Item 1. Business.
We are a biopharmaceutical company focused on discovering, developing and commercializing innovative therapeutics for immune disorders.
Our product candidates span three distinct specialty disease areas. Our lead asset, RPC1063, is being developed as an oral therapy for the treatment of Relapsing Multiple Sclerosis (RMS) and
Inflammatory Bowel Disease (IBD). Our second asset, RPC4046, is being developed for the treatment of an allergic/immune-mediated disorder, Eosinophilic Esophagitis (EoE), which is an Orphan Disease.
Our strategy is to develop best-in-class (by mechanism of action) drug candidates and selectively pursue first-in-class (based on projected timing of approval) market positions. The mechanism of
action for each of our product candidates has been validated in one or more immunology indications. RPC1063 was selected for pharmaceutic properties with potential to demonstrate best-in-class
differentiation in RMS. In IBD and EoE, our product candidates RPC1063 and RPC4046, respectively, have the potential to be the first in their respective classes to be approved.
Our
founders and executive management team have held senior positions at leading pharmaceutical and biotechnology companies and possess substantial experience across the spectrum of drug
discovery, development and commercialization. Our CEO was previously the CEO of Facet Biotech, which was developing daclizumab for RMS when Facet was acquired by Abbott Laboratories. Members of our
senior executive team have also played key roles at Biogen Idec, Bristol-Myers Squibb and Genentech
in successfully advancing therapeutics, including ocrelizumab in RMS, as well as advancing and launching therapeutics in immune disease, including Orencia® (abatacept) and
Rituxan® (rituximab) for Rheumatoid Arthritis.
RPC1063
is currently being tested in an accelerated design, randomized Phase 2/3 study called RADIANCE for the treatment of RMS. The Phase 2 portion of the study completed
enrollment in October 2013 and primary endpoint (top-line) results are anticipated in mid-2014. In the fourth quarter of 2013, we conducted a pre-planned interim analysis of the Phase 2 data.
Based upon this analysis, as well as approval from the independent Data Monitoring Committee (DMC) following its review of interim analysis data, we initiated the Phase 3 portion of RADIANCE in
December 2013. Our accelerated Phase 2/3 design for RADIANCE allowed us to eliminate a potentially lengthy period of time between completing enrollment for the Phase 2 portion and
initiating enrollment for the Phase 3 portion. We have obtained Special Protocol Assessment (SPA) agreement from the US Food and Drug Administration (FDA) on our clinical trial design for the
Phase 3 portion of RADIANCE as well as a second planned RMS Phase 3 study. RPC1063 is also being tested in a randomized Phase 2 study for the treatment of Ulcerative
Colitis (UC), a gastrointestinal (GI) disease affecting a well-defined subset of IBD patients. Top-line results for this Phase 2 study are anticipated in mid-2014.
RPC1063
impacts the immune system by modulating an important G protein-coupled receptor (GPCR) known as the sphingosine 1-phosphate 1 receptor (S1P1R), a member of the sphingosine
1-phosphate receptor (S1PR) family of receptors. GPCRs are membrane protein receptors involved in a broad range of biological processes and diseases. S1P1R modulation causes selective and
reversible retention, or sequestration, of circulating white blood cells (lymphocytes) in peripheral lymphoid tissue (such as the lymph nodes) and in the thymus. The sequestration of lymphocytes is
achieved by modulating cell migration patterns (known as "lymphocyte trafficking"), specifically preventing self-targeting, or autoreactive, lymphocyte migration to areas of disease inflammation,
which is a major contributor to autoimmune disease. By measuring lymphocyte count reduction in peripheral blood circulation, we are able to observe and confirm this desired drug effect.
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Reduction
in peripheral lymphocyte count serves as a pharmacodynamic measure, or a "biomarker," of the physiological effect of S1PR modulators in RMS. Certain threshold levels of
peripheral lymphocyte count reduction correlate with efficacy in Phase 2 and Phase 3 RMS studies as measured by standard efficacy endpoints: for Phase 2, a significant reduction
in the cumulative number of total gadolinium enhancing (GdE) lesions (or areas of injury or disease in the brain highlighted by a contrast medium) as determined by magnetic resonance imaging (MRI);
and for Phase 3, a significant reduction in the annualized relapse rate (ARR), which is a measure of the rate of disease reoccurrence. We have demonstrated dose-dependent lymphocyte count
reduction to target levels with RPC1063 in a Phase 1 study. In addition, observations from our interim analysis of the data from our Phase 2 study include preliminary clinical activity
and reduction in lymphocyte count that appear to be consistent with data from other S1PR modulators on the market or in development. The Phase 2 and Phase 3 portions of our
randomized Phase 2/3 study of RPC1063 in RMS seek to demonstrate efficacy based on the noted MRI and ARR endpoints, respectively.
The
first oral immune-targeting agent approved for RMS was Novartis' Gilenya® (fingolimod), a non-selective S1PR modulator launched in 2010. Achieving worldwide sales of
approximately $1.9 billion in 2013, the success of Gilenya® highlights the unmet need in the RMS market for efficacious, orally administered therapies. RPC1063 was discovered by our
scientific founders and advanced by members of our management team for development based on key pharmaceutic properties that have the potential for clinically meaningful improved safety features as
compared to those of Gilenya®.
In
addition to RMS, we believe that S1P1R modulation of lymphocyte trafficking may have utility in other immune disorders. An increasing body of both preclinical and clinical evidence
provides a strong rationale for this mechanistic approach in IBD, and lymphocyte trafficking agents have been shown to be effective in IBD treatment. For example, Tysabri® has been
approved by the FDA for the treatment of Crohn's Disease (CD), one form of IBD. The FDA has also granted priority review to an investigational agent, vedolizumab, which inhibits trafficking of
lymphocyte populations similar to those targeted by S1P1R modulators. In December 2013, an FDA advisory committee recommended approval of vedolizumab for the treatment of UC and CD and the PDUFA
action date is in May 2014. Given the lack of disease-modifying oral therapeutics in late-stage development for IBD, we believe RPC1063 could potentially represent the best orally administered therapy
for IBD and effect a paradigm shift in IBD treatment similar to the impact on RMS treatment dynamics caused by the market entry of Gilenya®.
Our
second asset, RPC4046 for the treatment of EoE, builds upon our core competencies in immunology and GI diseases. In-licensed from AbbVie Bahamas Ltd. and AbbVie Inc.,
which we refer to together as AbbVie (formerly a part of Abbott Laboratories), RPC4046 is a monoclonal antibody directed against the interleukin-13 (IL-13) target, which has been validated in Asthma,
a predominantly allergic/immune-mediated disorder. EoE is an Orphan-designated GI disease of high unmet need with no current FDA-approved therapy. As part of our development program for RPC4046 in
EoE, we held a pre-Investigational New Drug application (IND) meeting with the FDA in the fourth quarter of 2013 in which the FDA was in general agreement with the design of our Phase 2 study
and nonclinical program. We plan to submit a new IND in the first half of 2014 and subsequently initiate a randomized Phase 2 trial.
We
utilize our proprietary GPCR structure-based drug design technology platform in discovery research to identify potential best-in-class product candidates directed to
high-value GPCR targets. Structure-based drug design is a technique by which the three-dimensional structure of a protein receptor is identified and utilized in drug discovery research to
design potential drug candidates to the specific requirements of the receptor. Our technology platform augments our expertise in GPCR biology. Our research includes a preclinical program
developing oral, small molecule, positive allosteric modulators (PAMs) of the glucagon-like peptide-1 receptor (GLP-1R) for the treatment of Type 2
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Diabetes.
Allosteric modulators bind the protein receptor at a site distinct from the receptor's natural binding partner (ligand), and positive allosteric modulators of the GLP-1R enhance the activity
between the GLP-1R and its natural binding partner. We have previously entered into several collaborative, cash-flow positive arrangements to leverage this technology platform, including one ongoing
technology transfer program.
We
retain full development and commercial rights to RPC1063. We may seek a development and commercial partner for RPC1063 after the availability of Phase 2 results to offset risk
and preserve capital, although we intend to retain key development and commercialization rights. We believe retaining this strategic flexibility will help us to maximize shareholder value. If we are
successful in developing RPC1063 and/or RPC4046, we may elect to build a targeted specialty sales force.
Our key product candidates are:
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RPC1063 for the treatment of
RMS:
RPC1063 is a novel, once daily, selective and potent small molecule S1P1R modulator administered orally for immunology indications.
RMS is a chronic autoimmune disorder of the central nervous system (CNS), characterized by recurrent acute exacerbations (relapses) of neurological dysfunction followed by variable degrees of recovery
with clinical stability between relapses (remission). The disease invariably results in progressive and permanent accumulation of disability and impairment, affecting adults during their most
productive years. RMS disproportionately affects women, with a majority of patients diagnosed between the ages of 20 and 40.
RMS
represents a specialty market estimated at 500,000 patients worldwide. Total branded RMS drug sales in the global market were approximately $13 billion in 2012, increasing from
approximately $11 billion in 2011. Since the market entry of oral drugs for RMS, the oral drug market share has reached approximately 25% of the total RMS market. Based upon forecasts by an
independent market assessment firm, we believe this market share could approach 50% by 2018. We also believe oral agents will modify treatment dynamics over time, driving further market growth,
largely displacing standard of care first-line injectable therapies and providing more options in a market characterized by frequent cycling through therapeutic agents.
The
first oral agent approved for RMS was Gilenya®, a non-selective S1PR modulator launched in 2010. Biogen Idec's Tecfidera® (dimethyl fumarate), which was approved by the FDA
in 2013, has further shifted treatment dynamics in favor of oral therapy, consistently gaining market share since its launch. A primary measure of efficacy for RMS therapeutics is reduction in ARR
compared with placebo, which ranges from approximately 30% for standard-of-care injectable agents to 54% for Gilenya® and 44-53% for Tecfidera®.
We
believe there is a significant market opportunity for effective oral RMS therapies with improved safety and tolerability profiles. Based on profiles of currently marketed therapies and available
information for therapies in late-stage clinical development, we believe RPC1063 has the potential to be the best oral S1PR modulator for RMS. In particular, we believe RPC1063 has the potential for
meaningfully improved safety features, including:
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Reduced cardiovascular side effects (in particular, decrease in heart rate and heart conduction abnormalities, including
prolongation of the QT interval), through favorable pharmaceutic and pharmacologic properties, utilization of an initially increasing dosing regimen, known as dose titration, and selectivity for
S1P1R;
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Better management of infections and retreatment decisions through a shorter half-life and rapid lymphocyte recovery, which
can allow for better treatment options and outcomes in the case of disease relapse, infection, or pregnancy, since the patient's immune system is more rapidly reconstituted;
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Reduced liver toxicity, known as hepatotoxicity, and lower resultant treatment discontinuation rates; and
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Avoidance of potential "off-target" side effects, including potential for promotion of fibrosis and hypertension.
In
October 2013, we completed enrollment in the Phase 2 portion of our accelerated design, randomized Phase 2/3 study called RADIANCE. Designed to enroll 210 patients, the Phase 2
portion enrolled 258 patients based on strong investigator and patient interest. The Phase 2 portion of RADIANCE is a randomized, double-blind comparison of the doses of 0.5 and 1.0 mg of
RPC1063 against placebo in patients with RMS, and is designed to characterize the short-term safety and efficacy of RPC1063 in RMS. The primary objective is to demonstrate the superior clinical
efficacy of RPC1063 compared to placebo by showing a reduction in the cumulative number of total GdE lesions determined by MRI from week 12 to week 24 of study treatment. The primary endpoint
(top-line) results are anticipated in mid-2014.
In
the fourth quarter of 2013, we conducted a pre-planned interim analysis of the Phase 2 RADIANCE data. Based upon this analysis, as well as approval from the independent DMC following its
review of interim analysis data, we initiated the Phase 3 portion of RADIANCE in December 2013. The Phase 3 portion, which will enroll up to 1,200 patients, is a randomized,
double-blind, double-dummy comparison of RPC1063 to an active control in patients with RMS. Patients are receiving one of two oral daily doses of RPC1063 (0.5 mg or 1.0 mg) or a weekly injection of
Avonex® 30 µg, and the primary objective is to assess whether RPC1063 is superior to Avonex® in reducing the ARR at the end of month 24 of treatment in
patients with RMS.
Our
accelerated Phase 2/3 design for RADIANCE allowed us to eliminate a potentially lengthy period of time between completing enrollment for the Phase 2 portion and initiating enrollment
for the Phase 3 portion. We have obtained SPA agreement from the FDA on our clinical trial design for the Phase 3 portion of RADIANCE as well as a second planned RMS Phase 3
study.
A
composition of matter patent for RPC1063 was issued by the US Patent and Trademark Office (PTO) in the third quarter of 2013 and we expect this patent will expire in 2029 (worldwide), not including
any patent term adjustments or extensions.
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RPC1063 for the treatment of
UC:
IBD is comprised of two chronic, autoimmune, GI inflammatory disorders: UC and CD. UC is a GI inflammatory disorder
involving ulcers in the colon and is characterized by a chronic course of remissions and exacerbations. Patients suffer from a multitude of GI symptoms, including diarrhea, rectal bleeding and
abdominal pain.
The
worldwide prevalence of IBD is estimated at approximately 2.5 million patients, with UC patients numbering approximately 1.5 million. Total IBD drug sales were forecast for 2012 by
the Datamonitor Group at approximately $5 billion worldwide. However, the development and potential for approval of novel mechanism of action agents, including vedolizumab, a lymphocyte
trafficking agent in development by Takeda Pharmaceutical Company, are expected, if approved, to accelerate market growth. In December 2013, an FDA advisory committee recommended approval of
vedolizumab for the treatment of UC and CD. Positive Phase 3 clinical outcomes in UC and CD for vedolizumab contribute
to a growing body of evidence generated by third parties which supports efficacy for agents that inhibit lymphocyte trafficking in the treatment of IBD and appear to improve maintenance over currently
approved anti-tumor necrosis factor (TNF) biologics. While vedolizumab, an intravenously (IV) administered therapy, could have the potential to impact the current treatment algorithm for IBD,
an oral therapy such as RPC1063 inhibiting trafficking of similar lymphocyte populations could further evolve treatment practices.
Current
UC treatments include oral therapies, such as corticosteroids designed to treat inflammation in the intestine. However, the long-term use of anti-inflammatory agents such as
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corticosteroids
is associated with significant side effects. While these agents are often sufficient for the treatment of mild disease, patients with moderate to severe pathology often require
treatment with injectable or infused biologics. Biologic therapies, including the anti-TNF class of drugs, are also used to treat UC. However, these products are limited by an injectable or infused
route of administration and side effects, such as infections, immunogenicity and infusion/injection site reactions, and lack of efficacy in a significant proportion of patients. For these reasons,
biologic therapies have typically been reserved for the last line of treatment in UC.
We
believe there is a significant market opportunity for effective oral therapies that can induce and maintain clinical response and remission, and which offer favorable safety profiles conducive to
chronic, long-term administration. Based on available information on the limited number of therapies currently in clinical development, we believe RPC1063 has the potential to be the best orally
administered therapy as well as the first S1PR modulator approved for the treatment of UC. The potential product profile of RPC1063 may allow its use early in the step-by-step treatment procedure (or
treatment algorithm) for IBD or as an oral therapy alternative to injectable or infused biologics.
We
are currently enrolling a randomized Phase 2 study, called TOUCHSTONE, evaluating the ability of RPC1063 to induce clinical remission in patients with moderately to severely active UC. The
primary objective of TOUCHSTONE is to compare the efficacy of RPC1063 to placebo for the induction of clinical remission in patients with moderately to severely active UC after eight weeks of
treatment. We expect to complete enrollment for TOUCHSTONE in the first half of 2014 with top line results available in mid-2014.
We
believe the rigorous design of TOUCHSTONE provides a basis for a reliable proof-of-concept study in IBD with validated and objective endpoints. We designed TOUCHSTONE with endpoints and a
statistical analysis plan consistent with a registrational (Phase 3) study approach. Typically for a registration program the FDA requires two Phase 3 studies for induction of clinical
remission and one Phase 3 study for maintenance of clinical remission. The FDA has indicated that if the results of the study are statistically and clinically persuasive, TOUCHSTONE could be
considered as a Phase 3 study for RPC1063 in UC and the balance of our registration program could be supported by a single additional Phase 3 induction of clinical remission efficacy
study accompanied by a Phase 3 maintenance of clinical remission study. However, we have not requested an SPA with respect to TOUCHSTONE, and the FDA could change its view even if the study
achieves statistically and clinically persuasive results.
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RPC4046 for the treatment of
EoE:
RPC4046 is a monoclonal antibody selective to IL-13 and produced by recombinant DNA technology. The RPC4046 antibody binds strongly
(with high affinity) and has been "humanized," meaning it is made in non-human species, but modified to increase its similarity to an antibody produced naturally in humans. EoE is a chronic
immune-mediated Orphan Disease with symptoms related to esophageal dysfunction, including food impaction and difficulty swallowing, which can have a profound impact on quality of life.
Based
on reported prevalence and diagnosis rates, we estimate that the 2012 diagnosed EoE patient population is approximately 160,000 patients in the US and approximately 145,000 patients in the
European Union (EU). Despite the significant morbidity associated with EoE, there are currently no FDA-approved drugs, and the current mainstay of treatment, topical steroids, is associated with a
short-lived duration of efficacy and local fungal infections. As such, there is a high unmet need for drugs that sustainably reduce symptoms and potentially alter the course of EoE.
IL-13
antagonists have demonstrated efficacy in preclinical models of allergic and other immunological disorders. The first human proof-of-concept data was obtained in a Phase 2 study of
Roche's anti-IL-13 antibody, lebrikizumab, for the treatment of Asthma. Similar to Asthma,
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increased
tissue levels of IL-13 present in EoE are associated with over-expression of certain proteins which may serve as predictive biomarkers for patients with higher response rates to therapy
and/or targeted immunotherapy.
EoE
is a disease characterized by allergic-related tissue inflammation and by extensive structural changes to the tissues of the esophagus, including fibrosis. Numerous studies have established that
the cytokine IL-13 plays a prominent role in EoE by initiating and amplifying inflammatory pathways as well as by promoting tissue damage consistent with the structural changes and fibrosis observed
in patients with EoE. In rodent studies, expression or delivery of IL-13 to the lung induces inflammation and tissue remodeling and fibrosis in the esophagus, consistent with pathologic features of
human EoE. In humans, IL-13 is over expressed in EoE and has been shown to promote allergic inflammation by causing activation of proinflammatory cells, including eosinophils and mast cells, and by
inducing the expression of immunoglobulin E (IgE) antibodies that play a prominent role in allergic diseases. In addition, IL-13 treatment of harvested cells from normal human esophagus induces a
genetic expression profile that overlaps with an inflammatory and tissue remodeling genetic expression profile seen in patients with EoE. We believe that RPC4046 treatment therefore has the potential
to block important pathologic processes and consequently improve clinical symptoms in patients with EoE.
As
part of our development program for RPC4046 in EoE, we held a pre-IND meeting with the FDA in the fourth quarter of 2013 in which the FDA was in general agreement with the design of our
Phase 2 study and nonclinical program. We plan to submit a new IND in the first half of 2014 and subsequently initiate a randomized Phase 2 trial in adolescent and adult active EoE
patients to demonstrate proof-of-concept in EoE through measurement of histologic, clinical and endoscopic assessments. We plan to enroll approximately 90 patients, including adults and adolescents,
to assess two doses of RPC4046 against placebo. The primary objective of the Phase 2 trial will be to determine whether treatment with RPC4046 has clinical efficacy as determined by
histological improvement of eosinophil count reduction.
We
have an exclusive development license to RPC4046 from AbbVie. AbbVie holds an option to enter into a global collaboration with us for RPC4046 following the availability of results from the planned
Phase 2 study. If AbbVie does not exercise its option, we will have an exclusive worldwide license for the development and commercialization of RPC4046.
We
utilize our proprietary GPCR structure-based drug discovery and design technology platform to identify potential best-in-class therapeutics for high-value GPCR targets. Our research
includes our in-house program developing oral, small molecule, GLP-1R PAMs for the treatment of Type 2 Diabetes. Activation of the GLP-1 receptor with peptide modulators has been one of
the most important therapeutic advances in the treatment of Type 2 Diabetes in the last decade. However, marketed GLP-1R peptide agonists are only available as injections, which has limited
adoption of the therapy. We believe that an oral, potent, non-peptide modulator of GLP-1R would make this important therapeutic class more convenient and accessible to a wider population of
Type 2 Diabetes patients. Our efforts involving GLP-1R PAMs for the treatment of Type 2 Diabetes have only been preclinical to date, and we have not filed an IND for this program.
In addition to our in-house research discovery efforts, we have entered into several collaborations utilizing our proprietary GPCR platform. These consist of a completed collaboration and
ongoing technology transfer program with Ono Pharmaceutical Co., Ltd. (Ono), a completed partnership with Ortho-McNeil-Janssen Pharmaceuticals, Inc. (OMJP) and a completed
collaboration with Eli Lilly and Company (Eli Lilly).
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Our Strategy
Our goal is to build a sustainable biopharmaceutical company that significantly advances innovative treatment alternatives for patients
with immune disorders. Critical components of our business strategy include:
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Focus our resources on advancing our product candidates to address unmet patient needs in immune
disorders:
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Successfully develop RPC1063 for the treatment of
RMS.
We have completed enrollment in the Phase 2 portion and initiated the Phase 3 portion of RADIANCE, our randomized
Phase 2/3 study of RPC1063 in RMS. The goal of our development strategy for RPC1063 in RMS is to demonstrate clinically meaningful differentiation, including a favorable safety profile. We
believe RPC1063 has the potential to be the best oral S1PR modulator for RMS.
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Successfully develop RPC1063 for the treatment of
UC.
We have initiated TOUCHSTONE, our randomized Phase 2 study of RPC1063 in UC. Our development strategy for RPC1063 in UC
leverages the validation of S1P1R modulation in RMS. Emerging positive data for other lymphocyte trafficking agents, such as vedolizumab, highlight the potential for this novel mechanism of action in
IBD. We believe RPC1063 has the potential to be the best orally administered therapy, as well as the first S1PR modulator, approved for the treatment of UC. Given a lack of disease-modifying oral
therapeutics in late-stage development for IBD, we believe RPC1063 could effect a paradigm shift in IBD treatment not unlike the impact on RMS treatment dynamics caused by the market entry of
Gilenya®.
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Successfully develop RPC4046 for the treatment of
EoE.
Following our fourth quarter 2013 pre-IND meeting with the FDA, we intend to file a new IND for RPC4046 in the first half of
2014 and subsequently initiate a randomized Phase 2 clinical study in EoE, an Orphan Disease for which there is currently no FDA-approved therapy. We believe we could potentially develop
RPC4046 independently through regulatory approval, although AbbVie has an option to collaborate with us after the availability of Phase 2 results in EoE.
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Retain substantial development and commercialization
rights.
We may seek a development and commercial partner for RPC1063 after the availability of Phase 2 results to offset risk and
preserve capital, although we intend to retain key development and commercialization rights. We believe retaining this strategic flexibility will help us to maximize shareholder value. If we are
successful in developing RPC1063 and/or RPC4046, we may elect to build a targeted specialty sales force.
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Mitigate development risk with validated mechanisms of action and use
of biomarkers.
We seek to mitigate development risk by developing product candidates with validated mechanisms of action and by
utilizing biomarkers that may correlate with clinical efficacy, such as lymphocyte count reduction for RPC1063 since other S1PR modulators have demonstrated a positive relationship between lymphocyte
count reduction and efficacy in RMS. Biomarkers may also identify patient subgroups that may be more responsive to targeted therapy. For example, up-regulated tissue levels of certain proteins that we
can measure in the clinical setting are associated with IL-13 expression and may serve as diagnostic biomarkers for EoE patients in our RPC4046 program. With respect to developing product candidates
with validated mechanisms of action, we are relying upon third-party data which could prove to be inaccurate or unreliable and thus adversely affect our assumptions.
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Accelerate timelines through innovative clinical study
design.
We seek to accelerate development timelines through innovative clinical study design. Our Phase 2/3 study in RMS allowed
us to eliminate a potentially lengthy period of time between completing enrollment for
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the
Phase 2 portion of the study and initiating enrollment for the Phase 3 portion of the study. We have engaged proactively with regulatory authorities to define expedited pathways and
secure high-level regulatory agreements, such as the two SPAs we have obtained from the FDA for the Phase 3 portion of RADIANCE and a second planned RMS Phase 3 study. The robust design
of our ongoing Phase 2 study for RPC1063 in UC is another example of potentially accelerated development. The FDA has indicated that if the results of the study are statistically and clinically
persuasive, the balance of our registration program for RPC1063 in UC could be supported by a single Phase 3 induction of clinical remission efficacy study accompanied by a Phase 3
maintenance of clinical remission study. Based upon the lack of approved products in EoE, we plan to seek Orphan and/or Fast Track designation for RPC4046 in EoE. If granted, this designation may
allow us to pursue an accelerated development program, including registration with a smaller patient safety database than otherwise required in non-Orphan indications as well as priority review,
allowing for a more rapid development timeline to potential registration.
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Build our pipeline in-house and through
in-licensing.
We intend to deploy most of our resources to develop our lead clinical compounds. However, we recognize the importance of
building a pipeline to create a sustainable biopharmaceutical company. Drawing upon our experience with RPC4046, we may engage in further in-licensing, particularly where a product candidate
potentially addresses a high unmet medical need within our development expertise. We have used our drug discovery platform to catalyze a novel preclinical research program focused on GLP-1R
PAMs for the potential treatment of Type 2 Diabetes. Building upon our platform-associated expertise in GPCR targets, we have identified additional high-value GPCRs for
which we may initiate drug discovery efforts in the future.
Our Pipeline
Note: All dates represent Company expectations. Actual timing may vary.
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Our Lead Product CandidateS1P1R Modulator RPC1063
Receptos is developing RPC1063, a novel, once daily, selective and potent small molecule S1P1R modulator administered orally for the
treatment of immunology indications. We exclusively licensed a broad genus patent for S1P1R modulator compounds from The Scripps Research Institute (TSRI) in 2009. From our early stage research on
these compounds, we identified and selected a product candidate, RPC1063, based on key pharmaceutic properties that offer the potential for clinically meaningful improved safety features. A
composition of matter patent for RPC1063 has issued and we expect this patent will expire in 2029 (worldwide), not including any patent term adjustments or extensions. We believe RPC1063 has the
potential to be the best oral S1PR modulator for RMS as well as the best orally administered therapy and first S1PR modulator approved for the treatment of UC.
S1P1R Modulation in RMS and IBD
There are five sphingosine 1-phosphate (S1P) receptors (S1PRs), termed S1P1R, S1P2R, S1P3R, S1P4R and S1P5R. The S1P1R is expressed on
lymphocytes that are associated with the underlying inflammation of autoimmune diseases. Importantly, S1P1R modulation causes selective and reversible sequestration of circulating lymphocytes in the
thymus and peripheral lymphoid tissues. Sequestration is achieved through changes in lymphocyte trafficking, preventing autoreactive lymphocyte migration to sites of inflammation, including the CNS in
RMS and the GI tract in IBD. This approach differs from cytotoxic agents which may cause non-selective depletion or inhibition of healthy, functional lymphocytes. Sequestration of lymphocytes in the
lymphoid tissues results in decreased lymphocyte count in peripheral circulation, which can be easily measured through blood sampling and thereby provide a robust mechanistic pharmacodynamic biomarker
for preclinical and clinical studies.
Threshold
levels of lymphocyte count reduction have been correlated to clinical efficacy for Gilenya®, the first-in-class non-selective S1PR modulator for the treatment of
RMS, as well as other S1PR modulators in late-stage clinical development by third parties. Additional direct beneficial effects of S1P1R modulation for RMS patients may occur in the CNS. For example,
stimulation of the S1P1R could increase the integrity of the blood-brain barrier, which may inhibit the trafficking of autoreactive lymphocytes to the site of disease. In addition, S1P1R is expressed
in CNS tissue and modulation of this receptor in the brain may have neuroprotective effects such as reduction in brain atrophy, or brain volume loss.
We
believe that S1P1R modulation of lymphocyte trafficking may have utility in other autoimmune diseases. An increasing body of both preclinical and clinical evidence provides a strong
rationale for this mechanistic approach in IBD, and lymphocyte trafficking agents have been shown to be effective in IBD treatment. For example, Tysabri® has been approved by the FDA for
the treatment of Crohn's Disease (CD), one form of IBD. The FDA has also granted priority review to an investigational agent, vedolizumab, which inhibits trafficking of similar lymphocyte populations
to that of S1P1R modulators. In December 2013, an FDA advisory committee recommended approval of vedolizumab for the treatment of UC and CD, and the PDUFA action date is in May 2014. In addition, in
late 2012 an S1PR modulator (ponesimod) successfully met the primary endpoint of a Phase 2 double blind, placebo-controlled study in patients with moderate to severe Chronic Plaque Psoriasis.
Although the data supporting correlation of lymphocyte count reduction with clinical efficacy has to date been generated by third parties, we use lymphocyte count reduction as a biomarker which we
believe will correlate with clinical efficacy in our current Phase 2 studies of RPC1063 in RMS and UC. We have demonstrated lymphocyte count reduction in the clinical setting with RPC1063.
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S1P1R Modulator RPC1063 in RMS
RMS Description
Multiple sclerosis (MS) is a chronic disorder of the CNS involving brain, spinal cord and optic nerves, and is characterized clinically
by recurring episodes of neurological symptoms (relapses). MS is immune-mediated, driven by autoreactive lymphocytes that attack the covering surrounding nerve cells, or myelin sheath. This autoimmune
response results in destruction of the myelin sheath, termed demyelination, and nerve damage. The CNS destruction caused by autoreactive lymphocytes can lead to debilitating clinical symptoms such as
numbness, difficulty walking, visual loss, lack of coordination and muscle weakness.
RMS
is the most frequent clinical presentation of MS. The majority of patients are diagnosed between the ages of 20 and 40, with a peak at age 29-30, and there is a consistent 2:1
female-to-male ratio. At onset, approximately 85% of MS patients have RMS, characterized by recurrent acute exacerbations (relapses) of neurological dysfunction followed by variable degrees of
recovery with clinical stability between relapses. Almost half of relapses result in incomplete recovery of function and leave permanent disability and impairment that accumulates over time. Owing to
the complications of chronic disability, life span for patients with MS is typically shortened by approximately ten years. Depression and/or anxiety due to the physical co-morbidities associated with
MS result in suicide in approximately 15-30% of patients.
The
early onset and progressive nature of RMS highlights the need for treatment options that are convenient and tolerable. This unmet need is particularly important for sufferers in the
workforce or those raising families. The inevitability of both relapse and disease progression also highlights the cycling nature of RMS therapy as patients and physicians avail themselves of
medications that offer progressive levels of efficacy and differing risk/benefit profiles. As new efficacious and safe treatments are approved, RMS patients will have more options for treatment in
earlier stages of the disease.
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Overview of the RMS Market
In 2012, the annual RMS market for branded therapeutic treatments was approximately $13 billion worldwide (excluding any
supportive care therapies), increasing from approximately $11 billion in 2011. These included injectable therapies Avonex® (interferon (IFN)
b
-1a) Betaseron® (IFN
b
-1b), Copaxone® (glatiramer acetate) and Rebif® (IFN
b
-1a), together often referred to as the ABCRs, as well as Tysabri® (natalizumab) and the oral therapies Gilenya®, which is a
non-selective S1PR modulator, and Aubagio® (teriflunomide), which is not an S1PR modulator:
2012 RMS Market: ~$13 billion
Note: Aubagio® sales were $9M for 2012
($ in billions)
We
believe further RMS market growth may be driven to a significant extent by the market entry of additional oral therapies that demonstrate higher efficacy and improved safety and
tolerability compared to the ABCRs and Tysabri®. In 2012, the second full year after its launch,
Gilenya® achieved $1.2 billion in worldwide sales. Highlighting continued adoption and a strong revenue growth trajectory, Gilenya® achieved worldwide sales of
approximately $1.9 billion in 2013. In addition, Tecfidera® achieved $876 million in sales in 2013, its first year of launch. We believe that the success of these products is
indicative of a strong market trend toward efficacious oral therapies.
RMS
patients represent a specialty market of an estimated 500,000 patients worldwide. RMS patients can be segmented into first-line, second-line and last-line treatment groups.
RMS Patient Population
The
ABCR therapies have often been the first line of treatment in RMS. Newly diagnosed RMS patients receive ABCR treatment and typically cycle through the therapies for so long as they
remain controlled and responsive to therapy. However, patients inevitably become uncontrolled and/or progress to become non-responsive. These second-line patients may opt to quit therapy altogether
due to
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tolerability
issues or dissatisfaction with treatment options, such as injection fatigue or perceived lack of efficacy. Finally, the last line of treatment represents a small patient population with
more severe disease progression willing to tolerate risk/benefit profiles of more efficacious drugs accompanied by serious side effects. We believe the second-line uncontrolled and/or discontinued
patient population represents an area of large unmet medical need. Patients that have discontinued treatment are expected to re-enter treatment with the availability of new oral therapies to fulfill
their unmet treatment need. It is also anticipated that a portion of newly diagnosed patients will be considered for safe, oral products as physician experience grows with this class of therapies.
Finally, with the market entry of oral
therapies such as Gilenya®, Tecfidera®, and Aubagio®, a portion of the first-line treatment segment of patients is shifting away from ABCR cycling and toward such
oral therapeutics, which we believe is due to the low tolerability of the ABCRs and a diminishing tolerance for injectable therapies. We believe a preference for oral therapies, particularly those
with higher efficacy, will continue to shift the RMS treatment algorithm.
Currently Available Treatment Options for RMS
Introduced in the 1990's, interferon beta therapies and Copaxone® are generally safe and thus have become the standard of
care in the treatment of RMS. However, these RMS therapies have not conclusively been shown to positively impact long-term disease disability and have unfavorable tolerability profiles. In addition,
these therapies are administered via frequent injections leading many patients to develop injection fatigue. Oral therapies for MS have been actively sought by neurologists and patients. The first
oral treatment for RMS, Gilenya®, was approved in September 2010, the second, Aubagio®, was approved in September 2012, and the third, Tecfidera®, was approved in
March 2013.
A
primary measure of efficacy for RMS therapeutics is reduction in ARR measured versus placebo. The ABCRs have shown reductions in ARR of approximately 30%. The interferon-beta therapies
are characterized by flu-like symptoms that accompany their regimens of weekly to every-other day injections. Copaxone® is not associated with flu-like symptoms, but requires daily
injections. In addition, hepatic injury has been associated with Avonex® and Rebif® treatment. The ABCRs are generally administered early in the treatment algorithm due to
physician experience with their long-term safety profile. Tysabri® has shown a reduction in ARR of 67%, but it may cause serious side effects, including increased risk of progressive
multifocal leukoencephalopathy (PML), a rare and potentially fatal viral disease. Tysabri® is generally recommended for patients who have an inadequate response to, or are unable to
tolerate, alternate RMS therapies, and is only available to this defined patient group through a special restricted distribution program.
Three
oral drug therapies have been approved for RMS. The first, Gilenya®, is a non-selective S1PR modulator with activity on four of the five S1P receptors: S1P1R, S1P3R,
S1P4R, and S1P5R. Gilenya® at a 0.5 mg once daily dose has shown a reduction in ARR of 54% versus placebo, a reduction in ARR of 52% versus Avonex®, and a reduction by 30%
versus placebo in the risk of three-month confirmed disability progression (as measured by the Expanded Disability Status Scale, or EDSS). Gilenya® has also shown a reduction in brain
volume loss determined by magnetic resonance imaging (MRI), with Gilenya® at a 0.5 mg once daily dose demonstrating a reduction of 35% versus placebo and a reduction of 32% versus
Avonex®. Common Gilenya® adverse reactions include headache, influenza, diarrhea, back pain, liver transaminase elevations and cough. In addition, prescribing information
warnings and precautions for Gilenya® include risks of abnormal slowing of the heart rate, or bradyarrhythmia, and atrioventricular (AV) blocks, infection, macular edema, respiratory
effects, hepatic effects (elevations in liver enzymes), fetal risk, blood pressure effects and
immune system effects following discontinuation of therapy (long lymphocyte recovery time of one to two months). Aside from hepatic effects, we believe these reactions and risks are associated with
S1PR modulation. Since RPC1063 is also an S1PR modulator, although more selective for the S1P1R, these adverse reactions and risks could apply to use of RPC1063. However, we believe that by virtue of
its
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pharmaceutic
properties, RPC1063 has the potential to improve upon the cardiovascular side effect profile and immune system effects following discontinuation of therapy as well as the non-class
hepatic effects.
In
September 2012, Genzyme's Aubagio® became the second oral treatment for RMS approved for first-line therapy. Aubagio®, which is not an S1PR modulator, has
shown a reduction in ARR of 31% versus placebo at once daily doses of 7 or 14 mg. The most common adverse reactions include risk of alanine aminotransferase (ALT, or liver enzyme) increases, alopecia
(hair loss), diarrhea, influenza, nausea and paresthesia. Aubagio® prescribing information carries a black box, or cautionary, warning for both hepatotoxicity and teratogenicity.
In
March 2013, Biogen Idec's Tecfidera® (a dimethyl fumarate compound with a mechanism of action different from S1PR modulation) was approved by the FDA for the treatment of
RMS, thereby becoming the third available oral therapy. In Phase 3 clinical trials, with twice daily dosing, Tecfidera® showed reductions in ARR versus placebo of 44% and 53%,
compared to Phase 2 results of 32%. Tecfidera® also showed a reduction in the cumulative number of total gadolinium enhancing (GdE) lesions determined by MRI of 73% and 57% in
Phase 3 clinical trials, compared to Phase 2 results of 69%. Adverse events of note in the prescribing label for Tecfidera® include flushing (40%), abdominal pain (18%),
diarrhea (14%), nausea (12%) and vomiting (9%). Tecfidera® is further catalyzing the transition to an oral treatment market.
In
September 2013, Sanofi's Lemtrada (alemtuzumab) was approved in the EU as a twice-yearly, intravenously infused therapy. In two Phase 3 studies,
Lemtrada showed reduced ARR of 49% and 55% against an active comparator, Rebif®, although reduced disability progression of significance was shown in only one of the two
studies. Sanofi has submitted a Biologics License Application (BLA) to the FDA for Lemtrada. In December 2013, Sanofi received a Complete Response Letter from the FDA rejecting approval
of Lemtrada
TM
in RMS in the United States.
Potential New RMS Market Entrants
Laquinimod from Teva Pharmaceuticals Industries is an oral product candidate in registration for the treatment of RMS. In January 2014,
EMA's CHMP recommended against approval of laquinimod because the benefits of the oral immunomodulator in RMS patients do not outweigh the potential risks. Teva and Active Biotech have announced plans
to request a reexamination. The sponsors have an ongoing Phase 3 trial which is being conducted under an SPA with the FDA. In addition, filings for regulatory approval of two Phase 3
drug candidates, daclizumab (injectable) from Biogen Idec/AbbVie, and ocrelizumab (IV infused therapy) from Roche, are expected before 2018. However, we believe these new injectable or infused
therapies are likely to be used in later lines of therapy and are unlikely to change substantially the treatment algorithm for RMS. Over the next three years, we believe physicians will continue to
adopt oral therapies, stepping up from less to more efficacious oral treatments, while progressing through the RMS treatment algorithm.
The Need for a Safer S1PR Modulator
The availability of the first oral treatment for RMS, Gilenya®, was a paradigm shift in treatment for RMS patients.
Gilenya® has now been used to treat tens of thousands of RMS patients in clinical trials and in the post-marketing setting, and Novartis has more than seven years of experience for certain
clinical trial patients. However, despite strong revenue performance to date, the utilization of Gilenya® is accompanied by several distinct side effect concerns, which we believe have
negatively impacted adoption rates.
As
an S1PR modulator, we believe RPC1063 has the potential to be a high efficacy oral therapeutic option for RMS patients. We also believe there is a significant market opportunity for
an S1PR modulator more selective for the S1P1R with a differentiated and improved safety profile
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compared
to Gilenya®. In this regard, we believe RPC1063 has the potential for clinically meaningfully improved safety features,
including:
-
-
Potential for improved cardiovascular safety profile through pharmaceutic and pharmacologic
properties
. Upon initial treatment, S1PR modulators have been associated with a dose-dependent transient drop in heart rate and carry a potential increased risk
for cardiac conduction abnormalities. During its development, Gilenya® was reported to cause certain cardiovascular side effects, including bradyarrhythmia and AV blocks. In a study with
available 24-hour Holter monitoring data after first dose, second-degree AV blocks, Mobitz types I (Wenckebach) and/or II, were reported in 3.7% of patients receiving
Gilenya® 0.5 mg compared with 2% of patients on placebo. Gilenya® prescribing information requires six hours of cardiac monitoring upon first dose administration to observe for
potential cardiovascular side effects, with extended monitoring in certain situations including low heart rate (below 45 beats per minute, or bpm) or where the six-hour electrocardiogram (ECG) shows
new onset second degree or higher AV block. In a study of the heart's electrical conduction system, known as a "thorough QT/QTc" (TQT) study, at supra-therapeutic doses of 1.25 or 2.5 mg (versus the
recommended dose of 0.5 mg) at steady-state, when a negative effect on heart rate of Gilenya® was still present, Gilenya® treatment resulted in a prolongation of the
mean-corrected QT interval (known as the QTc interval), with the upper bound of the 90% confidence interval of 14.0 milliseconds. Gilenya® prescribing information indicates patients with a
prolonged QTc interval before dosing or during the first six hours after dosing, as well as those at risk for QT prolongation or taking certain QT prolonging drugs, should be monitored overnight with
continuous ECG in a medical facility, and Gilenya® is contraindicated for use in patients with elevated QTc intervals (
³
500 milliseconds) before
dosing.
Key
pharmacokinetic (PK) properties of RPC1063, including low maximum concentration (or C
max
), slow time to maximum concentration (or Tmax) and lower overall exposure, may provide the
potential for an improved cardiac conduction profile. In addition, the pharmacology profile for RPC1063 demonstrates selectivity for S1P1R whereas Gilenya® is a non-selective S1PR
modulator with activity on four of the five S1P receptors, including S1P3R. In preclinical (rodent) studies, S1P3R, but not S1P1R, is expressed on the Purkinje fibers, which are specialized cardiac
muscle fibers that are part of the impulse-conducting network of the heart. It is not known whether S1P3R is expressed on these nerve fibers in the human heart. In contrast to Gilenya®,
the top-line results from a TQT study of RPC1063 ruled out a relevant QT effect for RPC1063 at both therapeutic (1 mg/day) and the supra-therapeutic (2 mg/day) doses (see "RPC1063
DevelopmentThorough QT Study").
-
-
Potential for improved cardiovascular safety profile through utilization of a dose titration
regimen
. In our ongoing development of RPC1063, we are employing a dose titration strategy to further improve patient outcomes upon first dose administration. Dose
titration works through initial administration to patients of subtherapeutic doses of drug, and then increasing the dose to therapeutic levels over time, allowing attenuation of the first-dose heart
rate effects while the patient adjusts to treatment. Based on the high potency of RPC1063, we are also exploring the potential for efficacy at a lower dose in order to further improve the
cardiovascular safety profile.
Data
from our TQT study of RPC1063 (which employed dose titration) shows RPC1063, compared to placebo, decreasing the magnitude of normal increases in heart rate associated with circadian rhythm, but
not appearing to lead to a mean reduction in heart rate when compared to the pre-dose morning
baseline. In our TQT study, there were no clinically significant episodes of bradycardia, the minimum daily heart rates in the RPC1063 and placebo groups were comparable, and the number of patients
with mean hourly heart rates below 45 bpm was relatively balanced between the RPC1063 and placebo groups. Observations from an interim
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analysis
of patient data from the Phase 2 portion of RADIANCE include a modest impact on heart rate for RPC1063-treated patients compared to placebo patients, consistent with results of the TQT
study, with no cardiac adverse events observed.
RPC1063 Appears to Blunt Normal Increase in Heart Rate Based on Change in
Mean Hourly Heart Rate from Daily Baseline
(Data from RPC1063 TQT Study with dose titration)
-
-
Better management of infections and retreatment decisions through a shorter half-life and more
rapid lymphocyte recovery.
The circulatory half-life of RPC1063 is approximately 19 hours versus 168 hours for Gilenya®. It can take four
to eight weeks for lymphocyte recovery counts to return to the normal range in Gilenya®-treated patients. In our Phase 1 study of RPC1063, lymphocyte recovery counts returned to the
normal range within three days. If patients can experience a more rapid reconstitution of their immune system upon discontinuation of therapy, treating physicians can better manage treatment-related
complications, including opportunistic infections, and make retreatment decisions upon disease relapse, which is common in RMS patients. Administration of a new immunosuppressive agent can increase
the risk of infection by further suppressing a patient's immune system after another agent with a long half-life is withdrawn but its immunosuppressive effect lingers. We believe that short
circulatory half-life will become an important consideration in selecting an S1PR modulator therapy, since having more control of treatment withdrawal and immune system recovery is desirable for both
physicians and patients. In particular, women of child-bearing age represent a disproportionate segment of the RMS population. If a woman with RMS becomes pregnant or wants to become pregnant, a
therapy with a shorter half-life may be preferred to a therapy with a longer half-life in order to rapidly withdraw treatment.
-
-
Potential for reduced hepatotoxicity.
Gilenya®
causes hepatotoxicity as measured by elevations in liver enzymes and is a risk for patients in selecting this therapy. The product label for Gilenya® 0.5 mg describes adverse events in 8%
of patients as defined by elevations in liver enzyme at greater than or equal to three-fold the upper limit of normal (3x ULN). A profile with lower hepatotoxicity rates may lead to fewer patient
discontinuations, lower risk for hepatic injury and a potential basis for reduced patient monitoring requirements. We did not observe any hepatotoxicity signals in the RPC1063 preclinical toxicology
program where animals were dosed daily for up to nine months at doses 150-200-fold above a pharmacologically relevant dose. We did not observe any evidence of hepatotoxicity in our Phase 1
study, even at doses above the anticipated therapeutic range. This Phase 1 study included 68 subjects treated with RPC1063, of which 18 subjects received drug on a 28-day dosing schedule. In
addition, no increase in liver function text (LFT) results at greater than or equal to 3x ULN occurred in the TQT study of RPC1063 during 14 days of dosing. Observations from an interim
analysis of patient data from the Phase 2 portion of RADIANCE include low rates of liver enzyme elevations observed that
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appear
supportive of a favorable hepatotoxicity profile. In contrast, early signals of liver enzyme increases were observed in the preclinical and Phase 1 clinical setting with
Gilenya®, including in a Phase 1 28-day dosing regimen.
-
-
Avoidance of potential "off-target" side effects, including potential for promotion of fibrosis
and hypertension
. We believe that the high selectivity of RPC1063 to the S1P1R may minimize "off-target" side effects. In preclinical studies, S1P3R has been
implicated in profibrotic activity, or the creation of excess connective tissue. The preclinical program of Gilenya®, a non-selective S1PR modulator with activity on four of the five S1P
receptors including S1P3R, included incidents of fibrosis observed in both the lung and the heart, and in
in vitro
studies with human cell types. These
findings were not observed in the RPC1063 preclinical program in multiple animal species with dosing up to 150-200-fold above a pharmacologically relevant dose. We are not aware of any observations of
fibrosis in patients treated with Gilenya®. In preclinical studies, S1P3R activation has also been implicated in hypertension, or high blood pressure. In clinical trials, patients treated
with Gilenya® (0.5 mg) had an average increase of approximately 2 mmHg in systolic pressure, and approximately 1 mmHg in diastolic pressure, first detected after approximately one
month of treatment initiation, and persisting with continued treatment. In controlled studies involving 854 MS patients on Gilenya® (0.5 mg) and 511 MS patients on placebo, hypertension
was reported as an adverse reaction in 5% of patients on Gilenya® compared with 3% of patients on placebo. The prescribing information states that blood pressure should be monitored during
treatment with Gilenya®.
Key
pharmaceutic properties of RPC1063, including shorter half-life, low peak plasma concentration (C
max
), delayed absorption (T
max
), lower overall exposure, and
selectivity and potency, represent a profile that has the potential to significantly improve upon the side effect profile of Gilenya®. In addition, our use of a dose titration regimen as a
clinical strategy may further improve the cardiovascular safety profile for RPC1063. Because of the limited oral treatment options currently available as well as their side effect profiles, we believe
that a significant market exists for an effective oral therapy with an improved safety profile allowing earlier use in the treatment algorithm as well as greater comfort with chronic administration.
Based upon a third-party survey of 96 neurologists that we sponsored, we believe that if RPC1063 is able to obtain market approval for RMS and show efficacy comparable to Gilenya® but with
an improved safety profile, then RPC1063 could potentially achieve the largest market share among currently marketed oral therapies, competing effectively against Gilenya® based on safety
and against Tecfidera® earlier in the treatment algorithm based on efficacy and tolerability. However, as clinical development of RPC1063 is conducted and trial results become known, the
data may not support such comparable
efficacy, an improved safety profile, or even regulatory approval. It is also possible that, if approved for RMS, RPC1063 may not be approved with a label that includes the claims necessary or
desirable for successful commercialization. Furthermore, the third-party survey did not take into account differences in pricing and reimbursement, which could impact RPC1063's ability to compete
effectively against other RMS treatments.
S1PR Modulators in Development
The late-stage S1PR modulator drug pipeline consists of three programs in addition to RPC1063: Novartis' siponimod, a follow-on to its
first-in-class Gilenya®; ceralifimod, which is under development by Merck Serono and Ono; and ponesimod, which is under development by Actelion. Clinical outcomes from Phase 2
studies for these programs demonstrate efficacy in reduction compared to placebo in the cumulative number of total gadolinium enhancing (GdE) lesions determined by magnetic resonance imaging (MRI),
which is a standard Phase 2 primary endpoint in RMS. The Phase 2 MRI efficacy outcomes in these other programs were consistently demonstrated at doses reaching threshold levels of
lymphocyte count reduction of approximately 60-70%. These programs also demonstrated ARR
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reduction
comparable to Gilenya®. In addition to these programs, Mitsubishi Tanabe initiated a Phase 2 study of MT-1303, an S1PR modulator, in RMS in January 2013.
Pharmacodynamic Marker (Lymphocyte Count Reduction) Correlates with
Improved MRI and Relapse Rate Outcomes
-
*
-
not
significant
note:
Phase 2 studies not powered to show significant reduction in ARR outcomes
A shorter half-life and faster lymphocyte recovery are themes of differentiation relative to Gilenya® for the potential second
generation S1PR modulators. Gilenya® has a prolonged half-life of 168 hours (approximately seven days) with a resulting prolonged effect on peripheral lymphocyte recovery, as
half-life (or the body's ability to clear the drug) impacts the time to lymphocyte recovery. Siponimod and ponesimod have a half-life of 30 hours and RPC1063's half-life is 19 hours. At
a dose resulting in approximately 70% lymphocyte count reduction, the time for patients to experience the return of lymphocyte counts into the normal range is approximately four to eight weeks for
Gilenya®. In contrast, the time to such immune reconstitution is one week or shorter for siponimod, ponesimod and RPC1063. Another theme of differentiation is that the potential second
generation S1PR modulators are more selective for the S1P1R than Gilenya®, which is a non-selective S1PR modulator with activity on four of the five S1P receptors: S1P1R, S1P3R, S1P4R and
S1P5R. Higher selectivity may avoid potential "off-target" side effects as discussed above.
Pharmaceutic
properties differ across the potential second generation S1PR modulators, which results in differences in exposure across these compounds. Siponimod and ponesimod exhibit
greater peak plasma concentrations (C
max
) and total drug exposure (Area Under the Curve, or AUC), more rapid absorption, and lower volume of distribution as compared to RPC1063 or
Gilenya®. We believe these specific pharmaceutic differences for siponimod and ponesimod may account for the greater impact on first dose drop in heart rate and other cardiac conduction
signals seen for these compounds in the Phase 2 setting without dose titration. Overall, RPC1063 appears to have the lowest C
max
and total drug exposure (AUC) among these compounds
at doses resulting in approximately 70% lymphocyte count reduction. We believe these differences may contribute to an improved safety profile for RPC1063 since many of the adverse events for S1PR
modulators are considered to be dose-dependent or exposure-related.
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Peak Plasma Concentration (Cmax) and Total Drug Exposure (AUC) Observed Over
the First 24 Hours for Doses Resulting in Approximately 70% Lymphocyte Count Reduction
Clinical
trials to date with late-stage S1PR modulators have been associated with a number of adverse effects including abnormally slow heart rate, or bradycardia, AV block and liver
toxicity (hepatotoxicity). For the incidence of hepatotoxicity as defined by elevations in liver enzymes of greater than or equal to three-fold the upper limit of normal (3x ULN): Gilenya®
had a rate of 8% at a dose of 0.5 mg; ceralifimod had rates of 11.9%, 5.9% and 14.2% at doses of 0.05 mg, 0.1 mg and 0.15 mg, respectively; ponesimod had rates of 2.8%, 4.5% and 4.2% at doses of 10
mg, 20 mg and 40 mg, respectively; and siponimod had a rate of 4.3% at doses of 2 mg and 10 mg. Additionally, when compared against available Phase 2 or later data, ponesimod demonstrated
higher rates of dyspnea, or difficulty breathing, and peripheral edema than the rest of the S1PR modulator class.
Since
the conclusion of the siponimod Phase 2 study, called BOLD, to our knowledge Novartis has not announced plans to initiate a Phase 3 study in RMS. Rather, Novartis has
announced the initiation of a Phase 3 placebo-controlled secondary progressive MS (SPMS) trial for siponimod with dose titration. SPMS is a more severe stage of the MS disease in which
disability accumulation continues either in the absence of relapses or between relapses. Except for Novantrone® (mitoxantrone for injection concentrate), which has had a black box warning
since 2005, there are no drugs approved for SPMS and therefore a higher risk-benefit ratio may be tolerated by physicians and patients should a product be approved as efficacious for the treatment of
SPMS. Actelion has stated that ponesimod will not move into Phase 3 development unless a development and commercial partner is secured. However, Actelion has recently announced that it is
planning a single-dose, 7-day, Phase 1 trial for I.V. and oral ponesimod in male healthy volunteers. Ponesimod was previously partnered with Roche, which returned the rights to Actelion in
December 2009.
RPC1063 Development
Summary of Preclinical Program
We have established a comprehensive pharmacology program for RPC1063, during which we demonstrated robust, dose proportional lymphocyte
count reduction with rapid lymphocyte recovery in multiple species. We have demonstrated dose proportional efficacy in a rodent therapeutic autoimmune disease model for RMS
(
experimental autoimmune
encephalomyelitis, or EAE) as well as two mouse models of IBD (naïve T-cell adoptive transfer and
2,4,6-trinitrobenzene sulfonic acid (TNBS)-induced colitis models). The efficacy of RPC1063 in the EAE model was comparable to Gilenya®, which we tested in the same experiment. In the TNBS
model, improvements in disease parameters were correlated with lymphocyte count reduction. RPC1063 demonstrated no adverse findings in a rat CNS safety pharmacology study. We have established a wide
safety margin for RPC1063 for cardiac effects
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in
primates and for respiratory effects in rodents. We have also demonstrated wide safety margins with respect to human Ether-à-go-go Related Gene (hERG) inhibition, including no
evidence of prolongation of waves in the heart's electrical cycle (QTc)
in vivo
in primates.
We
have completed oral daily dosing in chronic toxicology studies of six months in rodents and nine-months in primates at doses up to 200-fold above the therapeutically relevant dose.
Our efficacy biomarker of lymphocyte count reduction allowed us to establish wide safety margins with respect to human exposure. We have also completed genotoxicological and reproductive toxicological
studies with no adverse findings with the exception of Segment II studies (rat and rabbit) in which we demonstrated teratogenicity findings (capability of producing fetal malformation) consistent with
Gilenya®. As agreed with the FDA, we will continue to assess immunotoxicology and carcinogenicity (six-month mouse study and standard two-year rat study) as part of our ongoing development
of RPC1063.
Summary of Completed Phase 1 Study
We have had an active IND with the Division of Neurology Products (DNP) of the FDA since December 2010 in support of our clinical
program for RPC1063 in RMS. We have completed a Phase 1 study of RPC1063 which tested single ascending doses, multiple ascending doses and dose titration regimens in healthy volunteers. This
study, RPCS 001, was a single center, randomized, double-blind, placebo-controlled, single and multiple dose escalation study which evaluated the safety, tolerability, pharmacokinetic and
pharmacodynamic effects of RPC1063 administered orally to 88 healthy adult volunteers, 68 of whom were treated with RPC1063. The study consisted of four parts (A, B, C and D) in which we
administered RPC1063 as single doses of 0.3 mg to 3.0 mg, as multiple doses of 0.3 mg to 2.0 mg daily for seven days, as multiple doses of 0.3 mg to 1.5 mg daily for 28 days, or as multiple
daily doses for ten days in a dose titration regimen from 0.3 mg to 2.0 mg. This study demonstrated adequate safety and tolerability, linear PK, and dose-dependent reduction in lymphocyte count
reduction for RPC1063.
Consistent
with our plan to provide extensive characterization of the cardiac profile for RPC1063, we collected cardiac data through continuous in-house observation and
telemetry/portable device monitoring, especially over the first 24 to 48 hours of dosing. All 88 subjects underwent intensive monitoring. We observed a dose-dependent drop in heart rate upon
initial dose administration of RPC1063, which was mitigated by the use of a dose titration regimen. Analysis of the complete cardiac dataset demonstrated that the largest difference from the placebo
group (both in terms of absolute heart rate values as well as change from baseline) occurred within the first six hours after dosing, and the effect gradually attenuated over time.
The
findings we observed in the Phase 1 study are consistent with the biology of S1P1R modulation, including potential dose-dependent effects on target organ systems, such as
cardiovascular and pulmonary effects, with subjects treated with higher than planned therapeutic doses (such as 1.5 mg and higher) experiencing greater changes on parameters. In the completed
Phase 1 study, we observed an overall adverse event rate in subjects dosed with RPC1063 of 75%, as compared with 70.8% for subjects dosed with placebo. Adverse events for RPC1063-treated
patients at rates of at least 5% included local contact dermatitis as a result of reaction to medical adhesive used to apply ECG leads of 42.6% (as compared to 50% for placebo-treated patients),
headache of 13.2% (as compared to 12.5% for placebo-treated patients), sleepiness (somnolence) of 8.8% (as compared to 4.2% for placebo-treated patients), nausea of 8.8% (as compared to 0% for
placebo-treated patients), dizziness of 7.4% (as compared to 4.2% for placebo-treated patients), and fatigue of 5.9% (as compared to 4.2% for placebo-treated patients). Adverse events for
RPC1063-treated patients at rates of less than 5% included tingling sensation (paraesthia), abdominal pain, dry mouth, vessel puncture site haematoma, non-cardiac chest pain, cough, nasal congestion,
obstructive airway disorder, runny nose (rhinorrhea), wheezing, sinus arrest, neck pain, decreased appetite, oral herpes and abnormal dreams. Overall, RPC1063 treatment was well tolerated with only
one Grade 2 serious adverse event observed in the
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study,
which the treating physician considered to be a pre-existing condition and unrelated to RPC1063 treatment. There were no Grade 3 or higher adverse events and no dose-limiting toxicities
reported during the study. We did not observe any increased frequency of serious infections or side effect concerns associated with Gilenya®, such as macular edema or hepatotoxicity
effects.
S1PR
modulators, including Gilenya®, demonstrated clinical efficacy as measured by a reduction in GdE lesions (as measured by MRI) at doses reaching threshold levels of
lymphocyte count reduction of approximately 50% to 70%. Gilenya® and several S1PR modulators in development demonstrated comparable clinical efficacy as measured by ARR at doses reaching
threshold levels of lymphocyte count reduction of approximately 60% to 70%. We believe the results from other S1PR modulator studies demonstrate a correlation between a target lymphocyte count
reduction range of 50% to 70% and MRI and clinical relapse efficacy outcomes. (See "S1PR Modulators in Development.") We measured lymphocyte counts throughout the Phase 1 program.
We observed dose-related decreases in lymphocyte count following single dose administration of RPC1063 and upon multiple dose administration for 28 days, with lymphocyte counts continuing to
decrease throughout dosing (see graph below). At dose levels of 0.3 mg, 1.0 mg and 1.5 mg, lymphocyte reduction appeared to approach steady state by the 28
th
day. The median
decreases in lymphocyte count after 28 days of dosing for dose levels of 0.3 mg, 1.0 mg and 1.5 mg were 34%, 65% and 68%, respectively, and circulating lymphocyte levels returned to above lower
limit of normal within three days in all patients. In contrast, in Gilenya®-treated patients, it can take four to eight weeks for lymphocyte recovery counts to return to the normal range
following chronic administration. When we employed a dose titration regimen for RPC1063 to minimize first dose effects on heart rate, lymphocyte counts also decreased throughout the dosing period and
achieved target levels.
Phase 1 RPC1063 Target Lymphocyte Count Reduction Levels
Shorter half-life and rapid lymphocyte recovery important for better management
of infections and retreatment decisions
We
were able to achieve target levels of lymphocyte count reduction at the lowest dose levels of 0.3 mg and 1.0 mg tested in our Phase 1 study, where we did not observe any
clinically concerning adverse events. Based on the Phase 1 pharmacodynamic and clinical data and additional exposure-response modeling, we selected 0.5 mg (projected to lead to approximately
50% lymphocyte count reduction) and 1.0 mg (projected to lead to approximately 70% lymphocyte count reduction) for the Phase 2 and 3 clinical studies in RMS, and the FDA has agreed with this
dose selection. These doses were also selected for TOUCHSTONE, the Phase 2 study of RPC1063 in UC, based on preclinical animal disease models and the existing data from RMS studies.
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Thorough QT Study
We have further characterized the cardiac safety profile of RPC1063 through a TQT study. This study enrolled 124 subjects, with 62
subjects randomized to receive RPC1063 at an intended therapeutic dose (1 mg/day) and at a supra-therapeutic dose (2 mg/day), and 62 subjects randomized to receive placebo. The dosage of RPC1063 was
titrated in this study from 0.25 mg to 2.0 mg over 14 days of treatment. The primary objective of the TQT study was to assess whether exposure to therapeutic or supra-therapeutic doses of
RPC1063 in healthy male and female subjects increased the mean-corrected QT interval (known as the QTc interval) compared to placebo. Top-line results show that the primary objective of the TQT study
was met. Specifically, the study was "negative" in that a relevant QT effect was ruled out for RPC1063 at both the therapeutic and the supra-therapeutic doses. In addition, the TQT study was validated
by reproducing the known effect of a control treatment (moxifloxacin) on the QT interval as part of the study.
In
contrast, in a TQT study of Gilenya® at supra-therapeutic doses of 1.25 mg or 2.5 mg (versus the recommended dose of 0.5 mg) at steady-state, when a negative effect on
heart rate of Gilenya® was still present, Gilenya® treatment resulted in a prolongation of the QTc interval, with the upper bound of the 90% confidence interval of 14.0
milliseconds. There is no consistent signal of increased incidence of QTc outliers, either absolute or change from baseline,
associated with Gilenya® treatment. The MS clinical database for Gilenya® includes no clinically relevant prolongation of the QT interval, but patients at risk for QT
prolongation were not included in the Gilenya® MS studies. Prescribing information states that Gilenya® may prolong the QT interval and that patients with a prolonged QTc
interval before dosing or during the six-hour, first-dose cardiac monitoring, as well as patients at additional risk for QT prolongation or taking certain QT prolonging drugs, should be monitored
overnight with continuous ECG in a medical facility.
Our
TQT study also included assessments of heart rate intended to add to our body of data on the potential for an improved cardiac safety profile for RPC1063. We utilized the same dose
titration regimen for RPC1063 as in the Phase 2 and Phase 3 portions of our ongoing Phase 2/3 study of RPC1063 in RMS, up to the supra-therapeutic dose of 2.0 mg in order to reach steady
state dosing and to obtain more clinical experience utilizing the clinical dose titration regimen. We incorporated additional detailed heart rate monitoring with continuous 24-hour ambulatory ECG
monitoring in-house on the day before dosing, on the first day of dosing, on each day of dose escalation during the dose titration regimen and on each day of QT interval assessment to assess changes
in heart rate and the risk of any cardiac adverse events. The dose titration regimen was well tolerated, the difference in the mean lowest heart rate over 24 hours between the RPC1063 and
placebo arms was approximately three bpm in the first day of therapy, and such difference never exceeded five bpm as the dose was increased during the titration regimen. We believe these results
indicate that, rather than inducing an absolute decrease in mean heart rate, RPC1063 is instead blunting normal increases in heart rate associated with circadian rhythm. In our TQT study, there were
no clinically significant episodes of bradycardia and the number of patients with mean hourly heart rates below 45 bpm was relatively balanced between the RPC1063 and placebo groups. No serious
adverse events occurred during the TQT study and a similar proportion of subjects experienced cardiac adverse events in both the placebo and RPC1063-treated groups. Overall, safety results were
consistent with the completed Phase 1 study.
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Frequency Table of the Daily Minimum Hourly Heart Rate
Percent of Subjects at < 45 bpm in each of RPC1063 and
placebo treatment groups at specified doses and time points
In
each of the therapeutic (1 mg/day) and supra-therapeutic (2 mg/day) doses in our TQT study, the 95% confidence limit (one-sided) for QTc change from baseline was always below 10
milliseconds, which met the pre-specified criteria for determining the absence of effect of RPC1063 on cardiac repolarization. Shown below are the QTc changes at the supra-therapeutic dose as
corrected for heart rate and relative to placebo, which demonstrate that the 90% confidence interval (two-sided) for RPC1063 was below 10 milliseconds at each time point measured over five days.
Results of RPC1063 TQT Study Demonstrate No Relevant QT Effect
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Phase 2/3 RMS Program
We are conducting an accelerated design, randomized Phase 2/3 clinical trial for RPC1063 in RMS. This Phase 2/3 study, called RADIANCE,
is a placebo-controlled (Phase 2) and active comparator-controlled (Phase 3) trial (RPC01-201), and is the first study suitable for
registration for RPC1063 in the indication of RMS. The Phase 2 portion of RADIANCE, which was designed to enroll up to 210 patients but which completed patient recruitment in October
2013 with 258 patients enrolled based on strong investigator and patient interest, is a randomized, double-blind comparison of the doses of 0.5 mg and 1.0 mg of RPC1063 against placebo in patients
with RMS, and is designed to characterize the short-term safety and efficacy of RPC1063 in RMS. The primary objective is to demonstrate the superior clinical efficacy of RPC1063 compared to placebo by
showing a reduction in the cumulative number of total GdE lesions determined by MRI from week 12 to week 24 of study treatment. Phase 2 results for other S1PR modulators in RMS studies have
demonstrated significant improvement in MRI and clinical relapse endpoints versus placebo. We believe these results from other S1PR modulator studies demonstrate a correlation between a target
lymphocyte count reduction range of 50% to 70% and MRI and clinical relapse efficacy outcomes. Primary endpoint (top-line) results for the Phase 2 portion of RADIANCE are anticipated in
mid-2014.
In
the fourth quarter of 2013, we conducted an interim analysis of patient data from the Phase 2 portion of RADIANCE which focused on several potential attributes that may be
important for differentiation of RPC1063 from other S1PR modulators on the market or in development. The following observations of the interim data were made: (i) the overall adverse event
profile appeared relatively balanced between the RPC1063 and placebo groups, with no serious adverse events observed; (ii) a modest impact on heart rate for RPC1063-treated patients compared to
placebo patients, consistent with results of the TQT study of RPC1063, with no cardiac adverse events observed; (iii) low rates of liver enzyme elevations observed that appear supportive of a
favorable hepatotoxicity profile; and (iv) preliminary clinical activity and reduction in lymphocyte count that appear to be consistent with data from other S1PR receptor modulators on the
market or in development.
Based
upon our interim analysis of patient data as well as approval from the independent DMC following its review of interim analysis data, we initiated the Phase 3 portion of
RADIANCE in December 2013. The Phase 3 portion, which will enroll up to 1,200 patients, is a randomized, double-blind, double-dummy comparison of RPC1063 to an active control in patients with
RMS. Patients receive one of two oral daily doses of RPC1063 (0.5 mg or 1.0 mg) or a weekly injection of Avonex® 30 µg. The primary objective is to assess whether
RPC1063 is superior to Avonex® in reducing the ARR at the end of month 24 of treatment in patients with RMS.
Our
accelerated Phase 2/3 design for RADIANCE allowed us to eliminate a potentially lengthy period of time between completing enrollment for the Phase 2 portion and initiating
enrollment for the Phase 3 portion. We have obtained SPA agreement from the FDA on our clinical trial design for the Phase 3 portion of RADIANCE, including an amendment increasing the
study size from 900 to 1,200 patients which addressed FDA recommendations around secondary endpoints.
RMSForward Development
We will need to conduct a second pivotal trial of RPC1063 in patients with RMS prior to submitting an NDA to the FDA. The timing of
initiation of this second pivotal trial will be subject to the results of the Phase 2 portion of RADIANCE as well as the availability of adequate financing and other resources. We have obtained
SPA agreement with the FDA for this second trial.
Subject
to the results of current and future clinical development (including the Phase 3 portion of RADIANCE and the second pivotal trial of RPC1063 in patients with RMS) as well
as the availability of adequate financing and other resources, we believe it may be possible to submit an NDA to the FDA for the use of RPC1063 in patients with RMS in late 2017, thereby positioning
RPC1063 as a
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potential
next-to-market S1P1R modulator in the US behind Gilenya®. We would also expect to submit a Marketing Authorization Application (MAA) with the EMA, pending input from European
regulatory authorities.
S1P1R Modulator RPC1063 in Inflammatory Bowel Disease (IBD)
We are also developing RPC1063 for the treatment of IBD. We believe that S1P1R modulation of lymphocyte trafficking may have utility in
other autoimmune diseases, including IBD. An increasing body of both preclinical and clinical evidence provides a strong rationale for this mechanistic approach in IBD.
IBD
is comprised of two distinct disease states, UC and CD. A number of agents that demonstrate efficacy in one IBD indication also demonstrate efficacy in the other. We selected UC as
our initial development path within IBD for key strategic reasons. We believe that UC patients, relative to CD patients, represent a greater number of underserved patients. The anti-TNF class of
biologics is currently relegated to the last line of treatment for UC. As such, patients and physicians are in greater need of therapeutic alternatives for UC than for CD, where more immunomodulators
have gained approval and are used earlier in the treatment algorithm.
Specific
to our strategy to mitigate development risk, UC provides us with the advantage of the utilization of initial endoscopy to confirm diagnosis and disease activity level of UC.
This firm diagnosis assists us in our selection of appropriate patients for study and helps ensure placebo response rates consistent with other UC studies. Notably, our trial utilizes a central
reading system for endoscopic images which will ensure accurate and congruent results, including assurance that all subjects enrolled have objective evidence of active UC.
As
part of the primary efficacy endpoints, endoscopy allows rapid, objective and robust outcome measures through visualization of disease in the colon. In contrast, CD trials typically
utilize the Crohn's Disease Activity Index (CDAI) scoring system, which lacks an endoscopic component, and is consequently a more subjective study endpoint relying solely on patients' signs and
symptoms and physician assessment. Together, these elements have led us to select UC as a proof-of-concept indication for IBD. Through these rigorous trial design elements developed in close
collaboration with FDA, we are seeking to mitigate development risk.
The
availability of additional therapeutic options for UC in the future will offer physicians more aggressive treatment strategies for this debilitating and progressive disease. We
believe RPC1063 has the potential to be the best orally administered therapy as well as the first S1PR modulator approved for the treatment of UC, and that an opportunity therefore exists to position
RPC1063 in a unique patient subgroup in earlier lines of therapy.
Overview of IBD
Ulcerative Colitis (UC) Description
UC is a chronic GI inflammatory disorder which involves the surface mucosa, the epithelium and the submucosa of the colon. Patients
with UC suffer from a multitude of gastrointestinal symptoms, such as diarrhea, rectal bleeding and weight loss. UC is characterized by a chronic course of remissions and exacerbations. Within
10 years of diagnosis, 20% of adults with UC had undergone colectomy. In addition, patients with UC have an increased risk of carcinoma over time.
Crohn's Disease (CD) Description
Similar to UC, CD is a chronic, inflammatory disorder of the GI tract. Symptoms include diarrhea, blood in the stool, abdominal pain
and weight loss. Maintaining symptomatic control and obtaining remission are critical to minimizing short-term and long-term complications and to improving the
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outcomes
and quality of life for patients with CD. The natural course of CD is a progression from inflammation of the mucosa to stricture formation of the intestine and of mucosal penetration or
fistula formation, with the risk of stricture and fistula increasing with the duration of CD.
Overview of IBD Market
Drug sales in the IBD market were forecasted by Datamonitor Group at approximately $5 billion worldwide in 2012 and consisted of
three therapeutic categories: immunomodulator, anti-inflammatory and biologics:
IBD Market: ~$5 billion
The
Datamonitor Group forecasted that biologic therapies, such as Remicade® (infliximab), Humira® (adalimumab), and Tysabri®, would represent
approximately 60% of total drug sales in the global IBD market in 2012. We believe that new immunological mechanisms of action, as well as oral therapeutics and their associated convenience and
promotion of patient compliance, will drive growth of drug sales in the IBD market.
The
total IBD population is estimated at approximately 2.5 million patients worldwide. UC represents a patient population of approximately 1.5 million worldwide.
Current Treatments Options for IBD
The overall goal of treatment for IBD is to induce and maintain remission in acute, active disease. IBD treatment consists of therapies
of varying degrees of efficacy and safety, depending on the patient's disease severity and response to prior therapy. While agents used to treat mild to moderate IBD are generally well tolerated, as
the severity of IBD increases, so do the potential toxicities of the medications required to manage the disease.
Specifically
for UC, up to 90% of patients with mild to moderate UC can initially be maintained in remission using once-daily oral administration of 5-aminosalicylic acid (5-ASA).
However, half of these patients will progress to more severe disease and become nonresponsive to therapy. For those patients who do not respond to 5-ASA, or those with more severe and/or extensive
disease at diagnosis, corticosteroids are generally the next line of treatment for inducing clinical remission. Longer-term treatment with corticosteroids is associated with multiple adverse effects.
Furthermore, after one year, approximately 45% of patients who initially responded to corticosteroids have either become steroid-dependent or have required surgery. Patients who have become
nonresponsive or intolerant to corticosteroids may move to azathioprine (AZA) and 6-mercaptopurine (6-MP), but these treatments
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show
a delay in onset of action of three months. Finally, as a last line of treatment for UC, biologics are used to induce and maintain remission, although the anti-TNFs have not been as effective in
maintaining remission in IBD as in other disease areas in which they are approved for treatment.
Approved
biologics therapies for IBD include the anti-TNF monoclonal antibodies, Remicade® and Humira®, both approved for UC and CD, Cimzia®
(certolizumab pegol), approved for CD, and Simponi® (golimumab), approved for UC. In addition, Tysabri® has been approved for CD. Tysabri® was the first
proof-of-concept for a lymphocyte trafficking agent in IBD.
Biologics
are most commonly used in later lines of IBD therapy, and require either recurring IV or subcutaneous (SC) delivery. Specifically in UC, induction of clinical remission therapy
with anti-TNFs has demonstrated consistent favorable clinical response at eight weeks; however, maintenance of clinical remission has been less successful. The anti-TNFs carry the risk of infusion and
injection-site reactions, immunogenicity, immunosuppression and infection. Humira® has a black box warning for malignancy and serious infection.
Profile of Available Anti-TNF Therapies in IBD
-
*
-
Clinical
responsea decrease from baseline in the Mayo score by
³
30% and
³
3 points, with a decrease in the rectal bleeding subscore of
³
1 or a rectal bleeding subscore of 0 or 1, at
week 8;
-
**
-
Clinical
remissiona Mayo score of
³
2 points, with no individual subscore > 1, with a rectal bleeding
subscore of either 0 or 1, at week 8, 30, or 54;
-
***
-
Mucosal
Healinga Mayo endoscopy subscore of 0 or 1
While numerous potential treatments exist for patients with IBD, none are curative and all are associated with significant risks. There exists in
IBD significant unmet medical need for new and effective immunomodulatory treatments, particularly with oral route of administration and with improved safety and tolerability profiles. UC patients
have fewer therapeutic options compared to CD, as biologics have only been adopted as a last line of therapy in UC.
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IBD Pipeline Products
IBD Late-Stage Pipeline Products
Vedolizumab is an intravenously infused inhibitor of lymphocyte trafficking. The GEMINI I Phase 3 trial for vedolizumab in
moderate to severe UC showed significant improvement in both induction and maintenance of clinical remission settings. For example, in the maintenance of clinical remission setting vedolizumab
produced an absolute improvement (i.e., delta) in clinical response of approximately 28-33% over the placebo group in the GEMINI I Phase 3 study, and Humira® produced an
improvement of approximately 12% over the placebo group in the ULTRA2 Phase 3 study. Vedolizumab also showed efficacy in anti-TNF failures. Pooled Phase 3 safety outcomes showed no major
differences in adverse events for vedolizumab-treated UC and CD patients compared to placebo groups, with infections that occurred more frequently in vedolizumab treated-patients involving the upper
respiratory tract. Takeda filed a BLA with the FDA for vedolizumab in UC as well as CD in June 2013. In September 2013, Takeda announced that the BLA had been granted priority review status for UC,
which allows for an eight-month review period from the date of filing, meaning that vedolizumab could be approved for UC by February 2014. In December
2013, an FDA advisory committee recommended approval of vedolizumab for the treatment of UC and CD, and the PDUFA action date is in May 2014.
Phase 3 Vedolizumab Clinical Outcomes
-
*
-
Clinical
responsea reduction in complete Mayo score by
³
30% and
³
3 points + decrease in rectal bleeding subscore of
³
1 or absolute rectal bleeding subscore of
£
1;
-
**
-
Clinical
remissiona complete Mayo score of
£
2 points, with no individual subscore >1;
-
***
-
Mucosal
Healinga Mayo endoscopy subscore of
£
1
Although vedolizumab has a different mechanism of action to S1P1R modulation (alpha-4 beta-7 integrin antibody inhibitor), it inhibits trafficking
of similar lymphocyte populations (naïve T cells
[CD4+, CD8+], memory T cells and B cells) to that of S1P1R modulation. Phase 3 clinical outcomes from vedolizumab contribute to a growing body of evidence generated by
third parties which supports efficacy for agents that inhibit lymphocyte trafficking in the treatment of IBD. We believe that agents with new lymphocyte trafficking inhibition mechanisms of action
such as RPC1063 could have the potential to impact the current treatment algorithm for IBD. Based upon a third-party survey of 101 physicians that we sponsored, we believe that if RPC1063 is
able to obtain market approval for UC and show efficacy comparable to vedolizumab and a safety profile improved from Gilenya® (see "S1P1R Modulator RPC1063 in
RMSThe Need for a Safer S1PR Modulator"), RPC1063 could be adopted in both early and late lines of treatment and compete effectively as an oral agent, including against vedolizumab
(assuming vedolizumab is approved). However, as clinical development of RPC1063 is conducted and trial results become known, the data may not support such comparable efficacy, an improved safety
profile, or even regulatory approval. It is also possible that, if approved for UC, RPC1063 may not be approved with a label that includes the claims necessary or desirable for successful
commercialization. Furthermore, the third-party survey did not take into account differences in pricing and reimbursement, which could impact RPC1063's ability to compete effectively against other UC
treatments.
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IBD Oral Pipeline Products
Tofacitinib is a twice daily oral janus kinase (JAK) inhibitor currently under development for patients with CD and UC. Tofacitinib is
approved in the US for treatment of patients with moderately to severely active Rheumatoid Arthritis and is also in development for patients with Psoriasis. In May 2011, Pfizer announced the
Phase 2 results for tofacitinib in UC. Clinical efficacy outcomes ranged dose dependently from 32% up to 78% for clinical response in the induction of clinical remission setting. Numerous
safety concerns have been shown with tofacitinib, such as infections, cytopenias and cholesterol elevations, while similar safety considerations have not been seen in the S1PR modulator class of
therapeutics. There are currently three Phase 3 trials open for enrollment in UC with expected outcomes in 2014 through 2016.
Laquinimod
is a second generation quinoline-3-carboxamide with inflammatory modulation mechanisms of action currently under development in CD. In May 2013, Teva presented Phase 2a
study results showing a trend toward improvement of remission and response measurements in CD patients treated with laquinimod (0.5mg) compared to placebo.
S1PR Modulator Competition in IBD
Novartis, in partnership with Kyorin, recently reported clinical trial outcomes of a European-based exploratory Phase 2 trial
examining one dose of KRP203 in 27 moderate to severe UC patients, with only 14 subjects completing the trial (KRP203 n=9; placebo n=5). KRP203 is a non-selective S1PR modulator, similar to
Gilenya®. When all subjects who completed treatment at least through day 28 were evaluated (KRP203 n=14; placebo n=8), reported outcomes showed that a greater proportion of UC patients
treated with KRP203 achieved remission compared to placebo (14% vs. 0%, respectively). After eight weeks of treatment (KRP203 n=10; placebo n=5), improvement with KRP203 treatment in partial Mayo
score was greater than that observed with placebo (-2.7 vs. -1.6, respectively). Although only a limited number of patients were treated, we believe the KRP203 clinical trial
results contribute to a body of evidence supporting the use of S1P1R modulators in treating IBD. Subsequent to the reporting of these results, Kyorin opened a Japan-based open-label Phase 2
clinical trial of KRP203 with a target accrual of approximately 60 CD patients and Novartis has opted to initiate a Phase 1 trial of KRP203 in 10 patients undergoing allogeneic hematopoietic
stem cell transplant for Hematological Malignancies. We have studied the efficacy of both RPC1063 and KRP203 in a preclinical disease model of IBD. At the completion of the preclinical study,
KRP203-treated animals had more active disease as measured by an outcome of greater amount of diseased tissue, or histopathology score, than did RPC1063-treated animals.
In
June 2012, Mitsubishi Tanabe initiated a Phase 1 study of MT-1303, an S1PR modulator, in IBD patients.
Phase 2 UC Program
We are currently enrolling a Phase 2 study of RPC1063 for the clinical efficacy and safety of induction of clinical remission
therapy in patients with moderately to severely active UC called TOUCHSTONE. In connection with TOUCHSTONE (RPC01-02), we filed an IND with the FDA. TOUCHSTONE is a multi-national, multicenter,
double-blind, randomized, placebo-controlled study investigating the effect of two active doses (0.5 mg and 1.0 mg) of RPC1063 versus placebo. This study is designed to enroll approximately 180
patients in North America, Europe and Asia Pacific. The primary objective of TOUCHSTONE is to compare the efficacy of RPC1063 for the induction of clinical remission in patients with moderately to
severely active UC after eight weeks of treatment. Secondary objectives for this study include a comparison of the efficacy of RPC1063 versus placebo at weeks eight and 32 as measured by clinical
response, clinical remission, mucosal healing and a
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comparison
of the overall safety and tolerability of RPC1063 versus placebo for the duration of TOUCHSTONE.
IBDForward Development
We expect to complete enrollment for TOUCHSTONE in the first half of 2014 with top line results relating to the proportion of patients
in clinical remission at week eight available in mid-2014. We designed TOUCHSTONE with endpoints and a statistical analysis plan consistent with a registrational (Phase 3) study approach.
Typically for a registration program the FDA requires two Phase 3 studies for induction of clinical remission and one Phase 3 study for maintenance of clinical remission. The FDA has
indicated that if the results of the study are statistically and clinically persuasive, TOUCHSTONE could be considered as a Phase 3 study for RPC1063 in UC and the balance of our registration
program could be supported by a single additional Phase 3 induction of clinical remission efficacy study accompanied by a Phase 3 maintenance of clinical remission study. However, we
have not requested an SPA with respect to TOUCHSTONE, and the FDA could change its view even if the study achieves statistically and clinically persuasive results. Subject to the results of current
and future clinical development (including the proposed pivotal trials) as well as the availability of adequate financing and other resources, we believe it may be possible to submit an NDA to the FDA
for use of RPC1063 in patients with UC as early as 2018, thereby positioning RPC1063 as the potential first S1P1R modulator approved in UC. We would also expect to submit an MAA with the EMA, pending
input from European regulatory authorities.
Depending
upon efficacy outcomes and the availability of adequate resources, we may pursue clinical development of RPC1063 in CD subsequent to demonstrating efficacy in UC.
Potential Additional Clinical Indications for RPC1063
RPC1063 may have therapeutic application in other chronic immune disorders including Psoriasis, Psoriatic Arthritis, Rheumatoid
Arthritis and Systemic Lupus Erythematosus (SLE). Compounds targeting the S1P1R have been shown to be active in animal models of these diseases, although the supportive data has, to date, been
generated by third parties. Ponesimod, another S1P1R modulator in development, recently reported significant efficacy in a Phase 2 clinical study of patients with moderate to severe chronic
plaque Psoriasis. The ponesimod Phase 2 study demonstrated a positive primary endpoint of Psoriasis Area and Severity Index at 75% reduction (PASI 75) of 71% (20 mg) and 77% (40 mg) at
end of study which is similar to the clinical experience
for biologics but with the potential for an improved side effect profile. There may also be therapeutic application for S1P1R-targeted therapies such as RPC1063 in limiting the incidence of colon
cancer in individuals with IBD. Gilenya® has recently been shown in an animal model to limit the development of colitis-associated cancer via S1P1R-mediated events, which may be
significant given the high rates of colorectal carcinoma in those suffering from UC.
Our Second Clinical Product CandidateRPC4046
Our second clinical product candidate, RPC4046, is a recombinant, humanized, high-affinity, selective anti-IL-13 monoclonal antibody.
We are preparing RPC4046 for a Phase 2 proof-of-concept study in adults and adolescents with active EoE, a GI-related immunological indication designated an Orphan Disease by the FDA. We have
an exclusive development license from AbbVie to explore the efficacy of RPC4046 in EoE. As part of our development program for RPC4046 in EoE, we held a pre-IND meeting with the FDA in the fourth
quarter of 2013 in which the FDA was in general agreement with the design of our Phase 2 study and nonclinical program. We plan to submit an IND in the first half of 2014 and initiate a
randomized Phase 2 trial shortly thereafter, in which event we would anticipate Phase 2 primary endpoint (top-line) results to be available in the second half of 2015.
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We selected EoE as the lead therapeutic indication for RPC4046 after careful consideration of the strength of the biological hypothesis for the anti-IL-13
antibody mechanism in EoE. Extensive preclinical and clinical studies provide strong evidence indicating that EoE is an atopic, or allergic-associated disease characterized by infiltration of a type
of white blood cell, called an eosinophil, into the esophagus. The condition is also characterized by increased tissue levels of other immune cell types and related signaling proteins. Notably, the
most over-expressed genes in patients with EoE are eotaxin-3, an eosinophil-specific chemoattractant (a chemical which causes movement of cells towards it at high concentrations), and periostin, an
extracellular matrix protein that supports eosinophil cell migration. Expression of both of these proteins in epithelial cells is induced by IL-13, and these proteins represent important diagnostic
biomarkers to assess the potential for patient response to targeted immunotherapy.
IL-13
antagonists have demonstrated efficacy in preclinical models of allergic and other immunological disorders and recently have shown activity in Asthma patients. IL-13 contributes to
localized allergic immune responses, recruitment of proinflammatory cells and tissue remodeling including fibrosis, all of which are features of EoE. The first human demonstration of clinical efficacy
(or proof of concept) for the anti-IL-13 mechanism of action in Asthma was demonstrated in a positive Phase 2 clinical study with the anti-IL-13 antibody lebrikizumab, which is being developed
by Roche. Lebrikizumab was associated with improved lung function. Roche also demonstrated that Asthma patients with high pretreatment levels of serum periostin had greater improvement in lung
function with lebrikizumab than did patients with low periostin, providing validation for this diagnostic biomarker in assessing a patient subgroup with potential for higher response rates.
EoE
is a chronic, allergic/immune-mediated disease characterized clinically by symptoms related to esophageal dysfunction and eosinophil-predominant inflammation. The disease affects
both pediatric and adult populations. Quality of life is often significantly decreased due to food impaction, swallowing difficulty and other disease effects. As a result, EoE patients often
experience weight loss/difficulty putting on weight, with this particular concern in the pediatric population on account of the morbidity associated with failure to thrive. There are currently no FDA
approved drugs for the treatment of EoE. The majority of patients are treated chronically with topical steroids, which are associated with a number of side effects. Amongst these side effects, fungal
infection, in particular esophageal candidiasis, can paradoxically worsen some of the symptoms associated with EoE, such as difficulty swallowing. Furthermore, topical steroids are associated with a
short-lived duration of efficacy, with patients relapsing in approximately four months. Consequently, a high unmet need exists for drugs that reduce clinical symptoms, modify disease progression
through tissue remodelling and/or increase duration of treatment response. Over the course of the last decade, there has been a steady rise in the incidence and diagnosis of EoE due to increases in
atopic diseases in the general population and adoption of diagnostic guidelines. Based on reported prevalence and diagnosis rates, our 2012 epidemiological estimates for EoE are approximately 160,000
patients in the US and approximately 145,000 patients in the EU.
AbbVie
previously completed a Phase 1 study and demonstrated that RPC4046 was well tolerated in healthy subjects as well as in patients with mild to moderate persistent Asthma.
The Phase 1 study supports both single-dose IV administration and multiple SC doses. We plan to use an initial IV loading dose followed by the SC injection route of administration in future EoE
clinical studies. RPC4046 binds to an IL-13 epitope that prevents the binding of circulating IL-13 to both types of IL-13 receptor, (IL-13R)
a
1 and IL-13R
a
2. This binding profile may be advantageous in optimizing efficacy and/or safety features.
We
plan to conduct a Phase 2 EoE trial as a randomized, double-blind, placebo controlled, parallel enrollment, multicenter study in patients with active EoE as measured by
endoscopic, histologic (eosinophil count) and clinical assessment. We plan to enroll approximately 90 patients, including adults and adolescents, to assess two doses of RPC4046 against placebo. The
primary objective of the Phase 2
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trial
will be to determine whether treatment with RPC4046 has clinical efficacy as determined by histological improvement of eosinophil count reduction. We plan to explore periostin, eotaxin and other
proteins as potential predictive diagnostic biomarkers for clinical efficacy in the proof-of-concept study. Secondary objectives for this study include a comparison of patients with histologic
response and remission, improvement in swallowing difficulty including as assessed by patient diaries as well as scores calculated from symptom and behavior measurements, and safety, pharmacodynamic
and biomarker measures.
RPC4046
aligns with key components of our strategy. EoE is an immune-mediated disease, consistent with our development expertise. Anti-IL-13 antibodies work by a recently validated
mechanism of action. There are also diagnostic biomarkers available for exploration in early EoE clinical studies that may be predictive of patient subsets with the potential for higher response rates
to therapeutic intervention with an anti-IL-13 therapeutic. Patients suffering from EoE currently have limited therapeutic options, including no currently approved products for this indication.
We
have an exclusive development license to RPC4046 from AbbVie which is limited in scope to conducting a Phase 2 study of RPC4046 in EoE. See "Strategic
Collaborations and Research Arrangements" for more details. AbbVie holds an option to enter into a global collaboration for RPC4046 with us following the availability of results from the planned
Phase 2 study. If AbbVie does not exercise its option, we will have an exclusive worldwide license for the development and commercialization of RPC4046 which will be unlimited as to
indications.
Should
AbbVie elect to enter into a collaboration with us, we will have a strong partner with biologic manufacturing experience and a vested interest in GI indications easily expandable
to EoE. Should AbbVie elect not to enter into a collaboration with us, we may have the opportunity to independently complete a potentially expedited development program (based on unmet need) for an
Orphan Disease. If such a development program is successful, we believe it may be possible to commercialize RPC4046 in the US and potentially in the EU with a targeted specialty sales force. Depending
on clinical outcomes in UC with our lead candidate RPC1063, as well as the successful development and approval of RPC1063 and RPC4046, we believe commercial synergies could be realized in GI by a
targeted specialty sales force.
Proprietary GPCR Drug Discovery Platform
Our biology expertise and drug discovery efforts for GPCR therapeutics are informed by our proprietary GPCR technology
platform for high resolution crystal structure determination. This pioneering technology facilitates structure-based drug design for developing potential best-in-class small molecule drugs
to GPCR targets. We licensed exclusive global rights to a proprietary GPCR discovery platform from TSRI, and alongside our in-house programs, we have entered into several collaborative,
cash-flow positive arrangements to leverage the platform.
Preclinical Program for Glucagon-like Peptide-1 Receptor Small Molecule Positive Allosteric Modulators (GLP-1R PAMs)
We are pursuing a research program for glucagon-like peptide-1 receptor (GLP-1R) small molecule positive allosteric modulators (PAMs)
for the treatment of Type 2 Diabetes. This program was derived from our dual efforts in medicinal chemistry combined with contribution from our proprietary GPCR technology platform. The
GLP-1 mechanism of action is known for controlling glucose as well as conferring weight loss in Type 2 Diabetes patients. Currently marketed GLP-1R peptide agonists are administered by
injection, which has limited their adoption rate in Type 2 Diabetes. We believe that an oral, potent, non-peptide modulator of GLP-1R would make this important therapeutic class more convenient
and accessible to a wider population of Type 2 Diabetes patients. We are designing and developing small molecule drug candidate leads to increase the activity of endogenous GLP-1 and
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related
gastrointestinal hormones, which is a novel mechanism of action. This approach fits well with our strategy to deliver differentiated, novel therapeutic offerings where unmet need exists in the
disease category. This opportunity also aligns with our desire to utilize early clinical biomarkers that may correlate with efficacy. In Type 2 Diabetes, pharmacodynamic biomarkers such as
measuring levels of blood glucose or hemoglobin A1c (HbA1C) can be explored in Phase 1 studies. Our efforts involving GLP-1R PAMs for the treatment of Type 2 Diabetes have only
been preclinical to date, and we have not filed an IND for this program.
We
may initiate further internal drug discover efforts based on our proprietary platform for select high-value GPCR targets that align with our focus on immune or metabolic
diseases.
Platform Collaborations Contributing to Capital Requirements
We have enacted several collaborations on our proprietary platform, one of which is active and two of which have concluded as
scheduled. We have used capital raised as part of upfront payments, success milestones and full-time equivalent support to advance our proprietary and wholly owned drug discovery and development
programs and support ongoing operations. With Ono Pharmaceuticals, we have completed the drug discovery portion of our collaboration and are now engaged in transferring to Ono intellectual property
and know-how related to our proprietary GPCR technology platform for the purpose of enabling Ono to independently obtain high resolution crystal
structures for their proprietary GPCR targets. We have previously had a partnership and a collaboration with OMJP and Eli Lilly, respectively. See "Collaborations Using the
Receptos GPCR Structure Determination Technology Platform" for more details on these arrangements.
We
may seek to enter into future technology collaborations to utilize our GPCR proprietary technology platform together with partners, with the historical payment of multiple
success milestones as validation that the platform has utility in optimizing drug design for the high-value GPCR target class.
Strategic Collaborations and Research Arrangements
License Agreements with The Scripps Research Institute (TSRI)
Novel Modulators of Sphingosine Phosphate Receptors
In April 2009, we entered into an exclusive license agreement (with a right to sublicense) with TSRI to rights to novel modulators of
sphingosine phosphate receptors, including modulators to the S1P1R. The technology licensed covers RPC1063, and we will owe to TSRI a royalty on net sales for RPC1063 of up to 2% depending on whether
RPC1063 is patent protected under the licensed technology in a particular country. We will also owe to TSRI up to an aggregate of $4,350,000 in success milestones as development of RPC1063 advances,
and upon any sublicense of RPC1063, we will owe to TSRI a percentage of any sublicensing revenues obtained as part of the sublicensing arrangement. The agreement will continue for as long as we are
obligated to pay royalties to TSRI, which will be for as long as any licensed patent covers any product in any country at issue or, where no such patent applies in a particular country, for as long as
any licensed patent would cover any product in any one of several specified major markets, after which the licenses granted to us will survive and become royalty-free, perpetual and irrevocable.
However, TSRI has the right to terminate the agreement if we fail to use commercially reasonable efforts to develop and commercialize the licensed compound. In addition, TSRI has the right to
terminate the agreement if we do not make a payment under the agreement and fail to cure the non-payment, in the event that we file for bankruptcy, if we are convicted of a felony related to the
development, manufacture, use, marketing, distribution or sale of the licensed products or licensed biological materials, if we underreport or underpay TSRI the greater of 15% or $100,000 or more, or
if we materially breach the agreement.
Because TSRI receives funding from the US government in support of TSRI's research activities, to the extent that inventions
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claimed
by the novel modulators of sphingosine phosphate receptors arise or result from TSRI's receipt of research support from the US government, our rights and obligations under the agreement will
be subject to all applicable rights of the US government.
Technology Relating to the Crystallization of Membrane Proteins
In June 2009, we entered into an exclusive license agreement (with a right to sublicense) with TSRI to intellectual property rights to
a technology platform for obtaining high-resolution crystal structures for GPCR receptors and using such structural solutions to perform structure-based drug design in pursuit of therapeutic
candidates for GPCR targets. This license has been subsequently amended twice to add further intellectual property rights. For any product candidates we derive from the platform, we will owe to
TSRI certain development success milestones and a
de minimus
royalty rate on net sales; however, in the case of RPC1063, these payments are not additive
to the rate owed to TSRI as part of the S1P1R modulator license referenced above. In instances where we enact collaborations using the technology platform, we will owe to TSRI up to 7.5% of payments
we receive based upon use of the technology. To date, we have entered into three such collaborations and have made corresponding payment to TSRI. We will also owe TSRI up to an aggregate of $950,000
in milestone payments depending upon the development of certain product candidates to the extent identified or discovered using the technology licenses from TSRI. The agreement will continue for as
long as we are obligated to pay royalties or milestone payments on product candidates we derive from the platform or 7.5% of payments we receive based upon use of the technology where we enact
collaborations using the technology platform (which, in the instance of royalties, could be for as long as ten years following the first commercial sale in one of several specified major markets and,
in the instance of milestone payments and payments based on use of the technology, could be until June 18, 2027), after which the licenses granted to us will survive and become royalty-free,
perpetual and irrevocable. However, TSRI has the right to convert the license granted to us into a non-exclusive license if we fail to use commercially reasonable efforts to exploit the licensed
technology. In addition, TSRI has the right to terminate the agreement if we do not make a payment under the agreement and fail to cure the non-payment, in the event that we file for bankruptcy, if we
are convicted of a felony related to the development, manufacture, use, marketing, distribution or sale of the licensed technology or know-how, if we underreport or underpay to TSRI the greater of 15%
or $100,000 or more, or if we materially breach the agreement. Because TSRI receives funding from the US government in support of TSRI's research activities, to the extent that inventions claimed by
the licensed patent rights arise or result from TSRI's receipt of research support from the US government, our rights and obligations under the agreement will be subject to all applicable rights of
the US government.
Development License and Option Agreement between AbbVie and Receptos for RPC4046
In October 2012, we entered into a Development License and Option Agreement with AbbVie which provided us with an exclusive research
and development license to the IL-13 antibody ABT-308 (referred to by us as RPC4046) to conduct a Phase 2 study of RPC4046 in EoE. Under the terms of this agreement, we are fully responsible
for the costs of such study. Following our delivery to AbbVie of a data package including results for the Phase 2 study, AbbVie may elect to enter into an exclusive, worldwide collaboration
with us. Key terms of this collaboration include our obligation to fund half of the costs of global development, a 50/50 net profit/loss arrangement in the US market, co-promotion and
commercialization rights for us in the US market, a double-digit royalty for us on net sales outside the US, shared decision-making for US commercialization and AbbVie having control of
commercialization outside the US.
If
AbbVie does not exercise its option to collaborate, we will have an exclusive, worldwide license to RPC4046 which will be unlimited as to indications. Key terms of this license
include our obligation to fund 100% of all development and payment to AbbVie of a royalty on global net sales at the same
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double
digit rate payable from AbbVie to us on net sales outside of the US in the event of a collaboration. The royalty rate in a collaboration or licensing scenario may be subject to offset in the
event third-party intellectual property is required. AbbVie has the right but not the obligation in either the collaboration or the licensing scenario to be the manufacturer and supplier for RPC4046.
If
AbbVie does not exercise its option to collaborate in the first instance, AbbVie will have a second option to enter into a collaboration with us, if applicable, when a data packages
including results for a Phase 2 study is available for a second indication for RPC4046; however, if AbbVie exercises this second option, AbbVie would be required to reimburse us for development
costs incurred after completion of the Phase 2 study in EoE and the collaboration would be a 50/50 net profit/loss arrangement worldwide. AbbVie's second option terminates if we undergo a
change of control, if we execute a sublicense to RPC4046 or if five years pass following AbbVie's election not to exercise its first option.
The
term of the Development License and Option Agreement extends until the parties enter into a collaboration (if AbbVie exercises its option to collaborate) or AbbVie provides us with
an exclusive, worldwide license to RPC4046. However, AbbVie has the right to terminate the Development License and Option Agreement if we materially breach the agreement and fail to cure the breach,
if we
prosecute or otherwise participate in any claim that an AbbVie patent is invalid, or if we file for bankruptcy. In addition, we have the right to terminate the Development License and Option Agreement
if we have delivered to AbbVie a data package including results for the Phase 2 study of RPC4046 in EoE, if despite our exercise of commercially reasonable efforts we are unable to proceed with
the Phase 2 study or the objectives of such study are determined by us to be unachievable or materially frustrated, or if the Phase 2 study is suspended for at least nine months or
halted indefinitely.
Collaborations Using the Receptos GPCR Structure Determination Technology Platform
Collaboration with Ono Pharmaceutical Co., Ltd.
In December 2011, we entered into a co-exclusive Collaboration Agreement with Ono Pharmaceuticals to utilize our
proprietary GPCR technology platform for high resolution structure determination technologies for the identification of a high resolution novel protein crystal structure of an Ono
proprietary GPCR drug discovery target. These activities are unrelated to ceralifimod , which is an S1PR modulator (like our product candidate RPC1063) under development by Ono and Merck Serono
(see "S1P1R Modulator RPC1063 in RMSS1PR Modulators in Development"). Under the terms of the agreement, Ono paid us an upfront payment of $2,500,000 to gain access to the
technology and we completed protein expression, crystallization studies and structure determination with respect to the GPCR drug discovery target for Ono, with Ono providing research funding.
By December 2013, we had achieved several milestones, including determination of the novel GPCR structure, and earned aggregate milestone payments of $3,750,000.
In
December 2013, we amended the Collaboration Agreement with Ono and agreed to perform technology transfer with respect to, and to grant Ono a non-exclusive sublicense to,
our GPCR technology platform for high resolution crystal structure determination. Pursuant to the amendment, we are entitled to receive upfront license and collaborative research termination
fees totaling $3,700,000, and we are eligible to receive technology transfer milestone payments of up to $2,000,000. We will provide training services in support of Ono's efforts to achieve certain
technology transfer milestones.
Under
the Collaboration Agreement, as amended, we remain eligible for research milestone payments of up to another $2,000,000 based on successful completion of certain research
activities and we remain eligible for development milestone payments of up to $13,500,000 for therapeutic drugs discovered as a result of the collaboration research efforts and developed by Ono. Ono
has the right to
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terminate
the agreement if we materially breach the agreement, if we file for bankruptcy, or in the event that we undergo a change of control.
Collaboration with Eli Lilly and Company
In December 2010, we entered into two year co-exclusive Collaborative Agreement with Eli Lilly to utilize our proprietary GPCR
structure determination technologies, including application of such technologies to the development of potential modulators directed to an undisclosed GPCR target. Eli Lilly paid us an upfront
payment of $5,000,000 to access our technology during the term. Under the agreement, we were responsible for conducting certain research activities with respect to the target and sharing certain
information in pursuit of potential drug candidate leads. The agreement expired on December 31, 2012. As of such time, all of our performance and delivery obligations to Eli Lilly had been met,
and we are entitled to no further payments under the agreement.
License and Technology Transfer Agreement with Ortho-McNeil-Janssen Pharmaceuticals, Inc.
In December 2010, we entered into a License and Technology Transfer Agreement with OMJP in which OMJP took a perpetual sublicense to
our GPCR technology platform for high resolution crystal structure determination. OMJP paid us an upfront payment of $4,000,000. As part of the arrangement, we conducted a technology transfer
program to OMJP using two GPCR targets as prototype examples. Our activities under the agreement concluded on December 7, 2011, when we received a milestone payment of $2,500,000 for
successfully completing the technology transfer program. As of such time, all of our performance and delivery obligations to OMJP had been met, and we are entitled to no further payments under the
agreement.
Intellectual Property
The proprietary nature of, and protection for, our product candidates and our discovery programs, processes and know-how are important
to our business. We have sought patent protection in the US and internationally for RPC1063 and our discovery GLP-1R PAM program, and any other inventions to which we have rights, where available and
when appropriate. AbbVie has sought similar patent protection for RPC4046, to which we currently have a license to conduct a Phase 2 study of RPC4046 in EoE. Our policy is to pursue, maintain
and defend patent rights, whether developed internally or licensed from third parties, and to protect the technology, inventions and improvements that are commercially important to the development of
our business. We also rely on trade secrets relating to our proprietary technology platform that may be important to the development of our business.
Our
commercial success will depend in part on obtaining and maintaining patent protection and trade secret protection of our current and future product candidates and the methods used to
develop and manufacture them, as well as successfully defending these patents against third-party challenges. Our ability to stop third parties from making, using, selling, offering to sell or
importing our products depends on the extent to which we have rights under valid and enforceable patents or trade secrets that cover these activities. We cannot be sure that patents will be granted
with respect to any of our pending patent applications or with respect to any patent applications filed by us in the future, nor can we be sure that any of our existing patents or any patents that may
be granted to us in the future will be commercially useful in protecting our product candidates, discovery programs and processes. For this and more comprehensive risks related to our intellectual
property, please see "Risk FactorsRisks Relating to Our Intellectual Property."
RPC1063 (S1P1R Modulator)
The patent portfolio for RPC1063 contains patents and patent applications directed to compositions of matter for RPC1063 and multiple
chemical scaffolds as well as certain of their
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metabolites,
synthetic intermediates, manufacturing methods and methods of use. As of December 31, 2013, we owned or had an exclusive license from TSRI to six issued US patents and six pending
US patent applications, as well as corresponding foreign patents and patent applications issued or pending
in Canada, Europe, Japan, Australia, Mexico, Eurasia, South Korea, China, New Zealand, Malaysia, Philippines, Singapore, Brazil, India, Israel and South Africa. We expect the composition of matter
patent for RPC1063, if the appropriate maintenance, renewal, annuity or other governmental fees are paid, to expire in 2029 (worldwide). It is possible, assuming RPC1063 achieves regulatory approval,
that the term of the composition of matter patent in the US may be extended up to a maximum of five additional years under the provisions of the Drug Price Competition and Patent Term Restoration Act
of 1984, or the Hatch-Waxman Act (see "Government Regulation and Product ApprovalUnited States Government RegulationPatent Term Restoration and Marketing
Exclusivity"). Patent term extension may similarly be available in certain foreign countries upon regulatory approval. We expect the other patents and patent applications in this portfolio, if issued,
and if the appropriate maintenance, renewal, annuity, or other governmental fees are paid, to expire from 2030 to 2032.
RPC4046 (anti-IL-13 antibody)
The patent portfolio for RPC4046, to which rights are in-licensed from AbbVie, contains an issued patent and pending patent
applications directed to compositions of matter for RPC4046 and certain of their methods of use. As of December 31, 2013, the in-licensed portfolio consisted of rights to one US patent, one
pending US patent application, and corresponding foreign pending patent applications in Europe, Japan, China, Canada, Australia, Mexico, Norway, Korea, Russia and Costa Rica. We expect the issued
composition of matter patent in the US, if the appropriate maintenance, renewal, annuity or other governmental fees are paid, to expire in 2028. It is possible, assuming RPC4046 achieves regulatory
approval, that the term of the composition of matter patent in the US may be extended up to five additional years under the provisions of the Hatch-Waxman Act (see "Government Regulation
and Product ApprovalUnited States Government RegulationPatent Term Restoration and Marketing Exclusivity"), although such an extension is subject to AbbVie's consent where
AbbVie does not exercise its option to enter into a global collaboration for RPC4046 with us and we instead receive an exclusive worldwide license to RPC4046, and thus the possibility that AbbVie
utilizes or chooses to reserve the opportunity for an extension of that patent in such context for a different drug. We expect the pending foreign patent applications in the portfolio, if issued, and
if the appropriate maintenance, renewal, annuity, or other governmental fees are paid, to expire in 2027. Patent term extension may similarly be available, also subject to AbbVie's consent, in certain
foreign countries upon regulatory approval.
GLP-1R PAMs (positive allosteric modulators)
The patent portfolio for our GLP-1R PAM program contains pending patent applications directed to certain compositions of matter for
multiple chemical scaffolds as well as one issued US patent directed to certain methods of use. As of December 31, 2013, we owned one issued US patent and five pending US patent applications
and corresponding foreign patent applications, including one pending PCT application as well as applications pending in Europe and
Japan. We expect the composition of matter patents in the US, if issued from the pending patent applications and if the appropriate maintenance, renewal, annuity or other governmental fees are paid,
to expire from 2031 to 2032. It is possible that the term of any composition of matter patents in the US, if issued, may be extended up to a maximum of five additional years under the provisions of
the Hatch-Waxman Act if a clinical candidate covered by such a patent is selected for development and subsequently receives regulatory approval (see "Government Regulation and Product
ApprovalUnited States Government RegulationPatent Term Restoration and Marketing Exclusivity"). We expect the corresponding foreign patent applications in the portfolio, if
issued, and if the appropriate maintenance, renewal,
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annuity,
or other governmental fees are paid, to expire from 2031 to 2032. Patent term extension may similarly be available in certain foreign countries upon regulatory approval.
GPCR Structure Determination Technology Platform
The patent portfolio for our proprietary GPCR structure determination portfolio, which is in-licensed from TSRI, includes
patents and patent applications directed primarily to methods and compositions for obtaining high resolution crystals of GPCRs. As of December 31, 2013, we had exclusive commercial
license rights from TSRI to two US patents, two pending US patent applications, and foreign patent applications in Australia, Canada, China, Eurasia, Europe, Israel, India, Japan, Korea, New Zealand
and Singapore related to GPCR structure determination. We expect the patent and any patent applications in the US or corresponding foreign patent applications which issue, if the appropriate
maintenance, renewal, annuity or other governmental fees are paid, to expire from 2028 to 2032.
Trade Secrets
In addition to patents, we rely on trade secrets and know-how to develop and maintain our competitive position. We seek to protect our
proprietary data and processes, in part, by confidentiality agreements and invention assignment agreements with our employees, consultants, scientific advisors, contractors and partners. These
agreements are designed to protect our proprietary information. We also seek to preserve the integrity and confidentiality of our data, trade secrets and know-how by maintaining physical security of
our premises and physical and electronic security of our information technology systems. With respect to our proprietary GPCR structure determination
technology platform, we consider trade secrets and know-how to be our primary intellectual property. Trade secrets and know-how can be difficult to protect. In particular, we anticipate that with
respect to this GPCR structure determination technology platform, these trade secrets and know-how will over time be disseminated within the industry through independent development, the
publication of journal articles describing methodology for crystallization of membrane proteins, and the movement of personnel skilled in the art from academic to industry scientific positions.
Manufacturing
RPC1063
We currently contract with third parties for the manufacture of RPC1063 for preclinical studies and clinical trials and intend to do so
in the future. The third parties with whom we currently work have the capability to meet our current and commercial manufacturing needs. We do not own or operate manufacturing facilities for the
production of clinical quantities of our product candidates. We currently have no plans to build our own clinical or commercial scale manufacturing capabilities. Although we rely on contract
manufacturers, we have personnel with extensive manufacturing experience to oversee the relationships with our contract manufacturers. One of our contract manufacturers has manufactured what we
believe to be sufficient quantities of RPC1063 active pharmaceutical ingredient (or drug substance) to complete the ongoing Phase 2 clinical trials. Another of our existing contract
manufacturers continues to produce RPC1063 drug product for use in ongoing clinical trials. We are evaluating secondary contract manufacturers for clinical and commercial production of drug substance
and product. We have contracted a second drug product contract manufacturer for clinical and commercial production of drug product. In addition, a separate contract manufacturer labels, packages and
distributes clinical supplies of RPC1063. We believe the manufacturing processes for the active pharmaceutical ingredient and finished drug product for RPC1063 have been developed to adequately
support future development and commercial demands. While we believe that our existing suppliers of active pharmaceutical ingredient and drug product would be capable of continuing to produce materials
in commercial quantities, we may need to identify
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additional
third-party manufacturers capable of providing commercial quantities of drug product. If we are unable to arrange for such a third-party manufacturing source, or fail to do so on
commercially reasonable terms, we may not be able to successfully produce and market RPC1063.
RPC4046
As part of our Development License and Option Agreement, AbbVie has agreed to manufacture quantities of RPC4046 drug substance and drug
product needed for preclinical and clinical studies as part of the development activities contemplated by such Agreement, including the planned Phase 2 study of RPC4046 in EoE. AbbVie will
support Receptos on regulatory chemistry, manufacturing and control (CMC) activities suitable for regulatory filings with the FDA and EMA as needed. We may also request during the term of the
Development License and Option Agreement that AbbVie initiate CMC activities in order to supply the first Phase 3 trial for RPC4046.
Should
AbbVie elect at its option to enter into a collaboration with us following delivery to AbbVie of a data package including results for the planned Phase 2 of RPC4046 in EoE,
AbbVie can elect to supply the collaboration with RPC4046 or effect technology transfer to a third-party manufacturer to supply the collaboration. If AbbVie does not exercise its option to
collaborate, the parties will either agree on the terms for AbbVie to supply RPC4046 to Receptos, or AbbVie will effect technology transfer to a third-party manufacturer. If technology transfer occurs
in either scenario, we believe there is sufficient expertise and capacity within the biologic manufacturing industry to perform clinical and commercial supply of RPC4046. However, if we are unable to
arrange for such a third-party manufacturing source, or fail to do so on commercially reasonable terms, our ability to develop and commercialize RPC4046 will be adversely affected. Additionally, an
inability to effect technology transfer in a timely fashion will impact the pace and potential success of our development efforts as well as our prospects for potential commercialization.
Government Regulation and Product Approval
Governmental authorities in the US, at the federal, state and local level, and other countries extensively regulate, among other
things, the research, development, testing, manufacture, labeling, packaging, promotion, storage, advertising, distribution, marketing and export and import of products such as those we are
developing. Our product candidates must be approved by the FDA before they may be legally marketed in the US and by the EMA before they may be legally marketed in Europe. Our product candidates will
be subject to similar requirements in other countries prior to marketing in those countries. The process of obtaining regulatory approvals and the subsequent compliance with applicable federal, state,
local and foreign statutes and regulations require the expenditure of substantial time and financial resources.
United States Government Regulation
NDA Approval Processes
In the US, the FDA regulates drugs under the Federal Food, Drug and Cosmetic Act, or FDCA, and biologics under the Public Health
Service Act, or PHSA, and implementing regulations. Failure to comply with the applicable US requirements at any time during the product development process or approval process, or after approval, may
subject an applicant to administrative or judicial sanctions, any of which could have a material adverse effect on us. These sanctions could include:
-
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refusal to approve pending applications;
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withdrawal of an approval;
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imposition of a clinical hold;
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-
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warning letters;
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-
product seizures;
-
-
total or partial suspension of production or distribution; or
-
-
injunctions, fines, disgorgement, or civil or criminal penalties.
The
process required by the FDA before a drug or biologic may be marketed in the US generally involves the following:
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completion of nonclinical laboratory tests, animal studies and formulation studies conducted according to Good Laboratory
Practices, or GLPs, or other applicable regulations;
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submission to the FDA of an IND, which must become effective before human clinical trials may begin;
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performance of adequate and well-controlled human clinical trials according to Good Clinical Practices, or GCPs, to
establish the safety and efficacy of the proposed product for its intended use;
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submission to the FDA of an NDA or BLA;
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satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product is produced
to assess compliance with current Good Manufacturing Practices, or cGMPs, to assure that the facilities, methods and controls are adequate to preserve the drug's identity, strength, quality and
purity; and
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FDA review and approval of the NDA or BLA.
Once
a product candidate is identified for development, it enters the preclinical or nonclinical testing stage. Nonclinical tests include laboratory evaluations of product chemistry,
toxicity and formulation, as well as animal studies. An IND sponsor must submit the results of the nonclinical tests, together with manufacturing information and analytical data, to the FDA as part of
the IND. Some nonclinical testing may continue even after the IND is submitted. In addition to including the results of the nonclinical studies, the IND will also include a protocol detailing, among
other things, the objectives of the clinical trial, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated if the first phase lends itself to an efficacy
determination. The IND automatically becomes
effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, places the IND on clinical hold. In such a case, the IND sponsor and the FDA must resolve any
outstanding concerns before clinical trials can begin. A clinical hold may occur at any time during the life of an IND, and may affect one or more specific studies or all studies conducted under the
IND.
All
clinical trials must be conducted under the supervision of one or more qualified investigators in accordance with GCPs. They must be conducted under protocols detailing the
objectives of the trial, dosing procedures, research subject selection and exclusion criteria and the safety and effectiveness criteria to be evaluated. Each protocol must be submitted to the FDA as
part of the IND, and progress reports detailing the status of the clinical trials must be submitted to the FDA annually. Sponsors also must timely report to FDA serious and unexpected adverse
reactions, any clinically important increase in the rate of a serious suspected adverse reaction over that listed in the protocol or investigation brochure, or any findings from other studies or
animal or in vitro testing that suggest a significant risk in humans exposed to the product candidate. An institutional review board, or IRB, at each institution participating in the clinical trial
must review and approve the protocol before a clinical trial commences at that institution and must also approve the information regarding the trial and the consent form that must be provided to each
research subject or the subject's legal representative, monitor the study until completed and otherwise comply with IRB regulations.
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Human
clinical trials are typically conducted in three sequential phases that may overlap or be combined:
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Phase 1.
The drug is initially introduced into
healthy human subjects and tested for safety, dosage tolerance, absorption, metabolism, distribution and elimination. In the case of some products for severe or life-threatening diseases, such as
cancer, especially when the product may be inherently too toxic to ethically administer to healthy volunteers, the initial human testing is often conducted in patients.
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Phase 2.
Clinical trials are performed on a limited
patient population intended to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage
tolerance and optimal dosage.
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Phase 3.
Clinical trials are undertaken to further
evaluate dosage, clinical efficacy and safety in an expanded patient population at geographically dispersed clinical study sites. These studies are intended to establish the overall risk-benefit ratio
of the product and provide an adequate basis for product labeling.
Human
clinical trials are inherently uncertain and Phase 1, Phase 2 and Phase 3 testing may not be successfully completed. The FDA or the sponsor may suspend a
clinical trial at any time for a variety of reasons, including a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or
terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB's requirements or if the product candidate has been associated with
unexpected serious harm to patients.
During
the development of a new drug or biologic, sponsors are given opportunities to meet with the FDA at certain points. These points may be prior to the submission of an IND, at the
end of Phase 2 and before an NDA or BLA 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 and for the FDA to provide advice on the next phase of development. Sponsors typically use the meeting at the end of Phase 2 to discuss their Phase 2 clinical results
and present their plans for the pivotal Phase 3 clinical trial that they believe will support the approval of the new product. A sponsor may also request a Special Protocol Assessment, or SPA,
the purpose of which is to reach agreement with the FDA on the Phase 3 clinical trial protocol design and analysis that will form the primary basis of an efficacy claim.
According
to published guidance on the SPA process, a sponsor which meets the prerequisites may make a specific request for an SPA and provide information regarding the design and size
of the proposed clinical trial. The FDA is supposed to evaluate the protocol within 45 days of the request to assess whether the proposed trial is adequate, and that evaluation may result in
discussions and a request for additional information. An SPA request must be made before the proposed trial begins, and all open issues must be resolved before the trial begins. If a written agreement
is reached, it will be documented and made part of the record. The agreement will be binding on the FDA and may not be changed by the sponsor or the FDA after the trial begins except with the written
agreement of the sponsor and the FDA or if the FDA determines that a substantial scientific issue essential to determining the safety or efficacy of the product candidate was identified after the
testing began.
Concurrent
with clinical trials, sponsors usually complete additional animal safety studies and also develop additional information about the chemistry and physical characteristics of
the drug and finalize a process for manufacturing commercial quantities of the product in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality
batches and the manufacturer must develop methods for testing the quality, purity and potency. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted
to
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demonstrate
that the drug candidate does not undergo unacceptable deterioration over its proposed shelf-life.
The
results of product development, nonclinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests and other control mechanisms, proposed
labeling and other relevant information are submitted to the FDA as part of an NDA or BLA requesting approval to market the product. The submission is subject to the payment of user fees, but a waiver
of such fees may be obtained under specified circumstances. The FDA reviews all NDAs and BLAs submitted to ensure that they are sufficiently complete for substantive review before it accepts them for
filing. It may request additional information rather than accept an NDA or BLA for filing. In this event, the application must be resubmitted with the additional information. The resubmitted
application also is subject to review before the FDA accepts it for filing.
Once
the submission is accepted for filing, the FDA begins an in-depth review. A product candidate representing a significant improvement in treatment, prevention or diagnosis of disease
may receive priority review. The FDA may refuse to approve an application if the applicable regulatory criteria are not satisfied or may require additional clinical or other data. Even if such data
are submitted, the FDA may ultimately decide that the application does not satisfy the criteria for approval. The FDA reviews applications to determine, among other things, whether a product is safe
and effective for its intended use and whether its manufacturing is cGMP-compliant. The FDA may refer the NDA or BLA to an advisory committee for review and recommendation as to whether the
application should be approved and under what conditions. The FDA is not bound by the recommendation of an advisory committee, but it generally follows such recommendations. Before approving an
application, the FDA will inspect the facility or facilities where the product is manufactured and tested.
Expedited Review and Approval
The FDA has various programs, including Fast Track, priority review, and accelerated approval, which are intended to expedite or
simplify the process for reviewing new products, and/or provide for the approval of a product on the basis of a surrogate endpoint. Even if a product qualifies for one or more of these programs, the
FDA may later decide that it no longer meets the conditions for qualification or that the time period for FDA review or approval will not be shortened. Generally, products that are eligible for these
programs are those for serious or life-threatening conditions, those with the potential to address unmet medical needs and those that offer meaningful benefits over existing treatments. For example,
Fast Track is a process designed to facilitate the development and expedite the review of drugs and biologics to treat serious or life-threatening diseases or conditions and fill unmet medical needs.
Priority review is designed to give products that offer major advances in treatment or provide a treatment where no adequate therapy exists an initial review within eight months of submission as
compared to a standard review time of
12 months. Although Fast Track and priority review do not affect the standards for approval, the FDA will attempt to facilitate early and frequent meetings with a sponsor of a Fast Track
designated product and expedite review of the application for a product designated for priority review. Accelerated approval, which is described in Subpart H of 21 CFR Part 314, provides
for an earlier approval for a product that is intended to treat a serious or life-threatening disease or condition and that fills an unmet medical need based on a surrogate endpoint. A surrogate
endpoint is a laboratory measurement or physical sign used as an indirect or substitute measurement representing a clinically meaningful outcome. As a condition of approval, the FDA may require that a
sponsor of a product candidate receiving accelerated approval perform post-marketing clinical trials.
In
the recently enacted Food and Drug Administration Safety and Innovation Act, or FDASIA, Congress encouraged the FDA to utilize innovative and flexible approaches to the assessment of
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products
under accelerated approval. The law requires the FDA to issue related draft guidance within a year after the law's enactment and also promulgate confirming regulatory changes.
Patent Term Restoration and Marketing Exclusivity
Depending upon the timing, duration and specifics of FDA approval of the use of our drug and biologic product candidates, some of the
US patents covering our product candidates may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the Hatch-Waxman
Act. The Hatch-Waxman Act permits 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 or BLA and the approval of that application. Only one patent applicable to
an approved product is eligible for the extension and the application for extension must be made prior to expiration of the patent. The US 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 intend to apply for restorations of patent term for some of our currently owned or licensed patents
to add patent life beyond their current expiration date, depending on the expected length of clinical trials and other factors involved in the submission of the relevant application. However, our
ability to seek restoration of the patent term of certain licensed patents, such as in the instance of patents covering RPC4046 (where AbbVie is the licensor), will be subject to action by the
licensor, and it is possible (including in a situation where a patent at issue also covers a separate approved drug or drug candidate owned or otherwise licensed to a third party by the licensor) that
the licensor may elect not to seek such a restoration.
Market
exclusivity provisions under the FDCA also can delay the submission or the approval of certain applications. The FDCA provides a five-year period of non-patent marketing
exclusivity within the US to the first applicant to gain approval of an NDA for a new chemical entity. A drug is a new chemical entity if the FDA has not previously approved any other new drug
containing the same active moiety, which is the molecule or ion responsible for the action of the drug substance. During the exclusivity period, the FDA may not accept for review an abbreviated new
drug application, or ANDA, or a 505(b)(2) NDA submitted by another company for another version of such drug where the applicant does not own or have a legal right of reference to all the data required
for approval. However, an application may be submitted after four years if it contains a certification of patent invalidity or non-infringement. The FDCA also provides three years of marketing
exclusivity for an NDA, 505(b)(2) NDA or supplement to an approved NDA if new clinical investigations, other than bioavailability studies, that were conducted or sponsored by the applicant are deemed
by the FDA to be essential to the approval of the application, for example, for new indications, dosages or strengths of an existing drug. This three-year exclusivity covers only the conditions
associated with the new clinical investigations and does not prohibit the FDA from approving ANDAs for drugs containing the original active agent. Five-year and three-year exclusivity will not delay
the submission or approval of a full NDA; however, an applicant submitting a full NDA would be required to conduct or obtain a right of reference to all of the preclinical studies and adequate and
well-controlled clinical trials necessary to demonstrate safety and effectiveness.
Orphan Drug Designation
Under the Orphan Drug Act, the FDA may grant Orphan Drug designation to drugs intended to treat a rare disease or condition, which is
generally a disease or condition that affects fewer than 200,000 individuals in the US, or more than 200,000 individuals in the US and for which there is no reasonable expectation that the cost of
developing and making available in the US a drug for this type
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of
disease or condition will be recovered from sales in the US for that drug. Orphan Drug designation must be requested before submitting an NDA. After the FDA grants Orphan Drug designation, the
identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan Drug designation does not convey any advantage in or shorten the duration of the regulatory
review and 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 product
exclusivity, which
means that the FDA may not approve any other applications to market the same drug for the same indication, except in very limited circumstances, for seven years. Orphan Drug exclusivity, however,
could also block the approval of one of our products for seven years if a competitor obtains approval of the same drug as defined by the FDA or if our drug candidate is determined to be contained
within the competitor's product for the same indication or disease.
Post-Approval Requirements
Once an approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements is not maintained or if
problems occur after the product reaches the market. Later discovery of previously unknown problems with a product may result in restrictions on the product or even complete withdrawal of the product
from the market. After approval, some types of changes to the approved product, such as adding new indications, manufacturing changes and additional labeling claims, are subject to further FDA review
and approval. In addition, the FDA may require testing and surveillance programs to monitor the effect of approved products that have been commercialized, and the FDA has the power to prevent or limit
further marketing of a product based on the results of these post-marketing programs.
Any
products manufactured or distributed by us pursuant to FDA approvals are subject to continuing regulation by the FDA, including, among other
things:
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record-keeping requirements;
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reporting of adverse experiences;
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providing the FDA with updated safety and efficacy information;
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drug sampling and distribution requirements;
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notifying the FDA and gaining its approval of specified manufacturing or labeling changes; and
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complying with FDA promotion and advertising requirements.
Drug
or biologic manufacturers and other entities involved in the manufacture and distribution of approved 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 some state agencies for compliance with cGMP and other laws.
We
rely, and expect to continue to rely, on third parties for the production of clinical and commercial quantities of our products. Future FDA and state inspections may identify
compliance issues at the facilities of our contract manufacturers that may disrupt production or distribution, or require substantial resources to correct.
From
time to time, legislation is drafted, introduced and passed in Congress that could significantly change the statutory provisions governing the approval, manufacturing and marketing
of products regulated by the FDA. In addition, FDA regulations and guidance are often revised or reinterpreted by the agency in ways that may significantly affect our business and our products. It is
impossible to predict whether legislative changes will be enacted, or FDA regulations, guidance or interpretations changed or what the impact of such changes, if any, may be.
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Regulation Outside of the United States
In addition to regulations in the US, we will be subject to regulations of other countries governing clinical trials and commercial
sales and distribution of our products. Whether or not we obtain FDA approval for a product, we must obtain approval by the comparable regulatory authorities of countries outside of the US before we
can commence clinical trials in such countries and
approval of the regulators of such countries or economic areas, such as the EU, before we may market products in those countries or areas. The approval process and requirements governing the conduct
of clinical trials, product licensing, pricing and reimbursement vary greatly from place to place, and the time may be longer or shorter than that required for FDA approval.
Under
EU regulatory systems, a company may submit marketing authorization applications either under a centralized or decentralized procedure. The centralized procedure, which is
compulsory for medicines produced by biotechnology or those medicines intended to treat AIDS, cancer, neurodegenerative disorders or diabetes and optional for those medicines which are highly
innovative, provides for the grant of a single marketing authorization that is valid for all EU member states. The decentralized procedure provides for mutual recognition of national approval
decisions. Under this procedure, the holder of a national marketing authorization may submit an application to the remaining member states. Within 90 days of receiving the applications and
assessments report, each member state must decide whether to recognize approval. If a member state does not recognize the marketing authorization, the disputed points are eventually referred to the
European Commission, whose decision is binding on all member states.
As
in the US, we may apply for designation of a product as an Orphan Drug for the treatment of a specific indication in the EU before the application for marketing authorization is made.
Orphan Drugs in Europe enjoy economic and marketing benefits, including up to ten years of market exclusivity for the approved indication unless another applicant can show that its product is safer,
more effective or otherwise clinically superior to the orphan-designated product.
Pharmaceutical Coverage, Pricing and Reimbursement
Sales of our products will depend, in part, on the extent to which the costs of our products will be covered by third-party payors,
such as government health programs, commercial insurance and managed healthcare organizations. These third-party payors are increasingly challenging the prices charged for medical products and
services. Additionally, the containment of healthcare costs has become a priority of federal and state governments and the prices of drugs have been a focus in this effort. The US government, state
legislatures and foreign governments have shown significant interest in implementing cost-containment programs, including price controls, restrictions on reimbursement and requirements for
substitution of generic products. Adoption of price controls and cost-containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could
further limit our net revenue and results. If these third-party payors do not consider our products to be cost-effective compared to other therapies, they may not cover our products after approval as
a benefit under their plans or, if they do, the level of payment may not be sufficient to allow us to sell our products on a profitable basis.
The
Medicare Prescription Drug, Improvement, and Modernization Act of 2003, or the MMA, imposed new requirements for the distribution and pricing of prescription drugs for Medicare
beneficiaries. Under Part D, Medicare beneficiaries may enroll in prescription drug plans offered by private entities
which will provide coverage of outpatient prescription drugs. Part D plans include both stand-alone prescription drug benefit plans and prescription drug coverage as a supplement to Medicare
Advantage plans. Unlike Medicare Part A and B, Part D coverage is not standardized. Part D prescription drug plan sponsors are not required to pay for all covered Part D
drugs, and each drug plan can develop its own drug formulary that identifies which drugs it will cover and at what tier or
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level.
However, Part D prescription drug formularies must include drugs within each therapeutic category and class of covered Part D drugs, though not necessarily all the drugs in each
category or class. Any formulary used by a Part D prescription drug plan must be developed and reviewed by a pharmacy and therapeutic committee. Government payment for some of the costs of
prescription drugs may increase demand for our products for which we receive marketing approval. However, any negotiated prices for our products covered by a Part D prescription drug plan will
likely be lower than the prices we might otherwise obtain. Moreover, while the MMA applies only to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policy and
payment limitations in setting their own payment rates. Any reduction in payment under Medicare Part D may result in a similar reduction in payments from non-governmental payors.
The
American Recovery and Reinvestment Act of 2009 provides funding for the federal government to compare the effectiveness of different treatments for the same illness. A plan for the
research will be developed by the Department of Health and Human Services, the Agency for Healthcare Research and Quality and the National Institutes for Health, and periodic reports on the status of
the research and related expenditures will be made to Congress. Although the results of the comparative effectiveness studies are not intended to mandate coverage policies for public or private
payors, it is not clear what effect, if any, the research will have on the sales of any product, if any such product or the condition that it is intended to treat is the subject of a study. It is also
possible that comparative effectiveness research demonstrating benefits in a competitor's product could adversely affect the sales of our product candidates. If third-party payors do not consider our
products to be cost-effective compared to other available therapies, they may not cover our products as a benefit under their plans or, if they do, the level of payment may not be sufficient to allow
us to sell our products on a profitable basis.
The
Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act of 2010, collectively referred to as ACA, enacted in March
2010, is expected to have a significant impact on the health care industry. ACA is expected to expand coverage for the uninsured while at the same time containing overall healthcare costs. ACA, among
other things, imposes a significant annual fee on companies that manufacture or import branded prescription drug products. It also contains substantial new provisions intended to broaden access to
health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against healthcare fraud and abuse, add new transparency requirements for the healthcare industry, impose new
taxes and fees on pharmaceutical manufacturers, and impose additional health policy reforms, any or all of which may affect our business. A significant number of provisions are not yet, or have only
recently become, effective, but ACA is likely to continue the downward pressure on pharmaceutical pricing, especially under the Medicare program, and may also increase our regulatory burdens and
operating costs.
Other
legislative changes have also been proposed and adopted since ACA was enacted. For example, the Budget Control Act of 2011 resulted in aggregate reductions in Medicare payments to
providers of up to 2% per fiscal year, starting in 2013, and the American Taxpayer Relief act of 2012, among other things, reduced Medicare payments to several types of providers and increased the
statute of limitations period for the government to recover overpayments to providers from three to five years. These new laws may result in additional reductions in Medicare and other healthcare
funding.
In
addition, in some non-US jurisdictions, the proposed pricing for a drug must be approved before it may be lawfully marketed. The requirements governing drug pricing vary widely from
country to country. For example, the EU provides options for its member states to restrict the range of medicinal products for which their national health insurance systems provide reimbursement and
to control the prices of medicinal products for human use. A member state may approve a specific price for the medicinal product or it may instead adopt a system of direct or indirect controls on the
profitability of the company placing the medicinal product on the market. There can be no assurance that any country that has price controls or reimbursement limitations for pharmaceutical products
will
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allow
favorable reimbursement and pricing arrangements for any of our products. Historically, products launched in the EU do not follow price structures of the US and generally tend to be
significantly lower.
We
expect that ACA, as well as other healthcare reform measures that have been and may be adopted in the future, may result in more rigorous coverage criteria and in additional downward
pressure on the price that we receive for any approved product, and could seriously harm our future revenues. Any reduction in reimbursement from Medicare or other government programs may result in a
similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability
or commercialize our products.
Employees
As of December 31, 2013, we had 41 employees, of which 18 hold M.D. or Ph.D. degrees. Thirty of our employees are involved in
our drug research and development operations, and 11 are in general and administrative functions. None of our employees are represented by a labor union, and we consider our employee relations to be
good.
Corporate Information
We were incorporated in the state of Delaware on September 26, 2008 under the name Receptor Pharmaceuticals, Inc. and
changed our name to name to Receptos, Inc. on May 11, 2009. As used in this Annual Report, unless the context suggests otherwise, "the Company", "Receptos," "we,", "us" and "our" refer
to Receptos, Inc. and its subsidiaries on a consolidated basis. Our principal executive offices are located at 10835 Road to the Cure, Suite 205, San Diego, California 92121, and our
telephone number is (858) 652-5700.
Our
corporate website address is www.receptos.com. Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to
reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, are available free of charge on our website as soon as reasonably
practicable after we electronically file such material with, or furnish it to, the SEC. The SEC maintains an internet site that contains our public filings with the SEC and other information regarding
the Company, at www.sec.gov. These reports and other information concerning the Company may also be accessed at the SEC's Public Reference Room at 100 F Street, NE, Washington, DC 20549. The
public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The contents of these websites are not incorporated into this Annual Report. Further,
our references to the URLs for these websites are intended to be inactive textual reference only.
This
Annual Report contains references to our trademarks and to trademarks belonging to other entities. Solely for convenience, trademarks and trade names referred to in this Annual
Report, including logos, artwork and other visual displays, may appear without the ® or symbols, but such references are not intended to indicate, in any way, that we will
not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names. We do not intend our use or display of other companies'
trade names or trademarks to imply a relationship with, or endorsement or sponsorship of us by, any other companies.
We
are an "emerging growth company," as defined in the Jumpstart Our Business Startups Act of 2012. We will remain an emerging growth company until the earlier of (1) the last day
of the fiscal year (a) following the fifth anniversary of our initial public offering in May 2013, (b) in which we have total annual gross revenue of at least $1.0 billion, or
(c) in which we are deemed to be a large accelerated filer, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year
period. We refer to the Jumpstart Our Business Startups Act of 2012 herein as the
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"JOBS
Act," and references herein to "emerging growth company" are intended to have the meaning associated with it in the JOBS Act.
Item 1A. Risk Factors.
Except for the historical information contained herein or incorporated by reference, this Annual Report and the
information incorporated by reference contains forward-looking statements that involve risks and uncertainties. These statements include projections about our accounting and finances, plans and
objectives for the future, future operating and economic performance and other statements regarding future performance. These statements are not guarantees of future performance or events. Our actual
results may differ materially from those discussed here. Factors that could cause or contribute to differences in our actual results include those discussed in the following section, as well as those
discussed in Part II, Item 7 entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere throughout this Annual Report and in any other
documents incorporated by reference into this Annual Report. You should consider carefully the following risk factors, together with all of the other information included or incorporated in this
Annual Report. Each of these risk factors, either alone or taken together, could adversely affect our business, operating results and financial condition, as well as adversely affect the value of an
investment in our common stock. There may be additional risks that we do not presently know of or that we currently believe are immaterial which could also impair our business and financial
position.
Risks Related to Our Financial Position and Capital Requirements
We are a clinical-stage company with no approved products and no historical product revenues, which makes it difficult to assess our future prospects and financial results.
We are a clinical-stage biopharmaceutical company with a limited operating history upon which you can evaluate our business and
prospects. Biopharmaceutical product development is a highly speculative undertaking and involves a substantial degree of uncertainty. Our operations to date have been limited to developing our
technology, undertaking preclinical studies and
clinical trials of our product candidate RPC1063, and in-licensing and preparing for the clinical development of our product candidate RPC4046. As an early stage company, we have not yet demonstrated
an ability to successfully overcome many of the risks and uncertainties frequently encountered by companies in new and rapidly evolving fields, particularly in the biopharmaceutical area.
Consequently, the ability to accurately assess our future operating results or business prospects is more limited than if we had a longer operating history or approved products on the market.
Our
actual financial condition and operating results have varied significantly in the past and are expected to continue to fluctuate significantly from quarter-to-quarter or year-to-year
due to a variety of factors, many of which are beyond our control. Factors relating to our business that may contribute to these fluctuations
include:
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the results of our clinical trials through all phases of clinical development;
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the timing of commencement of and enrollment in our clinical trials;
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potential side effects of our product candidates that could delay or prevent approval or cause an approved drug to be
taken off the market;
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our ability to obtain, as well as the timeliness of obtaining, additional funding to develop our product candidates;
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our ability to secure and maintain collaborations, licensing or other arrangements for the future development and/or
commercialization of our product candidates, as well as the terms of such arrangements;
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the results of clinical trials or marketing applications for product candidates that may compete with our product
candidates;
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competition from existing products, as well as new products that may receive marketing approval;
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the availability of generic versions of products that compete with our product candidates;
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the timing of regulatory review and approval of our product candidates;
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market acceptance of our product candidates that receive regulatory approval, if any;
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our ability to establish an effective sales and marketing infrastructure directly or through collaborations with third
parties;
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the ability of patients or healthcare providers to obtain coverage or sufficient reimbursement for our products;
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our ability, and the ability of third parties on which we rely upon for clinical development of our product candidates
such as contract research organizations (CROs), to adhere to clinical study and other regulatory requirements;
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the ability of third-party manufacturers to manufacture our product candidates for the conduct of clinical trials and, if
approved, for successful commercialization;
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the costs to us, and our ability as well as the ability of any third-party collaborators, to obtain, maintain and protect
intellectual property rights covering our product candidates and technologies;
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costs related to potential intellectual property disputes, and the outcome of any such dispute;
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our ability to adequately support future growth;
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our ability to attract and retain key personnel to manage our business effectively;
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our ability to identify and develop additional product candidates; and
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our ability to build our finance infrastructure and improve our accounting systems and controls.
Accordingly,
the likelihood of our success must be evaluated in light of many potential challenges and variables associated with an early-stage drug development company, many of which
are outside of our control, and past operating or financial results should not be relied on as an indication of future results.
We have incurred significant losses since our inception and anticipate that we will continue to incur significant losses for the foreseeable future. We have never generated
any revenue from product sales and may never be profitable.
We have incurred significant operating losses since our inception in 2008. Our net loss attributable to common stockholders for the
year ended December 31, 2013 was approximately $50.4 million, and as of December 31, 2013, we had an accumulated deficit of $95.9 million. Our prior losses, combined with
expected future losses, have had and will continue to have an adverse effect on our stockholders' equity and working capital. We expect to continue incurring significant research, development and
other expenses related to our ongoing operations, and to continue incurring losses for the foreseeable future. We also expect these losses to increase as we continue our development of, and seek
regulatory approvals for, our product candidates.
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We do not anticipate generating revenues from sales of products for the foreseeable future, if ever. If any of our product candidates fail in clinical trials or
do not gain regulatory approval, or if any of our product candidates, if approved, fail to achieve market acceptance, we may never become profitable. Even if we achieve profitability in the future, we
may not be able to sustain profitability in subsequent periods. Our ability to generate future revenues from product sales depends heavily on our success in:
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completing development and clinical trial programs for our product candidates RPC1063 and RPC4046;
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entering into collaboration and license agreements, particularly with respect to the development and commercialization of
RPC1063;
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seeking and obtaining marketing approvals for any product candidates that successfully complete clinical trials;
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establishing and maintaining supply and manufacturing relationships with third parties; and
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successfully commercializing any product candidates for which marketing approval is obtained, including with one or more
partners or, if launched independently, successfully establishing a sales force, marketing and distribution infrastructure.
If
one or more of our product candidates is approved for commercial sale and we retain commercial rights, we anticipate incurring significant costs associated with commercializing any
such approved product candidate. Therefore, even if we are able to generate revenues from the sale of any approved product, we may never become profitable. Because of the numerous risks and
uncertainties associated with pharmaceutical product development, we are unable to predict the timing or amount of expenses and when we will be able to achieve or maintain profitability, if ever.
We will require substantial additional funding, which may not be available to us on acceptable terms, or at all.
Our operations have consumed substantial amounts of cash since inception. We are currently conducting the Phase 2 and
Phase 3 portions of a Phase 2/3 study of RPC1063 in Relapsing Multiple Sclerosis (RMS) and a Phase 2 study of RPC1063 in Ulcerative Colitis (UC), and we are preparing to conduct a
Phase 2 study of RPC4046 in Eosinophilic Esophagitis (EoE). Developing pharmaceutical product candidates, including conducting clinical trials, is expensive. We will require substantial
additional future capital in order to complete clinical development and, if we are successful, to commercialize any of our current product candidates. If the US Food and Drug Administration (FDA) or
any foreign regulatory agency, such as the European Medicines Agency (EMA), requires that we perform studies or trials in addition to those that we currently anticipate with respect to the development
of RPC1063 and RPC4046, or repeat studies or trials, our expenses would further increase beyond what we currently expect, and any delay resulting from such further or repeat studies or trials could
also result in the need for additional financing.
Our
existing cash and cash equivalents and our access to funds through our credit and security agreement with MidCap Funding III, LLC (MidCap), will not be sufficient for us to
complete advanced clinical development of any of our product candidates or, if applicable, to prepare for commercializing any product candidate that is approved. Accordingly, we will continue to
require substantial additional capital to continue our clinical development activities and potentially engage in commercialization activities. Because successful development of our product candidates
is uncertain, we are unable to estimate the actual funds we will require to complete research and development and commercialize our
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product
candidates. The amount and timing of our future funding requirements will depend on many factors, including but not limited to:
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the progress, costs, results of and timing of our ongoing and planned clinical trials;
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our ability to enter into collaborative agreements for the development and commercialization of our product candidates,
particularly RPC1063;
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the willingness of the FDA and EMA to accept our clinical and preclinical studies and other work as the basis for review
and approval of product candidates;
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the outcome, costs and timing of seeking and obtaining regulatory approvals from the FDA, EMA and any similar regulatory
agencies;
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whether AbbVie Bahamas Ltd. and AbbVie Inc., which we refer to together as AbbVie (formerly a part of Abbott
Laboratories), exercises its option, following the availability of results from the planned Phase 2 trial of RPC4046 in EoE, to collaborate with us on the development and commercialization of
RPC4046;
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the number of product candidates and indications that we pursue, whether developed from our research program for
glucagon-like peptide-1 small molecule positive allosteric modulators (GLP-1R PAMs), otherwise developed internally or in-licensed;
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the timing and costs associated with manufacturing our product candidates for clinical trials and other studies and, if
approved, for commercial sale;
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our need to expand our development activities and, potentially, our research activities;
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-
the timing and costs associated with establishing sales and marketing capabilities;
-
-
market acceptance of any approved product candidates;
-
-
the costs of acquiring, licensing or investing in additional businesses, products, product candidates and technologies;
-
-
the cost to maintain, expand and defend the scope of our intellectual property portfolio, including the amount and timing
of any payments we may be required to make, or that we may receive, in connection with licensing, filing, prosecution, defense and enforcement of any patents or other intellectual property rights;
-
-
the extent to which we are required to pay milestone or other payments under our in-license agreements and the timing of
such payments;
-
-
our need and ability to hire additional management, development and scientific personnel; and
-
-
our need to implement additional internal systems and infrastructure, including financial and reporting systems.
Some
of these factors are outside of our control. Based upon our current expected level of operating expenditures, our existing cash and cash equivalents and our access to funds through
our credit and security agreement with MidCap, we believe that we will be able to fund our operations for at least the next 12 months. This period could be shortened if there are any
significant increases beyond our expectations in spending on development programs or more rapid progress of development programs than anticipated. We do not expect our existing capital resources to be
sufficient to enable us to complete the Phase 3 portion of the Phase 2/3 study of RPC1063 in RMS. Accordingly, we expect that we will need to raise substantial additional funds in the future.
Additional funding may not be
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available
to us on acceptable terms, or at all. If we are unable to obtain funding from equity offerings or debt financings, including on a timely basis, we may be required
to:
-
-
seek collaborators for one or more of our product candidates at an earlier stage than otherwise would be desirable or on
terms that are less favorable than might otherwise be available;
-
-
relinquish or license on unfavorable terms our rights to technologies or product candidates that we otherwise would seek
to develop or commercialize ourselves; or
-
-
significantly curtail one or more of our research or development programs or cease operations altogether.
Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our product candidates or
technologies.
We may seek additional funding through a combination of equity offerings, debt financings, collaborations and/or licensing
arrangements. Additional funding may not be available to us on acceptable terms, or at all. To the extent that we raise additional capital through the sale of equity or convertible debt securities,
your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a stockholder. The incurrence of additional indebtedness and/or
the issuance of certain equity securities could result in increased fixed payment obligations and could also result in certain additional restrictive covenants, such as limitations on our ability to
incur additional debt and/or issue additional equity, limitations on our ability to acquire or license intellectual property rights and other operating restrictions that could adversely impact our
ability to conduct our business. In addition, the issuance of additional equity securities by us, or the possibility of such issuance, may cause the market price of our common stock to decline. In the
event that we enter into collaborations and/or licensing arrangements in order to raise capital, we may be required to accept unfavorable terms, including relinquishing or licensing to a third party
on unfavorable terms our rights to technologies or product candidates that we otherwise would seek to develop or commercialize ourselves or potentially reserve for future potential arrangements when
we might be able to achieve more favorable terms.
Our credit and security agreement with MidCap contains restrictions that limit our flexibility in operating our business. We may be required to make a prepayment or repay
the outstanding indebtedness earlier than we expect under our credit and security agreement if a prepayment event or an event of default occurs, including a material adverse change with respect to us,
which could have a materially adverse effect on our business.
Our credit and security agreement with MidCap, pursuant to which we have drawn down $5.0 million, contains various covenants
that limit our ability to engage in specified types of transactions. These covenants limit our ability to, among other things:
-
-
incur or assume certain debt;
-
-
merge or consolidate or acquire all or substantially all of the capital stock or property of another entity;
-
-
change the nature of our business;
-
-
change our organizational structure or type;
-
-
amend, modify or waive any of our organizational documents;
-
-
license, transfer or dispose of certain assets;
-
-
grant certain types of liens on our assets;
-
-
make certain investments;
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-
-
pay cash dividends;
-
-
enter into material transactions with affiliates; and
-
-
amend or waive provisions of material agreements in certain manners.
The
restrictive covenants of the agreement could cause us to be unable to pursue business opportunities that we or our stockholders may consider beneficial. A breach of any of these
covenants could result in an event of default under the agreement. An event of default will also occur if, among other things, a material adverse change in our business, operations or condition
occurs, or a material impairment of the prospect of our repayment of any portion of the amounts we owe under the agreement occurs. In the case of a continuing event of default under the agreement,
MidCap could elect to declare all amounts outstanding to be immediately due and payable and terminate all commitments to extend further credit, proceed against the collateral in which we granted
MidCap a security interest under the agreement, or otherwise exercise the rights of a secured creditor. Amounts outstanding under the agreement are secured by all of our existing and future assets
(excluding intellectual property we own, which is subject to a negative pledge arrangement). Additionally, in the event we receive negative clinical data for RPC1063 and discontinue development of
RPC1063 for all indications in humans, at MidCap's election we could be required to prepay an amount under the credit agreement equal to the lesser of $10.0 million or 50% of the sum otherwise
then-payable upon a full repayment under the credit agreement.
We
may not have enough available cash or be able to raise additional funds on satisfactory terms, if at all, through equity or debt financings to make any required prepayment or repay
such indebtedness at the time any such prepayment event or event of default occurs. In such an event, we may be required to delay, limit, reduce or terminate our product development or
commercialization efforts or grant to others rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves. Our business, financial condition and
results of operations could be materially adversely affected as a result.
Our ability to utilize our net operating loss carryforwards and certain other tax attributes may be limited.
We have incurred substantial losses during our history. We do not anticipate generating revenues from sales of products for the
foreseeable future, if ever, and we may never achieve profitability. To the extent that we continue to generate taxable losses, unused losses will carry forward to offset future taxable income, if
any, until such unused losses expire. Under Section 382 of the Internal Revenue Code of 1986, as amended (the Code), if a corporation undergoes an "ownership change" (generally defined as a
greater than 50% change (by value) in its equity ownership over a three-year period), the corporation's ability to use its pre-change net operating loss carryforwards and other pre-change tax
attributes to offset its post-change income may be limited. We have not completed our analysis to determine what, if any, impact any prior ownership change has had on our ability to utilize our net
operating loss carryfowards. In addition, we may experience ownership changes in the future as a result of subsequent shifts in our stock ownership. As of December 31, 2013, we had federal net
operating loss carryforwards of approximately $87.1 million that could be limited if we have experienced, or if in the future we experience, an ownership change, which could have an adverse
effect on our future results of operations.
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Risks Related to Our Business and Industry
We are heavily dependent on the success of our product candidate RPC1063. We are also dependent on the success of our product candidate RPC4046. We cannot give any assurance
that any product candidate will successfully complete clinical trials or receive regulatory approval, which is necessary before it can be commercialized.
Our business and future success is substantially dependent on our ability to successfully develop, obtain regulatory approval for, and
then successfully commercialize our product candidate RPC1063, which is in the Phase 2 and Phase 3 portions of a Phase 2/3 study for RMS and a Phase 2 study for UC. Our business
and future success also depends on our ability to successfully develop, obtain regulatory approval for, and then successfully commercialize our product candidate RPC4046, which we are preparing for a
Phase 2 study in EoE. Our product candidates will require additional clinical development, management of clinical and manufacturing activities, regulatory approval in multiple jurisdictions (if
regulatory approval can be obtained at all), securing sources of commercial manufacturing supply, building of or partnering with a commercial organization, substantial investment and significant
marketing efforts before any revenues can be generated from product sales. We are not permitted to market or promote any of our product candidates before we receive regulatory approval from the FDA,
the EMA or any other foreign regulatory authority, and we may never receive such regulatory approval for any of our product candidates. We cannot assure you that our clinical trials for RPC1063 or
RPC4046 will be completed in a timely manner, or at all, or that we will be able to obtain approval from the FDA, the EMA or any other foreign regulatory authority for either of these product
candidates. We cannot be certain that we will advance any other product candidates into clinical trials. If any of RPC1063, RPC4046 or any future product candidate is not approved and commercialized,
we will not be able to generate any product revenues. Moreover, any delay or setback in the development of any product candidate could adversely affect our business and cause our stock price to fall.
Clinical development is a lengthy and expensive process with an uncertain outcome, and results of earlier studies and trials as well as data from an interim analysis of a
current clinical trial may not be predictive of future trial results. Clinical failure can occur at any stage of clinical development. We have never completed a Phase 2 or 3 study or submitted
a New Drug Application (NDA) or a Biologics License Application (BLA).
Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any
time during the clinical trial process. The results of preclinical studies and early clinical trials of our product candidates and data from an interim analysis of a current clinical trial, as well as
studies and trials of other products with similar mechanisms of action to our product candidates, may not be predictive of the results of later-stage clinical trials. For example, the positive results
generated to date in preclinical and Phase 1 clinical studies for RPC1063, as well as the observations from an interim analysis of our Phase 2 study of RPC1063 in RMS, do not ensure that
our current Phase 2 trials or later clinical trials will demonstrate similar results or observations. Product candidates in later stages of clinical trials may fail to show the desired safety
and efficacy traits despite having progressed through preclinical studies and initial clinical trials. In addition to the safety and efficacy traits of any product candidate, clinical trial failures
may result from a multitude of factors including flaws in trial design, dose selection, placebo effect and patient enrollment criteria. A number of companies in the biopharmaceutical industry have
suffered significant setbacks in advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier trials. Based upon negative or inconclusive
results, we or our collaborators may decide, or regulators may require us, to conduct additional clinical trials or preclinical studies. In addition, data obtained from trials and studies are
susceptible to varying interpretations, and regulators may not interpret our data as favorably as we do, which may delay, limit or prevent regulatory approval. Our future clinical trial results may
not be successful.
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We may experience delays in our ongoing clinical trials and we do not know whether planned clinical trials will begin on time, need to be redesigned, enroll
patients on time or be completed on schedule, if at all. Clinical trials can be delayed for a variety of reasons, including delays related to:
-
-
obtaining regulatory approval to commence a trial;
-
-
reaching agreement on acceptable terms with prospective CROs and clinical trial sites, the terms of which can be subject
to extensive negotiation and may vary significantly among different CROs and trial sites;
-
-
obtaining Institutional Review Board (IRB) approval at each site;
-
-
obtaining regulatory concurrence on the design and parameters for the trial;
-
-
obtaining approval for the design of the Phase2/3 trial of RPC1063 in RMS for each country targeted for trial enrollment;
-
-
recruiting suitable patients to participate in a trial, which may be impacted by the number of competing trials that are
enrolling patients;
-
-
having patients complete a trial or return for post-treatment follow-up;
-
-
clinical sites deviating from trial protocol or dropping out of a trial;
-
-
adding new clinical trial sites;
-
-
manufacturing sufficient quantities of product candidate for use in clinical trials; or
-
-
the availability of adequate financing and other resources.
Patient
enrollment, a significant factor in the timing of clinical trials, is affected by many factors including the size and nature of the patient population, the proximity of patients
to clinical sites, the eligibility criteria for the trial, the design of the clinical trial, competing clinical trials and clinicians' and patients' perceptions as to the potential advantages of the
drug being studied in relation to other
available therapies, including any new drugs that may be approved for the indications we are investigating. With respect to our clinical development of RPC1063 in RMS, the recent availability of oral
therapies such as Gilenya® (fingolimod), Aubagio® (teriflunomide) and Tecfidera® (dimethyl fumarate) may cause patients to be less willing to participate in our
clinical trial for an oral therapy in regions in which an oral therapy has been approved. Since RMS is a competitive market in certain regions such as the US and the European Union (EU) with a number
of product candidates in development, patients may have other choices with respect to potential clinical trial participation and we may have difficulty in reaching our enrollment targets. In addition,
the relatively limited number of RMS patients worldwide (estimated at 500,000) may make enrollment more challenging.
We
could encounter delays if a clinical trial is suspended or terminated by us, by the IRBs of the institutions in which such trials are being conducted, by the Data Monitoring Committee
(DMC) for such trial or by the FDA or other regulatory authorities. A suspension or termination may be imposed due to a number of factors, including failure to conduct the clinical trial in accordance
with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical
hold, safety issues or adverse side effects, failure to demonstrate a benefit from using a drug, changes in governmental regulations or administrative actions or lack of adequate funding to continue
the clinical trial. For example, it is possible that safety issues or adverse side effects could be observed in one or both of our Phase 2 trials for RPC1063 in RMS and UC or the Phase 3
portion of the Phase 2/3 study of RPC1063 in RMS, which could result in a delay, suspension or termination of either or both of the Phase 2 trials or the Phase 3 portion of the Phase 2/3
study of RPC1063 in RMS. If we experience delays in the completion of, or termination of, any clinical trial of our product candidates, the commercial prospects of our
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product
candidates will be harmed, and our ability to generate product revenues from any of these product candidates will be delayed. In addition, any delays in completing our clinical trials will
increase our costs, slow down our product candidate development and approval process and jeopardize our ability to commence product sales and generate revenues. Any of these occurrences may harm our
business, financial condition and prospects significantly. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately
lead to the denial of regulatory approval of our product candidates.
If
RPC1063, RPC4046 or any other product candidate is found to be unsafe or lack efficacy, we will not be able to obtain regulatory approval for it and our business would be materially
harmed. For example, if the results of our Phase 2 trials ongoing for RPC1063 in RMS and/or UC, or the Phase 3 portion of our Phase 2/3 study of RPC1063 in RMS, do not achieve the
primary efficacy endpoints or demonstrate unexpected safety findings, the prospects for approval of RPC1063 as well our stock price and our ability to create stockholder value would be materially and
adversely affected.
In
some instances, there can be significant variability in safety and/or efficacy results between different trials of the same product candidate due to numerous factors, including
changes in trial protocols, differences in composition of the patient populations, adherence to the dosing regimen and other trial protocols and the rate of dropout among clinical trial participants.
We do not know whether any Phase 2, Phase 3 or other clinical trials we or any of our collaborators may conduct will demonstrate consistent or adequate efficacy and safety to obtain
regulatory approval to market our product candidates. If we are unable to bring any of our current or future product candidates to market, or to acquire any marketed, previously approved products, our
ability to create long-term stockholder value will be limited.
We face significant competition from other biotechnology and pharmaceutical companies, and our operating results will suffer if we fail to compete effectively.
The biotechnology and pharmaceutical industries are intensely competitive and subject to rapid and significant technological change. In
addition, the competition in the RMS market is intense. We have competitors both in the US and internationally, including major multinational pharmaceutical companies, biotechnology companies and
universities and other research institutions. For example, the branded RMS treatment market today includes the ABCRs (including Avonex® (interferon (IFN)
b
-1a), Betaseron® (IFN
b
-1b), Copaxone® (glatiramer acetate) and Rebif® (IFN
b
-1a)), Tysabri® (natalizumab), mitoxantrone, Aubagio®, Gilenya® and Tecfidera®. In addition, in 2012 two drug
candidates for RMS were submitted for regulatory approval, laquinimod (in the EU) and LemtradaTM, and there are a number of active clinical trials ongoing in RMS for additional product candidates. For
Inflammatory Bowel Disease (IBD), which consists of UC and Crohn's Disease (CD), drug sales from three therapeutic categories substantially comprise the market, including intestinal anti-inflammatory
drugs (including mesalamine, budesonide, hydrocortisone and others), immunosuppressive agents (including Remicade® (infliximab), Simponi® (golimumab), Tysabri®,
Cimzia® (certolizumab pegol) and Humira® (adalimumab)) and antimetabolites (including methotrexate and others). In addition, there are several late-stage pipeline programs in
development for IBD indications, including vedolizumab which was submitted for regulatory approval for UC and CD in June 2013 and has been granted priority review status by the FDA for UC. For EoE,
there are currently no approved drugs indicated for that disorder, although steroids are prescribed off-label and several anti-inflammatory targeted drugs are in development for EoE.
Oral
RMS therapies in particular represent competition for us, since RPC1063 is being developed as an oral therapy. The first oral treatment for RMS, Novartis' Gilenya®, was
approved in September 2010. In 2013, Gilenya® achieved approximately $1.9 billion in worldwide sales. Like RPC1063, Gilenya® is an S1PR modulator, although
non-selective. Whereas Gilenya® is already approved and is currently being marketed, RPC1063 is in the Phase 2 and Phase 3 portions of a Phase 2/3 trial for
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RMS
and will require significant additional clinical development before it will be eligible for approval, if ever. Gilenya® will thus have at least a several-year period, prior to any
market entrance by RPC1063, in which to acquire additional brand identity and market share. Aside from Gilenya®, other oral therapies for RMS have recently been, or may soon be, approved.
Specifically, in September 2012, Genzyme's Aubagio® became the second oral therapy approved for RMS, and in March 2013, Biogen Idec's Tecfidera® became the third oral therapy
approved for RMS. Of the two drug candidates for RMS submitted for regulatory approval in 2012, one (laquinimod, submitted for approval in the EU) is also an oral therapy. The second, Sanofi's
Lemtrada
TM
(alemtuzumab), was approved in the EU in September 2013 as a twice-yearly, intravenously infused therapy, and Sanofi has submitted a BLA to the FDA. Although not an S1PR
modulator, Tecfidera® in particular has built upon the shift in treatment paradigm from a largely injectable product landscape to an oral product landscape. Tecfidera® achieved
$286 million in sales in the third quarter of 2013, which is only the second full quarter after its approval by the FDA. Beyond Gilenya®, which is approved, the late-stage S1PR
modulator drug pipeline of potential competition in RMS consists of three programs: Novartis' siponimod; ceralifimod, which is under development by Merck Serono and Ono Pharmaceuticals; and Actelion's
ponesimod. In addition to these programs, Mitsubishi Tanabe initiated a Phase 2 study of MT-1303, an S1PR modulator, in RMS in January 2013.
Although
we believe RPC1063 has the potential to demonstrate differentiation as the best S1PR modulator in RMS, as clinical development of RPC1063 is conducted and trial results become
known it is possible that the data will not support such differentiation, whether as a result of the effectiveness of RPC1063 in RMS or as a result of its safety profile. With respect to efficacy, for
example, whereas Gilenya® is a non-selective S1PR modulator with activity on four of the five S1P receptors and RPC1063 is by comparison more selective for the S1P1R, it is possible that
efficacy for an S1PR modulator benefits from, and is potentially dependent upon, broader activity among the S1P receptors and that RPC1063's profile will not result in best-among-S1PR modulator
effectiveness, or even meaningful effectiveness. Moreover, although we believe RPC1063 has the potential for clinically meaningful improved safety features, no data yet exists with respect to the
safety profile of RPC1063 beyond preclinical, Phase 1 and TQT study results and interim Phase 2 data. Inasmuch as RPC1063 will, if approved in RMS, be entering a market in which the
first approved oral therapy (Gilenya®, which is also an S1PR modulator) will have been available since 2010, the absence of differentiation for RPC1063 as the best S1PR modulator in RMS
may adversely affect the ability of RPC1063 to be approved for commercialization. If approved, the absence of differentiation for RPC1063 as the best S1PR modulator in RMS would adversely affect the
ability of RPC1063 to gain market share and otherwise be commercialized successfully. In addition, at such time as RPC1063 is approved for marketing in RMS, if ever, the patent protection for
Gilenya® may have lapsed, in which case generic treatments of Gilenya® may be available. The competition represented by generic alternatives to or versions of an S1PR
modulator, including the expected lower cost of any such generic alternatives, would adversely affect the ability of RPC1063, if approved, to gain market share and otherwise be commercialized
successfully.
We
believe that the effects of S1P1R modulation may have utility in other immune disorders in addition to RMS, such as UC, and we have an ongoing Phase 2 study of RPC1063 in UC.
Although we believe RPC1063 has the potential to be the best orally administered therapy as well as the first S1PR
modulator approved for the treatment of UC, as clinical development of RPC1063 in UC is conducted and trial results become known it is possible that the data will not support such differentiation,
whether as a result of the effectiveness of RPC1063 in UC, the safety profile of RPC1063 or the relative pace of development and potential timing for regulatory approval, if any, of RPC1063 in UC.
Other S1PR modulators such as Gilenya® may also pursue approval in immune disorders such as UC. In the instance of Gilenya®, its status as a currently approved therapy in RMS
may provide it with an advantage in becoming the first S1PR modulator approved in other indications such as UC. It is also possible, particularly as clinical results for the use of an S1PR modulator
in UC become available
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(including,
for example, from our Phase 2 trial of RPC1063 in UC, if successful), that an approved therapy, such as Gilenya®, could be used for UC patients notwithstanding the
absence of regulatory approval (so called "off-label" use). Where applicable, off-label use of generic alternatives to Gilenya® may also occur. Xeljanz® (tofacitinib), Pfizer's
oral JAK tyrosine kinase inhibitor which is approved for Rheumatoid Arthritis and currently in development for CD and UC, completed a Phase 2 study in 2011 and is in four Phase 3 trials.
Although Xeljanz® is not an S1P1R modulator, its advanced stage of development relative to RPC1063 in UC may provide Xeljanz® with the opportunity to become the first approved
oral therapy for UC. KRP203, a non-selective S1PR modulator being developed by Novartis and Kyorin, has completed a Phase 2 exploratory trial for UC and is in Phase 2 development for CD.
If RPC1063 is not the first-approved S1PR modulator for UC, the ability of RPC1063 to be approved for commercialization in UC may be adversely affected. In addition, the absence of such status for
RPC1063 as an S1P1R modulator and/or oral therapy in UC, as well as any off-label use of another S1P1R modulator in UC, would adversely affect the ability of RPC1063, if approved, to gain market share
and otherwise be commercialized successfully in UC.
RPC4046
is a recombinant, humanized, high-affinity, selective, anti-interleukin-13 (IL-13) monoclonal antibody. IL-13 antagonists have demonstrated efficacy in preclinical models of
allergic and other immunological disorders, with the first human proof-of-concept data being recently obtained in a Phase 2 study of Genentech's anti-IL-13 antibody lebrikizumab for the
treatment of Asthma. We intend to file a new IND for RPC4046 and thereafter initiate a Phase 2 clinical study in an allergic/immune-mediated disorder, EoE, which is an Orphan Disease for
which there is currently no FDA-approved therapy. It is possible that other anti-IL-13 antibodies may also pursue approval in EoE. For example, QAX-576, an intravenously administered anti-IL-13
antibody currently in development by Novartis for EoE and other indications, has completed an exploratory single dose Phase 2 study in 25 patients with EoE. The absence of status for RPC4046 as
the first-approved therapy in EoE would adversely affect the ability of RPC4046, if approved, to gain market share and otherwise be commercialized successfully in EoE. If RPC4046 is not the
first-approved therapy for EoE, the ability of RPC4046 to be approved for commercialization may be adversely affected. If approved, the presence of other approved therapies, including in particular
any other anti-IL-13 antibodies, would adversely affect the ability of RPC4046 to gain market share and otherwise be commercialized successfully.
Many
of our competitors have substantially greater financial, technical and other resources, such as larger research and development staff and experienced marketing and manufacturing
organizations. Mergers and acquisitions in the biotechnology and pharmaceutical industries may result in even more resources being concentrated in our competitors. As a result, these companies may
obtain regulatory approval more rapidly than we are able and may be more effective in selling and marketing their products as well. Smaller or early-stage companies may also prove to be significant
competitors, particularly through collaborative arrangements with large, established companies. Competition may increase further as a result of advances in the commercial applicability of technologies
and greater availability of capital for investment in these industries. Our competitors may succeed in developing, acquiring or licensing on an exclusive basis drug products that are more effective or
less costly than any drug candidate that we are currently developing or that we may develop. If approved, our product candidates will face competition from commercially available drugs as well as
drugs that are in the development pipelines of our competitors.
Established
pharmaceutical companies may invest heavily to accelerate discovery and development of novel compounds or to in-license novel compounds that could make our product candidates
less competitive. In addition, any new product that competes with an approved product must demonstrate compelling advantages in efficacy, convenience, tolerability and safety in order to overcome
price competition and to be commercially successful. Accordingly, our competitors may succeed in obtaining patent protection, receiving FDA, EMA or other regulatory approval or discovering, developing
and commercializing medicines before we do, which would have a material adverse impact on our business.
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We
believe that our ability to successfully compete will depend on, among other things:
-
-
the efficacy and safety of our product candidates, including as relative to marketed products and product candidates in
development by third parties;
-
-
the time it takes for our product candidates to complete clinical development and receive marketing approval;
-
-
the ability to maintain a good relationship with regulatory authorities;
-
-
the ability to commercialize and market any of our product candidates that receive regulatory approval;
-
-
the price of our products, including in comparison to branded or generic competitors;
-
-
whether coverage and adequate levels of reimbursement are available under private and governmental health insurance plans,
including Medicare;
-
-
the ability to protect intellectual property rights related to our product candidates;
-
-
the ability to manufacture and sell commercial quantities of any of our product candidates that receive regulatory
approval; and
-
-
acceptance of any of our product candidates that receive regulatory approval by physicians and other healthcare providers.
If
our competitors market products that are more effective, safer or less expensive than our future products, if any, or that reach the market sooner than our future products, if any, we may not
achieve commercial success. In addition, the biopharmaceutical industry is characterized by rapid technological change. Because our research approach integrates many technologies, it may be difficult
for us to stay abreast of the rapid changes in each technology. If we fail to stay at the forefront of technological change, we may be unable to compete effectively. Technological advances or products
developed by our competitors may render our technologies or product candidates obsolete, less competitive or not economical.
We may not be successful in establishing development and commercialization collaborations, which could adversely affect, and potentially prohibit, our ability to develop our
product candidates.
Developing pharmaceutical products, conducting clinical trials, obtaining regulatory approval, establishing manufacturing capabilities
and marketing approved products are expensive. Accordingly, we may seek to enter into collaborations with companies that have more resources and experience. For example, we may seek a development and
commercial partner for RPC1063 after the availability of Phase 2 results, particularly since the substantial costs of developing an RMS therapy in later stage clinical trials may otherwise be
prohibitive. If we are unable to obtain a partner for RPC1063, we may be unable to advance the development of RPC1063 through late-stage clinical development and seek approval in any market. In
addition, although AbbVie has an option to enter into a global collaboration for RPC4046 with us following the availability of Phase 2 results in EoE, if AbbVie declines such option, we may
elect to seek a different development and commercial partner for RPC4046 if we believe such Phase 2 results warrant further development. We do not intend to enter into a collaboration agreement
for the development of RPC1063 unless we retain key decision-making, development and/or commercialization rights, and it may be difficult to find a suitable partner willing to share such rights. In
situations where we enter into a development and commercial collaboration arrangement for a product candidate, we may also seek to establish additional collaborations for development and
commercialization in territories outside of those addressed by the first collaboration arrangement for such product candidate. If any of our product candidates receives marketing approval, we may
enter into sales and marketing arrangements with third parties with respect to otherwise
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unlicensed
or unaddressed territories. There are a limited number of potential partners, and we expect to face competition in seeking appropriate partners. If we are unable to enter into any
development and commercial collaborations and/or sales and marketing arrangements on acceptable terms, if at all, we may be unable to successfully develop and seek regulatory approval for our product
candidates and/or effectively market and sell approved products, if any.
We may not be successful in maintaining development and commercialization collaborations, and any partner may not devote sufficient resources to the development or
commercialization of our product candidates or may otherwise fail in development or commercialization efforts, which could adversely affect our ability to develop certain of our product candidates and
our financial condition and operating results.
Even if we are able to establish collaboration arrangements, any such collaboration may not ultimately be successful, which could have
a negative impact on our business,
results of operations, financial condition and growth prospects. When we partner with a third party for development and commercialization of a product candidate, we can expect to relinquish some or
all of the control over the future success of that product candidate to the third party. For example, if AbbVie elects to exercise its option to enter into a global collaboration for RPC4046 with us
following the availability of Phase 2 results in EoE, AbbVie will have control of any ex-US commercialization in the event RPC4046 is approved. It is possible that a partner may not devote
sufficient resources to the development or commercialization of our product candidate or may otherwise fail in development or commercialization efforts, in which event the development and
commercialization of such product candidate could be delayed or terminated and our business could be substantially harmed. In addition, the terms of any collaboration or other arrangement that we
establish may not be favorable to us or may not be perceived as favorable, which may negatively impact the trading price of our common stock. In some cases, we may be responsible for continuing
development of a product candidate or research program under a collaboration and the payment we receive from our partner may be insufficient to cover the cost of this development. Moreover,
collaborations and sales and marketing arrangements are complex and time consuming to negotiate, document and implement and they may require substantial resources to maintain.
We
are subject to a number of additional risks associated with our dependence on collaborations with third parties, the occurrence of which could cause our collaboration arrangements to
fail. Conflicts may arise between us and partners, such as conflicts concerning the interpretation of clinical data, the achievement of milestones, the interpretation of financial provisions or the
ownership of intellectual property developed during the collaboration. If any such conflicts arise, a partner could act in its own self-interest, which may be adverse to our best interests. Any such
disagreement between us and a partner could result in one or more of the following, each of which could delay or prevent the development or commercialization of our product candidates, and in turn
prevent us from generating sufficient revenues to achieve or maintain profitability:
-
-
reductions in the payment of royalties or other payments we believe are due pursuant to the applicable collaboration
arrangement;
-
-
actions taken by a partner inside or outside our collaboration which could negatively impact our rights or benefits under
our collaboration; or
-
-
unwillingness on the part of a partner to keep us informed regarding the progress of its development and commercialization
activities or to permit public disclosure of the results of those activities.
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AbbVie retains rights to the antibody which is the subject of RPC4046 which could conflict with the development and commercialization of RPC4046.
RPC4046 is a recombinant, humanized, high affinity, selective anti-IL-13 monoclonal antibody. Our rights to RPC4046, which are the
subject of an exclusive development agreement with AbbVie which is limited in scope to conducting a Phase 2 study of RPC4046 in EoE, do not preclude AbbVie from using the anti-IL-13 antibody in
certain other products. Whether AbbVie elects to exercise its option to enter into a global collaboration for RPC4046 with us following the availability of Phase 2 results in EoE, or in the
alternative AbbVie does not elect such a collaboration and we receive an exclusive worldwide license to RPC4046 which will be unlimited as to indications, AbbVie will retain the right to use the
anti-IL-13 antibody in certain other products. While we believe that any such product would necessarily be meaningfully different from RPC4046, there can be no assurance that any such product would
not have certain qualities in common with or similar to RPC4046 and thus be potentially competitive with RPC4046, or that adverse events arising from the clinical development of any such product would
not have an impact on the development, commercialization or potential value of RPC4046 due, for example, to such qualities. With respect to the patent portfolio for RPC4046, which is in-licensed from
AbbVie, AbbVie maintains rights to prosecute and maintain patents and patent applications within the portfolio as well as to assert such patents against infringers within and outside the scope of our
license, and to defend such patents against claims of invalidity and unenforceability. Although we have rights to consult with AbbVie on actions taken as well as back-up rights of prosecution and
enforcement, another AbbVie product covered by the same patent portfolio, such as a different product using the anti-IL-13 antibody, could potentially influence AbbVie's interests in the exercise of
its prosecution, maintenance and enforcement rights in a manner that may favor the interests of such other product as compared with RPC4046. In addition, while the term of the composition of matter
patent for RPC4046 in the US could be extended up to five additional years under the provisions of the Hatch-Waxman Act if RPC4046 achieves regulatory approval, such an extension for RPC4046 is
subject to AbbVie's consent where AbbVie does not exercise its option to enter into a global collaboration for RPC4046 with us and we instead receive an exclusive worldwide license to RPC4046. If the
extension is otherwise available in such context it is possible that AbbVie would instead utilize or choose to reserve the opportunity for an extension of the composition of matter patent for a
different product using the anti-IL-13 antibody, in which case we would not have the benefit of a potential extended patent term for RPC4046.
The regulatory approval processes of the FDA and comparable foreign authorities are lengthy, time consuming and inherently unpredictable, and if we are ultimately unable to
obtain regulatory approval for our product candidates, our business will be substantially harmed.
The time required to obtain approval by the FDA and comparable foreign authorities is unpredictable but typically takes many years
following the commencement of clinical trials and depends upon numerous factors, including the substantial discretion of the regulatory authorities. In addition, approval policies, regulations, or the
type and amount of clinical data necessary to gain approval may change during the course of a product candidate's clinical development and may vary among jurisdictions. We have not obtained regulatory
approval for any product candidate and it is possible that none of our existing product candidates or any product candidates we may seek to develop in the future will ever obtain regulatory approval.
Our
product candidates could fail to receive regulatory approval for many reasons, including the following:
-
-
the FDA or comparable foreign regulatory authorities may disagree with the design or implementation of our clinical
trials;
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-
-
we may be unable to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that a product
candidate is safe and effective for its proposed indication;
-
-
the results of clinical trials may not meet the level of statistical significance required by the FDA or comparable
foreign regulatory authorities for approval;
-
-
we may be unable to demonstrate that a product candidate's clinical and other benefits outweigh its safety risks;
-
-
the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from preclinical studies
or clinical trials;
-
-
the data collected from clinical trials of our product candidates may not be sufficient to support the submission of an
NDA, supplemental NDA (sNDA), BLA or other submission or to obtain regulatory approval in the US or elsewhere;
-
-
the FDA or comparable foreign regulatory authorities may fail to approve the manufacturing processes or facilities of
third party manufacturers with which we contract for clinical and commercial supplies; and
-
-
the approval policies or regulations of the FDA or comparable foreign regulatory authorities may change significantly in a
manner rendering our clinical data insufficient for approval.
This
lengthy approval process as well as the unpredictability of future clinical trial results may result in our failing to obtain regulatory approval to market RPC1063 and/or RPC4046,
which would harm our business, results of operations and prospects significantly.
In
addition, even if we were to obtain approval, regulatory authorities may approve any of our product candidates for fewer or more limited indications than we request, may not approve
the price we intend to charge for our products, may grant approval contingent on the performance of costly post-marketing clinical trials, or may approve a product candidate with a label that does not
include the labeling claims necessary or desirable for the successful commercialization of that product candidate. Any of the foregoing scenarios could materially harm the commercial prospects for our
product candidates.
We
have not previously submitted an NDA, a BLA, a Marketing Authorization Application (MAA) or any similar drug approval filing to the FDA, the EMA or any comparable foreign authority
for any product candidate, and we cannot be certain that any of our product candidates will be successful in clinical trials or receive regulatory approval. Further, our product candidates may not
receive regulatory approval even if they are successful in clinical trials. If we do not receive regulatory approvals for our product candidates, we may not be able to continue our operations. Even if
we successfully obtain regulatory approvals to market one or more of our product candidates, our revenues will be dependent,
to a significant extent, upon the size of the markets in the territories for which we gain regulatory approval and have commercial rights or share in revenues from the exercise of such rights. If the
markets for patient subsets that we are targeting (such as RMS, UC and EoE) are not as significant as we estimate, we may not generate significant revenues from sales of such products, if approved.
Our product candidates may cause undesirable side effects or have other properties that could delay or prevent their regulatory approval, limit the commercial profile of an
approved label, or result in significant negative consequences following marketing approval, if any.
Undesirable side effects caused by our product candidates could cause us or regulatory authorities to interrupt, delay or halt clinical
trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or other comparable foreign authorities. Results of our trials could reveal a high and
unacceptable severity and prevalence of these or other side effects. In such an event, our trials could be suspended or terminated and the FDA or comparable foreign regulatory
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authorities
could order us to cease further development of or deny approval of our product candidates for any or all targeted indications. The drug-related side effects could affect patient
recruitment or the ability of enrolled patients to complete the trial or result in potential product liability claims. Any of these occurrences may harm our business, financial condition and prospects
significantly.
RPC1063
is an S1PR modulator which is selective for the GPCR termed S1P1R. Upon initial treatment, S1PR modulators have been associated with a dose-dependent transient drop in
heart rate that attenuates over time. During its development program, Gilenya®, a non-selective S1PR modulator, was reported to cause certain cardiovascular side effects, including
abnormal slowing of the heart rate, or bradyarrhythmia, and atrioventricular (AV) blocks after first dose administration. The prescribing information for Gilenya® requires that six hours
of cardiac monitoring occur upon first dose administration to observe patients for potential cardiovascular side effects. In a Phase 1 study of RPC1063, the findings we observed are consistent
with the biology of S1P1R agonism, including potential dose-dependent effects on target organ systems, such as cardiovascular and pulmonary effects, with subjects treated with higher doses (such as
1.5 mg and higher) experiencing greater changes on parameters. Although pharmaceutic properties of RPC1063 including low maximum concentration (or "C
max
"), slow time to maximum
concentration (or "T
max
") and lower overall exposure may provide the potential for an improved cardiac conduction profile which may reduce risk of cardiovascular side effects, in our
ongoing development of RPC1063 we are also employing a dose titration strategy to further improve patient outcomes upon first dose administration. Based on the high potency of RPC1063, we are
exploring the potential for efficacy at a lower dose in an effort to further improve the cardiovascular safety profile. Despite these features and efforts, as clinical development of RPC1063 is
conducted and trial results become known, it is possible the data will reveal that RPC1063
may have a cardiovascular safety profile which is no better than, and possibly inferior to, Gilenya®. Moreover, whether or not RPC1063 has an improved profile, since RPC1063 is an S1PR
modulator, physicians may nonetheless associate RPC1063 with adverse cardiovascular side effects. In connection with any approval of RPC1063, cardiac monitoring may be required upon first dose
administration to observe patients for potential cardiovascular side effects. Required cardiac monitoring as well as dose titration will adversely affect the convenience of prescribing RPC1063 and the
initiation of patients on the therapy, if RPC1063 is approved, and may thus adversely affect the adoption and market potential of RPC1063.
Common
Gilenya® adverse reactions include headache, influenza, diarrhea, back pain, liver transaminase elevations and cough. In addition to the risks of bradyarrhythmia and
AV blocks, prescribing information warnings and precautions for Gilenya® include risks of infection, macular edema, respiratory effects, hepatic effects (elevations in liver enzymes),
fetal risk, blood pressure effects and immune system effects following discontinuation of therapy (long lymphocyte recovery time of one-to-two months). Aside from hepatic effects, we believe these
reactions and risks are associated with S1PR modulation. Since RPC1063 is also an S1PR modulator, although selective for S1P1R, these adverse reactions and risks could apply to use of RPC1063.
However, we believe that by virtue of its pharmaceutic properties, RPC1063 has the potential to improve upon the cardiovascular side effect profile and immune system effects following discontinuation
of therapy as well as the non-class hepatic effects.
If
one or more of our product candidates receives marketing approval, and we or others later identify undesirable side effects caused by such products, a number of potentially
significant negative consequences could result, including:
-
-
regulatory authorities may withdraw approvals of such product;
-
-
regulatory authorities may require additional warnings on the label;
-
-
we may be required to create a medication guide outlining the risks of such side effects for distribution to patients;
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-
-
we could be sued and held liable for harm caused to patients; and
-
-
our reputation may suffer.
Any
of these events could prevent us from achieving or maintaining market acceptance of the particular product candidate, if approved, and could significantly harm our business, results
of operations and prospects.
If serious adverse events or other undesirable side effects are identified during the development of RPC1063 or any other product candidate for one indication, we may need
to abandon our development of RPC1063 or such other product candidate for any other indications.
We are simultaneously developing RPC1063 for both RMS and UC. When a drug candidate is in development for multiple indications,
different patient populations are involved and side effects could be identified in either population. Side effects found during the development of RPC1063 or any other product candidate for one
indication, particularly if severe or having unexpected characteristics, could require us to abandon our development of RPC1063 or any other product candidate at issue for other potential indications.
We cannot assure you that severe or unexpected side effects with respect to RPC1063 or any other product candidate will not develop in current or future clinical trials, which could delay or preclude
regulatory approval of RPC1063 or any other product candidate at issue or limit its commercial use.
We rely on third parties to conduct our preclinical and clinical trials. If these third parties do not successfully carry out their contractual duties or meet expected
deadlines, we may not be able to obtain regulatory approval for or commercialize our product candidates and our business could be substantially harmed.
We have relied upon and plan to continue to rely upon CROs to monitor and manage data for our preclinical and clinical programs. We
rely on these parties for execution of our preclinical and clinical trials, and we control only certain aspects of their activities. We and our CROs also rely upon clinical sites and investigators for
the performance of our clinical trials in accordance with the applicable protocols and applicable legal, regulatory and scientific standards. Nevertheless, we are responsible for ensuring that each of
our studies is conducted in accordance with the applicable protocol and applicable legal, regulatory and scientific standards, and our reliance on CROs as well as clinical sites and investigators does
not relieve us of our regulatory responsibilities. We, our CROs as well as the clinical sites and investigators are required to comply with current good clinical practices (GCPs), which are
regulations and guidelines enforced by the FDA, the Competent Authorities of the Member States of the European Economic Area (EEA) and comparable foreign regulatory authorities for all of our products
in clinical development. Regulatory authorities enforce these GCPs through periodic inspections of trial sponsors, investigators and clinical sites. If we, any of our CROs or any of the clinical sites
or investigators fail to comply with applicable GCPs, the clinical data generated in our clinical trials may be deemed unreliable and the FDA, EMA or comparable foreign regulatory authorities may
require us to perform additional clinical trials before approving our marketing applications. We cannot assure you that upon inspection by a given regulatory authority, such regulatory authority will
determine that any of our clinical trials comply with GCP regulations. We also cannot assure you that our CROs as well as the clinical sites and investigators will perform our clinical trials in
accordance with the applicable protocols as well as applicable legal, regulatory and scientific standards, or report the results obtained in a timely and accurate manner. In addition to GCPs, our
clinical trials must be conducted with product produced under cGMP regulations. While we have agreements governing activities of our CROs, we have limited influence over the actual performance of our
CROs as well as the performance of clinical sites and investigators. In addition, significant portions of the clinical studies for our product candidates will be conducted outside of the US, which
will make it more difficult for us to monitor CROs as well as clinical sites and investigators and perform visits of our clinical sites, and will force us to rely heavily on CROs to ensure the proper
and timely conduct of
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our
clinical trials in accordance with the applicable protocols and compliance with applicable regulations, including GCPs. Failure to comply with applicable protocols and regulations in the conduct
of the clinical studies for our product candidates may require us to repeat clinical trials, which would delay the regulatory approval process.
Some
of our CROs have an ability to terminate their respective agreements with us if it can be reasonably demonstrated that the safety of the subjects participating in our clinical
trials warrants such termination, if we make a general assignment for the benefit of our creditors or if we are liquidated.
If
any of our relationships with these CROs terminate, we may not be able to enter into arrangements with alternative CROs or to do so on commercially reasonable terms. In addition, our
CROs are not our employees, and except for remedies available to us under our agreements with such CROs, we cannot control whether or not they devote sufficient time and resources to our preclinical
and clinical programs. If CROs do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced, or if the quality or accuracy of the
clinical data they obtain is compromised due to the failure (including by clinical sites or investigators) to adhere to our clinical protocols, regulatory requirements or for other reasons, our
clinical trials may be extended, delayed or terminated and we may not be able to obtain regulatory approval for or successfully commercialize our product candidates. As a result, our results of
operations and the commercial prospects for our product candidates would be harmed, our costs could increase substantially and our ability to generate revenues could be delayed significantly.
Switching
or adding additional CROs involves additional cost and requires management time and focus. In addition, there is a natural transition period when a new CRO commences work. As a
result, delays occur, which can materially impact our ability to meet our desired clinical development timelines. Though we carefully manage our relationships with our CROs, there can be no assurance
that we will not encounter challenges or delays in the future or that these delays or challenges will not have a material adverse impact on our business, financial condition and prospects.
We rely completely on third parties to manufacture our preclinical and clinical drug supplies and we intend to rely on third parties to produce commercial supplies of any
approved product candidate.
If we were to experience an unexpected loss of supply of our product candidates for any reason, whether as a result of manufacturing,
supply or storage issues or otherwise,
we could experience delays, disruptions, suspensions or terminations of, or be required to restart or repeat, any pending or ongoing clinical trials. We do not currently have, nor do we plan to
acquire, the infrastructure or capability internally to manufacture our preclinical and clinical drug supplies and we lack the resources and the capability to manufacture any of our product candidates
on a clinical or commercial scale. The facilities used by our contract manufacturers or other third-party manufacturers to manufacture our product candidates must be approved by the FDA pursuant to
inspections that will be conducted after we submit our NDA to the FDA. We do not control the implementation of the manufacturing process of, and are completely dependent on, our contract manufacturers
or other third-party manufacturers for compliance with the regulatory requirements, known as cGMPs, for manufacture of both active drug substances and finished drug products. If our contract
manufacturers or other third-party manufacturers cannot successfully manufacture material that conforms to applicable specifications and the strict regulatory requirements of the FDA or others, they
will not be able to secure and/or maintain regulatory approval for their manufacturing facilities. In addition, we have no control over the ability of our contract manufacturers or other third-party
manufacturers to maintain adequate quality control, quality assurance and qualified personnel. If the FDA or a comparable foreign regulatory authority does not approve these facilities for the
manufacture of our product candidates or if it withdraws any such approval in the future, we may need to find alternative manufacturing facilities, which would significantly impact our ability to
develop, obtain regulatory approval for or market our product candidates, if approved.
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We
rely on our manufacturers to purchase from third-party suppliers the materials necessary to produce our product candidates for our clinical trials. There are a limited number of
suppliers for raw materials that we use to manufacture our drugs and there may be a need to assess alternate suppliers to prevent a possible disruption of the manufacture of the materials necessary to
produce our product candidates for our clinical trials, and if approved, for commercial sale. We do not have any control over the process or timing of the acquisition of these raw materials by our
manufacturers. Moreover, we currently do not have any agreements for the commercial production of these raw materials. Although we generally do not begin a clinical trial unless we believe we have
access to a sufficient supply of a product candidate to complete the clinical trial, any significant delay in the supply of a product candidate, or the raw material components thereof, for an ongoing
clinical trial due to the need to replace a contract manufacturer or other third-party manufacturer could considerably delay completion of our clinical trials, product testing and potential regulatory
approval of our product candidates. If our manufacturers or we are unable to purchase these raw materials after regulatory approval has been obtained for our product candidates, the commercial launch
of our product candidates would be delayed or there would be a shortage in supply, which would impair our ability to generate revenues from the sale of our product candidates.
For
RPC4046, as part of our Development License and Option Agreement, AbbVie has agreed to manufacture quantities of RPC4046 drug substance and drug product needed for preclinical and
clinical studies, including the planned Phase 2 study of RPC4046 in EoE. Should AbbVie elect at its option to enter into a collaboration with us following the completion of the planned
Phase 2 trial of RPC4046 in EoE, AbbVie can elect to manufacture and supply the collaboration with RPC4046 or effect technology transfer to a third-party manufacturer to supply the
collaboration. If AbbVie does not exercise its
option to collaborate, the parties will either agree on the terms for AbbVie to supply RPC4046 to us or AbbVie will effect technology transfer to a third-party manufacturer. If technology transfer
occurs in either scenario, and if we or AbbVie are unable to arrange for such a third-party manufacturing source or fail to do so on commercially reasonable terms, or if AbbVie fails to supply RPC4046
on a timely basis, any ability to develop and commercialize RPC4046 will be adversely affected. Additionally, an inability to effect technology transfer in a timely fashion will impact the pace and
potential success of our development efforts as well as our prospects for potential commercialization.
As
part of our planned development program for RPC4046, we held a pre-IND application meeting with the FDA in the fourth quarter of 2013. We expect to submit an IND in the first half of
2014, which may lead to the initiation of a Phase 2 trial in EoE shortly thereafter. However, we will need to provide appropriate regulatory agencies in the US and EU with a chemistry,
manufacturing and control (CMC) comparability assessment filing. Specifically, a number of improvements have been made to the RPC4046 manufacturing process since drug product was manufactured and used
in a Phase 1 study of RPC4046. Although drug product has been manufactured using this new process, it has not been used in a clinical study. Therefore, a comparability assessment of the
Phase 1 and Phase 2 processes must be filed and approved prior to initiation of the planned Phase 2 study of RPC4046 in EoE. Although we believe information provided to us by
AbbVie indicates that, in its current state, the manufacturing process for RPC4046 has been sufficiently developed to produce materials appropriate for Phase 2 clinical development, final
approval will only be granted after the regulatory agencies have been allowed to review all of the relevant data. The absence of a timely approval could adversely affect the availability of suitable
RPC4046 drug product and thus adversely impact both our ability to commence, as well as the timing of, the planned Phase 2 trial of RPC4046 in EoE.
We
expect to continue to depend on contract manufacturers or other third-party manufacturers for the foreseeable future. We currently obtain our supplies of finished drug product through
individual purchase orders. We have not entered into long-term agreements with our current contract manufacturers or with any alternate fill/finish suppliers. Although we intend to do so prior to any
commercial launch in order to ensure that we maintain adequate supplies of finished drug product, we
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may
be unable to enter into such an agreement or do so on commercially reasonable terms, which could have a material adverse impact upon our business.
We rely on clinical data and results obtained by third parties that could ultimately prove to be inaccurate or unreliable.
As part of our strategy to mitigate development risk, we seek to develop product candidates with validated mechanisms of action and we
utilize biomarkers to assess potential clinical efficacy early in the development process. This strategy necessarily relies upon clinical data and other results obtained by third parties that may
ultimately prove to be inaccurate or unreliable. Further, such clinical data and results may, at times, be based on products or product candidates that are significantly different from our product
candidates. If the third-party data and results we rely upon prove to be inaccurate, unreliable or not applicable to our product candidates, we could make inaccurate assumptions and conclusions about
our product candidates and our research and development efforts could be materially adversely affected.
Even if we receive regulatory approval for any of our product candidates, we will be subject to ongoing obligations and continued regulatory review, which may result in
significant additional expense. Additionally, our product candidates, if approved, could be subject to labeling and other restrictions and market withdrawal and we may be subject to penalties if we
fail to comply with regulatory requirements or experience unanticipated problems with our products.
Any regulatory approvals that we receive for our product candidates may also be subject to limitations on the approved indicated uses
for which the product may be marketed or to the conditions of approval, or contain requirements for potentially costly post-marketing testing, including Phase 4 clinical trials, and
surveillance to monitor the safety and efficacy of the product candidate. For example, the prescribing information for Gilenya® requires that six hours of cardiac monitoring occur upon
first dose administration to observe patients for potential cardiovascular side effects. In connection with any approval of RPC1063, cardiac monitoring may be required upon first dose administration.
Required cardiac monitoring will adversely affect the convenience of prescribing RPC1063 and the initiation of patients on the therapy if RPC1063 is approved, and may thus adversely affect the
adoption and market potential of RPC1063.
If
the FDA or a comparable foreign regulatory authority approves any of our product candidates, the manufacturing processes, labeling, packaging, distribution, adverse event reporting,
storage, advertising, promotion and recordkeeping for the product will be subject to extensive and ongoing regulatory requirements. These requirements include submissions of safety and other
post-marketing information and reports, registration requirements and continued compliance with cGMPs and GCPs for any clinical trials that we conduct post-approval. Later discovery of previously
unknown problems with a product, including adverse events of unanticipated severity or frequency, or with our third-party manufacturers or manufacturing processes, or failure to comply with regulatory
requirements, may result in, among other things:
-
-
restrictions on the marketing or manufacturing of the product, withdrawal of the product from the market, or voluntary or
mandatory product recalls;
-
-
fines, warning letters or holds on clinical trials;
-
-
refusal by the FDA to approve pending applications or supplements to approved applications filed by us, or suspension or
revocation of product license approvals;
-
-
product seizure or detention, or refusal to permit the import or export of products; and
-
-
injunctions or the imposition of civil or criminal penalties.
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The
FDA's policies may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our product candidates. If we are slow or
unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we
may have obtained, which would adversely affect our business, prospects and ability to achieve or sustain profitability.
We currently have no marketing and sales organization. To the extent any of our product candidates for which we maintain commercial rights is approved for marketing, if we
are unable to establish marketing and sales capabilities or enter into agreements with third parties to market and sell our product candidates, we may not be able to effectively market and sell any
product candidates, or generate product revenues.
We currently do not have a marketing or sales organization for the marketing, sales and distribution of pharmaceutical products. In
order to commercialize any product candidates that receive marketing approval, we would have to build marketing, sales, distribution, managerial and other non-technical capabilities or make
arrangements with third parties to perform these services, and we may not be successful in doing so. In the event of successful development of RPC1063 and/or RPC4046, we may elect to build a targeted
specialty sales force which will be expensive and time consuming. Any failure or delay in the development of our internal sales, marketing and distribution capabilities would adversely impact the
commercialization of these products. With respect to our product candidates, we may choose to partner with third parties that have direct sales forces and established distribution systems, either to
augment our own sales force and distribution systems or in lieu of our own sales force and distribution systems. In the instance of RPC4046, should AbbVie elect to enter into a collaboration with us
following completion of the planned Phase 2 trial of RPC4046 in EoE, then we will have co-promotion and commercialization rights with AbbVie in the US with AbbVie having control of
commercialization outside the US. If we are unable to enter into collaborations with third parties for the commercialization of approved products, if any, on acceptable terms or at all, or if any such
partner (including AbbVie if it exercises its option to collaboration with us on RPC4046) does not devote sufficient resources to the commercialization of our product or otherwise fails in
commercialization efforts, we may not be able to successfully commercialize any of our product candidates that receive regulatory approval. If we are not successful in commercializing our product
candidates, either on our own or through collaborations with one or more third parties, our future revenue will be materially and adversely impacted.
Although we have obtained SPA agreements for the Phase 3 portion of our Phase 2/3 study of RPC1063 for RMS as well as a second planned Phase 3 study of
RPC1063 in RMS, these agreements do not guarantee any particular outcome from regulatory review of these trials of RPC1063.
We have obtained SPA agreements from the FDA for the Phase 3 portion of our Phase 2/3 study of RPC1063 for RMS (called
RADIANCE) as well as a second planned Phase 3 study of RPC1063 in RMS. The FDA's SPA process creates a written agreement between the sponsoring company and the FDA regarding clinical trial
design and other clinical trial issues that can be used to support approval of a product candidate. The SPA is intended to provide the sponsoring company with assurance that if the agreed upon
clinical trial protocols are followed and the clinical trial endpoints are achieved, the data may serve as the primary basis for an efficacy claim in support of an NDA. However, SPA agreements are not
a guarantee of an approval of a product candidate or any permissible claims about the product candidate. In particular, SPA agreements are not binding on the FDA if previously unrecognized public
health concerns arise during the performance of the clinical trial, if other new scientific concerns regarding product candidate safety or efficacy arise or if the sponsoring company fails to comply
with the agreed upon clinical trial protocols. SPA agreements do not address all of the variables and details that may go into planning for or conducting a clinical trial,
and any change in the protocol for a clinical trial can invalidate the SPA agreement unless the change is intended to improve
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the
clinical trial at issue and the FDA agrees in writing prior to implementation. A protocol change entails a resubmission to the FDA and triggers a new cycle of FDA review which is not limited to
the change. In the event of a resubmission, there can be no assurance that the FDA will agree with the proposed changes or that delays in the applicable development program will not occur as a result.
Moreover, there can be no assurance that the FDA will ultimately consider either of our SPA agreements to be binding, in which event the FDA could assert that additional data, including data obtained
through one or more additional clinical trials, may be required to support a regulatory submission. In addition, while an SPA agreement addresses the requirements for submission of an NDA, the results
of the related clinical trial(s) may not support FDA approval.
Our revenues to date have been generated through our collaboration agreements and we may not receive any additional revenues under such agreements.
To date, our sources of revenue have been the upfront and milestone payments received under now-concluded collaborations utilizing our
proprietary GPCR platform with Ortho-McNeil-Janssen Pharmaceuticals, Inc. and Eli Lilly & Co., as well as a completed collaboration and ongoing technology transfer program
with Ono Pharmaceutical Co., Ltd. We do not expect to receive further payments pursuant to the collaborations with Ortho-McNeil-Janssen Pharmaceuticals and Eli Lilly. Additional payments
under the collaboration with Ono Pharmaceuticals are based on the achievement of various research, development and technology transfer milestones. Future payments from Ono Pharmaceuticals are
uncertain because the nature of the research, development and technology transfer activities is inherently uncertain, and Ono Pharmaceuticals may choose not to pursue activities that would support
achievement of the milestones. If we do not receive any further milestone payments from Ono Pharmaceuticals and we are unable to enter into new collaborations utilizing our proprietary GPCR
platform, then our reliance on other potential sources of funding for our operations will be increased. Financing from such other potential sources may not be available to us on acceptable terms, or
at all.
Our commercial success depends upon attaining significant market acceptance of our product candidates, if approved, among physicians, healthcare payors, patients and the
medical community.
Even if we obtain regulatory approval for one or more of our product candidates, the product may not gain market acceptance among
physicians, healthcare payors, patients and the medical community, which is critical to commercial success. Market acceptance of any product candidate for which we receive approval depends on a number
of factors, including:
-
-
the efficacy and safety as demonstrated in clinical trials;
-
-
the timing of market introduction of the product candidate as well as competitive products;
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the clinical indications for which the product candidate is approved;
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acceptance by physicians, the medical community and patients of the product candidate as a safe and effective treatment;
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the convenience of prescribing and initiating patients on the product candidate, which may be adversely affected in the
instance of RPC1063 by dose titration as well as cardiac monitoring upon first dose administration;
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the potential and perceived advantages of such product candidate over alternative treatments;
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the cost of treatment in relation to alternative treatments, including any similar generic treatments;
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the availability of coverage and adequate reimbursement and pricing by third-party payors and government authorities;
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relative convenience and ease of administration;
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the prevalence and severity of adverse side effects; and
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the effectiveness of sales and marketing efforts.
If
our product candidates are approved but fail to achieve an adequate level of acceptance by physicians, healthcare payors, patients and the medical community, we will not be able to
generate significant revenues, and we may not become or remain profitable.
Even if we obtain and maintain approval for any of our product candidates from the FDA, we may never obtain approval for such product candidates outside of the US, which
would limit our market opportunities and adversely affect our business.
Sales of our product candidates outside of the US will be subject to foreign regulatory requirements governing clinical trials and
marketing approval and, to the extent that we retain commercial rights following clinical development, we would plan to seek regulatory approval to commercialize our product candidates in the US, the
EU and additional foreign countries. Even if
the FDA grants marketing approval for a product candidate, comparable regulatory authorities of foreign countries must also approve the manufacturing and marketing of the product candidates in those
countries. Approval procedures vary among jurisdictions and can involve requirements and administrative review periods different from, and greater than, those in the US, including additional
preclinical studies or clinical trials. In many countries outside the US, a product candidate must be approved for reimbursement before it can be approved for sale in that country. In some cases, the
price that we intend to charge for our products is also subject to approval. We may decide to submit an MAA to the EMA for approval in the EEA. As with the FDA, obtaining approval of an MAA from the
EMA is a similarly lengthy and expensive process and the EMA has its own procedures for approval of product candidates. Even if a product is approved, the FDA or the EMA, as the case may be, may limit
the indications for which the product may be marketed, require extensive warnings on the product labeling or require expensive and time-consuming clinical trials or reporting as conditions of
approval. Regulatory authorities in countries outside of the US and the EEA also have requirements for approval of drug candidates with which we must comply prior to marketing in those countries.
Obtaining foreign regulatory approvals and compliance with foreign regulatory requirements could result in significant delays, difficulties and costs for us and could delay or prevent the introduction
of our products in certain countries. Further, clinical trials conducted in one country may not be accepted by regulatory authorities in other countries and regulatory approval in one country does not
ensure approval in any other country, while a failure or delay in obtaining regulatory approval in one country may have a negative effect on the regulatory approval process in others. Also, regulatory
approval for any of our product candidates may be withdrawn. If we fail to comply with the regulatory requirements in international markets and or receive applicable marketing approvals, our target
market will be reduced and our ability to realize the full market potential of our product candidates will be harmed and our business will be adversely affected.
Coverage and reimbursement decisions by third-party payors may have an adverse effect on pricing and market acceptance. Recent legislative and regulatory activity may exert
downward pressure on potential pricing and reimbursement for any of our product candidates, if approved, that could materially affect the opportunity to commercialize.
There is significant uncertainty related to the third-party coverage and reimbursement of newly approved drugs. To the extent that we
retain commercial rights following clinical development, we would seek approval to market our product candidates in the US, the EU and other selected foreign jurisdictions. Market acceptance and sales
of our product candidates, if approved, in both domestic and international markets will depend significantly on the availability of adequate coverage and
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reimbursement
from third-party payors for any of our product candidates and may be affected by existing and future healthcare reform measures. Government authorities and third-party payors, such as
private health insurers and health maintenance organizations, decide which drugs they will cover and establish payment levels. We cannot be certain that coverage and adequate reimbursement will be
available for any of our product candidates, if approved. Also, we cannot be certain that reimbursement policies will not reduce the demand for, or the price paid for, any of our product candidates,
if approved. If reimbursement is not available or is available on a limited basis for any of our product candidates, if approved, we may not be able to successfully commercialize any such product
candidate. Reimbursement by a third-party payor may depend upon a number of factors, including, without limitation, the third-party payor's determination that use of a product
is:
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a covered benefit under its health plan;
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-
safe, effective and medically necessary;
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-
appropriate for the specific patient;
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cost-effective; and
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neither experimental nor investigational.
Obtaining
coverage and reimbursement approval for a product from a government or other third-party payor is a time consuming and costly process that could require us to provide
supporting scientific, clinical and cost-effectiveness data for the use of our products to the payor. We may not be able to provide data sufficient to gain acceptance with respect to coverage and
reimbursement or to have pricing set at a satisfactory level. If reimbursement of our future products, if any, is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory
levels such as may result where alternative or generic treatments are available, we may be unable to achieve or sustain profitability.
In
some foreign countries, particularly in the EU, the pricing of prescription pharmaceuticals is subject to governmental control. In these countries, pricing negotiations with
governmental authorities can take considerable time after the receipt of marketing approval for a product candidate. To obtain reimbursement or pricing approval in some countries, we may be required
to conduct additional clinical trials that compare the cost-effectiveness of our product candidates to other available therapies. If reimbursement of any of our product candidates, if approved, is
unavailable or limited in scope or
amount in a particular country, or if pricing is set at unsatisfactory levels, we may be unable to achieve or sustain profitability of our products in such country.
In
the US, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) changed the way Medicare covers and pays for pharmaceutical products. The legislation
established Medicare Part D, which expanded Medicare coverage for outpatient prescription drug purchases by the elderly but provided authority for limiting the number of drugs that will be
covered in any therapeutic class. The MMA also introduced a new reimbursement methodology based on average sales prices for physician-administered drugs. Any negotiated prices for any of our product
candidates, if approved, covered by a Part D prescription drug plan will likely be lower than the prices we might otherwise obtain outside of the Medicare Part D prescription drug plan.
Moreover, while Medicare Part D applies only to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policy and payment limitations in setting their own
payment rates. Any reduction in payment under Medicare Part D may result in a similar reduction in payments from non-governmental payors.
The
US and several other jurisdictions are considering, or have already enacted, a number of legislative and regulatory proposals to change the healthcare system in ways that could
affect our ability to sell any of our product candidates profitably, if approved. Among policy-makers and payors in the US and elsewhere, there is significant interest in promoting changes in
healthcare systems with the stated goals of containing healthcare costs, improving quality and/or expanding access to healthcare. In
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the
US, the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives. There have been, and likely will continue to be,
legislative and regulatory proposals at the federal and state levels directed at broadening the availability of healthcare and containing or lowering the cost of healthcare. We cannot predict the
initiatives that may be adopted in the future. The continuing efforts of the government, insurance companies, managed care organizations and other payors of healthcare services to contain or reduce
costs of healthcare may adversely affect:
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-
the demand for any of our product candidates, if approved;
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the ability to set a price that we believe is fair for any of our product candidates, if approved;
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our ability to generate revenues and achieve or maintain profitability;
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the level of taxes that we are required to pay; and
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the availability of capital.
In
March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act (collectively, ACA), became law in the US. The
goal of ACA is to reduce the cost of healthcare and substantially change the way healthcare is financed by both governmental and private insurers. The ACA may result in downward pressure on
pharmaceutical reimbursement, which could negatively affect market acceptance of any of our product candidates, if they are approved. Provisions of ACA relevant to the pharmaceutical industry include
the following:
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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;
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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;
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-
a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% point-of-sale
discounts on negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer's outpatient drugs to be covered under Medicare
Part D;
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extension of manufacturers' Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in
Medicaid managed care organizations;
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expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage
to additional individuals and by adding new mandatory eligibility categories for certain individuals with income at or below 133% of the Federal Poverty Level beginning in 2014, thereby potentially
increasing manufacturers' Medicaid rebate liability;
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expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program;
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new requirements under the federal Open Payments program and its implementing regulations;
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expansion of healthcare fraud and abuse laws, including the federal False Claims Act and the federal Anti-Kickback
Statute, new government investigative powers and enhanced penalties for noncompliance;
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-
a licensure framework for follow-on biologic products; and
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-
a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in and conduct comparative clinical
effectiveness research, along with funding for such research.
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In
addition, other legislative changes have been proposed and adopted since ACA was enacted. These changes include aggregate reductions to Medicare payments to providers of up to 2% per
fiscal year, which went into effect in April 2013. In January 2013, President Obama signed into law the American Taxpayer Relief Act of 2012, which, among other things, reduced Medicare payments to
several types of providers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. These new laws may result in additional
reductions in Medicare and other healthcare funding.
Our future success depends on our ability to retain our executive officers and to attract, retain and motivate qualified personnel. If we are not successful in attracting
and retaining highly qualified personnel, we may not be able to successfully implement our business strategy.
Our industry has experienced a high rate of turnover of management personnel in recent years. Our ability to compete in the highly
competitive biotechnology and pharmaceuticals industries depends upon our ability to attract and retain highly qualified managerial, scientific and medical personnel. We are highly dependent on our
management, scientific and medical personnel, especially Faheem Hasnain, our President and Chief Executive Officer, Graham Cooper, our Chief Financial Officer, Sheila Gujrathi, our Chief Medical
Officer, Marcus Boehm, our Chief Technology Officer, Robert Peach, our Chief Scientific Officer, Chrysa Mineo, our Senior Vice President of Corporate Development, and Christian Waage, our Senior Vice
President and General Counsel, whose services are critical to the successful implementation of our product candidate acquisition, development and regulatory strategies. We are not aware of any present
intention of any of these individuals to leave our company. In order to induce valuable employees to continue their employment with us, we have provided stock options that vest over time. The value to
employees of stock options that vest over time is significantly affected by movements in our stock price that are beyond our control, and may at any time be insufficient to counteract more lucrative
offers from other companies.
Despite
our efforts to retain valuable employees, members of our management, scientific and development teams may terminate their employment with us at any time, with or without notice.
The loss of the services of any of our executive officers or other key employees and our inability to find suitable replacements could harm our business, financial condition and prospects. Our success
also depends on our ability to continue to attract, retain and motivate highly skilled junior, mid-level, and senior managers as well as junior, mid-level, and senior scientific and medical personnel.
We
may not be able to attract or retain qualified management and scientific personnel in the future due to the intense competition for a limited number of qualified personnel among
biopharmaceutical, biotechnology, pharmaceutical and other businesses. Many of the other pharmaceutical companies that we compete against for qualified personnel have greater financial and other
resources, different risk profiles and a longer history in the industry than we do. They also may provide more diverse opportunities and better chances for career advancement. Some of these
characteristics may be more appealing to high quality candidates than what we have to offer. If we are unable to continue to attract and retain high quality personnel, the rate and success at which we
can develop and commercialize product candidates will be limited.
We will need to grow the size of our organization, and we may experience difficulties in managing this growth.
As of December 31, 2013, we had 41 full-time employees. As our development and commercialization plans and strategies develop,
we expect to need additional managerial, operational, scientific, sales, marketing, financial and other resources. Future growth would impose significant added responsibilities on members of
management, including:
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managing our clinical trials effectively;
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-
identifying, recruiting, maintaining, motivating and integrating additional employees;
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managing our internal development efforts effectively while complying with our contractual obligations to licensors,
licensees, contractors and other third parties;
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-
improving our managerial, development, operational and finance systems; and
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-
expanding our facilities.
As
our operations expand, we expect that we will need to manage additional relationships with various strategic partners, suppliers and other third parties. Our future financial
performance and our ability to commercialize our product candidates and to compete effectively will depend, in part, on our ability to manage any future growth effectively. To that end, we must be
able to hire, train and integrate additional management, scientific, administrative and sales and marketing personnel. We may not be able to accomplish these tasks, and our failure to accomplish any
of them could prevent us from successfully growing our company.
If we engage in an acquisition, reorganization or business combination, we will incur a variety of risks that could adversely affect our business operations or our
stockholders.
From time to time we have considered, and we will continue to consider in the future, strategic business initiatives intended to
further expand and develop our business. These initiatives may include acquiring businesses, technologies or products or entering into a business combination with another company. If we pursue such a
strategy, we could, among other things:
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issue equity securities that would dilute our stockholders;
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incur substantial debt that may place strains on our operations;
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spend substantial operational, financial and management resources to integrate new businesses, technologies and products;
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-
assume substantial actual or contingent liabilities;
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reprioritize our development programs and even cease development and commercialization of our product candidates; or
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merge with, or otherwise enter into a business combination with, another company in which our stockholders would receive
cash and/or shares of the other company on terms that certain of our stockholders may not deem desirable.
Although
we intend to evaluate and consider acquisitions, reorganizations and business combinations in the future, we have no agreements or understandings with respect to any
acquisition, reorganization or business combination at this time.
Failure to build our finance infrastructure and improve our accounting systems and controls could impair our ability to comply with the financial reporting and internal
controls requirements for publicly traded companies and our ability to accurately report our financial condition, results of operations or cash flows, which may adversely affect investor confidence in
us and, as a result, the value of our common stock.
As a public company, we operate in an increasingly demanding regulatory environment, which requires us to comply with the
Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley Act), and the related rules and regulations of the Securities and Exchange Commission (SEC), expanded disclosure requirements, accelerated reporting
requirements and more complex accounting rules. Requirements under the Sarbanes-Oxley Act include establishing corporate oversight and adequate internal control over financial reporting and disclosure
controls and procedures. Effective internal controls are necessary for us to produce reliable financial reports and are important to help prevent financial fraud.
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We are continuing to implement upgrades to our system of internal controls over financial reporting and preparing the documentation necessary to perform and
document the evaluation needed to comply with Section 404(a) of the Sarbanes-Oxley Act. We anticipate that we will need to continue building upon our financial infrastructure, enhancing
internal controls and training our financial and accounting staff.
Beginning
with our annual report on Form 10-K following the date we are no longer an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012 (JOBS
Act), we will be required to obtain from our independent registered public accounting firm an attestation report on the effectiveness of our internal control over financial reporting. We will remain
an "emerging growth company" until the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of $1 billion or more, (ii) December 31,
2018, (iii) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years or (iv) the date on which we are deemed to be a large
accelerated filer under the rules of the SEC.
We
will be required to perform system and process evaluation and testing of our internal controls over financial reporting to allow management to report, commencing in our annual report
on Form 10-K for the year ending December 31, 2014, on the effectiveness of our internal controls over financial reporting, if then required by Section 404 of the Sarbanes-Oxley
Act. Our testing, or the subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal controls over financial reporting that are deemed to be
material weaknesses. Our compliance with
Section 404 will require that we incur substantial accounting expense and expend significant management efforts. If we identify, or our independent registered public accounting firm identifies,
deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses, the market price of our stock could decline and we could be subject to sanctions or
investigations by the NASDAQ Stock Market (NASDAQ), the SEC or other regulatory authorities, which would require additional financial and management resources. New laws and regulations as well as
changes to existing laws and regulations affecting public companies, including the provisions of the Sarbanes-Oxley Act and rules adopted by the SEC and by NASDAQ, would likely result in increased
costs to us as we respond to these requirements.
If
we cannot prepare and disclose, in a timely manner, our consolidated financial statements and other required disclosures or comply with the Sarbanes-Oxley Act or existing or new
reporting requirements, or if we cannot prevent fraud, our business and results of operations could be harmed and investors could lose confidence in our reported financial information.
If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could have a material
adverse effect on the success of our business.
We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and
the handling, use, storage, treatment and disposal of hazardous materials and wastes. Our operations involve the use of hazardous and flammable materials, including chemicals and biological materials.
Our operations also produce hazardous waste products. We generally contract with third parties for the disposal of these materials and wastes. We cannot eliminate the risk of contamination or injury
from these materials. In the event of contamination or injury resulting from our use of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our
resources. We also could incur significant costs associated with civil or criminal fines and penalties.
Although
we maintain workers' compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of hazardous materials or
other work-related injuries, this insurance may not provide adequate coverage against potential liabilities. In addition, we may incur substantial costs in order to comply with current or future
environmental, health
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and
safety laws and regulations. These current or future laws and regulations may impair our research, development or production efforts. Failure to comply with these laws and regulations also may
result in substantial fines, penalties or other sanctions.
Any future relationships with customers and third-party payors may be subject, directly or indirectly, to applicable anti-kickback laws, fraud and abuse laws, false claims
laws, health information privacy and security laws and other healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm,
administrative burdens and diminished profits and future earnings.
If we obtain FDA approval for any of our product candidates and begin commercializing those products in the US, our future arrangements
with third-party payors and customers may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and
relationships through which we market, sell and distribute any products for which we obtain marketing approval. In addition, we may be subject to health information privacy and security regulation by
the federal government and by the US states and foreign jurisdictions in which we conduct our business. The laws that may affect our ability to operate
include:
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-
the federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting,
receiving, offering or paying remuneration, directly or indirectly, to induce, or in return for, either the referral of an individual, or the purchase or recommendation of an item or service for which
payment may be made under a federal healthcare program, such as the Medicare and Medicaid programs;
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-
federal civil and criminal false claims laws and civil monetary penalty laws, including the federal False Claims Act,
which impose criminal and civil penalties against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, including the Medicare and Medicaid programs,
claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government;
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the federal Health Insurance Portability and Accountability Act of 1996 (HIPAA), which created new federal criminal
statutes that prohibit executing a scheme to defraud any healthcare benefit program and making false statements relating to healthcare matters;
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HIPAA, as amended by the Health Information Technology and Clinical Health Act of 2009 (HITECH), and their respective
implementing regulations, which imposes certain obligations, including mandatory contractual terms, on covered healthcare providers, health plans, and healthcare clearinghouses, as well as their
business associates, with respect to safeguarding the privacy, security and transmission of individually identifiable health information; and
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analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, which may apply to
sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers, and state and foreign laws governing
the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance
efforts.
Efforts
to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations may involve substantial costs. It is possible that
governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws
and regulations. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and
administrative penalties,
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including,
without limitation, damages, fines, imprisonment, exclusion from participation in government funded healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring
of our operations. If any of the physicians or other healthcare providers or entities with whom we expect to do business is found to be not in compliance with applicable laws, it may be subject to
criminal, civil or administrative sanctions, including exclusions from participation in government funded healthcare programs.
If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of any of our product candidates,
if approved.
We face an inherent risk of product liability as a result of the clinical testing of our product candidates and will face an even
greater risk if we commercialize any products. For example, we may be sued if any product we develop allegedly causes injury or is found to be otherwise unsuitable during product testing,
manufacturing, marketing or sale. Any such product
liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability and a breach of warranties.
Claims could also be asserted under state consumer protection acts. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to
stop development or, if approved, limit commercialization of our product candidates. Even successful defense would require significant financial and management resources. Regardless of the merits or
eventual outcome, liability claims may result in:
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delay or termination of clinical studies;
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-
injury to our reputation;
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withdrawal of clinical trial participants;
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initiation of investigations by regulators;
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costs to defend the related litigation;
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a diversion of management's time and our resources;
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-
substantial monetary awards to trial participants or patients;
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-
decreased demand for our product candidates;
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-
product recalls, withdrawals or labeling, marketing or promotional restrictions;
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loss of revenues from product sales; and
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the inability to commercialize any our product candidates, if approved.
Our
inability to obtain and retain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims could prevent or inhibit the
development or commercialization of our product candidates. We currently carry $10 million in clinical trial liability insurance, which we believe is appropriate for our clinical trials.
Although we maintain such insurance, any claim that may be brought against us could result in a court judgment or settlement in an amount that is not covered, in whole or in part, by our insurance or
that is in excess of the limits of our insurance coverage. Our insurance policies also have various exclusions, and we may be subject to a product liability claim for which we have no coverage. We
will have to pay any amounts awarded by a court or negotiated in a settlement that exceed our coverage limitations or that are not covered by our insurance, and we may not have, or be able to obtain,
sufficient capital to pay such amounts.
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We are conducting a substantial portion of the clinical trials for our product candidates outside of the US. If approved, we intend to market our product candidates abroad.
We will thus be subject to the risks of doing business outside of the US.
We are conducting a substantial portion of our clinical trials outside of the US and, if approved, we intend to market our product
candidates outside of the US. We are thus subject to risks associated with doing business outside of the US. With respect to our product candidates, we may choose to partner with third parties that
have direct sales forces and established distribution systems, either to augment our own sales force and distribution systems outside of the US or in lieu of our own sales force and distribution
systems, which would indirectly expose us to these
risks. Our business and financial results in the future could be adversely affected due to a variety of factors associated with conducting development and marketing of our product candidates, if
approved, outside of the US, including:
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-
efforts to develop an international sales, marketing and distribution organization may increase our expenses, divert our
management's attention from the acquisition or development of product candidates or cause us to forgo profitable licensing opportunities in these geographies;
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changes in a specific country's or region's political and cultural climate or economic condition;
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-
unexpected changes in foreign laws and regulatory requirements;
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-
difficulty of effective enforcement of contractual provisions in local jurisdictions;
-
-
inadequate intellectual property protection in foreign countries;
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-
trade-protection measures, import or export licensing requirements such as Export Administration Regulations promulgated
by the US Department of Commerce and fines, penalties or suspension or revocation of export privileges;
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-
regulations under the US Foreign Corrupt Practices Act and similar foreign anti-corruption laws;
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-
the effects of applicable foreign tax structures and potentially adverse tax consequences; and
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-
significant adverse changes in foreign currency exchange rates which could make the cost of our clinical trials, to the
extent conducted outside of the US, more expensive.
Risks Related to Our Intellectual Property
If our efforts to protect the proprietary nature of the intellectual property related to our technologies are not adequate, we may not be able to compete effectively in our
market.
We rely upon a combination of patents, trade secret protection and confidentiality agreements to protect the intellectual property
related to our technologies. Any disclosure to or misappropriation by third parties of our confidential proprietary information could enable competitors to quickly duplicate or surpass our
technological achievements, thus eroding our competitive position in our market.
The
strength of patents in the biotechnology and pharmaceutical field involves complex legal and scientific questions and can be uncertain. The patent applications that we own or license
may fail to result in issued patents in the US or in other foreign countries. Even if patents have issued, or do successfully issue, from patent applications, third parties may challenge the validity,
enforceability or scope thereof, which may result in such patents being narrowed, invalidated or held unenforceable. Furthermore, even if they are unchallenged, our patents and patent applications may
not adequately protect our intellectual property or prevent others from designing around our claims. If the breadth or strength of protection provided by the patents and patent applications we hold,
license or pursue with respect to our product candidates is threatened, it could threaten our ability to commercialize our product candidates. Further, if we encounter delays in our clinical trials,
the period of time during
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which
we could market any of our product candidates under patent protection, if approved, would be reduced. Since patent applications in the US and most other countries are confidential for a period
of time after filing, we cannot be certain that we or our licensors were the first to file any patent application related to our product candidates. Furthermore, an interference proceeding can be
provoked by a third party or instituted by the US Patent and Trademark Office (PTO) to determine who was the first to invent any of the subject matter covered by the patent claims of our applications.
The
patent portfolio for RPC1063 contains patents and patent applications directed to compositions of matter for RPC1063 and multiple chemical scaffolds as well as certain of their
metabolites, synthetic intermediates, manufacturing methods, and methods of use. As of December 31, 2013, we owned or had exclusive license (from The Scripps Research Institute (TSRI)) to six
issued US patents and six pending US patent applications as well as corresponding foreign patents and patent applications issued or pending in Canada, Europe, Japan, Australia, Mexico, Eurasia, South
Korea, China, New Zealand, Malaysia, Philippines, Singapore, Brazil, India, Israel, and South Africa. We expect the composition of matter patent for RPC1063 (which is in-licensed from TSRI), if the
appropriate maintenance, renewal, annuity or other governmental fees are paid, to expire in 2029 (worldwide). It is possible, assuming RPC1063 achieves regulatory approval, that the term of the
composition of matter patent in the US may be extended up to a maximum of five additional years under the provisions of the Drug Price Competition and Patent Term Restoration Act of 1984 (Hatch-Waxman
Act). Patent term extension may similarly be available in certain foreign countries upon regulatory approval. We expect the other patents and patent applications in this portfolio, if issued, and if
the appropriate maintenance, renewal, annuity, or other governmental fees are paid, to expire from 2030 to 2032.
The
patent portfolio for RPC4046, which is in-licensed from AbbVie, contains issued patents and pending patent applications directed to compositions of matter for RPC4046 and certain of
their methods of use. As of December 31, 2013, this in-licensed portfolio consisted of two issued US patents, one pending US patent application, and corresponding foreign pending patent
applications in Europe, Japan, China, Canada, Australia, Mexico, Norway, Korea, Russia, and Costa Rica. We expect the issued composition of matter patent in the US, if the appropriate maintenance,
renewal, annuity or other governmental fees are paid, to expire in 2028. It is possible, assuming RPC4046 achieves regulatory approval, that the term of the composition of matter patent in the US may
be extended up to five additional years under the provisions of the Hatch-Waxman Act, although such an extension is subject to AbbVie's consent where AbbVie does not exercise its option to enter into
a global collaboration for RPC4046 with us and we instead receive an exclusive worldwide license to RPC4046, and thus the possibility that AbbVie utilizes or chooses to reserve the opportunity for an
extension of that patent in such context for a different drug. We expect the pending foreign patent applications in the portfolio, if issued, and if the appropriate maintenance, renewal, annuity, or
other governmental fees are paid, to expire in 2027. Patent term extension may similarly be available, also subject to AbbVie's consent, in certain foreign countries upon regulatory approval.
The
patent portfolio for our GLP-1R PAMs program contains pending patent applications directed to certain compositions of matter for multiple chemical scaffolds as well as one
issued patent directed to certain methods of use. As of December 31, 2013, we owned one issued US patent and five pending US
patent applications and corresponding foreign patent applications, including one pending PCT application as well as applications pending in Europe and Japan. We expect the composition of matter
patents in the US, if issued from the pending patent applications and if the appropriate maintenance, renewal, annuity or other governmental fees are paid, to expire from 2031 to 2032. It is possible
that the term of the composition of matter patents in the US, if issued, may be extended up to a maximum of five additional years under the provisions of the Hatch-Waxman Act if a clinical candidate
covered by such a patent is selected for development and subsequently receives regulatory approval. We expect the corresponding foreign patent applications in the portfolio, if issued, and if the
appropriate
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maintenance,
renewal, annuity, or other governmental fees are paid, to expire from 2031 to 2032. Patent term extension may similarly be available in certain foreign countries upon regulatory approval.
The
patent portfolio for our proprietary GPCR structure determination portfolio, which is in-licensed from TSRI, includes patents and patent applications directed primarily to
methods and compositions for obtaining high resolution crystals of G-protein coupled receptors. As of December 31, 2013, we had exclusive commercial license rights from TSRI to two US patents,
two pending US patent applications and foreign patent applications in Australia, Canada, China, Eurasia, Europe, Israel, India, Japan, Korea, New Zealand and Singapore related to GPCR structure
determination. We expect the patent and any patent applications in the US or corresponding foreign patent applications which issue, if the appropriate maintenance, renewal, annuity or other
governmental fees are paid, to expire from 2028 to 2032.
In
addition to the protection afforded by patents, we seek to rely on trade secrets and know-how to develop and maintain our competitive position. We seek to protect our proprietary data
and processes, in part, by confidentiality agreements and invention assignment agreements with our employees, consultants, scientific advisors, contractors and partners. These agreements are designed
to protect our proprietary information, although we cannot be certain that our trade secrets and other confidential proprietary information will not be disclosed or that competitors will not otherwise
gain access to our trade secrets or independently develop substantially equivalent information and techniques. We also seek to preserve the integrity and confidentiality of our data, trade secrets and
know-how by maintaining physical security of our premises and physical and electronic security of our information technology systems. With respect to our proprietary GPCR structure
determination technology platform, we consider trade secrets and know-how to be our primary intellectual property. Trade secrets and know-how can be difficult to protect. In particular, we anticipate
that with respect to this GPCR structure determination technology platform, these trade secrets and know-how will over time be disseminated within the industry through independent development,
the publication of journal articles describing methodology for crystallization of membrane proteins, and the movement of personnel skilled in the art from academic to industry scientific positions. If
any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent such competitor from using that technology or information to compete
with us, which could harm our competitive position. Further, the laws of some foreign countries do not protect proprietary rights to the same extent or in the same manner as the laws of the US. As a
result, we may encounter
significant problems in protecting and defending our intellectual property both in the US and abroad. If we are unable to prevent material disclosure of the intellectual property related to our
technologies to third parties, we will not be able to establish or maintain a competitive advantage in our market, which could materially adversely affect our business, results of operations and
financial condition.
Third-party claims of intellectual property infringement may prevent or delay our drug discovery and development efforts.
Our commercial success depends in part on our avoiding infringement of the patents and proprietary rights of third parties. There is a
substantial amount of litigation involving patent and other intellectual property rights in the biotechnology and pharmaceutical industries, including interference and reexamination proceedings before
the PTO or oppositions and other comparable proceedings in foreign jurisdictions. Numerous US and foreign issued patents and pending patent applications, which are owned by third parties, exist in the
fields in which we are developing product candidates. As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that our product candidates may give
rise to claims of infringement of the patent rights of others.
Third
parties may assert that we are employing their proprietary technology without authorization. As a result of searching patent literature in support of patent protection and
otherwise evaluating the patent landscape, we are aware of third-party patents, and third-party patent applications which may
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issue,
with coverage that could be asserted with respect to mechanisms of action and uses or formulations of RPC4046, which if successful could materially affect any commercialization of RPC4046
contemplated by us, if RPC4046 is approved. Similarly, we are also aware of a third-party patent, and third-party patent applications which may issue, with respect to certain dosing regimens for S1P1R
modulators. Such patent contains broad claims to administering an S1P receptor agonist (including for treatment of Multiple Sclerosis) at a dosage lower than the standard daily dosage, and then
increasing the dosage to the standard daily dosage (including to ameliorate a negative chronotropic effect of the S1PR agonist). While we do not believe that any claims of such patent that could
otherwise materially adversely affect commercialization of RPC1063 (if approved) are valid and enforceable, we may be incorrect in this belief. In addition, other patents may issue from third-party
patent applications with respect to certain dosing regimens with coverage broader than any product candidate being developed by a party seeking such a patent, which could adversely affect our ability
to commercialize RPC1063 if RPC1063 is approved, and if it is included within such coverage together with its dosing regimen. We are also aware of pending third-party patent applications with claims
to broad generic structural formulas, which claims if issued in their broadest form could adversely affect commercialization of RPC1063, if RPC1063 is approved. In addition, we are aware of a
portfolio of patents and pending third party patent applications with respect to certain GPCR structure-based drug discovery and design
technology. While we do not believe that any of the currently issued patents in such portfolio affect the manner in which we are utilizing our proprietary GPCR structure-based drug discovery
and design technology, if a patent were to issue from any pending application in such portfolio with coverage affecting the manner in which we utilize such technology, our ability to utilize such
technology or to use the results of any such utilization could be adversely affected. There may be third-party patents of which we are currently unaware with claims to materials, formulations, methods
of manufacture or methods for treatment related to the use or manufacture of our product candidates. Because patent applications can take many years to issue, there may be currently pending patent
applications which may later result in issued patents that our product candidates may infringe. Third parties may obtain patents in the future and claim that use of our technologies infringes upon
these patents. If any third-party patent were held by a court of competent jurisdiction to cover the manufacturing process of any of our product candidates, any molecules formed during the
manufacturing process or any final product itself, the holders of any such patent may be able to block our ability to develop and commercialize such product candidate unless we obtain a license under
the applicable patent or limit or modify our manufacturing process to avoid the coverage of the patent, or until such patent expires or is finally determined to be invalid or unenforceable. Similarly,
if any third-party patent were held by a court of competent jurisdiction to cover aspects of the formulation of any of our product candidates or any method of use of any of our product candidates,
including any therapy or patient selection methods, the holder of any such patent may be able to block our ability to develop and commercialize such product candidate unless we obtain a license under
the applicable patent or limit or modify the formulation or use, or until such patent expires or is finally determined to be invalid or unenforceable. Where a license to a third-party patent is
needed, such a license may not be available on commercially reasonable terms or at all.
Parties
making claims against us may obtain injunctive or other equitable relief, which could effectively block our ability to further develop and commercialize one or more of our
product candidates. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from our business. In
the event of a successful claim of infringement against us, we may have to pay substantial damages, including treble damages and attorneys' fees for willful infringement (which may include situations
in which we had knowledge of an issued patent but nonetheless proceeded with activity which infringed such patent), obtain one or more licenses from third parties, limit our uses, pay royalties or
redesign our infringing product candidates, which may be impossible or require substantial time and monetary expenditure. We cannot predict whether any required license would be available on
commercially reasonable terms, if at
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all.
Furthermore, even in the absence of litigation, we may need to obtain licenses from third parties to advance our research or allow commercialization of our product candidates, and we have done so
from time to time. We may fail to obtain any of these licenses at a reasonable cost or on reasonable terms, if at all. In such an event, we would be unable to further develop and commercialize any of
our product candidates at issue, which could harm our business significantly.
Patent protection and patent prosecution for some of our product candidates is dependent on, and the ability to assert patents and defend them against claims of invalidity
is maintained by, third parties.
While we normally seek and gain the right to prosecute fully the patents relating to our product candidates, there may be times when
patents that relate to our product candidates are controlled by our licensors. The patent portfolio for our proprietary GPCR structure determination technology and a portion of the patent
portfolio for RPC1063 (including a composition of matter patent for RPC1063) are each in-licensed from TSRI. Although TSRI prosecutes and maintains the patent portfolio, we have the right to consult
with TSRI on any action taken. With respect to the patent portfolio for RPC4046, which is in-licensed from AbbVie, AbbVie maintains rights to prosecute and maintain patents and patent applications
within the portfolio as well as to assert such patents against infringers within and outside the scope of our license and to defend such patents against claims of invalidity and unenforceability,
although we have rights to consult with AbbVie on actions taken as well as back-up rights of prosecution and enforcement. If TSRI, AbbVie or any future licensor fails to appropriately prosecute and
maintain patent protection for patents covering any of our product candidates, or if patents covering any of our product candidates are asserted against infringers or defended against claims of
invalidity or unenforceability in a manner which adversely affects such coverage, our ability to develop and commercialize any such product candidate may be adversely affected and we may not be able
to prevent competitors from making, using and selling competing products.
We may be involved in lawsuits to protect or enforce our patents or the patents of our licensors, which could be expensive, time consuming and unsuccessful.
Competitors may infringe our patents or the patents of our licensors. To counter infringement or unauthorized use, we may be required
to file infringement claims, which can be expensive and time-consuming. In addition, in an infringement proceeding, a court may decide that a patent of ours or one of our licensors is not valid or is
unenforceable, or may refuse to stop the other party in such infringement proceeding from using the technology at issue on the grounds that our patents do not cover the technology in question. An
adverse result in any litigation or defense proceedings could put one or more of our patents at risk of being invalidated, held unenforceable or interpreted narrowly, and could put any of our patent
applications at risk of not yielding an issued patent.
Interference
proceedings provoked by third parties or brought by the PTO or any foreign patent authority may be necessary to determine the priority of inventions with respect to our
patents or patent applications or those of our licensors. An unfavorable outcome could require us to cease using the related technology or to attempt to license rights to it from the prevailing party.
Our business could be harmed if the prevailing party does not offer us a license on commercially reasonable terms, if any license is offered at all. Litigation or interference proceedings may fail
and, even if successful, may result in substantial costs and distract our management and other employees.
We
may not be able to prevent, alone or with our licensors, misappropriation of our trade secrets or confidential information, particularly in countries where the laws may not protect
those rights as fully as in the US. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our
confidential information could be compromised by disclosure during this type of litigation. In addition, there could be public announcements of the results of hearings, motions or other interim
proceedings or developments. If
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securities
analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock.
We may not be able to protect our intellectual property rights throughout the world.
Filing, prosecuting and defending patents on all of our product candidates throughout the world would be prohibitively expensive.
Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories
where we have patent protection but enforcement is not as strong as in the US. These products may compete with our products in jurisdictions where we do not have any issued patents and our patent
claims or other intellectual property rights may not be effective or sufficient to prevent them from so competing. Many companies have encountered significant problems in protecting and defending
intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual
property protection, particularly those relating to biopharmaceuticals, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of
our proprietary rights generally. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial cost and divert our efforts and attention from other aspects of our
business.
If we breach any of the agreements under which we license the use, development and commercialization rights to our product candidates or GPCR structure determination
technology from third parties, we could lose license rights that are important to our business.
The patent portfolio for our proprietary GPCR structure determination technology and a portion of the patent portfolio for
RPC1063 (including a composition of matter patent for RPC1063) are each in-licensed from TSRI. The patent portfolio for RPC4046 is in-licensed
from AbbVie. Under our existing license agreements, we are subject to various obligations, including diligence obligations such as development and commercialization obligations, as well as potential
royalty payments and other obligations. If we fail to comply with any of these obligations or otherwise breach our license agreements, our licensing partners may have the right to terminate the
applicable license in whole or in part. Generally, the loss of any one of our current licenses, or any other license we may acquire in the future, could materially harm our business, prospects,
financial condition and results of operations.
In
particular, the loss of the license from TSRI to a portion of the patent portfolio for RPC1063, inasmuch as it includes a composition of matter patent for RPC1063, would materially
adversely affect our ability to proceed with any development or potential commercialization of RPC1063. In addition, the loss of the license from AbbVie for RPC4046 would likely result in the
termination of our efforts with respect to RPC4046.
Intellectual property rights do not necessarily address all potential threats to our competitive advantage.
The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have
limitations, and may not adequately protect our business or permit us to maintain our competitive advantage. The following examples are illustrative:
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Others may be able to make compounds that are similar to our product candidates but that are not covered by the claims of
the patents that we own or have licensed;
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We or our licensors or partners might not have been the first to make the inventions covered by an issued patent or
pending patent application that we own or have exclusively licensed;
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We or our licensors or partners might not have been the first to file patent applications covering an invention;
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Others may independently develop similar or alternative technologies or duplicate any of our technologies without
infringing our intellectual property rights;
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Pending patent applications that we own or have licensed may not lead to issued patents;
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Issued patents that we own or have licensed may not provide us with any competitive advantages, or may be held invalid or
unenforceable, as a result of legal challenges by our competitors;
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Our competitors might conduct research and development activities in countries where we do not have patent rights and then
use the information learned from such activities to develop competitive products for sale in our major commercial markets;
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We may not develop or in-license additional proprietary technologies that are patentable; and
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The patents of others may have an adverse effect on our business.
Should
any of these events occur, they could significantly harm our business, results of operations and prospects.
Obtaining and maintaining patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental
patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.
Periodic maintenance fees, renewal fees, annuity fees and various other governmental fees on patents and/or applications will be due to
be paid to the PTO and various governmental patent agencies outside of the US in several stages over the lifetime of the patents and/or applications. We employ reputable law firms and other
professionals and rely on such third parties to effect payment of these fees with respect to the patents and patent applications that we own, and we rely upon our licensors to effect payment of these
fees with respect to the patents and patent applications that we license. The PTO and various non-US governmental patent agencies require compliance with a number of procedural, documentary, fee
payment and other similar provisions during the patent application process. We employ reputable law firms and other professionals to help us comply with respect to the patents and patent applications
that we own, and we rely upon our licensors to effect compliance with respect to the patents and patent applications that we license. In many cases, an inadvertent lapse can be cured by payment of a
late fee or by other means in accordance with the applicable rules. However, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application,
resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, our competitors might be able to enter the market and this circumstance would have a material
adverse effect on our business.
Recent patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our
issued patents.
In 2011, the Leahy-Smith America Invents Act (Leahy-Smith Act) was signed into law. The Leahy-Smith Act includes a number of
significant changes to US patent law. These include provisions that affect the way patent applications will be prosecuted and may also affect patent litigation. The PTO is currently developing
regulations and procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act, and in particular, the first to file
provisions, did not become effective until March 2013, 18 months after its enactment. Accordingly, it is not clear what, if any, impact the Leahy-Smith Act will have on the operation of our
business. However, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our
issued patents, all of which could have a material adverse effect on our business and financial condition.
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We may be subject to claims that our employees or consultants have wrongfully used or disclosed alleged trade secrets of former or other employers.
Many of our employees and consultants, including our senior management and our scientific founders, have been employed or retained by
other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Some of these employees and consultants, including each member of our senior management and each of
our scientific founders, executed proprietary rights, non-disclosure and non-competition agreements in connection with such previous employment or retention. Although we try to ensure that our
employees and consultants do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or these employees or consultants have used or
disclosed intellectual property, including trade secrets or other proprietary information, of any such employee's or consultants former or other employer. We are not aware of any threatened or pending
claims related to these matters or concerning the agreements with our senior management or scientific founders, but in the future litigation may be necessary to defend against such claims. If we fail
in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against such claims,
litigation could result in substantial costs and be a distraction to management.
Intellectual property disputes could cause us to spend substantial resources and distract our personnel from their normal responsibilities.
Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur
significant expenses, and could distract our technical and/or management personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings,
motions or other interim proceedings or developments and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the market price of
our common stock. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing or
distribution activities. We may not have sufficient financial or other resources to adequately conduct such litigation or proceedings. Some of our competitors may be able to sustain the costs of such
litigation or proceedings more effectively than we can because of their greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other
proceedings could have a material adverse effect on our ability to compete in the marketplace.
If we do not obtain protection under the Hatch-Waxman Act and similar legislation outside of the US by extending the patent terms and obtaining data exclusivity for our
product candidates, our business may be materially harmed.
Depending upon the timing, duration and specifics of FDA marketing approval of our product candidates, if any, one or more US patents
may be eligible for limited patent term restoration under the Hatch-Waxman Act. The Hatch-Waxman Act permits 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, we may not be granted an extension because of, for example, failing to apply within applicable deadlines, failing to apply prior to
expiration of relevant patents or otherwise failing to satisfy applicable requirements. Moreover, the applicable time period or the scope of patent protection afforded could be less than we request.
We
expect the composition of a matter patent for RPC1063 in the US, if the appropriate maintenance, renewal, annuity or other governmental fees are paid and it withstands any challenge,
would expire in 2029. It is possible, assuming RPC1063 achieves regulatory approval in the US and a timely application is made, that the term of the composition of matter patent in the US may be
extended up to a maximum of five additional years under the Hatch-Waxman Act. We expect the composition of matter patent for RPC4046 in the US if the appropriate maintenance, renewal, annuity
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or
other governmental fees are paid and it withstands any challenge, to expire in 2028. It is possible, assuming RPC4046 achieves regulatory approval in the US and a timely application is made, that
the term of the composition of matter patent in the US may be extended up to a maximum of five additional years under the Hatch-Waxman Act, although such an extension for RPC4046 is subject to
AbbVie's consent where AbbVie does not exercise its option to enter into a global collaboration for RPC4046 with us and we instead receive an exclusive worldwide license to RPC4046, and thus the
possibility in such context that AbbVie utilizes such extension for a different drug.
If
we are unable to obtain patent term extension or restoration or the term of any such extension is less than we request, the period during which we will have the right to exclusively
market our product will be shortened and our competitors may obtain approval of competing products following our patent expiration, and our revenue could be reduced, possibly materially.
Risks Related to Ownership of our Common Stock
The price of our stock may be volatile, and you could lose all or part of your investment.
The trading price of our common stock is likely to be highly volatile and could be subject to wide fluctuations in response to various
factors, some of which are beyond our control. In addition to the factors discussed in this "Risk Factors" section and elsewhere in this Annual Report, these factors
include:
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actual or anticipated adverse results or delays in our clinical trials;
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positive outcomes, or faster development results than expected, by parties developing product candidates that are
competitive with our product candidates, as well as approval of any such competitive product candidates;
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unanticipated serious safety concerns related to the use of any of our product candidates;
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our failure to secure collaboration agreements for our product candidates or actual or perceived unfavorable terms of such
agreements;
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adverse regulatory decisions;
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changes in laws or regulations applicable to our product candidates, including but not limited to clinical trial
requirements for approvals;
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disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to
obtain patent protection for our product candidates;
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our decision to initiate a clinical trial, not to initiate a clinical trial or to terminate an existing clinical trial;
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our dependence on third parties, including CROs as well as manufacturers;
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our failure to successfully commercialize any of our product candidates, if approved;
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additions or departures of key scientific or management personnel;
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failure to meet or exceed any financial guidance or development timelines that we may provide to the public;
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actual or anticipated variations in quarterly operating results;
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failure to meet or exceed the estimates and projections of the investment community;
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overall performance of the equity markets and other factors that may be unrelated to our operating performance or the
operating performance of our competitors, including changes in market valuations of similar companies;
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conditions or trends in the biotechnology and biopharmaceutical industries;
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announcements of significant acquisitions, strategic collaborations, joint ventures or capital commitments by us or our
competitors;
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our ability to maintain an adequate rate of growth and manage such growth;
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issuances of debt or equity securities;
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significant lawsuits, including patent or stockholder litigation;
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sales of our common stock by us or our stockholders in the future;
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trading volume of our common stock;
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publication of research reports about us or our industry or positive or negative recommendations or withdrawal of research
coverage by securities analysts;
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ineffectiveness of our internal controls;
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general political and economic conditions;
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effects of natural or man-made catastrophic events; and
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other events or factors, many of which are beyond our control.
In
addition, the stock market in general, and The NASDAQ Global Market and biotechnology companies in particular, have experienced extreme price and volume fluctuations that have often
been unrelated or disproportionate to the operating performance of these companies. Broad market and
industry factors may negatively affect the market price of our common stock, regardless of our actual operating performance. The realization of any of the above risks or any of a broad range of other
risks, including those described in these "Risk Factors," could have a dramatic and material adverse impact on the market price of our common stock.
We have broad discretion in the use of our cash and may not use it effectively.
Our management has broad discretion in the use of our cash and might not use it in ways that ultimately increase the value of your
investment. If we do not invest or use our cash in ways that enhance stockholder value, we may fail to achieve expected financial results, which could cause our stock price to decline.
We may be subject to securities litigation, which is expensive and could divert management attention.
The market price of our common stock may be volatile, and in the past companies that have experienced volatility in the market price of
their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs
and divert our management's attention from other business concerns, which could seriously harm our business.
Our principal stockholders and management own a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder
approval.
As of February 28, 2014, our executive officers, directors, holders of 5% or more of our capital stock and their respective
affiliates beneficially owned approximately 40.7% of our outstanding stock. Therefore, these stockholders will have the ability to influence us through this ownership position. These stockholders may
be able to determine all matters requiring stockholder approval. For example, these stockholders may be able to control elections of directors, amendments of our organizational documents, or approval
of any merger, sale of assets, or other major corporate transaction. This may
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prevent
or discourage unsolicited acquisition proposals or offers for our common stock that you may feel are in your best interest as one of our stockholders.
We are an "emerging growth company" as defined in the JOBS Act and have availed, and intend to continue to avail, ourselves of reduced disclosure requirements applicable to
emerging growth companies, which could make our common stock less attractive to investors.
We are an "emerging growth company" as defined in the JOBS Act, and we have taken, and intend to continue to take, advantage of certain
exemptions from various reporting requirements that are applicable to other public companies that are not "emerging growth companies" including not being required to comply with the auditor
attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and
exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We cannot predict if
investors will find our common stock less attractive because we rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market
for our common stock and our stock price may be more volatile. We may continue taking advantage of these reporting exemptions until we are no longer an "emerging growth company." We will remain an
"emerging growth company" until the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of $1 billion or more, (ii) December 31,
2018, (iii) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years or (iv) the date on which we are deemed to be a large
accelerated filer under the rules of the SEC.
Sales of a substantial number of shares of our common stock in the public market could cause our stock price to fall.
Sales of a substantial number of shares of our common stock in the public market or the perception that these sales might occur could
depress the market price of our common stock and could impair our ability to raise capital through the sale of additional equity securities. We are unable to predict the effect that sales may have on
the prevailing market price of our common stock.
In
connection with our January 2014 public offering, we, along with our directors and executive management team and certain of our principal stockholders, have agreed that for a period
of 90 days after January 8, 2014, subject to specified exceptions, we or they will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any shares
of our common stock or securities
convertible into or exchangeable or exercisable for any shares of our common stock. Subject to certain limitations, approximately 7,805,459 shares will be freed for sale upon expiration of such
lock-up period. Shares issued or issuable to these stockholders upon exercise of options vested as of the expiration of the lock-up period will also be eligible for sale at that time. In addition,
during the lock-up period and subject to certain exceptions and limitations, sales of shares by certain of our principal stockholders otherwise subject to the lock-up arrangements are permitted under
pre-existing trading plans established pursuant to Rule 10b5-1 of the Exchange Act. Sales of stock by any of our directors, executive management team or principal stockholders could have a
material adverse effect on the trading price of our common stock.
Certain
holders of shares of our common stock are entitled to rights with respect to the registration of their shares under the Securities Act. Registration of these shares under the
Securities Act would result in the shares becoming freely tradable without restriction under the Securities Act, except for shares purchased by affiliates. Any sales of securities by these
stockholders could have a material adverse effect on the trading price of our common stock.
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Future sales and issuances of our common stock or rights to purchase common stock, including pursuant to our equity incentive plans, could result in additional dilution of
the percentage ownership of our stockholders and could cause our stock price to fall.
We expect that significant additional capital will be needed in the future to continue our planned operations. To raise capital, we may
sell common stock, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from time to time. Such sales may result in material dilution to
our existing stockholders, and new investors could gain rights, preferences and privileges senior to those of holders of our common stock.
Pursuant
to our equity incentive plan(s), our board of directors or compensation committee, and in certain instances (involving non-executive new hires) our chief executive officer and
chief financial officer, are authorized to grant equity-based incentive awards to our employees, directors and consultants. The number of shares of our common stock available for future grant under
our 2013 Stock Plan as of December 31, 2013, was 269,373. The number of shares of our common stock reserved for issuance under our 2013 Plan will be increased (i) from time to time by
the number of shares of our common stock forfeited upon the expiration, cancellation, forfeiture, cash settlement or other termination of awards under our 2008 Stock Plan, and (ii) on
January 1 of each year through January 1, 2023, by the lesser of (x) a number of additional shares of our common stock representing four percent of our then-outstanding shares of
common stock and (y) another amount that our board of directors determines. The number of shares of our common stock available for future grant under our ESPP as of December 31, 2013 was
160,000. The number of shares of our common stock reserved for issuance
under our ESPP will be increased on January 1 of each year by the lesser of (x) a number of additional shares of our common stock representing one percent of our then-outstanding shares
of common stock and (y) another amount that our board of directors determines. Future option grants and issuances of common stock under our 2013 Stock Plan or ESPP may have an adverse effect on
the market price of our common stock.
Some provisions of our charter documents and Delaware law may have anti-takeover effects that could discourage an acquisition of us by others, even if an acquisition would
be beneficial to our stockholders and may prevent attempts by our stockholders to replace or remove our current management.
Provisions in our amended and restated certificate of incorporation and bylaws, as well as provisions of Delaware law, could make it
more difficult for a third party to acquire us or increase the cost of acquiring us, even if doing so would benefit our stockholders or remove our current management. These
provisions:
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divide our board of directors into three classes, each serving staggered, three-year terms;
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authorize the board of directors to issue, without further action by the stockholders, up to 10,000,000 shares of
undesignated preferred stock;
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require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by
written consent;
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specify that special meetings of our stockholders can be called only by the board of directors, the chairman of the board,
or the chief executive officer;
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establish an advance notice procedure for stockholder approvals to be brought before an annual meeting of our
stockholders, including proposed nominations of persons for election to the board of directors;
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provide that directors may be removed only for cause;
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establish the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain derivative actions or
proceeding brought on our behalf, any action asserting a claim of
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These
provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of
our board of directors, which is responsible for appointing the members of our management. Because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the
Delaware General Corporation Law, which may discourage, delay or prevent someone from acquiring us or merging with us whether or not it is desired by or beneficial to our stockholders. Under Delaware
law, a corporation may not, in general, engage in a business combination with any holder of 15% or more of its capital stock unless the holder has held the stock for three years or, among other
things, the board of directors has approved the transaction. Any provision of our certificate of incorporation or bylaws or Delaware
law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock, and could also affect
the price that some investors are willing to pay for our common stock.
We do not anticipate paying cash dividends and, accordingly, stockholders must rely on stock appreciation for any return on their investment.
We do not anticipate paying cash dividends in the future. Additionally, our credit and security agreement with MidCap contains
covenants that restrict our ability to pay dividends. As a result, only appreciation of the market price of our common stock, which may never occur, will provide a return to our stockholders.
Investors seeking cash dividends should not invest in our common stock.