UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
10-K
☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 20192020
OR
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number:
001-36500
CYMABAY THERAPEUTICS, INC.
(Exact name of registrant as specified in its charter)
Delaware | 94-3103561 | ||
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||
7575 Gateway Blvd, Suite 110 Newark, CA | 94560 | ||
(Address of principal executive offices) | (Zip Code) | ||
(510)
293-8800
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading symbol(s) | Name of each exchange on which registered | ||||
Common stock, $0.0001 par value per share | Nasdaq Global Select Market |
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
☐
No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes
☐
No☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes
☒
No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T
(§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒
No ☐
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
☒ | ||||||
| Emerging Growth Company | ||||||
☐ | ||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2
of the Act). Yes ☐
No ☒
The aggregate market value of the voting and28, 2019,30, 2020, was $487,988,477.$238,474,701. This excludes 546,232425,196 shares of the registrant’s Common Stock held by executive officers, directors and stockholders affiliated with directors outstanding at June 28, 2019.30, 2020. Exclusion of such shares should not be construed to indicate that any such person possesses the power, direct or indirect, to direct or cause the direction of the management or policies of the registrant or that such person is controlled by or under common control with the registrant.
non-voting
common equity held bynon-affiliates
of the registrant based upon the closing price of its Common Stock on the Nasdaq Global Select Market on June The number of shares of common stock outstanding as of February 29, 2020,28, 2021, was 68,882,459.68,946,092.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s Proxy Statement for its 20202021 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days after the registrant’s fiscal year ended December 31, 2019,2020, are incorporated by reference in Part III, Items
10-14
of this Annual Report on Form
10-K.
CYMABAY THERAPEUTICS, INC.
ANNUAL REPORT ON FORM
10-K
For the Year Ended December 31, 20192020
TABLE OF CONTENTS
Page | |||||||
2
CAUTIONARY LANGUAGE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form
10-K
contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that are subject to the “safe harbor” created by those sections. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “projected,” “potential,” “seek,” “target,” “goal,” “intend,” and similar expressions intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance, time frames or achievements to be materially different from any future results, performance, time frames or achievements expressed or implied by the forward-looking statements. We discuss many of these risks, uncertainties and other factors in this Annual Report on Form10-K
in greater detail under the heading “Risk Factors.” Given these risks, uncertainties and other factors, you should not place undue reliance on these forward-looking statements. Also, these forward-looking statements represent our estimates and assumptions only as of the date of this filing. You should read this Annual Report on Form10-K
completely and with the understanding that our actual future results may be materially different from what we expect. We hereby qualify our forward-looking statements by our cautionary statements. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.RISK FACTOR SUMMARY
We are subject to a number of risks that if realized could materially harm our business, prospects, operating results, and financial condition. Some of the more significant risks and uncertainties we face include those summarized below. The summary below is not exhaustive and is qualified by reference to the full set of risk factors set forth in Item 1A of this Form
10-K
“Risk Factors.” Please carefully consider all of the information in this Form10-K,
including the full set of risks set forth in the “Risk Factors” section, and in our other filings with the SEC before making an investment decision regarding CymaBay.Risks Related to the
COVID-19
PandemicOur business may be adversely affected by the effects of the
COVID-19
pandemic, including those impacting our ability to enroll and conduct critical clinical trials such as RESPONSE, as well as impacts to our other development efforts, administrative personnel and third-party service providers.Risks Related to Our Financial Condition and Capital Requirements
We have incurred significant net losses since our inception and anticipate that we will continue to incur significant losses for the foreseeable future. We may need to raise additional equity and/or debt capital to fund our continued operations, including clinical trials and other product development. In the event we do not successfully raise sufficient funds to finance our product development activities, we will curtail our product development activities commensurate with the magnitude of the shortfall or our product development activities may cease altogether.
Our ability to generate future revenues from product sales is uncertain and depends upon our ability to successfully develop, obtain regulatory approval for, and commercialize product candidates, including most importantly, seladelpar.
Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our technologies or product candidates.
3
Risks Related to Clinical Development and Regulatory Approval
Drug development and obtaining and maintaining regulatory approval for drug products is costly, time-consuming, and highly uncertain.
Serious complications or side effects in connection with the use or development of our product candidates could lead to delay or discontinuation of development of our product candidates.
Risks Related to Our Reliance on Third Parties
Our manufacturing partners and other service providers, including CROs managing our clinical trials, may fail to perform adequately in their efforts to support the development, manufacture, and commercialization of our drug candidates and future products.
Commercialization Risks
We have never successfully commercialized a product. If any of our product candidates receive marketing approval, they may nonetheless be unable to gain sufficient market acceptance by physicians, patients, health care payors and others in the medical community.
If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to market and sell our product candidates, we may be unable to generate any revenue.
The commercial success of our products is subject to significant competition from products or product candidates that may be superior to, or more cost effective than, our products or product candidates.
Intellectual Property Risks
We may not be able to protect the confidentiality of our trade secrets, and our patents or other means of defending our intellectual property may be insufficient to protect our proprietary rights.
Patents or proprietary rights of others may restrict our development, manufacturing, and/or commercialization efforts and subject us to litigation and other proceedings that could find us liable for damages.
Other Risks Factors – Risks Related to Employees, Information Technology, and Our Common Stock
Our business is dependent on our key personnel and will be harmed if we cannot recruit and retain leaders in our development, administrative, and commercial organizations.
Significant disruptions of information technology systems or breaches of data security could adversely affect our business.
Changes in and failures to comply with United States and foreign privacy and data protection laws, regulations and standards may adversely affect our business, operations and consolidated financial performance.
Our stock price is extremely volatile.
PART I
Item 1. Business
Overview
We are a clinical-stage biopharmaceutical company focused on developing and providing access to innovative therapies for patients with liver and other chronic diseases with high unmet medical need.
4
Our lead product candidate, seladelpar, is a potent and selective agonist of peroxisome proliferator activated receptor delta (PPAR
d
), a nuclear receptor that regulates genes directly or indirectly involved in the synthesis of bile acids/sterols, metabolism of lipids and glucose, inflammation and fibrosis. We have been developing seladelpar for the treatment of liver diseases including:primary biliary cholangitis (PBC), an autoimmune disease that causes progressive destruction of the bile ducts in the liver resulting in impaired bile flow (cholestasis) and inflammation; and
nonalcoholic steatohepatitis (NASH), a prevalent and serious chronic liver disease caused by excessive fat accumulation in the liver that results in inflammation and cellular injury that can progress to fibrosis and cirrhosis, and potentially liver failure and death; anddeath.
mid-2022.
Strategy
Our goal is to become a leading biopharmaceutical company focused on developing and providing access to innovative therapies for patients with liver and other chronic diseases with high unmet medical need. Key elements of our strategy have been to advanceare to:
Advance clinical development of seladelpar for patients with PBC, NASH and PSC, to strengthen
Strengthen our patent portfolio and other means of protecting exclusivity, and to evaluate
Develop other product candidates.
Recent Events
We are currently in the terminationprocess of ourcommencing enrollment of a global, Phase 2b3 registration study of(RESPONSE) to evaluate seladelpar in subjectspatients with NASHPBC and recently enrolled our recently initiated Phase 2first subject in a global long-term safety study of(ASSURE) to evaluate seladelpar in subjects with PSC. In addition, we placed on hold all studies of seladelpar in subjects with PBC. The decision to halt development of seladelpar was based on initial histological observations in the Phase 2b study of seladelpar in NASH that were observed in the first blinded tranche of liver biopsies in the trial. These observations were characterized by an interface hepatitis presentation, with or without biliary injury. Although these patients had stable or improving biochemical markers of liver disease, the decision to halt development was based on a need to understand the significance of the observations, and possible impact on patients, before dosing additional patients with seladelpar. The U.S. Food and Drug Administration (FDA) agreed with this decision and subsequently placed a formal clinical hold on seladelpar in December 2019. We have since terminated our Phase 3 and otherNDA-enablingstudies of seladelpar in subjects with PBC.
CymaBay Pipeline Overview
Our pipeline includes twothree clinical stage product candidates: seladelpar (MBX-8025)(a PPAR MBX-2982*CB-001.CB-001(a GPR120 agonist).
d
agonist),MBX-2982
(a GPR119 agonist) andCB-0406
(a PPARg
non-agonist
ligand). We also have one preclinical stage product candidate,Product Candidates | Disease/condition | Status | Description | |||
Seladelpar (PPAR d agonist) | Primary Biliary Cholangitis (PBC) | Phase 3 | Ongoing 52-week Phase 3 study to evaluate seladelpar in PBC patients with inadequate response or intolerance to ursodeoxycholic acid (UDCA) | |||
Seladelpar (PPAR d agonist) | Nonalcoholic Steatohepatitis (NASH) | Phase | Completed 52-week Phase 2b study to evaluate safety, tolerability, and effect of seladelpar in patients with NASH | |||
( | Hypoglycemia in Type 1 Diabetics | Phase 2a | Commencing | |||
CB-0406 (PPAR g non-agonist ligand) | Phase 1 | Undisclosed indication(s) | ||||
CB-001 ( | Preclinical | Undisclosed indication(s) |
| * | Being conducted and funded by third parties (see MBX-2982 section below) |
Seladelpar
(MBX-8025)
Summary
Seladelpar is a selective agonist for the peroxisome proliferator-activated receptor delta (PPAR
d
). The PPARd
receptor is a nuclear receptor that regulates genes involved in bile acid/sterol, lipid, and glucose metabolism, and regulation of certain inflammatory cells. Seladelpar has the potential to treat certain diseases of the liver and a variety of disorders of lipid metabolism.Seladelpar was initially developed for treatment of mixed dyslipidemia, which is characterized by elevatedconditions, theseconditions. These benefits including:include:
low-density
lipoprotein(LDL-C)
and triglycerides (TGs). Results from our Phase 2 clinical study of seladelpar in patients with mixed dyslipidemia established effects that we believe have the potential to benefit patients affected with PBC and other Lowered
LDL-C
and total cholesterol, and raised high-density-lipoprotein(HDL-C),
Decreased triglycerides and free fatty acids,
Decreases in high-sensitivity
C-reactive
protein(hs-CRP),
a marker of inflammation, andSignificant reductions in markers of cholestasis, such as alkaline phosphatase (ALP) and gamma-glutamyl transferase (GGT),.
In February 2019, the Food and Drug Administration (FDA) granted seladelpar Breakthrough Therapy Designation for the treatment of early stage PBC, and in October 2016, seladelpar received the European Medicines Agency (EMA) PRIority MEdicines (PRIME) designation for the treatment of PBC. In November 2016, the FDA granted orphan drug designation to seladelpar for the treatment of PBC. In September 2017, EMA’s Committee for Orphan Medicinal Products (COMP) granted orphan drug designation to seladelpar for the treatment of PBC.
To date, we have completedninewe have completed multiple Phase 1 clinical studies and three Phase 2 and one Phase 3 clinical studies with seladelpar have been completed.
six-month
and twelve-month toxicity studies of seladelpar in rats and monkeys, respectively, as well astwo-year
carcinogenicity studies in mice and rats. In addition, hs-CRP,
andLDL-C.
Many PBC patients suffer from pruritus, or itching, which can significantly impact their quality of life. Based on data from our Phase 2 Target Indications for Seladelpar Clinical
We have been targetingare actively pursuing PBC as our initial launch indication for seladelpar. Other indications, such as NASH, will be pursued opportunistically. Following is a review of PBC and NASH and PSC as indications for seladelpar, although our programs fordevelopment progress in each of these indications are on hold. The following is a short description of each of these target indications.indication.
Primary Biliary Cholangitis (PBC)
Summary
PBC is a rare, chronic progressive autoimmune liver disease that predominantly affects middle-aged women. A
T-cell
mediated immune response is thought to damage, and ultimately destroy, the interlobular and septal bile ducts. The loss of bile duct function leads to decreased bile secretion and retention of toxic substances, including bile acids, within the liver parenchyma. This retention may ultimately cause liver cirrhosis and liver failure in PBC patients.6
PBC primarily affects an estimated one in 1,000 women over the age of 40. Due to its low prevalence, PBC has been recognized as an orphan disease in the U.S. and E.U., meeting itstheir respective FDA and EMA orphan designation criteria. Diagnosis of PBC is confirmed by elevated serum alkaline phosphatase (AP)(ALP) presence and/or magnitude of antimitochondrial antibody (AMA presence), and liver biopsies, although biopsies are no longer required for diagnosis in most patients.
The most common clinical symptoms of PBC include fatigue and pruritus, or itching (up to 70% occurrence), which adversely affects many patients’ quality of life. PBC patients are also frequently affected by conditions including jaundice, hyperlipidemia (notably hypercholesterolemia), hypothyroidism, osteopenia and osteoporosis, and coexisting autoimmune diseases. Late complications of PBC include portal hypertension, malabsorption, deficiencies of
fat-soluble
vitamins, and steatorrhea (excess fat in feces). Left untreated, PBC disease progression can lead to the need for liver transplantation and liver-related mortality. Despite being a rare disease, PBC is one of the top six indications for liver transplantation in the U.S. and E.U. Recurrence of PBC following liver transplantation is reported in11-46%
of transplantations, with an estimated prevalence of 30% at 10 years following transplantation, further demonstrating a need for effective therapies.Retrospective analyses of PBC clinical outcomes data have shown that elevated levels of APALP and bilirubin are associated with worsened clinical outcomes including liver transplantation and death associated with PBC. These analyses supported the use of APALP and bilirubin as elements of a clinical surrogate reasonably likely to predict outcomes that was used for the approval of obeticholic acid as a second line therapy for PBC.
Competition/Industry
We face competition from pharmaceutical and biotechnology companies. The), marketed by Intercept Pharmaceuticals, Inc). UDCA is a natural bile acid that decreases serum levels of AP,ALP, bilirubin, alanine transferase, aspartate aminotransferase, cholesterol, and immunoglobulin M, which are all elevated in patients with PBC and can serve as biochemical markers of disease. OcalivaU.S. FDA for the treatment of PBC. In December 2018, Genfit announced positive Phase 2 results from a Phase 2 study evaluating the efficacy and safety of elafibranor (80 mgin PBC and 120 mg once-daily) in adultSeptember 2020, announced the commencement of a Phase 3 study of elafibranor in PBC. Saroglitazar (Zydus Cadila) is a dual PPARwhoat the annual meeting of the American Association for the Study of Liver Diseases and in December 2020, Zydus announced saroglitazar had an inadequate responsereceived Fast Track Designation from the FDA for the treatment of PBC and in January 2021 it received Orphan Drug Designation for PBC from the FDA. Phase 2 study data in patients with PBC has been reported for the selective NOX inhibitor GKT137831 (Calliditas) along with the announced intention to UDCA.conduct a Phase 2/3 study in the second half of 2021.
FDA-approved
treatments for PBC are ursodeoxycholic acid (UDCA), also known as ursodiol, a generic drug, and obeticholic acid (Ocaliva®
®
is a synthetic bile acid analog that binds to and activates the farnesoid X receptor, or FXR, and received orphan designations in the U.S. and the E.U. Elafibranor (Genfit S.A.) is a mixed PPARa
/d
agonist in development for patients with PBC. In April 2019, Genfit announced elafibranor had been granted Breakthrough Therapy Designation by the a
/g
agonist in development for patients with PBC. In November 2020, Zydus presented data from a Phase 2 study evaluating saroglitazar in patients with PBC Studies of Seladelpar in PBC
RESPONSE (Phase 3)
We are currently in the process of commencing enrollment in a global, Phase 3 registration study (RESPONSE) to evaluate seladelpar in patients with PBC. The Phase 3 study is a
52-week,
double blind, placebo-controlled, randomized, global, registration study evaluating the safety and efficacy of seladelpar in patients with PBC. The study is intended to enroll 180 patients, who have an inadequate response to, or intolerance to, ursodeoxycholic acid, in a 2:1 randomization to oral, once daily seladelpar 10 mg or placebo. The primary outcome measure will be the composite biochemical responder rate at 52 weeks. A responder is defined as a patient who achieves an ALP level less than 1.67 times the upper limit of normal with at least a 15%7
decrease from baseline and has a normal level of total bilirubin. Additional key outcomes of efficacy will compare the rate of normalization of ALP at 52 weeks and the change from baseline in level of pruritus at six months for patients with moderate to severe pruritus at baseline assessed by a numerical rating scale (NRS) recorded with an electronic diary.
ENHANCE
In October 2018 we commenced enrollment of a global, Phase 3 registration study (ENHANCE) to evaluate seladelpar in patients with PBC. The Phase 3 study iswas a double-blind, randomized, placebo-controlledursodeoxycholic acid (UDCA).UDCA.
52-week
study evaluating the safety and efficacy of 5 mg and 10 mg of seladelpar versus placebo in patients with PBC who have had an inadequate response or are intolerant to first-line treatment with In December 2019 we announced that this trial was being terminated ENHANCE early based on initial histological observations obtained in our Phase 2b study of seladelpar in NASH. TheIn May 2020, we announced completion of an independent expert panel review into the NASH findings that concluded the data, in aggregate, did not support liver injury related to seladelpar. In June 2020, we discussed the data, the panel’s conclusions, and other matters with the FDA. In July 2020, the FDA subsequently placed a formallifted the clinical hold on the program and we made the decision to reinstate clinical development of seladelpar in all indications.
PBC.In August 2020 we announced positive results from ENHANCE, which we believe demonstrated seladelpar to be safe, well-tolerated, and efficacious in patients with PBC. Although the study was terminated prior to the completion of
the 52-week treatment
period, the statistical analysis plan was amended while the study remained blinded to adjust for evaluation of the primary and two key secondary endpoints at Week 12 rather than Week 52. Topline data for patients through 12 and to 26 weeks showed what we believe to be robust anti-cholestatic, anti-inflammatory and anti-pruritic activity of seladelpar. Specifically, 78.2% of patients on 10 mg of seladelpar compared with 12.5% on placebo achieved the primary composite outcome after 3 months (p<0.0001), and 27.3% of patients on 10 mg of seladelpar compared with 0% on placebo normalized ALP by 3 months (p<0.0001). In addition, the study revealed statistically significant improvement in change from baseline in pruritus at 3 months (p<0.05) for patientswith moderate-to-severe itch
treated with seladelpar 10 mg versus placebo.Safety Extension Study
With the reinstatement of the clinical development of seladelpar we recently commenced a long-term safety study (ASSURE), which is open to patients who were eligible for the prior long-term extension study, including those from our Phase 2 open label study and our Phase 3 ENHANCE study, as well as patients completing treatment in RESPONSE.
8
Phase 2 Open Label Study
In December 2016, we initiated a second Phase 2 Low Dose study of seladelpar in patients with PBC. The study was an open label, randomized, dose-ranging study evaluating lower2 mg, 5 mg and 10mg doses of seladelpar and the primary efficacy endpoint was percent change in APALP from baseline. The study had an initial twelve-week period in which starting doses were maintained, but after which doses could be increased to as high as 10 mg for those patients in which a greater biochemical response was deemed appropriate, these being described as titration groups. Secondary outcomes were to evaluate other markers of cholestasis, inflammation, and lipid parameters, as well as clinical symptoms such as pruritus and quality of life.
Specifically, efficacy data was released on the first set of patients treated for 52 weeks and safety data on patients that received at least one dose of seladelpar in the study. Eligible PBC patients with either an inadequate response or intolerance to ursodeoxycholic acid (UDCA) were randomized to daily seladelpar at 5 or 10 mg. After 12 weeks, patients on 5 mg could escalate to 10 mg if their AP treatment goal was not met (5/10 mg group). The primary efficacy outcome was the AP % change from baseline. At 52 weeks the mean decreases in APALP wereAPALP <1.67 x ULN,≥³15% decrease in AP,ALP, and total bilirubin≤£ULN. At 52 weeks 59% and 71% of patients met the composite endpoint in the 5/10 titration and 10 mg groups, respectively. The anti-cholestatic effect of seladelpar was further substantiated with normalization of APALP levels at 52 weeks in 24% and 29% of patients in the 5/10 titration and 10 mg groups, respectively. Treatment with seladelpar also demonstrated a robust anti-inflammatory activity with median transaminase decreases of
-47%
and-46%
in the 5/10 titration and 10 mg groups, respectively. A key secondary outcome was the composite response measured at week 52 where a responder was defined as a patient with -31%
and-33%
in the 5/10 titration and 10 mg groups, respectively.A26-week52-weekanalysis from the study was also shared on the effect of seladelpar on pruritus, or itching, which is a common clinical symptom of PBC that adversely effects a patient’s quality of life. After 26 weeks, the median changes inPatient self-reported experiences were collected using the pruritus visual analoganalogue scale (VAS) was-50%and-55%in 101 PBC patients in the 5 /105/10 titration or 10 mg groups. In patients with moderate to severe pruritus (VAS
³
40), substantial improvement in pruritus (VAS³
20-point
decrease) was seen in 58% and 93% of patients in the 5/10 titration and 10 mg groups, respectively. These data suggest that seladelpar is not associated with drug-induced pruritus and support further evaluation of seladelpar’s potential benefit on pruritus.Nonalcoholic Steatohepatitis (NASH)
Summary
Nonalcoholic fatty liver disease (NAFLD) is the most common chronic liver disease worldwide and encompasses a spectrum of conditions that arise from fat accumulation in the liver of individuals that cannot otherwise be attributed to alcohol consumption. The prevalence of NAFLD has increased and is reported to account for approximately 25% of the general population worldwide. It is widely believed that the increase in NAFLD prevalence is a consequence of the obesity epidemic, and studies associate NAFLD with visceral obesity, Type 2 diabetes, hypertension, dyslipidemia, and hypothyroidism.
The accumulation of fat in combination with hepatic inflammation can cause chronic liver injury leading to nonalcoholic steatohepatitis (NASH). NASH is the progressive form of NAFLD and increases patient risk of developing advanced liver fibrosis, cirrhosis, decompensated cirrhosis, the need for liver transplantation, hepatocellular carcinoma (HCC), and/or death. Serum markers that are often elevated in NASH patients include the transaminases alanine aminotransferase (ALT) and/or aspartate aminotransferase (AST). Liver biopsies are performed to confirm a NASH diagnosis. Approximately
10-20%
of individuals with NAFLD progress to NASH.9
Competition/Industry
There are currently no drugs approved in the U.S. or E.U. for the treatment of NASH. In September 2019, Intercept Pharmaceuticals filed a New Drug Application towith the U.S. FDA for obeticholic acid (Ocalivaan FXR-agonist (Intercept Pharmaceuticals), elafibranor (GFT505), a PPARa/dagonist (Genfit SA), cenicriviroc, a CCR2/5 receptor antagonist (Allergan)(Abbvie), and selonsertib, an ASK1 inhibitor (Gilead)Resmitiron, a THROverNovo Nordisk is also planning to start a Phase 3 study in NASH in 2021 with semaglutide, a
®
), anFXR-agonist,
in patients with fibrosis due to NASH. Several clinical studies have been completed or are underway with drug candidates that may affect disease outcomes in patients withnon-cirrhotic
NASH, including Phase 3 studies with Ocaliva®
, b
agonist (Madrigal). GLP-1
receptor agonist. In addition, over two dozen other compounds are currently in Phase 2 development in NASH.Studies of Seladelpar in NASH
Phase 2b NASH Study
In May 2018, we initiated a randomized, placebo-controlled, parallel, dose-ranging Phase 2b study to evaluate seladelpar in patients with NASH. In February 2019, we announced full enrollment of 181 patients with liver biopsy proven NASH at specialized U.S. investigational centers. Seladelpar at doses of 10, 20, and 50 mg per day were studied versus placebo in a 2:2:2:1 randomization. The primary efficacy outcome was the change from baseline in liver fat content at 12 weeks as measured by magnetic resonance imaging using the proton density fat fraction methodminimalsignificant reductions in liver fat but that these changes were not significant when compared to placebo.placebo, which also had significant reductions. Treatment with seladelpar did, however, result in robust and clinically meaningful reductions in markers associated with liver injury. Alanine aminotransferase (ALT) declined up to 37.5% or 32 U/L in 12 weeks. These reductions in ALT are significantly greater than the 17 U/L threshold that has been correlated with histologic improvement in NASH. Gamma glutamyl transferase (GGT) also decreased significantly, suggesting a reduction in hepatocellular oxidative stress. Significant reductions in alkaline phosphatase (AP)(ALP) at 12 weeks were observed, supportive of a decrease in hepatocellular bile acids. The marked changes in these liver enzymes collectively suggested the potential to impact ballooning and lobular inflammation, the two key components of NASH resolution. In November 2019, we announced that this trial was
(MRI-PDFF).
In June 2019, we announced results from the primary efficacy outcome, which were that treatment with seladelpar resulted in terminated based on initial histological observations. Although these patients had stable or improving biochemical markers of liver disease, FDA placed a clinical hold onwe halted dosing additionalof patients with seladelpar due to the lack of understanding the significance of the observations, and possible impact on patients. We have initiated a series of investigative actions to better understand the histological observations.
In March 2020, we announced additional preliminary data from the terminated Phase 2b study of seladelpar in patients with NASH. For liver tests at 52 weeks, there were 19, 35, 41 and 40 evaluable patients in the placebo, 10, 20 and 50 mg groups, respectively. The corresponding percent changes from baseline at week 52 in ALT were +1.1%,
-29.1%,
-41.9%
and-41.3%.
Similarly for AST, relative changes at week 52 were-0.5%,
-19.7%,
-25.0%,
and-16.6%
percent for placebo, 10, 20 and 50 mg, respectively. Finally, corresponding changes in GGT were-0.6%,
-29.0%,
-46.1%
and-35.0%.
Out of 181 patients enrolled in the study, there were 152 with paired biopsies at entry andend-of-treatment.
The number of patients with paired biopsies in the placebo, 10, 20 and 50 mg seladelpar groups were 25, 39, 42 and 46, respectively. The proportion of responders with resolution of NASH with no worsening in fibrosis were 8.0%, 10.3%, 19.0% and 26.1% in the placebo, 10, 20 and 50 mg seladelpar groups, respectively. The corresponding responder rates for at least a one stage improvement in fibrosis with no worsening in NASH were 20.0%, 23.1%, 23.8% and 37.0%. The proportion of patients meeting both endpoints were 8.0%, 5.1%, 11.9% and 19.6% for the placebo, 10, 20 and 50 mg seladelpar groups, respectively.Pre-clinical
StudiesThe mode of action for seladelpar in NASH was established in a diabetic and dyslipidemic obese mouse model (the mouse model; Haczeyni et al., 2017). These mice develop liver pathology similar to humans with NASH consisting of steatohepatitis complicated by pericellular fibrosis (Van Rooyen et al., 2011; Haczeyni et al., 2015). The pathogenic progression of NASH and seladelpar’s actions in this model are broadly
foz/foz
10
summarized as follows: (1) The accumulation of fat with an accompanying development of insulin resistance: seladelpar reduced hepatic steatosis by increasing expression of genes associated with mitochondrial fatty acid oxidation, which was accompanied by restoration of full insulin sensitivity; (2) Cell stress and injury response: seladelpar reduced hepatocellular toxic species, including lipotoxic lipids and free cholesterol, with strong reductions in apoptosis and cell regeneration response to injury. There was a complete abrogation of cellular ballooning (necroinflammation), which is a defining characteristic of NASH; (3) Initiation and perpetuation of inflammation: seladelpar treatment led to strong reductions in liver macrophages, which was accompanied by reductions in inflammatory mediators; (4) Extracellular matrix deposition and remodeling: seladelpar reduced collagen deposition and characteristic fibrogenic transcripts that accompany stellate cell activation and fibrosis.
trans-fat,
fructose and cholesterol to create a more aggressive NASH with fibrosis. Reduction in hepatic fat and improvement in NASH pathology, including abrogation of ballooning, were also observed. Fibrosis was reduced as measured by total collagen content in the liver.With the receipt of additional requests from the FDA, we initiated a series of investigative actions tolarge-sizedbile ducts inside better understand the baseline characteristics of patients enrolled in our Phase 2b NASH study and outside the histological observations identified by our study pathologists at the end of treatment. The investigation included three activities intended to confirm and subsequently understand the significance of the observations. The first was a comprehensive collection and review of data including patient demographics, medical history, concomitant medications and additional biochemical markers. The second was a blinded, independent review of baseline and end of treatment biopsies by several experienced liver pathologists. Finally, the third, was a formal pathology and is manifested by ongoing ductal destruction leadingclinical hepatology review panel meeting during which experts reviewed all information gathered to cholestasis, advanced fibrosis,provide a consensus independent determination of the role of seladelpar in these findings. These activities were essential to ourcirrhosis. Disease progression will eventually lead to determine if there was a path forward for seladelpar.
follow-up
with the FDA and In May 2020, we announced completion of an independent expert panel review into the findings from our NASH Phase 2b study. The eight-person panel included three hepatopathologists and five hepatologists with expertise in drug-induced liver failureinjury, NASH and PBC. The expert panel found no clinical, biochemical or histological evidence of seladelpar-related liver injury in the study. The panel also unanimously supported lifting of the clinical hold and theconsequent complications such as portal hypertensionthe FDA and increased risksubmitted a complete response letter to answer outstanding FDA questions and seek approval from the FDA to lift the clinical hold. In July 2020, we received a response from the FDA lifting the clinical hold, thereby permitting us to reinstate clinical development of malignancy, including hepatocellular carcinoma (HCC) and cholangiocarcinoma. Other clinical symptoms of PSC include fatigue and pruritus. Males are affected
seladelpar.re-initiation of
clinical development. In June 2020, we discussed the data, the panel’s conclusions, and other matters with 11
MBX-2982
MBX-2982
targets G protein-coupled receptor 119 (GPR119), a receptor that interacts with bioactive lipids known to stimulate glucose-dependent insulin secretion. Preclinical data indicate thatMBX-2982
is a potent selective orally-active GPR119 agonist that functions through a unique dual mechanism of action that acts directly on the beta cell to increase insulin secretion and stimulates release of the incretinGLP-1
from the gut. We have previously conducted clinical studies forMBX-2982
as a potential treatment for diabetes, demonstratingMBX-2982
was, we believe, safe and well tolerated.We believe
MBX-2982
may also have utility in various diseases impacting the gut, liver orgut-liver
axis and are currently exploring potential opportunities to advance development.In November 2020, we announced a study to evaluate the potential for
MBX-2982
to stimulate the release of the hormone glucagon in response to hypoglycemia in patients with type 1 diabetes (T1D). Glucagon is a regulatory hormone that elevates blood sugar levels in response to below normal glucose levels (hypoglycemia). Insulin-induced hypoglycemia in diabetes is a significant limiting factor in achieving the desired glucose control and is the cause of significant morbidity. In recent preclinical studies, GPR119 agonists were shown to enhance glucagon secretion in response to low glucose levels and were able to prevent hypoglycemia in animal models. The Phase 2aproof-of-pharmacology
study will assess whetherMBX-2982
can enhance glucagon secretion during insulin-induced hypoglycemia in subjects with T1D. If successful, studies to evaluateMBX-2982
as a potential preventive therapy for hypoglycemia in patients with T1D may be warranted. The study is being led by the AdventHealth Translational Research Institute in Orlando, Florida and is fully funded by The Leona M. and Harry B. Helmsley Charitable Trust. CymaBay retains full commercial rights toMBX-2982.
CB-0406
In 2020, we began to evaluate
CB-0406,
the active metabolite of thepro-drug
arhalofenate that had previously been studied for chronic metabolic diseases. We initiated a single and multiple ascending dose study ofCB-0406
in healthy subjects to establish its pharmacokinetics, safety and maximum tolerated dose.CB-0406
is a PPARg
non-agonist
ligand that attenuates the expression of inflammatory genes. It has been shown to block innate immune responses to inflammatory triggers in macrophages, and to attenuate gouty inflammation when dosed as thepro-drug
in mouse animal models and in a Phase 2 clinical study in gout patients. Based on pharmacokinetic studies in monkeys, we believe thatCB-0406
may have greater exposure and potentially greater efficacy than does thepro-drug
arhalofenate. Decisions on any future development are contingent on it achieving a favorable profile with respect to safety and exposure. The innate immune system plays a pivotal role in many diseases besides gout and thus we believeCB-0406
may have utility in various inflammatory diseases and are currently exploring potential opportunities to advance its development pending the results of the ongoing Phase 1 study.CB-001
(GPR120)CB-001
targets G protein-coupled receptor 120 (GPR120), a receptor foromega-3
fatty acids such as docosahexaenoic acid (DHA). Pharmacodynamic effects include insulin sensitization, stimulation ofGLP-1
release, glucose sensitive insulin secretion (GSIS), improvement in hepatic steatosis and lipid profile, and anti-inflammatory activity. Preclinical target validation has been achieved.We believe
CB-001
may have utility in various diseases impacting the gut, liver orgut-liver
axis and are currently exploring potential opportunities to advance development.12
December 2019, we announced a restructuring plan to reduce our workforce by approximately 60% to control our operating costs, and we commenced a process to evaluate strategic alternatives to maximize stockholder value. Following the rightsFDA’s decision in July 2020 to lift the clinical hold on the seladelpar program, we subsequently concluded our formal review of strategic options, having made the determination to restart clinical development of seladelpar in PBC and to conduct other drug development activities. Specifically, we made the strategic decision to refocus our strategy primarily on clinical development of seladelpar in PBC and to explore the potential to partner seladelpar in NASH in a combination study with other complimentary agents. In addition, we intend to continue evaluating opportunities to develop other internal programs and commercialize arhalofenate inpossibly acquire
or in-license new
compounds or programs.COVID-19
PandemicIn March 2020, the U.S. (including all possessionsWorld Health Organization declared the global novel coronavirusterritories). Under liquidity have not been significantly impacted by termination,rights licensedcompletion of our clinical studies, and other associated drug development activities. Possible disruptions are currently difficult to Kowaforesee. We continue to monitor areas of potential risk which include but are not limited to the following:
disease (COVID-19) outbreak
a pandemic. Through the date of filing of this Annual Report, our operations, financial condition and the terms of the agreement with Kowa, we received an upfront payment of $5.0 million, and in January 2018 we received a $5.0 million milestone payment for the initiation of a study evaluating the pharmacokinetics of arhalofenate in subjects with renal impairment. We were also entitled to receive additional milestone payments based upon the achievement of specific development and sales milestones and royalties on future sales of arhalofenate products. On October 24, 2018, we received a notice from Kowa terminating the license agreement for the development of arhalofenate, effective on January 22, 2019. COVID-19 outbreak.
As a result of theCOVID-19 pandemic,
we may experience future disruptions that could impact aspects of our business, including our progress towards the Remote workforce operations
. To date, our workforce has adapted to remotely working to maintain operations. Our reliance on personnel working from home could potentially negatively impact future productivity, or disrupt, delay, or otherwise adversely impact our business. In addition, remote operations could increase our cyber-security and data privacy risks, create data accessibility concerns, and make us more susceptible to communication disruptions, any of which could adversely impact our business operations, or delay necessary interactions with regulators, contract manufacturers, contract research organizations, clinical trial sites, and other important agencies and contractors, which may result in increased costs to us.Clinical trial and drug manufacturing operations
. In collaboration with our clinical research organization partners, we sponsor clinical trials that take place at investigator sites in the United States and internationally. We also partner with contract manufacturing organizations to develop, manufacture, and distribute our product candidate drug supplies. To date, these collective research and development personnel and vendors are adapting toCOVID-19 related
travel restrictions and reduced access to work facilities through the Drug regulator interactions
. The FDA, comparable foreign regulatory agencies, and ethics boards may experience operational interruptions or delays, which could impact timelines for regulatory meetings, submissions, trial initiations, and regulatory approvals.Financial reporting and compliance
. To date, there has been no adverse impact on our ability to maintain our established financial reporting functions and internal controls over financial reporting. However, our ability to prepare our financial results timely and accurately is partially dependent upon13
| the availability of third-party information systems and other cloud-based services. Any degradation in the quality or timeliness of critical third-party information or cloud-based services could adversely impact our financial reporting capabilities. |
Overall, we cannot at this time predict the specific extent, duration, or full impact that thetermination datefinancial markets and wethe overall economy are no longer eligible to receive additional milestone payments highly uncertain. If the financial markets and/or royalties from Kowa.the overall economy are impacted for an extended period, our results may be adversely affected.
COVID-19
outbreak will have on our financial condition and operations. The impact of theCOVID-19
coronavirus outbreak on our consolidated financial performance will depend on future developments, including the duration and spread of the outbreak and related governmental advisories and restrictions. These developments and the impact ofCOVID-19
on the License Agreements and Intellectual Property
General
We actively seek to obtain, where appropriate, patent protection and regulatory exclusivity for the proprietary technology that we consider important to our business, including compounds, compositions and formulations, their methods of use and processes for their manufacture both in the United States and other countries. We also rely on trade secrets, know — how,
know-how,
continuing technological innovation andin-licensing
to develop and maintain our proprietary position. Our success depends in part on our ability to obtain, maintain and enforce proprietary protection for our product candidates, technology andknow-how,
to operate without infringing the proprietary rights of others, and to exclude others from infringing our proprietary rights. However, patent protection may not afford us complete protection against competitors who seek to circumvent our patents.We also depend upon the skills, knowledge, experience and
know-how
of our management, research and development personnel, as well as that of our advisors, consultants and other contractors. To help protect our proprietaryknow-how,
which is not patentable, and for inventions for which patents may be difficult to enforce, we currently rely, and will in the future rely, on trade secret protection and confidentiality agreements to protect our interests. To this end, we require all of our employees, consultants, advisors and other contractors to enter into confidentiality agreements that prohibit the disclosure of confidential information and, where applicable, require disclosure and assignment to us of the ideas, developments, discoveries and inventions important to our business.Collaborations and Licensing Agreements
We have entered into various arrangements with licensors and licensees. Our current significant collaborations are summarized below:
Johnson
& Johnson:
d
compounds (the PPARd
Products) with the right to grant sublicenses to third parties to make, use and sell such PPARd
Products. Under the terms of the agreement, we have full control and responsibility over the research, development and registration of any PPARd
Products and are required to use diligent efforts to conduct all such activities. Janssen NV has the sole responsibility for the preparation, filing, prosecution, maintenance of, and defense of certain patents related to the PPARd
Products. Janssen NV has a right of first negotiation under the agreement to license PPARd
Products from us in the event that we elect to seek a third-party corporate partner for the research, development, promotion, and/or commercialization of such PPARd
Product. Under the terms of the agreement Janssen NV is entitled to receive up to an 8% royalty on net sales of PPARd
Products. Under the terms of the agreement, if we do not expend more than a de minimis amount of effort and resources on the research and/or development of at least one PPARd
Product, such action would constitute a default under the agreement. In addition, if we fail to use diligent efforts to promote, market and sell any PPARd
Product under the agreement, such action would constitute a14
default under the agreement. In the event of such default, or upon our termination of the agreement, we are
obligated to grant Janssen NV a worldwide, exclusive, irrevocable license under the agreement in all information that is controlled, developed or acquired by us that relates to a PPAR
d
compound or PPARd
Product and in all patents that are filed during the term of the agreement with a priority date after the effective date of the agreement and relate to a PPARd
compound or PPARd
Product.In June 2010, we entered into two development and license agreements with Janssen Pharmaceuticals, Inc. (Janssen), an affiliate of Johnson & Johnson, under which Janssen obtained the right to further develop undisclosed metabolic disease target agonists for the treatment of Type 2 diabetes and other disorders, and we received a
one-time
nonrefundable technology access fee related to the agreements. These development and licensing agreements were terminated as of April 2015. In December 2015, we exercised an option pursuant to the terms of one of the original agreements to continue work to research, develop and commercialize compounds with activity against an undisclosed metabolic disease target. Janssen granted us an exclusive, worldwide license (with rights to sublicense) under the Janssenknow-how
and patents to research, develop, make, have made, import, use, offer for sale and sell such compounds. We have full control and responsibility over the research, development and registration of any products developed and/or discovered from the metabolic disease target and are required to use diligent efforts to conduct all such activities.DiaTex:
On June 30, 1998, we entered into a License and Development Agreement with DiaTex, Inc. Under the agreement, DiaTex granted us an exclusive license to develop and commercialize therapeutic products containing halofenate, its enantiomers, derivatives, and analogs (the licensed products) for the treatment of diseases.CB-0406
is a derivative of halofenate.The license agreement contains a $2,000 per month license fee as well as a requirement to make additional payments for development achievements and royalty payments on any sales of licensed products. DiaTex is entitled to up to $0.8 million for the future development of
CB-0406,
as well as a 2% royalty payment on any net sales of products containingCB-0406.
Under the terms of the agreement, if we fail to use diligent efforts to conduct preclinical and clinical testing of halofenate and its enantiomers to determine its efficacy for use in the treatment or prevention of human diseases or conditions, fail to make any payment called for under the agreement, or disclosenon-exempt
confidential information under the agreement, such action would constitute a material breach under the agreement. In addition, if we fail to execute all instruments and assignments or fail to take any action to effect joint ownership of any enantiomer patent with DiaTex, such action would constitute a material breach under the agreement. We may terminate the agreement at any time if we determine we are no longer interested in DiaTex’s license grant, provided we provide sufficient written notice within a specified time period.Research and Development
We do not currently own or operate research and development facilities. We rely on contract service providers (CSPs) including clinical research organizations, clinical trial sites, central laboratories and other service providers to ensure the proper and timely conduct of our clinical trials. While we have agreements governing their activities, we have limited influence over their actual performance. We have relied and plan to continue to rely upon CSPs to monitor and manage data for our ongoing clinical programs for our product candidates, as well as the execution of nonclinical studies. We control only certain aspects of our CSPs’ activities. Nevertheless, we are responsible for ensuring that each of our studies is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards and our reliance on the CSPs does not relieve us of our regulatory responsibilities. We also rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and development and commercialization strategy. Our consultants and advisors may be employed by employers other than us and may have commitments under consulting or advisory contracts with other entities that may limit their availability to us, which could also adversely affect the progress of our research, development and commercialization objectives.
15
Intellectual Property
We own or190200 foreign patents, as well as approximately 1020 United States patent applications and 4050 foreign and Patent Cooperation Treaty applications that are counterparts to certain United States patents and patent applications. In addition, we license from third parties approximately 20 United States patents and 1 United States patent application, 330 foreign patents and 20 foreign and Patent Cooperation Treaty applications that are counterparts to certain United States patents and patent applications. These patents and patent applications include claims covering various aspects of our product pipeline and research and development strategies, including certain PPAR arhalofenate crystal forms, GPR 120GPR120 agonist compositions and uses.
co-own
approximately 40 United States patents and d
agonists (including seladelpar), their compositions and uses both alone and in combination with other drugs,CB-0406
methods of use and methods of manufacture, and certain GPR119 and The seladelpar portfolio consists of approximately 470480 issued patents and 7060 pending patent applications related to composition and method of use that we believe protect it through at least 2025-2038,expire between 2025 and 2038, before accounting for any potential patent term extension.extension or orphan disease exclusivity. Patent and trade secret protection is critical to our business. Our success will depend in large part on our ability to obtain, maintain, defend and enforce patents and other intellectual property, to extend the life of patents covering our product candidates, to preserve trade secrets and proprietary
know-how,
and to operate without infringing the patents and proprietary rights of third parties.Manufacturing
We do not currently own or operate manufacturing facilities for the production or testing of seladelpar or other product candidates that we develop, nor do we have plans to develop our own manufacturing operations in the foreseeable future. We presently depend on third party contract manufacturers to obtain all of our required raw materials, active pharmaceutical ingredients (APIs) and finished products for our clinical studies for seladelpar. We also expect to use third party contract manufacturers to obtain our commercial supplies of seladelpar. We have executed manufacturing agreements for our API and clinical supplies of seladelpar with established manufacturing firms that are responsible for sourcing and obtaining the raw materials necessary for the finished products. The raw materials necessary to manufacture the API for seladelpar are available from more than one source.
Competition
The biopharmaceutical industry is highly competitive and subject to rapid and significant innovation. Although we believe that our development expertise and scientific knowledge provide us with advantages over our competitors, particularly in the therapeutic areas in which we are focused, other biopharmaceutical companies in the industry may be able to develop therapeutics that are able to achieve better results. Our competitors include pharmaceutical companies, biotechnology companies, specialty pharmaceutical companies, universities and other research institutions. Many of our competitors have significantly greater financial, technical and human resources than we have.
We have been developing seladelpar for the treatment of patients with PBC PSC and NASH; competition in these indications is discussed further below.
PBC Competition
Currently, the onlyAP,ALP, bilirubin, alanine aminotransferase, aspartate aminotransferase, cholesterol, and immunoglobulin M, all of which are elevated in patients with PBC and can serve as biochemical markers of the disease. In a study that combined data from three controlled trials with a total of 548 patients, ursodiol significantly reduced the likelihood of liver transplantation or death after
FDA-approved
treatments for PBC are ursodeoxycholic acid (UCDA), also known as ursodiol, an isomer of chenodeoxycholic acid and the synthetic bile acid analog obeticholic acid (Ocaliva®
, Intercept Pharmaceuticals). Ursodiol decreases serum levels of 16
four years. Ursodiol also delayed the progression of hepatic fibrosis in early-stage PBC, but was not effective in advanced disease. It is also known that up to 50% of PBC patients fail to respond adequately to ursodiol therapy. Ursodiol is available as a generic and is priced at a discount to typical branded therapies.
Ocaliva was approved by the FDA and European Medicines Agency in 2016 for the treatment of PBC in combination with UDCA in adults with an inadequate response to UDCA, or as monotherapy in adults unable to tolerate UDCA. Ocaliva also received orphan designations in the U.S. and the E.U. A Phase 3 study was completed with a primary composite endpoint defined as a responder rate comprised of the percentage of patients with APALP < 1.67 times upper limit of normal with a decrease in APALP of at least 15% and total bilirubin less than or equal to upper limit of normal. This study met its goals and Ocaliva was granted accelerated approval based on meeting this primary composite endpoint.
Although not approved for use in PBC,
off-label
use of fibrate drugs has been reported, though many fibrates are specifically contraindicated for use in PBC due to potential concerns over acute and long-term safety in this patient population. Nevertheless,off-label
use of fibrates is mentioned in several published treatment guidelines. Other therapies, such as colchicine, methotrexate, prednisone and multiple immunosuppressive regimens have been attempted. However, their efficacy is limited or unproven, and they are associated with multiple side-effects impacting tolerance and safety. Liver transplantation improves survival in patients with PBC, and it is the only effective treatment for those with liver failure. Liver transplantation however is problematic because of its costs, the limited availability of donor organs, and by the fact that the disease may recur after an initially successful transplantation. As a result, despite the previously mentioned therapeutic interventions, it is recognized that PBC continues to progress in many patients and additional medical treatment is needed to address this disease.Elafibranor (Genfit S.A.) is a mixed PPARAdditionalIn September 2020, Genfit announced the commencement of a Phase 3 study of elafibranor in patients with PBC who had an inadequate response or intolerance to UDCA. Another potential therapiestherapy in early stage clinical development for PBC include FXR agonists that act through the same mechanism of action as Ocaliva (tropifexor (LJN452, Novartis Pharmaceuticals Corp.), GS-9674 (Gilead Sciences, Inc.) and EDP-305 (Enanta Pharmaceuticals, Inc.)),is the dual PPARtheoxy-sterolsulfate DUR-928,(Calliditas) has also reported Phase 2 study data for PBC and announced its intention to conduct a Phase 2/3 study in PBC commencing in the selective S1P receptor modulator etrasimod (APD334) (Arena Pharmaceuticals, Inc.). GSK23306772second half of 2021. In cholestatic pruritus, GSK2330672 (GlaxoSmithKline) is an inhibitor of the Intestinal Bile Acid Transporter (IBAT) and, which is being evaluatedundergoing evaluation for the treatmentdecreasing symptoms of itch associated with PBC and maralixibat, another IBAT inhibitor, was recently discontinued for this indication due to lack of efficacy. NGM-282 (NGM Biopharmaceuticals), an FGF-19 variant was also studiedpruritus, including in PBC, but the clinical program has beenre-focusedPBC.towards the treatment of NASH.
a
/d
agonist in development for patients with PBC. In April 2019, Genfit announced elafibranor had been granted Breakthrough Therapy Designation by the U.S. FDA for the treatment of PBC. In December 2018, Genfit announced positive Phase 2 results from a Phase 2 study evaluating the efficacy and safety of elafibranor (80 mg and 120 mg once-daily) in adult patients with PBC who had an inadequate response to UDCA. a
/g
agonist saroglitazar (Zydus Cadila). In November 2020, Phase 2 results were presented at the Liver Meeting hosted by the American Association for the Study of Liver Disease. In December 2020, Zydus announced saroglitizar had been granted Fast Track Designation for PBC and in January 2021 it received Orphan Drug Designation for PBC by the FDA. The selective NOX inhibitor GKT137831 NASH Competition
There are currently no drugs approved in the U.S. or E.U. for the treatment of NASH. In September 2019, Intercept Pharmaceuticals filed a New Drug Application to the U.S. FDA for obeticholic acid in patients with fibrosis due to NASH. Several clinical studies have been completed or are underway with drug candidates that may affect disease outcomes in patients with, elafibranor (GFT505), a PPARa/dagonist (Genfit SA), cenicriviroc, a CCR2/5 receptor antagonist (Allergan)(Abbvie), and selonsertib, an ASK1 inhibitor (Gilead)Resmitiron, aOverNovo Nordisk is also planning to start a Phase 3 study in NASH in 2021 with semaglutide, a
non-cirrhotic
NASH, including Phase 3 studies with OCA, anFXR-agonist (Intercept
(Intercept Pharmaceuticals)THR-beta
agonist (Madrigal). GLP-1
agonist. In addition, over two dozen other compounds are currently in Phase 2 development in NASH.Government Regulation and Product Approval
Government authorities in the United States, at the federal, state and local level, and other countries extensively regulate, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution, post-approval monitoring and reporting, marketing and export and import of products such as those we are developing. The pharmaceutical drug product candidates that we develop must be approved by the Food and Drug Administration (FDA) before they may be legally marketed in the United States.
United States Pharmaceutical Product Development Process
In the United States, the FDA regulates pharmaceutical products under the Federal Food, Drug and Cosmetic Act, and implementingimplements regulations. Pharmaceutical products are also subject to other federal, state and local statutes and regulations. The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources. Failure to comply with the applicable United States requirements at any time during the product development process, approval process or after approval, may subject an applicant to administrative or judicial sanctions. FDA sanctions could include refusal to approve pending applications, withdrawal of an approval, a clinical hold, warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement or civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on us. The
process required by the FDA before a pharmaceutical product may be marketed in the United States generally involves the following:
Completion of preclinical laboratory tests, animal studies and formulation studies according to Good Laboratory Practices (GLP) or other applicable regulations;
Submission to the FDA of an Investigational New Drug (IND) application, which must become effective before human clinical studies may begin;
Performance of adequate and well-controlled human clinical studies according to the FDA’s current Good Clinical Practices (GCP), to establish the safety and efficacy of the proposed pharmaceutical product for its intended use;
Submission to the FDA of a New Drug Application (NDA) for a new pharmaceutical product;
Satisfactory completion of an FDA inspection of the manufacturing facility or facilities where the pharmaceutical product is produced to assess compliance with the FDA’s current Good Manufacturing Practice standards (cGMP), to assure that the facilities, methods and controls are adequate to preserve the pharmaceutical product’s identity, strength, quality and purity;
Potential FDA audit of selected preclinical and clinical study sites that generated the data in support of the NDA; and
FDA review and approval of the NDA.
The lengthy process of seeking required approvals and the continuing need for compliance with applicable statutes and regulations require the expenditure of substantial resources and approvals are inherently uncertain.
Before testing any compounds with potential therapeutic value in humans, the pharmaceutical product candidate enters the preclinical testing stage. Preclinical tests include laboratory evaluations of product chemistry, toxicity and formulation, as well as animal studies to assess the potential safety and activity of the pharmaceutical product candidate. The conduct of the preclinical tests must comply with federal regulations and requirements including GLP. The sponsor must submit the results of the preclinical tests, together with manufacturing information, analytical data, any available clinical data or literature and a proposed clinical protocol, to the FDA as part of the IND. The IND automatically becomes effective 30 days after receipt by the
18
FDA, unless the FDA has concerns and notifies the sponsor by way of a clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical study can begin. The FDA may also impose clinical holds on a pharmaceutical product candidate at any time before or during clinical studies due to safety concerns or
non-compliance.
Submission of an IND may not result in the FDA allowing clinical studies to begin and, once begun, issues may arise that lead to suspension or termination of such clinical study.During the development of a new drug, sponsors are given opportunities to meet with the FDA at certain points. These points may be prior to submission of an IND, at the end of a Phase 2 trial and before an NDA is submitted. Meetings at other times may be requested. These meetings can provide an opportunity for the sponsor to share information about the data gathered to date, for the FDA to provide advice, and for the sponsor and FDA to reach agreement on the next phase of development. Sponsors typically use thedrug.drug candidate.
End-of-Phase
2 meeting to discuss their Phase 2 clinical results and present their plans for the pivotal Phase 3 clinical trial that they believe will support approval of the new Clinical studies involve the administration of the pharmaceutical productdrug candidate to healthy volunteers or patients under the supervision of qualified investigators, who are generally physicians not employed by or under the clinical study sponsor’s control. Clinical studies are conducted under protocols detailing, among other things, the objectives of the clinical study, dosing procedures, subject selection and exclusion criteria, how the results will be analyzed and presented and the parameters to be used to monitor subject safety. Each protocol must be submitted to the FDA as part of the IND. Clinical studies must be conducted in accordance with GCP. Further,
each clinical study must be reviewed and approved by an independent institutional review boardInstitutional Review Board (IRB) at, or servicing, each institution at which the clinical study will be conducted. An IRB is charged with protecting the welfare and rights of study participants and considers such items as whether the risks to individuals participating in the clinical studies are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the informed consent form that must be provided to each clinical study subject or his or her legal representative and must monitor the clinical study until completed.
Human clinical studies are typically conducted in three sequential phases that may overlap or be combined:
Phase 1. The pharmaceutical product is initially introduced into healthy human subjects and tested for safety, dosage tolerance, absorption, metabolism, distribution and excretion.
Phase 2. The pharmaceutical product is evaluated in a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases, to determine dosage tolerance, optimal dosage and dosing schedule and to identify patient populations with specific characteristics where the pharmaceutical product may be more effective.
Phase 3. Clinical studies are undertaken to further evaluate dosage, clinical efficacy and safety in an expanded patient population at geographically dispersed clinical study sites. These clinical studies are intended to establish the overall risk/benefit ratio of the product and provide an adequate basis for product labeling. The studies must be well-controlled and usually include a control arm for comparison. One or two Phase 3 studies are required by the FDA for an NDA approval, depending on the disease severity and other available treatment options.
Post-approval studies, or Phase 4 clinical studies, may be conducted after initial marketing approval. These studies are used to gain additional experience from the treatment of patients in the intended therapeutic indication.
Progress reports detailing the results of the clinical studies must be submitted at least annually to the FDA and written IND safety reports must be submitted to the FDA and the investigators for serious and unexpected adverse events or any finding from tests in laboratory animals that suggests a significant risk for human subjects. Phase 1, Phase 2 and Phase 3 clinical studies may not be completed successfully within any specified period, if at all. The FDA or the sponsor or its data safety monitoring board may suspend a clinical study at any time on
19
various grounds, including, but not limited to, a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical study at its institution if the clinical study is not being conducted in accordance with the IRB’s requirements or if the pharmaceutical productdrug candidate has been associated with unexpected serious harm to patients.
Concurrent with clinical studies, companies usually complete additional animal studies and must also develop additional information about the chemistry and physical characteristics of the pharmaceutical productdrug candidate as well as finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the pharmaceutical productdrug candidate and, among other things, must develop methods for testing the identity, strength, quality and purity of the final pharmaceutical product. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the pharmaceutical productdrug candidate does not undergo unacceptable deterioration over its shelf life.
United States Review and Approval Processes
Pre-Approval
RequirementsThe results of product development, preclinical studies and clinical studies, along with descriptions of the manufacturing process, analytical tests conducted on the chemistry of the pharmaceutical product, proposed
labeling and other relevant information are submitted to the FDA as part of an NDA requesting approval to market the product. The submission of an NDA is subject to the payment of substantial user fees; a waiver of such fees may be obtained under certain limited circumstances.
In addition, under the Pediatric Research Equity Act (PREA), an NDA or supplement to an NDA must contain data to assess the safety and effectiveness of the pharmaceutical product for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The FDA may grant deferrals for submission of data or full or partial waivers. Unless otherwise required by regulation, PREA does not apply to any pharmaceutical product for an indication for which orphan designation has been granted.
The FDA reviews all NDAs submitted before it accepts them for filing and may request additional information rather than accepting an NDA for filing. Once the submission is accepted for filing, the FDA begins an
in-depth
review of the NDA. Under the goals and policies agreed to by the FDA under the Prescription Drug User Fee Act (PDUFA), the FDA has 10 months from filing in which to complete its initial review of a standard NDA and respond to the applicant, and six months from filing for a priority NDA. The FDA does not always meet its PDUFA goal dates for standard and priority NDAs. The review process and the PDUFA goal date may be extended by three months if the FDA requests or if the NDA sponsor otherwise provides additional information or clarification regarding information already provided in the submission within the last three months before the PDUFA goal date.After the NDA submission is accepted for filing, the FDA reviews the NDA application to determine, among other things, whether the proposed product is safe and effective for its intended use, and whether the product is being manufactured in accordance with cGMP to assure and preserve the product’s identity, strength, quality and purity. The FDA may refer applications for novel pharmaceutical products or pharmaceutical products which present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions. During the pharmaceutical product approval process, the FDA also will determine whether a risk evaluation and mitigation strategy (REMS) is necessary to assure the safe use of the pharmaceutical product. If the FDA concludes that a REMS is needed, the sponsor of the NDA must submit a proposed REMS; the FDA will not approve the NDA without a REMS, if required.
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Before approving an NDA, the FDA will inspect the facilities at which the product is manufactured. The FDA will not approve the product unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. Additionally, before approving an NDA, the FDA will typically inspect one or more clinical sites as well as the site where the pharmaceutical product is manufactured to assure compliance with GCP and cGMP. If the FDA determines the application, manufacturing process or manufacturing facilities are not acceptable, it will outline the deficiencies in the submission and often will request additional testing or information. In addition, the FDA will require the review and approval of product labeling.
The NDA review and approval process is lengthy and difficult and the FDA may refuse to approve an NDA if the applicable regulatory criteria are not satisfied or may require additional clinical data or other data and information. Even if such data and information is submitted, the FDA may ultimately decide that the NDA does not satisfy the criteria for approval. Data obtained from clinical studies are not always conclusive and the FDA may interpret data differently than we interpret the same data. The FDA will issue a complete response letter if the agency decides not to approve the NDA. The complete response letter describes the specific deficiencies in the NDA identified by the FDA. The deficiencies identified may be minor, for example, requiring labeling changes, or major, for example, requiring additional clinical studies. Additionally, the complete response letter may include recommended actions that the applicant might take to place the application in a condition for
approval. If a complete response letter is issued, the applicant may either resubmit the NDA, addressing all of the deficiencies identified in the letter, or withdraw the application.
If a product receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications for use may otherwise be limited, which could restrict the commercial value of the product. Further, the FDA may require that certain contraindications, warnings or precautions be included in the product labeling. In addition, the FDA may require Phase 4 testing which involves clinical studies designed to further assess pharmaceutical product safety and effectiveness and may require testing and surveillance programs to monitor the safety of approved products that have been commercialized.
Expedited Development and Review Programs
The FDA offers a number of expedited development and review programs for qualifying product candidates. A product intended to treat a serious or life-threatening disease or condition may be eligible for breakthrough therapy designation to expedite its development and review. A product can receive breakthrough therapy designation if preliminary clinical evidence indicates that the product, alone or in combination with one or more other drugs or biologics, may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. The designation provides opportunities for frequent interactions with the review team during product development and, once an NDA is submitted, the product may be eligible for priority review. The NDA may also be eligible for rolling review, where the FDA may consider for review sections of the NDA on a rolling basis before the complete application is submitted.
EMA’s recently established PRIME regulatory initiative similarly provides early enhanced regulatory support to facilitate regulatory applications and accelerate the review of medicines that address a high unmet need.
Orphan Drug Designation
Under the Orphan Drug Act, the FDA may grant orphan designation to a drug or biologic intended to treat a rare disease or condition, which is a disease or condition that affects fewer than 200,000 individuals in the United States, or more than 200,000 individuals in the United States for which there is no reasonable expectation that the cost of developing and making available in the United States a drug for this type of disease or condition will be recovered from sales in the United States for that drug. Orphan drug designation must be requested before
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submitting an NDA. After the FDA grants orphan drug designation, the generic identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. The orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review or approval process.
If a product that has orphan drug designation subsequently receives the first FDA approval for the disease for which it has such designation, the product is entitled to orphan drug exclusive approval (or exclusivity), which means that the FDA may not approve any other applications, including a full NDA, to market the same drug for the same indication for seven years, except in limited circumstances, such as a showing of clinical superiority to the product with orphan drug exclusivity or if the FDA finds that the holder of the orphan drug exclusivity has not shown that it can assure the availability of sufficient quantities of the orphan drug to meet the needs of patients with the disease or condition for which the drug was designated. Orphan drug exclusivity does not prevent the FDA from approving a different drug or biologic for the same disease or condition, or the same drug or biologic for a different disease or condition. Among the other benefits of orphan drug designation are tax credits for certain research and a waiver of the NDA application fee.
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, exclusive marketing rights in the United States may be lost if the FDA later determines that the request for designation was materially defective or if the
Post-Approval Requirements
Any pharmaceutical products for which we receive FDA approvals are subject to continuing regulation by the FDA, including, among other things, record-keeping requirements, reporting of adverse experiences with the product, providing the FDA with updated safety and efficacy information, product sampling and distribution requirements, complying with certain electronic records and signature requirements and complying with FDA promotion and advertising requirements, which include, among others, standards for
direct-to-consumer
advertising, prohibitions on promoting pharmaceutical products for uses or in patient populations that are not described in the pharmaceutical product’s approved labeling (known as“off-label
use”), industry-sponsored scientific and educational activities and promotional activities involving the internet. Failure to comply with FDA requirements can have negative consequences, including adverse publicity, enforcement letters from the FDA, actions by the United States Department of Justice and/or United States Department of Health and Human Services (HHS) Office of Inspector General, mandated corrective advertising or communications with doctors, and civil or criminal penalties. Although physicians may prescribe legally available pharmaceutical products foroff-label
uses, manufacturers may not directly or indirectly market or promote suchoff-label
uses.Manufacturers of our products are required to comply with applicable FDA manufacturing requirements contained in the FDA’s cGMP regulations. cGMP regulations require, among other things, quality control and quality assurance, as well as the corresponding maintenance of records and documentation. Pharmaceutical product manufacturers and other entities involved in the manufacture and distribution of approved pharmaceutical products are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMP and other laws. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain cGMP compliance. Discovery of problems with a product after approval may result in restrictions on a product, manufacturer or holder of an approved NDA, including withdrawal of the product from the market. In addition, changes to the manufacturing process generally require prior FDA approval before being implemented and other types of changes to the approved product, such as adding new indications and additional labeling claims, are also subject to further FDA review and approval.
The FDA also may require post-marketing testing, known as Phase 4 testing, risk minimization action plans and surveillance to monitor the effects of an approved product or place conditions on an approval that could restrict the distribution or use of the product.
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U.S. Foreign Corrupt Practices Act
The U.S. Foreign Corrupt Practices Act, or FCPA, prohibits certain individuals and entities, including us, from promising, paying, offering to pay, or authorizing the payment of anything of value to any foreign government official, directly or indirectly, to obtain or retain business or an improper advantage. The U.S. Department of Justice and the U.S. Securities and Exchange Commission, or SEC, have increased their enforcement efforts with respect to the FCPA. Violations of the FCPA may result in large civil and criminal penalties and could result in an adverse effect on a company’s reputation, operations, and financial condition. A company may also face collateral consequences such as debarment and the loss of export privileges.
Federal and State Fraud and AbuseHealthCare Laws
In addition to FDA restrictions on marketing of pharmaceutical products, several other types of state and federal healthcare laws have been applied to restrict certain business practices in the biopharmaceutical industry in recent years. These laws include anti-kickback statutes, false claims statutes, data privacy and security laws, as well as transparency laws regarding payments or other items of value provided to healthcare providers. The
federal Anti-Kickback Statute prohibits, among other things, knowingly and willfully offering, paying, soliciting, or receiving remuneration to induce or in return for purchasing, leasing, ordering, or arranging for the purchase, lease, or order of any healthcare item or service reimbursable under Medicare, Medicaid, or other federally financed healthcare programs. The term “remuneration” has been broadly interpreted to include anything of value, including for example, gifts, discounts, the furnishing of supplies or equipment, credit arrangements, payments of cash, waivers of payment, ownership interests and providing anything at less than its fair market value. The Anti-Kickback Statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on one hand and prescribers, purchasers, and formulary managers on the other. Although there are a number of statutory exemptions and regulatory safe harbors protecting certain common activities from prosecution, the exemptions and safe harbors are drawn narrowly, and our practices may not in all cases meet all of the criteria for statutory exemptions or safe harbor protection. Practices that involve remuneration that may be alleged to be intended to induce prescribing, purchases, or recommendations may be subject to scrutiny if they do not qualify for an exemption or safe harbor. Several courts have interpreted the statute’s intent requirement to mean that if any one purpose of an arrangement involving remuneration is to induce referrals of federal healthcare covered business, the statute has been violated. The intent standard of the Anti-Kickback Statute was also broadened by the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively the PPACA, so that a person or entity no longer needs to have actual knowledge of this statute or specific intent to violate it in order to have committed a violation. In addition, the PPACA 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 civil False Claims Act (discussed below).
The federal False Claims Act prohibits any person from knowingly presenting, or causing to be presented, a false claim for payment to the federal government. Recently, several pharmaceutical and other healthcare companies have been prosecuted under these laws for allegedly providing free product to customers with the expectation that the customers would bill federal programs for the product. Other companies have been prosecuted for causing false claims to be submitted because of the companies’ marketing of the product for unapproved, and thus
non-reimbursable,
uses. Additionally, the civil monetary penalties statute imposes penalties against any person who is determined to have presented or caused to be presented a claim to a federal health program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent. The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, created additional federal criminal statutes that prohibit knowingly and willfully executing a scheme to defraud any healthcare benefit program, including private third-party payers and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services.23
The federal Physician Payments Sunshine Act, created under the PPACA, and its implementing regulations, require certain manufacturers of drugs, devices, biologicals and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) to report annually information related to certain payments or other transfers of value provided to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, or to entities or individuals at the request of, or designated on behalf of, the physicians and teaching hospitals, and applicable manufacturers and group purchasing organizations to report annually certain ownership and investment interests held by physicians and their immediate family members. Beginning in 2022, applicable manufacturers also will be required to report such information regarding its payments and other transfers of value during the previous year to physician assistants, nurse practitioners, clinical nurse specialists, anesthesiologist assistants, certified registered nurse anesthetists and certified nurse midwives.
We may also be subject to data privacy and security regulation by both the federal government and the states in which we conduct our business. HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and its implementing regulations, imposes certain requirements on covered entities, including certain healthcare providers, health plans, and healthcare clearinghouses, and their respective business associates that create, receive, maintain or transmit individually identifiable health information for or on behalf of a covered entity as well as their covered subcontractors relating to the privacy, security and transmission of individually identifiable health information. Among other things, HITECH makes HIPAA’s privacy and security standards directly applicable to “business associates”—independent contractors or agents of covered entities that receive or obtain protected health information in connection with providing a service on behalf of a covered entity.. HITECH also increased the civil and criminal penalties that may be imposed against covered entities, business associates and possibly other persons, and gave
state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorney’s fees and costs associated with pursuing federal civil actions. In addition, state laws govern the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.
The majority of states also have statutes or regulations similar to the aforementioned federal fraud and abuse laws, some of which are broader in scope and apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor. Further, some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government in addition to requiring drug manufacturers to report information related to payments or other transfers of value provided to physicians and other health care providers and entities, marketing expenditures, and drug pricing. Certain state and local laws also require the registration of pharmaceutical sales representatives.
These federal and state laws may impact, among other things, our proposed sales, marketing and education programs. If our operations are found to be in violation of any of the federal and state laws described above or any other governmental regulations that apply to us, we may be subject to significant penalties, including administrative, criminal and significant civil monetary penalties, damages, fines, imprisonment, exclusion from participation in government healthcare programs, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate its business and our results of operations. To the extent that any of our product candidates are ultimately sold in a foreign country, we may be subject to similar foreign laws and regulations, which may include, for instance, applicable post-marketing requirements, including safety surveillance, anti-fraud and abuse laws, and implementation of corporate compliance programs and reporting of payments or transfers of value to healthcare professionals.
Patent Term Restoration and Marketing Exclusivity
Depending upon the timing, duration and specifics of the FDA approval of the use of our pharmaceutical product candidates, some of our patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, commonly referred to as the Hatch-Waxman
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Amendments. 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. However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product’s approval date. The patent term restoration period is generally
one-half
the time between the effective date of an IND and the submission date of an NDA plus the time between the submission date of an NDA and the approval of that application. Only one patent applicable to an approved pharmaceutical product is eligible for the extension and the application for the extension must be submitted prior to the expiration of the patent. The United States Patent and Trademark Office, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration. In the future, we may apply for restoration of patent term for one of our currently owned or licensed patents to add patent life beyond its current expiration date, depending upon the expected length of the clinical studies and other factors involved in the filing of the relevant NDA.Market exclusivity provisions under the U.S. Food, Drug, and Cosmetic Act can also delay the submission or the approval of certain applications of other companies seeking to reference another company’s NDA. Currently seven years of reference product exclusivity are available to pharmaceutical products designated as orphan drugs, during which the FDA may not approve generic products relying upon the reference product’s data. Pediatric exclusivity is another type of regulatory market exclusivity in the United States. Pediatric exclusivity, if granted, adds six months to existing exclusivity periods and patent terms. This
six-month
exclusivity, which runs from the end of other exclusivity protection or patent term, may be granted based on the voluntary completion of a pediatric clinical study in accordance with anFDA-issued
“Written Request” for such a clinical study.Pharmaceutical Coverage, Pricing and Reimbursement
Significant uncertainty exists as to the coverage and reimbursement status of any pharmaceutical product candidates for which we obtain regulatory approval. In the United States and markets in other countries, sales of any products for which we receive regulatory approval for commercial sale will depend in part upon the availability of coverage and adequate reimbursement from third-party payors. Third-party payors include government payors such as Medicare and Medicaid, managed care providers, private health insurers and other organizations. In the United States, no uniform policy of coverage and reimbursement for products exists among third-party payors. While commercial payors often follow Medicare coverage policy and payment limitations, coverage and reimbursement for products can differ significantly from payor to payor. The process for determining whether a payor will provide coverage for a pharmaceutical product may be separate from the process for setting the price or reimbursement rate that the payor will pay for the pharmaceutical product. Third-party payors may limit coverage to specific pharmaceutical products on an approved list, or formulary, which might not include all of the
FDA-approved
pharmaceutical products for a particular indication.Third-party payors are increasingly challenging the price and examining the medical necessity and cost-effectiveness of medical products and services, in addition to their safety and efficacy. We may need to conduct expensive pharmaco-economic studies in order to demonstrate the medical necessity and cost-effectiveness of its products, in addition to the costs required to obtain the FDA approvals. Our pharmaceutical product candidates may not be considered medically necessary or cost-effective. A payor’s decision to provide coverage for a pharmaceutical product does not imply that an adequate reimbursement rate will be approved. Adequate third-party reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in product development. In addition, in the United States there is a growing emphasis on comparative effectiveness research, both by private payors and by government agencies. To the extent other drugs or therapies are found to be more effective than our products, payors may elect to cover such therapies in lieu of our products and/or reimburse our products at a lower rate.
Different pricing and reimbursement schemes exist in other countries. The downward pressure on health care costs in general, particularly prescription drugs, has become very intense. As a result, increasingly high barriers are being erected to the entry of new products. In addition, in some countries, cross-border imports from
low-priced
markets exert a commercial pressure on pricing within a country.25
The marketability of any pharmaceutical product candidates for which we receive regulatory approval for commercial sale may suffer if the government and third-party payors fail to provide adequate coverage and reimbursement. In addition, emphasis on managed care in the United States has increased and we expect this will continue to increase the pressure on pharmaceutical pricing. Coverage policies and third-party reimbursement rates may change at any time. Even if favorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.
In the United States and foreign jurisdictions, there have been a number of legislative and regulatory changes to the healthcare system that could affect our future results of operations. In particular, there have been and continue to be a number of initiatives at the United States federal and state levels that seek to reduce healthcare costs. For example, in March 2010 the PPACA was enacted, which includes measures to significantly change the way healthcare is financed by both governmental and private insurers. Among the provisions of the PPACA of importance to the pharmaceutical and biotechnology industry are the following:
an annual, nondeductible fee on any entity that manufactures or imports certain branded prescription drugs and biologic agents, apportioned among these entities according to their market share in certain government healthcare programs;
an increase in the rebates a manufacturer must pay under the Medicaid Drug Rebate Program to 23.1% and 13% of the average manufacturer price for branded and generic drugs, respectively;