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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934. |
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for the fiscal year ended December 31, 2004. |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934. |
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For the transition period
from to . |
Commission file number 000-50447
Pharmion Corporation
(Exact name of Registrant as specified in its charter)
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Delaware
(State or other jurisdiction of
incorporation or organization) |
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84-1521333
(I.R.S. Employer
Identification No.) |
2525 28th Street, Suite 200
Boulder, Colorado 80301
(720) 564-9100
(Address, including zip code, and telephone number,
including area code, of principal executive offices)
Securities registered pursuant to Section 12(b) of the
Act:
None
Securities registered pursuant to Section 12(g) of the
Act:
Common Stock $.001 Par Value
(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 þ No o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K
(Section 229.405 of this chapter) 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. þ
Indicate by check mark whether the Registrant is an accelerated
filer (as defined by Exchange Act
Rule 12b-2). Yes þ No o
The aggregate market value of the Registrant’s voting and
non-voting common equity held by non-affiliates as of
June 30, 2004, the last business day of the
Registrant’s most recently completed second fiscal quarter,
was approximately $830,839,767.
As of March 11, 2005, there were 31,819,131 shares of
the Registrant’s Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s definitive Proxy Statement for
its 2005 Annual Meeting of Stockholders are incorporated by
reference into Part III of this report on Form 10-K to
the extent stated therein.
TABLE OF CONTENTS
PART I
Unless the context requires otherwise, references in this
report to “Pharmion,” the “Company,”
“we,” “us,” and “our” refer to
Pharmion Corporation.
All statements, trend analysis and other information contained
in this Form 10-K and the information incorporated by
reference which are not historical in nature are forward-looking
statements within the meaning of the Private-Securities
Litigation Reform Act of 1995. These forward-looking statements
include, without limitation, discussion relative to markets for
our products and trends in revenue, gross margins and
anticipated expense levels, as well as other statements
including words such as “anticipate,”
“believe,” “plan,” “estimate,”
“expect” and “intend” and other similar
expressions. All statements regarding our expected financial
position and operating results, business strategy, financing
plans, forecast trends relating to our industry are
forward-looking statements. These forward-looking statements are
subject to business and economic risks and uncertainties, and
our actual results of operations may differ materially from
those contained in the forward-looking statements. Although we
may elect to update forward-looking statements in the future, we
specifically disclaim any obligation to do so, even if our
estimates change, and readers should not rely on those
forward-looking statements as representing our views as of any
date subsequent to the date of this annual report.
Overview
We are a global pharmaceutical company focused on acquiring,
developing and commercializing innovative products for the
treatment of hematology and oncology patients. We have
established our own regulatory, development and sales and
marketing organizations covering the U.S., Europe and Australia.
We have also developed a distributor network to cover the
hematology and oncology markets in 22 additional countries
throughout Europe, the Middle East and Asia. To date, we have
acquired the rights to four products. Thalidomide Pharmion
50mgtm
is being sold by us on a compassionate use or named patient
basis in Europe and other international markets while we pursue
marketing authorization from the European Agency for the
Evaluation of Medicinal Products, or EMEA. In May 2004,
Vidaza® was approved for marketing in the U.S. and we
commenced sales of the product in July 2004. We have filed for
approval to market Vidaza in Europe and Australia and these
submissions are under review by the respective regulatory
authorities. In addition, we sell Innohep® in the U.S. and
Refludan® in Europe and other international markets. With
our combination of regulatory, development and commercial
capabilities, we intend to continue to build a balanced
portfolio of approved and pipeline products targeting the
hematology and oncology markets. We had total sales of
$130.2 million in 2004, $25.5 million in 2003 and
$4.7 million in 2002.
Our current product portfolio consists of the following four
products:
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Vidaza (azacitidine for injectable
suspension) — On May 19, 2004, we received full
approval from the U.S. Food and Drug Administration, or
FDA, to market Vidaza for the treatment of Myelodysplastic
Syndromes, or MDS, a bone marrow disorder characterized by the
production of abnormally functioning immature blood cells.
Vidaza is the first and only drug currently approved for the
treatment of MDS and is the first of a new class of drugs known
as demethylating agents to be approved. The FDA approved Vidaza
for the treatment of all MDS sub-types, including both low and
high-risk patients. We launched Vidaza for commercial sale in
the U.S. in July 2004. In September 2004 the EMEA accepted
for review our Marketing Authorization Application for Vidaza
for the treatment of MDS. In addition, we filed for approval to
market Vidaza in Australia in October 2004 and both submissions
are currently under review by the respective regulatory
authorities. We obtained worldwide rights to this product from
Pharmacia & Upjohn Company, now part of Pfizer, Inc.,
in June 2001. In 2004, sales of Vidaza were $47.1 million,
which represented approximately 36% of our total revenue
for 2004. |
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Thalidomide Pharmion 50mg and Thalidomide Laphal
(thalidomide) — Thalidomide has become a standard of
care for the treatment of relapsed and refractory multiple
myeloma, a cancer of the plasma |
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cells in the bone marrow. We have licensed the marketing rights
to thalidomide from Celgene Corporation and, in a separate
agreement, have an exclusive supply agreement for thalidomide
with Celgene UK Manufacturing II Limited (formerly known as
Penn T Limited) for all countries outside of North America and
certain Asian markets. We began selling thalidomide in Europe on
a compassionate use or named patient basis under a stringent
risk management program in the third quarter of 2003 while we
actively seek full regulatory approval for this drug in Europe
and several additional countries. Thalidomide Pharmion 50mg has
been approved as a treatment for relapsed and refractory
multiple myeloma in Australia, New Zealand, Turkey and Israel.
Although thalidomide has become a standard of care for the
treatment of relapsed/refractory multiple myeloma, these
regulatory approvals represent the first, and to date only,
regulatory approvals for this indication. In 2004, sales of
thalidomide were $65.3 million, which represented
approximately 50% of our total revenue for 2004. |
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Innohep (tinzaparin) — Innohep is a low
molecular weight heparin approved in the U.S. for the
treatment of deep vein thrombosis, or DVT, which occurs when a
blood clot develops in the deep veins of the legs. We obtained
the U.S. rights to this product from LEO Pharma A/ S, which
markets Innohep in Europe and several additional countries. We
re-launched Innohep as a treatment for DVT in cancer patients in
the fourth quarter of 2002, and used this drug to establish our
U.S. sales and marketing organization. |
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Refludan (lepirudin) — Refludan is an
anti-thrombin agent approved in the U.S., Europe and several
additional countries for the treatment of heparin-induced
thrombocytopenia, or HIT, an allergic, adverse immune response
to heparin, resulting in an absence of sufficient cell platelets
to enable blood clotting. We obtained rights to this product in
all countries outside of the U.S. and Canada from Schering AG.
We began selling Refludan in Europe and Australia in the third
quarter of 2002, and used this drug to establish our European
and Australian sales and marketing organizations. |
We were incorporated in Delaware in August 1999 and commenced
operations in January 2000. Our principal executive offices are
located at 2525 28th Street, Boulder, Colorado 80301, and our
telephone number is (720) 564-9100. Our website is located
at www.pharmion.com. The reference to our website does not
constitute incorporation by reference of the information
contained on our website into this annual report on
Form 10-K.
Our periodic and current reports, and all amendments to those
reports, are available free of charge, on our website at
www.pharmion.com, as soon as reasonably practicable after we
have electronically filed them with, or furnished them to, the
Securities and Exchange Commission.
Our Strategy
We believe that there are significant opportunities available
for a global pharmaceutical company with a focus on the
hematology and oncology markets. Our strategy for taking
advantage of these opportunities includes the following key
elements:
Focusing on the hematology and oncology markets. We focus
on the hematology and oncology markets for several reasons. The
hematology and oncology markets are characterized by a number of
disorders with high rates of recurrence and a limited response
from current therapies or treatments, many of which include
severe side effects. New hematology and oncology product
candidates addressing unmet medical needs or providing a
superior safety profile are frequently the subject of expedited
regulatory reviews and, if effective, can experience rapid
adoption rates. While the overall global hematology and oncology
markets are substantial, many drugs directed at hematology and
oncology patients treat relatively small patient populations or
subsets of patients with a specific cancer type. Because large,
multinational pharmaceutical companies are increasingly seeking
products with very large revenue potential, they often do not
devote resources to develop drugs they discover with the
potential to treat these patient populations, presenting us the
opportunity to acquire, develop and market these drugs. There
are also a large number of emerging biotechnology companies
doing research in hematology and oncology, many of which do not
have the global commercial and regulatory capabilities that we
have. We believe we can be a regional or global partner for
these companies, particularly for compounds that target smaller
patient populations. There are approximately 11,000
hematologists and
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oncologists practicing in each of the U.S. and Europe. In
addition, a small number of opinion leaders significantly
influence the types of drugs prescribed by this group of
physicians. We believe that we can effectively reach the
hematology and oncology markets with a relatively small sales
organization focused on these physicians and opinion leaders.
Expanding and leveraging our global sales and marketing
capabilities. We believe that our U.S., European and
Australian sales and marketing organizations, combined with our
distributor network in other countries, distinguish us from
other pharmaceutical companies of our size. In each of these
markets, we have developed highly-trained sales forces that
target the hematology and oncology communities in conjunction
with medical science liaisons focused on advocate development,
educational forums, clinical development strategies and clinical
data publications. By managing the global sales and marketing of
our products on our own and with our partners, we believe we can
provide uniform marketing programs and consistent product
positioning and labeling. In addition, we seek consistent
pricing across these markets to maximize the commercial
potential of our products and reduce the risk of parallel
imports and re-importation. With the commercial launch of Vidaza
in the U.S. and increased sales of thalidomide in Europe in
2004, we have substantially increased our sales, marketing and
payer-relations organizations.
Leveraging our global regulatory expertise. We have
assembled a team of highly-experienced regulatory professionals
with multinational expertise in obtaining regulatory approvals
for new drugs and maintaining compliance with the regulations
governing the sales, marketing and distribution of
pharmaceutical products. While some early stage biotechnology
and pharmaceutical companies have developed regulatory
capabilities in the country in which they are located, we have
built an organization with multinational regulatory expertise.
We believe our regulatory experience enables us to devise time
and cost-efficient strategies to obtain regulatory approvals for
new drugs, and to choose the regulatory pathway that allows us
to get a product to market as quickly as possible. We can use
our resources efficiently to generate a regulatory submission
that can be used in multiple jurisdictions. Our global
regulatory expertise is an essential element of effectively
evaluating and developing late-stage product candidates. We
believe that this provides us with a competitive advantage in
attracting biotechnology and pharmaceutical companies with
products in development that they want to out-license.
Acquiring attractive late-stage development or approved
products. We intend to continue to acquire or in-license
rights to late-stage development and approved products to more
fully exploit our regulatory, sales and marketing capabilities
and build our product pipeline. We are focused on acquiring
products that satisfy significant unmet medical needs and that
provide us with a period of sales, regulatory or geographic
exclusivity.
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Our Products
Our product portfolio is focused on addressing unmet needs in
the hematology and oncology markets. We believe these markets
present us with significant commercial opportunities. Our
current product portfolio consists of the following:
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Disease/Indication |
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Phase of Development |
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Licensor |
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Licensed Territory |
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Vidaza (azacitidine)
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• Myelodysplastic Syndromes |
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Approved May 19, 2004 in the U.S.; commercial launch in
July 2004. In registration in Europe and Australia.
Phase III/IV study ongoing |
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Pfizer, Inc. |
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Global rights |
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Thalidomide Pharmion 50mg and Thalidomide Laphal (thalidomide)
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• Relapsed and refractory multiple myeloma |
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Approved in Australia, New Zealand, Turkey and Israel;
compassionate use and named patient sales ongoing in Europe;
Phase III study ongoing |
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Celgene Corporation and Celgene UK Manufacturing II Limited |
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All countries outside North America, Japan and all provinces of
China (except Hong Kong) |
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• Newly-diagnosed multiple myeloma |
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Phase III study ongoing |
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Innohep (tinzaparin)
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• Deep vein thrombosis with or without pulmonary
embolisms |
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Marketed |
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LEO Pharma A/S |
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U.S. |
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Refludan (lepirudin)
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• Heparin-induced thrombocytopenia type II |
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Marketed |
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Schering AG |
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All countries outside North America |
On May 19, 2004, we received full approval from the FDA to
market Vidaza in the U.S. for the treatment of all subtypes
of MDS. Vidaza is the first and only drug currently approved for
the treatment of MDS and is the first of a new class of drugs
known as demethylating agents to be approved. The subtypes of
MDS are: refractory anemia (RA), refractory anemia with ringed
sideroblasts (RARS) (if accompanied by neutropenia or
thrombocytopenia or requiring transfusions), refractory anemia
with excess blasts (RAEB), refractory anemia with excess blasts
in transformation (RAEB-T) and chronic myelomonocytic leukemia
(CMMoL).
We launched Vidaza for commercial sale in the U.S. in July
2004. In anticipation of the launch, we expanded our
U.S. field organization from 31 to 75 employees, including
additional sales representatives, medical science liaisons,
payer relations and field based management. Since launch, we
have further increased our field organization from 75 to 85
employees. In addition, we developed appropriate materials for
mailings, educational literature and advertising in medical
journals geared to hematologists and oncologists, as well as
presentations at key industry conferences in support of the
Vidaza launch. Since we believe that securing timely
reimbursement will be critical to the commercial success of
Vidaza, we assembled a payer-relations team to work with state
Medicare carriers, state Medicaid programs and private payers to
insure that healthcare providers are promptly paid for Vidaza.
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In June 2001, we entered into an agreement with
Pharmacia & Upjohn Company, now part of Pfizer, Inc.,
to obtain the exclusive worldwide manufacturing, marketing and
distribution rights to azacitidine, which we market under the
trademark “Vidaza.” Under the agreement with Pfizer,
we also obtained an exclusive worldwide license to use
Pfizer’s azacitidine technology and patents, including its
clinical data. Azacitidine was the subject of a completed and
published Phase III study demonstrating its safety and
efficacy in the treatment of MDS, a group of hematologic
conditions caused by abnormal blood-forming cells of the bone
marrow.
Azacitidine, a pyrimidine nucleoside analog, was originally
developed by Upjohn Corporation as a cytotoxic agent, which is
an agent that indiscriminately kills actively multiplying cells.
Azacitidine was studied at high doses as a treatment for various
malignancies, including acute myelogenous leukemia, or AML. A
New Drug Application, or NDA, was submitted by Upjohn in 1982
for the treatment of AML, but was deemed not approvable by the
FDA, due to a lack of controlled studies adequately
demonstrating clinical benefit. In addition, there were severe
side effects observed in the high dosage studies. Researchers at
the National Cancer Institute, or NCI, The Mount Sinai Medical
Center and other institutions continued to study azacitidine and
determined that it could be used effectively at much lower doses
than originally studied by Upjohn, thereby reducing the side
effects experienced in the earlier clinical studies. The results
of subsequent clinical studies suggest that azacitidine is an
effective treatment for MDS.
The recognition that azacitidine could be effective at lower
doses was based on the discovery that azacitidine acts not only
as a cytotoxic agent, but also through an additional mechanism
of action. Azacitidine is a member of a class of drugs in
development known as “hypomethylating” or
“demethylating” agents. Methylation of DNA is a major
mechanism regulating gene expression. Researchers have
determined that an increase in specific methylation of DNA
results in blockage of the activity of genes that regulate cell
division and differentiation, known as “suppressor
genes.” With suppressor genes blocked, cell division
becomes unregulated, causing cancer. In studies, researchers
have demonstrated that azacitidine can reverse the methylation
of DNA, leading to reexpression of suppressor genes and a
resulting differentiation and maturation of the cancer cells
back to normal.
MDS occurs when blood cells remain in an immature, or
“blast,” stage within the bone marrow and never
develop into mature cells capable of performing their necessary
functions. More than 80% of MDS cases occur in persons aged
60-80. According to the American Cancer Society, or ACS, the
exact number of cases of MDS in the U.S. is unknown, as
there is no registry tracking this information, but most
estimates are between 10,000 and 30,000 new cases each year.
According to the ACS, these numbers appear to be increasing each
year. Currently, we estimate there are approximately 40,000 MDS
patients throughout the U.S. with similar incidence and
prevalence rates in the E.U. According to the ACS, survival
rates range from six months to six years for the different types
of MDS. MDS can result in death from bleeding and infection in
the majority of patients, while transformation to AML occurs in
up to 40% of patients. Following transformation to AML, these
patients have an exceptionally poor prognosis. MDS may occur
without any identifiable cause, may be related to chemotherapy
or radiation therapy being administered to treat other diseases,
or may result from exposure to petrochemicals, benzene or
rubber. Prior to the availability of Vidaza, patients generally
received best supportive care, which typically consisted of a
combination of transfusions, antibiotics and growth factors,
such as erythropoietin and granulocyte colony stimulating
factor. In addition, best supportive care treatment options
included low-dose chemotherapies, if clinicians felt that their
patients could tolerate the side effects and, for patients under
60 years of age, bone marrow transplants.
Vidaza has been granted orphan product designation by the FDA
that entitles the drug to seven years of market exclusivity for
MDS in the U.S. We submitted the NDA on December 29,
2003 and received full approval from the FDA less than five
months later. Vidaza was granted priority review status by the
FDA on February 10, 2004.
The NDA submission was based upon a National Cancer
Institute-sponsored open-label, controlled Phase III study
for the treatment of MDS, conducted by Cancer and Leukemia Group
B, or CALGB, and two supportive Phase II studies conducted
by CALGB, which were also sponsored by the National Cancer
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Institute. The results of this Phase III study were
published in the May 2002 Journal of Clinical Oncology. For the
purposes of the FDA submission, we re-collected and reanalyzed
the CALGB data.
The Phase III study examined the safety and efficacy of
Vidaza plus supportive care or supportive care alone in
191 patients with all five subtypes of MDS classified
according to the French-American-British system. Patients with
acute myelogenous leukemia were not intended to be included.
Vidaza was administered subcutaneously at a dose of
75 mg/m2
daily for seven days every four weeks. Dosage adjustments were
allowed based on response or adverse events. Patients in the
observation arm were allowed by protocol to cross over to Vidaza
if they met pre-determined criteria indicating worsening of
their condition. The primary endpoint of the study was response
rate.
Our recollected and reanalyzed CALGB data, including an
independent review showed that, of the 191 patients
included in the study, 19 had the diagnosis of AML at baseline.
These patients were excluded from the primary analysis of
response rate, although they were included in the
intent-to-treat analysis of all patients randomized. The overall
response rate, which includes both complete and partial
responses, was 15.7% in Vidaza-treated patients without AML
(16.2% for all Vidaza randomized patients including AML),
compared to zero percent in the observation group
(p<0.0001). Responses occurred in all five subtypes of MDS
as well as in patients determined to have a baseline diagnosis
of AML.
Patients responding to Vidaza had a decrease in bone marrow
blasts percentage or an increase in platelets, hemoglobin or
white blood cells. Greater than 90 percent of the
responders initially demonstrated these changes by the fifth
treatment cycle. All patients who had been transfusion dependent
became transfusion independent during complete or partial
response. The mean and median duration of clinical response for
patients experiencing complete or partial response was estimated
at 512 and 330 days, respectively. Seventy-five percent of
the responding patients were still in partial response or better
at the completion of treatment. Approximately 55% of the
observation patients crossed over to receive Vidaza treatment,
and of that crossover group, 12.8% demonstrated complete or
partial response.
The Phase II studies consisted of two multi-center,
open-label, single-arm studies. A study of 72 patients with
RAEB, RAEB-T, CMMoL or AML who were treated with subcutaneous
Vidaza demonstrated an overall response rate of 13.9%. A study
of 48 patients with RAEB, RAEB-T or AML who were treated
with intravenous Vidaza demonstrated an overall response rate of
18.8%. Response occurred in all MDS subtypes as well as in
patients with adjudicated baseline diagnosis of AML in both of
these studies.
Benefit was also seen in patients who did not meet the criteria
for partial response or better, but were considered
“improved.” About 24% of patients treated with Vidaza
were considered improved and about two-thirds of those became
transfusion independent. In the observation group, five of
83 patients met the criteria for improvement; none became
transfusion independent. In all three studies, about 19% of
patients met the criteria for improvement with a median duration
of 195 days. All three studies used similar dosing regimens
and response criteria. Response rates were similar regardless of
age or gender.
The recommended starting dose is
75 mg/m2
delivered subcutaneously, daily for seven consecutive days,
every four weeks. It is recommended that patients be treated for
a minimum of four cycles; however, complete or partial response
may require more than four cycles. Treatment may be continued as
long as the patient continues to benefit. Patients should be
monitored for hematologic response and renal toxicities, and
dosage delay or reduction may be necessary.
We have initiated a comparative Phase III/ IV clinical
trial that will examine survival and other secondary end points,
using a multi-center, randomized, open-label, parallel group
study design. The aim of this study is to compare the effect of
Vidaza plus best supportive care against conventional care
regimens plus best supportive care on survival in MDS patients.
Because this study is global in nature and MDS treatment
practices vary among countries, there are three comparative
conventional care treatments in the comparator arm of the study:
best supportive care only; low dose cytarabine plus best
supportive care; and standard chemotherapy plus best supportive
care. This design takes into account the actual
“conventional care” used to treat MDS patients in each
country targeted for trial participation and should also help to
enhance timely
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enrollment. The study will recruit over 350 patients and
will be one of the largest studies to date in this disease. We
expect to complete enrollment of this study by the end of 2005.
The primary objective of this Phase III/ IV study is to
look at survival in these MDS patients. This study will also
assess several other relevant endpoints, such as time to
transformation to AML, time to relapse after complete remission
or partial remission, disease progression, hematological status
(peripheral blood counts, need for platelet and red blood cell
transfusions and hematological response), episodes of infections
requiring intravenous antibiotics and safety parameters.
We have also initiated an additional clinical study that will
investigate use of Vidaza with alternative dosing schedules and
we continue our Vidaza formulation development activities. The
alternative dosing study consists of two arms of fifty patients
each. One arm examines
75 mg/m2
of Vidaza in a schedule of five days on, two days off, two days
on. The other arm examines
50 mg/m2
of Vidaza in a schedule of five days on, two days off, five days
on. Our formulation development efforts are focused on improving
administration and manufacturing efficiencies, and, as a result
of these activities, potentially enhancing our intellectual
property. We have also initiated exploratory work to identify
the feasibility of developing an oral formulation of Vidaza.
In addition, a number of investigator-initiated trials
investigating the use of Vidaza in a variety of settings are
planned for 2005. Investigator-initiated clinical development
efforts are focused on MDS, AML and other hematological
malignancies as well as solid tumors. We do not control these
studies and the investigator is responsible for submitting and
maintaining an Investigational New Drug Application, or IND,
covering the clinical investigation as required by the FDA or
the equivalent regulatory applications required by foreign
regulatory authorities. Generally, we have the right to review
and use for our own business purposes clinical data generated by
these trials, however, the investigators own the study data and
may publish study data subject to our right to review any
publications prior to submission.
We expect to devote significant resources to continue the
clinical development of Vidaza in MDS as well as other potential
hematological and oncological disorders believed to be
associated with hypermethylation.
In September 2004 the EMEA accepted for review our Marketing
Authorization Application, or MAA, for Vidaza for the treatment
of MDS. We also filed for approval to market Vidaza in Australia
in October 2004. We are working with the EMEA to respond
promptly to inquiries on our MAA submission. However, the
timelines for product approval in Europe are often longer than
the corresponding approval timelines in the U.S. and, in
contrast with the U.S. regulatory process, the EMEA does
not provide applicants with a deadline on when it will render a
decision on an MAA. Furthermore, we cannot be certain that the
EMEA will approve Vidaza for marketing in Europe based on the
same data accepted by the FDA. If the EMEA requires additional
clinical data to approve Vidaza for marketing in Europe, we
believe our ongoing Phase III/ IV, if the results are
positive, could provide the required data.
The EMEA granted Vidaza Orphan Product Designation, which, if
the MAA is approved, and the criteria for orphan drug
designation continue to be met, entitles the drug to ten years
of market exclusivity from the date of the MAA’s approval
for the MDS indication in the European Union. During this period
the EMEA would be prohibited, except in very limited
circumstances, from approving another formulation of Vidaza for
the treatment of MDS.
In November 2001, we entered into agreements with Celgene
Corporation and Penn T Limited to obtain the exclusive marketing
and distribution rights to Celgene’s formulation of
thalidomide, Thalomid®, in all countries outside of North
America, Japan, China, Taiwan and Korea. Under the agreement
with Celgene, we also obtained an exclusive license in our
territory to utilize Celgene’s current and future
thalidomide-related patents, including its patented System for
Thalidomide Education and Prescribing Safety, or
S.T.E.P.S.tm
program, and its current and future thalidomide-related
dossiers, including clinical and pharmaceutical formulation
data. In October 2004, Penn T Limited was acquired by Celgene
and was renamed Celgene UK Manufacturing II Limited, or
CUK. In December 2004, we amended our agreements with Celgene
and CUK. Under the modified agreements we made a one-time
payment of $77 million in return for a substantial
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reduction in our product supply price and royalty obligations to
Celgene and CUK. In addition, for an additional one-time payment
to Celgene of $3 million, we added Hong Kong, Korea and
Taiwan to our sales territories and eliminated a right held by
Celgene to terminate our license to market the product if
regulatory approval of thalidomide in Europe had not occurred by
November 2006. Furthermore, under our agreements with Celgene,
to further the clinical development of thalidomide, particularly
in multiple myeloma, we have also agreed to fund up to
$10 million incurred by Celgene for the conduct of
thalidomide clinical trials during 2005, 2006 and 2007.
In the second quarter of 2003, we began selling thalidomide on a
compassionate use and named patient basis in Europe while we
actively seek marketing authorizations for this drug in Europe
and several additional countries. Thalidomide Pharmion 50mg has
been approved as a treatment for relapsed and refractory
multiple myeloma and ENL in Australia, New Zealand, Turkey and
Israel. These approvals are the only regulatory approvals of
thalidomide for multiple myeloma in the world.
Since acquiring thalidomide rights from Celgene, we have
undertaken the following activities to commercialize thalidomide
in Europe and our additional markets:
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Filed marketing authorization applications —
Beginning in March 2002, we submitted marketing authorization
applications to the EMEA and the Therapeutic Goods
Administration, or the TGA, in Australia and to regulatory
authorities in New Zealand, South Africa, Saudi Arabia, Turkey,
Israel, Thailand and the Philippines. We are seeking approval
for thalidomide as a treatment for relapsed and refractory
multiple myeloma and for erythema nodosum leprosum, or ENL.
Thalidomide Pharmion 50mg has been approved in Australia, New
Zealand, Turkey and Israel for these indications. In May 2004,
we withdrew our multiple myeloma applications with the EMEA, but
intend to resubmit our application with additional clinical data
from ongoing studies in relapsed/ refractory multiple myeloma
patients. This action was based on the EMEA’s stated view
that additional clinical data would be required before it can
reach an opinion on whether or not Thalidomide Pharmion 50mg
should be approved as a treatment for multiple myeloma. There
are at least two studies underway that we believe will provide
the clinical data required by the EMEA. We completed enrollment
in the first of these studies in October 2004 and we expect that
enrollment of the second study will be completed in the second
quarter of 2005. We will continue to sell thalidomide on a named
patient or compassionate use basis in Europe while we pursue a
marketing authorization for the drug. |
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Acquired Laphal Développement, S.A or
Laphal. — In March 2003, we acquired Laphal, the
only other company that has submitted a marketing authorization
application for thalidomide in Europe. In addition, Laphal was
selling its formulation of thalidomide on a compassionate use or
named patient basis in France, Belgium and Luxembourg, and we
are continuing to sell thalidomide in these markets on a
compassionate use or named patient basis. |
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Assumed CUK’s compassionate use and named patient sales
in the U.K., Ireland and Denmark — Under our
initial license agreement with CUK, CUK was permitted to
continue compassionate use and named patient sales of their
formulation of thalidomide in the U.K., Ireland and Denmark
until we received a marketing authorization from the EMEA. In
June 2003, CUK agreed to discontinue its sales of thalidomide in
these countries and we initiated sales of Thalidomide Pharmion
50mg on a compassionate use or named patient basis in these
countries. |
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Initiated compassionate use and named patient sales in
Europe — In late June 2003, we began compassionate
use and named patient sales in the markets previously served by
Grünenthal Group, the original manufacturer of thalidomide.
Through June 2003, Grünenthal distributed thalidomide free
of charge in all European markets, except for those served by
Laphal and CUK. In June 2003, Grünenthal announced that it
would no longer be providing thalidomide due to the exhaustion
of its supply and it referred healthcare professionals seeking
thalidomide supply to us. |
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Developed and implemented the Pharmion Risk Management
Program or PRMP — Given thalidomide’s history
and risk, the development of the PRMP was a critical element to
our planned commercialization of thalidomide and enrollment is
obligatory for all patients receiving the drug. |
8
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Shortly after our acquisition of the thalidomide rights from
Celgene in 2001, we began to develop the PRMP consistent with
Celgene’s S.T.E.P.S. This process included the development
of software and educational materials in over 20 languages
for use by physicians, pharmacists and patients throughout
Europe and our other markets. We implemented the PRMP in June
2003 in connection with the commencement of our compassionate
use and named patient sales. |
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Appointed Lipomed our Swiss and Austrian distributor and
settled patent litigation we initiated against
Lipomed — In May 2004, we appointed Lipomed AG, a
Swiss pharmaceutical company, on customary terms, as our
exclusive distributor of Thalidomide Pharmion 50mg in
Switzerland and Austria. In addition, both parties agreed to
terminate ongoing patent infringement litigation that we had
initiated against Lipomed in the fall of 2003. Under the terms
of the agreements, Lipomed exclusively distributes Thalidomide
Pharmion 50mg in Switzerland and Austria and has stopped selling
its own formulation of thalidomide in other European markets.
Lipomed also utilizes the PRMP to control the use and
distribution of thalidomide. |
Thalidomide was developed in the late 1950s as an oral,
non-barbiturate sedative and was prescribed throughout Europe
for use as a sleep aid and for the treatment of morning sickness
in pregnancy. Shortly thereafter, use of thalidomide was found
to be associated with severe birth defects and it was virtually
withdrawn from the worldwide market, without ever receiving
approval in the U.S. In 1964, thalidomide was discovered to
be effective in the treatment of ENL, which is an inflammatory
complication of leprosy. As a result, thalidomide has remained
in use as a treatment for ENL. In the 1990s, it was further
discovered to act as an anti-angiogenic agent, which is an agent
that prevents the formation of new blood vessels. Since many
types of tumors are associated with the formation of new blood
vessels, physicians began to explore thalidomide’s use as a
treatment to prevent the growth of tumor-associated blood
vessels on the theory that this would result in starvation of
the tumor.
In 1998, Celgene’s Thalomid® was approved in the
U.S. for the treatment of acute cutaneous manifestations of
moderate to severe ENL and as maintenance therapy for prevention
and suppression of cutaneous manifestation recurrences. Thalomid
was the first drug approved by the FDA under a special
“restricted distribution for safety regulation.” In
connection with FDA approval, given the known propensity of
thalidomide for causing birth defects, Celgene developed its
patented S.T.E.P.S. program, which is a comprehensive compliance
and risk management program designed to support the safe and
appropriate use of Thalomid by ensuring that women of
child-bearing potential do not come into contact with Thalomid.
While the treatment of ENL is the only currently approved
indication for thalidomide in the U.S., the drug is used
primarily in the treatment of multiple myeloma and other forms
of cancer, including: renal cell carcinoma, which is a cancer of
the kidneys; glioblastoma, which is a cancer of the brain; and
colon cancer.
Multiple myeloma is the second most common hematological cancer
after non-Hodgkin’s lymphoma. It is a cancer of the plasma
cells in the bone marrow, which is characterized by lytic bone
lesions or the production of elevated levels of M-protein, an
abnormal monoclonal antibody, in the blood or urine of patients.
The symptoms of multiple myeloma include painful bone
deterioration, bone marrow failure (anemia, leukopenia and
thrombocytopenia), plasma cell leukemia, infections, kidney
damage or failure and hyperviscosity of the blood. Although the
median age of onset of multiple myeloma is 65 to 70 years
of age, according to the Multiple Myeloma Research Foundation,
recent statistics indicate both increasing incidence and earlier
age of onset. The incidence of multiple myeloma in most western
industrialized countries is approximately four in every 100,000
persons. We estimate that there are approximately 65,000
multiple myeloma patients in the E.U., with approximately 21,000
new cases annually, and 4,000 to 5,000 multiple myeloma patients
in Australia, with approximately 800 new cases annually. While
current treatment regimens provide some therapeutic benefit,
multiple myeloma patients continue to have high rates of relapse
and suffer high mortality rates.
Thalidomide is currently being evaluated as a potential therapy
for all stages of multiple myeloma, in particular, newly
diagnosed and relapsed and refractory. Several leading
investigators at cancer research centers have published data on
the response rate, the median effective dose and the average
duration of response for multiple myeloma patients treated with
thalidomide in clinical trials.
9
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Newly Diagnosed Multiple Myeloma. Peer-reviewed studies
from MD Anderson Cancer Center and the Mayo Clinic evaluating
the use of the orally administered combination of thalidomide
and dexamethasone for newly diagnosed multiple myeloma were
published in November 2002 in the Journal of Clinical
Oncology. Dr. S. Vincent Rajkumar of the Mayo Clinic
reported that 32 of 50 patients (64%) achieved a greater
than 50% reduction in M-protein, and an additional
14 patients (28%) achieved a reduction in M-protein of
between 25% and 50%. These reductions in M-protein are an
indication of a positive effect of the drug on the course of
this disease. The regimen was generally well-tolerated, and the
most commonly reported grade one or two adverse events were
constipation, sedation, fatigue, neuropathy, rash, tremor, edema
and elevated alkaline phosphatase, a kidney enzyme. Based on
this data, Celgene is sponsoring, and we are helping to fund, a
Phase III registration study to confirm the benefits of
thalidomide plus dexamethasone in newly diagnosed multiple
myeloma patients. If successful, we intend to submit this data
to the EMEA in support of an indication for Thalidomide Pharmion
50mg as a treatment for newly diagnosed multiple myeloma. |
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Relapsed and Refractory Multiple Myeloma.
Thalidomide’s effect on long-term survival in multiple
myeloma was published in Blood in July 2001 in an article
entitled “Extended Survival in Advanced and Refractory
Multiple Myeloma After Single-agent Thalidomide: Identification
of Prognostic Factors in a Phase II Study of
169 Patients.” The study is a follow-up of a
Phase II trial of 169 advanced and refractory multiple
myeloma patients with progressive disease treated with
thalidomide, and it extends results of 84 patients
previously reported in The New England Journal of
Medicine. The Phase II study was initiated to evaluate
the use of thalidomide in multiple myeloma patients who relapsed
after high dose chemotherapy. Of the study’s
169 patients, 37% demonstrated a 25% or greater reduction
in M-protein, 30% demonstrated a 50% or greater reduction and
14% of patients achieved a complete or near complete response. |
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The trial’s principal investigator, Bart
Barlogie, M.D., Ph.D., and researchers at the Arkansas
Cancer Research Center reported that high-risk patients who
received greater than or equal to 42 grams of thalidomide in a
three-month period experienced higher response rates (54% vs.
21%) and longer survival time (63% vs. 45%). In addition, for
the entire patient group, event-free survival after two years of
follow-up was 20%, and two year overall survival was 48%. The
study’s most commonly reported side effects included one or
more grade three toxicities, which reflect more severe side
effects. Approximately 25% of patients experienced events
affecting the central nervous system, such as sedation and
somnolence, confusion, depression and tremor. Approximately 16%
of patients experienced gastrointestinal toxicities, mainly
constipation. Neuropathy was seen in 9% of patients, and less
than 2% of patients developed deep vein thrombosis. These
toxicities were found to be dose related. |
In addition to these studies evaluating thalidomide as a therapy
for multiple myeloma, there are various Phase II studies
ongoing in respect of solid tumors, including colorectal cancer,
non-small cell lung cancer, prostate cancer, glioblastoma and
metastatic melanoma.
Despite the lack of any formal regulatory approval for
thalidomide in Europe, as a result of compassionate use and
named patient sales and the publication of articles reporting on
investigator-led clinical trials, thalidomide has become a
widely used therapy for the treatment of multiple myeloma and
certain other forms of cancer. Through mid-2003, substantially
all drug product used in Europe was distributed by four
companies. Grünenthal Group, the German company that was
the original developer of thalidomide, distributed approximately
two-thirds of the overall volume used in Europe free of charge
upon physician request through various special regulatory
authorizations. In June 2003, Grünenthal announced that due
to the exhaustion of its supply, it was discontinuing the
distribution of thalidomide. We believe that the remaining
thalidomide used in Europe during 2002 was supplied primarily by
three suppliers: CUK (then known as Penn T Limited); Laphal, the
French pharmaceutical company that we acquired in March 2003;
and Lipomed, which subsequently agreed to exclusively distribute
Thalidomide Pharmion 50mg in Switzerland and Austria and to stop
selling its own formulation of thalidomide in other European
markets. CUK, Laphal and Lipomed supplied thalidomide pursuant
to the regulatory provisions allowing for sale of unlicensed
drugs on a compassionate use or named patient basis. While the
thalidomide supplied by CUK, Laphal and Lipomed was not given
free of charge, it was sold at a significant discount to the
price charged by Celgene in the U.S.
10
We recognized that Grünenthal’s decision to
discontinue distributing thalidomide would create a large void
in the supply of thalidomide for the thousands of patients
currently being treated with the drug in Europe, Australia and
many Asian countries. We also believed that patients and medical
professionals would benefit from a more tightly controlled
distribution system for thalidomide, such as the PRMP.
Accordingly, in the fourth quarter of 2002, we began to actively
work with the regulatory authorities in each of the major
European countries to fully explain to them the benefits of the
PRMP and to obtain authorizations, where required, to allow us
to sell thalidomide on a compassionate use or named-patient
basis prior to the issuance of a formal marketing authorization.
Following negotiations with the health authorities of individual
countries, while we pursue a marketing authorization, we began
selling Thalidomide Pharmion 50mg in June 2003 on a
compassionate use and named patient basis in Europe, South
Africa and Egypt and we have made the PRMP program available in
over 20 languages. Since receiving regulatory approval to
market Thalidomide Pharmion 50mg in Australia, New Zealand,
Turkey and Israel, we have been actively marketing the product
in each of those countries.
In March 2002, working with the data packages that we had
obtained from Celgene and CUK, we submitted to the EMEA, under
its centralized procedure, two marketing authorization
applications for thalidomide for the treatment of relapsed and
refractory multiple myeloma and for ENL. In February 2003, we
withdrew our marketing authorization application for ENL to
focus our efforts with the EMEA on obtaining the marketing
authorization for relapsed and refractory multiple myeloma. This
decision was made in consultation with the EMEA, which, given
their belief that thalidomide would have widespread off-label
use in the treatment of multiple myeloma, was not comfortable
approving thalidomide for the much narrower indication of ENL,
especially given the history of thalidomide in Europe.
In May 2004, we withdrew our relapsed and refractory multiple
myeloma applications from the EMEA with the intent of
resubmitting one or more applications with additional clinical
data for relapsed/ refractory or newly diagnosed multiple
myeloma patients, or both. We made this decision following a
series of discussions with the EMEA during which it indicated
that it would require additional clinical data for thalidomide
before it can reach an opinion on whether or not the drug should
be approved as a treatment for multiple myeloma. We intend to
provide a dossier to the EMEA incorporating newly generated
clinical data on thalidomide that will reflect current practices
in the use of the drug to treat multiple myeloma.
We are focused on completing several ongoing studies with
thalidomide in patients with multiple myeloma, at least two of
which we believe could provide the significant new clinical data
required by the EMEA. The first is a study comparing survival
and additional clinical endpoints for two doses of thalidomide
in patients with relapsed/refractory multiple myeloma.
Enrollment of this 400 patient study was completed in
October 2004. The second study, currently being conducted by
Celgene in collaboration with us and with our financial support,
compares time to progression and additional clinical endpoints,
including survival, in newly diagnosed patients taking
thalidomide plus dexamethasone versus patients taking
dexamethasone alone. We expect that enrollment of this
435 patient study will be completed in the second quarter
of 2005.
We will continue to sell thalidomide in Europe on a named
patient or compassionate use basis while these studies are
completed and we pursue marketing authorization.
In addition to these EMEA regulatory approval activities, the
regulatory authorities in Australia, New Zealand, Turkey and
Israel have approved the use of Thalidomide Pharmion 50mg for
treatment of relapsed and refractory multiple myeloma and ENL.
Although thalidomide has become a standard of care for the
treatment of relapsed/refractory multiple myeloma, these
regulatory approvals represent the first, and to date only,
regulatory approvals for this indication. We have also submitted
regulatory approval applications for Thalidomide Pharmion 50mg
in Saudi Arabia, South Africa, Thailand and the Philippines.
We were granted orphan drug designation for thalidomide in
Europe by the EMEA for the multiple myeloma indication, which,
if the marketing authorization application is approved and the
criteria for orphan drug designation continue to be met, would
provide a ten year period of exclusivity from the date of the
marketing authorization application’s approval. During this
period the EMEA would be prohibited, except in very limited
circumstances, from approving another formulation of thalidomide
for treatment of relapsed and
11
refractory multiple myeloma. We were also granted orphan drug
designation for thalidomide in Australia, as well as data
exclusivity, which provides similar protection for a five year
period from the date of approval.
In March 2003, through our purchase of all of the outstanding
stock of Gophar S.A.S., we acquired Laphal, which sells its
formulation of thalidomide, known as Thalidomide Laphal, in
France and Belgium under an autorisation temporaire
d’utilisation, or ATU, which is a temporary
authorization for compassionate use sales. We are continuing to
sell Thalidomide Laphal in France and Belgium until such time as
we are permitted to replace this formulation with Thalidomide
Pharmion 50mg.
Our acquisition of Laphal, also allowed us to obtain its two
marketing authorization applications on file with the EMEA for
thalidomide. These two marketing authorization applications are
for thalidomide as a treatment for ENL and for relapsed and
refractory multiple myeloma, both of which have been granted
orphan drug status by the EMEA. We did, however, withdraw
Laphal’s relapsed and refractory multiple myeloma and ENL
applications from the EMEA at the same time as we withdrew the
Pharmion applications for those indications. Laphal had also
undertaken a number of clinical trials of thalidomide, the data
from which may be useful to us in connection with our efforts to
seek marketing approval from the EMEA.
We believe that an integral component of our applications was
and will continue to be our undertaking to develop and implement
the PRMP throughout Europe and our other markets. The PRMP
requires adherence to strict guidelines both prior to and during
the course of thalidomide therapy, including comprehensive
physician, pharmacist and patient registration and education,
emphasizing, among other things, the need for adequate
contraception in patients taking thalidomide and pregnancy tests
for female patients of child-bearing potential. Under the PRMP,
automatic prescription refills are prohibited, and prescriptions
may not exceed four weeks dosing. The PRMP also permits
authorization of each prescription only upon confirmation of
compliance with the PRMP guidelines.
We intend to work closely with the EMEA to better determine a
path to approval for thalidomide in the relapsed/refractory
multiple myeloma indication. We remain committed to gaining an
approval for thalidomide in Europe, and we believe an approval
in Europe would significantly enhance our revenue opportunity in
those markets.
Innohep, the trade name for tinzaparin, is a low molecular
weight heparin that is approved in the U.S. and 63 other
markets. In July 2002, we entered into an agreement with LEO
Pharma to obtain the exclusive U.S. marketing and
distribution rights to Innohep. Since LEO Pharma does not have a
presence in the U.S., it sought to market the product in the
U.S. through a marketing partner. It originally chose
DuPont Pharmaceuticals Company, which launched Innohep in the
U.S. in late 2000 following its approval by the FDA in June
of that year. Shortly after Innohep’s launch, DuPont’s
pharmaceutical business was acquired by Bristol Myers Squibb,
which elected to return the U.S. rights to the product back
to LEO Pharma. As a result, although the product has achieved
significant sales in Europe and elsewhere around the world,
Innohep received minimal marketing support in the
U.S. throughout 2001 and 2002.
Innohep is a member of a broad class of drugs known as
anticoagulants, which are generally prescribed to prevent or
treat blood clotting in patients. In the U.S., Innohep is
approved for the treatment of acute, symptomatic deep vein
thrombosis, or DVT, which is a subset of the overall
anticoagulant market. DVT occurs when a blood clot develops in
the deep veins of the legs. If not effectively treated, DVT can
lead to pulmonary embolisms that, in turn, can result in death.
Cancer patients are particularly at risk to develop DVT, either
from the disease itself or as a side effect of certain cancer
treatments. The estimated prevalence of DVT in cancer patients
ranges from 15-20%. Further, according to the ACS, approximately
1.3 million new cases of cancer occur in the U.S. each
year.
The acquisition of the marketing and distribution rights to
Innohep allowed us to establish our sales and marketing
organization in the U.S. in a cost-effective manner, and
provided us with access and exposure to the opinion leaders that
influence product sales in the hematology and oncology markets.
We completed the hiring
12
and training of our U.S. sales force and re-launched
Innohep in October 2002. Innohep is administered through a
subcutaneous injection once daily for at least a six day cycle.
We attribute the growth we have experienced in Innohep sales
since we began selling the product to our strategy of focusing
our marketing efforts on hematologists and oncologists, groups
often overlooked by pharmaceutical companies marketing other
anticoagulants. Hematologists and oncologists are among the top
three prescribers of DVT treatments. We believe, however, that
only a small number of the sales calls made to DVT treatment
prescribers are made to hematologists and oncologists. Innohep
does not require a dosing adjustment for weight-compromised,
elderly or renally-impaired patients. Because these are common
conditions for cancer patients, we believe that this feature,
combined with the convenience of its once per day dosing, makes
Innohep an attractive treatment choice for a cancer patient with
DVT.
Refludan, the trade name for lepirudin, is an anti-thrombin
agent for patients with heparin-induced thrombocytopenia
type II, or HIT type II. In May 2002, we entered into
an agreement with Schering AG to obtain the exclusive marketing
and distribution rights to Refludan in all markets outside of
North America. Schering AG continues to market the product in
the U.S. and Canada through its subsidiary, Berlex Laboratories,
Inc. We are currently marketing Refludan principally in Europe
and Australia.
HIT is an allergic, adverse immune response to heparin.
Generally this response occurs after two to four days of heparin
exposure, resulting in an absence of sufficient cell platelets
to enable blood clotting. HIT occurs in 2-3% of patients treated
with unfractionated heparin and 1-2% of patients treated with
low molecular weight heparins. There are two forms of HIT. The
first is relatively benign. The second, known as HIT
type II, is a more serious form with the potential for
significant impact on patient morbidity and mortality. Refludan
is prescribed for the treatment of HIT type II. Refludan is
administered through subcutaneous injection or infusion. Given
the relatively low incidence rate for HIT, we do not expect
Refludan sales to grow significantly above the current level.
In addition to adding a marketed product to our portfolio, the
acquisition of Refludan allowed us to achieve our objective of
establishing a sales and marketing organization throughout
Europe and our other non-U.S. markets. The primary target
physician audience for Refludan is hematologists. With the
planned launch of thalidomide and, later, Vidaza, it was
important that we develop our commercial organization and
establish relationships with the key prescribers of these
products. We were able to achieve that objective in Europe
through our acquisition of Refludan. Today we have sales and
marketing organizations established in each of the primary
European markets, Australia, and, through third party
distributors, in 22 additional countries throughout Europe, the
Middle East and Asia.
Sales, Marketing and Distribution
We have established sales and marketing organizations in the
U.S., Europe and Australia.
In the U.S., as of March 9, 2005, we have increased our
field based organization to 85 professionals consisting of
fifty-nine clinical account specialists, eight medical science
liaisons, five reimbursement specialists, one sales director,
three strategic account managers, three national accounts
managers and six field based managers. Each member of our field
based staff has significant experience in pharmaceutical and
oncology products sales and marketing. They target hematologists
and oncologists who prescribe high volumes of cancer therapies.
The concentration of high volume prescribers will allow us to
promote Vidaza and Innohep with a relatively small, dedicated
sales and marketing organization. The field based organization
is also supported by a medical education team that focuses on
the development, presentation and distribution of scientific and
clinical information regarding our products and the diseases
they treat.
In Europe, we employ a general manager in each of the U.K.,
France, Germany, Spain and Italy, and a general manager for the
Nordic countries. These general managers are responsible for all
commercial activities in each of their home countries, and may
also have responsibility for commercial activities in smaller
nearby countries. Each of our subsidiaries employs, in addition
to the general manager, a trained physician,
13
regulatory specialists if required by local law, sales
representatives, PRMP experts and administrative support staff.
In general, we only employ nationals in each of our local
subsidiaries. All marketing activities are centrally directed
from our U.K. office to ensure consistency across regional
markets. In addition, clinical development, regulatory affairs
and information technology functions are centrally managed from
our U.K. office. In this manner, we seek to develop globally
consistent programs but ensure that they are implemented
according to local practices. Our Australian sales and marketing
organizational structure is consistent with our European
structure. Information regarding geographic areas is included in
the notes to our consolidated financial statements included
elsewhere in this report.
In addition to our own sales organizations, we have access to
the hematology and oncology markets in 22 additional
countries through relationships with our distributors. Pursuant
to the agreements governing our relationships with our
distributors, we are prohibited from selling or marketing our
products on our own behalf in a country covered by one of these
agreements until the applicable agreement expires.
The chart below identifies the countries which are served
directly by our sales organizations and those which we access
using our third-party distribution network.
Direct Sales Countries
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Australia
Belgium
Denmark
Finland
France |
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Germany
Ireland
Italy
Netherlands
Norway
Portugal |
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Spain
Sweden
Switzerland
U.K.
U.S. |
Distribution Countries
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Austria
Cyprus
Egypt
Greece
Hong Kong
Israel
Jordan
Kuwait |
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Lebanon
Malaysia
Malta
New Zealand
Oman
Saudi Arabia
Singapore |
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South Africa
Switzerland*
Syria
Taiwan
Thailand
Turkey
United Arab Emirates |
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| * |
In Switzerland, we sell Refludan directly to customers and we
sell Thalidomide Pharmion 50mg through our Swiss distributor,
Lipomed AG. |
By working closely with top scientists, physicians and
association leaders, our sales and marketing professionals are
able to create science-based marketing materials of interest to
key opinion leaders. In addition, our product acquisition
strategy has been designed to maximize the success of our sales
and marketing efforts by focusing on the acquisition of products
and product candidates that make a clinical difference to
patients in markets responsive to key opinion leaders. We intend
to seek new countries in which to promote our products and we
will continue the expansion of our sales and marketing
organization as product growth or product acquisitions warrant.
In the U.S., we sell to pharmaceutical wholesalers, who in turn
distribute product to physicians, retail pharmacies, hospitals,
and other institutional customers. In Europe and Australia, we
sell directly to retail and hospital pharmacies. Sales into
countries where we have partnered with third party distributors
are made directly to our partners. Net sales generated from our
largest three wholesale customers in the U.S. totaled
approximately 35% of our total net sales for the year ended
December 31, 2004.
14
Regulatory and Medical Affairs
Our regulatory affairs group is comprised of professionals with
experience from both large pharmaceutical companies and
biotechnology companies. The difference between an attractive
drug candidate and one which is not economically viable for
development often hinges on our assessment of the time and
expense required to get the drug approved and sold in a
particular jurisdiction. Determining the optimal regulatory
pathway for commercialization is an integral part of our product
candidate selection. We believe that our combination of
country-specific regulatory expertise and our focus on the
hematology and oncology markets provide a significant advantage
as we seek to acquire additional product candidates through
in-license or, if necessary and appropriate, through company
acquisition, and move our future product pipeline candidates, as
identified, forward through the approval process.
Collaborations and License Agreements
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Celgene and CUK Agreements |
In 2001, we licensed rights relating to the use of thalidomide
from Celgene and separately entered into an exclusive supply
agreement for thalidomide with CUK. Under the agreements, as
amended, we obtained the right to market thalidomide in all
countries other than the United States, Canada, Mexico, Japan
and all provinces of China (except Hong Kong). More
specifically, under agreements with Celgene, as amended, we
obtained the rights in these territories to Celgene’s
formulation of thalidomide, Thalomid, exclusive licenses or
sublicenses for the intellectual property owned or licensed by
Celgene relating to thalidomide, as well as all existing and
future clinical data relating to thalidomide developed by
Celgene, and an exclusive license to employ Celgene’s
patented and proprietary S.T.E.P.S. program as our PRMP in
connection with the distribution of thalidomide in these
territories. Under agreements with CUK, as amended, CUK is our
exclusive supplier of thalidomide formulations that we sell in
certain territories licensed to us by Celgene. We pay
(i) Celgene a royalty/license fee of 8% on our net sales of
thalidomide under the terms of the license agreements, and
(ii) CUK product supply payments equal to 15.5% of our net
sales of thalidomide under the terms of the product supply
agreement. In connection with our ongoing relationship with
Celgene, and to further the clinical development of thalidomide,
particularly in multiple myeloma, we have also agreed to fund
certain amounts incurred by Celgene for the conduct of
thalidomide clinical trials. Through December 31, 2004, we
have funded $6 million of these costs and have agreed to
fund an additional $10 million of Celgene’s costs for
these studies incurred between January 1, 2005 and
December 31, 2007, payable in quarterly installments
through the end of 2007. The agreements with Celgene and CUK
each have a ten-year term running from the date of receipt of
our first regulatory approval for thalidomide in the United
Kingdom. In October 2004, Celgene acquired CUK.
We licensed worldwide exclusive rights to azacitidine from
Pharmacia & Upjohn Company, now a part of Pfizer, Inc.,
in June 2001. Under the terms of our agreement, we are obligated
to pay Pfizer a royalty of 20% on net sales of Vidaza. The
license from Pfizer has a term extending for the longer of the
last to expire of valid patent claims in any given country or
ten years from our first commercial sale of the product in a
particular country.
In July 2002, we obtained an exclusive ten year licensing
agreement from LEO Pharma A/ S to distribute Innohep in the
U.S., as well as an exclusive supply and requirements agreement
with LEO Pharma for their supply to us of Innohep. Under our
agreement with LEO Pharma, we made an up-front payment for this
license of $7.5 million, up to $2.5 million of which
is creditable against royalty payments otherwise due during the
period ending March 1, 2005. In addition, we are obligated
to pay LEO Pharma royalties at the rate of 30% on annual net
sales of up to $20.0 million and at the rate of 35% of
annual net sales exceeding $20.0 million, less in each case
our purchase price from LEO Pharma of the units of product we
sell. Furthermore, the agreement contains a minimum net sales
clause that is effective for two consecutive two-
15
year periods. If we do not achieve these minimum sales levels
for two consecutive years, we have the right to pay LEO Pharma
additional royalties up to the amount LEO Pharma would have
received had we achieved these net sales levels. If we opt not
to make the additional royalty payment, LEO Pharma has the right
to terminate the license agreement. The second of the two-year
terms will conclude on December 31, 2006.
In May 2002, we obtained the exclusive rights from Schering AG
to distribute Refludan in all countries outside of North
America. Schering produces the product for us under contract
with a third-party manufacturer and sells it to us at its
acquisition cost plus 5%. Our agreements with Schering, as
amended, transfer to us all of the marketing authorizations and
product registrations for Refludan in the individual countries
within our territory. We have paid Schering an aggregate of
$9.0 million and are obligated to make an aggregate of
$4.0 million of additional fixed payments to Schering,
payable in quarterly installments of $1.0 million through
the end of 2005. We are obligated to make up to
$7.5 million of additional payments upon the achievement of
certain milestones. We paid to Schering, in addition to our
product acquisition costs, a royalty of 8% of our net sales of
Refludan during the period through December 31, 2003 and we
pay a royalty of 14% of our net sales of Refludan thereafter.
However, when we have paid $12.0 million in royalties
measured from January 2004, the royalty rate would then be
reduced to 6%.
Manufacturing
We currently use, and expect to continue to be dependent upon,
contract manufacturers to manufacture each of our products. We
do not maintain alternative manufacturing sources for any of our
products. Our contract manufacturers and distributors are
subject to extensive governmental regulation. Regulatory
authorities in our markets require that drugs be manufactured,
packaged and labeled in conformity with Good Manufacturing
Practices, or cGMPs. We have established a quality control and
quality assurance program, including a set of standard operating
procedures and specifications, designed to ensure that our
products are manufactured in accordance with cGMPs, and other
applicable domestic and foreign regulations.
Thalidomide. We obtain our two formulations of
thalidomide from two different suppliers. Thalidomide Pharmion
50mg is formulated, encapsulated and packaged for us by CUK, of
Great Britain in a facility that is in compliance with the
regulatory standards of each of the countries where we sell and
expect to sell the product. Under the terms of our agreement
with CUK we purchase from CUK all of our requirements of the
product. Pricing is subject to an annual audit and, if
appropriate, an adjustment based upon the fully allocated cost
of manufacture. This agreement terminates upon the tenth
anniversary of the date upon which we receive regulatory
approval for thalidomide in the U.K.
Thalidomide Laphal is formulated, encapsulated and packaged for
us by Laphal Industrie, an unaffiliated company, in a facility
that is in compliance with the regulatory standards of each of
the countries where we sell and expect to sell the product.
Pricing is subject to an annual adjustment based upon a formula
that accounts for increases in the cost of manufacture. In
addition, in the event that prior to the expiration of the
agreement we decide to discontinue ordering Thalidomide Laphal
from Laphal Industrie, we are obligated to provide twelve months
advance notice and
pay €300,000
(approximately $409,000 as of December 31, 2004). If our
notice to discontinue ordering Thalidomide Laphal is not timely,
the fee may increase to as much
as €500,000
(approximately $680,000 as of December 31, 2004). This
agreement terminates in March 2013.
Vidaza. Under the terms of two development agreements,
Ash Stevens, Inc. and Ben Venue Labs provide us with clinical
supplies and manufacturing services for azacitidine. Azacitidine
drug substance is manufactured for us by Ash Stevens, who sends
the product in its raw form to Ben Venue Labs. Ben Venue Labs
then formulates the product, fills the product into vials and
labels the finished product for us. Both Ash Stevens and Ben
Venue Labs operate facilities that are in compliance with the
regulatory standards of each of the countries in which we sell
or expect to sell the product. To date, we have obtained our
commercial quantities of Vidaza from Ash Stevens and Ben Venue
under standard purchase order commitments, and we are in active
negotiations with both of these suppliers to finalize long-term
commercial supply agreements. We
16
are actively seeking back-up manufacturers for Vidaza and also
working with a number of partners in our reformulation efforts.
Innohep. Innohep is formulated and packaged for us by LEO
Pharmaceutical Products Ltd. in a facility that is in compliance
with FDA requirements. Under our agreement, we are required to
purchase our Innohep requirements exclusively from LEO. Pricing
may be adjusted annually based upon changes in the Danish Pay
Index. This agreement terminates in June 2012.
Refludan. Refludan is manufactured in a facility that
meets the standards of each of the countries where we sell and
expect to sell the product by a third-party manufacturer, who
then supplies the drug to our supplier, Schering AG. Under our
agreement, we are required to purchase our Refludan requirements
exclusively from Schering. The pricing is subject to an annual
adjustment under the existing supply agreement between Schering
and the third-party manufacturer. This agreement terminates in
2022.
Raw Materials
Raw materials and supplies are normally available in quantities
adequate to meet the needs of our business.
Government Regulation
Regulation by governmental authorities in the U.S. and other
countries is a significant factor in the manufacture and
marketing of our products and in ongoing research and product
development activities. All of our products require regulatory
approval by governmental agencies prior to commercialization. In
particular, our products are subject to rigorous preclinical and
clinical testing and other approval requirements by the FDA and
similar regulatory authorities in other countries. Various
statutes and regulations also govern or influence the
manufacturing, safety, reporting, labeling, storage, record
keeping and marketing of our products. The lengthy process of
seeking these approvals, and the subsequent compliance with
applicable statutes and regulations, require the expenditure of
substantial resources. Any failure by us to obtain, or any delay
in obtaining, regulatory approvals could harm our business.
The regulatory requirements relating to the manufacturing,
testing and marketing of our products may change from time to
time. For example, at present, member states in the E.U. are in
the process of incorporating into their domestic laws the
provisions contained in the E.U. Directive on the implementation
of good clinical practice in the conduct of clinical trials. The
Directive imposes more onerous requirements in relation to
certain aspects of clinical trial conduct than are currently in
place in many member states. This may impact our ability to
conduct clinical trials and the ability of independent
investigators to conduct their own research with support from us.