UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
FOR
ANNUAL AND TRANSITIONAL REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
ý ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2003
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission
File Number 0-19635
GENTA
INCORPORATED
(Exact name of Registrant as specified in its certificate
of incorporation)
| Delaware | 33-0326866 | |
| (State or other jurisdiction of incorporation or organization) | (IRS Employer Identification Number) | |
| Two
Connell Drive Berkeley Heights, New Jersey |
07922 | |
| (Address of principal executive offices) | (Zip Code) |
(908)
286-9800
(Registrant’s telephone number, including area code)
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 ý 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 Rule 12b-2 of the Securities Exchange Act of 1934). Yes ý No o
The approximate aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant was $508,349,195 as of June 30, 2003 (the last business day of the registrant’s most recently completed second fiscal quarter). For purposes of determining this number, 36,307,738 shares of common stock held by affiliates as of June 30, 2003 are excluded. For purposes of making this calculation, the registrant has defined affiliates as including all directors, executive officers and beneficial owners of more than ten percent of the common stock of the Company.
As of March 11, 2004, the registrant had 77,722,489 shares of Common Stock outstanding.
Documents Incorporated by Reference
Certain provisions of the registrant’s definitive proxy statement to be filed not later than April 30, 2004 pursuant to Regulation 14A are incorporated by reference in Items 10 through 13 of Part III of this Annual Report on Form 10-K.
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Genta
Incorporated
Table of Contents
| Part I | |||
| Item 1. | Business | 4 | |
| Item 2. | Properties | 27 | |
| Item 3. | Legal Proceedings | 27 | |
| Item 4. | Submission of Matters to a Vote of Security Holders | 28 | |
| Part II | |||
| Item 5. | Market For Registrant's Common Equity and Related Stockholder Matters | 29 | |
| Item 6. | Selected Consolidated Financial Data | 30 | |
| Item 7. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 31 | |
| Item 7A. | Quantitative and Qualitative Disclosure about Market Risk | 37 | |
| Item 8. | Financial Statements and Supplemental Data | 38 | |
| Part III | |||
| Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 65 | |
| Item 9A. | Controls and Procedures | 65 | |
| Item 10. | Directors and Executive Officers of the Registrant (1) | 65 | |
| Item 11. | Executive Compensation (1) | 65 | |
| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters (1) | 65 | |
| Item 13. | Certain Relationships and Related Transactions (1) | 65 | |
| Item 14. | Principal Accounting Fees and Services (1) | 65 | |
| Part IV | |||
| Item 15. | Exhibits, Financial Statement Schedules and Reports on Form 8-K | 66 | |
| Signatures | 70 | ||
| Certifications | 77 | ||
| (1) | The information required in these items is incorporated by reference from the Company’s definitive proxy statement to be filed not later than April 30, 2004 pursuant to Regulation 14A of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended. |
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Table of Contents
The statements contained in this Annual Report on Form 10-K that are not historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding the expectations, beliefs, intentions or strategies regarding the future. The Company intends that all forward-looking statements be subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect the Company’s views as of the date they are made with respect to future events and financial performance, but are subject to many risks and uncertainties, which could cause actual results to differ materially from any future results expressed or implied by such forward-looking statements. Forward-looking statements include, without limitation, statements about:
The Company does not undertake to update any forward-looking statements.
We make available free of charge on our internet website (http://www.genta.com) our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission. The content on the Company’s website is available for informational purposes only. It should not be relied upon for investment purposes, nor is it incorporated by reference into this Form 10-K.
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PART I
A. Overview
Genta Incorporated (“Genta” or the “Company”) was incorporated in Delaware on February 4, 1988. Genta is a biopharmaceutical company dedicated to the identification, development and commercialization of novel drugs for cancer and related diseases. Our research portfolio consists of two major areas of focus:
We began marketing our first commercial product, Ganite™, which is part of our Small Molecule program in October 2003. Ganite™ has been approved by the U.S. Food and Drug Administration (“FDA”), for treatment of cancer-related hypercalcemia that is resistant to hydration. The drug is being marketed and sold exclusively by Genta in the United States by our dedicated sales force.
The Company’s lead investigational antisense drug is called Genasense™ (oblimersen sodium), a molecule that is designed to block the production of a protein known as Bcl-2. Current science suggests that Bcl-2 is a fundamental (although not sole) cause of the inherent resistance of cancer cells to current anticancer treatments, such as chemotherapy, radiation, or monoclonal antibodies. While Genasense™ has displayed some anticancer activity when used by itself, the Company is developing the drug solely as a means of amplifying the effects of other anticancer therapy by pre-treating patients with Genasense™.
In September 2003, Genta reported Phase 3 clinical data for Genasense™ in patients with advanced malignant melanoma. We included these data in our FDA New Drug Application (“NDA”), for Genasense™, which we initiated on a rolling basis in August 2003 (i.e., we filed the NDA in several sections with each section being filed when completed). We completed the NDA filing for use of Genasense™ in combination with chemotherapy for patients with advanced malignant melanoma on December 8, 2003. The FDA accepted our NDA filing on February 5, 2004 and granted “Priority Review” status to the application, which targets an agency action on or before June 8, 2004. On February 10, 2004, we were invited by the FDA to meet on May 3, 2004 with the FDA Oncology Drugs Advisory Committee.
We are pursuing further testing of both Ganite™ and Genasense™ in additional indications. Ganite™ is currently undergoing clinical testing for use as a cancer chemotherapy drug, especially in patients with non-Hodgkin’s lymphoma, or NHL. Genasense™ is being tested as a drug that can increase the effectiveness of current types of cancer therapy. We have completed patient enrollment in two additional randomized Phase 3 trials that test the efficacy of Genasense™ in patients with multiple myeloma and chronic lymphocytic leukemia, or CLL. Genasense™ is also being tested in earlier clinical trials for treating more than 10 other cancer types, including non-small cell lung cancer, small cell lung cancer, NHL, acute and chronic leukemias, cancers of the prostate, colon and breast and other diseases. Genasense™ has received designations as “Fast Track” and “Orphan Drug” from the FDA in the advanced malignant melanoma, multiple myeloma and CLL indications.
We have a series of agreements with Aventis to develop and commercialize Genasense™. Aventis and Genta will co-promote Genasense™ in the United States; Aventis is a major participant in the worldwide oncology market and possesses one of the largest oncology sales forces in the U.S. Under these agreements, Aventis has committed to provide up to $476.9 million in initial payments, milestone payments and for the purchase from us of equity and convertible notes. In addition, Aventis is responsible for 75% of development costs related to any U.S. NDA incurred by Genta or Aventis, and substantially all other development, marketing and sales costs incurred worldwide in connection with Genasense™. Aventis has agreed to pay us royalties on its exclusive worldwide net sales of Genasense™, and to reimburse a portion of our expense in building Genta’s sales force to market Genasense™ in the United States.
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Our pre-clinical pipeline of DNA/RNA Medicines includes technologies known as antisense, RNA inhibitor molecules, or RNAi, and decoys, as well as novel delivery system formulations that can increase the entry of these drugs into cells. In August 2003 we acquired a private company, Salus Therapeutics, Inc., or Salus, in order to strengthen our research and development activities in the DNA/RNA Medicines program. The acquisition of Salus provides a proprietary screening system that rapidly identifies “hot spots” or key target areas in messenger RNA, which can be targeted using both antisense oligonucleotides and RNAi; methods of using single-stranded small interfering RNA and micro-RNA molecules to knockdown gene expression in target cells; and a proprietary delivery platform designed to improve the pharmaceutical properties of oligonucleotides.
In addition to Ganite™, current activities in the Small Molecule program include development of an oral formulation of a gallium-containing compound.
We carry out our strategy by identifying and licensing or acquiring from third parties early to mid-stage products and well-characterized targets. We design and manage the pre-clinical and clinical testing of promising products, which is carried out for us by contract research organizations. Generally we expect to scale up, validate, conduct late-stage clinical trials and commercialize our products either alone or in partnership with established businesses, such as Aventis and Avecia for Genasense™. Our own product quality and regulatory staffs oversee FDA-regulated activities conducted by us or by our business partners.
In 2003, sales of Ganite™ accounted for $1.4 million, or 21%, of our consolidated revenues. License fees and development funding revenues received from Aventis pursuant to our collaborative agreement related to Genasense™ accounted for $1.0 million, or 15% and $4.2 million, or 63% of our consolidated revenues respectively. In 2002 license fees and development funding revenues received from Aventis accounted for $0.8 million, or 22% and $2.8 million, or 78% of our consolidated revenues respectively. In 2001 license fees and royalties derived from non-exclusive sub-license agreements involving antisense technology accounted for $0.1 million, or 100% of consolidated revenues.
B. Summary of Business and Research and Development Programs
Our goal is to establish Genta as a biopharmaceutical leader and preferred partner in the oncology market, and as direct marketers of our products in the United States. Our key strategies and objectives in this regard are:
We believe that drugs based on DNA and RNA are an important next-generation development that Genta is well positioned to commercialize. We are committed to the discovery, clinical development and commercialization of these next-generation oncology drugs.
We believe that Genasense™ will be more effective as a cancer drug used in conjunction with chemotherapy. We are testing Genasense™ in a variety of cancer types in order to establish its utility across many indications. The FDA accepted our filing on February 5, 2004 and granted “Priority Review” status to the application, which targets an agency action on or before June 8, 2004. Assuming FDA approval, we intend to launch Genasense™ in the United States via a co-promotion with Aventis. Aventis plans to file for regulatory approval for Genasense™ in advanced malignant melanoma in countries outside the United States. We are entitled to royalties on all sales of Genasense™ by Aventis. We have completed enrollment in Phase 3 clinical testing of Genasense™ in patients with multiple myeloma and CLL. We expect to complete data analysis and report our results from those clinical trials in 2004. If one or both of these trials proves positive, we believe we can submit a follow-on NDA for Genasense™ in at least one of those diseases in 2004. In addition, in collaboration with Aventis and the National Cancer Institute, or NCI, we plan to initiate both non-randomized and randomized trials for treating eligible patients, based on their disease state, suffering from some of the most prevalent cancers, including lung, breast, prostate and colon cancers and NHL.
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In October 2003, we launched Ganite™ in the United States for the treatment of cancer-related hypercalcemia, and we intend to continue to commercialize the product for that indication. However, Ganite™ was originally developed as a chemotherapy agent, and published Phase 1 and Phase 2 studies have shown a high degree of clinical activity in several diseases, including NHL and bladder cancer. We are currently investigating the use of Ganite™ in Phase 2 clinical trials in patients with NHL, and we intend to pursue the clinical development of Ganite™ in this and other indications with the initiation of new clinical trials.
We intend to continue to develop our other pipeline products for the treatment of patients with cancer, including DNA/RNA Medicines (antisense, siRNA and decoys) and Small Molecules (oral gallium). We intend to continue to evaluate licensing and acquisitions of complementary technologies.
We plan to seek opportunities to license or acquire attractive new products, well-characterized targets, and technologies that could enable us to expand our internal applied research and pre-clinical capabilities. We will continue to strengthen our core competencies in clinical development and regulatory and quality assurance. We also are planning to build our U.S. sales and marketing capabilities.
Antisense Technology
Most of a cell’s functions, including whether the cell lives or dies, are carried out by proteins. The genetic code for a protein is contained in DNA, which is made up of bases known as nucleotides that are arranged in a specific sequence. The specificity of the sequence accounts for the production of a specific protein. In order for DNA to produce a protein, an intermediate step is required. In this step, DNA is transcribed into messenger RNA, or mRNA. The sequence of mRNA that encodes a protein is oriented in only one direction, which is known as the “sense” orientation.
Antisense drugs are short sequences of chemically modified DNA bases that are called oligonucleotides, or oligos. The oligos are engineered in a sequence that is exactly opposite (hence “anti”) to the “sense” coding orientation of mRNA. Because antisense drugs bind only short regions of the mRNA (rather than the whole message itself), they contain far fewer nucleotides than the whole gene. Moreover, since they are engineered to bind only to the matching sequence on a specific mRNA, antisense drugs have both high selectivity and specificity, which can be used to attack production of a single, disease-causing protein. Genasense™ is an antisense oligo that is designed to block the production of Bcl-2.
We have devoted significant resources towards the development of antisense oligos that contain a “second generation” phosphorothioate backbone, which is the nucleotide chain comprised of ribose and phosphate groups. However, we also have patents and technologies covering later “third generation” technologies that involve mixed phosphorothioate and methylphosphonate backbones, as well as sterically fixed chemical bonds, that may further enhance the molecule’s ability to bind to the intended target. Moreover, we have developed certain formulations of polymers that can be used to more efficiently increase the uptake of oligos into cells. Some of these advanced technologies may be incorporated into new DNA/RNA Medicines.
Programmed Cell Death
The programmed death of cells is necessary to accommodate the billions of new cells that are produced daily, and also to eliminate aged or damaged cells. However, abnormal regulation of the programmed cell death process can result in diseases.
Cancer is commonly associated with the over- or under-production of many types of proteins. These proteins may be directly cancer-causing (i.e., “oncogenic”) or they may contribute to the malignant nature of cancer (for instance, by increasing the longevity of cancer cells or making them more likely to spread throughout the body). We believe that the ability to selectively halt the production of certain proteins may make the treatment of certain diseases more effective. The process of programmed cell death is regulated by a large number of proteins, particularly members of the Bcl-2 protein family. In an effort to make existing cancer therapy more effective, Genta is developing Genasense™ to target and block the production of Bcl-2, a protein that is central to the process of programmed cell death also known as apoptosis.
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Bcl-2 as an Inhibitor of Programmed Cell Death
Normally, when a cancer cell is exposed to treatment, such as with chemotherapy, radiation or immunotherapy, a “death signal” is sent to an organelle within the cell called the mitochondrion. The mitochondrion then releases a factor known as cytochrome C that activates a series of enzymes called caspases. These enzymes cause widespread fragmentation of cellular proteins and DNA, which ultimately causes cell death.
Bcl-2 is normally found in the mitochondrial membrane where it regulates the release of cytochrome C. High levels of Bcl-2 are associated with most types of human cancer, including major hematologic cancers such as lymphomas, myeloma, and leukemia, and solid tumors such as melanoma and cancers of the lung, colon, breast, and prostate. In these diseases, Bcl-2 inhibits the release of cytochrome C that would ordinarily be triggered by cancer therapy. Thus, Bcl-2 appears to be a major contributor to both inherent and acquired resistance to cancer treatments. Overcoming resistance to chemotherapy poses a major challenge for cancer treatment.
In cancer cells, Bcl-2 inhibits the process of programmed cell death, thereby allowing cells to survive for much longer than normal cells. Genasense™ has been developed as a chemosensitizing drug to block production of Bcl-2, thereby dramatically increasing the sensitivity of cancer cells to standard cancer treatment.
Genasense™
The lead product from our DNA/RNA Medicines program is Genasense™, an antisense oligonucleotide molecule that is designed to block the production of a protein known as Bcl-2. Current science suggests that Bcl-2 is a fundamental cause of the inherent resistance of cancer cells to current cancer treatments, such as chemotherapy, radiation or monoclonal antibodies. Blocking Bcl-2, therefore, may enable cancer treatments to be more effective. While Genasense™ has displayed some anticancer activity when used by itself, we believe it is more effective as a means of amplifying the effectiveness of other cancer therapies, principally by pre-treatment of patients with Genasense™. Accordingly, we are seeking FDA approval of Genasense™ in conjunction with chemotherapy.
Overview of Preclinical and Clinical studies of Genasense™
Genasense™ Preclinical Studies
The Development of Genasense™
A number of pre-clinical studies in cell lines and in animals have shown enhancement of tumor cell killing when Bcl-2 antisense was used in combination with standard cancer therapies, including anti-metabolites, alkylating agents, corticosteroids, other cytotoxic chemotherapy, radiation, and monoclonal antibodies. Several studies have demonstrated enhanced antitumor activity and durable tumor regression in animals engrafted with human cancers that were treated with Bcl-2 antisense followed by antitumor agents that induce programmed cell death. These studies include human lymphoma, melanoma, breast cancer and prostate cancers, which were treated with Genasense™ in combination with cyclophosphamide, dacarbazine, docetaxel and paclitaxel, respectively.
Genasense™ has been in clinical trials since 1995 in both the United States and Europe. We currently have efficacy and safety data on over 1,400 patients in Phase 1, Phase 2 or Phase 3 clinical trials. These studies have been conducted in patients with a wide variety of tumor types, including advanced malignant melanoma, several types of leukemia, NHL and cancers of the prostate, colon, lung, breast and other tumor types. Since 2001, Genta and the NCI have jointly approved the initiation of approximately 20 new clinical trials. In addition to making Genasense™ available to more physicians and patients, these trials allow us to evaluate Genasense™ in certain diseases (and in combination with other chemotherapy drugs) that would otherwise be outside our initial priorities for clinical development. The overall results of clinical trials performed to date suggest that Genasense™ can be administered to cancer patients with acceptable side-effects, and that such treatment may reduce the level of Bcl-2 protein in cancer cells.
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The following chart sets forth the progress of our clinical trials with respect to various potential indications for Genasense™:
| Indication | Status |
| Advanced Malignant Melanoma | Phase 3 fully enrolled; NDA filed and accepted for "Priority Review"; target FDA action date June 2004 |
| Multiple Myeloma | Phase 3 (fully enrolled);
Phase 1-2 |
| Chronic Lymphocytic Leukemia (CLL) | Phase 3 (fully enrolled);
Phase 2 |
| Acute Myelocytic Leukemia | Phase 2 |
| Non-Small-Cell Lung Cancer | Phase 2 (randomized) |
| Prostate Cancer | Phase 2 |
| Small-Cell Lung Cancer | Phase 2 (randomized) |
| Breast Cancer | Phase 1-2 |
| Colorectal Cancer | Phase 1-2 |
| Non-Hodgkin's Lymphoma (NHL) | Phase 1-2; Phase 2 |
| Kidney Cancer | Phase 2 |
| Pancreatic Cancer (and other solid tumors) | Phase 1-2 |
| Waldenstrom's macroglobulinemia | Phase 1-2 |
| Hepatocellular Carcinoma | Phase 1-2 |
| Childhood Solid Tumors | Phase 1 |
To date, we have completed patient enrollment in three randomized Phase 3 trials, as follows:
Phase 3 Trial of Genasense™ Plus Chemotherapy in Patients with Advanced Malignant Melanoma
On September 10, 2003, we and Aventis announced results from our Phase 3 clinical study of Genasense™ plus chemotherapy in patients with advanced malignant melanoma. The trial enrolled patients at 140 sites from 12 different countries. A total of 771 patients who had not been previously treated with chemotherapy were randomly assigned to receive dacarbazine, a standard chemotherapy drug, alone or in combination with Genasense™. The primary endpoint of this trial was to compare the overall survival between the two treatment arms. Secondary endpoints included comparative analyses of progression-free survival and tumor response. The following results were obtained:
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Data from this trial comprised the basis of a “rolling” NDA for Genasense™, a process that we initiated in August 2003 and completed in December 2003. The FDA accepted our NDA filing on February 5, 2004 and granted “Priority Review” status to the application, which targets an agency action on or before June 8, 2004. On February 10, 2004, we were invited by the FDA to meet on May 3, 2004 with the FDA Oncology Drugs Advisory Committee.
Phase 3 Trial of Genasense™ Plus Chemotherapy in Patients with Multiple Myeloma
We expect to report results in 2004 of a Phase 3 trial of Genasense™ plus chemotherapy in patients with multiple myeloma. This trial is directed at patients whose disease progressed despite chemotherapy. The primary goal of this trial is to increase the time to progression of disease in patients treated with Genasense™ plus high-dose dexamethasone compared with dexamethasone alone. This trial completed enrollment of 220 patients in December 2002, and follow-up of these patients is continuing.
Phase 3 Trial of Genasense™ Plus Chemotherapy in Patients with Chronic Lymphocytic Leukemia
We expect to report results in 2004 of a Phase 3 trial of Genasense™ plus chemotherapy in patients with CLL. This trial is directed at patients whose disease progressed despite chemotherapy. The primary goal of this trial is to increase the proportion of patients who achieve a complete (or nodular partial) response after treatment with Genasense™ plus fludarabine/cyclophosphamide compared with fludarabine/cyclophosphamide alone. This trial completed enrollment of 241 patients in the second quarter of 2003, and follow-up of these patients is continuing.
Current Phase 1 and Phase 2 Trials
In addition to the Phase 3 trials described above, Genasense™ is currently the subject of a number of other clinical trials, as indicated in the foregoing table, including randomized trials in patients with non-small cell lung cancer and small cell lung cancer, and non-randomized trials in patients with NHL, acute and chronic leukemias, various solid tumors and other disorders.
Regulatory Status
We completed the submission of our NDA for Genasense™ to the FDA in December 2003. The FDA accepted our NDA filing on February 5, 2004 and granted “Priority Review” status to the application, which targets an agency action on or before June 8, 2004. On February 10, 2004, we were invited by the FDA to meet on May 3, 2004 with the FDA Oncology Drugs Advisory Committee. We believe we are well-positioned for FDA approval of Genasense™ in 2004 for use in advanced malignant melanoma patients. However, the approval is subject to a number of uncertainties, and we cannot assure you that Genasense™ will be approved in this time frame or at all. The FDA has granted several designations to Genasense™ that may expedite its regulatory review. These designations include:
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For additional background information on the drug application process and clinical trials, see “Government Regulation”.
We have applied for similar designations from regulatory agencies in Europe.
Commercialization Plan
In April 2002, we announced an exclusive agreement with Aventis to jointly develop and commercialize Genasense™. We have agreed with Aventis that only Aventis may sell Genasense™. Genta will supply Aventis with Genasense™ on a global basis. Aventis will pay us a royalty for all worldwide sales of Genasense™. Genta retains sole ownership of and exclusive title to the intellectual property with respect to Genasense™. We have jointly established an alliance management committee consisting of representatives from both Genta and Aventis to oversee the alliance. The agreement contains provisions that allow for assignment to a successor in the event of a merger of Aventis, such that the terms of the agreement remain unchanged.
In the United States, Genta and Aventis will jointly develop and co-promote Genasense™. Joint teams have been created under our collaborative agreement, including a U.S. commercialization team that is responsible for coordinating the development and implementation of commercialization of Genasense™ in the United States. Genta is responsible for filing, prosecuting and maintaining all patent applications and patents in the United States. Aventis will reimburse Genta for the cost of an escalating number of Genta sales representatives throughout the United States.
In all countries outside of the United States, Aventis will have exclusive development and marketing rights and regulatory responsibilities. Genta retains responsibility for filing, prosecuting and maintaining all patent applications and patents outside of the United States.
Ganite™
Hypercalcemia
On October 6, 2003, we began marketing Ganite™ for the treatment of cancer-related hypercalcemia. Ganite™ is our first drug to receive marketing approval and our sales force is now promoting the product in the United States.
Hypercalcemia is a life-threatening condition caused by excessive buildup of calcium in the bloodstream, which may occur in up to 20% of cancer patients. Gallium nitrate was originally studied by the NCI as a new type of cancer chemotherapy. More than 1,000 patients were treated in Phase 1 and Phase 2 trials, and the drug showed promising antitumor activity against NHL, bladder cancer and other diseases. In the course of these studies, gallium nitrate was also shown to strongly inhibit bone resorption. Gallium nitrate underwent additional clinical testing and was approved by the FDA in 1991 as a treatment for cancer-related hypercalcemia. Lower doses of Ganite™ were also tested in patients with less severe bone loss, including bone metastases, a cancer that has spread to bone, Paget’s disease, an affliction of older patients that causes pain and disability, and osteoporosis.
Side effects of Ganite™ include nausea, diarrhea and kidney damage. (A complete listing of Ganite’s side effects is contained in the product’s Package Insert that has been reviewed and approved by the FDA.) We believe the development of methods to administer Ganite™ in the outpatient setting will improve the commercial prospects for Ganite™ as compared to when it was originally introduced.
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The extension for an important patent covering the use of Ganite™ for its approved indication will expire in 2005. Genta has filed and continues to file patent applications seeking intellectual property protection for Ganite™. In addition, Genta intends to seek orphan drug designation for the use of Ganite™ for the treatment of NHL.
Non-Hodgkin’s Lymphoma and Other Cancer Types
Based on previously published data, we believe that Ganite™ may also be an effective treatment for patients with certain types of cancer, particularly NHL. We have been granted an investigational new drug exemption, or IND, and we have commenced clinical trials of Ganite™ for the treatment of patients with relapsed NHL. If our trials suggest that Ganite™ is safe and effective, we plan to seek expanded marketing approval for this indication. Approximately 54,000 new cases of NHL are diagnosed in the United States each year. We are also planning to evaluate Ganite™ in other indications, such as bladder cancer. Previous clinical trials of Ganite™ showed that it does not cause significant myelosuppression, a decrease of bone marrow activity often associated with cancer therapy, which can cause increased susceptibility to bleeding and infection. We believe this feature may allow Ganite™ to be readily incorporated into combination chemotherapy regimens that employ other drugs that cause myelosuppression.
Regulatory Status
In April 2000, we acquired assets, rights, licenses to patents, and technology relating to gallium-containing compounds for treatment of bone loss, and to Ganite™ (gallium nitrate injection), the liquid injectable product. The acquired assets included the ownership of an approved NDA relating to Ganite™. Since this acquisition, we have worked with the FDA to address certain regulatory issues and to update certain aspects of drug manufacturing. In the first quarter of 2003, we filed a supplemental NDA for Ganite™ for the treatment of cancer-related hypercalcemia that has not responded to hydration. On September 18, 2003, we received approval from the FDA to market Ganite™ for the treatment of cancer-related hypercalcemia that is resistant to hydration.
Given the extensive published data on the anticancer activity of gallium nitrate, we filed a new IND request for Ganite™ with the Oncology Drug Products Division at the FDA for the treatment of patients with relapsed NHL. Under this IND, we initiated a clinical trial of Ganite™ in NHL patients in 2002.
Other Pipeline Products and Technology Platforms
Oral Gallium
We are currently planning to develop new formulations of gallium-containing compounds that can be taken orally. These formulations may be useful for diseases in which long-term low-dose therapy is deemed desirable. We believe that such formulations will be useful for the treatment of patients who have chronic bone loss diseases, such as bone metastases, Paget’s disease and osteoporosis. Such patients are commonly afflicted by bone pain and susceptibility to fractures.
Decoys
In addition to the antisense program, we are developing compounds known as decoys, which are short strands of DNA or RNA that bind certain proteins known as transcription factors. Normally, transcription factors bind to specific portions of DNA known as response elements and regulate the functions of genes in a positive or negative fashion (i.e., they can turn genes “on” or “off”). When a cell is flooded with an excess of decoys, these decoys compete with normal DNA response elements to bind transcription factors and inactivate them. By selectively inactivating the transcription factor, the function of the gene can be regulated in a positive or negative manner. This type of control could potentially be used to regulate genes that are critically involved in cancer progression.
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In December 2000, Genta licensed patents and technology relating to decoys from the NIH. Our current program is targeting a transcription factor known as the cyclic adenosine monophosphate response element binding protein, or CRE-BP. Pre-clinical studies conducted at the NIH have shown broad anticancer activity for this compound, with very low toxicity to normal cells. The CRE-BP decoy is currently undergoing additional pre-clinical testing.
Antisense and RNAi Research and Discovery
We have numerous oligonucleotide-based discovery programs and collaborations devoted to the identification of both antisense- and RNAi-based inhibitors of oncology gene targets. Several of these programs combine specific, clinically validated gene targets with our OptiSense™ technology to identify new therapeutic sequences. Other programs are longer-term projects that combine Optisense™ and oncology target validation assays to determine the therapeutic potential of newly discovered genes and identify new therapeutic agents simultaneously.
We continue to evaluate novel nucleic acid chemistries, through sponsored research and collaborative agreements, on an ongoing basis. These efforts will produce our next generation of antisense and RNAi molecules with enhanced biological activities.
Finally, our proprietary PolyBus™ delivery formulations, and formulations obtained through expert collaborations, are being used to enhance the pharmacokinetic properties of antisense and RNAi in preclinical efficacy studies.
Androgenics Technologies
Subsequent to a review of our preclinical research portolio of programs, we recently terminated our Androgenics program that was designed to develop inhibitors of androgen hormones for the treatment of patients with hormone-sensitive prostate cancer.
Patents and Proprietary Technology
It is our policy to protect our technology by filing patent applications with respect to technologies important to our business development. To maintain our competitive position, we also rely upon trade secrets, unpatented know-how, continuing technological innovation, licensing opportunities and certain regulatory approvals (such as orphan drug designations).
We own or have licensed several patents and applications to numerous aspects of oligonucleotide technology, including novel compositions of matter, methods of large-scale synthesis, methods of controlling gene expression and methods of treating disease. Genta's patent portfolio includes both U.S. and foreign applications and patents. To date, Genta has approximately 100 U.S. and foreign patent applications. Genta's portfolio of owned or licensed patents includes approximately 50 issued U.S. patents and approximately 13 pending U.S. patent applications. Genta endeavors to seek appropriate U.S. and foreign patent protection on its oligonucleotide technology.
In the United States, a patent filed on or before June 8, 1995 expires the later of 17 years from the issue date or 20 years from the date on which the application for patent was filed in the United States or the earliest claimed priority date. A patent filed after June 8, 1995 expires 20 years from the date on which the application for patent was filed in the United States or the earliest claimed priority date.
Genta has licensed six U.S. patents relating to Genasense™ that expire between 2008 and 2015, two pending U.S. patent applications that relate to Genasense™, and approximately 45 foreign patent applications that are pending relating to Genasense™. Genta also owns three U.S. patent applications relating to methods of using Genasense™.
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Included among Genta’s property rights are certain rights licensed from the NIH covering phosphorothioate oligonucleotides. We also acquired from the University of Pennsylvania exclusive rights to antisense oligonucleotides directed against the Bcl-2 mRNA, as well as methods of their use for the treatment of cancer. In 1998, two U.S. patents were issued encompassing our licensed antisense oligonucleotide compounds targeted against the Bcl-2 mRNA and the use of these compounds outside of organisms. These claims cover our proprietary antisense oligonucleotide molecules, which target the Bcl-2 mRNA including our lead clinical candidate, Genasense™. Other related U.S. and corresponding foreign patent applications are still pending.
The patent covering the use of Ganite™ for its approved indication will expire in 2005. Genta has filed and continues to file patent applications seeking intellectual property protection for Ganite™.
In May 2000, we entered into a licensing arrangement with Molecular Biosystems, Inc. for a broad portfolio of patents and technology that relates to antisense for therapeutic and diagnostic applications. The arrangement included a grant of both exclusive and non-exclusive rights from Molecular Biosystems, Inc. to Genta on a royalty-free basis in return for cash and shares of common stock.
The patent positions of biopharmaceutical and biotechnology firms, including Genta, can be uncertain and can involve complex legal and factual questions. Consequently, even though we are currently prosecuting our patent applications with the United States and foreign patent offices, we do not know whether any of our applications will result in the issuance of any patents, or if any issued patents will provide significant proprietary protection, or even if successful that these patents will not be circumvented or invalidated. Even if issued, patents may be circumvented or challenged and invalidated in the courts. Because some applications in the United States are kept in secrecy until an actual patent issues, we cannot be certain that others have not filed patent applications directed at inventions covered by our pending patent applications, or that we were the first to file patent applications for such inventions. Thus, we may become involved in interference proceedings declared by the U.S. Patent and Trademark Office (or comparable foreign office or process) in connection with one or more of our patents or patent applications to determine priority of invention, which could result in substantial costs to us, as well as an adverse decision as to priority of invention of the patent or patent application involved.
Competitors or potential competitors may have filed applications for, or have received patents and may obtain additional patents and proprietary rights relating to, compounds or processes competitive with those of ours. Accordingly, there can be no assurances that our patent applications will result in issued patents or that, if issued, the patents will afford protection against competitors with similar technology. We cannot provide assurance that any patents issued to Genta will not be infringed or circumvented by others, nor can there be any assurance that we will obtain necessary patents or technologies or the rights to use such technologies.
We also rely upon unpatented trade secrets. No assurances can be given as to whether third parties will independently develop substantially equivalent proprietary information and techniques, or gain access to our trade secrets, or disclose such technologies to the public, or that we can meaningfully maintain and protect unpatented trade secrets.
We require our employees, consultants, outside scientific collaborators, sponsored researchers and other advisors to execute confidentiality agreements with us. These agreements generally provide that all confidential information developed or made known to an individual during the course of the individual’s relationship with Genta shall be kept confidential and shall not be disclosed to third parties except in specific circumstances. In the case of employees, the agreement generally provides that all inventions conceived by the individual shall be assigned to, and made the exclusive property of, Genta. There can be no assurance, however, that these agreements will provide meaningful protection to our trade secrets, or guarantee adequate remedies in the event of unauthorized use or disclosure of confidential proprietary information, or in the event of an employee’s refusal to assign any patents to Genta in spite of his/her contractual obligation.
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Research and Development
In addition to our current focus in the areas described above, we continually evaluate our programs in light of the latest market information and conditions, the availability of third-party funding, technological advances and other factors. As a result of such evaluations, we change our product development plans from time to time and anticipate that we will continue to do so. We recorded research and development expenses of $82.9 million, $86.6 million, and $39.4 million during the years ended December 31, 2003, 2002 and 2001, respectively.
Sales and Marketing
On October 6, 2003 our oncology sales force began selling Ganite™ for use in the treatment of cancer-related hypercalcemia. We have been expanding our sales force to support the anticipated launch of Genasense™; currently, the U.S. sales force is comprised of 36 people. If Genasense™ is approved for marketing by the FDA, the sales force will be partially subsidized by Aventis, as described below. Overall, we presently have 46 employees dedicated to sales and marketing.
In April 2002, we entered into a series of agreements relating to the development and commercialization of Genasense™, to which we refer collectively as the collaborative agreement, with Aventis and its affiliates. Under the terms of our collaborative agreement, Genta and Aventis will jointly develop and commercialize Genasense™ in the United States, and Aventis will have exclusive development and marketing rights to the compound in all countries outside of the United States. We retain responsibility for global manufacturing and for regulatory filings within the United States, while Aventis has assumed all regulatory responsibilities outside the United States. Joint management teams, including representatives from both Genta and Aventis, currently oversee the joint efforts of Genta and Aventis in developing and commercializing Genasense™ in the United States. Under our collaborative agreement, Aventis has committed to provide up to $476.9 million in initial payments, milestone payments and for the purchase from us of equity and convertible notes. In addition, we are entitled to royalties on Aventis’ exclusive worldwide net sales of Genasense™, from which we are required to pay third-party pass-through royalties to the University of Pennsylvania and The National Institutes of Health, or NIH, based on net worldwide sales of Genasense™. Furthermore, under our collaborative agreement, Aventis has agreed to pay 75% of development costs related to any U.S. NDA incurred by either Genta or Aventis subsequent to the execution of our collaborative agreement, and substantially all other development, marketing, and sales costs incurred worldwide. Aventis will also reimburse a portion of our expense in building our sales force to market Genasense™ in the United States. Genta has received a total of $235.7 million in initial and near-term funding, which included a $10.0 million licensing fee and $40.0 million in development funding, $10.0 million in convertible debt proceeds, $71.9 million pursuant to an at-market equity investment in our common stock, $68.8 million in paid expense reimbursements and $35.0 million in line of credit proceeds. The commercialization agreement may be terminated by Aventis with six months’ notice. For additional discussion of the collaborative agreement (see Note 12 to our financial statements).
Either alone or in partnerships with other companies, we intend to be a direct marketer or co-marketer of our pharmaceutical products by continuing to build a sales and marketing infrastructure in the United States to launch and fully realize the commercial potential of our products. For international product sales, we intend to distribute our products through collaborations with third parties.
Manufacturing and Raw Materials
Our ability to conduct clinical trials on a timely basis, to obtain regulatory approvals and to commercialize our products will depend in part upon our ability to manufacture our products, either directly or through third parties, at a competitive cost and in accordance with applicable FDA and other regulatory requirements, including current Good Manufacturing Practice regulations.
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We currently rely on third parties to manufacture our products. In December 2002, we signed a five-year manufacturing and supply agreement with Avecia Biotechnology, Inc., or Avecia, a leading multinational manufacturer of pharmaceutical products, to supply quantities of Genasense™. This agreement is also renewable beyond the initial five-year period. In 2004, we are obligated to purchase $27.5 million in clinical drug substance from Avecia. Pursuant to our collaborative agreement with Aventis, we anticipate that we will be reimbursed for at least 75% of the drug purchases from Avecia once Genasense™ is shipped to the clinical sites or Aventis distribution sites. In addition, we have committed up to $5.0 million of advance financing to Avecia for facility expansion, which will be recovered with interest through future purchase payments to be made by us to Avecia. We believe these arrangements are sufficient for our medium-term production needs with respect to Genasense™.
We have a three-year manufacturing and supply agreement with Johnson Matthey Inc. (“JMI”), whereby Genta will purchase a minimum of 80% of our requirements for quantities of Ganite™.
The raw materials that we require to manufacture our drugs, are available only from a few suppliers. Under the terms of our manufacturing and supply agreement, Avecia is responsible for procuring the raw materials needed to manufacture Genasense™. We believe that we have adequately addressed our needs for suppliers of raw materials to manufacture Genasense™ and Ganite™ and meet future customer demand.
Genta Jago
Genta Jago Technologies B.V. (“Genta Jago”) is a joint venture formed by SkyePharma PLC and Genta. On March 4, 1999, SkyePharma PLC (on behalf of itself and its affiliates) entered into an interim agreement with Genta (the “Interim JV Agreement”) pursuant to which the parties to the joint venture released each other from all liability relating to unpaid development costs and funding obligations of Genta Jago. Under the terms of the Interim JV Agreement, SkyePharma PLC assumed responsibility for substantially all the obligations of the joint venture to third parties as well as further development of the product line. In addition, earnings of the joint venture are to be allocated equally between the two parties. Accordingly, Genta recognized $0.5 million as its equity in net income of the joint venture during the first quarter of 2000. Since the first quarter of 2000, there have been only $33 thousand in net earnings of the joint venture allocated to Genta and we plan to seek to terminate our involvement with the joint venture.
Human Resources
As of December 31, 2003, Genta had 155 employees, 36 of whom hold doctoral degrees. As of that date, there were 96 employees engaged in research, development and other technical activities, 30 employees in sales and marketing and 29 in administration. None of Genta’s employees are represented by a union. Most of the management and professional employees of Genta have had prior experience and positions with pharmaceutical and biotechnology companies. Genta believes it maintains satisfactory relations with its employees and has not experienced interruptions of operations due to labor disagreements.
C. Government Regulation
Regulation by governmental authorities in the United States and foreign countries is a significant factor in our ongoing research and product development activities and in the manufacture and marketing of our proposed products. All of our therapeutic products will require regulatory approval by governmental agencies prior to commercialization. In particular, human therapeutic products are subject to rigorous pre-clinical and clinical testing and pre-market approval procedures by the FDA and similar authorities in foreign countries. Various federal, and in some cases, state statutes and regulations also govern or affect the development, testing, manufacturing, safety, labeling, storage, recordkeeping and marketing of such products. The lengthy process of seeking these approvals, and the subsequent compliance with applicable federal and, in some cases, state statutes and regulations, require substantial expenditures. Any failure by Genta, our collaborators or our licensees to obtain, or any delay in obtaining, regulatory approvals could adversely affect the marketing of our products and our ability to receive products or royalty revenue.
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The activities required before a new pharmaceutical agent may be marketed in the United States begin with pre-clinical testing. Pre-clinical tests include laboratory evaluation of product chemistry and animal studies to assess the potential safety and efficacy of the product and its formulations. The results of these studies must be submitted to the FDA as part of an IND. An IND becomes effective within 30 days of filing with the FDA unless the FDA imposes a clinical hold on the IND. In addition, the FDA may, at any time, impose a clinical hold on ongoing clinical trials. If the FDA imposes a clinical hold, clinical trials cannot commence or recommence, as the case may be, without prior FDA authorization and then only under terms authorized by the FDA.
Clinical trials are generally categorized into four phases.
Phase 1 trials are initial safety trials on a new medicine in which investigators attempt to establish the dose range tolerated by a small group of patients using single or multiple doses, and to determine the pattern of drug distribution and metabolism.
Phase 2 trials are clinical trials to evaluate efficacy and safety in patients afflicted with a specific disease. Typically, Phase 2 trials in oncology comprise 14 to 50 patients. Objectives may focus on dose-response, type of patient, frequency of dosing or any of a number of other issues involved in safety and efficacy. Phase 2a trials are pilot studies while Phase 2b trials typically incorporate more patients than Phase 2a trials in order to more precisely establish efficacy.
In the case of products for life-threatening diseases, the initial human testing is generally done in patients rather than in healthy volunteers. Since these patients are already afflicted with the target disease, it is possible that such studies may provide results traditionally obtained in Phase 2 trials.
Phase 3 trials are usually multi-center, comparative studies that involve larger populations. These trials are generally intended to be pivotal in importance for the approval of a new drug. In oncology, Phase 3 trials typically involve 100 to 1,000 patients for whom the medicine is eventually intended. Trials are also conducted in special groups of patients or under special conditions dictated by the nature of the particular medicine and/or disease. Phase 3 trials often provide much of the information needed for package insert and labeling of the medicine. A trial is fully enrolled when it has a sufficient number of patients to provide enough data for the statistical proof of efficacy and safety required by the FDA and others. Phase 3b trials are conducted after submission of a new drug application, but before the product’s approval for market launch. Phase 3b trials may supplement or complete earlier trials, or they may seek different kinds of information, such as quality of life or marketing. Phase 3b is the period between submission for approval and receipt of marketing authorization.
After a medicine is marketed, Phase 4 trials provide additional details about the product’s safety and efficacy.
The results of the pre-clinical and clinical testing, together with chemistry, manufacturing and control information, are then submitted to the FDA for a pharmaceutical product in the form of an NDA, for a biological product in the form of a biologics license application and for a particular medical device in the form of a premarket approval application in order to obtain approval to commence commercial sales. In responding to an NDA, biologics license application or premarket approval application, the FDA may grant marketing approval, request additional information or deny the application if it determines that the application does not satisfy its regulatory approval criteria. There can be no assurance that the approvals that are being sought or may be sought by Genta in the future will be granted on a timely basis, if at all, or if granted will cover all the clinical indications for which we are seeking approval or will not contain significant limitations in the form of warnings, precautions or contraindications with respect to conditions of use.
In circumstances where a company intends to develop and introduce a novel formulation of an active drug ingredient already approved by the FDA, clinical and pre-clinical testing requirements may not be as extensive. Limited additional data about the safety and/or effectiveness of the proposed new drug formulation, along with chemistry and manufacturing information and public information about the active ingredient, may be satisfactory for product approval. Consequently, the new product formulation may receive marketing approval more rapidly than a traditional full new drug application, although no assurance can be given that a product will be granted such treatment by the FDA.
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For clinical investigation and marketing outside the United States, we are or may be subject to foreign regulatory requirements governing human clinical trials and marketing approval for drugs. The requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary widely from country to country. Our approach is to design our European clinical trial studies to meet FDA, European Economic Community, or EEC, and other European countries’ standards. At present, the marketing authorizations are applied for at a national level, although certain EEC procedures are available to companies wishing to market a product in more than one EEC member state. If the competent authority is satisfied that adequate evidence of safety, quality and efficacy has been presented, a market authorization will be granted. The registration system proposed for medicines in the EEC after 1992 is a dual one in which products, such as biotechnology and high technology products and those containing new active substances, will have access to a central regulatory system that provides registration throughout the entire EEC. Other products will be registered by national authorities under the local laws of each EEC member state. With regulatory harmonization finalized in the EEC, our clinical trials will be designed to develop a regulatory package sufficient for multi-country approval in our European target markets without the need to duplicate studies for individual country approvals. This approach also takes advantage of regulatory requirements in some countries, such as in the United Kingdom, which allow Phase 1 studies to commence after appropriate toxicology and pre-clinical pharmacology studies, prior to formal regulatory approval.
Prior to the enactment of the Drug Price Competition and Patent Term Restoration Act of 1984, or the Waxman/Hatch Act, the FDA, by regulation, permitted certain pre-1962 drugs to be approved under an abbreviated procedure which waived submission of the extensive animal and human studies of safety and effectiveness normally required to be in a new drug application. Instead, the manufacturer only needed to provide an abbreviated new drug application containing labeling, information on chemistry and manufacturing procedures and data establishing that the original pioneer product and the proposed generic product are bioequivalent when administered to humans.
Originally, the FDA’s regulations permitted this abbreviated procedure only for copies of a drug that was approved by the FDA as safe before 1962 and which was subsequently determined by the FDA to be effective for its intended use. In 1984, the Waxman/Hatch Act extended permission to use the abbreviated procedure established by the FDA to copies of post-1962 drugs subject to the submission of the required data and information, including data establishing bioequivalence. However, approval of such abbreviated new drug applications was dependent upon there being no outstanding patent or non-patent exclusivity.
Additionally, the FDA allows, under section 505(b)(2) of the Food Drug and Cosmetic Act, for the submission and approval of a hybrid application for certain changes in drugs which, but for the changes, would be eligible for an effective abbreviated new drug application approval. Under these procedures the applicant is required to submit the clinical efficacy and/or safety data necessary to support the changes from the abbreviated new drug application-eligible drug (without submitting the basic underlying safety and efficacy data for the chemical entity involved) plus manufacturing and chemistry data and information. Approval of a 505(b)(2) application is dependent upon the abbreviated new drug application being subject to no outstanding patent or non-patent exclusivity. As compared to a new drug application, an abbreviated new drug application or a 505(b)(2) application typically involves reduced research and development costs. However, there can be no assurance that any such applications will be approved. Furthermore, the supply of raw materials must also be approved by the FDA.
We and our third-party manufacturers are also subject to various foreign, federal, state and local laws and regulations relating to health and safety, laboratory and manufacturing practices, the experimental use of animals and the use, manufacture, storage, handling and disposal of hazardous or potentially hazardous substances, including radioactive compounds and infectious disease agents, used in connection with our research and development work and manufacturing processes. We currently incur costs to comply with laws and regulations and these costs may become more significant.
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D. Competition
In many cases, our products under development will be competing with existing therapies for market share. In addition, a number of companies are pursuing the development of antisense technology and controlled-release formulation technology and the development of pharmaceuticals utilizing such technologies. We compete with fully integrated pharmaceutical companies that have substantially more experience, financial and other resources and superior expertise in research and development, manufacturing, testing, obtaining regulatory approvals, marketing and distribution. Smaller companies may also prove to be significant competitors, particularly through their collaborative arrangements with large pharmaceutical companies or academic institutions. Furthermore, academic institutions, governmental agencies and other public and private research organizations have conducted and will continue to conduct research, seek patent protection and establish arrangements for commercializing products. Such products may compete directly with any products that may be offered by us.
Our competition will be determined in part by the potential indications for which our products are developed and ultimately approved by regulatory authorities. For certain of our potential products, an important factor in competition may be the timing of market introduction of our or our competitors’ products. Accordingly, the relative speed with which we can develop products, complete the clinical trials and approval processes and supply commercial quantities of the products to the market are expected to be important competitive factors. We expect that competition among products approved for sale will be based, among other things, on product efficacy, safety, reliability, availability, price, patent position and sales, marketing and distribution capabilities. The development by others of new treatment methods could render our products under development non-competitive or obsolete.
Our competitive position also depends upon our ability to attract and retain qualified personnel, obtain patent protection or otherwise develop proprietary products or processes and secure sufficient capital resources for the often substantial period between technological conception and commercial sales.
E. Certain Risks and Uncertanties Related to the Company's Business
You should carefully consider the following risks and all of the other information set forth in this prospectus before deciding to invest in shares of our common stock. The risks described below are not the only ones facing our company. Additional risks not presently known to us or that we currently deem immaterial may also impair our business operations.
If any of the following risks actually occurs, our business, financial condition or results of operations would likely suffer. In such case, the trading price of our common stock could decline due to any of these risks, and you may lose all or part of your investment.
| We may be unsuccessful in our efforts to obtain FDA approval for and commercialize Genasense™ or our other pharmaceutical products. |
The commercialization of our pharmaceutical products involves a number of significant challenges. In particular, our ability to commercialize products, such as Ganite™ and Genasense™, depends, in large part, on the success of our clinical development programs, our efforts to obtain regulatory approvals and our sales and marketing efforts directed at physicians, patients and third-party payors. A number of factors could affect these efforts, including:
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We cannot assure you that Genasense™ will receive FDA approval in the time frame we expect or at all. We have filed our first new drug application, or NDA, with the FDA for Genasense™ as a treatment combined with chemotherapy for patients with advanced malignant melanoma. We filed and received “priority designation”, which increased the probability that the review by the FDA will be concluded within six months from the date of the completed application. The FDA may not complete its review within the time it has targeted. In addition, the action it takes may be to request further data or to disapprove the application. If Genasense™ is not approved by the FDA for melanoma, if the review time is substantially prolonged or if the FDA requires further clinical studies prior to approval, we have no short-term alternative for generating substantial revenue or income. Genasense™ may not be approved because the FDA may find our efficacy and safety data deficient or for other reasons. While we have completed enrollment in Phase 3 trials for other indications (including multiple myeloma and chronic lymphocytic leukemia), we do not yet know whether the results of these clinical trials will warrant submission of a NDA. Moreover, preparation of NDAs for either or both of these indications would entail significant delay relative to the melanoma application, and there can be no assurance that either or both of these applications would suffice for Genasense™ approval. Failure to obtain approval or a substantial delay in approval of Genasense™ would have a material adverse effect on our results of operations and financial condition.
Ultimately, our efforts may not prove to be as effective as those of our competitors. In the United States and elsewhere, our products will face significant competition. The principal conditions on which our product development efforts are focused and some of the other disorders for which we are conducting additional studies, are currently treated with several drugs, many of which have been available for a number of years or are available in inexpensive generic forms. Thus, even if we obtain regulatory approvals, we will need to demonstrate to physicians, patients and third-party payors that the cost of our products is reasonable and appropriate in light of their safety and efficacy, the price of competing products and the relative health care benefits to the patient. If we are unable to demonstrate that the costs of our products are reasonable and appropriate in light of these factors, we will likely be unsuccessful in commercializing our products.
We intend to be a direct marketer of some products in the United States. Currently we have a limited number of sales personnel. Our inability to build a sales force capable of marketing our pharmaceutical products will adversely affect our sales and limit the commercial success of our products.
We anticipate that we will incur additional losses and we may never be profitable.
We have not been profitable. We have incurred substantial operating losses associated with ongoing research and development activities, pre-clinical testing, clinical trials, regulatory submissions and manufacturing activities. From the period since our inception to December 31, 2003, we have incurred a cumulative net loss of $323.3 million. We may never achieve revenue sufficient for us to attain profitability. Achieving profitability is unlikely before Genasense™ becomes an approved drug and we receive at least a full year of royalties from Aventis Pharmaceuticals Inc., or Aventis, on worldwide sales pursuant to the development and commercialization agreements which we have entered into with Aventis. For a further description of our agreements with Aventis, see “B. Summary of Business and Research and Development Programs —Sales and Marketing”.
Our business will suffer if we fail to obtain timely funding.
Our operations to date have required significant cash expenditures. Our future capital requirements will depend on the results of our research and development activities, pre-clinical studies and clinical trials, competitive and technological advances, and regulatory activities of the FDA and other regulatory authorities. Our credit line with Aventis terminates with respect to new borrowings upon the earlier of December 31, 2004 or the first FDA approval of Genasense™ (which triggers a milestone payment from Aventis), and amounts borrowed under the credit line are due six months after termination. In order to commercialize our products, we will need to raise additional funds. We may obtain those funds through public and private offerings of our securities, including debt or equity financing, or through collaborations or other arrangements with research institutions and corporate partners. We may not be able to obtain adequate funds for our operations from these sources when needed or on acceptable terms. Future collaborations or similar arrangements may require us to license valuable intellectual property to, or to share substantial economic benefits with, our collaborators. If we raise additional capital by issuing additional equity or securities convertible into equity, our stockholders may experience dilution and our share price may decline. Any debt financing may result in restrictions on our spending.
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If we are unable to raise additional funds, we will need to do one or more of the following:
Our business depends heavily on a small number of products.
We are currently marketing one product, Ganite™, and we are actively seeking FDA approval of Genasense™ for advanced malignant melanoma. We do not expect to expand our marketed product portfolio significantly in the short term. If Genasense™ is not approved, or is commercially unsuccessful, we do not expect significant sales of other products to offset this loss of potential revenue.
To diversify our product line in the long term, it will be important for us to identify suitable technologies and products for acquisition or licensing and development. If we are unable to identify suitable technologies and products, or if we are unable to acquire or license products we identify, we may be unable to diversify our product line and to generate long-term growth.
| We may be unable to obtain or enforce patents, other proprietary rights and licenses to protect our business; we could become involved in litigation relating to our patents or licenses that could cause us to incur additional costs and delay or prevent our introduction of new drugs to market. |
Our success will depend to a large extent on our ability to:
Legal standards relating to the validity of patents covering pharmaceutical and biotechnological inventions and the scope of claims made under these types of patents are still developing, and they involve complex legal and factual questions. As a result, our ability to obtain and enforce patents that protect our drugs is highly uncertain. If we are unable to obtain and enforce patents and licenses to protect our drugs, our business, results of operations and financial condition could be adversely affected.
We hold numerous U.S., foreign and international patents covering various aspects of our technology, which include novel compositions of matter, use, methods of large-scale synthesis and methods of controlling gen