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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTION 13
OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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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
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Commission file number: 000-50767
CRITICAL THERAPEUTICS, INC.
(Exact name of registrant as specified in its charter)
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Delaware
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04-3523569 |
(State or other jurisdiction of
incorporation or organization) |
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(IRS Employer
Identification No.) |
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60 Westview Street
Lexington, Massachusetts
(Address of principal executive offices) |
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02421
(Zip Code) |
Registrant’s telephone number, including area code:
(781) 402-5700
Securities registered pursuant to Section 12(b) of the
Act:
None.
Securities registered pursuant to Section 12(g) of the
Act:
Common Stock, $0.001 par value per share
(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 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. o
Indicate by check mark whether the registrant is an accelerated
filer (as defined in Exchange Act
Rule 12b-2). Yes o No þ
The aggregate market value of the registrant’s common stock
held by non-affiliates of the registrant as of June 30,
2004, was approximately $56,868,686, based on the price at which
the registrant’s common stock was last sold on that date.
As of March 15, 2005, the registrant had
24,097,624 shares of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Specified portions of the registrant’s proxy statement for
the registrant’s 2005 annual meeting of stockholders to be
held on June 2, 2005, which are to be filed pursuant to
Regulation 14A within 120 days after the end of the
registrant’s fiscal year ended December 31, 2004, are
incorporated by reference into Part III of this report.
CRITICAL THERAPEUTICS, INC.
ANNUAL REPORT
ON FORM 10-K
INDEX
PART I
Cautionary Statement Regarding Forward-Looking Statements
This annual report on Form 10-K includes forward-looking
statements within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended, which we refer to
as the Exchange Act. For this purpose, any statements contained
in this report regarding the progress and timing of our drug
development programs and related trials; the timing of
regulatory approvals and product launches; the efficacy of our
drug candidates; our strategy, future operations, financial
position, future revenues, projected costs, prospects, plans and
objectives of management; and all other statements that are not
purely historical in nature, constitute forward-looking
statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Without limiting the foregoing,
the words “anticipate,” “believe,”
“could,” “estimate,” “expect,”
“intend,” “may,” “plan,”
“project,” “should,” “will,”
“would” and similar expressions are intended to
identify forward-looking statements. Actual results may differ
materially from those indicated by such forward-looking
statements as a result of various important factors, including
our “critical accounting estimates” and risks relating
to: conducting clinical trials including the timing and success
of patient enrollment; the results of preclinical studies and
clinical trials with respect to our products under development
and whether such results will be indicative of results obtained
in later clinical trials; the timing and success of submission,
acceptance and approval of regulatory filings; our heavy
dependence on the commercial success of ZYFLO® tablets and
the controlled-release formulation of zileuton; our ability to
obtain the substantial additional funding required to conduct
our research, development and commercialization activities; our
dependence on our strategic collaboration with MedImmune, Inc.;
and our ability to obtain, maintain and enforce patent and other
intellectual property protection for our discoveries and drug
candidates. These and other risks are described in great detail
below under the caption “Factors That May Affect Future
Results”. If one or more of these factors materialize, or
if any underlying assumptions prove incorrect, our actual
results, performance or achievements may vary materially from
any future results, performance or achievements expressed or
implied by these forward-looking statements. In addition, any
forward-looking statements in this annual report represent our
views only as of the date of this annual report and should not
be relied upon as representing our views as of any subsequent
date. We anticipate that subsequent events and developments will
cause our views to change. However, while we may elect to update
these forward-looking statements publicly at some point in the
future, we specifically disclaim any obligation to do so,
whether as a result of new information, future events or
otherwise. Our forward-looking statements do not reflect the
potential impact of any future acquisitions, mergers,
dispositions, joint ventures or investments we may make.
Overview
Critical Therapeutics, Inc. is a biopharmaceutical company
focused on the discovery, development and commercialization of
products designed to treat respiratory, inflammatory and
critical care diseases through the regulation of the body’s
inflammatory response. The inflammatory response occurs within
the body’s immune system following a stimulus such as
infection or trauma. Our most advanced product is ZYFLO®
Filmtab®, a tablet formulation of zileuton, which the
U.S. Food and Drug Administration, or FDA, approved in 1996
for the prevention and chronic treatment of asthma. We licensed
from Abbott Laboratories exclusive worldwide rights to ZYFLO and
other formulations of zileuton for multiple diseases and
conditions. We are currently in the process of changing
manufacturing sites for ZYFLO. Subject to FDA approval of these
sites, we expect to begin selling ZYFLO in the United States in
the second half of 2005.
We are also developing product candidates to regulate the
excessive inflammatory response that can damage vital internal
organs and, in the most severe cases, result in multiple organ
failure and death.
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CTI-01. We are developing a small molecule product
candidate, CTI-01, that we believe may be effective in
regulating the inflammatory response. Results from preclinical
studies suggest that CTI-01 |
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inhibits the release of protein molecules called cytokines that
are responsible for communication between cells in the body and
are associated with conditions such as post-operative ileus,
which is the loss of normal intestine movement following
surgery, and the damage to vital organs that can occur in
patients after cardiopulmonary bypass, a procedure commonly
performed during heart surgery. |
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HMGB1. We believe that a cytokine called HMGB1, or high
mobility group box protein 1, may be an important target
for the development of products to treat inflammation-mediated
diseases because of the timing and the duration of its release
from cells into the bloodstream. We are currently collaborating
with MedImmune, Inc. on preclinical development of our
monoclonal antibodies directed towards HMGB1 in a number of
animal models. In addition, we are currently collaborating with
Beckman Coulter, Inc. on development of a diagnostic directed
towards HMGB1. |
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Cholinergic Anti-inflammatory Program. We are developing
small molecules designed to inhibit the body’s inflammatory
response by acting on the nicotinic α-7 cholinergic
target, which is a cell receptor associated with the production
of the cytokines that play a fundamental role in the
inflammatory response. We believe that successful development of
a product candidate targeting the nicotinic α-7
cholinergic receptor could lead to an oral anti-cytokine therapy
for acute and chronic diseases. We are also exploring the
development of a medical device, similar to those already
marketed for the treatment of epileptic seizures, to stimulate
the vagus nerve, a nerve that links the brain with the major
organs of the body, and induce an anti-inflammatory response by
acting on the α-7 receptor. |
We were incorporated in Delaware on July 14, 2000. Since
our inception, we have incurred significant losses each year. As
of December 31, 2004, we had an accumulated deficit of
$58.5 million. We expect to incur significant and growing
losses for the foreseeable future. Although the size and timing
of our future operating losses are subject to significant
uncertainty, we expect our operating losses to continue to
increase over the next several years as we continue to fund our
development programs and prepare for potential commercial launch
of our product candidates. We do not expect to achieve
profitability in the foreseeable future; and we cannot assure
you that we will achieve profitability at all. Since inception,
we have raised proceeds to fund our operations through our
initial public offering of common stock, private placements of
equity securities, debt financings, the receipt of interest
income and payments from our collaborators MedImmune and Beckman
Coulter.
Our Strategy
Our goal is to become a leading biopharmaceutical company
focused on developing therapeutics to treat respiratory,
inflammatory and critical care diseases through the regulation
of the body’s inflammatory response. The key elements of
our strategy are to:
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Maximize the commercial potential of ZYFLO. We are
focused on successfully launching ZYFLO in the United States in
the second half of 2005. We plan to build a marketing and sales
infrastructure to promote ZYFLO and the controlled-release
formulation of zileuton that we are developing for the treatment
of asthma upon regulatory approval from the FDA. We believe that
by targeting specialists rather than primary care physicians, we
can successfully promote ZYFLO with an initial sales force of
fewer than 100 sales representatives in the United States. |
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Expand the potential applications of zileuton. We believe
that zileuton has potential therapeutic benefits in a range of
diseases and conditions, such as acne, chronic obstructive
pulmonary disease, or COPD, nasal polyposis and acute asthma
exacerbations. We intend to expand the potential applications of
zileuton through development of additional formulations,
including controlled-release, intranasal and intravenous
formulations. |
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Advance and expand our portfolio of product candidates.
We intend to focus on developing products that address large
unmet medical needs in the critical care market. We believe that
our understanding of the cytokine cascade and its role in
critical care diseases will enable us to continue |
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to develop and discover drug candidates with novel mechanisms of
action that may address some of the unmet medical needs in
critical care medicine. We believe our focus on diseases
associated with the severe inflammatory response will allow us
to pursue drug development and discovery programs across a
number of therapeutic areas in an efficient manner. |
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Maximize the economic value of our product portfolio. We
believe we can maximize the potential economic benefit to us of
our product candidates by retaining sole or shared ownership of
our product development opportunities. We intend to undertake
selected strategic collaborations, such as our collaborations
with MedImmune and Beckman Coulter, to develop projects that may
be beyond our internal resources, while seeking to retain
co-promotion or commercial rights in any such collaborations. |
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Strategically in-license or acquire attractive development
candidates or approved products. We intend to enhance our
product pipeline and leverage the marketing and sales
infrastructure that we are building through strategically
in-licensing or acquiring product candidates or approved
products for the critical care market. We believe our focus on
critical care medicine and our targeted sales force will make us
an attractive partner for companies seeking to out-license
products or product candidates in our areas of focus. |
Our Product Pipeline
The following table sets forth the current status of our product
candidates in development and our research and development
programs:
Zileuton
We have acquired from Abbott exclusive worldwide rights to
develop and market ZYFLO and other formulations of zileuton for
multiple diseases and conditions. ZYFLO, a tablet formulation of
zileuton, is an FDA-approved product for the prevention and
chronic treatment of asthma that was developed and previously
sold by Abbott. We are required to submit a supplemental new
drug application, or sNDA, for ZYFLO because we are changing the
process for manufacturing and transferring the manufacturing of
ZYFLO to new, third-party manufacturing sites. We intend to
submit this sNDA to the FDA in late
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March 2005 shortly after completing the transfer of
manufacturing, and, subject to regulatory approval, we expect to
begin selling ZYFLO in the United States in the second half of
2005.
Zileuton blocks the activity of the 5-lipoxygenase enzyme, which
is the main enzyme responsible for formation of a family of
lipids known as leukotrienes. There are many different
leukotrienes, and ZYFLO’s mechanism of action blocks
production of the entire leukotriene family. Leukotrienes are in
part responsible for the inflammatory response associated with
asthma and are known to cause many of the biological effects
that contribute to inflammation, mucus production and closing of
the lung airways of asthmatic patients. Leukotrienes are also
implicated in the disturbance of normal lung airway function in
certain other diseases, including COPD. ZYFLO is the only
FDA-approved product that blocks the activity of the
5-lipoxygenase enzyme.
Asthma is a chronic respiratory disease that is characterized by
the narrowing of the bronchi, or lung airways, that makes
breathing difficult. An asthma attack leaves the victim gasping
for breath as the airways become constricted, inflamed and
clogged with thick, sticky secretions. Severe asthma attacks can
be life threatening and, according to the American Lung
Association, resulted in almost two million people visiting
hospital emergency rooms in the United States in 2000. The
Centers for Disease Control and Prevention estimate that
20.3 million people in the United States had asthma in
2001. The direct healthcare costs associated with treating
asthma reached an estimated $9.4 billion in 2001.
There is no one ideal treatment for asthma and there is no cure.
Currently, patients are treated with a combination of products
that are designed primarily to manage their disease symptoms by
opening the airways in the lungs and reducing inflammation.
Typical treatments include bronchodilatory drugs, such as
Serevent®, leukotriene receptor antagonists, or LTRAs, such
as Singulair®, inhaled corticosteroids, such as
Flovent® and combination products such as Advair®,
which is a combination of an inhaled corticosteroid and a
bronchodilator. We believe many prescribing physicians are
dissatisfied with the treatment options available for patients
with uncontrolled or severe, persistent asthma due to the
inability of these treatments to control symptoms reliably. As a
result, these patients, who we believe constitute approximately
20% of the asthma population, often have severe asthma attacks
requiring emergency room visits and, in many cases, further
hospitalization to stabilize airway function. Despite the
approval and launch in 2004 of Xolair® to treat severe
allergic asthma, we believe patients with severe asthma remain
underserved and in need of effective medication.
We believe that many patients with asthma may benefit from
therapy with zileuton. Zileuton actively inhibits the main
enzyme responsible for the production of a broad spectrum of
lipids responsible for the symptoms associated with asthma,
including all leukotrienes. We believe that this is an important
distinction from Singulair®, the most frequently prescribed
LTRA, which blocks only one of the two known receptors for a
single leukotriene out of the many leukotrienes associated with
asthma symptoms. We intend to market ZYLFO as a treatment for
asthma patients who do not gain adequate symptomatic control
from currently available medications.
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Zileuton Product Development |
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ZYFLO: The Tablet Formulation of Zileuton |
ZYFLO is the only 5-lipoxygenase inhibitor drug to be approved
for marketing by the FDA. In 1996, ZYFLO was approved by the FDA
as an immediate-release, four-times-a-day tablet for the
prevention and chronic treatment of asthma. ZYFLO was launched
in the United States in 1997. We have completed the transfer of
the manufacturing technology used in the production of the
zileuton active pharmaceutical ingredient, or API, and for ZYFLO
tablets from Abbott to contract manufacturing sites. We have
completed manufacture of the tablets required for registration,
and these tablets are currently undergoing stability testing.
Once stability testing is completed, we expect to submit an
sNDA, which FDA regulations require in connection with our
changes in manufacturing process and manufacturing sites. We
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expect that the FDA’s review of our sNDA will take
approximately six months. If the FDA approves our sNDA within
this timeframe, we would expect to begin marketing ZYFLO in the
second half of 2005.
Dr. Paul Rubin, our President and Chief Executive Officer,
led the development of ZYFLO while he was employed by Abbott.
The full clinical development program for ZYFLO consisted of 21
safety and efficacy trials in an aggregate of approximately
3,000 patients with asthma. FDA approval was based on
pivotal three-month and six-month safety and efficacy clinical
trials in 774 asthma patients. The pivotal trials compared
patients taking a combination of ZYFLO and their inhaled
bronchodilators to patients taking a combination of placebo and
inhaled bronchodilators. The results of the group taking ZYFLO
and their inhaled bronchodilators showed:
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rapid and sustained improvement for patients over a six-month
period in objective and subjective measures of asthma control; |
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reduction of exacerbations and need for either bronchodilatory
or steroid rescue medications; and |
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acute bronchodilatory effect two hours after the first dose. |
Our post hoc analysis of the data suggested there was a greater
airway response benefit in asthma patients with less than 50% of
expected airway function, and a six-fold decrease in steroid
rescues compared to placebo.
In these placebo-controlled clinical trials, 1.9% of patients
taking ZYFLO experienced an increase in the liver enzyme alanine
transaminase, or ALT, to greater than three times the level
normally seen in the bloodstream compared to 0.2% of patients
receiving placebo. These enzyme levels resolved or returned
towards normal in both the patients who continued and those who
discontinued the therapy.
In addition, prior to FDA approval, a long-term, safety
surveillance trial was conducted in 2,947 patients. In this
safety trial, 4.6% of patients taking ZYFLO experienced ALT
levels greater than three times the level normally seen in the
bloodstream compared to 1.1% of patients receiving placebo. In
61.0% of the patients with ALT levels greater than three times
the level normally seen in the bloodstream, the elevation was
seen in the first two months of dosing. After two months of
treatment, the rate of ALT levels greater than three times the
level normally seen in the bloodstream stabilized at an average
of 0.3% per month for patients taking a combination of
ZYFLO and their usual asthma medications compared to
0.11% per month for patients taking a combination of
placebo and their usual asthma medications. This trial also
demonstrated that ALT levels returned to below two times the
level normally seen in the bloodstream in both the patients who
continued and those who discontinued the therapy. The overall
rate of patients with ALT levels greater than three times the
level normally seen in the bloodstream was 3.2% in the
approximately 5,000 patients who received ZYFLO in
placebo-controlled and open-label trials combined. In these
trials, one patient developed symptomatic hepatitis with
jaundice, which resolved upon discontinuation of therapy, and
three patients developed mild elevations in the protein
bilirubin.
After reviewing the data from these trials, the FDA approved
ZYFLO in 1996 on the basis of the data submitted and we are not
aware of any reports of ZYFLO being directly associated with
serious liver damage in patients treated with ZYFLO since its
approval.
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Controlled-Release Formulation of Zileuton |
We believe that the controlled-release formulation of zileuton
that we are developing will be more convenient for patients
because of its twice-a-day dosing regimen, as compared to
ZYFLO’s current four-times-a-day dosing regimen, and may
increase patient drug compliance. Abbott completed
Phase III clinical trials for this formulation in asthma,
but did not submit a new drug application, or NDA. Based upon
data provided to us, we believe this decision was not based upon
the clinical efficacy or safety data generated during the
program. We expect to submit an NDA based on safety and efficacy
data generated
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from the two completed Phase III clinical trials, a
three-month efficacy trial and a six-month safety and efficacy
trial. The results of these clinical trials were as follows:
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The three-month pivotal efficacy trial, in which
409 patients received either the controlled-release
formulation of zileuton or placebo, generated similar efficacy
results to those seen in the ZYFLO pivotal trials. The trial
demonstrated statistically significant improvements over
placebo, in objective measures of asthma control, such as mean
forced expiratory volume. The trial also showed a reduced need
for bronchodilatory drugs as a rescue medication to alleviate
uncontrolled symptoms; |
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The efficacy component of the six-month trial included
757 patients and generated similar efficacy results to
those seen in the ZYFLO pivotal trials. The trial demonstrated
statistically significant improvements over a combination of
placebo and the patients’ normal asthma therapies, in
objective measures of asthma control, such as mean forced
expiratory volume. In the trial, the controlled-release
formulation of zileuton also showed a reduced need for
bronchodilatory drugs as a rescue medication to alleviate
uncontrolled symptoms; and |
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The safety data generated in a total of 1,335 patients from
these two trials was comparable to safety data seen in the ZYFLO
pivotal trials. The incidence of ALT levels greater than three
times the level normally seen in the bloodstream in patients
receiving zileuton was 2.1% and in all cases ALT levels resolved
or returned towards normal in both the patients who continued
and those who discontinued the therapy. |
We believe that this clinical development package will be
sufficient to support the submission in the fourth quarter of
2005 of an NDA for the controlled-release formulation of
zileuton for asthma. However, before we can submit the NDA, we
must receive satisfactory comparative bioavailability data from
a clinical trial in healthy volunteers designed to show that our
manufactured tablets behave similarly in the body to the tablets
that had been manufactured by Abbott. At present, we are
conducting production campaigns and assessing performance of the
manufactured tablets, prior to initiation of the bioavailability
study. We believe that any significant variability in product
performance or delay in manufacturing could delay the submission
of the NDA by up to six months.
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Intravenous Formulation of Zileuton |
We also commenced development in 2004 of a new intravenous
formulation of zileuton for use in severe acute asthma attacks.
In 2000, approximately two million hospital emergency room
visits in the United States involved severe asthma attacks, of
which approximately 465,000 resulted in hospitalization.
Currently, most patients suffering severe asthma attacks are
treated with bronchodilators inhaled via a nebulizer, typically
for 20 minutes or more. Nebulizers attempt to restore airway
function by delivering the bronchodilatory drug to the
bloodstream via the lungs. However, the patient’s ability
to get the drug into his lungs may be impaired by his inability
to breathe efficiently caused by the severe asthma attack.
Clinical data demonstrate that zileuton exhibits its maximum
effect on lung function when the blood drug concentration
reaches its peak level and that the effect is achieved after a
single dose of zileuton. We believe that an intravenous
formulation of zileuton that would deliver zileuton directly to
the bloodstream would have a rapid onset of action, reaching
peak blood concentration within minutes of the injection. We
believe that this rapid delivery of the drug to the
patient’s bloodstream may lead to more rapid symptom
improvements, and potentially reduce the number of hospital
admissions of patients arriving in the emergency room suffering
from a severe asthma attack.
In 2004, we entered into an agreement with Baxter Healthcare
Corporation to conduct feasibility studies to analyze the
various properties of zileuton and determine the most suitable
technologies for the development of an intravenous formulation
of zileuton. As a result, we have produced, and are currently
evaluating, two intravenous formulations of zileuton. Due to the
large amount of available preclinical information on zileuton,
we believe that the preclinical development requirements for the
intravenous formulation will be restricted to limited exposure
studies in animals designed to clarify the safety of the mode of
administration. These studies are currently ongoing and as a
result, we expect to begin Phase I clinical trials of a
product candidate in the middle of 2005.
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Commercialization Strategy |
We are developing a targeted marketing and sales infrastructure
in connection with our anticipated launch of ZYFLO in the United
States in the second half of 2005. We plan to build a marketing
and sales force to promote ZYLFO and the controlled-release
formulation of zileuton that we are developing for the treatment
of asthma. We believe that by targeting specialists rather than
primary care physicians, we can successfully promote ZYFLO with
an initial sales force of fewer than 100 sales representatives
in the United States.
We plan to utilize the knowledge we have obtained through review
of recent ZYFLO prescription patterns, which demonstrate that,
despite the lack of a sustained marketing effort, ZYFLO has
developed an established prescriber base among specialists who
treat asthma. Prescription data for the 12-month period ended
September 30, 2003 revealed that approximately 1,700
physicians were prescribing the product. The top 20% of
prescribing physicians accounted for 57% of all prescriptions
and the top 25 prescribers averaged 79 prescriptions each. We
believe these data suggest that physicians who are aware of
zileuton prescribe the product in moderately high volumes.
We intend to position ZYFLO as a treatment for asthma patients
who do not gain adequate control of their symptoms with other
currently available medications. We expect that as part of our
launch, we will promote ZYFLO to specialists who treat asthma
and managed care decision makers. As part of our marketing
strategy, we plan to educate key opinion leaders and physicians
on the scientific data that differentiates ZYFLO’s
mechanism of action from other asthma treatments and emphasize
clinical data that show safety and efficacy for ZYFLO in asthma
at all levels of severity.
We also intend to maximize patient and physician access to ZYFLO
by addressing ZYFLO’s position on managed care formularies.
We believe that in many managed care formularies, as a result of
the lack of a sustained marketing effort, ZYFLO has been removed
or relegated to third-tier status, which requires the highest
co-pay for patients prescribed the product.
If we successfully complete the development of, and receive
regulatory approval for, the controlled-release formulation of
zileuton, we will seek to convert prescribing and usage of ZYFLO
to this formulation.
We intend to explore the therapeutic benefits of zileuton in
treating a range of diseases and conditions, including acne,
COPD, nasal polyposis and mastocytosis. We are aware, for
instance, of clinical data available in publications of clinical
trials and individual patient case trials that indicate zileuton
has shown efficacy in the treatment of nasal polyps and acne. We
are currently conducting a Phase II clinical trial in
patients with moderate to severe inflammatory acne and we expect
to complete the trial by the end of the first half of 2005. In
each case, if we develop zileuton for one of these diseases or
conditions, we will need to commence clinical development
programs to generate sufficient information to obtain a
regulatory label. During the manufacturing transfer and
regulatory review periods, we intend to conduct additional
trials in specific asthma patient populations prior to
commercial launch to aid in the successful repositioning of the
product as well as to support the use of the product in the
target markets.
Critical Care: The Inflammatory Response
We are developing product candidates directed towards the
inflammatory response that we believe is responsible for the
single or multiple organ failures often seen in patients
admitted to the emergency room or the intensive care unit, or
ICU. Our product development programs in this area center on
cytokines and other inflammatory mediators that play a key role
in regulating the body’s immune system. We believe that the
cytokine cascade is responsible for the severe inflammatory
response seen in:
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acute diseases and conditions that lead to admission to the ICU,
such as sepsis, septic shock, post surgical ileus, the damage to
vital organs resulting from cardiopulmonary bypass during
surgery, trauma and burns; and |
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acute exacerbations of chronic diseases that frequently lead to
hospitalization, such as rheumatoid arthritis, Crohn’s
disease, acute pancreatitis and ulcerative colitis. |
In the setting of severe infection, trauma, severe bleeding or a
lack of oxygen to the major organs of the body, the
overproduction of inflammatory mediators, including cytokines,
can lead to organ failure, tissue destruction and, eventually,
death. When cytokine levels become elevated, an excessive
inflammatory response occurs that may potentially result in
damage to vital internal organs and, in the most severe cases,
may result in multiple organ failure and death. While TNFα
is the first cytokine released during the cytokine cascade, the
transient nature of its release leaves only a short window of
opportunity for therapy. Many previous therapies directed at
TNFα in acute diseases have failed in clinical
development. The failure of such therapies may be a consequence
of the fact that the cytokine cascade comprises many different
cytokines, including HMGB1, which is believed to be released
late in the inflammatory response and acts as the final common
pathway to sickness and death.
Individual programs within our portfolio, while targeted toward
the inflammatory response, exert their effects through different
mechanisms of action. These programs include:
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a CTI-01 program directed towards the development of a small
molecule product candidate that directly affects the release of
cytokines through a number of different mechanisms; |
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an HMGB1 program directed towards a newly-discovered
pro-inflammatory cytokine, HMGB1; and |
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a cholinergic anti-inflammatory program directed towards a
receptor that we believe regulates the release of the cytokines
that play a fundamental role in the inflammatory response,
including TNFα, in response to an inflammatory stimulus. |
8
We believe the probability of success of any one of our programs
is not directly dependent upon the success or failure of any of
our other programs. We believe our therapeutic approaches
provide multiple opportunities for success and may increase the
productivity of our research and development efforts. The
programs we currently have directed towards the inflammatory
response are as follows:
We are developing a small molecule, CTI-01, that we believe may
be effective in regulating the inflammatory response in addition
to its known antioxidant activity. We plan to develop CTI-01 for
at least one disease or condition such as organ damage resulting
from cardiopulmonary bypass or post-operative ileus. In animal
studies, CTI-01 has improved organ function or survival in a
number of models of critical illness. In these studies, CTI-01
was effective when the drug was administered after disease
onset, as well as in preventative administration when the drug
was administered before disease onset. CTI-01 has demonstrated
positive responses in animal models of restricted blood supply
to the intestines, severe bleeding, overwhelming bacterial
infection and acute intestinal injury.
Scientific research suggests that CTI-01 inhibits the systemic
release of a number of cytokines that play a fundamental role in
the inflammatory response, including TNFα and HMGB1. Many
of these cytokines are responsible for the severe inflammatory
response that contributes to organ damage. Research shows CTI-01
inhibits the activation of inflammatory signaling pathways, the
activation of a number of pro-inflammatory genes and the release
of the late-acting cytokine HMGB1, both in vivo and
in vitro.
Our current formulation of CTI-01 is an intravenous infusion
best administered in diseases and conditions that enable a
central line to be utilized to deliver the drug to the
patients’ bloodstream via a large vein. We believe this
product candidate to be best suited for diseases and conditions
with the inflammatory response as the underlying complication
and where patients already have central lines inserted for
medical care. Potential opportunities for CTI-01 include:
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damage to vital organs that can occur in patients after
cardiopulmonary bypass, a procedure commonly performed during
cardiothoracic surgery; and |
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post-operative ileus, which is the loss of normal contractile
movement in the intestine due to inflammation of the muscle
layers of the intestine after abdominal surgery, which is one of
the major reasons why patients stay in the hospital after
surgery. |
9
In 2003, we conducted a Phase I clinical trial of CTI-01 in
healthy volunteers in the United Kingdom. The trial consisted of
two phases, a phase designed to evaluate the highest dose that
can be given before experiencing unwanted drug effects followed
by an endotoxin challenge model designed to investigate whether
CTI-01 would affect cytokine production. The results from the
completed trial indicated:
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a reduction in the TNFα response to bacterial endotoxin
challenge compared to placebo; and |
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a maximum tolerated dose of 160mg/kg infused over 12 hours. |
At doses above the maximum tolerated dose, human volunteers in
the trial experienced local irritation in the vein at the
infusion site. In 2004, we conducted a second Phase I
clinical trial in healthy volunteers in the United States. In
this trial, in order to avoid the local venous irritation,
CTI-01 was administered using a PICC line, or peripherally
inserted central catheter line, positioned in a larger vein
where faster bloodflow rates caused a more rapid dispersal of
CTI-01 into the bloodstream. By overcoming the local irritation
issue, we were able to deliver higher doses of CTI-01 to the
volunteers. The results from the completed trial demonstrated
that doses of up to 75 mg/kg could be infused over 30
minutes without significant side effects and enabled us to
select a dose for use in a Phase II clinical trial.
In February 2005, we initiated a Phase II clinical trial to
determine the safety and efficacy of CTI-01 in the prevention of
organ damage in patients undergoing major cardiac surgery
involving the use of cardiopulmonary bypass, such as coronary
bypass graft and/or valve replacement or repair. This
double-blind, randomized, placebo-controlled trial is being
conducted at multiple centers in the United States, and we
expect to complete enrollment by the end of 2005.
We are evaluating mechanisms to prevent HMGB1 from effecting its
role in inflammation-mediated diseases. HMGB1 has been
identified as a potential late mediator of inflammation-induced
tissue damage. Unlike other previously identified cytokines,
such as interleukin-1 and TNFα, HMGB1 is expressed much
later in the inflammatory response and persists at elevated
levels for a longer time period and we believe therefore is a
unique target for the development of products to treat
inflammation-mediated diseases.
In 2003, we entered into an exclusive license and collaboration
agreement with MedImmune to jointly develop and commercialize
products directed towards HMGB1. In January 2005, we entered
into a collaboration with Beckman Coulter to develop a
diagnostic that could be used to identify which patients have
elevated levels of HMGB1 and would, therefore, be most likely to
respond to anti-HMGB1 therapy.
Our internal research programs are currently aimed at generating
antibodies that can neutralize circulating HMGB1 prior to it
binding to its receptor. We have developed in our laboratories
monoclonal antibodies directed towards HMGB1 that are currently
in preclinical development. We intend to initiate small molecule
programs directed towards HMGB1 once we are able to fully
characterize its receptor.
We believe that HMGB1’s delayed and prolonged expression
offers a new target for the development of products with a
significantly broader treatment window than TNFα for acute
diseases that can result in multiple organ failure, including
sepsis and septic shock, and acute exacerbations of chronic
diseases associated with the inflammatory response mediated by
cytokines, such as rheumatoid arthritis.
Sepsis is the body’s systemic inflammation response to
infection or trauma. In animal models of septic shock, both
polyclonal and monoclonal antibodies targeting HMGB1 were
successful in significantly reducing the mortality rate
associated with these models. To date, limited clinical
investigations have identified that patients with sepsis have
elevated levels of HMGB1 in their bloodstream, compared to
normal individuals, who do not have detectable levels of HMGB1
in their bloodstream. The elevated HMGB1 levels appeared to be
greatest in the patients who subsequently died as a result of
their disease.
10
Similar treatment opportunities also exist with other diseases
that include an HMGB1 component, such as rheumatoid arthritis.
Elevated levels of HMGB1 have been observed in the synovial
fluid in the joints of rheumatoid arthritis patients, and
positive symptom responses have been achieved in animal models
of rheumatoid arthritis with anti-HMGB1 therapy.
We have generated a number of monoclonal antibodies that bind to
HMGB1 and that are active in vitro and in
vivo. A number of these antibodies have demonstrated a
dose-dependent benefit on survival in a mouse model of
overwhelming infection and a reduction in clinical arthritis
symptoms in a mouse rheumatoid arthritis model. In both of these
tests, the monoclonal antibodies were administered in a
treatment model after disease onset, as opposed to the
preventive model in which the drug is administered before
disease onset.
We are currently collaborating with MedImmune in the further
preclinical investigation of our monoclonal antibodies in a
number of animal models. MedImmune is conducting programs
necessary to advance potential product candidates into
Phase I clinical trials of the lead product candidate.
Together with MedImmune, we plan to develop product candidates
in parallel for both acute and chronic diseases and conditions.
We are still investigating the receptor for HMGB1, and we plan
to commence programs directed towards small molecules that block
this receptor once we have isolated and fully characterized the
receptor.
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Cholinergic Anti-inflammatory Program |
Stimulation of the vagus nerve, a nerve that links the brain
with the major organs of the body, causes the release of a
chemical neurotransmitter called acetylcholine. Acetylcholine
has been shown to inhibit the release of cytokines that play a
fundamental role in the inflammatory response, including
TNFα. Research indicates that acetylcholine exerts
anti-inflammatory activity by stimulating the nicotinic
α-7 cholinergic receptor, or α-7 receptor, on the
macrophage cell.
Historically, a number of companies have focused on the
α-7 receptor target in the treatment of central nervous
system, or CNS, diseases. We believe the discovery of the role
of this receptor in inflammation has led to a new opportunity
for the development of products to treat diseases in which
inflammation plays a role. We are undertaking both a program to
develop a small molecule product that inhibits the inflammatory
response by acting on the α-7 receptor on human macrophage
cells and a program to develop an electrical device to stimulate
the vagus nerve to inhibit the release of proinflammatory
cytokines.
Our successful development of a product candidate targeting the
α-7 receptor could lead to a novel treatment for severe
acute inflammatory disease, as well as an oral anti-cytokine
therapy that could be directed at chronic inflammatory diseases
such as rheumatoid arthritis and Crohn’s disease. We
believe the previous work on this receptor will assist the
discovery of new, peripherally acting drugs that stimulate the
α-7 receptor. We believe a drug candidate taken orally
could have a strong market position against current injectable
anti-TNFα biological therapies, particularly if it avoids
the potential immunological response to therapy, which is a
known risk with antibody products.
Small Molecule. We are currently seeking to develop
novel, small molecules directed towards the α-7 receptor.
In September 2004, we licensed from the University of Florida
access to a family of molecules known to be active against the
α-7 receptor. We are currently conducting preclinical
evaluation
11
of these molecules in animal models of cytokine-mediated disease
to determine the extent of their activity against this receptor.
Electronic Vagal Stimulation. We are also exploring the
development of a medical device, similar to those already
marketed for the treatment of epileptic seizures, to stimulate
the vagus nerve, cause the release of acetylcholine and induce
an anti-inflammatory response. We would develop this device only
with a collaborator who has direct experience in device
development and commercialization. Vagus nerve stimulators are
currently approved and used for the treatment of epileptic
seizures in the United States. Electronic vagal stimulation may
provide a novel option for the treatment of acute exacerbations
of rheumatoid arthritis, Crohn’s disease, ulcerative
colitis and pancreatitis.
Collaborations
In July 2003, we entered into an exclusive license and
collaboration agreement with MedImmune to jointly develop
products directed towards HMGB1. Under the terms of the
agreement, we granted MedImmune an exclusive worldwide license,
under patent rights and know-how controlled by us, to make, use
and sell products, including small molecules and antibodies,
that bind to, inhibit or inactivate HMGB1 and are used in the
treatment or prevention, but not the diagnosis, of diseases,
disorders and medical conditions.
We and MedImmune determine the extent of our collaboration on
research and development matters each year upon the renewal of a
rolling three-year research plan. We are currently working with
MedImmune to evaluate the potential of a series of mouse
monoclonal antibodies, discovered and cloned at our
laboratories, as agents for development as therapeutic
antibodies to enable them to enter clinical development. Under
the terms of the agreement, MedImmune has agreed to fund and
expend efforts to research and develop at least one
HMGB1-inhibiting product for two indications through specified
clinical phases.
Under the collaboration, MedImmune has paid us initial fees of
$12.5 million. We may also receive under the collaboration
research and development payments from MedImmune, including a
minimum of $3.0 million of research and development
payments for the first three years of the agreement, of which
$1.5 million had been paid by December 31, 2004. In
addition, we may receive, subject to the terms and conditions of
the agreement, other payments upon the achievement of research,
development and commercialization milestones up to a maximum of
$124.0 million, after taking into account payments that we
are obligated to make to North Shore-Long Island Jewish Research
Institute on milestone payments we receive from MedImmune.
MedImmune also has agreed to pay royalties to us based upon net
sales by MedImmune of licensed products resulting from the
collaboration. MedImmune’s obligation to pay us royalties
continues on a product-by-product and country-by-country basis
until the later of ten years from the first commercial sale of a
licensed product in each country and the expiration of the
patent rights covering the product in that country. We are
obligated to pay a portion of any milestone payments or
royalties we receive from MedImmune to North Shore, which
initially licensed to us patent rights and know-how related to
HMGB1. In connection with entering into the collaboration
agreement, an affiliate of MedImmune purchased an aggregate of
$15.0 million of our series B convertible preferred
stock in October 2003 and March 2004, which converted into
2,857,142 shares of our common stock in June 2004 in
connection with our initial public offering.
We have agreed to work exclusively with MedImmune in the
research and development of HMGB1-inhibiting products. Under the
terms of the agreement, MedImmune’s license to
commercialize HMGB1-inhibiting products generally excludes us
from manufacturing, promoting or selling the licensed products.
However, we have the option to co-promote in the United States
the first product for the first indication approved in the
United States, for which we must pay a portion of the ongoing
development costs and will receive a proportion of the profits
in lieu of royalties that would otherwise be owed to us.
MedImmune has the right to terminate the agreement at any time
on six-months written notice. Each party has the right to
terminate the agreement upon the occurrence of a material
uncured breach by the
12
other party. Under specified conditions, we or MedImmune may
have certain payment or royalty obligations after the
termination of the agreement.
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Beckman Coulter Collaboration |
In January 2005, we entered into a license agreement with
Beckman Coulter relating to the development of diagnostic
products for measuring HMGB1. Under the terms of the agreement,
we granted to Beckman Coulter and its affiliates an exclusive
worldwide license, under patent rights and know-how controlled
by us relating to the use of HMGB1 and its antibodies in
diagnostics, to evaluate, develop, make, use and sell a kit or
assemblage of reagents for measuring HMGB1 that utilizes one or
more monoclonal antibodies to HMGB1 developed by us or on our
behalf.
In consideration for the license, Beckman Coulter paid us a
product evaluation license fee of $250,000. Under the agreement,
we may also receive additional aggregate license fees of up to
$850,000 upon the exercise by Beckman Coulter of its option to
continue the license prior to a future date and the achievement
of the first commercial sale of a licensed product. Beckman
Coulter also agreed to pay us royalties based on net sales of
licensed products by Beckman Coulter and its affiliates. Beckman
Coulter has the right to grant sublicenses under the license,
subject to our written consent, which we have agreed not to
unreasonably withhold. In addition, Beckman Coulter agreed to
pay us a percentage of any license fees, milestone payments or
royalties actually received by Beckman Coulter from its
sublicensees.
The license agreement will terminate if Beckman Coulter does not
exercise its option to continue the license by a future date. In
addition, Beckman Coulter has the right to terminate the license
agreement at any time on 90-days written notice. Each party has
the right to terminate the license agreement upon the occurrence
of a material uncured breach by the other party.
Research and Development
We believe that our research and development capabilities and
our sponsored research arrangements position us well to sustain
our product pipeline. As of December 31, 2004, we had 34
employees engaged in research, development and regulatory
affairs. Our research and development group seeks to identify
the most promising development candidates and the most
appropriate development pathways to maximize our chances of
successful development. We also augment our internal research
capabilities through sponsored research arrangements with
academic and research institutions and individual academics, as
well as in-licensed product candidates and technologies.
During the fiscal years ended December 31, 2002, 2003 and
2004, research and development expenses were $3.3 million,
$17.5 million and $25.6 million, respectively.
Sales and Marketing
We plan to develop a sales and marketing infrastructure to
commercialize ZYFLO and the controlled-release formulation of
zileuton in the United States. We believe that, by developing a
sales and marketing infrastructure to commercialize zileuton, we
will have a seasoned organization in place that we can leverage
if and when we launch any future respiratory or critical care
products. Accordingly, we have hired Frederick Finnegan as our
Senior Vice President of Sales and Marketing, four regional
sales directors and a national director for managed care to lead
the development of this infrastructure. Mr. Finnegan has
significant sales and marketing experience from previous roles
at biotechnology and large and small pharmaceutical companies.
We intend to focus our sales and marketing efforts for zileuton
on key opinion leaders and specialists who treat asthma,
including allergists, pulmonologists and ENTs, or ear, nose and
throat surgeons. Because we expect to target our marketing and
sales efforts to the moderate to severe asthma market, we
believe we can successfully focus our efforts with a relatively
small sales force on the approximately 16,000 specialists who
tend to treat the majority of these patients. These specialists
include a top tier of 100 to 200 national or key opinion leaders
who serve to influence the direction of the diagnosis and
treatment of
13
asthma through their research and publications, and a second
tier of practice-based specialists who are responsible for
treating the majority of patients.
Given the importance of these key opinion leaders, we plan to
direct our scientific message and support to help educate and
inform key opinion leaders regarding the scientific rationale
and data that support our commercialization strategy. Initially,
we will enter into consulting arrangements with approximately
ten key opinion leaders who will comprise our expert panel.
After our expert panel has been formed, we intend to expand our
reach to 100 to 200 key opinion leaders through a group of
medical liaisons who will be directed by our chief medical
officer.
We plan to initiate contact with the second tier of
practice-based specialists when we launch our sales force. In
the first two years following the launch of our sales force, we
do not expect to contact every practicing specialist who treats
asthma. Instead, we expect to target the top 50% of specialists
in terms of prescribing productivity within asthma and the top
400 to 500 physicians prescribing ZYFLO. As we expand our sales
force, we expect to expand our reach to the top 70% to 80% of
specialists who treat asthma.
Part of our overall strategy for zileuton also includes
repositioning the product within the managed care market. We
intend to position zileuton with managed care medical directors
and pharmacists as a treatment alternative when medications have
failed to provide adequate symptomatic control. As a result, in
addition to the awareness provided by office-based
representatives, we believe information regarding zileuton will
reach potential prescribing physicians through managed care
pharmacies communicating the product’s modified formulary
status.
We expect that our sales effort for zileuton will expand if we
develop and obtain regulatory approval for the intravenous
formulation of zileuton for urgent and inpatient treatment of
acute exacerbations of asthma. We believe the launch of an
intravenous formulation will increase awareness of zileuton
among those primary care physicians, or PCPs, whose patients are
prescribed zileuton after a visit to the emergency room due to
an acute exacerbation of asthma. In addition, we intend to seek
a co-promotion partner for the controlled-release and
immediate-release formulations of zileuton who would take
responsibility to promote zileuton to PCPs. We believe these
efforts should enable us to migrate our sales and marketing
focus and activities from solely office-based specialists to
include the hospital products marketplace.
Manufacturing
We have no experience in, and we do not own any facilities for,
manufacturing our product candidates. We currently outsource the
manufacturing of our product candidates for use in clinical
trials to qualified third parties and intend to continue to rely
on contract manufacturing from third parties to supply products
for both clinical use and commercial sale.
Prior to licensing zileuton to us, Abbott maintained its own
manufacturing capabilities for ZYFLO. Under the terms of our
license agreements, Abbott agreed to transfer its know-how and
technology for the manufacture and validation of zileuton API
and the immediate-release and controlled-release formulations of
zileuton and the manufacturing process to us or a designated
third party. We have established the following manufacturing
arrangements for zileuton.
We have contracted with Rhodia Pharma Solutions Ltd. to
establish and validate a manufacturing process for the API at
sites operated by Rhodia. The technology transfer to Rhodia has
been completed and Rhodia is validating the API manufacturing
process and preparing to commence commercial production. In
February 2005, we entered into a commercial supply agreement
with Rhodia for the commercial production of the API. Under the
commercial supply agreement, Rhodia has agreed to manufacture
our commercial supplies of API, subject to specified
limitations, through December 31, 2009. The agreement will
automatically extend for successive one-year periods after
December 31, 2009, unless
14
Rhodia provides us with 18-months prior written notice of
cancellation. We have the right to terminate the agreement upon
12-months prior written notice for any reason, provided that we
may not cancel prior to January 1, 2008 for the purpose of
retaining any other company to act as our exclusive supplier of
the API. We also have the right to terminate the agreement upon
six-months prior written notice if we terminate our plans to
commercialize zileuton for all therapeutic indications. If we
exercise our right to terminate the agreement prior to its
scheduled expiration, we are obligated to reimburse Rhodia for
specified raw material and out-of-pocket costs. In addition, if
we exercise our right to terminate the agreement due to
termination of our plans to commercialize zileuton for all
therapeutic indications, then we are also obligated to pay
Rhodia for all API manufactured by Rhodia through that date.
Furthermore, each party has the right to immediately terminate
the agreement for cause, including a material uncured default by
the other party.
We have contracted with Patheon Pharmaceuticals Inc. for the
manufacture of ZYFLO for clinical trials and regulatory review.
The agreement with Patheon has no specified term, and we can
terminate the agreement at any time for any reason, subject to
payment of fees and expenses incurred by Patheon through the
date of termination. Patheon may deem the agreement to be
terminated if any rescheduling of services requested by us
results in a delay in Patheon’s ability to provide services
beyond 120 days. Each party has the right to terminate the
agreement upon the occurrence of a material uncured breach by
the other party. In addition to this agreement, we have
initiated discussions with Patheon for an agreement relating to
the ongoing manufacture of commercial supplies of ZYFLO.
We have contracted with SkyePharma PLC, through its subsidiary
Jagotec AG, for the manufacture of the controlled-release tablet
formulation of zileuton for clinical trials, regulatory review
and commercial sale. SkyePharma has agreed to manufacture the
commercial supplies of the controlled-release formulation of
zileuton, upon FDA approval, under a manufacturing agreement
that we would enter into with SkyePharma having a term of no
less than five years. SkyePharma’s current manufacturing
obligations for the controlled-release formulation of zileuton
are reflected in our license agreement relating to our use of
SkyePharma’s controlled-release patent rights and know-how.
Both we and SkyePharma have the right to terminate that license
agreement upon the occurrence of a material uncured breach by
the other party. We have separately contracted with SkyePharma
to help establish a manufacturing process for ZYFLO and, if
needed, to manufacture ZYFLO for clinical trials and regulatory
review. In consideration for SkyePharma’s manufacturing and
development services, we agreed to pay SkyePharma an upfront fee
of $250,000 and additional amounts on a time and materials
basis. Both we and SkyePharma have the right to terminate the
contract upon the occurrence of a material uncured breach by the
other party, upon a change of control of the other party or,
with the consent of the other party, if results achieved during
testing or other technical, medical or scientific problems
reasonably require termination. We also have the right to
terminate the contract upon 120-days prior notice.
We expect to enter into manufacturing arrangements with third
parties for the manufacture of our other product candidates for
clinical use. For example, we will need to enter into
arrangements for the manufacture of products for clinical trials
in our cholinergic anti-inflammatory and CTI-01 programs. We
believe that MedImmune will be responsible for manufacturing of
any biologic products that result from our HMGB1 program.
License and Royalty Agreements
We have entered into a number of license agreements under which
we have licensed intellectual property and other rights needed
to develop our products, including the license agreements
summarized below.
15
In December 2003, we acquired an exclusive worldwide license,
under patent rights and know-how controlled by Abbott, to
develop, make, use and sell controlled-release and intravenous
formulations of zileuton for all clinical indications, except
for the treatment of children under age seven and use in
cardiovascular and vascular devices. This license included an
exclusive sublicense of Abbott’s rights in proprietary
controlled-release technology originally licensed to Abbott by
Jagotec AG, a subsidiary of SkyePharma. In consideration for the
license, we paid Abbott an initial $1.5 million license fee
and agreed to make aggregate milestone payments of up to
$13.0 million to Abbott upon the achievement of various
development and commercialization milestones, including the
completion of the technology transfer from Abbott to us, filing
and approval of a product in the United States and specified
minimum net sales of licensed products. In addition, we agreed
to pay royalties to Abbott based on net sales of licensed
products by us, our affiliates and sublicensees. Our obligation
to pay royalties continues on a country-by-country basis for a
period of ten years from the first commercial sale of a licensed
product in each country. Upon the expiration of our obligation
to pay royalties for licensed products in a given country, the
license will become perpetual, irrevocable and fully paid up
with respect to licensed products in that country. If we decide
to sublicense rights under the license, we must first enter into
good faith negotiations with Abbott for the commercialization
rights to the licensed product. Each party has the right to
terminate the license upon the occurrence of a material uncured
breach by the other party. We also have the right to terminate
the license at any time upon 60 days notice to Abbott and
payment of a termination fee.
In March 2004, we acquired from Abbott the U.S. trademark
ZYFLO® and an exclusive worldwide license, under patent
rights and know-how controlled by Abbott, to develop, make, use
and sell the immediate-release formulation of zileuton for all
clinical indications. In consideration for the license and the
trademark, we have agreed to pay Abbott an initial fee of
$500,000, a milestone payment of $750,000 upon approval of the
sNDA, and royalties based upon net sales of licensed products by
us, our affiliates and sublicensees. Our obligation to pay
royalties continues on a country-by-country basis for a period
of ten years from the first commercial sale of a licensed
product in each country. Upon the expiration of our obligation
to pay royalties in a given country, the license will become
perpetual, irrevocable and fully paid up with respect to
licensed products in that country. Each party has the right to
terminate the license upon the occurrence of a material uncured
breach by the other party.
In December 2003, we entered into an agreement with SkyePharma,
through its subsidiary Jagotec, under which SkyePharma consented
to Abbott’s sublicense to us of rights to make, use and
sell the controlled-release formulation of zileuton covered by
SkyePharma’s patent rights and know-how. Under the terms of
the agreement, SkyePharma also agreed to manufacture the
controlled-release formulation of zileuton for clinical trials,
regulatory review and, subject to negotiation of a commercial
manufacturing agreement, commercial sale. In consideration for
SkyePharma’s prior work associated with the licensed patent
rights and know-how, we paid SkyePharma an upfront fee of
$750,000. We also agreed to make aggregate milestone payments to
SkyePharma of up to $6.6 million upon the achievement of
various development and commercialization milestones. In
addition, we agreed to pay royalties to SkyePharma based upon
net sales of the product by us and our affiliates. We also
agreed to pay royalties to SkyePharma under the license
agreement between SkyePharma and Abbott based upon net sales of
the product by us and our affiliates. We also agreed to pay
SkyePharma fees if we sublicense our rights under the licensed
patent rights and know-how. Each party has the right to
terminate the agreement upon the occurrence of a material
uncured breach by the other party.
In July 2001, we acquired from North Shore an exclusive
worldwide license, under patent rights and know-how controlled
by North Shore relating to HMGB1, to make, use and sell products
covered by the licensed patent rights and know-how. North Shore
retained the right to make and use the licensed products in its
own laboratories solely for non-commercial, scientific purposes
and non-commercial
16
research. In consideration for the license, we paid an initial
license fee of $100,000. We also agreed to make milestone
payments to North Shore of up to $275,000 for the first product
covered by the licensed patent rights and an additional $100,000
for each additional distinguishable product covered by the
licensed patent rights, up to $137,500 for the first product
covered by the licensed know-how and not the licensed patent
rights and an additional $50,000 for each additional
distinguishable product covered by the licensed know-how and not
the licensed patent rights, in each case upon the achievement of
specified development and regulatory milestones for the
applicable licensed product. In addition, we agreed to pay North
Shore royalties based on net sales of licensed products by us
and our affiliates until the later of ten years from the first
commercial sale of each licensed product in a given country and
the expiration of the patent rights covering the licensed
product in that country. We agreed to pay minimum annual
royalties to North Shore beginning in July 2007 regardless of
whether we sell any licensed products. We also agreed to pay
North Shore fees if we sublicense our rights under the licensed
patent rights and know-how. Each party has the right to
terminate the agreement upon the occurrence of a material
uncured breach by the other party.
We also have entered into two sponsored research and license
agreements with North Shore. In July 2001, we entered into a
sponsored research and license agreement with North Shore under
which, as amended, we agreed to pay North Shore $200,000
annually until June 2006 to sponsor research activities at North
Shore to identify inhibitors and antagonists of HMGB1 and
related proteins, including antibodies. In January 2003, we
entered into a sponsored research and license agreement with
North Shore under which we agreed to pay North Shore $200,000
annually until January 2006 to sponsor research activities at
North Shore in the field of cholinergic anti-inflammatory
technology. Any future research terms under either of these
agreements are subject to agreement between North Shore and us.
Under the terms of these agreements, we acquired an exclusive
worldwide license to make, use and sell products covered by the
patent rights and know-how arising from the sponsored research.
North Shore retained the right under each of these agreements to
make and use the licensed products in its own laboratories
solely for non-commercial, scientific purposes and
non-commercial research.
In connection with the July 2001 sponsored research and license
agreement, we issued North Shore 27,259 shares of our
common stock and agreed to make milestone payments to North
Shore of $200,000 for the first product covered by the licensed
patent rights, and an additional $100,000 for each additional
distinguishable product covered by the licensed patent rights,
$100,000 for the first product covered by the licensed know-how
and not the licensed patent rights and an additional $50,000 for
each additional distinguishable product covered by the licensed
know-how and not the licensed patent rights, in each case upon
the achievement of specified development and regulatory approval
milestones with respect to the applicable licensed product. In
connection with the January 2003 sponsored research and license
agreement, we paid North Shore an initial license fee of
$175,000 and agreed to pay additional amounts in connection with
the filing of any U.S. patent application or issuance of a
U.S. patent relating to the field of cholinergic
anti-inflammatory technology. We also agreed to make aggregate
milestone payments to North Shore of up to $1.5 million in
both cash and shares of our common stock upon the achievement of
specified development and regulatory approval milestones with
respect to any licensed product. In addition, under each of
these agreements, we agreed to pay North Shore royalties based
on net sales of a licensed product by us and our affiliates
until the later of ten years from the first commercial sale of
licensed products in a given country and the expiration of the
patent rights covering the licensed product in that country.
Under the January 2003 sponsored research and license agreement,
we agreed to pay minimum annual royalties to North Shore
beginning in the first year after termination of research
activities regardless of whether we sell any licensed products.
We also agreed to pay North Shore certain fees if we sublicense
our rights under the licensed patent rights and know-how under
either agreement. In connection with our sublicense to MedImmune
of our rights with respect to HMGB1, we have pai
