UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
10-K
☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the fiscal year ended: December 31, 2020
OR
☐TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the transition period from ______________________ to ______________________
Commission
file number: 001-34673
CORMEDIX
INC.
(Exact name of Registrant as Specified in Its Charter)
(Address of Principal Executive Offices) (Zip Code)
Registrant’s
telephone number, including area code: (908)517-9500
Securities
registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol Name of each exchange on which registered
Common Stock, $0.001 Par Value CRMD Nasdaq Global Market
Securities
registered pursuant to Section 12(g) of the Act: none
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes
☐ No ☒
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes
☐ No ☒
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
☒ No ☐
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant
to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit
such files).
Yes
☒ No ☐
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☒ Smaller reporting company ☒
Emerging growth company ☐
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any news or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes
☐ No ☒
The
aggregate market value of the registrant’s voting common equity held by non-affiliates of the registrant, based upon the
closing price of the registrant’s common stock on the last business day of the registrant’s most recently completed
second fiscal quarter was approximately $208.4 million. Solely for the purpose of this calculation, shares held by directors and
executive officers of the registrant have been excluded.
The number of outstanding shares of the
registrant’s common stock was 38,024,194 as of March 25, 2021.
DOCUMENTS
INCORPORATED BY REFERENCE
None
CORMEDIX
INC.
PART I 1
Item 1. Business 1
Item 1A. Risk Factors 17
Item 1B. Unresolved Staff Comments 44
Item 2. Properties 44
Item 3. Legal Proceedings 44
Item 4. Mine Safety Disclosures 45
Item 6. Selected Financial Data 46
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 56
Item 8. Financial Statements and Supplementary Data 56
Item 9A. Controls and Procedures 57
Item 9B. Other Information 57
PART III 58
Item 10. Directors, Executive Officers, and Corporate Governance 58
Item 11. Executive Compensation 63
Item 14. Principal Accounting Fees and Services 77
Item 15. Exhibits, Financial Statement Schedules 78
DefenCathTM
is our registered trademark. All other trade names, trademarks and service marks appearing in this report are the property of
their respective owners. We have assumed that the reader understands that all such terms are source-indicating. Accordingly, such
terms, when first mentioned in this report, appear with the trade name, trademark or service mark notice and then throughout the
remainder of this report without trade name, trademark or service mark notices for convenience only and should not be construed
as being used in a descriptive or generic sense.
i
PART
I
Forward-Looking
Statements
This
report contains “forward-looking statements” that involve risks and uncertainties, as well as assumptions that,
if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by
such forward-looking statements. The statements contained in this report that are not purely historical are forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”),
and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking
statements are often identified by the use of words such as, but not limited to, “anticipate,”
“believe,” “can,” “continue,” “could,” “estimate,”
“expect,” “intend,” “may,” “will,” “plan,” “project,”
“seek,” “should,” “target,” “will,” “would,” and similar
expressions or variations intended to identify forward-looking statements. These statements are based on the beliefs and
assumptions of our management based on information currently available to management. Such forward-looking statements are
subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events
to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or
contribute to such differences include, but are not limited to, those identified below in the section titled “Item 1A.
Risk Factors.” The impact of COVID-19 may also exacerbate these risks, any of which could have a material effect on us.
Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we
undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such
statements.
Item 1. Business
Overview
We
are a biopharmaceutical company focused on developing and commercializing therapeutic products for the prevention and treatment
of infectious and inflammatory diseases.
Our
primary focus is on the development of our lead product candidate, DefenCathTM, for potential commercialization
in the United States, or U.S., and other key markets. We have in-licensed the worldwide rights to develop and commercialize DefenCath
and Neutrolin®. The name DefenCath is the U.S. proprietary name conditionally approved by the U.S. Food and Drug
Administration (“FDA”). The name Neutrolin is currently used in the European Union (“EU”) and other territories
where the Company has received CE-Mark approval for the commercial distribution of Neutrolin as a catheter lock solution (“CLS”)
regulated as a medical device.
DefenCath is a novel
anti-infective solution (a formulation of taurolidine 1.35% and heparin 1000 USP U/ml) intended for the reduction of catheter-related
infections in patients requiring central venous catheters in clinical settings such as hemodialysis, total parenteral nutrition
and oncology. Infections represent key complications among hemodialysis, total parenteral nutrition and cancer patients with central
venous catheters. These complications can lead to treatment delays and increased costs to the healthcare system when they occur
due to hospitalizations, need for intravenous, or IV, antibiotic treatment, removal/replacement of the central venous catheter
(“CVC”), related treatment costs and increased mortality. We believe DefenCath addresses a significant unmet medical
need and a potential large market opportunity.
DefenCath
– United States
In
late 2013, we met with the FDA, to determine the pathway for U.S. marketing approval of DefenCath. We launched the Phase 3 clinical
trial in patients with hemodialysis catheters in the U.S. in December 2015. The clinical trial, named Phase 3 Prospective, Multicenter,
Double-blind, Randomized, Active Control Study to Demonstrate Safety and Effectiveness of DefenCath in Preventing Catheter-related
Bloodstream Infection in Subjects on Hemodialysis for End Stage Renal Disease, or LOCK-IT-100, was a prospective, multicenter,
randomized, double-blind, active control trial which aimed to demonstrate the efficacy and safety of DefenCath in preventing catheter-related
bloodstream infections, or CRBSI, in subjects receiving hemodialysis therapy as treatment for end stage renal disease. The primary
endpoint for the trial was time to CRBSI. The trial evaluated DefenCath relative to the active control heparin by documenting
the incidence of CRBSI and the time until the occurrence of CRBSI for each study subject. Secondary endpoints were catheter patency,
which was defined as required use of tissue plasminogen activating factor, or tPA, or removal of catheter due to dysfunction,
and removal of catheter for any reason.
1
During
the course of the study, in consultation with the FDA, we established the Clinical Adjudication Committee, or CAC, to critically
and independently assess CRBSI while being blinded to treatment assignment. As announced in July 2018, the CAC reviewed potential
cases of CRBSI in our LOCK-IT-100 study that occurred through early December 2017 and identified 28 such cases. As previously
agreed with the FDA, an interim efficacy analysis was performed when the first 28 CRBSIs were identified. On July 25, 2018, we
announced that the independent Data Safety Monitoring Board, or DSMB, had completed its review of the interim analysis of the
data from the LOCK-IT-100 study. Based on the first 28 cases, there was a highly statistically significant 72% reduction in CRBSI
relative to the control (p=0.0034). Because the pre-specified level of statistical significance was reached for the primary endpoint
and efficacy had been demonstrated with no safety concerns, the DSMB recommended the study be terminated early.
Following
discussions with the FDA, we proceeded with an orderly termination of LOCK-IT-100. In late January 2019, we announced the topline
results of the full data set of the LOCK-IT-100 study. The study continued enrolling and treating subjects until study termination,
and the final efficacy analysis was based on a total of 795 subjects.
The
primary endpoint of the Phase 3 LOCK-IT-100 study was the reduction of the risk of occurrence of CRBSI by DefenCath relative to
the active control of heparin. In the analysis of the full data set, a total of 41 CRBSI events were determined by the CAC. There
was a 71% reduction in the risk of occurrence of CRBSIs compared with the active control of heparin, which was well in excess
of the study’s assumed treatment effect size of a 55% reduction. In the DefenCath arm, the CRBSI event rate was 0.13 per
1000 catheter days, which is significantly lower than the event rate of 0.46 per 1000 catheter days in the control arm. The statistical
significance of the primary endpoint in the full data set (p=0.0006) was even more impressive than that of the interim analysis
(p=0.0034).
There
were no statistically significant differences between the results in the DefenCath arm compared with the control arm in the final
analysis for the secondary endpoints. The event rate for one of the secondary endpoints, catheter removal for any reason, was
3.48 per 1000 catheter-days (236 out of 397 subjects) in the DefenCath arm and 3.23 per 1000 catheter-days (225 out of 398 subjects)
in the control arm (p=0.416). The loss of catheter patency, which was defined either as catheter removal due to loss of catheter
patency or the administration of tPA, was also a secondary endpoint. The event rate for loss of catheter patency was 0.99 per
1000 catheter-days (63 out of 397 subjects) in the DefenCath arm and 0.74 per 1000 catheter-days (48 out of 398 subjects) in the
control arm (p=0.12). In the top-line safety analysis, the observed rate of treatment-emergent adverse events was lower in the
DefenCath arm. The rate of adverse events per patient was 5.1 in the DefenCath arm and 5.8 in the control arm.
Although
the FDA usually requires two pivotal clinical trials to provide substantial evidence of safety and effectiveness for approval
of a New Drug Application, or NDA, the FDA will in some cases accept one adequate and well-controlled trial, where it is a large
multicenter trial with a broad range of subjects and investigation sites with procedures to include trial quality that has demonstrated
a clinically meaningful and statistically very persuasive effect on prevention of a disease with potentially serious outcome.
In March 2020, we
began the modular submission process for the NDA for DefenCath for the prevention of CRBSI in hemodialysis patients, and in
August 2020, the FDA accepted for filing the DefenCath NDA. The FDA also granted our request for priority review, which
provides for a six-month review period instead of the standard ten-month review period. As we announced in March 2021, the
FDA informed us that it will not approve the NDA for DefenCath in its present form. The FDA noted concerns at the third-party
manufacturing facility after a review of records requested by the FDA and provided by the manufacturing facility. We are
working with the manufacturing facility to develop plans for resolution of the deficiencies. Additionally, the FDA is
requiring a manual extraction study to demonstrate that the labeled volume can be consistently withdrawn from the vials
despite an existing in-process control to demonstrate fill volume within specifications. We expect to be able to complete
this requirement expeditiously. Satisfactory resolution of these issues is required for approval of the DefenCath NDA by a
pre-approval inspection and/or adequate manufacturing facility responses addressing these concerns. If an inspection is
required, we may encounter delays in obtaining FDA approval because the FDA is currently facing a backlog due to the pandemic
and is actively working to define an approach for scheduling outstanding inspections once safe travel may resume. We will
request a meeting with the FDA, which we estimate will occur in mid-April, to obtain agreement with the FDA on the proposed
resolutions of the deficiencies.
2
The
FDA did not request additional clinical data and did not identify any deficiencies related to the data submitted on the efficacy
or safety of DefenCath from LOCK-IT-100. In draft labeling discussed with the FDA, the FDA added that the initial approval will
be for the limited population of patients with kidney failure receiving chronic hemodialysis through a central venous catheter.
This is consistent with our request for approval pursuant to the Limited Population Pathway for Antibacterial and Antifungal Drugs,
or LPAD. LPAD, passed as part of the 21st Century Cures Act, is a new program intended to expedite the development
and approval of certain antibacterial and antifungal drugs to treat serious or life-threatening infections in limited populations
of patients with unmet needs. LPAD provides for a streamlined clinical development program involving smaller, shorter, or fewer
clinical trials and is intended to encourage the development of safe and effective products that address unmet medical needs of
patients with serious bacterial and fungal infections. We believe that LPAD will provide additional flexibility for the FDA to
approve DefenCath to reduce CRBSIs in the limited population of patients with kidney failure receiving hemodialysis through a
central venous catheter.
In
January 2015, the FDA granted Fast Track designation to DefenCath, a designation intended to facilitate development and expedite
review of drugs that treat serious and life-threatening conditions so that the approved drug can reach the market expeditiously.
Also in January 2015, the FDA designated DefenCath as a Qualified Infectious Disease Product, or QIDP, for prevention of catheter-related
blood stream infections in patients with end stage renal disease receiving hemodialysis through a central venous catheter. Catheter-related
blood stream infections can be life-threatening. The QIDP designation provides five years of marketing exclusivity in addition
to the five years granted for a New Chemical Entity upon approval of the NDA. We received a deferral from FDA for the requirement
of submitting data in the NDA for use of DefenCath in pediatric hemodialysis patients as a catheter lock solution. When the pediatric
study is completed as a post-approval commitment, DefenCath will be eligible for an additional six months of marketing exclusivity.
Neutrolin
– International
In
the European Union, or EU, Neutrolin is regulated as a Class 3 medical device. In July 2013, we received CE Mark approval for
Neutrolin. In December 2013, we commercially launched Neutrolin in Germany for the prevention of CRBSI, and maintenance of catheter
patency in hemodialysis patients using a tunneled, cuffed central venous catheter for vascular access. To date, Neutrolin is registered
and may be sold in certain European Union and Middle Eastern countries for such treatment.
In
September 2014, the TUV-SUD and The Medicines Evaluation Board of the Netherlands, or MEB, granted a label expansion for Neutrolin
for these same expanded indications for the EU. In December 2014, we received approval from the Hessian District President in
Germany to expand the label to include use in oncology patients receiving chemotherapy, IV hydration and IV medications via central
venous catheters. The expansion also adds patients receiving medication and IV fluids via central venous catheters in intensive
or critical care units (cardiac care unit, surgical care unit, neonatal critical care unit, and urgent care centers). An indication
for use in total parenteral nutrition was also approved.
Additional
Development Possibilities
In
addition to developing the use of taurolidine as a catheter lock solution, we are sponsoring a pre-clinical research collaboration
for the use of taurolidine as a possible treatment for rare pediatric tumors. In February 2018, the FDA granted orphan drug designation
to taurolidine for the treatment of neuroblastoma in children. We may seek one or more strategic partners or other sources of
capital to help us develop and commercialize taurolidine for the treatment of neuroblastoma in children. We are also evaluating
opportunities for the possible expansion of taurolidine as a platform compound for use in certain medical devices. Patent applications
have been filed in several indications, including wound closure, surgical meshes, and wound management. Based on initial feasibility
work, we are advancing pre-clinical studies for taurolidine-infused surgical meshes, suture materials and hydrogels. We will seek
to establish development/commercial partnerships as these programs advance.
The
FDA regards taurolidine as a new chemical entity and therefore it is currently regulated as an unapproved new drug. We might in
the future pursue product candidates that would involve devices impregnated with taurolidine, and we believe that at the current
time such products would be combination products subject to both device premarket submission requirements and drug regulations.
Consequently, given that there is no appropriate predicate medical device currently marketed in the U.S. on which a 510(k) clearance
process could be based and that taurolidine is not yet approved in any application, we anticipate that we would be required to
submit a premarket approval application, or PMA, for marketing authorization for any medical device indications that we may pursue
for devices containing taurolidine. In the event that an NDA for DefenCath is approved by the FDA, the regulatory pathway for
these medical device product candidates may be revisited with the FDA. Although there may be no appropriate predicate, de novo
Class II designation can be proposed, based on a risk assessment and a reasonable assurance of safety and effectiveness.
3
DefenCath
Market
Opportunity
Central venous catheters
and peripherally inserted central catheters (“Central Catheters”) are an important and frequently used method for accessing
the vasculature in hemodialysis (a form of dialysis where the patient’s blood is circulated through a dialysis filter), administering
chemotherapy and basic fluids in cancer patients and for cancer chemotherapy, long term antibiotic therapy, total parenteral nutrition
(complete or partial dietary support via intravenous nutrients).
According
to the 2015 United States Renal Disease System, there were 660,000 patients on hemodialysis in the U.S. Hemodialysis National
Kidney Foundation has reported that patients requiring Central Catheters represent over 63 million catheter/dialysis treatment
days per year. In 2019, the estimated number of patients with cancer is approximately 6 million, and between 25-60% require Central
Catheters, and represents about 136 million catheter days per year, based on market research by a third-party commissioned by
us.
One
of the major and common complications for all patients requiring CVCs is CRBSI and the clinical complications associated with
them. The total annual cost for treating CRBSI episodes and their related complications in the U.S. is up to $2.7 billion, with
approximately 250,000 CRBSI episodes per year (Becker’s Hospital Review).
Biofilm
build up is the pathogenesis of both infections and thrombotic complications in central venous catheters. Prevention of CRBSI
and inflammatory complications requires both removal of pathogens from the internal surface of the catheter to prevent the systemic
dissemination of organisms contained within the biofilm as well as an anticoagulant to retain blood flow during dialysis. Biofilm
forms when bacteria adhere to surfaces in aqueous environments and begin to excrete a slimy, glue-like substance that can anchor
them to various types of materials, including intravenous catheters. The presence of biofilm has many adverse effects, including
the ability to release bacteria into the blood stream. The current standard of catheter care is to instill a heparin lock solution
at a concentration of 1000 u/mL into each catheter lumen immediately following treatment, in order to prevent clotting between
dialysis treatments. However, a heparin lock solution provides no protection from the risk of infection.
Currently, there are
no pharmacologic agents approved in the U.S. for the prevention of CRBSI in CVCs. As noted above, we received the CE Mark approval
for Neutrolin from the MEB of the EU in July 2013. We believe there is a significant need for prevention of CRBSI in the hemodialysis
patient population as well as for other patient populations utilizing central venous catheters and peripherally inserted central
catheters, such as oncology/chemotherapy, and total parenteral nutrition.
DefenCath
is a broad-spectrum antibacterial, antifungal and anticoagulant combination that is active against common microbes including antibiotic-resistant
strains and in addition may prevent biofilm formation. We believe that using DefenCath as an anti-infective solution will significantly
reduce the incidence of life-threatening catheter-related blood stream infections, thus reducing the need for local and systemic
antibiotics while prolonging catheter function.
Initially, we expect
to sell DefenCath in the U.S. primarily to key operators of dialysis centers. We anticipate that Medicare reimbursement could be
available for DefenCath in hemodialysis and other catheter indications such as oncology patients and total parenteral nutrition
patients through relevant hospital inpatient diagnosis-related groups, or DRGs, or outpatient ambulatory payment classifications,
or APCs, the End-Stage Renal Disease Prospective Payment System, or ESRD PPS, base payment, or under the Durable Medical Equipment,
Prosthetics, Orthotics, and Supplies, or DMEPOS, Fee Schedule, depending on the setting of care. We also plan to seek separate
reimbursement as a drug, where available under Medicare, through mechanisms such as pass-through status under the Hospital Outpatient
Prospective Payment System, the transitional drug add-on payment adjustment, or TDAPA, under the ESRD PPS, or reimbursement as
a drug used with a DMEPOS infusion pump. We have engaged the U.S. Centers for Medicare & Medicaid Services, or CMS, in preliminary
discussions concerning the reimbursement for DefenCath under TDAPA, however, qualifications cannot be determined until after FDA
approval and CMS evaluates the request for coverage in a quarterly review. If approved under TDAPA, reimbursement of DefenCath
would be calculated based on its average selling price. To be eligible for TDAPA, a new renal drug or biologic must be:
● Commercially available
4
● Assigned a Healthcare Common Procedure Coding System code
● Identified as not fitting into an established ESRD PPS functional category
● Designated by CMS as a renal dialysis service.
Although
we cannot fully anticipate changes in reimbursement requirements and mechanisms in the coming years, we expect DefenCath would
be eligible for and would obtain TDAPA. DefenCath meets the criterion of being a new renal dialysis product used to treat or manage
a condition associated with ESRD, since infections are the second leading cause of death in patients with ESRD and CVCs are a
significant risk factor for infection-associated mortality.
Furthermore,
we anticipate that the CMS, and private payers will increasingly demand that manufacturers demonstrate the cost effectiveness
of their product as part of the reimbursement review and approval process. With this in mind, we are performing health economic
evaluations to support this review in the context of the prospective use of DefenCath in dialysis, and other settings, such as
oncology. Our studies may not be sufficient to support coverage or reimbursement at levels that allow providers to use DefenCath.
Competitive
Landscape
The
drug and medical device industries are highly competitive and subject to rapid and significant technological change. DefenCath’s
current and future competitors include large as well as specialty pharmaceutical and biotechnology companies. Many of our competitors
have substantially greater financial, technical and human resources than we do and significantly more experience in the development
and commercialization of drugs and medical devices. Further, the development of new treatment methods could render DefenCath non-competitive
or obsolete.
We believe that the
key competitive factors that will affect the development and commercial success of DefenCath are efficacy and safety, as well as
pricing and reimbursement. Given that there are no approved catheter lock solutions with antimicrobial properties in the U.S.,
and that the current standard of care is heparin, we believe there is an opportunity for DefenCath to become the new standard of
care as a CLS in the U.S. market, if approved by FDA. We are not aware of any potentially competitive CLS which are approved or
under development by other companies in the U.S. A development stage product from Citius is being studied for salvage of CVCs once
a patient becomes diagnosed with a catheter related blood stream infection.
In the EU, several
catheter lock solutions have received a CE Mark, in addition to Neutrolin. For example, TauroLock contains a combination of citrate
4% with (cyclo)-taurolidine and heparin or urokinase, but it is not approved for use in the U.S. Some device companies have launched
antibiotic or antimicrobial-coated catheters as short-term prevention of catheter infections. We believe these are not effective
for hemodialysis catheters due to the long-term use and high blood flow associated with hemodialysis.
Manufacturing/Supply
Chain
We
do not own or operate any manufacturing facilities related to the production of our products. All our manufacturing processes
currently are, and we expect them to continue, to be outsourced to third parties. We rely on third-party manufacturers to produce
sufficient quantities of drug product for use both commercially and in clinical trials. We intend to continue this practice in
the future.
With
regards to taurolidine, an active drug ingredient, or API, of DefenCath, we have a Drug Master File filed with the FDA. There
is a master commercial supply agreement between the third-party manufacturer, Alcami, and us in place from August 2018. We have
two sources for the other key API, Heparin sodium.
We have utilized two
drug product contract manufacturing organizations, or CMOs. One CMO manufactures for the EU and Middle East markets and the other
is for U.S. production. In order to assure supply, we are in the process of beginning to qualify a second CMO for U.S. vial production.
All API and drug products are validated at commercial scale.
We are confident that
these CMO’s have adequate capacity to produce the volumes needed, and that there exists a sufficient number of potential
alternate sources for the drug substances required to produce our products, as well as third-party manufacturers, that we will
be able to find alternate suppliers and third-party manufacturers in the event that our relationship with any supplier or third-party
manufacturer deteriorates. The process for selecting and qualifying an alternative contract manufacturer and for completing the
technology transfer to such a manufacturer to the point of enabling commercialization of the product would take several years.
5
United
States Government Regulation
The
research, development, testing, manufacture, labeling, promotion, advertising, distribution, and marketing, among other things,
of our products are extensively regulated by governmental authorities in the U.S. and other countries. Our products may be classified
by the FDA as a drug or a medical device depending upon the indications for use or claims. Because certain of our product candidates
are considered as medical devices and others are considered as drugs for regulatory purposes, we intend to submit applications
to regulatory agencies for approval or clearance of both medical devices and pharmaceutical product candidates.
In
the U.S., the FDA regulates drugs and medical devices under the Federal Food, Drug, and Cosmetic Act (FDCA) and the Agency’s
implementing regulations. If we fail to comply with the applicable U.S. requirements at any time during the product development
process, clinical testing, and during the approval process or after approval, we may become subject to administrative or judicial
sanctions. These sanctions could include the FDA’s refusal to approve pending applications, license suspension or revocation,
withdrawal of an approval, warning letters, adverse publicity, product recalls, product seizures, total or partial suspension
of production or distribution, injunctions, fines, civil penalties or criminal prosecution, among other actions. Any agency enforcement
action and/or any related impact could have a material adverse effect on us.
Drug
Approval Process
The
research, development, and approval process in the United States and elsewhere is intensive and rigorous and generally takes many
years to complete. The typical process required by the FDA before a therapeutic drug may be marketed in the United States includes:
During
pre-clinical testing, studies are performed with respect to the chemical and physical properties of candidate formulations. These
studies are subject to GLP requirements. Biological testing is typically done in animal models to demonstrate the activity of
the compound against the targeted disease or condition and to assess the apparent effects of the new product candidate on various
organ systems, as well as its relative therapeutic effectiveness and safety. An IND application must be submitted to the FDA and
become effective before studies in humans may commence.
Clinical
trial programs in humans generally follow a three-phase process. Typically, Phase 1 studies are conducted in small numbers of
healthy volunteers or, on occasion, in patients afflicted with the target disease. Phase 1 studies are conducted to determine
the metabolic and pharmacological action of the product candidate in humans and the side effects associated with increasing doses,
and, if possible, to gain early evidence of effectiveness. In Phase 2, studies are generally conducted in larger groups of patients
having the target disease or condition in order to validate clinical endpoints, and to obtain preliminary data on the effectiveness
of the product candidate and optimal dosing. This phase also helps determine further the safety profile of the product candidate.
In Phase 3, large-scale clinical trials are generally conducted in patients having the target disease or condition to provide
sufficient data for the statistical proof of effectiveness and safety of the product candidate as required by United States and
foreign regulatory agencies. Typically, two Phase 3 trials are required for marketing approval.
6
In
the case of products for certain serious or life-threatening diseases, the initial human testing may be done in patients with
the disease rather than in healthy volunteers. Because these patients are already afflicted with the target disease or condition,
it is possible that such studies will also provide results traditionally obtained in Phase 2 studies. These studies are often
referred to as “Phase 1/2” studies. However, even if patients participate in initial human testing and a Phase 1/2
study is carried out, the sponsor is still responsible for obtaining all the data usually obtained in both Phase 1 and Phase 2
studies.
Before
proceeding with a study, sponsors may seek a written agreement known as a Special Protocol Assessment, or SPA, from the FDA regarding
the design, size, and conduct of a clinical trial. Among other things, SPAs can cover clinical studies for pivotal trials whose
data will form the primary basis to establish a product’s efficacy. SPAs help establish up-front agreement with the FDA
about the adequacy of a clinical trial design to support a regulatory approval, but the agreement is not binding on the FDA if
new circumstances arise. An SPA may only be modified with the agreement of the FDA and the trial sponsor or if the director of
the FDA reviewing division determines that a substantial scientific issue essential to determining the safety or efficacy of the
drug was identified after the testing began. There is no guarantee that a study will ultimately be adequate to support an approval
even if the study is subject to an SPA.
Additionally,
some clinical trials are overseen by an independent group of qualified experts organized by the clinical trial sponsor, known
as a data safety monitoring board or committee. This group regularly reviews accumulated data and advises the study sponsor regarding
the continuing safety of trial subjects, and the continuing validity and scientific merit of the clinical trial. The data safety
monitoring board receives special access to unblinded data during the clinical trial and may advise the sponsor to halt the clinical
trial if it determined there is an unacceptable safety risk for subjects or on other grounds, such as no demonstration of efficacy.
The committee can also stop a clinical trial for an overwhelming demonstration of efficacy, based on pre-defined, stringent statistical
parameters and ethical considerations.
The
manufacture of investigational drugs for the conduct of human clinical trials is subject to current Good Manufacturing Practice,
or cGMP, requirements. Investigational drugs and active pharmaceutical ingredients imported into the United States are also subject
to regulation by the FDA relating to their labeling and distribution. Further, the export of investigational drug products outside
of the United States is subject to regulatory requirements of the receiving country as well as U.S. export requirements under
the FDCA.
IND
sponsors are required to submit a number of reports to the FDA during the course of a development program. For instance, sponsors
are required to make annual reports to the FDA concerning the progress of their clinical trial programs as well as more frequent
reports for certain serious adverse events. Sponsors must submit a protocol for each clinical trial, and any subsequent protocol
amendments to the FDA. Investigators must also provide certain information to the clinical trial sponsors to allow the sponsors
to make certain financial disclosures to the FDA. Information about certain clinical trials, including a description of the study
and study results, must be submitted within specific timeframes to the National Institutes of Health, or NIH, for public dissemination
on their clinicaltrials.gov website. Moreover, under the 21st Century Cures Act, manufacturers or distributors of investigational
drugs for the diagnosis, monitoring, or treatment of one or more serious diseases or conditions must have a publicly available
policy concerning expanded access to investigational drugs.
United
States law requires that studies conducted to support approval for product marketing be “adequate and well controlled.”
In general, this means that either a placebo or a product already approved for the treatment of the disease or condition under
study must be used as a reference control. The recently passed 21st Century Cures Act, however, provides for FDA acceptance of
new kinds of data such as patient experience data, real world evidence, and, for appropriate indications sought through supplemental
marketing applications, data summaries. Studies must also be conducted in compliance with good clinical practice requirements,
and informed consent must be obtained from all study subjects.
In
addition, under the Pediatric Research Equity Act, or PREA, an NDA or supplement to an NDA for a new active ingredient, indication,
dosage form, dosage regimen, or route of administration must contain data that are adequate to assess the safety and effectiveness
of the drug for the claimed indications in all relevant pediatric subpopulations, and to support dosing and administration for
each pediatric subpopulation for which the product is safe and effective. The FDA may, on its own initiative or at the request
of the applicant, grant deferrals for submission of some or all pediatric data until after approval of the product for use in
adults, or full or partial waivers from the pediatric data requirements.
7
The
FDA also may require submission of a risk evaluation and mitigation strategy, or REMS, to ensure that the benefits of the drug
outweigh the risks of the drug. The REMS plan could include medication guides, physician communication plans, and elements to
assure safe use, such as restricted distribution methods, patient registries, or other risk minimization tools. An assessment
of the REMS must also be conducted at set intervals. Following product approval, a REMS may also be required by the FDA if new
safety information is discovered and the FDA determines that a REMS is necessary to ensure that the benefits of the drug outweigh
the risks of the drug.
The
clinical trial process for a new compound can take ten years or more to complete. The FDA may prevent clinical trials from beginning
or may place clinical trials on hold at any point in this process if, among other reasons, it concludes that study subjects are
being exposed to an unacceptable health risk. Trials may also be prevented from beginning or may be terminated by institutional
review boards, or IRBs, who must review and approve all research involving human subjects and amendments thereto. The IRB must
continue to oversee the clinical trial while it is being conducted. This includes the IRB receiving information concerning unanticipated
problems involving risk to subjects. Side effects or adverse events that are reported during clinical trials can delay, impede,
or prevent marketing authorization. Similarly, adverse events that are reported after marketing authorization can result in additional
limitations being placed on a product’s use and, potentially, withdrawal of the product from the market.
Following
the completion of a clinical trial, the data are analyzed by the sponsoring company to determine whether the trial successfully
demonstrated safety and effectiveness and whether a product approval application may be submitted. In the United States, if the
product is regulated as a new drug, an NDA must be submitted and approved by the FDA before commercial marketing may begin. The
NDA must include a substantial amount of data and other information concerning the safety and effectiveness of the compound from
laboratory, animal, and human clinical testing, as well as data and information on manufacturing, product quality and stability,
and proposed product labeling.
Each
domestic and foreign manufacturing establishment, including any contract manufacturers that we may decide to use, must be listed
in the NDA and must be registered with the FDA. The application generally will not be approved until the FDA conducts a manufacturing
inspection, approves the applicable manufacturing process for the drug product, and determines that the facility is in compliance
with current cGMP requirements. Moreover, FDA will also typically inspect one or more clinical trial sites to confirm that the
applicable clinical trials were conducted in accordance with GCPs.
Under
the Prescription Drug User Fee Act (PDUFA), as amended, the FDA assesses and receives application user fees for reviewing an NDA,
as well as annual program fees for commercial manufacturing establishments and for approved products. These fees can be significant.
Fee waivers, reductions or refunds are available in certain circumstances. One basis for a waiver or refund of the application
user fee is if the applicant is a “small business” generally defined as employing fewer than 500 employees, including
employees of affiliates, no approved marketing application for a product that has been introduced or delivered for introduction
into interstate commerce, and the applicant, including its affiliates, is submitting its first marketing application. Product
candidates that are designated as orphan drugs, which are further described below, are also not subject to application user fees
unless the application includes an indication other than the orphan indication. Under certain circumstances, orphan products may
also be exempt from product and establishment fees.
Each
NDA submitted for FDA approval is usually reviewed for administrative completeness and reviewability. Following this review, the
FDA may request additional information rather than accept an NDA for filing. In this event, the application must be resubmitted
with the additional information. The resubmitted application is also subject to review before the FDA accepts it for filing.
Once
accepted for filing, the FDA’s review of an application may involve review and recommendations by an independent FDA advisory
committee. The FDA must refer applications for drugs that contain active ingredients, including any ester or salt of the active
ingredients that have not previously been approved by the FDA to an advisory committee or provide in an action letter a summary
for not referring it to an advisory committee. The FDA may also refer drugs to advisory committees when it is determined that
an advisory committee’s expertise would be beneficial to the regulatory decision-making process, including the evaluation
of novel products and the use of new technology. An advisory committee is typically a panel that includes clinicians and other
experts, which review, evaluate, and make a recommendation as to whether the application should be approved and under what conditions.
The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making
decisions.
8
After
evaluating the NDA and all related information, including the advisory committee recommendation, if any, and inspection reports
regarding the manufacturing facilities and clinical trial sites, the FDA may issue an approval letter, or, in some cases, a Complete
Response Letter, or CRL. If a CRL is issued, the applicant may either resubmit the NDA, addressing all the deficiencies identified
in the letter; withdraw the application; or request an opportunity for a hearing. A CRL indicates that the review cycle of the
application is complete, and the application is not ready for approval and describes all the specific deficiencies that the FDA
identified in the NDA. A CRL generally contains a statement of specific conditions that must be met in order to secure final approval
of the NDA and may require additional clinical or pre-clinical testing in order for the FDA to reconsider the application. The
deficiencies identified may be minor, for example, requiring labeling changes; or major, for example, requiring additional clinical
trials. Even with submission of this additional information, the FDA ultimately may decide that the application does not satisfy
the regulatory criteria for approval. If and when those conditions have been met to the FDA’s satisfaction, the FDA may
issue an approval letter. An approval letter authorizes commercial marketing of the drug with specific prescribing information
for specific indications.
Even
if the FDA approves a product, it may limit the approved therapeutic uses for the product as described in the product labeling,
require that warning statements be included in the product labeling, require that additional studies be conducted following approval
as a condition of the approval, impose restrictions and conditions on product distribution, prescribing, or dispensing in the
form of a REMS or otherwise limit the scope of any approval.
Special
FDA Expedited Review and Approval Programs
The
FDA has various programs, including Fast Track designation, priority review and breakthrough designation, that are intended to
expedite or simplify the process for the development and FDA review of certain drug products that are intended for the treatment
of serious or life threatening diseases or conditions, and demonstrate the potential to address unmet medical needs or present
a significant improvement over existing therapy. The purpose of these programs is to provide important new drugs to patients earlier
than under standard FDA review procedures.
To
be eligible for a Fast Track designation, the FDA must determine, based on the request of a sponsor, that a product is intended
to treat a serious or life-threatening disease or condition and demonstrates the potential to address an unmet medical need. The
FDA will determine that a product will fill an unmet medical need if the product will provide a therapy where none exists or provide
a therapy that may be potentially superior to existing therapy based on efficacy, safety, or public health factors. If Fast Track
designation is obtained, drug sponsors may be eligible for more frequent development meetings and correspondence with the FDA.
In addition, the FDA may initiate review of sections of an NDA before the application is complete. This “rolling review”
is available if the applicant provides and the FDA approves a schedule for the remaining information. A Fast Track product is
also eligible to apply for accelerated approval and priority review.
The
FDA may give a priority review designation to drugs that are intended to treat serious conditions and, if approved, would provide
significant improvements in the safety or effectiveness of the treatment, diagnosis, or prevention of serious conditions. A priority
review means that the goal for the FDA is to review an application within six months, rather than the standard review of ten months
under current PDUFA guidelines, of the 60-day filing date for new molecular entities.
Moreover,
under the provisions of the Food and Drug Administration Safety and Innovation Act, or FDASIA, enacted in 2012, a sponsor can
request designation of a product candidate as a “breakthrough therapy.” A breakthrough therapy is defined as a drug
that is intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition,
and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one
or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. Drugs
designated as breakthrough therapies are eligible for the Fast Track designation features as described above, intensive guidance
on an efficient drug development program beginning as early as Phase 1 trials, and a commitment from the FDA to involve senior
managers and experienced review staff in a proactive collaborative, cross-disciplinary review.
Even
if a product qualifies for one or more of these programs, the FDA may later decide that the product no longer meets the conditions
for qualification or decide that the time period for FDA review or approval will not be shortened.
9
A
final new program to expedite the development of drug products is the LPAD, which was passed as part of the 21st Century
Cures Act. LPAD allows for the FDA’s determination of safety and effectiveness to reflect the risk-benefit profile of the
drug in the intended limited population, taking into account the severity, rarity, or prevalence of the infection and the availability
of alternative treatments in the limited population. Under LPAD, a sponsor may request drug approval for an antibacterial or antifungal
drug if the drug is intended to treat a serious life-threatening infection in a limited population of patients with unmet needs.
The drug may be approved for the limited population notwithstanding a lack of evidence to fully establish a favorable benefit-risk
profile in a broader population. The FDA must provide prompt advice to sponsors seeking approval under LPAD to enable them to
plan a development program. If approved under LPAD, certain post-marketing requirements would apply, such as required labeling
and advertising statements and pre-distribution submission of promotional materials to FDA. If after approval for a limited population,
a product receives a broader approval, the FDA may remove such post-marketing restrictions. While a drug may only be approved
for a limited population under this program, the 21st Century Cures Act states that it is not intended to restrict
the prescribing of antimicrobial drugs or other products by healthcare professionals.
Exclusivity
For
approved drug products, market exclusivity provisions under the FDCA provide periods of regulatory exclusivity, which gives the
holder of an approved NDA limited protection from new competition in the marketplace for the innovation represented by its approved
drug.
Section
505 of the FDCA describes three types of marketing applications that may be submitted to the FDA to request marketing authorization
for a new drug. A Section 505(b)(1) NDA is an application that contains full reports of investigations of safety and efficacy.
A Section 505(b)(2) NDA is an application in which the applicant, in part, relies on investigations that were not conducted by
or for the applicant and for which the applicant has not obtained a right of reference or use from the person by or for whom the
investigations were conducted. Section 505(j) establishes an abbreviated approval process for a generic version of approved drug
products through the submission of an Abbreviated New Drug Application, or ANDA. An ANDA provides for marketing of a generic drug
product that has the same active ingredients, dosage form, strength, route of administration, labeling, performance characteristics,
and intended use, among other things, to a previously approved product. Limited changes must be pre-approved by the FDA via a