketing commitment to both the FDA and the EMA, we will conduct an observational cohort study to generate more data
on the long-term safety profile of lomitapide, the patterns of use and compliance and the long-term effectiveness of controlling LDL-C levels. The commitment to the FDA is to target enrollment of 300 HoFH patients worldwide, and to study
enrolled patients for a period of 10 years. The EMA has required that all patients taking lomitapide in the EU be encouraged to participate in the study, and that the study period be open-ended. In the study, investigators will follow each patient
to track malignancies, tumors, teratogenicity, hepatic effects, GI adverse reactions, events associated with coagulopathy, major adverse cardiovascular events and death. The EMA has also required that we conduct a vascular imaging study to determine
the impact of lomitapide on vascular endpoints. As part of our post-marketing commitments, we will also be conducting certain drug-drug interactions studies. Post-marketing commitments imposed by regulatory authorities outside the U.S. and the EU
may be more onerous and/or different than those imposed by the FDA and the EU, which could result in increased costs to us. A failure to meet post-marketing commitments to the FDA, the EMA or other regulatory authorities could impact our ability to
continue to market lomitapide in countries where we are unable to meet such commitments.
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In addition, as part of our observational cohort study or in the conduct of additional
clinical studies or in post-marketing surveillance, we or others may identify additional safety information on known side effects or new undesirable side effects caused by lomitapide, and, in that event, a number of potentially significant negative
consequences could result, including:
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regulatory authorities may suspend or withdraw their approval of lomitapide;
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regulatory authorities may require the addition of labeling statements, such as warnings or contraindications or distribution and use restrictions;
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regulatory authorities may require us to issue specific communications to healthcare professionals, such as “Dear Doctor” letters;
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regulatory authorities may issue negative publicity regarding lomitapide, including safety communications;
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we may be required to change the way lomitapide is administered, conduct additional preclinical studies or clinical trials or restrict the distribution
or use of lomitapide;
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we could be sued and held liable for harm caused to patients;
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the regulatory authorities may require us to amend the REMS or risk management plan; and
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our reputation may suffer.
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As part of the development of the commercial manufacturing process, we tightened specifications for lomitapide drug substance such that the commercial drug substance differs from the material used in our
Phase 3 trial in certain physical parameters and specifications that we do not believe are clinically meaningful. While we do not expect the changes to have any efficacy or safety consequences, there is the risk that we may see unexpected
differences in the type or severity of side effects with the commercial product.
Any known safety concerns for lomitapide or
any unknown safety issues that may develop could prevent us from achieving or maintaining market acceptance of lomitapide and our financial goals, and could adversely affect our ability to obtain approval of lomitapide outside the U.S. and EU.
We currently depend on a single third-party manufacturer to produce our lomitapide drug substance and a different third-party
manufacturer to produce our drug product. This may increase the risk that we will not have sufficient quantities of lomitapide or such quantities at an acceptable cost, which could delay, prevent or impair our clinical development and
commercialization of lomitapide.
We currently have no manufacturing facilities and limited personnel with
manufacturing experience. We rely on a contract manufacturer to produce drug substance for lomitapide and another contract manufacturer for drug product for our clinical trials and for commercial supplies. We have entered into a long-term commercial
supply agreement for lomitapide drug substance and drug product with each such contract manufacturer. We do not have any agreements or arrangements in place for redundant supply or a second source for lomitapide drug substance or drug product. Any
termination or non-renewal of our agreements, including by reason of merger and acquisition activities, performance failure, bankruptcy filing, plant closing or strategic shift on the part of our existing or future manufacturers could impact
availability of lomitapide for commercial sale in the U.S., the EU and in other countries where it is sold on a named patient basis or ultimately approved for commercial sale, or may delay further clinical development or marketing approval of
lomitapide in countries and territories outside the U.S. and EU. If for some reason either of our current contract manufacturers cannot or will not perform as agreed, we may be required to replace that manufacturer. If we are unable to maintain
arrangements for third-party manufacturing, or are unable to do so on commercially reasonable terms, we may not be able to successfully commercialize lomitapide or complete development of lomitapide. For example, we have been notified that our
drug substance contract manufacturer has signed a letter of intent to sell the facility at which lomitapide is currently manufactured, and is in the process of finalizing the sale transaction. If the facility is not sold,
the manufacturer intends to close the facility in 2014, and consolidate its manufacturing operations at another location. We are in the process of expanding our inventory of lomitapide drug substance, and plan to engage a second
source of drug substance manufacture, to mitigate the risk of shut down of the existing facility. Although we believe there are a number of third-party manufacturers that could manufacture the clinical and commercial supply of lomitapide drug
substance or drug product, we may incur significant added costs and delays in identifying and qualifying any such replacements. Furthermore, although we generally do not begin a clinical trial unless we have a sufficient supply of a product
candidate for the trial, any significant delay in the supply of a product candidate for an ongoing trial due to the need to replace a third-party manufacturer could delay completion of the trial. If for any reason we are unable to obtain adequate
supplies of lomitapide or any other product candidate that we develop, or the drug substances used to manufacture it, it will be more difficult for us to compete effectively, generate revenue, and further develop our products. In addition, if we are
unable to assure a sufficient quantity of the drug for patients with rare diseases or conditions, we may lose any orphan drug exclusivity to which the product otherwise would be entitled.
We have only recently manufactured commercial supplies of lomitapide, and rely on our contract manufacturers to utilize processes that
consistently produce drug substance and drug product to their required specifications, including those imposed by the FDA, the EMA and other regulatory authorities. As part of the development of the commercial manufacturing process, we tightened
specifications for drug substance such that the commercial drug substance differs from the material used in our Phase 3 trial in certain physical parameters and specifications that we do not believe are clinically meaningful. We have completed
validation of the manufacturing process for drug substance and drug product. There can be no assurance that our contractors will consistently be able to produce commercial supplies of drug substance or drug product meeting the approved
specifications. Any failure by our third-party manufacturers to produce product that meets specifications could lead to a shortage of lomitapide.
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The FDA, the EMA and other regulatory authorities require that product candidates and drug
products be manufactured according to current good manufacturing practice (“cGMP”). Any failure by our third-party manufacturers to comply with cGMP could lead to a shortage of lomitapide. In addition, such failure could be the basis for
action by the FDA, the EMA or regulatory authorities in other territories or countries to withdraw approvals previously granted to us and for other regulatory action, including seizure, injunction or other civil or criminal penalties. Certain
countries may impose additional requirements on the manufacturing of drug products or drug substance, and on our third-party manufacturers, as part of the regulatory approval process for lomitapide in such countries. The failure by us or our
third-party manufacturers to satisfy such requirements could impact our ability to obtain or maintain approval of lomitapide in such countries.
Our market is subject to intense competition. If we are unable to compete effectively, lomitapide or any other product candidate that we develop
may be rendered noncompetitive or obsolete.
Our industry is highly competitive and subject to rapid and significant
technological change. Our potential competitors include large pharmaceutical and biotechnology companies, specialty pharmaceutical and generic drug companies, academic institutions, government agencies and research institutions. All of these
competitors currently engage in, have engaged in or may engage in the future in the development, manufacturing, marketing and commercialization of new pharmaceuticals, some of which may compete with lomitapide or other product candidates. Smaller or
early stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large, established companies. Key competitive factors affecting the commercial success of lomitapide and any other product
candidates that we develop are likely to be efficacy, safety and tolerability profile, reliability, convenience of dosing, price and reimbursement. The market for cholesterol-lowering therapeutics is large and competitive with many drug classes.
Lomitapide is approved in the U.S. and EU as an adjunct to a low-fat diet and other lipid-lowering treatments, including LDL apheresis where available, to reduce LDL-C in HoFH patients. As a treatment for HoFH, JUXTAPID competes in the U.S. with
Kynamro, which is being commercialized by Genzyme, now part of Sanofi under a collaboration with Isis. Kynamro is an antisense apolipoprotein B-100 inhibitor which is taken as a weekly subcutaneous injection. In the EU, the CHMP recommended against
approval of Kynamro. If Isis and Genzyme obtain marketing approval of Kynamro for the treatment of patients with HoFH in any country prior to us, they could obtain a competitive advantage associated with being the first to market.
We believe that lomitapide will face additional competition for the treatment of HoFH. Although there are no other microsomal
triglyceride transfer protein inhibitor (“MTP-I”) compounds currently approved by the FDA for the treatment of hyperlipidemia, there may be other MTP-I compounds in development. We are aware of other pharmaceutical companies that are
developing product candidates that may compete with lomitapide in the treatment of HoFH, including Regeneron, in collaboration with Sanofi, Roche Holding AG, Amgen and Alnylam Pharmaceuticals, Inc., in collaboration with The Medicines Company, all
of which are developing molecules that attempt to mimic the impact observed in patients with defects in their PCSK9 gene. Such patients have lower LDL-C levels and an observed reduction in cardiovascular events, and some believe that medicines that
duplicate this behavior may effectively reduce LDL-C levels with a similar benefit. In July 2012, Regeneron and Sanofi announced commencement of patient enrollment for a 22,000 patient Phase 3 clinical program to evaluate its anti-PCSK9
antibody in several patient populations, including those with HeFH and primary hypercholesterolemia. Amgen is also conducting a clinical trial of its anti-PCSK9 antibody in multiple patient populations, including HoFH patients. We expect and
understand that some HoFH patients who might otherwise be candidates for treatment with lomitapide will be committed to, or candidates for, clinical studies of anti-PCSK9 antibodies. Given the rarity of HoFH, this may make it more difficult for us
to generate revenues and achieve profitability. Regeneron and Sanofi have indicated that their PCSK-9 product could receive approval in the treatment for HeFH as early as 2015.
Many of our potential competitors have substantially greater financial, technical and human resources than we do, and significantly
greater experience in the discovery and development of drug candidates, obtaining FDA and other regulatory approvals of products and the commercialization of those products. Accordingly, our competitors may be more successful than we may be in
obtaining marketing approvals for drugs and achieving widespread market acceptance.
Our competitors’ drugs may be more
effective, or more effectively marketed and sold, than any drug we may commercialize, and may render lomitapide or any other product candidate that we develop obsolete or non-competitive before we can recover the expenses of developing and
commercializing the product. We anticipate that we will face intense and increasing competition as new drugs enter the market and advanced technologies become available. Finally, the development of new treatment methods for the diseases we are
targeting could render lomitapide or any other product candidate that we develop non-competitive or obsolete.
We may face resistance
from certain private, government and other third party payers given the price we charge for JUXTAPID in the U.S., and expect to charge for LOJUXTA in the EU and in other countries in which lomitapide may receive approval. It will be difficult for us
to profitably sell lomitapide if reimbursement for the product is limited or delayed.
Market acceptance and sales of
lomitapide will depend on coverage and reimbursement policies and may be affected by healthcare reform measures. Government authorities and third-party payers, such as private health insurers and health maintenance organizations, decide which
medications they will pay for and establish reimbursement levels. A primary trend in the U.S. healthcare industry and elsewhere is cost containment. Government authorities and these third-party payers have attempted to control costs by limiting
coverage and limiting the amount of reimbursement for particular medications.
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Given that HoFH is a rare disease with a small patient population, we have set a price for
JUXTAPID in the U.S. that is significantly higher than that of most pharmaceuticals in order to generate enough revenue to fund our operating costs. Certain payers in the U.S. may resist providing adequate coverage and reimbursement for JUXTAPID.
Based on our experience to date, genotyping has not typically been required in the U.S. to determine a diagnosis of HoFH for reimbursement purposes, although there have been some exceptions. Similarly, payers have not typically been making
reimbursement decisions based on the price differential between JUXTAPID and Kynamro. A few payers in the U.S. have, however, imposed other requirements, conditions or limitations as conditions to coverage and reimbursement for JUXTAPID, and more
payers may decide to do so in the future.
In the EU, and in other countries outside the U.S. where lomitapide may be
approved, we expect to seek a price that, like the U.S. price, is at a level that is significantly higher than that of most pharmaceuticals, and which reflects the rare nature of HoFH. There is no assurance that government agencies in such countries
that are responsible for reimbursement of healthcare costs or other third party payers in such countries will agree to provide coverage for lomitapide at the prices we propose or at all. In the EU, and in certain other countries outside the U.S.,
the proposed pricing for a drug must be approved by governmental authorities before it may be lawfully sold. The requirements governing drug pricing vary widely from country to country. In EU countries, for example, the government has the option 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. EU countries will typically either approve a specific price for a
medicinal product, or instead adopt a system of direct or indirect controls on the profitability of the company placing the medicinal product on the market. In some countries, pricing negotiations with governmental authorities can take six to 12
months or longer after the receipt of marketing approval. To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of our product candidate to other available
therapies. While we have begun the process of obtaining pricing approval in key EU countries, we have not yet received pricing approval in any of those countries, and there is no assurance that we will receive such approval or, if we do, that the
price will be acceptable to us. Outside the U.S., the ongoing sovereign debt crisis and the macroeconomic climate in the EU and other countries, or local regulations or practices, may adversely affect our ability to set and charge a sufficiently
high price to generate adequate revenue in those markets. Even if we are successful in obtaining pricing approval for lomitapide in a country, such countries may impose onerous conditions on reimbursement, which may include genotyping. Countries
outside the U.S. and the EU may also require significant discounts or impose price or total expenditure caps.
In addition, we
may face pricing and reimbursement pressure in the U.S., EU and other countries as a result of prices charged for competitive products or therapies.
We plan to make lomitapide available in certain countries that allow use of a drug, on a named patient basis or under a compassionate use or other type of so-called expanded access program, before it has
obtained marketing approval in such country. We plan to seek reimbursement for lomitapide for authorized pre-approval uses in some of these countries to the extent permitted by applicable law and local regulatory authorities. In other countries or
under certain circumstances, we may provide lomitapide free of charge for permitted pre-approval uses. In certain countries where we seek reimbursement for the product during the pre-approval phase, we will be able to establish the price for
lomitapide, while in other countries we will need to negotiate the price. Such negotiations may not result in a price acceptable to us, in which case we may elect to not pursue distribution of lomitapide in such country prior to approval or we may
curtail distribution. Further, any negotiated price may adversely affect the market prices in other countries or jurisdictions where we may sell lomitapide, if such price is lower than the price that would have otherwise been set in such
geographies.
If we fail to successfully secure and maintain reimbursement coverage for lomitapide or are significantly
delayed in doing so or if onerous conditions are imposed by private payers, government authorities or other third party payers on such reimbursement, we will have difficulty achieving market acceptance of our products and our business and ability to
achieve our financial expectations will be harmed.
We support certain independent patient foundations in the U.S. that assist
eligible patients with certain co-payments or co-insurance requirements, and assist certain eligible uninsured or underinsured patients in the U.S. Our support of these programs could result in significant costs to us. We do not have control or
input into the decisions of these foundations.
The amount of reimbursement for lomitapide and the manner in which government and
private payers in the U.S. may reimburse for our potential products is uncertain.
Beginning April 1, 2013,
Medicare payments for all items and services under Part A and B, including drugs and biologicals, and most payments to plans under Medicare Part D are being reduced by 2% under the sequestration (i.e., automatic spending reductions) required by the
Budget Control Act of 2011 (“BCA”) as amended by the American Taxpayer Relief Act (“ATRA”). The BCA requires sequestration for most federal programs, excluding Medicaid, Social Security, and certain other programs, because
Congress failed to enact legislation by January 15, 2012, to reduce federal deficits by $1.2 trillion over ten years. The BCA caps the cuts to Medicare payments for items and services and payments to Part D plans at 2%. As long as these
cuts remain in effect, they could adversely impact payment for JUXTAPID.
Payers also are increasingly considering new metrics
as the basis for reimbursement rates, such as average sales price (“ASP”), average manufacturer price (“AMP”) or actual acquisition cost (“AAC”). The existing data for reimbursement based on these metrics is relatively
limited, although certain states have begun to survey acquisition cost data for the purpose of setting Medicaid reimbursement rates, and Centers for Medicare & Medicaid Services (“CMS”) has begun making pharmacy National Average
Drug Acquisition Cost and National Average Retail Price data publicly available on at least a monthly basis. Therefore, it may be difficult to project the impact of these evolving
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reimbursement mechanics on the willingness of payers to cover our products. Recent legislative changes to the 340B drug pricing program, the Medicaid Drug Rebate Program, and the Medicare Part D
prescription drug benefit also could impact our revenues. If reimbursement is not available or available only to limited levels, we may not be able to generate sufficient revenue to meet our operating costs or to achieve our revenue, cash flow
breakeven or profitability goals in the timeframe that we expect, or at all.
Enacted and future legislation may increase the difficulty
and cost for us to commercialize lomitapide or any other product candidate that we develop and affect the prices we may obtain.
In the U.S., there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that restrict or regulate post-approval activities, and may affect our
ability to profitably sell lomitapide or any other product candidate for which we obtain marketing approval. Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for
pharmaceutical products. We are not sure whether additional legislative changes will be enacted, or whether the FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on lomitapide may be. In addition,
increased scrutiny by the U.S. Congress of the FDA’s approval process may subject us to more stringent product labeling and post-marketing testing and other requirements.
In the U.S., the Medicare Prescription Drug Improvement and Modernization Act of 2003 (“MMA”) changed the way Medicare covers and pays for pharmaceutical products. The legislation expanded
Medicare coverage for drug purchases by those covered by Medicare and introduced a new reimbursement methodology based on average sales prices for drugs. In addition, this legislation authorized Medicare Part D prescription drug plans to use
formularies where they can limit the number of drugs that will be covered in any therapeutic class. As a result of this legislation and the expansion of federal coverage of drug products, we expect that there will be additional pressure to contain
and reduce costs. These cost reduction initiatives and other provisions of this legislation could decrease the coverage and price that we receive for any approved products, and could seriously harm our business. While the MMA applies only to drug
benefits for Medicare beneficiaries, private payers often follow Medicare coverage policy and payment limitations in setting their own reimbursement rates, and any reduction in reimbursement that results from the MMA may result in a similar
reduction in payments from private payers.
More recently, in 2010, President Obama signed into law the Patient Protection and
Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (together, the “Health Care Reform Law”), a sweeping law intended to broaden access to health insurance, reduce or constrain the growth of healthcare
spending, enhance remedies against fraud and abuse, add new transparency requirements for healthcare and health insurance industries, impose new taxes and fees on the health industry and impose additional health policy reforms. The Health Care
Reform Law revised the definition of “average manufacturer price” for reporting purposes, which could increase the amount of Medicaid drug rebates to states. The Health Care Reform Law also imposes a significant annual fee on companies
that manufacture or import branded prescription drug products. We do not know the full effects that the Health Care Reform Law will have on our commercialization efforts with respect to JUXTAPID. Although it is too early to determine the effect of
the Health Care Reform Law, the law appears likely to continue the pressure on pharmaceutical pricing, especially under the Medicare program, and may also increase our regulatory burdens and operating costs.
Countries outside the U.S. may also pass or consider passing changes to their healthcare systems which may in the future affect the
revenues we generate from sales of lomitapide.
We face extensive regulatory requirements, and lomitapide may still face future
development and regulatory difficulties.
Even after marketing approval, a regulatory authority may still impose
significant restrictions on a product’s indications, conditions for use, distribution or marketing or impose ongoing requirements for potentially costly post-marketing surveillance, post-approval studies or clinical trials. Because of the risk
of liver toxicity, JUXTAPID is available in the U.S. only through the JUXTAPID REMS program. We will certify all healthcare providers who prescribe JUXTAPID and the pharmacies that will dispense the medicine. The FDA has also required that we
periodically assess the effectiveness of the JUXTAPID REMS program. The goals of the REMS program are:
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to educate prescribers about the risk of hepatotoxicity associated with the use of JUXTAPID and the need to monitor patients during treatment with
JUXTAPID as per product labeling; and
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to restrict access to therapy with JUXTAPID to patients with a clinical or laboratory diagnosis consistent with HoFH.
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In the EU, we have adopted a risk management plan to help educate physicians on the safety information for LOJUXTA and appropriate
precautions to be followed by healthcare professionals and patients.
As part of our post-marketing commitment to the FDA and
EMA with respect to lomitapide, we will conduct an observational cohort study to generate more data on the long-term safety profile of lomitapide, the patterns of use and compliance and the long-term effectiveness of controlling LDL-C levels. The
commitment to the FDA is to target enrollment of 300 HoFH patients worldwide, and to study enrolled patients for a period of 10 years. The EMA has required that all patients taking lomitapide in the EU be encouraged to participate in the study,
and that the study period be open-ended. In the study, investigators will follow each patient to track malignancies, tumors, teratogenicity, hepatic effects, GI adverse reactions, events associated with coagulopathy, major adverse cardiovascular
events and death. The EMA has also required that we conduct a vascular imaging study to determine the impact of lomitapide on vascular endpoints. Our post-marketing commitments also include certain drug-drug interactions studies. Lomitapide will
also be subject to ongoing FDA and EMA requirements governing the labeling, packaging, storage, advertising, distribution, promotion, recordkeeping and submission of safety and other post-marketing information,
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including adverse events, and any changes to the approved product, product labeling, or manufacturing process. Regulatory authorities have significant post-marketing authority, including, for
example, the authority to require labeling changes based on new safety information, and to require post-marketing studies or clinical trials to evaluate serious safety risks related to the use of a drug. In addition, manufacturers of drug products
and their facilities are subject to continual review and periodic inspections by the FDA, the EMA and other regulatory authorities for compliance with cGMP, and other regulations.
We expect that the regulatory authorities in certain other countries outside the U.S. and EU where lomitapide may be approved may impose
post-approval obligations, including patient registries, and requirements that may in some countries be more onerous than those imposed by the FDA and EMA.
If we, or our drug substance or drug product or the manufacturing facilities for our drug substance or drug product, fail to comply with applicable regulatory requirements, a regulatory agency may:
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issue warning letters or untitled letters;
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seek an injunction or impose civil or criminal penalties or monetary fines;
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suspend or withdraw or alter the conditions of our marketing approval;
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mandate modifications to promotional materials or require us to provide corrective information to healthcare practitioners;
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suspend any ongoing clinical trials;
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require us to enter into a consent decree, which can include imposition of various fines, reimbursements for inspection costs, required due dates for
specific actions and penalties for noncompliance;
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refuse to approve pending applications or supplements to applications submitted by us;
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suspend or impose restrictions on operations, including costly new manufacturing requirements;
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seize or detain products, refuse to permit the import or export of products or request that we initiate a product recall; or
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refuse to allow us to enter into supply contracts, including government contracts.
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The FDA, the EMA and most other regulatory agencies outside the U.S. actively enforce laws and regulations prohibiting the promotion of off-label
uses. If we are found to have promoted off-label uses, we may become subject to significant liability.
The FDA, the
EMA and most other regulatory agencies outside the U.S. strictly regulate the promotional claims that may be made about prescription products. In particular, a product may not be promoted for uses that are not approved by the FDA or such other
regulatory agencies as reflected in the product’s approved labeling or other prescribing information. In the U.S., violations, including promotion of our products for unapproved (or off-label) uses, are subject to enforcement letters, inquiries
and investigations, and civil and criminal sanctions by the FDA. Engaging in impermissible promotion of our products for off-label uses in the U.S. can also subject us to false claims litigation under federal and state statutes, which can lead to
consent decrees, civil money penalties, restitution, criminal fines and imprisonment, and exclusion from participation in Medicare, Medicaid and other federal and state health care programs. These false claims statutes in the U.S. include the
federal False Claims Act, which allows any individual to bring a lawsuit against a pharmaceutical company on behalf of the federal government alleging submission of false or fraudulent claims, or causing to present such false or fraudulent claims,
for payment by a federal program such as Medicare or Medicaid. If the government prevails in the lawsuit, the individual will share in any fines or settlement funds. This growth in litigation has increased the risk that a pharmaceutical company will
have to defend a false claim action, pay settlement fines or restitution, agree to comply with burdensome reporting and compliance obligations, and be excluded from the Medicare, Medicaid, and other federal and state healthcare programs.
Governmental authorities in the EMA and countries outside the U.S. may also impose sanctions for off-label promotion. If we do not lawfully promote our approved products or are subject to allegations that we do not lawfully promote our product, we
may become subject to such investigations or litigation and, if we are not successful in defending against such actions, those actions may have a material adverse effect on our business, financial condition and results of operations.
If we are unable to execute effectively our sales and marketing activities, we may be unable to generate sufficient product revenue.
We launched our first product, lomitapide in the U.S. in January 2013 under the brand name, JUXTAPID. On
July 31, 2013, the European Commission approved lomitapide for marketing in the EU, under the brand name, LOJUXTA. We do not yet have marketing approval outside the U.S. and the EU, but have filed for approval, or plan to file for approval in
other key markets. We are continuing to build our sales, marketing, managerial and other non-technical capabilities in the U.S., and our commercial infrastructure in the EU and in other key countries. The establishment and development of our
commercial infrastructure will continue to be expensive and time consuming, and we may not be able to successfully fully develop this capability in a timely manner or at all. We anticipate developing a commercial infrastructure across multiple
jurisdictions. Doing so will require a high degree of coordination and compliance with laws and regulations in such jurisdictions. If we are unable to effectively coordinate such activities or comply with such laws and regulations, our ability to
commercialize lomitapide, if approved, in those jurisdictions will be adversely affected. Our sales force in countries outside the U.S. may not be successful in commercializing lomitapide in the countries in which it is approved. If we are unable to
establish and maintain adequate sales, marketing and distribution capabilities, whether independently or with third parties, we may not be able to generate product revenue consistent with our expectations and may not become profitable.
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We have evaluated markets outside the U.S. and major market countries in the EU to determine
in which geographies we might choose to commercialize lomitapide ourselves, if approved, and in which geographies we might choose to collaborate with third parties. To the extent we rely on third parties to commercialize lomitapide, if marketing
approval is obtained in the relevant country, we may receive less revenue than if we commercialized the product ourselves. In addition, we would have less control over the sales efforts of any third parties involved in our commercialization efforts,
including, in some countries, pricing. In the event we are unable to collaborate with a third-party to commercialize lomitapide, for certain geographies, our ability to generate product revenue may be limited internationally.
Our relationships with customers and payers in the U.S. will be subject to applicable anti-kickback, fraud and abuse and other healthcare laws and
regulations, which could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future earnings.
Healthcare providers, physicians and others have and will continue to play an important role in the recommendation and prescription of lomitapide and any other products for which we obtain marketing
approval. Our arrangements with third-party payers and customers in the U.S. have and will continue to expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial
arrangements and relationships through which we market, sell and distribute lomitapide and other products for which we may obtain marketing approval. Restrictions under applicable federal and state healthcare laws and regulations in the U.S. include
the following:
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The federal healthcare Anti-Kickback Statute prohibits, among other things, persons from knowingly and willfully soliciting, offering, paying, or
receiving remuneration, directly or indirectly, in cash or in kind, to induce or in return for purchasing, leasing, ordering, or arranging for the purchase, lease or order of any healthcare item or service, for which payment may be made under
federal healthcare programs such as Medicare and Medicaid. This statute has been interpreted to apply to arrangements between pharmaceutical companies on one hand and prescribers, purchasers and formulary managers on the other. Further, the
Healthcare Reform Act, among other things, amends the intent requirement of the federal Anti-Kickback Statute. A person or entity no longer needs to have actual knowledge of this statute or specific intent to violate it. In addition, the Healthcare
Reform Act provides that the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the false claims statutes. Although
there are a number of statutory exemptions and regulatory safe harbors protecting certain common manufacturer business arrangements and activities from prosecution, the exemptions and safe harbors are drawn narrowly, and practices that involve
remuneration may be subject to scrutiny if they do not qualify for an exemption or safe harbor. We intend to comply with the exemptions and safe harbors whenever possible, but our practices may not in all cases meet all of the criteria for safe
harbor protection from anti-kickback liability and may be subject to scrutiny.
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The federal False Claims Act prohibits any person from knowingly presenting, or causing to be presented, to the federal government, a false claim for
payment or knowingly making, or causing to be made, a false statement to get a false claim paid. Many pharmaceutical and other healthcare companies have been investigated and have reached substantial financial settlements with the federal government
under the federal Anti-Kickback Statute and False Claims Acts for a variety of alleged marketing activities, including providing free product to customers with the expectation that the customers would bill federal programs for the product; providing
consulting fees, grants, free travel, and other benefits to physicians to induce them to prescribe the company’s products; and inflating prices reported to private price publication services, which are used to set drug payment rates under
government healthcare programs. Companies have been prosecuted for causing false claims to be submitted because of the marketing of their products for unapproved uses. Pharmaceutical and other healthcare companies have also been prosecuted on other
legal theories of Medicare and Medicaid fraud.
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The federal Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical
Health Act, among other things, imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program, and also imposes obligations with respect to safeguarding the privacy, security and transmission of individually
identifiable health information.
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The federal Physician Payment Sunshine Act will require extensive tracking of payments to physicians and teaching hospitals, maintenance of a payments
database, and public reporting of the payment data. CMS recently issued a final rule implementing the Physician Payment Sunshine Act provisions and clarified the scope of the reporting obligations, as well as that manufacturers must begin
tracking on August 1, 2013 and must begin reporting payment data to CMS by March 31, 2014. Failure to comply with the reporting obligations may result in civil monetary penalties.
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Analogous state laws and regulations, such as state anti-kickback and false claims laws apply to sales or marketing arrangements and claims involving
healthcare items or services reimbursed by Medicaid or other state programs or, in several states, apply regardless of the payer. Several states now require pharmaceutical companies to report expenses relating to the marketing and promotion of
pharmaceutical products in those states and to report gifts and payments to individual health care providers in those states. Some of these states also prohibit certain marketing-related activities including the provision of gifts, meals, or other
items to certain health care providers. In addition, several states require pharmaceutical companies to implement compliance programs or marketing codes. Efforts to ensure that our business arrangements with third parties will continue to comply
with applicable healthcare laws and regulations could be costly. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable
fraud and abuse or other healthcare laws and regulations. If our operations, including activities conducted by our sales team, are found to be in violation of
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any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, exclusion from
government-funded healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of our operations. If any of the physicians or other providers or entities with whom we expect to do business is found to be not in compliance
with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government-funded healthcare programs.
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We could become subject to government investigations and related subpoenas. Such subpoenas are often associated with previously filed qui tam actions, or lawsuits filed under seal under the Federal False
Claims Act. Qui tam actions are brought by private plaintiffs suing on behalf of the federal government for alleged Federal False Claims Act violations. The time and expense associated with responding to such subpoenas, and any related qui tam
or other actions, may be extensive, and we cannot predict the results of our review of the responsive documents and underlying facts or the results of such actions.
Responding to government investigations, defending any claims raised, and any resulting fines, restitution, damages and penalties, settlement payments or administrative actions, as well as any related
actions brought by stockholders or other third parties, could have a material impact on our reputation, business and financial condition and divert the attention of our management from operating our business.
The number and complexity of both federal and state laws continues to increase, and additional governmental resources are being added to
enforce these laws and to prosecute companies and individuals who are believed to be violating them. In particular, the Healthcare Reform Act includes a number of provisions aimed at strengthening the government’s ability to pursue
anti-kickback and false claims cases against pharmaceutical manufacturers and other healthcare entities, including substantially increased funding for healthcare fraud enforcement activities, enhanced investigative powers, and amendments to the
False Claims Act that make it easier for the government and whistleblowers to pursue cases for alleged kickback and false claim violations. While it is too early to predict what effect these changes will have on our business, we anticipate that
government scrutiny of pharmaceutical sales and marketing practices will continue for the foreseeable future and subject us to the risk of government investigations and enforcement actions. Responding to a government investigation or enforcement
action would be expensive and time-consuming, and could have a material adverse effect on our business and financial condition and growth prospects.
If we fail to comply with our reporting and payment obligations under the Medicaid Drug Rebate Program or other governmental pricing programs in the U.S., we could be subject to additional
reimbursement requirements, penalties, sanctions and fines which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
We participate in the Medicaid Drug Rebate Program and a number of other Federal and state government pricing programs in the U.S., and
we may participate in additional government pricing programs in the future. These programs are described in detail in the “Business—Regulatory Matters” section of the 2012 Form 10-K, and generally require us to pay rebates or provide
discounts to government payers in connection with drugs, including JUXTAPID, that are dispensed to beneficiaries of these programs. In some cases, such as with the Medicaid Drug Rebate Program, the rebates are based on pricing and rebate
calculations that we report on a monthly and quarterly basis to the government agencies that administer the programs. The terms, scope and complexity of these government pricing programs change frequently. Responding to current and future changes
may increase our costs and the complexity of compliance, will be time-consuming, and could have a material adverse effect on our results of operations.
Pricing and rebate calculations vary among products and programs. The calculations are complex and are often subject to interpretation by governmental or regulatory agencies and the courts. For example,
the Medicaid rebate amount is computed each quarter based on our submission to the CMS of our AMP and BP for the quarter. If we become aware that our reporting for prior quarters was incorrect, or has changed as a result of recalculation of the
pricing data, we will be obligated to resubmit the corrected data for a period not to exceed 12 quarters from the quarter in which the data originally were due. Such restatements and recalculations would serve to increase our costs for
complying with the laws and regulations governing the Medicaid rebate program. Any corrections to our rebate calculations could result in an overage or underage in our rebate liability for past quarters, depending on the nature of the correction.
Price recalculations also may affect the price that we will be required to charge certain safety-net providers under the Public Health Service 340B drug discount program.
We are liable for errors associated with our submission of pricing data and for overcharging government payers. For example, in addition to retroactive rebates and the potential for 340B program refunds,
if we are found to have knowingly submitted false AMP or BP information to the government, we may be liable for civil monetary penalties in the amount of $100,000 per item of false information. Our failure to submit monthly/quarterly AMP and BP data
on a timely basis could result in a civil monetary penalty of $10,000 per day for each day the submission is late beyond the due date. In the event that CMS were to terminate our rebate agreement, no federal payments would be available under
Medicaid or Medicare Part B for our covered out-patient drugs. In addition, if we overcharge the government in connection with our FSS contract or under any other government program, we will be required to refund the difference to the government.
Failure to make necessary disclosures and/or to identify contract overcharges could result in allegations against us under the Federal False Claims Act and other laws and regulations.
Unexpected refunds to the U.S. government, and responding to a government investigation or enforcement action, would be expensive and
time-consuming, and could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
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Commercialization of lomitapide requires third-party relationships, and our dependence on these
relationships may have an adverse effect on our business.
Lomitapide is our first marketed product. As a result, we
do not have the same level of demonstrated ability to successfully commercialize a product as companies that have previously obtained marketing approval for drug candidates and commercially launched drugs. We currently have a contract with a single
specialty pharmacy distributor in the U.S., and are in the process of finalizing a contract with a single logistics provider in the EU. Any performance failure or inability or refusal to perform on the part of our specialty pharmacy distributor in
the U.S. or our logistic provider in the EU could impair our marketing and sales of lomitapide. To maximize the commercial potential of lomitapide, we plan to utilize distributors and other third parties to help distribute and, in some cases, to
commercialize the product, if approved, in certain geographic locations outside of the U.S. and the major market countries in the EU. In those geographic locations in which we are using third parties to commercialize our product, we will be reliant
on such strategic partners to generate revenue on our behalf.
If we enter into arrangements with third parties to perform
sales, marketing or distribution services, our product revenues or the profitability of these product revenues to us are likely to be lower than if we were to market and sell any products that we develop ourselves. In addition, we may not be
successful in entering into arrangements with third parties to sell and market our products or in doing so on terms that are favorable to us. We likely will have little control over such third parties, and any of them may fail to devote the
necessary resources and attention to sell and market our products effectively. If we do not establish sales and marketing capabilities successfully, either on our own or in collaboration with third parties, we will not be successful in
commercializing our products.
If we pursue development of lomitapide for broader patient populations, we likely will be subject to
stricter regulatory requirements, product development will be more costly and commercial pricing for any approved indication would likely be lower
Clinical development of lomitapide in broader patient populations, such as HeFH, would involve clinical trials with larger numbers of patients, with such patients possibly taking the drug for longer
periods of time. This would be costly, and could take many years to complete. In addition, we believe that the FDA and, possibly, the EMA would require a clinical outcomes study, for example, demonstrating a reduction in cardiovascular events in
broader patient populations, either prior to or after the submission of an application for marketing approval for these broader indications. Clinical outcomes studies are particularly expensive and time consuming to conduct because of the larger
number of patients required to establish that the drug being tested has the desired effect. It may also be more difficult for us to demonstrate the desired outcome in these studies than to achieve validated surrogate endpoints, such as the primary
efficacy endpoint of our pivotal Phase 3 clinical trial of lomitapide for the treatment of patients with HoFH of percent change in LDL-C levels from baseline. In addition, in considering approval of lomitapide for broader patient populations with
less severely elevated lipid levels, the FDA and other regulatory authorities may place greater emphasis on the side effect and risk profile of the drug in comparison to the drug’s efficacy and potential clinical benefit than in smaller, more
severely afflicted patient populations. These factors may make it more difficult for us to achieve marketing approvals of lomitapide for these broader patient populations.
If we are able to successfully develop and obtain marketing approval of lomitapide in these broader patient populations, we may not be able to obtain the same pricing level that we secure for use of
lomitapide for orphan indications. The pricing of some drugs intended for orphan populations is often related to the size of the patient population, with smaller patient populations often justifying higher prices. If the pricing for lomitapide is
lower in broader patient populations, we may not be able to maintain higher pricing in the population of more severely afflicted patients. This would lead to a decrease in revenue from sales to more severely afflicted patients, and could make it
more difficult for us to achieve or maintain profitability.
In addition, if one of our product candidates receives marketing
approval for a broader indication than its orphan designation, we may not be able to maintain orphan drug exclusivity or such orphan drug exclusivity may be circumvented by a third-party competitor.
Failures or delays in the commencement or completion of clinical testing could result in increased costs to us and delay, prevent or limit our
ability to generate revenue with respect to the relevant product candidate or new indication.
The commencement and
completion of clinical trials may be delayed or prevented for a number of reasons, including:
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difficulties obtaining regulatory clearance to commence a clinical trial or complying with conditions imposed by a regulatory authority regarding the
scope or term of a clinical trial;
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delays in reaching or failing to reach agreement on acceptable terms with prospective CROs, and trial sites, the terms of which can be subject to
extensive negotiation and may vary significantly among different CROs and trial sites;
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insufficient or inadequate supply or quality of a product candidate or other materials necessary to conduct our clinical trials, or other manufacturing
issues;
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difficulties obtaining institutional review board (“IRB”) approval to conduct a clinical trial at a prospective site;
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challenges recruiting and enrolling patients to participate in clinical trials for a variety of reasons, including the size and nature of a patient
population, the proximity of patients to clinical sites, the eligibility criteria for the trial, the nature of trial protocol, the availability of approved effective treatments for the relevant disease and the competition from other clinical trial
programs for similar indications;
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severe or unexpected drug-related side effects experienced by patients in a clinical trial; and
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difficulties retaining patients who have enrolled in a clinical trial but may be prone to withdraw due to the rigors of the trials, lack of efficacy,
side effects or personal issues, or who are lost to further follow-up.
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Clinical trials may also be delayed or terminated as a result of ambiguous or negative
interim results or the results of other clinical, preclinical or nonclinical studies. In addition, a clinical trial may be suspended or terminated by us, the FDA, the IRBs at the sites where the IRBs are overseeing a trial, or a data safety
monitoring board overseeing the clinical trial at issue, or other regulatory authorities due to a number of factors, including:
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failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols;
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inspection of the clinical trial operations or trial sites by the FDA or other regulatory authorities;
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unforeseen safety issues or lack of effectiveness; and
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lack of adequate funding to continue the clinical trial.
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Positive results in preclinical studies and earlier clinical trials of our product candidates may not be replicated in later clinical trials, which could result in development delays or a failure to
obtain marketing approval.
Positive results in preclinical or clinical studies of lomitapide or any other product
candidate that we develop may not be predictive of similar results in humans during further clinical trials. A number of companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in late-stage clinical trials
even after achieving promising results in early-stage development. Accordingly, there is, for example, a possibility that the nonclinical study in rodent models that we are conducting as part of our post marketing commitment to the FDA or our
planned clinical studies of lomitapide in pediatric HoFH patients or our clinical program to support approval of lomitapide in Japan in adult patients with HoFH may generate results that are not consistent with the results of our Phase 3 clinical
study. Our preclinical studies or clinical trials for any product candidate may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional preclinical studies or clinical trials. Moreover,
preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed
to obtain FDA or other regulatory approval for their products.
Changes in regulatory requirements and guidance or
unanticipated events during our clinical trials may occur, as a result of which we may need to amend clinical trial protocols. Amendments may require us to resubmit our clinical trial protocols to IRBs for review and approval, which may impact the
cost, timing or successful completion of a clinical trial. If we experience delays in completion of, or if we terminate, any of our clinical trials of lomitapide the commercial prospects for lomitapide may be harmed.
If we fail to obtain or maintain orphan drug exclusivity for lomitapide in any country where exclusivity is available, we will have to rely on our
data and marketing exclusivity, if any, and on our intellectual property rights, to the extent there is coverage in such country, which may reduce the length of time that we can prevent competitors from selling generic versions of lomitapide.
We have obtained orphan drug exclusivity for JUXTAPID in the U.S. for the treatment of HoFH. Under the Orphan Drug
Act, the FDA may designate a product as an orphan drug if it is a drug intended to treat a rare disease or condition, defined, in part, as a patient population of fewer than 200,000 in the U.S. In the U.S., the company that first obtains FDA
approval for a designated orphan drug for the specified rare disease or condition receives orphan drug marketing exclusivity for that drug for a period of seven years. This orphan drug exclusivity prevents the FDA from approving another application,
including a full new drug application (“NDA”), to market the same drug for the same orphan indication during the exclusivity period, except in very limited circumstances. For purposes of small molecule drugs, the FDA defines “same
drug” as a drug that contains the same active molecule and is intended for the same use as the drug in question. A designated orphan drug may not receive orphan drug exclusivity if it is approved for a use that is broader than the indication
for which it received orphan designation. In addition, orphan drug exclusive marketing rights in the U.S. may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unable to assure
sufficient quantity of the drug to meet the needs of patients with the rare disease or condition.
The EMA grants orphan drug
designation to promote the development of products that may offer therapeutic benefits for life-threatening or chronically debilitating conditions affecting not more than five in 10,000 people in the EU. Orphan drug designation from the EMA provides
ten years of marketing exclusivity following drug approval, subject to reduction to six years if the designation criteria are no longer met. Despite the prevalence rate, we will not have orphan drug exclusivity for lomitapide in the treatment of
HoFH in the EU since the EMA views the relevant condition, for orphan drug purposes, to include HoFH and HeFH. Our failure to obtain orphan drug designation for lomitapide for the treatment of HoFH in the EU means that we will not have the benefit
of the orphan drug market exclusivity for this indication in the EU, and, as a result, will need to rely on our intellectual property rights and other exclusivity provisions. Our European patents directed towards the composition of matter of
lomitapide are scheduled to expire in 2016. A patent to be selected by us may qualify for a supplemental certificate that would provide extended protection in certain countries under the designated patent for up to five years after patent
expiration. In addition, lomitapide qualifies as a new chemical entity in the EU. In the EU, new chemical entities qualify for eight years of data exclusivity from the date of marketing authorization and an additional two years of market
exclusivity. This data exclusivity, if granted, prevents regulatory authorities in the EU from assessing a generic application for eight years, after which generic marketing authorization can be submitted, but a generic may not be marketed for two
years. If we do not obtain extended patent protection and data exclusivity for our product candidates, our business may be materially harmed.
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There are many countries in which we do not have intellectual property coverage, and where
neither orphan drug exclusivity nor data and marketing exclusivity is available. Even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugs can be
approved for the same condition. In the U.S., even after an orphan drug is approved, the FDA can subsequently approve the same drug for the same condition if the FDA concludes that the later drug is safer, more effective or makes a major
contribution to patient care.
Recent federal legislation and actions by state and local governments may permit re-importation of drugs
from foreign countries into the U.S., including foreign countries where the drugs are sold at lower prices than in the U.S. Similarly, purchasers in the EU are permitted to purchase lomitapide in one EU country and import it into another EU country
where the price may be higher. These practices could materially adversely affect our operating results and our overall financial condition.
The MMA contains provisions that may change importation laws and expand pharmacists’ and wholesalers’ ability to import lower priced versions of an approved drug and competing products from
Canada, where there are government price controls. These changes to U.S. importation laws will not take effect unless and until the Secretary of Health and Human Services certifies that the changes will pose no additional risk to the public’s
health and safety, and may result in a significant reduction in the cost of products to consumers. While the Secretary of Health and Human Services has not yet announced any plans to make this required certification, we may ultimately face the risk
that a distributor or other purchaser of lomitapide in the U.S. will be permitted to import lower priced product from a country outside the U.S. that places price controls on pharmaceutical products. This risk may be particularly applicable to a
drug such as JUXTAPID that is formulated for oral delivery and currently commands a premium price. A number of federal legislative proposals have been made to implement the changes to the U.S. importation laws without any certification, and to
broaden permissible imports in other ways. Even if the changes do not take effect, and other changes are not enacted, imports from Canada and elsewhere may continue to increase due to market and political forces, and the limited enforcement
resources of the FDA, Customs and Border Protection and other government agencies. For example, Pub. L. No. 112-74, which was signed into law in December 2011, and provides appropriations for the Department of Homeland Security for the 2012
fiscal year, expressly prohibits Customs and Border Protection from using funds to prevent individuals from importing from Canada less than a 90-day supply of a prescription drug for personal use, when the drug otherwise complies with the Federal
Food, Drug, and Cosmetic Act (“FDCA”). Further, several states and local governments have implemented importation schemes for their citizens and, in the absence of federal action to curtail such activities, we expect other states and local
governments to launch importation efforts.
Similarly in the EU, a purchaser cannot be restricted from purchasing a medicine
in one EU country and importing the product into another EU country, which is called parallel importing. As a result, a purchaser in one EU country may seek to import lomitapide from another EU country where lomitapide is sold at a lower price.
The re-importation of lomitapide into the U.S. market from a foreign market and the parallel importation of lomitapide among
countries of the EU could negatively impact our revenue and anticipated profitability, possibly materially.
We face potential product
liability exposure, and, if claims are brought against us, we may incur substantial liability.
The use of lomitapide
or any other product candidate in clinical trials and the sale of lomitapide or any other product candidate for which we obtain marketing approval expose us to the risk of product liability claims. Product liability claims might be brought against
us by consumers, healthcare providers or others selling or otherwise coming into contact with our product and product candidates. If we cannot successfully defend ourselves against product liability claims, we could incur substantial liabilities. In
addition, regardless of merit or eventual outcome, product liability claims may result in:
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decreased demand for lomitapide or any other product candidate for which we obtain marketing approval;
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impairment of our business reputation and exposure to adverse publicity;
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increased warnings on product labels;
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withdrawal of clinical trial participants;
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costs as a result of related litigation;
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distraction of management’s attention from our primary business;
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substantial monetary awards to patients or other claimants;
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the inability to successfully commercialize lomitapide or any other product candidate for which we obtain marketing approval.
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We have obtained product liability insurance coverage for both our clinical trials and our commercial
exposures with a $20.0 million annual aggregate coverage limit. However, our insurance coverage may not be sufficient to reimburse us for any expenses or losses we may suffer. Moreover, insurance coverage is becoming increasingly expensive, and, in
the future, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability. On occasion, large judgments have been awarded in class action lawsuits based on drugs that
had unanticipated side effects or warnings found to be inadequate. The cost of any product liability litigation or other proceedings, even if resolved in our favor, could be substantial. A successful product liability claim or series of claims
brought against us could cause our stock price to decline and, if judgments exceed our insurance coverage, could decrease our cash and adversely affect our business.
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A variety of risks associated with our planned international business relationships could materially
adversely affect our business.
We plan to market lomitapide ourselves in certain countries outside the U.S., and to
enter into agreements with third parties for the commercialization of lomitapide in other international markets, if approved. If we do so, we would be subject to additional risks related to entering into international business relationships,
including:
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differing regulatory requirements for drug approvals in foreign countries;
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pricing that has a negative impact on our global pricing strategy;
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potentially reduced protection for intellectual property rights;
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the potential for parallel importing;
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unexpected changes in tariffs, trade barriers and regulatory requirements;
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economic weakness, including inflation, or political instability in particular foreign economies and markets;
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compliance with tax, employment, immigration and labor laws for employees working or traveling abroad;
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foreign currency fluctuations, which could result in increased operating expenses and reduced revenue, and other obligations incident to doing business
in another country;
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workforce uncertainty in countries where labor unrest is more common than in the U.S.;
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production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad;
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dependence upon third parties to perform distribution, quality control testing, collections and other aspects of the distribution, supply chain and
commercialization of our products that are required to be performed in order to conduct such activities in international markets; and
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business interruptions resulting from geo-political actions, including war and terrorism, or natural disasters, including earthquakes, volcanoes,
typhoons, floods, hurricanes and fires.
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These and other risks of international business relationships may
materially adversely affect our ability to attain or sustain profitable operations.
Risks Related to Our Intellectual Property
If our patent position does not adequately protect our product and product candidates, others could compete against us more
directly, which would harm our business, possibly materially.
Our lomitapide patent portfolio consists of five issued
U.S. patents and issued patents in parts of Europe, Canada, Israel, Australia, New Zealand and Japan and pending applications in the U.S., Europe, Australia, Japan, Canada, India and South Korea, all of which have been licensed to us in a specific
field. The U.S. patent covering the composition of matter of lomitapide is scheduled to expire in 2015, but we have filed an application for patent term extension for this patent. The non-U.S. patents directed to the composition of matter of
lomitapide are scheduled to expire in 2016. Our method of use patent covering certain dosing regimens for lomitapide expires in 2027 in the U.S., and in 2025 in the EU, but may be eligible for extension in the EU. Our commercial success with respect
to lomitapide will depend significantly on our ability to protect our existing patent position with respect to lomitapide as well as our ability to obtain and maintain adequate protection of other intellectual property for our technologies, product
candidates and any future products in the U.S. and other countries. If we do not adequately protect our intellectual property, competitors may be able to use our technologies and erode or negate any competitive advantage we may have, which could
harm our business and ability to achieve profitability. Our ability to use the patents and patent applications licensed to us to protect our business will also depend on our ability to comply with the terms of the applicable licenses and other
agreements. The laws of some foreign countries do not protect our proprietary rights to the same extent as the laws of the U.S., and we may encounter significant problems in protecting our proprietary rights in these countries.
The patent positions of biotechnology and pharmaceutical companies, including our patent position, involve complex legal and factual
questions, and, therefore, validity and enforceability cannot be predicted with certainty. Patents may be challenged, deemed unenforceable, invalidated or circumvented. We will be able to protect our proprietary rights from unauthorized use by third
parties only to the extent that our proprietary technologies, product candidates and any future products are covered by valid and enforceable patents or are effectively maintained as trade secrets.
The degree of future protection for our proprietary rights is uncertain, and we cannot ensure that:
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we will be able to successfully commercialize our product before some or all of our relevant patents expire, or in countries where we do not have
patent protection;
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we or our licensors were the first to make the inventions covered by each of our pending patent applications;
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we or our licensors were the first to file patent applications for these inventions;
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others will not independently develop similar or alternative technologies or duplicate any of our technologies;
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any of our pending patent applications or those we have licensed will result in issued patents;
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any of our patents or those we have licensed will be valid or enforceable;
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any patents issued to us or our licensors and collaborators will provide a basis for any additional commercially viable products, will provide us with
any competitive advantages or will not be challenged by third parties;
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we will develop additional proprietary technologies or product candidates that are patentable; or
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the patents of others will not have an adverse effect on our business.
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If we do not obtain protection under the Hatch-Waxman Amendments and similar foreign legislation by extending the patent terms and obtaining data exclusivity for our product or product candidates,
our business may be materially harmed.
The Hatch-Waxman Amendments permit a patent restoration term of up to five
years as compensation for patent term lost during product development and the FDA regulatory review process. Our U.S. composition of matter patent for lomitapide is scheduled to expire in 2015, and we have filed an application for patent term
extension for this patent. We also plan to apply for restorations or extensions of the term of certain patents outside the U.S. in those countries where such a mechanism is available. However, we may not be granted an extension because of, for
example, failing to apply within applicable deadlines, failing to apply prior to expiration of relevant patents or otherwise failing to satisfy applicable requirements. Moreover, the applicable time period of the extension or the scope of patent
protection afforded could be less than we request. If we are unable to obtain patent term extension or restoration or the term of any such extension is less than we request, our competitors may obtain approval of competing products following our
patent expiration, and our revenue could be reduced, possibly materially.
In addition, the FDA has classified lomitapide as a
new chemical entity in the U.S. and it is therefore eligible for data exclusivity under the Hatch-Waxman Amendments. A drug can be classified as a new chemical entity if the FDA has not previously approved any other new drug containing the same
active moiety. Under sections 505(c)(3)(E)(ii) and 505(j)(5)(F)(ii) of the FDCA, as amended, a new chemical entity that is granted marketing approval may, even in the absence of patent protection, be eligible for five years of data exclusivity in
the U.S. following marketing approval. This data exclusivity precludes submission of 505(b)(2) applications or abbreviated new drug applications submitted by another company that references the new chemical entity application for four years if
certain patents covering the new chemical entity or its method of use expire or are challenged by a generic applicant. In the EU, new chemical entities qualify for eight years of data exclusivity upon marketing authorization and an additional two
years of market exclusivity. This data exclusivity, if granted, prevents regulatory authorities in the EU from assessing a generic application for eight years, after which generic marketing authorization can be submitted, but a generic may not be
marketed for two years. If we are not able to gain or exploit the period of data exclusivity, we may face significant competitive threats to our commercialization of these compounds from other manufacturers, including the manufacturers of generic
alternatives. Further, even if our compounds are considered to be new chemical entities and we are able to gain the prescribed period of data exclusivity, another company nevertheless could also market another version of the drug if such company can
complete a full NDA with a complete human clinical trial process and obtain marketing approval of its product.
If we are not able to
adequately prevent disclosure of trade secrets and other proprietary information, the value of our technology, product and any product candidates could be significantly diminished.
We may rely on trade secrets to protect our proprietary technologies, especially where we do not believe patent protection is appropriate
or obtainable. However, trade secrets are difficult to protect. We rely in part on confidentiality agreements with our employees, consultants, outside scientific collaborators, sponsored researchers and other advisors to protect our trade secrets
and other proprietary information. These agreements may not effectively prevent disclosure of confidential information, and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. In addition, others
may independently discover our trade secrets and proprietary information. For example, the FDA, as part of its Transparency Initiative, currently is considering whether to make additional information publicly available on a routine basis, including
information that we may consider to be trade secrets or other proprietary information, and it is not clear at the present time how the FDA’s disclosure policies may change in the future, if at all. Costly and time-consuming litigation could be
necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could adversely affect our competitive business position.
We may infringe the intellectual property rights of others, which may prevent or delay our product development efforts and stop us from commercializing or increase the costs of commercializing our
product and any product candidates.
Our success will depend in part on our ability to operate without infringing the
proprietary rights of third parties. There could be issued patents of which we are not aware that our products or product candidates infringe. There also could be patents that we believe we do not infringe, but that we may ultimately be found to
infringe. Moreover, patent applications are in some cases maintained in secrecy until patents are issued. The publication of discoveries in the scientific or patent literature frequently occurs substantially later than the date on which the
underlying discoveries were made and patent applications were filed. Because patents can take many years to issue, there may be currently pending applications of which we are unaware that may later result in issued patents that our products or
product candidates infringe. For example, pending applications may exist that provide support or can be amended to provide support for a claim that results in an issued patent that our product infringes.
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The pharmaceutical industry is characterized by extensive litigation regarding patents and
other intellectual property rights. Other parties may obtain patents in the future and allege that our products or product candidates or the use of our technologies infringes these patent claims or that we are employing their proprietary technology
without authorization. Likewise, third parties may challenge or infringe upon our existing or future patents.
Proceedings
involving our patents or patent applications or those of others could result in adverse decisions regarding:
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the patentability of our inventions relating to our product or any product candidates; and
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the enforceability, validity or scope of protection offered by our patents relating to our product or any product candidates.
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Even if we are successful in these proceedings, we may incur substantial costs and divert management’s
time and attention in pursuing these proceedings, which could have a material adverse effect on us. If we are unable to avoid infringing the patent rights of others, we may be required to seek a license, defend an infringement action or challenge
the validity of the patents in court. Patent litigation is costly and time consuming. We may not have sufficient resources to bring these actions to a successful conclusion.
In addition, if we do not obtain a license, develop or obtain non-infringing technology, fail to defend an infringement action successfully or have infringed patents declared invalid, we may:
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incur substantial monetary damages;
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encounter significant delays in bringing our product candidates to market; and
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be precluded from manufacturing or selling our product candidates.
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In such event, our business could be adversely affected, possibly materially.
If we fail to comply with our obligations in our license agreements for our product candidates, we could lose license rights that are important to our business.
Our existing license agreements impose, and we expect any future license agreements that we enter into will impose, various diligence,
milestone payment, royalty, insurance and other obligations on us.
In addition, our license agreement with UPenn limits the
field of use for lomitapide as a monotherapy or in combination with other dyslipidemic therapies for treatment of patients with HoFH, or for the treatment of patients with severe hypercholesterolemia unable to come within 15% of the National
Cholesterol Education Program (“NCEP”) LDL-C goal on maximal tolerated oral therapy, as determined by the patient’s prescribing physician, or with severe combined hyperlipidemia unable to come within 15% of the NCEP non-HDL-C goal on
maximal tolerated oral therapy, as determined by the patient’s prescribing physician, or with severe hypertriglyceridemia unable to reduce triglycerides (“TG”) levels to less than 1,000 mg/dL on maximal tolerated therapy. If we fail
to comply with the obligations and restrictions under our license agreements, including the limited field of use under our license agreement with UPenn, the applicable licensor may have the right to terminate the license, in which case we might not
be able to market any product that is covered by the licensed patents. Any breach or termination of our license agreement with UPenn would have a particularly significant adverse effect on our business because of our reliance on the commercial
success of lomitapide. Although we intend to comply with the restrictions on field of use in our license agreement with UPenn by seeking product labels for lomitapide that are consistent with the license field, we may still be subject to the risk of
breaching the license agreement if we are deemed to be promoting or marketing lomitapide for an indication not covered by any product label that we are able to obtain. In addition, because this restriction on the field of use limits the indications
for which we can develop lomitapide, the commercial potential of lomitapide may not be as great as without this restriction.
Risks Related
to Our Dependence on Third Parties
If we are unable to establish and maintain effective sales, marketing and distribution
capabilities, or to enter into agreements with third parties to do so, we will be unable to successfully commercialize lomitapide.
We are marketing and selling lomitapide for HoFH directly in the U.S. using our own marketing and sales resources. We plan to market and sell lomitapide directly, using our own marketing and sales
resources in certain key countries in the EU and, if approved, in several other countries where it makes business sense to do so. We plan to use third parties to provide warehousing, shipping, third party logistics, invoicing, collections and other
distribution services on our behalf in those countries. We may selectively seek to establish distribution and similar forms of arrangements to reach patients with HoFH in geographies that we do not believe we can cost-effectively address with our
own sales and marketing capabilities. If we are unable to establish the capabilities to sell, market and distribute lomitapide, either through our own capabilities or by entering into arrangements with others, or if we are unable to enter into
distribution agreements in those countries we do not believe we can cost-effectively address with our own sales and marketing capabilities, we may not be able to successfully sell lomitapide. We cannot guarantee that we will be able to establish and
maintain our own capabilities or to enter into and maintain any distribution agreements with third-parties on acceptable terms, if at all. Additionally, we currently have a contract with a single specialty pharmacy distributor in the U.S., and are
in the process of finalizing a contract with a single logistics provider in the EU. Any performance failure or inability or refusal to
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perform on the part of our specialty pharmacy distributor in the U.S. or our logistic provider in the EU could impair our marketing and sales of lomitapide. Furthermore, our expenses associated
with building up and maintaining the sales force and distribution capabilities around the world may be disproportionate compared to the revenues we may be able to generate on sales of lomitapide. We cannot guarantee that our success in
commercializing lomitapide will meet our expectations.
We rely on third parties to conduct our clinical trials and to perform related
services, and those third parties may not perform satisfactorily, including failing to meet established deadlines for the completion of such clinical trials. We may become involved in commercial disputes with these parties.
We do not have the ability to independently conduct clinical trials, and we rely on third parties such as CROs, medical institutions,
academic institutions, and clinical investigators to perform this function. Our reliance on these third parties for clinical development activities reduces our control over these activities. However, if we sponsor clinical trials, we are responsible
for ensuring that each of our clinical trials is conducted in accordance with the general investigational plan and protocols for the trial, even if we use CROs. Moreover, the FDA requires us to comply with standards, commonly referred to as Good
Clinical Practices (“GCP”), for conducting, recording, and reporting the results of clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity and confidentiality of trial participants
are protected. Our reliance on third parties that we do not control does not relieve us of these responsibilities and requirements. Furthermore, these third parties may also have relationships with other entities, some of which may be our
competitors. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the data they provide is compromised due to the failure to adhere to
regulatory requirements or our clinical trial protocols, or for other reasons, our development programs may be extended, delayed or terminated, additional marketing approvals for lomitapide or any other product candidate may be delayed or denied in
the targeted indication, and we may be delayed or precluded in our efforts to successfully commercialize lomitapide or any other product candidate for targeted indications.
In addition, we may from time to time become involved in commercial disputes with these third parties, for example regarding the quality of the services provided by these third parties or our ultimate
liability to pay for services they purported to provide on our behalf, or the value of such services. Due to our reliance on third-party service providers, we may experience commercial disputes such as this in the future. In some cases, we may be
required to pay for work that was not performed to our specifications or not utilized by us, and these obligations may be material.
We
do not have drug research or discovery capabilities, and will need to acquire or license existing drug compounds from third parties to expand our product candidate pipeline.
Certain intellectual property related to lomitapide has been licensed to us by UPenn. We currently have no drug research or discovery
capabilities. Accordingly, if we are to expand our product candidate pipeline, we will need to acquire or license existing compounds from third parties. In addition, our rights under UPenn to intellectual property with respect to lomitapide are
limited to specified patient populations, such as patients with HoFH, severe hypercholesterolemia or severe hypertriglyceridemia. Accordingly, if we wished to expand the development of lomitapide to address other indications, we would need to expand
our license agreement with UPenn and potentially acquire rights from Bristol-Myers Squibb Company (“BMS”). We will face significant competition in seeking to acquire or license promising drug compounds. Many of our competitors for such
promising compounds may have significantly greater financial resources and more extensive experience in preclinical testing and clinical trials, obtaining regulatory approvals and manufacturing and marketing pharmaceutical products, and thus, may be
a more attractive option to a potential licensor than us. If we are unable to acquire or license additional promising drug compounds, we will not be able to expand our product candidate pipeline, which may adversely impact our future profitability
or growth prospects.
Risks Related to Employee Matters and Managing Growth
Our future success depends on our ability to hire and retain our key executives and to attract, retain, and motivate qualified personnel.
We are highly dependent on Marc Beer, our Chief Executive Officer, and the other principal members of our executive, commercial, medical,
and development teams. We have entered into employment agreements with certain members of our executive, commercial, medical and development teams, but any employee may terminate his or her employment with us at any time. We do not maintain
“key man” life insurance for any of our employees. The loss of the services of any of these persons might impede the achievement of our development and commercialization objectives.
We expect to continue hiring qualified personnel. Recruiting and retaining qualified personnel will be critical to our success. We may
not be able to attract and retain these personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel.
In addition, we need to continue to establish and maintain effective disclosure and financial controls, particularly as our business grows and continues to expand internationally. Failure to maintain
adequate controls could impact the quality and integrity of our financial statements and cause us reputational harm.
In
addition, we rely on consultants and advisors, including scientific, manufacturing, clinical, regulatory, pharmacovigilance and sales and marketing advisors, to assist us in formulating our development, manufacturing and commercialization strategy.
Our consultants and advisors may be employed by employers other than us and may have commitments under consulting or advisory contracts with other entities that may limit their availability to us.
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We will need to grow our organization, and we may encounter difficulties in managing this growth,
which could disrupt our operations.
We currently have approximately 125 employees, and we expect to experience
significant growth in the number of our employees and the scope of our operations. To manage our anticipated future growth, we must continue to implement and improve our managerial, operational and financial systems, expand our facilities and
continue to recruit and train additional qualified personnel. Our management may need to divert a disproportionate amount of its attention away from our day-to-day activities, and devote a substantial amount of time to managing these growth
activities. Due to our limited resources, we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel, which may result in weaknesses in our infrastructure, give rise to operational
mistakes, loss of business opportunities, loss of employees and reduced productivity among remaining employees. The physical expansion of our operations may lead to significant costs, and may divert financial resources from other projects. If our
management is unable to effectively manage our expected growth, our expenses may increase more than expected, our ability to generate or increase our revenue could be reduced and we may not be able to implement our business strategy. Our future
financial performance and our ability to commercialize lomitapide successfully, and to compete effectively will depend, in part, on our ability to effectively manage any future growth.
Risks Related to Our Financial Position and Capital Requirements
We have incurred
significant operating losses since our inception, and anticipate that we will incur continued losses for the near future.
We have a limited operating history. To date, we have primarily focused on developing our lead compound, lomitapide. We have funded our operations to date primarily through proceeds from the private
placement of convertible preferred stock, convertible debt, venture debt, bank debt, the proceeds from our initial public offering and the proceeds from our June 2011, June 2012 and January 2013 public offerings. We have incurred losses in each
year since our inception in February 2005. As of June 30, 2013, we had an accumulated deficit of approximately $229.8 million. Substantially all of our operating losses resulted from costs incurred in connection with our development programs
and from general and administrative costs associated with our operations. The losses we have incurred to date, combined with expected future losses, have had and will continue to have an adverse effect on our stockholders’ equity and working
capital. We expect our expenses to increase in the near-term as a result of spending on commercial launch of lomitapide in the U.S., in certain countries in the EU, and possible distribution of lomitapide in other countries as part of named patient
supply or compassionate use or on a commercial basis, if approved; hiring of additional key personnel in the U.S., Europe and other countries; plans to conduct a clinical development program to support an application for marketing approval of
lomitapide in Japan in adult patients with HoFH; the conduct of a juvenile animal toxicology study, and possible clinical study of lomitapide in the treatment of pediatric patients with HoFH; the conduct of our observational cohort study and other
post-marketing commitments to the FDA and EMA; the conduct of any post marketing commitments imposed by regulatory authorities in countries outside the U.S. and EU if lomitapide is approved in those countries; and other possible clinical development
activities. We expect to incur significant sales, marketing, and outsourced manufacturing expenses, as well as continued research and development expenses. In addition, we have incurred, and expect to continue to incur, additional costs associated
with operating as a public company. As a result, we expect to continue to incur significant operating losses at least in 2013 and 2014 and potentially in subsequent years.
Because of the numerous risks and uncertainties associated with developing and commercializing pharmaceutical products, we are unable to predict with certainty the extent of any future losses or when we
will become profitable, if at all.
We have not generated significant revenue from lomitapide or any other product, and may never be
profitable.
Our ability to become profitable depends upon our ability to generate revenue. As of June 30, 2013,
we had not generated significant revenue from any product including lomitapide, our only product. Our ability to generate significant revenue depends on a number of factors, including our ability to:
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effectively market, sell and distribute lomitapide in the U.S.;
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obtain timely pricing approval of lomitapide in the key countries of the EU at acceptable prices and without onerous restrictions or caps, and to
effectively launch lomitapide in the EU;
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obtain timely approval of lomitapide in other key international markets as a treatment for patients with HoFH without onerous restrictions or
limitations in the resulting label and successfully obtain timely pricing approval for lomitapide in such markets at acceptable prices;
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obtain and maintain market acceptance by patients, physicians and payors for lomitapide as a treatment for HoFH;
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effectively estimate the size of the total addressable market;
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obtain named patient sales of lomitapide in countries where such sales can occur as a result of the FDA or EMA approval of lomitapide; and
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maintain reimbursement policies for lomitapide in the U.S. that do not impose significant restrictions on reimbursement.
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Lomitapide may not gain long-term market acceptance or achieve commercial success. In addition, we anticipate incurring significant costs
associated with commercializing lomitapide and meeting our post-marketing commitments, and in connection with our on-going clinical efforts related to lomitapide. We may not achieve profitability soon after generating product revenue, if ever. If we
are unable to generate significant product revenue, we will not become profitable, and may be unable to continue operations without continued funding.
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We may need substantial additional capital in the future. If additional capital is not available, we
will have to delay, reduce or cease operations.
We may, in the future, need to raise additional capital to fund our
operations. Our future capital requirements may be substantial and will depend on many factors including:
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the level of physician, patient and payer acceptance of lomitapide, and the success of our commercialization efforts;
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our ability to obtain pricing approval of lomitapide in the key EU countries, at acceptable prices, and without significant restrictions or caps;
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the level of revenue we receive from named patient sales of lomitapide in key countries where a mechanism exists to sell the product on a pre-approval
basis in such country based on FDA or EU approval;
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the decisions of various countries outside the U.S. and EU with respect to approval of lomitapide, and reimbursement and pricing decisions in such
countries, if approved;
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the timing and cost of the ongoing juvenile animal toxicology study of lomitapide and an anticipated clinical trial to evaluate lomitapide for
treatment of pediatric patients with HoFH;
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the cost of establishing and maintaining the sales and marketing capabilities necessary for commercial launch of lomitapide in HoFH in the U.S. and the
EU and certain other key international markets, if approved;
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the timing and cost of our clinical development program of lomitapide in HoFH in Japanese patients;
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the cost of filing, prosecuting and enforcing patent claims;
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the costs of our manufacturing-related activities;
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the costs associated with commercializing lomitapide;
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the levels, timing and collection of revenue received from sales of lomitapide worldwide in the future;
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the cost of our observational cohort study and other post-marketing commitments to the FDA and EU, and the costs of post marketing commitments in any
other countries where lomitapide is ultimately approved;
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the timing and cost of other clinical development activities; and
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the timing and costs of future business development opportunities
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As a result of our June 2012 and January 2013 public offerings, we fully utilized our shelf registration statement on Form S-3, which
became effective in December 2011. On February 15, 2013, we filed an automatic shelf registration statement on Form S-3 ASR with the SEC. This shelf registration statement permits us to offer, from time to time, an unspecified amount of any
combination of common stock, preferred stock, debt securities and warrants, so long as we qualify as “well known seasoned issuer,” as defined under SEC regulations. To qualify as a well-known seasoned issuer, a company generally must have
a market value of equity held by non-affiliates of $700 million or more at some point within the 60-day period prior to filing a subsequent Annual Report on Form 10-K.
In March 2012, we entered into a Loan and Security Agreement with Silicon Valley Bank, pursuant to which Silicon Valley Bank made a term loan to us in the principal amount of $10.0 million. The Loan and
Security Agreement provides for interest-only payments through February 28, 2013, with per annum interest of 6.75% and a final payment of $0.2 million. We used the proceeds of the term loan to fully repay our existing loan from Hercules
Technology II, L.P. and Hercules Technology III, L.P. (collectively, the “Hercules Funds”). Under the Loan and Security Agreement, we have agreed to repay the principal balance of the term loan in 36 monthly installments starting on
March 1, 2013, and continuing through February 1, 2016. The remaining term loan principal balance and all accrued but unpaid interest will be due and payable on February 1, 2016. We may prepay all or any part of the outstanding term
loan subject to a prepayment premium (defined in the Loan and Security Agreement) at our option. In connection with the Loan and Security Agreement, we granted Silicon Valley Bank a security interest in all of our personal property now owned or
hereafter acquired, excluding intellectual property (and a negative pledge on intellectual property). The Loan and Security Agreement also provides for standard indemnification of Silicon Valley Bank and contains representations, warranties and
certain covenants (including the agreement by us to maintain a specified level of liquidity). During the six months ended June 30, 2013, we made principal payments to Silicon Valley Bank under the term loan amounting to $1.1 million.
In July 2012, the Loan and Security Agreement was amended to include a line of credit of up to $0.8 million to finance the
purchase of certain types of equipment acquired by us during the two years ended December 31, 2012 with a per annum interest of 4.75%. As of June 30, 2013, we owed approximately $0.6 million under the line of credit. Pursuant to the
amendment, monthly principal payments on the line of credit began in January 2013 and continue through December 2015. During the six months ended June 30, 2013, we made principal payments to Silicon Valley Bank under the line of credit
amounting to $0.1 million.
We may pursue opportunities to obtain additional external financing in the future through debt and
equity financing, lease arrangements related to facilities and capital equipment, collaborative research and development agreements, and license agreements.
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We anticipate that our existing cash and cash equivalents will be sufficient to enable us to
maintain our currently planned operations, including our continued development of lomitapide. However, changing circumstances may cause us to consume capital significantly faster than we currently anticipate.
Additional financing may not be available when we need it or may not be available on terms that are favorable to us.
In addition, we may seek additional capital due to favorable market conditions or strategic considerations, even if we believe we have
sufficient funds for our current or future operating plans. If we are unable to obtain additional financing, we may be required to reduce the scope of our planned development, sales and marketing efforts, which could harm our business, financial
condition and operating results. The source, timing and availability of any future financing will depend principally upon equity and debt market conditions, interest rates and, more specifically, on the extent of our commercial success and the
results of our future development efforts. There can be no assurance that external funds will be available on favorable terms, if at all.
Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights.
We may seek additional capital through a combination of private and public equity offerings, debt financings and
collaborations and strategic and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our existing stockholders will be diluted, and the terms may
include liquidation or other preferences that adversely affect the rights of our stockholders. Debt financing, if available, would result in increased fixed payment obligations and may involve agreements that include covenants limiting or
restricting our ability to take specific actions such as incurring debt, making capital expenditures or declaring dividends. If we raise additional funds through collaboration, strategic alliance and licensing arrangements with third parties, we may
have to relinquish valuable rights to our technologies, future revenue streams or product candidates, or grant licenses on terms that are not favorable to us.
Our limited operating history makes it difficult to evaluate our business and prospects.
We were incorporated in February 2005. Our operations to date have been limited to organizing and staffing our company and conducting product development activities and commercial-build and U.S. launch
activities, for lomitapide. Consequently, any predictions about our future performance may not be as accurate as they could be if we had a longer operating history and more experience in generating revenue. In addition, as a relatively young
business, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors.
Risks Related to
our Common Stock
We have limited history generating product revenue, and may, in the future, need to raise capital to operate our
business.
As of June 30, 2013, we had not generated significant revenue from the sale of lomitapide or any
product. We launched lomitapide in the U.S. under the brand name JUXTAPID in late January 2013. The European Commission granted market approval to lomitapide under the brand name, LOJUXTA, on July 31, 2013. We do not yet have pricing approval
for LOJUXTA in any country of the EU. Our ability to generate significant product revenue in the foreseeable future, and the amount of any such revenue, depend on a number of factors, including our ability to:
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effectively market, sell and distribute lomitapide in the U.S.;
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successfully obtain timely pricing approval for lomitapide in key countries of the EU at acceptable prices, and successfully launch lomitapide in those
countries;
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obtain and maintain market acceptance by patients and physicians for lomitapide as a treatment for HoFH;
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obtain timely approval of lomitapide in key international markets outside the U.S. and EU as a treatment for patients with HoFH without onerous
restrictions or limitations in the regulatory label;
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effectively estimate the size of the total addressable market;
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obtain named patient sales of lomitapide in countries where such sales can occur as a result of the FDA or EMA approval of lomitapide;
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obtain reimbursement or pricing approval, as the case may be, for lomitapide sufficient to allow us to sell lomitapide on a competitive and profitable
basis; and
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have sufficient commercial quantities of lomitapide to meet demand.
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We may in the future require additional financing. If we do not succeed in raising additional funds on acceptable terms, if needed, we
may be required to alter or scale back our planned activities. In addition, we could be forced to discontinue product development, forego attractive business opportunities or curtail operations. Any additional sources of financing could involve the
issuance of our equity securities, which would have a dilutive effect on our stockholders. No assurance can be given that additional financing will be available to us when needed on acceptable terms, or at all.
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The market price of our common stock has been, and may continue to be, highly volatile.
Our stock price is volatile, and from October 22, 2010, the first day of trading of our common stock, to
June 30, 2013, the trading prices of our stock have ranged from $9.00 to $75.69 per share. This is in part because there has been a public market for our common stock only since our initial public offering in October 2010, and our stock could
be subject to wide fluctuations in price in response to various factors, many of which are beyond our control, including the following:
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the short-term or long-term success or failure of our commercialization of lomitapide in the U.S. and EU;
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our ability to generate named patient sales in key countries where such sales can occur as a result of FDA or EMA approval of lomitapide;
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our ability to obtain timely pricing approval for lomitapide in the key countries of the EU at acceptable price levels;
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the short-term or long-term success or failure of our commercialization of lomitapide in other key countries outside the U.S. and EU, if ultimately
approved in such jurisdictions;
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the initiation and results of our planned further clinical trials of lomitapide;
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any issues that may arise with our supply chain for lomitapide;
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fluctuations in stock market prices and trading volumes of similar companies;
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general market conditions and overall fluctuations in U.S. equity markets;
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international financial market conditions, including the on-going sovereign debt crisis in the EU;
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variations in our quarterly operating results;
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changes in our financial guidance or securities analysts’ estimates of our financial performance;
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announcements of clinical data, new products, services or technologies, commercial relationships, acquisitions or other events by us or our
competitors;
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changes in accounting principles;
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issuance by us of new securities, or sales of large blocks of our common stock, including sales by our executive officers, directors and significant
stockholders;
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additions or departures of key personnel;
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success or failure of products within our therapeutic area of focus;
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discussion of us or our stock price by the financial press and in online investor communities;
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our relationships with and the conduct of third parties on which we depend; and
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other risks and uncertainties described in these risk factors.
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In addition, the stock market in general, and the market for small pharmaceutical and biotechnology companies in particular, have
experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Broad market and industry factors may negatively affect the market price of our common stock,
regardless of our actual operating performance. In the past, following periods of volatility in the market, securities class-action litigation has often been instituted against companies. Such litigation, if instituted against us, could result in
substantial costs and diversion of management’s attention and resources, which could materially and adversely affect our business and financial condition.
Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may prevent attempts by our
stockholders to replace or remove our current management.
Provisions in our certificate of incorporation and by-laws
may delay or prevent an acquisition of us or a change in our management. These provisions include a classified board of directors, a prohibition on actions by written consent of our stockholders and the ability of our board of directors to issue
preferred stock without stockholder approval. In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which limits the ability of stockholders owning in
excess of 15% of our outstanding voting stock to merge or combine with us. Although we believe these provisions collectively provide for an opportunity to obtain greater value for stockholders by requiring potential acquirers to negotiate with our
board of directors, they would apply even if an offer rejected by our board of directors was considered beneficial by some stockholders. In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our
current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management.
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We do not intend to pay dividends on our common stock and, consequently, a stockholder’s ability
to achieve a return on investment will depend on appreciation in the price of our common stock.
We have never
declared or paid any cash dividend on our common stock, and do not currently intend to do so for the foreseeable future.
We
currently anticipate that we will retain any future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. Therefore, the success of an
investment in shares of our common stock will depend upon any future appreciation in the value of such shares. There is no guarantee that shares of our common stock will appreciate in value or even maintain the price at which our stockholders have
purchased their shares.
Future sales of our common stock may cause our stock price to decline.
Sales of a substantial number of shares of our common stock in the public market or the perception that these sales might occur, could
significantly reduce the market price of our common stock and impair our ability to raise adequate capital through the sale of additional equity securities.
If our existing stockholders sell, or if the market believes our existing stockholders will sell, substantial amounts of our common stock in the public market, the trading price of our common stock could
decline significantly.
As of June 30, 2013, there were:
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5,400,270 shares issuable upon the exercise of stock options outstanding under our 2006 Stock Option and Award Plan, the 2010 Stock Option and
Incentive Plan and the 2012 Inducement Stock Option Plan;
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9,963 shares of restricted common stock subject to vesting;
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742,989 shares available for future issuance under the 2010 Stock Option and Incentive Plan; and
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550,066 shares available for issuance under our Inducement Stock Option Award Plan, a plan that is to be used exclusively for the grant of stock
options to individuals who were not previously an employee or a non-employee director (or following a bona fide period of non-employment with us), as an inducement material to the individual’s entry into employment, other than as an executive
officer, with us within the meaning of Rule 5635(c)(4) of the NASDAQ Listing Rules.
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Under the 2010 Plan,
the shares reserved for issuance under the plan are automatically increased on an annual basis in accordance with a pre-determined formula. As a result, on January 1, 2012 and January 1, 2013, an additional 848,012 and 1,019,590 shares,
respectively, were added to the aggregate number of shares reserved for future issuance under the 2010 Plan under the annual automatic share increase provision of the plan.
If additional shares are sold, or if it is perceived that they will be sold, in the public market, the price of our common stock could decline substantially.
We have registered approximately 8,000,000 shares of the common stock described above that are subject to outstanding stock options
and reserved for issuance under our equity plans. These shares can be freely sold in the public market upon issuance, subject to vesting restrictions.
