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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[ X ] Annual report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended June 30, 2000
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or
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _________ to _________
Commission File Number 0-24972
INKINE PHARMACEUTICAL COMPANY, INC.
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(Exact name of registrant as specified in its charter.)
New York 13-3754005
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1720 Walton Road, Suite 200
Blue Bell, Pennsylvania 19422
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (610) 260-9350
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Securities registered pursuant to Section 12(b) of the Act:
(Title of each class) (Name of each exchange on which registered)
None N/A
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.0001 par value per share
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(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. YES _X_ NO ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulations S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant is approximately $299,478,000. Such aggregate market value was
computed by reference to the closing price of the Common Stock as reported on
the NASDAQ SmallCap Market of The Nasdaq Stock Market on September 22, 2000. For
purposes of this calculation only, the registrant has defined affiliates as
including all directors and executive officers. In making such calculation,
registrant is not making a determination of the affiliate or non-affiliate
status of any holders of shares of Common Stock. The number of shares of the
registrant's Common Stock outstanding as of September 22, 2000 was 33,293,027.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Definitive Proxy Statement for the
registrant's 2000 Annual Meeting of Shareholders to be filed within 120 days
after the end of the fiscal year covered by this Annual Report on Form 10-K are
incorporated by reference into Part III of this Form 10-K.
INKINE PHARMACEUTICAL COMPANY, INC.
INDEX TO FORM 10-K
Page
References
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PART I
ITEM 1. BUSINESS.......................................................................1
ITEM 2. PROPERTIES....................................................................25
ITEM 3. LEGAL PROCEEDINGS.............................................................25
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...........................25
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS...........................................................26
ITEM 6. SELECTED FINANCIAL DATA.......................................................27
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS ..........................................27
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK...................................................................30
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA...................................30
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE...........................................30
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT............................30
ITEM 11. EXECUTIVE COMPENSATION........................................................30
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT....................................................................30
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................................30
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K...................................................................31
EXHIBITS......................................................................31
SIGNATURES....................................................................33
INDEX TO FINANCIAL STATEMENTS.................................................F-1
-i-
PART I
ITEM 1. BUSINESS.
OVERVIEW
InKine Pharmaceutical Company, Inc., formerly Panax Pharmaceutical
Company, Ltd., was incorporated in May 1993 to focus on the development of new
pharmaceutical compounds identified in and isolated from plants. In early 1996,
we modified our strategy, reducing our natural product discovery activities and
redirecting our principal efforts toward expanding our pipeline of commercially
viable pharmaceutical products by licensing or acquiring specifically-targeted
products developed for the treatment of certain diseases.
In February 1997, we acquired the rights to develop and commercialize a
novel purgative tablet ("Visicol(TM)", formerly Diacol(TM)) to clean the colon
for any medical purpose and for use as a laxative, with respect to which a Phase
IIb clinical trial for use prior to colonoscopy had been completed at that time.
Simultaneously with the consummation of a private placement in November 1997, we
also acquired the rights to develop and commercialize two additional
technologies: (i) a Thrombospondin Technology (defined below) for the treatment
of cancer, specifically, the inhibition and prevention of tumor metastasis and
(ii) technologies to down or up-regulate the Fc receptors on macrophages and
other cells to treat serious autoimmune disorders and other diseases, including
asthma/allergy and certain serious infectious diseases (the "Fc Receptor
Technology"). The compounds and technologies making up the Fc Receptor
Technology and the Thrombospondin Technology are currently either in clinical
trials or earlier stages of development. Additionally, simultaneous with the
private placement in November 1997, Panax changed its name to InKine
Pharmaceutical Company, Inc. and the management and Board were restructured.
Visicol(TM). On February 14, 1997, we entered into a License Agreement
(the "ALW License") with a partnership (the "ALW Partnership") whose partners
include Craig A. Aronchick, M.D. Dr. Aronchick is an attending
gastroenterologist and Head of the Endoscopy Unit at Pennsylvania Hospital in
Philadelphia and Associate Clinical Professor of Medicine at the University of
Pennsylvania School of Medicine. Pursuant to the ALW License, we acquired the
worldwide exclusive rights to sell, manufacture and sub-license Visicol(TM). On
April 1, 1997, a patent covering Visicol(TM) issued in the United States to the
ALW Partnership.
Visicol(TM) is a tablet form of the aqueous sodium phosphate purgative
formula used to clean the colon for any medical purpose with respect to which a
Phase I, Phase IIb dose ranging study and Phase III clinical trials for use
prior to colonoscopy have been completed. We believe that over 10 million
procedures, which require the use of products like Visicol(TM), will be
performed annually in the United States by the year 2003. All ethical colonic
cleansing products currently on the market are in liquid form, require the
ingestion of between one to four liters of fluid, and have either a very salty
taste or a taste so foul that patients are often unable to consume the required
dosage and/or nausea and vomiting occurs. Failure to ingest the required amount
of liquid could result in incomplete cleansing, and, in turn, an adenoma or
benign polyp could be overlooked during colonoscopy. Two Phase III clinical
studies conducted by us found that Visicol(TM) is as effective a colonic
cleanser, and better tolerated by patients, than the most commonly prescribed
liquid preparation. With respect to tolerance of each preparation, over twenty
times the number of the patients taking the liquid purgative found the taste
"bad, barely tolerable" or "very bad, not tolerable." Most patients taking
Visicol(TM) found that the tablets had no taste or a pleasant taste. We
submitted a New Drug Application or NDA, for Visicol(TM) on November 23, 1999 to
the United States Food and Drug Administration or FDA.
On September 21, 2000, we received notification from the FDA that
Visicol(TM) tablets (brand of sodium phosphate) for cleansing of the bowel as a
preparation for colonoscopy was approved for marketing. The approval occurred in
ten months from the NDA submission and included full labeling of the product as
agreed to by the FDA and us. We have projected January 2001 as the date on which
we intend to make Visicol(TM) available to patients undergoing colonoscopy.
Visicol(TM), our lead product, is the first and only tablet purgative
preparation indicated for bowel cleansing prior to colonoscopy.
-1-
The Thrombospondin Technology. In November 1997, we acquired an
exclusive worldwide license to the Thrombospondin Technology, a cancer treatment
technology previously owned by MCP Hahnemann University or MCP.
Dr. George Tuszynski, Professor of Surgery, Medicine and Pathology at
MCP has found a specific amino acid sequence in Thrombospondin ("TSP-1") that is
believed to be responsible for promoting the effects of this molecule on tumor
cell adhesion and metastasis. From this discovery, Dr. Tuszynski invented a
series of peptide molecules for which a patent has been allowed in the United
States. These molecules significantly reduced metastasis of a mouse tumor cell
line and a human tumor cell line when injected into athymic mice.
Dr. Tuszynski has also developed a murine polyclonal antibody against
the TSP-1 receptor, which was also shown to prevent or significantly reduce
metastasis in athymic mice. We filed a patent application directed to a novel
sequence of the thrombospondin receptor and antibodies directed to the same in
June 1999. More recently, Dr. Tuszynski has invented a novel soluble protein,
Angiocidin, which is a potent inhibitor of new blood vessel formation
(angiogenesis). Dr. Tuszynski discovered that Angiocidin is a receptor (docking
site) for TSP-1, and that Angiocidin specifically breaks up and kills blood
vessels in culture and when administered intravenously to animals bearing an
aggressive lung tumor implanted in their flank, inhibited the growth of the
tumor by approximately 560%. A patent application was filed in January 2000
directed to the composition of matter for the novel soluble protein. (The
peptide molecules, the polyclonal antibody, the TSP-1 receptor and Angiocidin
are referred to as the "Thrombospondin Technology"). Traditional methods of
cancer treatment include surgery, radiation therapy and chemotherapy, all of
which remove or kill cancer cells (and normal cells), but do not specifically
prevent or inhibit metastasis.
The Fc Receptor Technology. The focus of our research in the Fc
Receptor Technology area is to discover and develop pharmaceuticals designed to
modulate the immune system by manipulating macrophage and mast cell function.
Specifically, we are focused on developing treatments in three therapeutic
areas: autoimmune disease, serious infections and asthma/allergy. Millions of
patients in the United States suffer from serious autoimmune diseases, including
rheumatoid arthritis, inflammatory bowel disease ("IBD"), systemic lupus
erythematosus ("lupus"), Graves Disease, idiopathic thrombocytopenic purpura
("ITP") and others. The therapeutic agents which have traditionally constituted
the mainstay for the treatment of autoimmune disorders are glucocorticoid
hormones (typically prednisone), which inhibit macrophage Fc receptor expression
but which must be administered in high dosages and/or for extended periods of
time and which are accompanied by substantial side effects, including
exacerbation of diabetes, hypertension, electrolyte imbalance, weight gain,
osteoporosis and increased susceptibility to infection. In the case of the
autoimmune disease ITP, from which over 100,000 patients in the United States
suffer, most patients relapse after glucocorticoid treatment is tapered, and in
a number of such cases, surgical removal of the spleen is ultimately required.
The Fc Receptor Technology, developed under the guidance of Alan D. Schreiber,
M.D., Professor of Medicine and Assistant Dean for Research at the University of
Pennsylvania School of Medicine, consists of progesterone derivatives which do
not appear to have the toxic side effects of glucocorticoid hormone treatments
and many of which also do not have the potentially undesirable hormonal effects
normally associated with traditional progesterone and other sex hormone
treatments.
The most advanced product in the family of compounds comprising the Fc
Receptor Technology is CBP-1011, a potential treatment for ITP and IBD. For the
indication ITP, the compound is expected to receive protection under an orphan
drug application to be made under the Orphan Drug Act, as amended. The results
from two Phase II clinical studies completed to date suggest that CBP-1011
appears safe and effective in the treatment of patients with ITP. In March 1998,
Phase III pivotal trials of CBP-1011 at 38 sites in the United States were
initiated under a revised protocol. In June 1999 we announced, after reviewing
unaudited interim Phase III efficacy and safety data with the FDA that CBP-1011
appeared to benefit certain patients with ITP without the high incidence of side
effects that would normally be seen with the chronic administration of
"classical steroids," such as prednisone. Discussions with the FDA regarding the
data to date were favorable and we decided to commence a human pharmacokinetic
study comparing the original capsule formulation to a new commercially viable
tablet formulation. Preliminary results indicate that there is no significant
difference between the two.
-2-
Due to the unique action of CBP-1011 on inflamatory mediators, Dr.
Schreiber conducted preclinical testing of CBP-1011 in an accepted animal model
of IBD. The results demonstrated that CBP-1011 was effective in decreasing
lymphocyte infiltration into the bowel compared to the buffer control. Due to
good long term safety data obtained in the ITP clinical trials, we submitted a
Phase II protocol to the FDA to evaluate CBP-1011 for the treatment of IBD,
specifically Crohn's and ulcerative colitis. In early 2000, we initiated two
Phase II multicenter clinical trials to determine if CBP-1011 was effective in
treating both Crohn's and ulcerative colitis.
On September 11, 2000, we announced positive results of our Phase II
multicenter open-labeled, clinical trial of CBP-1011 in the treatment of
patients with mild or moderate Crohn's disease. Key results of the study
included the following: 80% of patients who completed the study responded to
treatment with CBP-1011 using endpoints that were previously defined by the FDA
for a recently approved drug indicated for Crohn's disease, 70% of the patients
were in remission at the completion of the study and 73% of the patients
responded after 4 weeks, with a remission rate of 64%. We intend to initiate
dialogue with the FDA to determine the appropriate course to advance CBP-1011 to
later stage clinical trials for Crohn's disease.
Results from our Phase II multicenter trial of CBP-1011 for ulcerative
colitis are expected by the end of calendar year 2000.
Since commencing operations, we have not generated any sales revenue.
FORWARD LOOKING STATEMENTS
Our disclosure and analysis in this report contains some
forward-looking statements. Forward-looking statements give our current
expectations or forecasts of future events. You can identify these statements by
the fact that they do not relate strictly to historical or current facts. Such
statements may include words such as "anticipate," "estimate," "expect,"
"project," "intend," "plan," "believe," and other words and terms of similar
meaning in connection with any discussion of future operating or financial
performance. In particular, these include statements relating to present or
anticipated scientific progress, development of potential pharmaceutical
products, future revenues, capital expenditures, research and development
expenditures, future financing and collaborations, personnel, manufacturing
requirements and capabilities, and other statements regarding matters that are
not historical facts or statements of current condition.
Any or all of our forward-looking statements in this report may turn
out to be wrong. They can be affected by inaccurate assumptions we might make,
or by known or unknown risks and uncertainties. Many factors mentioned in the
discussion below will be important in determining future results. Consequently,
no forward-looking statement can be guaranteed. Actual future results may vary
materially.
We undertake no obligation to publicly update any forward-looking
statements, whether as a result of new information, future events or otherwise.
You are advised, however, to consult any further disclosures we make on related
subjects in our filings with the Securities and Exchange Commission or SEC. Also
note that we provide cautionary discussion of risks and uncertainties relevant
to our business. These are factors that we think could cause our actual results
to differ materially from expected results. Other unanticipated occurrences
besides those listed could also adversely affect us. This discussion is provided
as permitted by the Private Securities Litigation Reform Act of 1995.
-3-
PRODUCT DEVELOPMENT AND RESEARCH PROGRAMS
The following table describes the major diseases upon which we intend to
focus our research and product development efforts at least through calendar
year 2000, and also sets forth the current development status of products or
product candidates in each area:
PROGRAM THERAPEUTIC INDICATIONS DEVELOPMENT STATUS
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Cancer Detection and Treatment (Visicol(TM) and Thrombospondin Technology)
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Visicol(TM) o Cleansing of colon prior to colonoscopy FDA Approved
(formerly Diacol) Phase I completed
Phase IIb dose ranging completed
Phase III completed
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o Cleansing of colon prior to sigmoidoscopy Phase I completed
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o Constipation Phase I completed
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Thrombospondin o Prevention of metastatic cancer including Preclinical (lead compound identified)
Technology but not limited to breast, lung, prostate, Receptor cloned
pancreas and squamous cell cancer
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Fc receptor regulation (Fc Receptor Technology)
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CBP-1011 Capsule o Idiopathic Thrombocytopenic Purpura Phase III (on hold)
- ------------------------------------------------------------------------------------------------------------------------
CBP-1011 Tablet o Crohn's and Ulcerative Colitis Single dose PK study complete
Phase II Crohn's disease complete
Phase II ulcerative colitis in
progress
- ------------------------------------------------------------------------------------------------------------------------
CBP-2011 series of o Autoimmune Hemolytic Anemia Preclinical
compounds
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o Systemic Lupus Erthematosus Early Preclinical
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o Rheumatoid Arthritis Preclinical
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- ------------------------------------------------------------------------------------------------------------------------
Gene Therapy o Serious Infection Early Preclinical
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Oligonucleotides o Asthma/Allergy Early Preclinical
- ------------------------------------------------------------------------------------------------------------------------
We spent $5,731,000, $6,565,000 and $2,270,000 for research and
development during the years ended June 30, 2000, 1999 and 1998, respectively.
We incurred a $3,952,000 expense for purchased research and development for the
year ended June 30, 1998.
Visicol(TM)
Colorectal Cancer and Colonoscopies; Background and Statistics.
According to the American Cancer Society, 2000 Cancer Facts and Figures,
colorectal cancer is the second leading cause of cancer related deaths in the
United States, with approximately 130,200 new cases and 56,300 deaths estimated
for 2000. The incidence of colorectal cancer has increased on a yearly basis and
is higher in women (51% of all colorectal cancer cases in the United States are
in women) than men (49% of all cases). Other statistics suggest that
age-specific incidence and mortality rates show that most cases are diagnosed in
patients over 50 years of age with most patients (63% of all cases diagnosed)
being diagnosed with advanced disease. The 5-year case fatality rate is 35%;
however, if the disease can be diagnosed in an earlier localized stage the
survival rate approaches 90%.
Published estimates taken from scientific literature state that 5% to 7% of
Americans will develop colorectal cancer. The reported risk of colorectal cancer
-4-
increases after age 40, rises sharply at ages 50-55, and doubles with each
succeeding decade until it peaks at age 75. It is fairly well established that
colorectal cancer begins as a benign polyp or adenoma and that a benign adenoma
may exist for five or ten years before degenerating into cancer. Therefore, with
colonoscopic and sigmoidoscopic surveillance, along with excision of the benign
polyp or adenoma, colorectal cancer appears to be a preventable disease. Many
physicians believe that screening colonoscopy is essential for high risk groups,
which include those with a family or personal history of colorectal cancer. High
risk groups account for 20-30% of all colorectal cancers.
The American Cancer Society and other professional groups have
published a joint guideline for colon cancer screening, which recommends
periodic screening for all persons over the age of 50 years. More intensive
screening, often starting at an earlier age, is recommended for various groups
of persons at high risk of colon cancer, including those with a family history
or personal history of colon cancer. Colonoscopy is one of several methods used
to screen persons over 50 who are not at high risk for colon cancer, but many
physicians believe it is the best method. This belief has been strengthened by
several large, recently published studies showing that colonoscopy is better at
detecting cancer than several other common screening methods. Colonoscopy is
widely used to screen patients at high risk for colon cancer and is used to
follow up most patients who have had suspicious findings with other screening
methods.
Estimates from the National Cancer Institute suggest that between
65-75% of early cancers can be detected by screening asymptomatic individuals
over 50 years of age with a 60-cm flexible sigmoidoscope, and the detection rate
increases dramatically when a 165-cm colonoscopy device is utilized. As a result
of such recommendations, colonoscopies have increased in the United States. We
believe that a trend of increasing numbers of procedures will continue and
estimate that, by the year 2003, over 10 million procedures will be performed
annually in the United States. Gastroenterologists and colorectal surgeons
comprise the substantial majority of professionals who perform colonoscopy.
However, we believe that flexible sigmoidoscopy is now routinely done by many
generalists (i.e., internists and family practitioners) in the United States.
Existing Colon Cleansing Products. Cleansing the colon is necessary
prior to colonoscopy or sigmoidoscopy, especially when the procedure is being
used to screen for pre-cancerous lesions which may be 1 cm or smaller in size.
Ineffective cleansing can result in poor visualization, which in turn can cause
the screening physician to miss an adenoma or benign polyp.
The most frequently used products for cleansing the colon in the United
States contain either polyethylene glycol salt solution ("PEG") or sodium
phosphate. Both types of products work by drawing water from the body into the
gut via an osmotic effect. The accumulated fluid then passes through and flushes
the intestine causing a cleansing effect. Over the last 15 years, patient
intolerance to these methods of cleansing the colon has become a substantial
problem.
Purgative products are currently administered in liquid form. There are
three dominant products which use PEG: Golytely(R) and NuLYTELY(R), which are
manufactured by Braintree Laboratories, Inc. and Colyte(R) which is manufactured
by Schwarz Pharma, Inc. Each product requires the ingestion of 4 liters (over 1
gallon) of PEG in roughly 2.5 hours. Additionally, PEG has an extremely salty
taste. More recently, aqueous sodium phosphate solution (Fleet's Phospho-soda,
manufactured by C.B. Fleet Company, Inc.) has been used as a purgatory
alternative. Aqueous sodium phosphate solution has been demonstrated to be as
effective as the PEG-electrolyte purge as a colonic cleanser. However, although
a smaller volume of liquid is required to be ingested for effective colonic
cleansing with aqueous sodium phosphate (between 1 and 2 liters of water), the
taste of the solution is so foul that nausea and vomiting frequently occur.
Claimed Advantages of Tablet for Cleaning Colon Prior to Colonoscopy or
Sigmoidoscopy. Craig A. Aronchick, M.D., Scott H. Wright, M.D. and William H.
Lipshutz, M.D., (the "Partners") developed a tablet form of the aqueous sodium
phosphate purge formulation which we believe avoids the two major problems
associated with the current purgatives.
In 1994, Dr. Aronchick and his colleagues conducted a Phase IIb
clinical study at the Pennsylvania Hospital in Philadelphia to evaluate the
-5-
efficacy of the sodium phosphate tablet as compared to Fleet's Phospho-soda and
Colyte. The study was designed as a single blinded evaluation of colon cleansing
in outpatients undergoing elective colonoscopy. The study enrolled 342 patients
who were randomized to one of three purgative methods (Colyte, Fleet's
Phospho-soda or sodium phosphate tablets). The goals of the study were to: (i)
determine the efficacy of cleansing, (ii) determine the adverse effects of the
preparation, and (iii) evaluate patient tolerance of the preparation.
Quality of colon cleansing was evaluated by the physician performing
the colonoscopy in a semi-quantitative fashion. Physicians were blinded from
knowing which preparation the patient had received. The responses indicated that
all three preparations, when patients completed assigned doses, had equal
efficacy with respect to the quality of cleansing of the bowel surface.
With respect to patient tolerance of the preparations, over 40% of
patients taking Fleet's Phospho-soda and over 10% of the patients taking Colyte
found the taste unacceptable. Adverse effects included nausea and moderate to
severe vomiting occurring in greater than 6% of patients taking a liquid
preparation. All patients taking the sodium phosphate tablets found that the
tablets had no taste or a pleasant taste, and none experienced nausea or
vomiting. Almost all patients who took tablets during this study and had
previously taken liquid Colyte or liquid Fleet's Phospho-soda preferred the
tablets for future colonoscopies. Eighty percent (80%) of patients who took the
sodium phosphate tablets found the tablet satisfactory, which was statistically
superior to the patients who took the Colyte preparation (50% found it
satisfactory) and the Fleet's Phospho-soda preparation (20% found it
satisfactory).
Results of Phase IIb Dose Ranging Study. In September 1998, we
concluded a Phase IIb dose ranging study of Visicol(TM) to assess the safety and
efficacy of three different doses of Visicol(TM). The results of the study were
as follows:
A total of 97 patients were randomized to receive 24, 42, or 60 grams
of Visicol(TM) prior to colonoscopy to prepare their colon for examination. Half
the assigned dose was self-administered the evening prior to, and half the
morning of the colonoscopy. Physicians assessed efficacy by direct visualization
of the colon using a 4-point scale (excellent, good, fair, inadequate/reprep).
Patients assessed tolerance and compliance using a self-administered
questionnaire.
A dose-response effect was observed for the efficacy of Visicol(TM). Of
patients who had a colonoscopy procedure, one hundred percent of patients
receiving the high dose, 88% of patients receiving the mid-dose and 70% of
patients receiving the low dose were observed to have an "excellent" or "good"
rating in their colon cleansing. The high dose group was the only group in which
no patient had an "inadequate or repreparation required" rating. In the "high
dose" group over 87% of patients preferred Visicol(TM) tablets compared to
ethical liquid preparations available as an alternative for colonoscopy
preparation.
Clinically insignificant changes in serum electrolytes which almost
always returned to normal, or baseline values, within 48 to 72 hours were
observed at all dose levels. No serious adverse events were reported in any dose
group.
We met with the FDA regarding the results of the Phase IIb study.
Following the meeting, we submitted a protocol for a Phase III clinical study of
Visicol(TM) at a dose of 60 grams.
Results of Phase III Clinical Study. In April 1999, we concluded two
pivotal Phase III trials of Visicol(TM). In each trial, Visicol(TM) tablets were
as effective as cherry flavored NuLYTELY(R) liquid in the quality of colonic
cleansing prior to colonoscopy. With a high degree of statistical significance,
each trial also indicated that Visicol(TM) tablets were greatly preferred by
patients and were better tolerated than NuLYTELY.
Two identical, randomized, single blind, nationwide multicenter pivotal
trials compared the safety, efficacy, and patient preference of Visicol(TM)
tablets with NuLYTELY, the leading prescription purgative agent, in patients
requiring colon cleansing prior to colonoscopy. Each trial included over 400
adults undergoing colonoscopy. Patients were randomized to receive either
Visicol(TM) tablets at a total dose of 60 grams or NuLYTELY at the usual total
dose of 4 liters, as in the prescribing information. The gastroenterologist
performing the colonoscopy was not aware of which drug the patient received.
Using a validated questionnaire, the gastroenterologist assessed the quality of
colon cleansing.
-6-
The pivotal trials were designed to demonstrate equivalence of
Visicol(TM) tablets to NuLYTELY, not the superiority of Visicol(TM) tablets. In
each trial, Visicol(TM) tablets demonstrated equivalence to NuLYTELY using the
statistical test that had been agreed to by the FDA. The vast majority of
patients in each trial were rated as having "excellent" or "good" colon
cleansing. In each trial, patients who took Visicol(TM) tablets had a slightly
better mean cleansing score than those who took NuLYTELY, but these differences
were not statistically significant.
In patients undergoing colonoscopy, the most commonly reported clinical
adverse events associated with colonic purgation are bloating, nausea, abdominal
pain and vomiting. In each pivotal trial, according to investigator documented
adverse events, Visicol(TM) tablets produced statistically significantly lower
incidences of nausea, vomiting and bloating when compared to NuLYTELY. For the
fourth symptom, abdominal pain, there was a statistically significant difference
favoring Visicol(TM) tablets in one trial, and equivalence in the other trial.
There was no significant difference in the rate of serious adverse
events between Visicol(TM) tablets and NuLYTELY in either trial or in each trial
combined. The overall rate of serious adverse events was less than 0.2% among
patients who took study drug.
In each pivotal trial, after ingesting their study medication and prior
to their colonoscopy, patients completed a questionnaire evaluating their study
medication. Analysis of patient questionnaires also yielded a number of
statistically significant advantages for Visicol(TM) tablets compared to
NuLYTELY. In each trial, at least seven times as many NuLYTELY patients were
unable to complete the prescribed dose compared to patients given Visicol(TM)
tablets. In each trial, if given a choice of a purgative product for future
colonoscopy, 90% of those taking Visicol(TM) tablets and over 75% of those
taking NuLYTELY liquid would prefer to take Visicol(TM) tablets. Over three
times as many patients reported that NuLYTELY was 'moderately' or 'extremely'
difficult to ingest compared to patients ingesting Visicol(TM) tablets.
Additionally, over twenty times as many patients found the taste of cherry
flavored NuLYTELY 'bad, barely tolerable' or 'very bad, not tolerable' when
compared to patients who took Visicol(TM) tablets. Finally, in each trial, to a
high degree of statistical significance, patients taking Visicol(TM) tablets
reported less nausea, bloating and vomiting.
Results of NDA Submission. Following such favorable clinical results,
we submitted an NDA to the FDA in November 1999. On September 21, 2000, we
received notification from the FDA that Visicol(TM) tablets (brand of sodium
phosphate) for cleansing of the bowel as a preparation for colonoscopy was
approved for marketing. The approval occurred in ten months from the NDA
submission and included full labeling of the product as agreed to by the FDA and
us. We have projected January 2001 as the date on which we intend to make
Visicol(TM) available to patients undergoing colonoscopy. Visicol(TM), our lead
product, is the first and only tablet purgative preparation indicated for bowel
cleansing prior to colonoscopy. Once marketing efforts are underway, we will
conduct additional studies to determine the dosing regimen that best combines
efficacious colon cleaning and patient satisfaction.
Other Applications for Visicol(TM). We believe there are several other
potential indications for the use of Visicol(TM). Colonic purgation is required
in all pre-operative colonic surgical procedures and therefore could be used as
a pre-operative preparation in lieu of NuLYTELY which is currently used a
majority of the time. Colonic purgation is also required prior to other
visualization procedures such as barium enema examinations and flexible
sigmoidoscopy. We similarly believe that Visicol(TM) may be effective as a
laxative for chronic constipation.
Acquisition of Proprietary Rights to Visicol(TM) Pursuant to License
Agreement. On February 14, 1997, we entered into the ALW License with the ALW
Partnership formed by the Partners, pursuant to which we obtained an exclusive
worldwide license, in perpetuity (subject to expiration of underlying patents
and rights of termination in the event of breach by a party), to develop, use,
market, sell, manufacture, have manufactured and sub-license, in the field of
colonic purgatives or laxatives (the "Field of Use"), Visicol(TM) along with ALW
Partnership's body of proprietary technical information, trade secrets and
know-how related thereto. A U.S. patent Non-Aqueous Colonic Purgative
Formulations--as to Visicol(TM) (covering any solid form of administration of
sodium phosphate for use as a colonic cleansing agent or as a laxative) was
issued on April 1, 1997. Patents on Visicol(TM) are pending in applications
designating Europe and Canada. In January 2000 we received notice of allowance
from the U.S. Patent and Trademark Office for an application that we filed for
numerous solid-dose colonic cleansing agents.
-7-
Our rights under the ALW License automatically extend to improvements
developed by us and/or the ALW Partnership which are derivative of Visicol(TM),
and we have a right of first refusal with respect to any new products which
relate to the Field of Use but which are not derivative of Visicol(TM).
Thrombospondin Technology
Cancer and Metastasis; Background and Statistics. Cancerous tumors are
believed to form when cancer cells multiply at a rate that is greater than the
rate at which the host defense system can destroy the cells. Traditional methods
of treating cancer generally include surgery, radiation therapy and
chemotherapy. Presently, chemotherapeutic approaches to cancer generally involve
the use of broad-based cytotoxic agents which kill many rapidly growing normal
cells in addition to cancer cells. Significant side effects result from
cytotoxic therapy. Most cancer will spread beyond its original site and invade
surrounding tissue, and may also metastasize to more distant sites and
ultimately cause death in the patient unless effectively treated. To be
effective, cancer treatment must not only target the primary site but also its
metastasis.
Tumor metastasis is a multi-step process involving cell adhesion,
migration, invasion, colonization of distant organs and angiogenesis. TSP-1 is a
large glycoprotein secreted by platelets and synthesized by many cell types,
including endothelial and tumor cells. TSP-1 has been implicated as a promoter
of tumor progression and angiogenesis. A number of studies have demonstrated
that TSP-1 can bind to multiple surface receptors on the same cell or bind to
different receptors on different cells, including carcinoma cells. We believe
that blocking the TSP-1 receptor may represent a novel approach for the
treatment and prevention of metastasis by uniquely acting on certain steps of
the metastatic cascade. By antagonizing TSP-1, cancer cell adhesion, migration,
invasion and angiogenesis may all be inhibited.
The Thrombospondin Technology and its Applications. Dr. George
Tuszynski has performed laboratory studies suggesting that TSP-1 promotes tumor
progression. In 1987, it was first shown that TSP-1 functioned as a tumor cell
and platelet adhesive protein. Subsequently, four adhesive domains in the TSP-1
molecule were identified. Several laboratories have demonstrated that TSP-1
stimulated the migration of several types of human cancer. The interpretation
that TSP-1 promotes tumor metastasis is further supported by the observation
that TSP-1 injected intravenously into mice enhanced lung tumor colony formation
three-fold.
Dr. Tuszynski has found a specific amino acid sequence in TSP-1 that is
believed to be responsible for promoting the effects of this molecule on tumor
cell adhesion and metastasis. From this discovery, Dr. Tuszynski invented a
series of peptide molecules, and a patent for the molecules has been allowed in
the United States. These molecules significantly reduce metastasis of a mouse
tumor cell line and a human tumor cell line when injected into athymic mice. Dr.
Tuszynski has also developed a murine polyclonal antibody against the TSP-1
receptor which was also shown to prevent or significantly reduce metastasis in
athymic mice. In June 1999 we filed a patent application directed to a novel
sequence of the thrombospondin receptor and monoclonal antibodies directed to
the same. Dr. Tuszynski investigated the pattern of distribution of the TSP-1
receptor in breast carcinoma and squamous cell carcinomas of the head and neck.
His laboratory study showed strong localization of TSP-1 in the stroma of
malignant tumors with little or none in benign tissue. Importantly, the receptor
was expressed in carcinoma cells but was absent in normal cells. More recently
similar observations were made in prostate, pancreatic and hepatocellular
carcinomas.
To determine if the presence or the amount of the specific TSP-1
receptor correlated directly to the capacity of tumor cells to invade and
metastasize, immunostained carcinoma specimens from humans were subjected to
computer-assisted image analysis with the purpose of quantifying the receptor
density on tumor cells. Dr. Tuszynski's results found that those patients with a
high positive stain score for specific receptors had a decreased overall
survival rate and all developed metastatic disease within sixteen months of
initial diagnosis. Patients with a low positive stain for the receptor were
found to be disease-free for at least two years. These studies, coupled with
preliminary studies using labeled peptides administered to animals, suggest that
several diagnostic products and therapies may be derived from this technology.
-8-
TSP-1 has been shown to modulate the behavior of endothelial and
non-endothelial cells involved in the regulation of angiogenesis. Antagonists of
the TSP-1 receptor appear to have effects on different steps of the angiogenic
process including, endothelial cell proliferation, migration and adhesion.
Research and Development Activities. Dr. Tuszynski has identified a
hexapeptide structure which appears to prevent the spread of human tumors in
animals by blocking the TSP-1 receptor. Preclinical testing is to be conducted
to determine if the pharmacokinetics and safety profile warrant the introduction
of this molecule into humans. We believe that because the lead compound contains
a hexapeptide, manufacturing would be inexpensive relative to other peptide
therapies. The prevention of the spread of small cell lung carcinoma has been
tentatively chosen as the initial target cancer. The survival term (generally
six months) for this type of cancer is extremely poor and should provide us with
an early indication of the compound's effectiveness.
More recently, Dr. Tuszynski has invented a novel soluble protein,
Angiocidin, which is a potent inhibitor of new blood vessel formation
(angiogenesis). Dr. Tuszynski discovered that Angiocidin is a receptor (docking
site) for TSP-1, and that Angiocidin specifically breaks up and kills blood
vessels in culture. When administered intravenously to animals bearing an
aggressive lung tumor implanted in their flank, Angiocidin inhibited the growth
of the tumor by approximately 560%.
Additionally, we intend to conduct an intensive program using
combinatorial chemistry capabilities to identify small organic molecules which
block the TSP-1 receptor. We are in a position to accomplish this since Dr.
Tuszynski cloned the TSP-1 receptor, thus providing us with chemical screening
capability which did not previously exist.
To develop this product, we intend to explore corporate partnerships
because of the expense involved in developing an agent used to treat or prevent
the spread of cancer. We have begun preliminary discussions with several
multinational pharmaceutical companies but there can be no assurance that a
corporate partnership or any cooperative agreement will be consummated.
License of Proprietary Rights. We have licensed the rights to all the
U.S. and foreign patents and patent applications relating to Thrombospondin
Technology and the rights to all future research and development of the
Thrombospondin Technology conducted in Dr. Tuszynski's laboratory from Dr.
Tuszynski and MCP. The patents, pending patent applications and future patent
applications cover or are expected to cover areas such as composition of matter
for a number of peptides with anti-metastatic activity, a novel cell surface
receptor which is important to the metastatic process, monoclonal antibodies to
such cell surface receptor and cancer diagnostic applications, a soluble protein
which is a potent inhibitor of angiogenesis, in addition to potential
applications and methods of inhibiting thrombotic activity and enhancing wound
healing, among other indications.
Fc Receptor Technology
Autoimmune and Inflammatory Diseases: Background and Statistics. Millions of
patients in the United States suffer from a variety of serious autoimmune
disorders such as rheumatoid arthritis, IBD, lupus, Graves Disease and others,
including ITP. All of these disorders are antibody-mediated and involve
antibody-coated complexes which are central to disease pathophysiology. In
almost all cases, the current therapy of choice is to administer
glucocorticoids, such as prednisone, at high doses and/or for extended periods
of time. Unfortunately there are many complications of glucocorticoid treatment;
adverse events are common and involve many major organ systems.
In autoimmune diseases such as ITP, there is an increased clearance of
platelets by macrophages in the spleen. ITP is caused by antiplatelet
antibodies, frequently of the IgG class, which form IgG-containing complexes
with the platelets. In the spleen, these IgG-coated platelets bind to the
macrophage at Fc receptor sites on the macrophage surface. Observations of
patients having ITP, lupus and autoimmune hemolytic anemia suggest that
interactions of IgG-containing complexes with the macrophage Fc (IgG) receptors
lead to tissue destruction in these immunologic disorders.
-9-
Diseases characterized by interactions of IgG-containing immune
complexes with macrophage Fc receptors are often chronic, involve much suffering
and are generally treated with agents having serious side-effects.
The following is the estimated U.S. population for select autoimmune
diseases in the disease categories noted below:
Estimated U.S. Patient Population
-------------------------------------------------------------------
Disorder Number of
Patients
-------------------------------------------------------------------
ITP 117,000
-------------------------------------------------------------------
IBD (both Crohn's and Ulcerative Colitis) 1,000,000
-------------------------------------------------------------------
Autoimmune Hemolytic Anemia 41,000
-------------------------------------------------------------------
Systemic Lupus Erthematosus 500,000
-------------------------------------------------------------------
Rheumatoid Arthritis 2,100,000
-------------------------------------------------------------------
Treatment Options; Glucocorticoid; Progesterone. We believe that a
number of autoimmune diseases may be treated by modulation of the Fc receptor.
For example, ITP, autoimmune hemolytic anemia, lupus and other systemic
vasculitis disorders (such as polyarteritis nodosa, Wegener's granulomatosis,
lymphomatoid granulomatosis and Sjogren's Syndrome) and rheumatoid arthritis are
all antibody-mediated and generally responsive to steroids. We further believe
that by concentrating on careful elucidation of mechanisms of autoimmune
diseases and the role of macrophage Fc receptors in the pathophysiology of these
disorders, a series of useful therapeutic agents can be identified.
Glucocorticoid hormones are small molecules which rank among the most
effective therapeutic agents in the treatment of autoimmune disorders. It has
been established that one important mechanism for their efficacy is their
ability to inhibit macrophage Fc receptor expression by down-regulating the
transcription of these receptors. While glucocorticoids are used widely in
autoimmune diseases, substantial side effects limit their overall effectiveness.
Toxic effects observed include exacerbation of diabetes, hypertension,
electrolyte imbalance, weight gain, osteoporosis and increased susceptibility to
infection.
We have focused our development efforts on a search for agents which inhibit
the clearance of antibody complexes without the accompanying toxicities observed
for many glucocorticoids. In that context, we have observed that some
progesterones may demonstrate the desired down-regulatory effect on macrophage
Fc receptor expression and antibody clearance but some may exert potentially
undesirable hormonal effects. Estrogens, meanwhile, enhance macrophage Fc
receptor expression and immune clearance. For treatments of diseases
characterized by interactions of IgG-containing immune complexes with macrophage
Fc receptors, we have concentrated on progesterone derivatives which do not
cause the toxicities seen with glucocorticoids.
ITP. ITP is one of several autoimmune disorders in which (a) the
pathophysiology involves the deposition of immune complexes in key organs and
(b) patients respond to treatment with glucocorticoids such as prednisone.
ITP, an orphan disease (a disease with less than 200,000 cases), is a
disorder which stems from Fc receptor-mediated macrophage phagocytosis of
antibody-coated platelet complexes. The purpura, when produced, is severe and
marked by copious hemorrhage from mucus membranes. If platelets are severely
depleted, hemorrhage into the brain can occur, which is often fatal. ITP is seen
alone (i.e., without concomitant autoimmune disease) as well as in up to 20% of
lupus patients and in HIV-infected patients.
-10-
Treatment of ITP typically begins with prednisone for variable periods
of one month or longer. A substantial portion of patients respond to treatment.
Patient tolerance is limited and most patients relapse as prednisone treatment
is tapered. Eventually the majority of patients advance to splenectomy to which,
again, a substantial portion respond.
Intravenous immunoglobulin ("IVIG") is used occasionally in very ill
patients or those refractory to prednisone, either before or following
splenectomy. IVIG treatment is believed to cause an antibody blockade of the Fc
receptor, inhibiting the clearance of IgG-coated platelets. Response rates are
similar to glucocorticoid therapy but immunoglobulin treatment is expensive and
relapse typically follows discontinuation of treatment. WinRho SD, a polyclonal
antibody product launched in 1995 which appears to work by inhibiting macrophage
Fc receptor mediated clearance of the IgG-coated platelet, is intended to be a
more convenient option to IVIG treatment in that WinRho SD can be rapidly
infused while IVIG cannot. WinRho SD still must be repeatedly administered
parenterally for this chronic disease, thus offering only modest benefit over
IVIG as well as continuing to raise certain safety issues regarding the product.
CBP-1011's mechanism of action for ITP is similar to that of
glucocorticoids on the regulation of macrophage Fc receptor production and
results in diminution of IgG-containing complex engulfment. Given this insight,
we believe that exploring related compounds with an improved safety profile over
glucocorticoids and progestins in lupus and rheumatoid arthritis has merit.
Upon successful development of CBP-1011, we anticipate that it will be
more readily accepted by ITP patients because it will be better tolerated and
available as an oral formulation with a reduced side effect profile as compared
to IVIG, WinRho, or prednisone, although no assurance as to successful
development or patient acceptance can be given. CBP-1011 is a steroid analog,
demonstrating steroid-like properties but without the side-effect profile
commonly associated with glucocorticoids. An extensive body of experience in
human use exists and the drug is well characterized. No significant estrogenic
activity has been observed to date with CBP-1011.
Summary of Clinical Data. To date there have been two studies completed
that have assessed the effects of CBP-1011 on the platelet count of patients
with ITP. The results of the two studies indicate that CBP-1011 appears safe and
effective in the treatment of patients with ITP. A positive response, as
indicated by an increase in platelet count of at least 20,000/mm3 over baseline
was noted in 14 of 19 treated patients, while adverse events were transient in
nature and did not, with few exceptions, cause the patients to discontinue from
the trial.
Phase III (Pivotal) Trials Program; Trial Design. The United States
pivotal trial being conducted calls for 100 evaluable ITP patients to be
enrolled at approximately 38 sites in the United States. Patients must be newly
diagnosed or previously responsive to prednisone. Patients will be required to
have a mean platelet count between 15,000 and 75,000/mm3 at entry. The primary
efficacy endpoint was defined as an increase in baseline platelet count of at
least 20,000/mm3. Dosing in this open-label, historically controlled, 42-day
course of treatment, commenced in March 1998.
Responders in the active disease phase will then be randomized in a
double-blind fashion, to one of three groups for an additional 42 days to assess
maintenance of effect: placebo, CBP-1011 at half-strength and CBP-1011 at full-
strength. The primary efficacy endpoint in this phase is maintenance of the
therapeutic effect, e.g., by a sustained increase in baseline platelet count of
> 20,000/mm3.
Interim Results of Phase III Data of CBP-1011. In June 1999, we
announced after reviewing unaudited interim Phase III efficacy and safety data
with the FDA that CBP-1011 appeared to benefit certain patients with ITP without
the side effects that would normally be seen with the chronic administration of
"classical steroids," such as prednisone. Discussions with the FDA regarding the
data to date were favorable and we decided to commence a human pharmacokinetic
study comparing the original capsule formulation to a new commercially viable
tablet formulation. The study enrolled 24 healthy volunteers, each of whom
received a single dose of each formulation of CBP-1011, separated by 21 days.
Preliminary results from the study indicate that the bioavailability of the
tablet formulation does not differ significantly from that of the capsule
formulation.
-11-
The results of this study will need to be reviewed by the FDA before
continuing our Phase III ITP clinical program with tablets. The new tablet
formulation is currently being used in our two Phase II studies in patients with
Crohn's disease and ulcerative colitis.
IBD (Crohn's Disease and Ulcerative Colitis).
Crohn's Disease. Crohn's disease is a serious inflammatory disease of
the gastrointestinal (GI) tract. It predominates in the intestine (ileum) and
the large intestine (colon), but may occur in any section of the GI tract.
Crohn's disease usually causes diarrhea, crampy abdominal pain, often fever, and
at times rectal bleeding. Loss of appetite and subsequent weight loss also may
occur.
Crohn's disease is chronic. Its cause is not known. Medication
currently available decreases inflammation and usually controls the symptoms,
but does not provide a cure. Because Crohn's disease behaves similarly to
ulcerative colitis, from which it may be difficult to differentiate, the two
disorders are grouped together as inflammatory bowel disease (IBD). Crohn's
disease affects all layers of the intestine in which there can be normal healthy
bowel in between patches of diseased bowel. Depending on where the involvement
occurs, Crohn's disease may be referred to as Ileitis, regional enteritis, or
colitis, etc. It is referred to as Crohn's disease because Burrill B. Crohn was
the first name in a three-author landmark paper published in 1932, which
described the disease.
According to the Crohn's & Colitis Foundation of America, it is
estimated that there may be up to 500,000 Americans with Crohn's. Males and
females appear to be affected equally. While Crohn's disease afflicts people of
all ages, it is primarily a disease of the young. Most cases are diagnosed
before age 30, but the disease can occur in the sixth, seventh and later
decades. Because no medical cure for Crohn's disease exists, the goals of
medical treatment are to suppress the inflammatory response, permit healing of
tissue and relieve the symptoms of fever, diarrhea and abdominal pain. Several
groups of drugs form the mainstay of therapy for Crohn's disease today. They
are:
1. Aminosalicylates: aspirin-like drugs, which include
sulfasalazine and messalamine, given both orally and rectally.
2. Corticosteroids: prednisone and methylprednisolone, available
orally and rectally.
3. Immune modifiers: azathioprine, 6MP, methotrexate.
4. Antibiotics: metronidazole, ampicillin, ciprofloxacin and
others.
Surgery becomes necessary in Crohn's disease when medication can no
longer control the symptoms, or when there is an intestinal obstruction or other
complication. In most cases, the diseased segment of bowel is removed and the
two ends of healthy bowel are joined together. It is not considered a cure for
Crohn's disease because the disease frequently recurs at or near the site of
anastomosis (i.e., the surgical reconnection of the bowel).
Research has shown that in IBD the body's defenses are operating
against some substances in the body, perhaps in the digestive tract, which they
recognize as foreign. These foreign substances (antigens) may themselves cause
the inflammation, or may stimulate the body's defenses to produce an
inflammation that continues without control.
Ulcerative Colitis. Ulcerative colitis is an inflammatory disease of
the colon, the large intestine, which is characterized by inflammation and
ulceration of the innermost lining of the colon. Symptoms characteristically
include diarrhea with or without rectal bleeding and often abdominal pain.
Ulcerative colitis differs from Crohn's disease since ulcerative colitis affects
only the colon. The inflammation is maximal in the rectum and extends up the
colon in a continuous manner without any "skip" areas of normal intestine.
Ulcerative colitis affects only the innermost lining of the colon,
whereas Crohn's disease can affect the entire thickness of the bowel wall. It is
estimated that there are up to 500,000 Americans with ulcerative colitis.
Ulcerative colitis is predominantly a disease of the young with most cases
generally beginning before age 30, although the disease can also occur in the
sixth, seventh and later decades of life.
-12-
Currently, no medical cure for ulcerative colitis exists, but effective
medical treatment can suppress the inflammatory process, permit healing of the
colon, and relieve the symptoms of diarrhea, rectal bleeding and abdominal pain.
As such, the treatment of ulcerative colitis involves medicines that decrease
the abnormal inflammation in the colon lining and thereby control the symptoms.
Three major classes of medication are used today to treat ulcerative
colitis. They are:
1. Aminosalicylates: These medications include aspirin-like
medications such as 5-aminosalicylic acid (5-ASA, mesalamine,
olsalazine) and sulfasalazine. These medications are effective
in the treatment of mild to moderate epsiodes of ulcerative
colitis.
2. Corticosteroids: These medications include prednisone,
methyprednisolone and budesonide. These medications are used for
patients with moderate to severe disease.
3. Immunomodulatory medicines: These medications include
azathioprine, 6-mercaptopurine (6-MP) and recently cyclosporine.
As a group, they alter the body's immune cells from interacting
with the inflammatory process. However, these medications can
take as long as three months to begin their beneficial effects.
In a small proportion of patients, medical therapy is not completely
successful or complications arise. Under these circumstances, surgery may be
considered. This surgery involves the removal of the entire colon and rectum
with the creation of an ileostomy or external stoma. Differing from Crohn's
disease, which can recur after surgery, ulcerative colitis is "cured" once the
colon is removed.
Researchers do not know what causes this disease. They do not believe
it is caused by emotional stress, or by food, or that it is transmitted directly
from one person to another. Research has shown that in ulcerative colitis, the
body's defenses are operating against some substances in the body, perhaps in
the digestive tract, which the body recognizes as foreign. These foreign
substances (antigens) may themselves cause the inflammation to begin or to
stimulate the inflammatory process to continue without control.
CBP-1011 and IBD. CBP-1011 is also being evaluated for the treatment of
IBD, specifically, Crohn's disease and ulcerative colitis. CBP-1011 inhibits
pro-inflammatory mediators while possibly offering distinct safety advantages
over traditional steroid therapy. In early 2000, we initiated two Phase II
multi-center clinical trials to determine if CBP-1011 was effective in treating
both Crohn's and ulcerative colitis.
Summary of Clinical Data. To date there has been one study completed
which has assessed the effects of CBP-1011 on Crohn's disease. The results of
the Phase II study indicate that CBP-1011 appears safe and effective in the
treatment of patients with Crohn's disease. The results of the study were as
follows:
A multicenter open-labeled, clinical trial of CBP-1011 was conducted in
the treatment of patients with mild or moderate Crohn's disease. Patients with
an established diagnosis of Crohn's disease, currently taking medications such
as aminosalicylates, cyclosporine, 6-mercaptopurine, azathioprine and/or
systemic corticosteroids (less than or equal to 20 mg/day), and experiencing
increased gastrointestinal symptoms confirmed by a baseline Crohn's Disease
Activity Index (CDAI) between 200 and 400 were eligible to receive CBP-1011
tablets in a loading dose of 4 grams per day for the first two days followed by
a daily maintenance dose of 1000 mg (500 mg every 12 hours) for up to 2 months.
Ninety-one percent (10 of 11) of patients completed 2 months of treatment and 1
additional patient remained on therapy and is included on the 4-week analysis.
Of the 12 patients enrolled, only 1 patient discontinued therapy, and this was
due to "fatigue."
Key results of the study included:
o 80% of patients who completed the study responded to treatment
with CBP-1011 using endpoints that were previously defined by the
FDA for a recently approved drug indicated for Crohn's (defined
as a decrease in the CDAI at 8 weeks compared to baseline greater
than or equal to 70 or a CDAI score of less than or equal to
150).
-13-
o 70% of the patients were in remission (CDAI less than or equal to
150) at the completion of the study.
o 73% of the patients responded after 4 weeks, with a remission
rate of 64%.
o Response at two months was accompanied by a decrease in
C-reactive protein in every case where this protein could be
detected at baseline, consistent with reduced inflammation.
o No serious adverse events occurred during the study.
o Transient elevations in serum transaminases were observed in some
patients but all values returned to normal while patients
remained on therapy.
To put our results in perspective, published studies of currently
marketed products for acute flares of Crohn's disease have produced remission
rates ranging from 25% to 80%. The upper range of remission rates were seen with
traditional glucocorticoids (e.g., prednisone), which are poorly tolerated when
chronically administered.
We intend to initiate dialogue with the FDA to determine the
appropriate course to advance CBP-1011 to later stage clinical trials for
Crohn's disease.
Results from our Phase II multicenter trial of CBP-1011 for ulcerative
colitis are expected by the end of calendar year 2000.
We also filed a patent describing the novel activity of CBP-1011 and
related analogs on IBD. With a large U.S. market potential we may choose an
out-licensing partner for Phase III development of these indications.
Additional Therapeutic Opportunities Identified in the Fc Receptor
Program. In addition to the autoimmune program, we are pursuing two other novel
programs: serious infection and asthma/allergy. The relationship of the Fc
receptor to these disease areas has been identified and a number of preclinical
studies have been performed.
Alan D. Schreiber, M.D., who is conducting sponsored research for us,
demonstrated and published in peer-reviewed journals the feasibility of
conferring engulfment (phagocytic) properties to cells which are not normally
capable of phagocytosis by nature. In collaboration with a leading gene therapy
researcher, this conversion was possible by administering Fc receptor gene cDNA
to the cells of interest. The feasibility of converting a non-phagocytic cell to
a phagocytic cell could represent a critical step in the body's fight against
infectious microorganisms. Dr. Schreiber has developed novel therapeutic
strategies to facilitate the removal of bacteria from the lung and from the
systemic circulation (via the liver). Such new therapies might be used in
association with antibiotics for the treatment of serious pulmonary or systemic
infections and in the prevention of the onset of infection in disorders
predisposed to bacterial or opportunistic infections.
Cellular receptors in the lung, (the IgE receptors), induce the release
of histamine and other biologically active products important in the
pathophysiology of asthma and other allergic disorders. Dr. Schreiber has
developed strategies for the local and systemic administration of therapies to
potentially prevent and treat these disorders. Two distinct novel targets which
have been characterized in detail are: (1) the Fc receptor domain responsible
for initiating the downstream signaling events resulting in mast cell histamine
release and subsequent bronchoconstriction and (2) the kinase responsible for an
initial step in the signal transduction process. A peptide inhibitor which binds
to the intracellular Fc receptor domain has been made and delivery issues are
currently being addressed. Several oligonucleotide inhibitors of the second
signal kinase have been made and can suppress histamine release in-vitro and
in-vivo. Animal feasibility efficacy studies have commenced for oligonucleotide
therapies.
A number of United States and foreign patent applications have been
filed, eight of which have been allowed in the United States which describe
methods of inhibiting or stimulating phagocytosis and methods of modulating
clearance of immune complexes. If the patents are issued, they will relate to
therapies for infectious diseases, inflammation, asthma/allergy and autoimmune
diseases.
-14-
License of Proprietary Rights. Rights to the Fc Receptor Technology are
owned by the University of Pennsylvania, pursuant to which we have obtained an
exclusive worldwide license for the term of the patents covered thereunder, to
make, have made, use, sell and to exploit all patent and other rights under this
license.
MANUFACTURING
We do not have the resources, facilities or capabilities to manufacture
any of our proposed products. We have no current plans to establish a
manufacturing facility. We expect that we will be dependent to a significant
extent on contract manufacturers for commercial scale manufacturing of our
proposed products in accordance with regulatory standards. Our dependence on
third parties for manufacturing may adversely affect operating results as well
as our ability to develop and deliver products on a timely and competitive
basis.
Contract manufacturers may utilize their own technology, technology
developed by us, or technology acquired or licensed from third parties. When
contract manufacturers develop proprietary process technology and have ownership
of the Drug Master File, our reliance on such contract manufacturer is
increased, and we may have to obtain a license from such contract manufacturer
to have our products manufactured by another party. Technology transfer from the
original contract manufacturer may be required. There can be no assurance that
any such license will be available on terms acceptable to us, or, if available,
that such technology will be successfully transferred to us. Any such technology
transfer may also require transfer of requisite data for regulatory purposes,
including information contained in a proprietary Drug Master File held by a
contract manufacturer. FDA approval of the new manufacturer and manufacturing
sight would also be required.
We have contracted with Pharmaceutical Manufacturing Research Services,
or PMRS, a manufacturing development company, to supply commercial quantities of
Visicol(TM) in a manner which meets FDA requirements. Recently, the FDA has
approved the manufacturing processes of PMRS. Standards set by the FDA must be
maintained at all times, since the failure to do so could result in the loss of
"approved status" at PMRS. Any such loss would have a significant negative
impact on us since we do not have an approved secondary manufacturer for
Visicol(TM). We are currently seeking an appropriate manufacturer to produce
CBP-1011 and other proposed products.
MARKETING & SALES
In order to market any of our products directly, we must develop a marketing
and sales organization. We have not marketed, distributed or sold pharmaceutical
products under the InKine name. We have recently hired an internal sales and
marketing management team which will set our strategies for the sales and
marketing organization. Since Visicol(TM) will be the first of our proposed
products to be sold, the following strategy for the launch of Visicol(TM) has
been initiated:
1. To minimize our internal infrastructure and the cost required
for product commercialization while maximizing product exposure
and reach, we are establishing numerous outsourced agreements
with experienced suppliers. These suppliers will assist us in
developing the sales, customer service and distribution arms of
our commercial operations, allowing us to realize certain
efficiencies and expertise we would not realize with start-up
internal operations. Our internal management structure will
oversee and support these outsourced operations, maintain
control over all marketing and strategic planning issues and
eventually manage the transition to an internal risk-minimizing
structure.
2. A Letter of Intent has been executed with Innovex, the leading
provider of contract sales and marketing solutions to the
healthcare industry. Innovex will be responsible for hiring and
training a dedicated sales force that will launch and promote
Visicol(TM), and any of our other products which may be approved
by the FDA. These sales representatives will spend their entire
day promoting our products, and will in all ways be perceived as
InKine sales reps. The sales force will cover the top 60% of
colonoscopy preparation prescribers, the majority of whom are
gastroenterologists.
-15-
3. We have authorized Integrated Commercialization Solutions, Inc.
or ICS, a leader in supply chain management for the
pharmaceutical industry, to implement third-party logistics.
This will involve handling customer service, order management,
distribution, accounts receivables, contract charge back
administration and promotional material distribution for
Visicol(TM). Like the sales force, ICS will in all ways be
represented to the customer as InKine.
4. Market Development Group is working on the medical marketing
side of Visicol(TM) to help translate the advantages of
Visicol(TM) into appropriate marketing messages. Goals of this
relationship include building a market and increasing early
adoption of the product.
5. Med Tier, a leading medical communications company, is helping
us develop advertising strategies and tactics for the promotion
of Visicol(TM).
COLLABORATIVE ARRANGEMENTS; RESEARCH AND LICENSE AGREEMENTS
Collaborations may allow us to leverage our scientific and financial
resources and gain access to markets and technologies that would not otherwise
be available to us. In the long term, development and marketing arrangements
with established companies in the markets in which potential products will
compete may allow our products more efficient access to intended markets and
may, accordingly, conserve our resources. We expect that we will enter into
development and marketing arrangements for some of the products we may develop.
From time to time, we hold discussions with various potential partners.
We have rights under license agreements to several patents and patent
applications under which we expect to owe milestone payments and royalties on
sales of certain of our proposed products. Additionally, certain of these
agreements also provide that if we elect not to pursue the commercial
development of any licensed technology, or do not adhere to an acceptable
schedule of commercialization, then our exclusive rights to such technology
would terminate. We also fund research at certain institutions, and these
relationships may provide us with an option to license any results of the
research.
GOVERNMENT REGULATION
The production and marketing of our products and our research and
development activities are subject to regulation by numerous governmental
authorities in the United States and other countries. In the United States,
biological products, drugs and diagnostic products are subject to rigorous
review by the FDA. The Federal Food, Drug, and Cosmetic Act, the Public Health
Service Act and other federal statutes and regulations govern or influence the
testing, manufacture, safety, efficacy, labeling, storage, recordkeeping,
approval, advertising and promotion of such products. Noncompliance with
applicable requirements can result in fines, recall or seizure of products,
refusal of the government to approve product and/or license applications or to
allow us to enter into government supply contracts, the withdrawal of previously
approved applications and criminal prosecution.
In order to obtain FDA approval of a new drug product, we must submit
proof of safety and efficacy. Such proof entails extensive and time-consuming
preclinical and clinical testing. The results of preclinical studies are
submitted to the FDA as part of an Investigational New Drug Application or IND.
Preclinical studies involve laboratory evaluation of product characteristics and
animal studies to assess the efficacy and safety of the product. Once the IND is
reviewed, human clinical trials may be conducted. Human clinical trials are
typically conducted in three sequential phases, but the phases may overlap.
Phase I trials consist of testing the product in a small number of patients or
healthy volunteer subjects primarily for safety at one or more doses. During
Phase II, in addition to safety, the efficacy of the product is evaluated in a
patient population somewhat larger than Phase I trials. Phase III trials
typically involve additional testing for safety and clinical efficacy in an
expanded population at geographically dispersed test sites. A clinical plan, or
"protocol," accompanied by the approval of the Institutional Review Board
reviewing and monitoring the trials, must be submitted to the FDA prior to
commencement of each clinical trial. Various reports must be submitted to the
FDA during the course of the trials, and the FDA may order the temporary or
permanent discontinuation of a clinical trial at any time.
-16-
The results of the clinical trials are submitted to the FDA as part of
an NDA. Following extensive review of an NDA, the FDA may grant marketing
approval, require additional testing or information, or deny the application.
Sales of a new drug may commence following FDA approval of an NDA and
satisfactory completion of a pre-approval review of the manufacturing facility
and pertinent production records. If there are any modifications to the drug,
including any changes in indication, manufacturing process, labeling or
manufacturing facility, an NDA supplement may be required by the FDA.
The FDA may also require post-marketing testing and surveillance to
monitor the effects of approved products or place conditions on any approvals
that could restrict the commercial applications of such products. Product
approvals may be withdrawn if compliance with regulatory standards is not
maintained. Continued compliance with all FDA requirements and conditions in an
approved application, including those concerning product specification,
manufacturing process, validation, labeling, promotional material, recordkeeping
and reporting requirements, is necessary for all products. Failure to comply
could lead to product recall or other FDA-initiated actions, which could delay
further marketing until the products are brought into compliance. Even after any
approval by the FDA and foreign regulatory authorities, products may later
exhibit adverse effects that could prevent their widespread use or necessitate
their withdrawal from the market.
Sales of pharmaceutical products outside the United States are subject
to foreign regulatory requirements that vary widely from country to country.
Whether or not FDA approval has been obtained, approval by comparable regulatory
authorities of foreign countries must be obtained prior to the commencement of
marketing in those countries. The time required to obtain such approval may be
longer or shorter than that required for FDA approval.
COMPETITION
The biopharmaceutical industry is highly competitive, including the
industry segments related to (i) receptor based technologies, which include the
Fc Receptor Technology, (ii) purgative agents for clearing the colon, which
include Visicol(TM), and (iii) the treatment and prevention of cancer, which
includes the Thrombospondin Technology. We are likely to encounter significant
competition with respect to Visicol(TM)and our product candidates currently
under development, including, but not limited to, competition from: (a)
Braintree Laboratories, Inc., Schwarz Pharma Inc. and C.B. Fleet Company, Inc.
with respect to the product applications targeted by Visicol(TM); (b) La Jolla
Pharmaceutical Company, AstraZeneca, Salix Pharmaceuticals, GeneLabs
Technologies, Inc., IDEC Pharmaceuticals Corporation, Immune Response
Corporation, Autoimmune, Inc. and Anergen, Inc. with respect to the treatment of
diseases targeted by the Fc Receptor Technology; and (c) Boston Life Sciences,
Inc., Entremed, Inc. and Human Genome Sciences, among others with respect to the
treatment of diseases targeted by the Thrombospondin Technology. Most of these
entities have substantially greater financial, technical, manufacturing,
marketing, distribution and other resources. We may also face competition from
companies using different or advanced technologies that could render our
products obsolete.
OTHER FACTORS TO BE CONSIDERED
If we do not obtain required approvals from the government, then we may
not successfully market or sell our products.
The FDA requires multiple stages of tests, known as phase I, II and III
clinical trials, on all pharmaceutical products. In addition, the FDA must
confirm that our drug manufacturers are complying with applicable federal
regulations. The process to obtain government approvals of a pharmaceutical
product takes many years and requires substantial resources.
The FDA may delay or halt the clinical development of our proposed
products at any stage, or may deny us approval to market a product. If any of
these adverse actions are taken by the FDA, we may delay or stop the development
of a product or may be unable to commercialize such product. We do not believe
we are subject to risks which are materially different than other pharmaceutical
companies seeking FDA approval, but the process of obtaining FDA approval is
-17-
expensive, time-consuming and often filled with unexpected problems. Even if we
receive approval of a product candidate, the FDA may limit and restrict the
drug's use and may subject our products to continuous review. If we fail to
comply with any applicable regulatory requirements, the FDA could impose
penalties on us, including:
o warning letters;
o fines;
o withdrawal of regulatory approval;
o product recalls;
o operating restrictions;
o injunctions; and
o criminal prosecution.
1. FDA marketing approval:
We submit the results of our scientific studies, commonly referred to
as preclinical studies, to the FDA as part of an investigational new drug
application, commonly referred to as an IND. An IND is a summary document
describing the drug product, the safety of the drug product and the filer's
proposed use of the drug product. After the FDA allows the IND to become
effective, we conduct human clinical trials (phase I, II and III). We then
submit the results of these trials to the FDA as part of an NDA. The FDA
requires the filing of the NDA, which summarizes all human clinical and
manufacturing experiences of the drug. The FDA approves a drug on the basis of
the NDA. After we file the NDA, the FDA may approve the product for marketing,
require additional testing or deny the application.
2. FDA manufacturing approval:
The FDA requires pharmaceutical companies to include detailed
manufacturing information in an NDA. The FDA has mandated that all manufacturing
facilities and processes comply with good manufacturing practices, or GMP. GMP
is a body of federal regulations and guidelines that govern the manufacture of
drugs for human use. For example, all manufacturers must pass manufacturing
plant inspections and provide records of detailed manufacturing processes. Among
other things, drug manufacturers must demonstrate that:
o the drug product can be consistently manufactured at the same
quality standard;
o the drug product is stable over time; and
o the level of chemical impurities in the drug product are under a
designated level.
For example, the FDA has approved our manufacturing process for
Visicol(TM). Visicol(TM) is one of our proposed products that is taken in tablet
form and used to clean the colon for medical purposes. Even after obtaining
manufacturing approval, the FDA may delay or prevent us from marketing
Visicol(TM) if we do not continue to consistently manufacture appropriate
amounts of Visicol(TM) or cannot continue to repeat the manufacturing process
used to manufacture the phase III clinical trial batches of Visicol(TM). We
currently have only one approved manufacturer of Visicol(TM), and we have
initiated the process to obtain a qualified secondary manufacturer of
Visicol(TM).
3. FDA oversight after product approval:
The FDA will regulate us after a product has been approved. The FDA may
require post-marketing testing and surveillance to monitor the effects of an
approved drug product. The FDA may also place conditions on any approvals that
could restrict the sale or use of a product.
-18-
4. Status of our products in the FDA approval process:
Our proposed products are in various stages of development and in
various stages of the FDA approval process, as set forth below:
o Visicol(TM). We have completed a phase I, IIb, and two phase III
clinical trials for Visicol(TM). We submitted an NDA for
Visicol(TM) to the FDA on November 23, 1999 and obtained FDA
approval to begin marketing Visicol(TM) on September 21, 2000. We
are currently putting in place the manufacturing and marketing
plans for Visicol(TM) with an anticipated product launch in
January 2001.
o CBP-1011. We developed CBP-1011 as a compound for the treatment
of idiopathic thrombocytopenic purpura, or ITP, an autoimmune
disease which causes spontaneous bleeding. CBP-1011 is currently
in phase III clinical trials for ITP. In December 1999, we began
enrolling patients in a phase II trial for the treatment of
patients with inflammatory bowel disease using CBP-1011.
Inflammatory bowel disease consists of both Crohn's disease and
ulcerative colitis, both of which are inflammation disorders of
the bowel. On September 11, 2000, we announced positive results
of our Phase II study on Crohn's disease and anticipate the
results of our Phase II study in ulcerative colitis by the end of
the calendar year 2000. We refer to CBP-1011 and certain related
products as the FcReceptor technology.
o Thrombospondin technology products. We have acquired an
exclusive worldwide license to a cancer treatment technology
known as the thrombospondin technology. We are evaluating a
number of product opportunities utilizing the thrombospondin
technology in the area of cancer treatment, which are in the
early stages of development (before phases I, II and III). We
have not begun human clinical trials for these products.
We may never receive FDA approval for any of these products (other than
Visicol(TM)), and without FDA approval, we may not manufacture, market or sell
these products.
We have not generated any revenue to date. If we continue to incur substantial
losses, then the value of our common stock is likely to be reduced. Also, we may
never achieve a profitable level of operation.
To date, we have engaged solely in the research and development of
proposed drug products. We have not generated any revenue from product sales or
royalties and will not do so until we manufacture and market them successfully.
We have incurred losses in each year since our inception on July 1, 1993. As of
June 30, 2000, we had an accumulated deficit of approximately $32.8 million.
Our proposed products are in various stages of marketing or development
and require significant research, development and testing. We must obtain all of
the necessary government approvals for our products before we can sell any
proposed product. As a result, we believe our losses will continue in the
foreseeable future as we develop our products.
If our research spending in the foreseeable future is greater than
potential Visicol(TM) sales revenue, then we may never conduct our operations at
a profit. Our common stock is likely to decrease in value if we fail to generate
profits or if the market believes that we are unable to do so.
We have granted or committed to grant shares and options to founding
scientists and consultants when we achieve agreed upon product development
goals. These goals relate to our filing applications with the FDA, and achieving
agreed upon sales targets. As a result, our potential earnings per share will
decrease because of the necessary accounting treatment of these shares and
options.
-19-
If we do not develop and maintain relationships with manufacturers, then we may
not successfully manufacture and sell our products.
We do not possess the capabilities, resources or facilities to
manufacture any of our proposed products. We must contract with manufacturers to
produce our proposed products according to government regulations. Our future
development and delivery of our products on a timely, profitable and competitive
basis depends on the performance of these manufacturers. A limited number of
manufacturers exist which are capable of manufacturing our proposed products. We
may fail to contract with the necessary manufacturers or we may contract with
manufacturers on terms which may not be entirely acceptable to us.
Manufacturers may utilize their own technology, our technology or
technology obtained from others in developing a manufacturing process for our
products. We may pay a fee to the manufacturer if we utilize the manufacturing
process that the manufacturer has developed or if we seek a third party to
participate in the development process.
We have contracted with Pharmaceutical Manufacturing Research Services,
or PMRS, a manufacturing development company, to supply commercial quantities of
Visicol(TM) in a manner which meets FDA requirements. Recently, the FDA has
approved the manufacturing processes of PMRS. Standards set by the FDA must be
maintained at all times, since the failure to do so could result in the loss of
"approved status" at PMRS. Any such loss would have a significant negative
impact on us since we do not have an approved secondary manufacturer for
Visicol(TM). We are currently seeking an appropriate manufacturer to produce
CBP-1011 and other proposed products.
If we do not develop and maintain either internal or external marketing
capabilities, then we may not successfully sell our products.
We have not marketed, distributed or sold pharmaceutical products under
the InKine name. We may contract with third parties which specialize in
marketing, selling and distributing pharmaceutical products or try to build an
internal sales and marketing operation. If we choose to utilize third parties
for sales and marketing, then we may exert limited control over these third
parties and the amount and timing of resources which they devote to our
products. We may not achieve our desired amount of revenue from product sales if
these third parties fail to market and sell our products effectively.
We may establish an internal sales and marketing force or convert from
an external sales force after a few years of selling Visicol(TM). If we choose
to follow this strategy, then we will have to spend significant additional funds
and devote significant resources and time to establish this internal sales and
marketing force. Because of our inexperience in these areas, however, we may not
successfully implement an internal sales and marketing force which is
competitive or cost effective.
We may choose to license our products to others to market, or
circumstances may force us to license our products if we do not develop adequate
manufacturing and marketing capabilities. If we license our products, we will
receive less revenue and may realize less profit.
-20-
If we cannot develop and market our products as rapidly or cost-effectively as
our competitors, then we will not be able to conduct our operations at a profit.
We are developing products that will compete in three very competitive
segments of the pharmaceutical industry. The three segments are those which
include (i) Visicol(TM), (ii) CBP-1011, and (iii) the thrombospondin technology.
Based on total assets and revenues, we are significantly smaller than the
majority of our competitors in these segments. Therefore, we may encounter
significant competition with respect to each of our potential products,
primarily from the following competitors:
Product Candidates
------------------
Thrombospondin
Visicol(TM) CBP-1011 Technology
----------- -------- ----------
Competitors Braintree Laboratories, Inc. La Jolla Pharmaceutical Company Boston Life Sciences, Inc.
- ----------- C.B. Fleet Company, Inc. AstraZeneca Entremed, Inc.
Schwarz Pharma Inc. Salix Pharmaceuticals Human Genome Sciences
GeneLabs Technologies, Inc.
IDEC Pharmaceuticals Corporation
Immune Response Corporation
Autoimmune, Inc.
Anergen, Inc.
The financial strength of our competitors is particularly important in
the pharmaceutical industry, where technological innovations occur rapidly.
These technological innovations can dramatically affect the price and
effectiveness of a product line and they can render a competing product line
obsolete. Our competitors that have strong financial resources may develop
competitive products that are cheaper and more effective than our products.
These competitive products may render our products unmarketable or
non-competitive. Even if our competitors do not develop better and more cost
effective products, they may manufacture and market their products more
successfully than us. Therefore, our competitors may capture all or a large
segment of our market, severely restricting our ability to achieve a profitable
level of product sales.
In addition to our competitors in the pharmaceutical industry, colleges
and universities, hospitals, government agencies and other research
organizations are conducting research and seeking patent protection for a
variety of products which may compete with our products. Any of these
organizations could develop products which could render our products obsolete or
non-competitive.
If the owners of technology licensed to us terminate our license agreements,
then these owners could prevent us from developing, manufacturing or selling
that product covered by that license.
We have acquired the worldwide exclusive right to market Visicol(TM),
the Fc receptor technology and the thrombospondin technology under various
license agreements. Each of the owners of the technology licensed to us may
terminate the license prior to its expiration date under certain circumstances,
including our failure to comply with commitments related to the development of
the products specified in the licenses. For example, some of our licensing
agreements require us to spend specific amounts for research and development of
our products. If we do not comply with the terms of these agreements, the owners
of the licensed technology could demand the return of all rights to the licensed
technology, and force us to cease developing, manufacturing or selling the
products covered by that license.
If we are unable to protect our intellectual property, then our competitors may
develop similar products which could render our products obsolete.
Our success depends, in part, on our ability to develop and maintain a
strong patent position for our products and technologies both in the United
-21-
States and other countries. As with most biotechnology and pharmaceutical
companies, our patent position is highly uncertain and involves complex legal
and factual questions. Without patent and other protections, other companies
could offer substantially identical products for sale without incurring the
sizeable development and testing costs that we have incurred. Our ability to
recoup these expenditures and realize profits upon sale of product could be
diminished.
The process of obtaining patents can be time consuming and expensive.
Even if we spend the necessary time and money, a patent may not issue or it may
insufficiently protect the technology it was intended to protect. We can never
be certain that we were the first to develop the technology or that we were the
first to file a patent application for the particular technology because U.S.
patent applications are maintained in secrecy until a patent issues and
publications in the scientific or patent literature lag behind actual
discoveries.
Even after the U.S. Patent and Trademark Office issues patent rights to
us, our competitors may develop similar or duplicate technologies or design
around the patented aspects of our technology, which may decrease sales of our
prospective products, therefore causing a negative impact on our profit.
Competitors may also challenge our patent rights in court by alleging patent
infringement. If we lose a patent infringement suit, third parties may claim
significant damages, require us to license the disputed technology or require us
to cease using the disputed technology.
In 1997, the U.S. Patent and Trademark Office issued a patent covering
the use of Visicol(TM) as a colonic cleansing agent or as a laxative. In January
2000 we received notice of allowance from the U.S. Patent and Trademark Office
for an application that we filed for numerous solid-dose colonic cleansing
agents. We have also filed applications for Visicol(TM) under the Patent
Cooperation Treaty which designate Europe and Canada.
One of our products, CBP-1011 (within the Fc receptor technology), is
not patentable for use in ITP. Instead of a patent, we expect that CBP-1011 will
receive protection based on FDA designation of Orphan Drug Status for ITP, which
means the FDA has determined that the number of people affected by the disease
to be treated by the drug is less than 200,000, and that having numerous
companies compete for the market is unrealistic and likely to harm, rather than
help, prospective users of the product. If we receive this designation, we will
have an exclusive right to sell CBP-1011 for ITP for seven years. In October of
1999, we filed a U.S. patent application to treat inflammatory bowel disease
with CBP-1011 and other similar compounds. The U.S. Patent and Trademark Office
has not yet issued this patent.
Patents or patent applications are pending for our TSP-1 peptide and
angiocidin, two of the thrombospondin technology compounds. The area of cancer
technology is complex and the patents covering our TSP-1 peptide may not be
adequate.
We have also obtained the rights to foreign patents, and intend to
apply for additional foreign patents, for other products and technologies.
Competitors could challenge or develop around the patents, or the scope of the
patents may not be adequate to protect the patented product from competitors.
The commercial success of our products will also depend upon our ability to make
sure the products do not infringe on patents issued to competitors. We have not
conducted a search to determine if there are any patents similar to those
covering Visicol(TM) or the TSP-1 peptide and angiocidin.
Our employees or scientific consultants may develop inventions or
processes independently that may be related to our products. These employees or
consultants could claim ownership of these inventions or processes, and these
claims could succeed. We may need to enter into protracted and costly litigation
to enforce or determine the scope of our proprietary rights.
Government agencies and academic institutions have funded the
development of some of our patented technologies, in particular the
thrombospondin technology and the Fc receptor technology. Although we have
acquired the rights to use such technology, these agencies or institutions may
have rights to the technology or inventions, including rights to the
royalty-free use, but not sale, of the invention or technology for our own
purposes.
-22-
If we do not receive adequate reimbursement from the government, managed care
organizations and private insurance plans, then some patients may be unable or
unwilling to purchase our products and we will achieve less revenue from product
sales.
Successful sales of our products in the United States and other
countries depend on the availability of adequate reimbursement from the
government, managed care organizations and private insurance plans.
Pharmaceutical companies often use reimbursement as the basis for determining
their sales. In the pharmaceutical industry, unlike other consumer product
industries, insurance companies, including managed care organizations, often pay
drug manufacturers and distributors directly for their products. In fact,
pharmaceutical companies make a majority of their sales to insurance companies
and not to consumers. These organizations provide for reimbursement only after
considering a number of factors, including product features such as safety,
medical necessity, cost and the experimental nature of the product. We will
spend significant amounts of time and other resources to obtain reimbursement
for our products. The organizations which provide reimbursement routinely limit
reimbursement and attempt to exert significant pressure on medical suppliers to
lower their prices.
We cannot predict the amounts or reliability of reimbursement because
reimbursement for pharmaceutical products incorporating new technology is
historically unpredictable in the pharmaceutical industry. Additionally,
reimbursement varies from country to country. We do not know whether our
products will qualify for reimbursement from domestic or foreign reimbursement
sources.
If we do not obtain debt financing or additional capital in the future, then we
may not be able to continue our operations beyond December 31, 2001.
We need additional capital to develop, manufacture and market our
proposed products. Specifically, we will spend funds for the following:
o Researching and developing our proposed products, including
participating in human clinical trials and animal studies
conducted before clinical trials;
o Seeking necessary approvals from the government;
o Developing manufacturing and distribution capabilities; and
o Funding our growth as a company.
We believe that our current capital resources will fund our operations
through December 31, 2001. Our future capital requirements will depend on a
variety of factors. For example, if we experience continued progress in our
research and development activities, or if we determine that it is necessary to
prosecute and enforce our patents, we will require additional capital. In
addition, our future marketing activities will affect our future capital
requirements. Because we have no experience in marketing our products, we have
no experience in predicting how much capital will be necessary to successfully
complete our marketing plans. If we fail to accurately predict our future
capital requirements, we may be unable to continue our operations.
We regularly seek funding for our operations from a variety of sources,
including public and private securities offerings, loans and joint arrangements
with partners. We currently do not possess a commitment to obtain additional
funding, and we may never receive additional funding in the future. If we fail
to obtain additional funding, we will delay, scale back or eliminate our
research and development activities or enter into arrangements with others to
develop and market certain proposed products that we may otherwise have
developed ourselves.
If the holders of our outstanding options and warrants exercise such options and
warrants, then the market price of the common stock may drop.
We have a total of approximately 7.6 million options and warrants
outstanding at June 30, 2000. Options and warrants give the holder the right to
purchase shares of a company's stock in the future for a predetermined price
which may or may not be below the current market value of such company's stock
at the time the option or warrant is exercised. In addition, we can issue an
additional 900,000 options pursuant to our option plans. To date, option and
-23-
warrant holders have exercised approximately 4,900,000 options and warrants in
the aggregate at prices ranging from $0.50 to $2.16. We believe that option
holders and warrant holders may exercise options and warrants when we are able
to obtain additional financing on more favorable terms. The exercise of these
outstanding warrants and options and the sale of the related shares may cause
our common stock price to drop.
If our common stock continues to be volatile and thinly traded, then our
shareholders may not be able to sell their shares when desired.
The market price of our common stock, similar to other development-stage
public pharmaceutical or biotechnology companies, has been volatile and may
remain volatile for the foreseeable future. Our shareholders may not sell their
shares when they desire because the stock price is highly volatile and the stock
is not widely traded. For example, the number of our shares theoretically
available for sale in any one day is approximately 33,000,000 shares and our
average daily trading volume has historically been approximately 479,000 shares.
If our stock continues to trade thinly, our shareholders may not be able to sell
their shares when desired.
If we do not have adequate insurance for product liability claims, we may be
subject to significant expenses relating to these claims.
We are subject to significant product liability risks relating to the
testing, manufacturing and sale of the products we are developing. These risks
include:
o Our proposed products could cause undesirable side effects or
injury during clinical trials;
o Our products could cause undesirable side effects or injury when
sold; or
o We may agree to reimburse others that incur liability relating to
our product.
We currently maintain insurance for product liability claims in the
amount of $10,000,000 per occurrence and $10,000,000 in the aggregate. We have
no way of knowing if these amounts will be adequate to cover any product
liability claims filed against us. If we do not or cannot maintain adequate
insurance coverage, we may incur a significant liability if a product liability
claim arises.
If our certificate of incorporation and New York law continue to contain
provisions that discourage potential takeovers, then our shareholders may not
receive a premium for their shares in a takeover situation and will be subject
to certain restrictions on voting and other rights.
Our board of directors has the right, granted under our certificate of
incorporation, to authorize certain preferred stock which may have a variety of
terms, commonly known as blank check preferred stock. The board of directors may
designate the rights and preferences of this stock without shareholder approval.
If the directors authorize and issue this stock, potential purchasers may be
unable to purchase the common stock at a premium over our market price. In
addition, the board of directors issuing this stock could have a negative impact
on the market price of the stock, and the voting rights and other rights of the
holders of the common stock.
New York corporate law places restrictions on transactions with
beneficial owners of 20% or more of the outstanding voting shares of a
corporation. These restrictions could reduce the potential that a third party
will attempt a takeover of us and therefore reduce the chances of shareholders
receiving a premium for their shares over the market price.
EMPLOYEES
As of June 30, 2000, we had 16 full-time employees. No employees are
covered by collective bargaining agreements, and we consider relations with our
employees to be good.
-24-
SUBSEQUENT EVENTS
On September 11, 2000, we announced positive results of our Phase II
multicenter open-labeled, clinical trial of CBP-1011 in the treatment of
patients with mild or moderate Crohn's disease. Key results of the study
included the following: 80% of patients who completed the study responded to
treatment with CBP-1011 using endpoints that were previously defined by the FDA
for a recently approved drug indicated for Crohn's, 70% of the patients were in
remission at the completion of the study and 73% of the patients responded after
4 weeks, with a remission rate of 64%.
On September 21, 2000, we received notification from the FDA that
Visicol(TM) tablets (brand of sodium phosphate) for cleansing of the bowel as a
preparation for colonoscopy was approved for marketing. The approval occurred in
ten months from the NDA submission and included full labeling of the product as
agreed to by the FDA and us. We have projected January 2001 as the date on which
we intend to make Visicol(TM) available to patients undergoing colonoscopy.
Visicol(TM), our lead product, is the first and only tablet purgative
preparation indicated for bowel cleansing prior to colonoscopy.
ITEM 2. PROPERTIES.
We occupy an aggregate of approximately 5,200 square feet of space in
Blue Bell, Pennsylvania, which is used as office space. We lease this space
pursuant to a lease expiring in January 2001, which provides for minimum annual
rent payments of approximately $62,000 for the remaining term of the lease. We
have recently signed a lease for new office space of approximately 8,000 square
feet, also in Blue Bell, Pennsylvania. This new lease will not take effect at
least until November 1, 2000 and will expire five years after the effective
date.
ITEM 3. LEGAL PROCEEDINGS.
We are not a party to any material litigation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
-25-
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS.
Our common stock trades on the Nasdaq SmallCap Market under the symbol
INKP. The quarterly range of high and low closing sales prices of our common
stock, as reported on the Nasdaq Stock Market, are shown below. The quotations
reflect inter-dealer prices, without retail mark-up, mark-down or commission and
may not represent actual transactions.
Year Ended June 30, 2000 High Low
------------------------ ---- ---
1st Quarter................................ $ 2.19 $1.56
2nd Quarter................................ $ 3.19 $1.50
3rd Quarter................................ $10.00 $3.06
4th Quarter ............................... $ 6.28 $3.81
Year Ended June 30, 1999 High Low
------------------------ ---- ---
1st Quarter................................ $1.75 $0.88
2nd Quarter................................ $1.78 $0.84
3rd Quarter................................ $2.00 $1.06
4th Quarter................................ $1.88 $1.13
Dividends
We have not paid any cash dividends since our inception and do not
anticipate paying any cash dividends in the foreseeable future. It is the
present policy of the Board of Directors to retain all earnings, if any, to
finance the development of our business.
Number of Holders of Common Stock
At September 12, 2000 there were approximately 318 shareholders of
record and approximately 19,390 beneficial holders of our Common Stock.
Recent Sales Of Unregistered Securities
On May 5, 2000, we completed a private offering of 2,838,871 shares of
our common stock to certain investors and issued a warrant to purchase 283,887
shares of common stock priced at $5.13 per share to our placement agent. After
expenses, we realized approximately $9.9 million of the approximately $10.8
million in proceeds from the offering. In connection with this offering we filed
a registration statement of Form S-3 covering both the common stock and the
shares issuable upon the exercise of the warrant.
-26-
ITEM 6. SELECTED FINANCIAL DATA.
The following table summarizes certain selected financial data. The
selected financial data is derived from, and is qualified by reference to, our
financial statements included herein.
July 1, 1993
Year Ended June 30, (Inception)
-------------------------------------------------- to June 30,
2000 1999 1998 1997 1996 2000
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