Item 1. Business
Item 1. Business
Overview
We are a clinical-stage biotechnology company advancing a novel class of oral therapeutic candidates for the treatment of chronic hepatitis B virus (HBV) infection. According to the World Health Organization (WHO), approximately 270 million people worldwide are chronically infected with HBV. Our research and development programs are pursuing multiple drug candidates designed to inhibit the HBV replication cycle and block the generation of covalently closed circular DNA (cccDNA), with the aim of discovering and developing finite and curative therapies for patients with HBV. We have discovered several novel core inhibitors, which are small molecules that directly target and allosterically modulate the HBV core (HBc) protein in a way that affects assembly and stability of HBV nucleocapsids.
The ongoing COVID-19 pandemic has affected certain aspects of our business. As further detailed below, those effects have been primarily limited to where and how our employees work in our labs and offices. To date, our current and future planned clinical trials and pre-clinical studies have not been subject to significant impact as a result of the COVID-19 pandemic.
As previously announced, in January 2021, we wound down our Microbiome program to prioritize and focus our resources on discovering and developing finite and curative therapies for HBV. Our Microbiome program had been developing a novel class of oral live microbial biotherapeutics candidates designed to treat disorders associated with the microbiome.
HBV Background
HBV is a leading global cause of chronic liver disease and liver transplants. The WHO estimates that approximately 270 million people worldwide are infected with HBV and 887,000 people died in 2015 as a result of HBV, mostly from complications, including cirrhosis and hepatocellular carcinoma. HBV is a global epidemic and infects more than twice the number of people infected with hepatitis C virus and HIV infections combined, according to the WHO as of the end of 2019. Of the approximately 270 million people living with HBV infection, only approximately 30 million were aware of their infection, and only approximately 5 million of those diagnosed received treatment. Few treated patients exhibit cure, defined herein as sustained viral suppression (more than six months) of HBV DNA (less than the lower limit of quantification (LLOQ)) after a finite duration of therapy.
Current Treatments
There have been no new mechanisms used to treat chronic HBV approved in 25 years. Current therapeutic options for HBV include:
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Direct Acting Antiviral medications (Nucelos(t)ide analog reverse transcriptase inhibitors (NrtIs)). Several antiviral medications—including lamivudine (Epivir®), adefovir (Hepsera®), telbivudine (Tyzeka®), tenofovir alafenamide (Vemlidy®), tenofovir disoproxil fumarate (Viread®) and entecavir (Baraclude®)—effectively reduce circulating virus levels by inhibiting reverse transcription. Chronic therapy with these agents can result in reduced liver inflammation and fibrosis. Unfortunately, these are rarely curative, even after years of therapy, and viral replication resumes when therapy is stopped.
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Pegylated Interferon alfa (Peg-IFNα or interferon). This synthetic version of a substance produced by the body to fight infection is used mainly for people infected with HBV who do not want to undergo long-term treatment (e.g., patients who might want to become pregnant within a few years). It is administered by injection. Cure rates are relatively low and side effects may be severe, including flu-like symptoms and depression.
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Business Strategy
Our goal is to discover and develop finite and curative therapies for those chronically infected with HBV. Our efforts to forge a new and differentiated path to develop finite and curative therapies for chronic HBV infection are inspired by the millions living with this condition worldwide. While we have learned that combination therapy of our first-generation core inhibitor product candidate, vebicorvir (VBR), with NrtIs alone will not result in a finite and curative treatment, we believe that a regimen of core inhibitors in combination with NrtI therapy will be the antiviral backbone of future finite and curative therapies. As a result, our business strategy is focused on three parallel paths:
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Developing and advancing VBR, ABI-H2158 (2158) and ABI-H3733 (3733), our current clinical-stage core inhibitor product candidates, and identifying and selecting a fourth-generation core inhibitor product candidate with a profile superior to 2158 and 3733;
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Assessing core inhibitors in multi-drug combination studies, adding non-overlapping mechanisms of action to the core inhibitor + NrtI backbone; and
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Discovering and developing additional compounds beyond core inhibitors, including a cccDNA disruptor and a number of other recently initiated novel pre-clinical programs.
With respect to our core inhibitor pipeline, we have concise, data-driven development plans to enable selection of the optimal core inhibitor to advance for finite and curative combination therapies for HBV. We intend to complement our core inhibitor programs with additional new mechanisms of action discovered and developed internally as well as externally through collaborations, licenses, partnerships and other types of business arrangements.
Our Primary Focus: Targeting HBV Core Protein to Achieve a Cure
HBV is a DNA virus that infects hepatocytes and establishes a reservoir of cccDNA, a unique DNA moiety that resides in the cell nucleus of HBV-infected hepatocytes and is associated with viral persistence and chronic infection. No currently approved oral therapies target cccDNA activity directly, which makes molecules that can modulate cccDNA generation or disrupt its function highly sought in the HBV field. As a result, most of our research and development efforts to date have focused on discovering and developing compounds targeting the core protein, a highly conserved viral structural protein that has no human homologue and is involved in numerous aspects of the HBV replication cycle, including the generation of HBV cccDNA. Through our research efforts, we have discovered several chemically distinct series of small molecule core inhibitors that directly target and allosterically inhibit core protein functions. Our pipeline therefore offers the potential for both first-in-class and best-in-class compounds that target critical steps involved in cccDNA generation and the HBV viral replication cycle. We believe that our approach of targeting viral core protein and its related functions provides a promising foundation for finite and curative HBV treatment regimens.
A benchmark for therapeutic agents aiming to decrease cccDNA levels is the use of several key viral antigens as surrogate biomarkers of active cccDNA. The same biomarkers can be used in both primary human hepatocyte cells and patients. On this basis, our core inhibitors have shown preclinical proof of principle. In a variety of cell culture models, core inhibitors have demonstrated the ability to reduce production of viral HBV DNA levels as well as the surrogate markers for cccDNA establishment: HBV e antigen (HBeAg), HBV core related antigen (HBcrAg), and viral pre-genomic RNA (pgRNA).
In pursuit of our goal of developing finite and curative therapies for patients with chronic HBV infection, we plan on advancing the optimal core inhibitor in our portfolio for use as an anti-viral backbone with NrtI. While we have three candidates in clinical studies and are working towards identifying a fourth-generation candidate later this year, we will follow a disciplined, data-driven approach to identify the optimal candidate(s) to produce potentially higher cure rates than are currently obtainable for patients with chronic HBV infection under the current standard of care.
Our Core Inhibitor Product Candidates
Our clinical strategy encompasses testing core inhibitors first as a monotherapy in Phase 1, as required by regulatory agencies, to demonstrate their intrinsic antiviral activity and safety and subsequently in Phase 2 in combination with NrtI and potentially other classes of HBV therapies.
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Vebicorvir
VBR, our lead core inhibitor product candidate, is licensed from Indiana University. The conduct of the Phase 2 studies, Study 201 and 202 and our open-label extension study, Study 211, are all complete. We presented interim updates on our clinical studies at a variety of conferences, including at the European Association for the Study of the Liver’s (EASL) Digital International Liver Congress TM in August 2020 and the American Association for the Study of Liver Diseases (AASLD) Annual Meeting in November 2020.
Our most recently completed study for VBR, Study 211, involved transitioning patients who met the requisite stopping criteria, as determined with our lead investigators and the U.S. Food and Drug Administration (FDA), off of therapy to test for sustained virologic response (SVR). SVR refers to sustained viral suppression (more than six months) of HBV DNA below LLOQ and would be consistent with a successful finite treatment for HBV. In November 2020, it became clear that patients who stopped therapy in Study 211 had not achieved meaningful SVR rates as 39 of 41 patients relapsed, meaning they had detectable HBV. We continue to analyze Study 211 data and intend to submit more detailed findings to a future medical meeting; however, it is clear that combination therapy of VBR plus NrtI alone is not sufficient to cure HBV. Based on these results, we terminated Study 211 prior to its completion.
Despite the off-treatment results in Study 211, the Phase 2 studies demonstrated on-treatment that subjects receiving VBR plus NrtI achieved faster and deeper suppression of viral replication compared to placebo. Based on this data, we believed that the addition of VBR to NrtI therapy could potentially help two patient populations as a chronic suppressive treatment (CST): (1) treatment-naïve patients, for whom addition of VBR to NrtI could lead to faster and deeper viral suppression and (2) partially virologically suppressed patients who continue to have viral levels above LLOQ by commercial assays, for whom the addition of VBR to NrtI could suppress viral levels below what could be achieved by NrtI alone.
In connection with preparation for registrational studies for VBR in CST in 2020, we held a number of discussions with leading viral hepatitis experts regarding use of VBR as a CST. In addition, we initiated an additional Phase 2 study of VBR, Study 205, to evaluate treatment intensification with VBR in patients with chronic HBV infection who are only partially virologically suppressed on NrtI.
In the second half of 2020, we also held an End-of-Phase 2 meeting with the National Medical Products Administration, Center for Drug Evaluation, China, and reached agreement on a Phase 3 registrational program for CST use of VBR plus NrtI. We also had discussions with the FDA regarding the same Phase 3 registrational program.
Based on discussions with leading viral hepatitis experts, global regulatory discussions and feedback, and, with respect to the China territory, discussions and agreement with our collaboration partner, BeiGene, Ltd. (BeiGene), we recently decided to not move forward with the global registrational studies for VBR as a chronic suppressive treatment (CST) with NrtI. The decision was made to focus on the greatest unmet medical need of patients, which lies predominantly in cure, rather than CST. As a result, we also expect to terminate Study 205, as we focus our efforts with VBR moving forward in combination with NrtI and additional mechanisms targeting finite and curative combination therapy.
ABI-H2158
Our second-generation core inhibitor product candidate, 2158, was internally discovered and developed and is chemically distinct from VBR.
We reported the final data from dose-ranging cohorts of the Phase 1b portion of the Phase 1a/1b dose-ranging clinical study at EASL in August 2020. Based on data from the Phase 1b dose-ranging study, we initiated a Phase 2 clinical study in June 2020 using a 300 mg daily dose of 2158. This study is being conducted in approximately ten countries in Asia, North America and Europe. We expect interim data from this study in the second half of 2021. While we will continue to monitor the situation closely, at this time, we do not expect our timelines for this study to be significantly impacted by the COVID-19 pandemic.
ABI-H3733
Our third core inhibitor product candidate, 3733, has completed Investigational New Drug (IND) enabling studies. 3733 has a novel chemical scaffold separate from both VBR and 2158. We presented a preclinical profile of this candidate in the first quarter of 2019.
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In the first quarter of 2020, we initiated a Phase 1a clinical study to evaluate safety, tolerability and pharmacokinetics (PK) following single ascending dose and multiple ascending dose administration of 3733 in healthy subjects in New Zealand. Conduct for the study was completed in the fourth quarter of 2020 and preliminary data indicate that 3733 was generally well-tolerated and had favorable PK.
Additional Product Candidates
In addition to our three clinical-stage product candidates, our research discovery team is actively focused on identifying and selecting a fourth-generation core inhibitor candidate, which we anticipate in the first half of 2021.
Core Inhibitor Collaboration and License Agreements
Indiana University Research and Technology Corporation
In September 2013, we entered into an exclusive license agreement (the IURTC License Agreement) with Indiana University Research and Technology Corporation (IURTC) pursuant to which we acquired, with rights to sublicense, the rights to develop and commercialize products associated with multiple patents and patent applications covering aspects of our HBV program held by IURTC. As part of this agreement, we are obligated to make milestone payments based upon the successful accomplishment of clinical and regulatory milestones. The aggregate amount of all performance milestone payments under the IURTC License Agreement, should all performance milestones through development be met, is $0.8 million, with a portion related to the first performance milestone having been paid. Under the IURTC License Agreement, we are also obligated to pay IURTC royalties based on net sales of the licensed technology ranging from 0.5% to 1.75%. In addition, under the IURTC License Agreement, we pay annual diligence maintenance fees of $0.1 million. Milestone payments received by IURTC are fully creditable against the annual diligence maintenance fee for the year in which the milestone payments are received.
The IURTC License Agreement may be terminated by us, with or without cause, upon 90 days advance written notice, by IURTC upon our material breach with 60 days advance written notice or by IURTC, in certain cases, upon our insolvency or bankruptcy immediately upon written notice.
BeiGene, Ltd.
In July 2020, we entered into a Collaboration Agreement with BeiGene, granting BeiGene an exclusive, royalty-bearing license to develop and commercialize products containing VBR, 2158 and 3733 (the BeiGene Agreement) in the People’s Republic of China, Hong Kong, Taiwan and Macau (the Territory).
Under the BeiGene Agreement, we and BeiGene will collaborate on development activities with respect to the licensed products in accordance with a mutually agreed upon development plan.
Pursuant to the terms of the BeiGene Agreement, BeiGene paid us an upfront amount of $40.0 million, and we are eligible to receive up to approximately $500.0 million in milestone payments, comprised of up to $113.8 million in development and regulatory and $385.0 million in net sales milestone payments. In addition, we are eligible to receive tiered royalties at percentages ranging from the mid-teens to the low 30s of net sales. BeiGene has also agreed to pay all development and regulatory costs up to an aggregate of $45.0 million in the Territory for VBR, 2158 and 3733. Following this initial investment, we and BeiGene will share development costs for the Territory equally.
The BeiGene Agreement also contains provisions such as representations and warranties of the parties, terms as to governance of the collaboration, commercialization and regulatory responsibilities of the parties, and manufacturing and supply, including potential adjustments in the event supply costs exceed certain levels. In addition, during the term of the BeiGene Agreement, neither party will commercialize any competing products in the Territory.
If, after 2158 and 3733 reach the end of Phase 2 clinical trials, we and BeiGene are unable to mutually agree on the terms of a Phase 3 global study, BeiGene may elect to terminate the BeiGene Agreement solely as it relates to that compound, as applicable. Such a termination would result in us regaining all rights to the applicable compound in the Territory. In addition, BeiGene may terminate the BeiGene Agreement for convenience at any time upon 90 days’ advance written notice to us. The BeiGene Agreement also contains customary provisions for termination by either party, including in the event of breach of the BeiGene Agreement, subject to cure.
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Multi-Drug Combination Studies
We believe that core inhibitors and NrtI will be central to finite and curative therapies for chronic HBV infection. Therefore, as we continue to develop and advance our current and future core inhibitors through clinical studies, we plan to conduct multi-drug combination studies in parallel that add additional drugs (or compounds) with non-overlapping mechanisms of action to the core inhibitor + NrtI antiviral backbone. Specifically, we plan on only incorporating our current and future core inhibitors that have demonstrated they are well-tolerated and effective in clinical studies in dual combination with NrtI. As the 300 mg daily dose of VBR has been observed to be well-tolerated in all studies conducted to date, with no serious adverse effects or dose-limiting toxicities identified and no pattern of treatment-emergent clinical or laboratory abnormalities observed and has progressed beyond dual combination studies, we currently have two triple combination studies planned to study VBR in combination with NrtI and a third mechanism of action.
In August 2020, we entered into a Clinical Trial Agreement with Arbutus Biopharma Corporation (Arbutus), pursuant to which we and Arbutus will conduct a randomized, multi-center, open-label Phase 2 clinical trial to explore the safety, PK and antiviral activity of the triple combination of VBR, NrtI and AB-729 compared to the double combinations of VBR plus NrtI and AB-729 plus NrtI in virologically suppressed patients. This clinical study is projected to initiate in the first half of 2021.
Our second triple combination study evaluates VBR and NrtI in combination with interferon in treatment-naïve HBeAg positive subjects and was initiated in the first quarter of 2021.
In addition to the above studies, we expect to continue to pursue additional multi-drug combinations that include other or additional non-overlapping mechanisms of action to the core inhibitor + NrtI antiviral backbone.
Beyond Core Inhibitors
In addition to the development and advancement of our core inhibitor portfolio and our current and future multi-drug combination studies, our research and development team is working on discovering and developing a potent fourth-generation core inhibitor, cccDNA disruptors and small molecules targeting novel undisclosed targets to add to the core inhibitor + NrtI antiviral backbone to achieve cure. In November 2020, we entered into an exclusive, two-year collaboration and option agreement with Door Pharmaceuticals (Door Pharma) focused on the development of a novel class of HBV inhibitors. Door Pharma’s discovery platform targets functions of core protein distinct from viral assembly and have the potential to interfere with viral nucleic acid including intra-nuclear cccDNA, providing a strong complement to our current portfolio. Together with Door Pharma, we are working on identifying cccDNA disruptors, which will be aimed at inhibiting different intra-nuclear steps in the viral replication cycle that complement the activity of our core inhibitors.
Under the terms of the agreement, Door Pharma will build upon its previous efforts to lead and conduct new discovery research, which we will fund. In return for an up-front payment and success-based milestones and royalties, we will be granted an exclusive option to license compounds arising from the collaboration and will be responsible for the continued development and commercialization of optioned compounds.
Intellectual Property
In regard to our HBV patent estate, we co-own with and exclusively license from Indiana University two issued U.S. patents and related foreign patents and patent applications that relate to compositions of matter and methods of using VBR. The issued U.S. patents are expected to expire in 2035 and 2036. In addition, we own a pending U.S. patent application and related foreign applications directed to a process for preparing VBR; any patents issuing therefrom are expected to expire in 2038. Finally, we own an international (PCT) patent application directed to formulations of VBR; any patents issuing therefrom are expected to expire in 2040.
We own a pending U.S. patent application and related foreign applications that relate to compositions of matter and methods of using 2158; any patents issuing therefrom are expected to expire in 2038.
We own a PCT patent application that relates to compositions of matter and methods of using 3733; any patents issuing therefrom are expected to expire in 2039.
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Microbiome Program
Following the termination of the Research, Development, Collaboration and License Agreement between the Company and Allergan Pharmaceuticals International Limited, which was acquired by AbbVie, Inc. in May 2020, we began an extensive process to identify strategic alternatives to continue the development of the Microbiome program upon the return of the related intellectual property rights. This process did not result in us receiving any bids on any portion of the Microbiome program, including our facility in Groton, Connecticut.
As a result, in December 2020, we and our Board of Directors (the Board) decided to wind down our Microbiome program as of January 31, 2021, including our facility in Groton, Connecticut, to prioritize and focus our resources on our HBV programs.
Government Regulation
Government authorities in the United States, at the federal, state and local level, and in other countries extensively regulate, among other things, the research, development, testing, manufacture, including any manufacturing changes, packaging, storage, recordkeeping, labeling, advertising, promotion, distribution, marketing, post-approval monitoring and reporting, import and export of pharmaceutical products, such as those we are developing.
U.S. drug approval process
In the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act (FDCA) and implementing regulations. The process of obtaining regulatory approvals and subsequent compliance with appropriate federal, state, local and foreign statutes and regulations requires the expenditure of substantial time and financial resources. Failure to comply with the applicable U.S. requirements at any time during the product development process, approval process or after approval may subject an applicant to a variety of administrative or judicial sanctions, such as the FDA’s refusal to approve pending applications, withdrawal of an approval, license revocation, imposition of a clinical hold, issuance of warning letters and untitled letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement of profits or civil or criminal penalties.
The process required by the FDA before a drug may be marketed in the United States generally involves the following:
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completion of nonclinical laboratory tests and animal studies in compliance with the FDA’s good laboratory practice (GLP) regulations and applicable requirements for the humane use of laboratory animals or other applicable requirements;
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submission to the FDA of an IND which must become effective before human clinical studies may begin;
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approval by an independent institutional review board (IRB) or ethics committee at each clinical site before each trial may be initiated;
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performance of adequate and well-controlled human clinical studies in accordance with good clinical practices (GCP), and any additional requirements for the protection of human research patients and their health information, to establish the safety and efficacy of the proposed drug for each indication;
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submission to the FDA of a new drug application (NDA);
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satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product is produced to assess compliance with current good manufacturing practices (cGMP) requirements and to assure that the facilities, methods and controls are adequate to preserve the product’s identity, strength, quality and purity; and
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FDA review and approval of the NDA.
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Nonclinical studies and IND
Nonclinical studies include laboratory evaluation of product chemistry and formulation, as well as in vitro and animal studies to assess the potential for adverse events and in some cases to establish a rationale for therapeutic use. The conduct of nonclinical studies is subject to federal regulations and requirements, including GLP regulations for safety/toxicology studies. An IND sponsor must submit the results of the nonclinical tests, together with manufacturing information, analytical data, any available clinical data or literature and plans for clinical studies, among other things, to the FDA as part of an IND. Some long-term nonclinical testing, such as animal tests of reproductive adverse events and carcinogenicity, may continue after the IND is submitted. For some products, the FDA may waive the need for certain nonclinical tests. An IND automatically becomes effective 30 days after receipt by the FDA, unless before that time the FDA raises concerns or questions related to one or more proposed clinical studies and places the trial on clinical hold. If an IND or clinical study is placed on clinical hold, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical study can begin. As a result, submission of an IND may not result in the FDA allowing clinical studies to commence.
Clinical studies
Clinical studies involve the administration of the investigational new drug to human subjects under the supervision of qualified investigators in accordance with GCP requirements, which include, among other things, the requirement that all research subjects provide their informed consent in writing before their participation in any clinical study. Clinical studies are conducted under written study protocols detailing, among other things, the objectives of the study, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated. A protocol for each clinical study and any subsequent protocol amendments must be submitted to the FDA as part of the IND. In addition, an IRB at each institution participating in the clinical study must review and approve the plan for any clinical study before it commences at that institution, and the IRB must conduct continuing review. The IRB must review and approve, among other things, the study protocol and informed consent information to be provided to study subjects. An IRB must operate in compliance with FDA regulations. Information about certain clinical studies must be submitted within specific timeframes to the National Institutes of Health for public dissemination at www.clinicaltrials.gov.
Human clinical studies are typically conducted in three sequential phases, which may overlap or be combined:
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Phase 1: The drug is initially introduced into healthy human subjects or patients with the target disease or condition and tested for safety, dosage tolerance, absorption, metabolism, distribution, excretion and, if possible, to gain an early indication of its effectiveness.
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Phase 2: The drug is administered to a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage.
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Phase 3: The drug is administered to an expanded patient population in adequate and well-controlled clinical studies to generate sufficient data to statistically confirm the efficacy and safety of the product for approval, to establish the overall risk-benefit profile of the product and to provide adequate information for the labeling of the product.
Progress reports detailing the results of the clinical studies must be submitted at least annually to the FDA. Additionally, IND safety reports must be submitted to the FDA and the investigators within 15 calendar days after determining that the information qualifies for reporting. IND safety reports are required for serious and unexpected suspected adverse reactions, findings from animal or in vitro testing or other studies that suggest a significant risk to humans, and any clinically important increase in the rate of a serious suspected adverse reaction over that listed in the protocol or investigator brochure. In addition, a sponsor must notify the FDA within seven calendar days after receiving information concerning any unexpected fatal or life-threatening suspected adverse reaction. Phase 1, Phase 2 and Phase 3 clinical studies may not be completed successfully within any specified period, or at all. Furthermore, the FDA or the sponsor may suspend or terminate a clinical study at any time on various grounds, including a finding that the research subjects are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical study at its institution if the clinical study is not being conducted in accordance with the IRB’s requirements or if the drug has been associated with unexpected serious harm to patients.
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A manufacturer of an investigational drug for a serious disease or condition is required to make available, such as by posting on its website, its policy regarding evaluating and responding to requests for individual patient access to such investigational drug. This requirement applies on the earlier of the first initiation of a Phase 2 or Phase 3 trial of the investigational drug or, as applicable, 15 days after the drug receives a designation as a breakthrough therapy, fast track product, or regenerative advanced therapy.
Marketing approval
After the completion of required clinical testing, the results of the nonclinical studies and clinical studies, together with detailed information relating to the product’s chemistry, manufacture, controls and proposed labeling, among other things, are submitted to the FDA as part of an NDA requesting approval to market the product for one or more indications. Under federal law, the submission of most NDAs is additionally subject to a substantial application user fee, currently $2.9 million and the sponsor of an approved NDA is also subject to an annual program fee currently set at $0.3 million through September 30, 2021. These fees are typically adjusted on October 1 each year.
The FDA conducts a preliminary review of all NDAs within the first 60 days after submission before accepting them for filing to determine whether they are sufficiently complete to permit substantive 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 the submission is accepted for filing, the FDA begins an in-depth substantive review. The FDA has agreed to specified performance goals in the review of NDAs. Under these goals, the FDA has committed to review most original applications for non-priority products within ten months, and most original applications for priority review products, that is, drugs for a serious or life-threatening condition that the FDA determines represent a significant improvement over existing therapy, within six months. For NDAs for novel products, the ten- and six-month time periods runs from the filing date; for all other original applications, the ten- and six-month time periods run from the submission date. The review process may be extended by the FDA for three additional months to consider certain information or clarification regarding information already provided in the submission. Despite these review goals, it is not uncommon for FDA review of an NDA to extend beyond the goal date. The FDA may also refer applications for novel drugs or products that present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application should be approved. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions.
Before approving an NDA, the FDA typically will inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. In addition, before approving an NDA, the FDA will typically inspect one or more clinical sites to assure compliance with GCP and integrity of the clinical data submitted.
After the FDA’s evaluation of the NDA and inspection of the manufacturing facilities, the FDA may issue an approval letter or a complete response letter. An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications. A complete response letter generally outlines the deficiencies in the submission and may require substantial additional testing or information in order for the FDA to reconsider the application. If and when those deficiencies have been addressed to the FDA’s satisfaction in a resubmission of the NDA, the FDA will issue an approval letter. The FDA has committed to reviewing such resubmissions in two or six months depending on the type of information included. Even with submission of this additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval and refuse to approve the NDA. Even if the FDA approves a product, it may limit the approved indications for use for the product, require that contraindications, warnings or precautions be included in the product labeling, require that post-approval studies, including Phase 4 clinical studies, be conducted to further assess a drug’s safety after approval, require testing and surveillance programs to monitor the product after commercialization, or impose other conditions, including distribution and use restrictions or other risk management mechanisms, including Risk Evaluation and Mitigation Strategies (REMS), which can materially affect the potential market and profitability of the product or impose new labeling, testing or distribution and use requirements. The FDA may prevent or limit further marketing of a product based on the results of post-market studies or surveillance programs. After approval, some types of changes to the approved product, such as adding new indications, manufacturing changes and additional labeling claims, are subject to further testing requirements and FDA review and approval.
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Fast track designation
The FDA is required to facilitate and expedite the development and review of drugs that are intended for the treatment of a serious or life-threatening disease or condition for which there is no effective treatment and which demonstrate the potential to address unmet medical needs for the disease or condition. Under the fast track program, the sponsor of a new product candidate may request the FDA to designate the product for a specific indication as a fast track product concurrent with or after the filing of the IND for the product candidate. The FDA must determine if the product candidate qualifies for fast track designation within 60 calendar days after receipt of the sponsor’s request.
In addition to other benefits, such as the ability to have greater interactions with the FDA, the FDA may initiate review of sections of a fast track product’s NDA before the application is complete. This rolling review is available if the applicant provides and the FDA approves a schedule for the submission of the remaining information and the applicant pays applicable user fees. However, the FDA’s time period goal for reviewing a fast track application does not begin until the last section of the NDA is submitted. In addition, the fast track designation may be withdrawn by the FDA if the FDA believes that the designation is no longer supported by data emerging in the clinical study process. In 2018 and 2020, the FDA granted fast track designation to VBR and 2158, respectively, for the treatment of patients with chronic HBV infection.
Priority review
Under FDA policies, a product candidate may be eligible for priority review, a review generally within a six-month time frame from the time a complete application is received or filed. Products generally are eligible for priority review if they are intended for treatment of a serious or life-threatening disease or condition and provide a significant improvement in safety or effectiveness compared to marketed products in the treatment, diagnosis or prevention of a serious disease or condition. A fast track designated product candidate would ordinarily meet the FDA’s criteria for priority review.
Accelerated approval
Under the FDA’s accelerated approval regulations, the FDA may approve a drug for a serious or life-threatening illness that provides meaningful therapeutic benefit to patients over existing treatments based upon a surrogate endpoint that is reasonably likely to predict clinical benefit or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality (IMM). In clinical studies, a surrogate endpoint is a measurement of laboratory or clinical signs of a disease or condition that substitutes for a direct measurement of how a patient feels, functions or survives. Surrogate endpoints can often be measured more easily or more rapidly than clinical endpoints. A product candidate approved on this basis is subject to rigorous post-marketing compliance requirements, including the completion of Phase 4 or post-approval clinical studies to confirm the effect on the clinical endpoint. Failure to conduct required post-approval studies, or confirm a clinical benefit during post-marketing studies, would allow the FDA to withdraw the drug from the market on an expedited basis. All promotional materials for drug candidates approved under accelerated regulations are subject to prior review by the FDA.
Breakthrough therapy designation
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 also may be eligible for priority review. The FDA must take certain actions, such as holding timely meetings and providing advice, intended to expedite the development and review of an application for approval of a breakthrough therapy. 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.
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Orphan drugs
Under the Orphan Drug Act, as amended, the FDA may grant orphan drug designation to drugs intended to treat a rare disease or condition, which is generally defined as a disease or condition that affects fewer than 200,000 individuals in the United States or that affects more than 200,000 individuals in the United States and for which there is no reasonable expectation that the cost of developing and making available the drug for the disease or condition will be recovered from sales of the product in the United States. Orphan drug designation must be requested before submitting an NDA or BLA. After the FDA grants orphan drug designation, the identity of the product and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not shorten the duration of the regulatory review and approval process. The first NDA or BLA applicant to receive FDA approval for a particular active moiety to treat a particular disease with FDA orphan drug designation is entitled to a seven-year exclusive marketing period in the United States for that product and indication. During the seven-year exclusivity period, the FDA may not approve any other applications to market the same drug for the same orphan indication, except in limited circumstances, such as a showing of clinical superiority to the product with orphan drug exclusivity. A drug will be considered clinically superior if it is shown to be safer, more effective or makes a major contribution to patient care. Orphan drug exclusivity does not prevent the FDA from approving a different drug for the same orphan disease or condition, or the same drug for a different disease or condition. Among the other benefits of orphan drug designation are tax credits for certain research and a waiver of the NDA/BLA application user fee.
Pediatric information
Under the Pediatric Research Equity Act of 2003, as amended, an NDA or supplement to an NDA for drug with certain novel features (e.g., new active ingredient, new indication) 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. A sponsor of a new drug subject to the above pediatric testing requirements also is required to submit to the FDA a pediatric study plan generally 60 days after an end-of-Phase 2 meeting with the agency. Generally, the pediatric data requirements do not apply to products with orphan drug designation.
Other regulatory requirements
Any drug manufactured or distributed by us pursuant to FDA approvals will be subject to pervasive and continuing regulation by the FDA, including, among other things, requirements relating to recordkeeping, periodic reporting, product sampling and distribution, advertising and promotion and reporting of adverse experiences with the product. After approval, most changes to the approved product, such as adding new indications or other labeling claims, are subject to prior FDA review and approval.
The FDA may impose a number of post-approval requirements, including REMS, as a condition of approval of an NDA or BLA. For example, the FDA may require post-marketing testing, including Phase 4 clinical studies, and surveillance to further assess and monitor the product’s safety and effectiveness after commercialization.
In addition, drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register their establishments with the FDA and state agencies and are subject to periodic unannounced inspections by the FDA and these state agencies for compliance with cGMP requirements. Changes to the manufacturing process are strictly regulated and often require prior FDA approval before being implemented. FDA regulations also require investigation and correction of any deviations from cGMP and impose reporting and documentation requirements upon us and any third-party manufacturers that we may decide to use. Accordingly, manufacturers must continue to expend time, money and effort in the areas of production and quality control to maintain cGMP compliance.
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Once an approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information, imposition of post-market studies or clinical studies to assess new safety risks or imposition of distribution or other restrictions under a REM program. Other potential consequences include, among other things:
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restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls;
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fines, warning letters or holds on post-approval clinical studies;
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refusal of the FDA to approve pending applications or supplements to approved applications, or suspension or revocation of product approvals;
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product seizure or detention, or refusal to permit the import or export of products; or
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consent decrees, injunctions or the imposition of civil or criminal penalties.
The FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the market. Drugs generally may be promoted only for the approved indications and in accordance with the provisions of the approved labeling. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off label uses, and a company that is found to have improperly promoted off label uses may be subject to significant liability.
Physician Drug Samples
As part of the sales and marketing process, pharmaceutical companies frequently provide samples of approved drugs to physicians. The Prescription Drug Marketing Act (PDMA) regulates the distribution of drug samples at the federal level and sets minimum standards for the registration and regulation of drug distributors by the states. Both the PDMA and state laws limit the distribution of prescription pharmaceutical product samples and impose requirements to ensure accountability in distribution. In addition, the PDMA sets forth civil and criminal penalties for violations.
Foreign Regulation
In order to market any product outside of the United States, we would need to comply with numerous and varying regulatory requirements of other countries regarding safety and efficacy and governing, among other things, clinical studies, marketing authorization, commercial sales and distribution of our products. Whether or not we obtain FDA approval for a product, we would need to obtain the necessary approvals by the comparable regulatory authorities of foreign countries before we can commence clinical studies or marketing of the product in those countries. The approval process varies from country to country and can involve additional product testing and additional administrative review periods. The time required to obtain approval in other countries might differ from and be longer than that required to obtain FDA approval. Regulatory approval in one country does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one country may negatively impact the regulatory process in others.
New Legislation and Regulations
From time to time, legislation is drafted, introduced and passed in Congress that could significantly change the statutory provisions governing the testing, approval, manufacturing and marketing of products regulated by the FDA. In addition to new legislation, FDA regulations and policies are often revised or interpreted by the agency in ways that may significantly affect our business and our products. It is impossible to predict whether further legislative changes will be enacted or whether FDA regulations, guidance, policies or interpretations will be changed or what the effect of such changes, if any, may be.
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Pharmaceutical Coverage, Pricing and Reimbursement
Significant uncertainty exists as to the coverage and reimbursement status of any drug products for which we may obtain regulatory approval. Sales of any of our product candidates, if approved, will depend, in part, on the extent to which the costs of the products will be covered by third-party payors, including government health programs such as Medicare and Medicaid, commercial health insurers and managed care organizations. The process for determining whether a payor will provide coverage for a drug product may be separate from the process for setting the price or reimbursement rate that the payor will pay for the drug product once coverage is approved. Third-party payors may limit coverage to specific drug products on an approved list, or formulary, which might not include all of the approved drugs for a particular indication.
In order to secure coverage and reimbursement for any product that might be approved for sale, we may need to conduct expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness of the product, in addition to the trials required to obtain FDA or other comparable regulatory approvals. Our product candidates may not be considered medically necessary or cost-effective. A payor’s decision to provide coverage for a drug product does not imply that an adequate reimbursement rate will be approved. Companies may also need to provide discounts to purchasers, private health plans or government healthcare programs. Third-party reimbursement may not be sufficient to enable us to maintain price levels high enough to realize an appropriate return on our investment in product development. Further, one payor’s determination to provide coverage for a product does not assure that other payors will also provide coverage and reimbursement for the product, and the level of coverage and reimbursement can differ significantly from payor to payor.
The containment of healthcare costs has become a priority of federal, state and foreign governments, and the prices of drugs have been a focus in this effort. Third-party payors are increasingly challenging the prices charged for medical products and services and examining the medical necessity and cost-effectiveness of medical products and services, in addition to their safety and efficacy. If these third-party payors do not consider our products to be cost-effective compared to other available therapies, they may not cover our products after approval as a benefit under their plans or, if they do, the level of payment may not be sufficient to allow us to sell our products at a profit. The U.S. government, state legislatures and foreign governments have shown significant interest in implementing cost containment programs to limit the growth of government-paid health care costs, including price controls, restrictions on reimbursement and requirements for substitution of generic products for branded prescription drugs. Adoption of such controls and measures and tightening of restrictive policies in jurisdictions with existing controls and measures, could limit payments for pharmaceuticals such as the drug candidates that we are developing and could adversely affect our net revenue and results. Even if favorable coverage and reimbursement status is attained for one or more products for which we may receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.
Pricing and reimbursement schemes vary widely from country to country. Some countries provide that drug products may be marketed only after a reimbursement price has been agreed. Some countries may require the completion of additional studies that compare the cost-effectiveness of a particular product candidate to currently available therapies. For example, the European Union provides options for its member states to restrict the range of drug products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. European Union member states may approve a specific price for a drug product or may instead adopt a system of direct or indirect controls on the profitability of us placing the drug product on the market. Other member states allow companies to fix their own prices for drug products but monitor and control company profits. The downward pressure on health care costs in general, particularly prescription drugs, has become very intense. As a result, increasingly high barriers are being erected to the entry of new products. In addition, in some countries, cross-border imports from low-priced markets exert competitive pressure that may reduce pricing within a country. There can be no assurance that any country that has price controls or reimbursement limitations for drug products will allow favorable reimbursement and pricing arrangements for any of our products.
The marketability of any products for which we may receive regulatory approval for commercial sale is dependent on the availability of adequate coverage and reimbursement from government and third-party payors. In addition, the emphasis on managed care in the United States has increased and we expect will continue to increase the pressure on drug pricing. Coverage policies, third-party reimbursement rates and drug pricing regulation may change at any time. In particular, in the United States, the Affordable Care Act (ACA) and its amendment, the Health Care and Education Reconciliation Act, contains provisions that may reduce the profitability of drug products, including, for example,
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increased rebates for drugs sold to Medicaid programs, extension of Medicaid rebates to Medicaid managed care plans, mandatory discounts for certain Medicare Part D beneficiaries and annual fees based on pharmaceutical companies’ share of sales to federal health care programs.
Among the provisions of the ACA of importance to our potential drug candidates are the following:
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an annual, nondeductible fee on any entity that manufactures or imports specified branded prescription drugs;
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an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program;
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expansion of healthcare fraud and abuse laws, including the False Claims Act and the Anti-Kickback Statute, new government investigative powers, and enhanced penalties for noncompliance;
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a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 70% point-of-sale discounts off negotiated prices of applicable brand drugs under the Bipartisan Budget Act of 2018 (BBA);
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extension of manufacturers’ Medicaid rebate liability;
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expansion of eligibility criteria for Medicaid programs;
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expansion of the entities eligible for discounts under the Public Health Service Act pharmaceutical pricing program;
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requirements to report financial arrangements with physicians and teaching hospitals;
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a requirement to annually report drug samples that manufacturers and distributors provide to physicians; and
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a Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research.
Since its enactment, there have been many judicial, Presidential, and Congressional challenges to numerous aspects of the ACA. For example, former President Trump issued several executive orders and other directives designed to delay, circumvent, or loosen certain requirements or implementation of certain requirements mandated by the ACA. Concurrently, Congress has considered legislation that would repeal, or repeal and replace all or part of the ACA. While Congress has not passed comprehensive repeal legislation, several bills affecting the implementation of certain taxes under the ACA have been signed into law. For example, the Tax Cuts and Jobs Act, signed into law in 2017, effectively repealed the individual health insurance mandate, which is considered a key component of the ACA, and the U.S. Supreme Court recently heard oral arguments regarding the constitutionality of the ACA and the individual mandate, with a decision expected during the current term in 2021. Further, the Trump Administration’s 2020 federal spending package permanently eliminated, effective January 1, 2020, the ACA-mandated “Cadillac” tax on certain high-cost employer-sponsored insurance plans and, on January 1, 2021, eliminated the health insurer tax. Moreover, the BBA, among other things, amended the ACA to close the coverage gap in most Medicare drug plans, commonly referred to as the “donut hole”.
In addition, other legislative changes have been proposed and adopted since the ACA was enacted. These changes included aggregate reductions to Medicare payments to providers of up to 2% per fiscal year, and, due to subsequent legislative amendments, will remain in effect through 2030, with the exception of a temporary suspension from May 1, 2020 through March 2021, unless additional Congressional action is taken. Further, in January 2013, then President Obama signed into law the American Taxpayer Relief Act of 2012, which, among other things, reduced Medicare payments to several providers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. These laws may result in additional reductions in Medicare and other healthcare funding.
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Additionally, there has been increasing legislative and enforcement interest in the United States with respect to drug pricing practices. Specifically, there have been several recent United States Congressional inquiries and proposed and enacted federal legislation designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drugs. For example, at the federal level, the Trump Administration issued several executive orders related to prescription drug pricing and sent “principles” for drug pricing to Congress. In addition, in September 2020, the FDA issued a final rule that sets up a legal framework for allowing the importation of certain prescription drugs from Canada, and the Centers for Medicare & Medicaid Services (CMS) issued guidance that addresses the treatment of certain imported drugs under the Medicaid Drug Rebate Program. In November 2020, the Trump Administration and the U.S. Department of Health and Human Services (HHS) announced regulations tying certain Medicare Part B drug prices to international drug prices, modifying certain federal Anti-Kickback Statute (AKS) safe harbors, including removing safe harbor protection for rebates negotiated between drug manufacturers and pharmacy benefit managers (PBMs) or health plan sponsors in Medicare Part D, and making further changes to the rules implementing the Stark Law, other AKS safe harbors and the beneficiary inducements provision in the civil monetary penalties law. On November 20, 2020, CMS issued an interim final rule implementing President Trump’s Most Favored Nation executive order, which would tie Medicare Part B payments for certain physician-administered drugs to the lowest price paid in other economically advanced countries. However, on December 28, 2020, the United States District Court in Northern California issued a nationwide preliminary injunction against implementation of the interim final rule, and CMS announced that the Most Favored Nation Model will not be implemented without further rulemaking. There also have been legal challenges to the modified AKS safe harbor for drug rebates, which delayed implementation of the modified safe harbor until January 1, 2023, pending HHS’s review, and gave the Biden Administration until April 1, 2021 to decide whether to defend the rebate rule in court. The Biden Administration also has issued a final rule to delay the effective date of other provisions of the rebate rule that were scheduled to take effect on January 29, 2021 to March 22, 2021. The likelihood of implementation of any of the other Trump Administration reform initiatives is uncertain, particularly in light of the change in presidential administrations. Individual states in the United States have also become increasingly active in passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures. Accordingly, the ultimate content, timing or effect of healthcare reform legislation on the United States healthcare industry is unclear.
Other Healthcare Laws
In the United States, our activities are potentially subject to regulation by various federal, state and local authorities in addition to the FDA, including but not limited to, CMS, other divisions of the U.S. Department of Health and Human Services (e.g., the Office of Inspector General), the U.S. Department of Justice (DOJ), and individual U.S. Attorney offices within the DOJ, and state and local governments. For example, the Company’s business practices, including its research and sales, marketing and scientific/ educational grant programs may be required to comply with federal and state fraud and abuse laws, false claims laws, the data privacy and security provisions of the Health Insurance Portability and Accountability Act (HIPAA), federal transparency requirements and similar state laws, each as amended. The laws that may affect our ability to operate include:
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the federal Anti-Kickback Statute, which prohibits, among other things, knowingly and willfully soliciting, receiving, offering or paying any remuneration (including any kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce, or in return for, either the referral of an individual, or the purchase, lease, order or recommendation of any good, facility, item or service for which payment may be made, in whole or in part, under a federal healthcare program, such as the Medicare and Medicaid programs. A person or entity can be found guilty of violating the statute without actual knowledge of the statute or specific intent to violate it. The Anti-Kickback Statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers, purchasers, and formulary managers on the other;
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federal civil and criminal false claims laws and civil monetary penalty laws, such as the federal False Claims Act, which impose criminal and civil penalties and authorize civil whistleblower or qui tam actions, against individuals or entities for, among other things: knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent; making a false statement or record material to a false or fraudulent claim or obligation to pay or transmit money or property to the federal
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government; or knowingly concealing or knowingly and improperly avoiding or decreasing an obligation to pay money to the federal government. In addition, the government may assert that a claim including items and services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act. Manufacturers can be held liable under the False Claims Act even when they do not submit claims directly to government payors if they are deemed to “cause” the submission of false or fraudulent claims;
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HIPAA, which created new federal criminal statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of the payor (e.g., public or private) and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false statements in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare matters. Similar to the federal Anti-Kickback Statute, a person or entity can be found guilty of violating HIPAA without actual knowledge of the statute or specific intent to violate it;
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HIPAA, as amended by HITECH, and their respective implementing regulations, which impose requirements on certain covered healthcare providers, health plans, and healthcare clearinghouses as well as their respective business associates that perform services for them that involve the use, or disclosure of, individually identifiable health information, relating to the privacy, security and transmission of individually identifiable health information. HITECH also created new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions;
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the federal false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement in connection with the delivery of or payment for healthcare benefits, items or services;
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the U.S. federal Food, Drug and Cosmetic Act (FDCA), which prohibits, among other things, the adulteration or misbranding of drugs, biologics and medical devices;
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the federal transparency requirements under the ACA, including the provision commonly referred to as the Physician Payments Sunshine Act, which requires manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program to report annually to the U.S. Department of Health and Human Services information related to payments or other transfers of value made to physicians and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members. Effective January 1, 2022, these reporting obligations will extend to include transfers of value made to certain non-physician providers such as physician assistants and nurse practitioners; and
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federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers.
Additionally, we are subject to state and non-U.S. equivalents of each of the healthcare laws described above, among others, some of which may be broader in scope and may apply regardless of the payor. Many U.S. states have adopted laws similar to the federal Anti-Kickback Statute, some of which apply to the referral of patients for healthcare services reimbursed by any source, not just governmental payors, including private insurers. In addition, some states have passed laws that require pharmaceutical companies to comply with the April 2003 Office of Inspector General Compliance Program Guidance for Pharmaceutical Manufacturers and/or the Pharmaceutical Research and Manufacturers of America’s Code on Interactions with Healthcare Professionals. Several states also impose other marketing restrictions or require pharmaceutical companies to make marketing or price disclosures to the state. There are ambiguities as to what is required to comply with these state requirements and if we fail to comply with an applicable state law requirement, we could be subject to penalties.
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In addition, regulators globally are also imposing greater monetary fines for privacy violations. The General Data Protection Regulation (GDPR), which went into effect on May 25, 2018, applies to any company established in the European Union (EU) as well as to those outside the EU if they collect and use personal data in connection with the offering goods or services to individuals in the EU or the monitoring of their behavior. The GDPR enhances data protection obligations for processors and controllers of personal data, including, for example, expanded disclosures about how personal information is to be used, limitations on retention of information, mandatory data breach notification requirements and onerous new obligations on services providers. Noncompliance with the GDPR may result in monetary penalties of up to €20 million or 4% of worldwide revenue, whichever is higher. The GDPR also confers a private right of action on data subjects and consumer associations to lodge complaints with supervisory authorities, seek judicial remedies, and obtain compensation for damages resulting from violations. In addition, the GDPR includes restrictions on cross-border data transfers. The GDPR may increase our responsibility and liability in relation to personal data that we process where such processing is subject to the GDPR, and we may be required to put in place additional mechanisms to ensure compliance with the GDPR, including as implemented by individual countries .
California recently enacted the California Consumer Privacy Act (CCPA) which creates new individual privacy rights for California consumers (as defined in the law) and places increased privacy and security obligations on entities handling personal data of consumers or households. The CCPA will require covered companies to provide certain disclosures to consumers about its data collection, use and sharing practices, and to provide affected California residents with ways to opt-out of certain sales or transfers of personal information. The CCPA went into effect on January 1, 2020, and the California Attorney General began taking enforcement action against violators beginning July 1, 2020. While there is currently an exception for protected health information that is subject to HIPAA and clinical trial regulations, as currently written, the CCPA may impact our business activities.
Competition
The pharmaceutical and biotechnology industry is very competitive, and the development and commercialization of new drugs is influenced by rapid technological developments and innovation. We face competition from several companies developing and commercializing products that will be competitive with our drug candidates, including large pharmaceutical and smaller biotechnology companies. Additionally, new entrants may potentially enter the market. Potential competitors include Johnson & Johnson, Roche, Gilead Sciences Inc., GlaxoSmithKline plc, Enanta Pharmaceuticals, Inc., HEC Pharma, Arbutus, Vir Bio and Aligos Therapeutics, among others. Additionally, we may face competition from currently available HBV treatments. Some of the competitive development programs from these companies may be based on scientific approaches that are similar to our approach, and others may be based on entirely different approaches. Potential competitors also include academic institutions, government agencies and other public and private research organizations that conduct research, seek patent protection and establish collaborative arrangements for research, development, manufacturing and commercialization of products similar to ours or that otherwise target indications that we are pursuing.
Manufacturing
We currently rely on third-party manufacturers to supply the quantities of VBR, 2158 and 3733 used in our clinical and nonclinical studies. We currently have no plans to establish any manufacturing facilities for our product candidates.
Human Capital Management
Employees
As of December 31, 2020, we had 139 total employees and contracts with a number of temporary contractors, consultants and contract research organizations. Our employees are spread across facilities in South San Francisco, California, Groton, Connecticut and a small facility in China. We also have a small number of remote employees spread across the United States. During 2020, we increased our headcount by adding 51 new employees. The new employees were hired to support, extend and grow our clinical and preclinical pipeline, with new hires in clinical development and operations, research, manufacturing and general and administrative functions, including expanding our corporate development team. Following the wind-down of our Microbiome program on January 31, 2021, we had 95 total employees, with one employee remaining in Groton, Connecticut to manage the shutdown of that facility.
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While we wound down our Microbiome program in early 2021, we expect to continue to add employees to support our HBV programs in 2021, with a focus on continuing to build out our clinical team to support ongoing and planned clinical development studies and building out our preclinical research and development team under our new Chief Scientific Officer, who joined us in May 2020. We continually evaluate our needs and make strategic choices regarding whether to hire internal teams or outsource certain functions to contract research organizations (CROs) or contract manufacturing organizations (CMOs), as appropriate. We currently outsource our clinical study management to various CROs and utilize certain CMOs to manufactur e both the drug substance and the drug product used in our ongoing and planned clinical studies.
We compete with both large and small companies in our industry for a limited number of qualified applicants to fill highly specialized needs. We generally target our base salaries and annual performance-based cash bonuses at the 50 th percentile of our peers and our long-term equity incentive compensation, which all employees receive, between the 50 th and 75 th percentiles of our peers. In certain circumstances, we offer compensation above these levels, based on a candidate’s experience, criticality, amount of responsibility and either individual or Company-wide performance. Both annual performance-based cash bonuses and long-term equity compensation increase as a percentage of total compensation based on employees’ levels of responsibility. We also offer comprehensive benefits packages to all of our employees, including: 100% Company-covered medical, dental and vision coverage for employees and their families; a 401k program with a Company match; an employee stock purchase plan; and paid family leave.
A large majority of our employees have advanced degrees, and we also offer an educational assistance program that reimburses employees up to a maximum amount per year for courses that directly enhance his or her area of professional work or contribute to his or her immediate career growth. This program demonstrates our commitment to analytical growth, enhanced knowledge and professional development.
COVID-19 Response
Shortly after the counties in the San Francisco Bay Area implemented a shelter-in-place order, followed quickly by California’s similar statewide order, we established a COVID-19 Task Force (the Task Force) that has held regular meetings since it was established. The Task Force, in conjunction with our Human Resources department, has taken the following actions in our effort to curb the pandemic:
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Drafting and distributing comprehensive COVID-19 office and exposure policies, and lab and safety protocols, each of which have been modified as federal, state and local governments have updated their guidance;
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Requiring all employees who are able to do so to work remotely;
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Holding Company-wide virtual Town Hall meetings at least monthly to foster a sense of community given that the majority of our employees worked remotely;
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Increasing cleaning protocols at U.S. office and lab facilities;
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Providing all employees with cloth face coverings and increasing availability of personal protective equipment to lab employees;
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Prohibiting all work-related domestic and international travel; and
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Requiring masks to be worn at all Company locations.
The Task Force will continue to hold regular meetings to discuss and update internal guidance and protocols until we determine that meetings are no longer necessary.
Corporate History
We were incorporated in Delaware in October 2005 under the name South Island Biosciences, Inc. (which was changed to Ventrus Biosciences, Inc. in April 2007). On July 11, 2014, we acquired Assembly Pharmaceuticals, Inc., a private company, through a merger with our wholly owned subsidiary (the Merger). In connection with the Merger, we changed our name from Ventrus Biosciences, Inc. to Assembly Biosciences, Inc.
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Corporate Information
Our principal executive office is at 331 Oyster Point Blvd., Fourth Floor, South San Francisco, California 94080. Our telephone number is (833) 409-4583.
Available Information
Our website address is www.assemblybio.com. We routinely post, or have posted, important information for investors on our website in the “Investors” section. We use this website as a means of disclosing material information in compliance with our disclosure obligations under Regulation FD. Accordingly, investors should monitor the “Investors” section of our website, in addition to following our press releases, Securities and Exchange Commission (SEC) filings, presentations and webcasts. We make available free of charge through our website our press releases, Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports as soon as reasonably practicable after electronically filed with or furnished to the SEC.
The information contained on our website is not a part of, and should not be construed as being incorporated by reference, into this report.
The reports filed with the SEC by us and by our officers, directors and significant shareholders are available for review on the SEC’s website at www.sec.gov.