Item 1. Business
Item 1. Business.
Overview
We are a New York City
based clinical-stage biopharmaceutical company committed to identifying and advancing transformative therapies for the treatment
of cancer and rare diseases with significant unmet needs. We prioritize creativity, diverse perspectives, integrity and tenacity
to expedite our goal of bringing life-changing therapies to people with limited treatment options.
Our portfolio includes
two development programs utilizing TARA-002, an investigational cell therapy based on the broad immunopotentiator, OK-432, which
was originally granted marketing approval by the Japanese Ministry of Health and Welfare as an immunopotentiating cancer therapeutic
agent. This cell therapy is currently approved in Japan for lymphatic malformations, or LMs, and multiple oncologic indications.
It has never been approved outside Japan and we have secured worldwide rights to the asset excluding Japan and Taiwan and have
begun to explore its use in rare and oncology indications. We are developing TARA-002 in non-muscle invasive bladder cancer, or
NMIBC, and in LMs.
TARA-002’s
lead oncology program is in NMIBC, which is cancer found in the tissue that lines the inner surface of the bladder that has not
spread into the bladder muscle. Bladder cancer is the sixth most common cancer in the United States, with NMIBC representing approximately
80% of bladder cancer diagnoses. Approximately 65,000 patients are diagnosed with NMIBC in the United States each year. Very few
new therapeutics have been approved in NMIBC since the 1990s and the current standard of care for NMIBC includes intravesical
Bacillus Calmette-Guerin, or BCG,. The mechanism of TARA-002 is similar to BCG. Both TARA-002 and BCG are intravesically administered
and elicit a type Th1 type immune response and locally activated generally similar array of cytokines and immune cells.
In August of 2020,
we announced constructive feedback following a pre-Investigational New Drug (pre-IND) interaction with the Office of Tissues and
Advanced Therapies division of the Center for Biologics Evaluation and Research, or CBER, at the FDA on a development plan for
TARA-002 in NMIBC. Building on existing data from OK-432, and subject to the completion of non-clinical studies as well as acceptance
of the IND application, we plan to commence a Phase 1 clinical trial in late 2021 to assess the safety and tolerability of TARA-002
in patients with high grade NMIBC.
Our most advanced
clinical program is for LMs, which are rare, non-malignant cysts of the lymphatic vascular system that primarily form in the head
and neck region of children before the age of two. In July 2020, the U.S. Food and Drug Administration, or FDA, granted Rare Pediatric
Disease designation for TARA-002 for the treatment of LMs. OK-432, the originator compound to TARA-002, has been the standard of
care in LMs in Japan for over 20 years. In addition to the clinical experience in Japan, we have secured the rights to a dataset
from one of the largest ever conducted Phase 2 studies in lymphatic malformations, in which OK-432 was administered via a compassionate
use program led by the University of Iowa to over 400 pediatric and adult patients. We have updated the initial IND that was submitted
by the University of Iowa and submitted the update and accompanying clarifying questions to the FDA Division of Vaccines and Related
Products Applications, or the Division, in connection with the IND for TARA-002 in LMs. We plan to utilize the robust dataset for
OK-432 in LMs to support the potential filing of a Biological License Application (BLA) for TARA-002 in lymphatic LMs. We are encouraged
by the progress to date and, at the FDA’s request, have submitted the full Clinical Study Report (CSR) of the randomized
Phase 2 study of OK-432 in LMs led by the University of Iowa. We continue to prepare for a potential BLA filing in the second half
of 2021, or to initiate additional clinical work as required by FDA.
TARA-002 was developed
from the same master cell bank of genetically distinct group A Streptococcus pyogenes as OK-432 (marketed as Picibanil ® in
Japan and Taiwan by Chugai Pharmaceutical Co., Ltd., or Chugai Pharmaceutical). Following a pre-IND interaction with the Office
of Tissues and Advanced Therapies Division of the Center for Biologics Evaluation and Research, or CBER, the FDA agreed that we
have successfully demonstrated initial manufacturing comparability between TARA-002 and OK-432. This initial comparability will
be confirmed by GMP scale batches, which are currently underway using the same release tests that have already been approved by
the FDA.
The third development
program in our portfolio is intravenous, or IV, Choline Chloride, an investigational phospholipid substrate replacement therapy
initially in development for patients receiving parenteral nutrition, or PN, who have intestinal failure associated liver disease,
or IFALD. IV Choline Chloride has been granted Orphan Drug Designation by the FDA for this indication and has also been granted
Fast Track Designation for the treatment of IFALD. Following a positive end of Phase 2 meeting with the FDA, we received feedback
on the design of the studies necessary to complete the registration package for IV Choline Chloride for the treatment of IFALD,
including a Phase 1 pharmacokinetic study followed by Phase 3 trial. Prior to initiating these clinical studies, we are currently
undertaking a prevalence study in partnership with a large home health organization in the United States to enhance understanding
of the PN patient population and we plan to use this information to determine the next steps for the development program. The goal
of the study is to understand the presence/incidence of liver disease in this patient population.
Our fourth program, vonapanitase,
is a recombinant human elastase. We are reviewing the research and preclinical and clinical data of vonapanitase and have not yet
determined whether to pursue further development of this product candidate in the future.
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We have devoted substantial
efforts to the development of these programs and do not have any approved products and have not generated any revenue from product
sales. TARA-002 is in later stage development for LMs and has not yet been approved for use for treatment of LMs, NMIBC or any
other indications. We do not expect to generate revenues prior to 2022, if ever. To finance our current strategic plans, including
the conduct of ongoing and future clinical trials and further research and development costs, we will need to raise additional
capital.
Our Product Candidate Pipeline
The following chart summarizes
the current status of our product candidate pipeline:
* TARA-002 Granted Rare Pediatric Disease Designation for
the treatment of LMs. OK-432 Granted Orphan Drug Designation by the U.S. FDA for the treatment of LMs, which we believe is applicable
under established comparability.
** Granted Orphan Drug and Fast Track Designations by the
U.S. FDA
† Phase 1 PK study to be conducted prior to commencing Phase
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Our Corporate Strategy:
We are an oncology and
rare disease company focused on identifying and acquiring or licensing de-risked assets and optimizing and/or accelerating their
development. Leveraging the drug development and commercialization experience of our management team, our goal is to build a leading
biopharmaceutical company focused on bringing life-saving therapies to patients with significant unmet needs.
1. Establish comparability of OK-432
and TARA-002
Utilizing the same genetically
distinct Streptococcus pyogenes strain and proprietary manufacturing process used by Chugai Pharmaceutical to manufacture
OK-432 (marketed as Picibanil® in Japan and Taiwan), we have produced development batches of TARA-002 and conducted comparability
studies using commercial OK-432 manufactured in Japan as a reference. Following a pre-IND interaction with the Office of Tissues
and Advanced Therapies division of the Center for Biologics Evaluation and Research, or CBER, the FDA agreed that we had successfully
demonstrated initial manufacturing comparability between TARA-002 and OK-432. This initial comparability will be confirmed by GMP
scale batches, which are currently underway using the same release tests that have already been accepted by the FDA.
2. Seek FDA approval for
the use of TARA-002 in Lymphatic Malformations
We plan to utilize the robust dataset for OK-432 in LMs to support
the potential filing of a Biological License Application (BLA) for TARA-002 in lymphatic LMs. We are encouraged by the progress
to date and, at the FDA’s request, have submitted the full Clinical Study Report (CSR) of the randomized Phase 2 study of
OK-432 in LMs led by the University of Iowa. We continue to prepare for a potential BLA filing in the second half of 2021, or to
initiate additional clinical work as required by FDA.
3. Pursue development of TARA-002 for
the treatment of non-muscle invasive bladder cancer (NMIBC). Complete toxicology and MOA characterization & immunogenicity
studies in order to file an IND and initiate P1 study
We are developing TARA-002
for the treatment of non-muscle invasive bladder cancer, or NMIBC. Building on existing safety and efficacy data from OK-432, and
subject to the completion of non-clinical studies, including toxicology and MOA characterization & immunogenicity studies,
which are currently underway, as well as acceptance of an Investigational New Drug, or IND, application, we plan to commence a
Phase 1 clinical trial in 2021 to assess the safety and tolerability of TARA-002 in patients with high grade NMIBC.
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4. Further characterize the patient population
of IFALD to determine the appropriate strategy/path for IV Choline Chloride as a potential treatment option
Following a positive end
of Phase 2 meeting with the FDA, we received feedback on the design of the studies necessary to complete the registration package
for IV Choline Chloride for the treatment of IFALD, including a Phase 1 pharmacokinetic study followed by Phase 3 trial. Prior
to initiating these clinical studies, we are currently undertaking a prevalence study in partnership with a very large home health
organization in the United States to enhance understanding of the PN patient population and plan to use this information to inform
the next steps for the development program.
5. Explore opportunities to expand our
pipeline
The immunological activity
of TARA-002’s reference product, OK-432, has been effectively interrogated in patients in a long list of indications. We
plan to carefully evaluate the case reports and the literature and perform initial in vitro characterization studies to
better understand the mechanism of action of TARA-002 and its potential activity in indications beyond LMs and NMIBC. We also plan
to engage with regulatory authorities outside of the US to explore the potential opportunities to bring TARA-002 to other geographies.
In addition, our leadership
team has a strong track record of licensing, acquiring and optimizing product candidates and we intend to leverage this skill to
identify opportunities for potential combination opportunities for TARA-002, particularly in NMIBC
Our Pipeline
TARA-002 / OK-432
TARA-002, our lead program,
is an investigational cell therapy developed from the master cell line of the same genetically distinct Streptococcus pyogenes
(group A, type 3) Su strain as OK-432, a the broad immunopotentiator (marketed as Picibanil® in Japan and Taiwan by Chugai
Pharmaceutical Co., Ltd. (Chugai Pharmaceutical)). We expect to utilize the same regulatory starting materials as OK-432 and manufacture
TARA-002 using an updated version of the same proprietary processes used to manufacture OK-432. Functionally, our lead product
is OK-432. We have designated this product as TARA-002 in order to differentiate the regulatory path in the U.S. and other geographies
from that of OK-432 in Japan.
We entered into an agreement
with Chugai Pharmaceutical in June 2019 to support our development of TARA-002. The agreement provides us with exclusive access
to certain materials and documents relating to OK-432 including the master cell bank of Streptococcus pyogenes used in the
manufacture of OK-432. Additionally, the agreement provides technical support during a certain period. We have utilized the materials,
proprietary manufacturing process and technical support provided by Chugai Pharmaceutical to produce TARA-002 at a GMP-compliant
facility in the United States. Under the agreement with Chugai Pharmaceutical, we will have sole responsibility for the development
and commercialization of TARA-002 worldwide, excluding Japan and Taiwan. On July 14, 2020, we entered into an amendment with Chugai
to the Chugai Pharmaceutical agreement. This agreement is exclusive through June 17, 2030 or following any termination of the agreement
by either party.
In Japan, OK-432 is indicated
for: the treatment of lymphangiomas (lymphatic malformations); the prolongation of survival time in patients with gastric cancer
(postoperative cases) or primary lung cancer in combination with chemotherapy; and the reduction of cancerous pleural effusion
or ascites in patients with lung cancer or gastrointestinal cancer respectively, head and neck cancer (maxillary cancer, laryngeal
cancer, pharyngeal cancer, and tongue cancer) and thyroid cancer that are resistant to other drugs.
We plan to pursue development
of TARA-002 for the treatment of lymphatic malformations (LMs) and non-muscle invasive bladder cancer (NMIBC) initially in the
U.S. and plan to also seek approval in Europe and other regions in the future, and may also explore additional indications where
its utility as an immunostimulant has been hypothesized to be of therapeutic benefit.
TARA-002 in NMIBC
Disease Overview:
Bladder cancer is the
sixth most common cancer in the United States, with NMIBC representing approximately 80% of bladder cancer diagnoses. NMIBC is
cancer found in the tissue that lines the inner surface of the bladder that has not spread into the bladder muscle. There are 3
subtypes of NMIBC: Ta (non-invasive papillary carcinoma), Tis (carcinoma in situ or CIS), and T1 (carcinoma invading the lamina
propria). Among the types of NMIBC, Ta accounts for most NMIBC cases (70%), whereas T1 and CIS account for 20% and 10%, respectively.
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Based on currently available
treatment data, we believe that there are approximately 30,000 incident cases of High-Grade NMIBC per year that would be appropriate
for treatment with TARA-002 in the U.S. There are 65,000 incident cases of NMIBC in the U.S. every year, of these, approximately
45% (~30,000) are made up of High-Grade tumor types that are considered higher risk, and therefore candidates for immunotherapies,
such as TARA-002). In addition, NMIBC has one of the highest rates of recurrence with 3-year rate estimated at up to 80%.
Treatment:
Treatment for NMIBC is
typically targeted to reduce unresectable persistence, recurrence after resection, and to prevent disease progression to muscle-invasive
bladder cancer. The initial treatment for NMIBC includes cystoscopy and complete transurethral resection of the bladder tumor (TURBT)
for papillary Ta or T1, or biopsy for CIS. A single postoperative instillation of intravesical chemotherapy is recommended in patients
with low risk of progression, and for patients with intermediate and high-risk disease, a longer course of intravesical therapy
is administered. The most efficacious intravesical agent is Bacillus Calmette-Guerin (BCG), a live attenuated form of Mycobacterium
bovis . BCG has been the subject of multiple supply shortages in the past decade due to the inability to meet demand to treat
the large population of patients with NMIBC resulting in strategies to conserve the use of the therapy. There has been a significant
increase in bladder cancer recurrence and progression and an escalated number of patients who needed to be treated by cystectomy
have been reported. As such, with the current BCG shortage and limited effective alternate therapies or dosing strategies, there
continues to be a significant unmet need for treatment options for patients with NMIBC.
Manufacturing:
TARA-002 will be manufactured
using an equivalent, but modernized, proprietary manufacturing process as is used to produce OK-432 by Chugai Pharmaceutical, starting
with a master cell line propagated by us but utilizing the same genetically distinct strain of Streptococcus pyogenes (A
group, type 3) Su strain as OK-432. We have contracted a contract development and manufacturing organization (CDMO), to manufacture
TARA-002. TARA-002 has received initial comparability to OK-432 from the FDA. We are currently conducting confirmatory large scale
GMP manufacturing comparability, which are scheduled to be completed in 2021.
TARA-002 for the Treatment of Lymphatic
Malformations
Disease Overview:
We are pursuing regulatory
approval for TARA-002 for the treatment of lymphatic malformations. Lymphatic malformations are rare, non-malignant cystic masses
that primarily form in the head and neck region of children before the age of two. The International Society for the Study of Vascular
Anomalies classifies LMs as either macrocystic, microcystic, or mixed. Macrocystic and microcystic LMs are differentiated by the
size of the fluid-containing portion of the malformation. Macrocystic LMs are characteristically large, fluid-filled cysts with
a thin endothelial lining. Macrocystic LMs are composed of cysts greater than 2 cm3 in size and present as a soft, fluid-filled
swelling beneath normal or slightly discolored skin. Macrocystic LMs are usually located in the antero-lateral cervical region
of the neck; however, it is possible for this type of LM to originate in other areas of the body. In contrast, microcystic LMs
have very limited internal space with a thick irregular endothelial lining. Microcystic LMs are comprised of cysts less than 2
cm3 in size and are often composed of micro-lymphatic channels that integrate and infiltrate normal soft tissue. Microcystic LMs
can involve both superficial and deep aspects including muscle and bone. Microcystic LMs can thicken or swell causing enlargement
of surrounding soft tissue and bones and can be found on any area of the skin or mucous membrane. Mixed LMs are comprised of varying
degrees of both macrocystic and microcystic LMs.
While the exact prevalence
of LMs is not known, in the United States, the condition is thought to be present in approximately one in every 4,000 live births
and we believe there are approximately 1,400-1,800 LM cases per year.
Treatment:
Outside of Japan and Taiwan,
the standard of care is surgical excision, which is associated with high rates of recurrence and complications. There are no approved
pharmacotherapies for LMs, except in Japan and Taiwan where OK-432 is approved. In these countries, OK-432 has been the standard
of care for LMs for over 25 years.
Treatment of LMs varies
depending on the symptoms and complications that present themselves. The standard of care outside Japan and Taiwan for the treatment
of LMs is either a partial or complete surgical excision of the cysts. While surgery is the standard approach to the treatment
of LMs in the head and neck, the region is a difficult area to operate in because of the large number of important anatomical structures
in the area. Major venous and arterial trunks travel through the neck, as do important nerves. Surgery on such malformations frequently
results in high rates of recurrence and complications including life-long chronic conditions, such as damage to nerves and other
important structures of the head and neck.
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Clinical Development
When OK-432 is administered
locally for LMs, it is hypothesized that innate immune cells within the cyst are activated and produce a strong immune cascade.
Neutrophils and monocytes infiltrate the cyst and various cytokines, including interleukins IL-6, IL-8, IL-12, interferon (IFN)-gamma,
tumor necrosis factor (TNF)-alpha, and vascular endothelial growth factor (VEGF) are secreted by immune cells within the cyst in
response to the presence of OK-432. In concert, these immune activities induce a strong local inflammatory reaction in the cyst
wall, resulting in fluid drainage, shrinkage and fibrotic adhesion of the cyst.
A
randomized, phase 2 clinical trial led by the University of Iowa studied the use of OK-432 in patients with LM from 1998 to 2005.
Most eligible subjects were between 6 months and 18 years of age with macrocystic or mixed macrocystic-microcystic LMs (with ≥
50% macrocytic disease) of the head and/or neck. There were three treatment groups: immediate treatment (ITG), delayed treatment
(DTG), and open label treatment group. The immediate treatment group received treatment with
OK-432 upon diagnosis. The delayed treatment group received OK-432 treatment following a six-month observation period; the cross-over
design was intended to investigate spontaneous resolution. The open-label treatment group included infants younger than six months
of age, adults older than 18 years of age, patients with LMs involving sites other than the head and neck (such as the axilla,
thorax, and extremities), and patients treated on an emergent basis. The open label treatment group were treated immediately with
OK-432. Response to therapy was measured by quantitating change in lesion size. Clinical success was defined as a complete (90%
to 100%) or substantial (60% to 89%) response to treatment based on radiographically confirmed shrinkage in lesions.
Results presented in this
report were based on a retrospective analysis of source verified data that included the full dataset of subjects enrolled in the
P2 randomized study between January 1998 and August 2005, including data in the published study (Smith et al. 2009) which included
subjects enrolled between January 1998 and November 2004.
Overall, 310 subjects
were enrolled with intent to treat: 246 subjects were randomized to the immediate (ITG, N=171) and delayed (DTG, N=75) treatment
groups; 64 subjects were nonrandomized and assigned to the open-label group. Analysis of the primary efficacy endpoint (N=150)
demonstrated clinical success (complete and/or substantial response) in 69% of patients in the ITG 6 months after enrollment, while
7.5% of patients in the DTG experienced spontaneous regression of a LM during this time interval (p < 0.0001)). When the results
were analyzed by lesion type across all treatment groups, a successful outcome was observed in 84% and 60% of patients with macrocystic
and mixed macrocystic-microcystic LM, respectively. None of the patients with microcystic LM demonstrated clinical success to OK-432
therapy. The results of the retrospective analysis were consistent with the results observed in the original analysis (Smith et
al. 2009).
Figure 1: demonstrates that the primary endpoint
was met showing that 69% of patients in the immediate treatment group had a complete or substantial response to OK-432 while 7.5%
of patients in the delayed treatment group had a complete or substantial response after six months of observation and before treatment.
ǂ Clinical Success was defined as complete or substantial
response
** Results were analyzed by lesion type across all treatment
groups
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Figure 2: illustrates that patients with
radiographically confirmed macrocystic lesions had the greatest likelihood of clinical success and in those patients with mixed
legions, clinical success was also achieved.
ǂ Clinical
Success was defined as complete or substantial response
* Reflects
data prior to dosing with OK-432. After dosing, the clinical success rate was 66%, which was not statistically different from
the Immediate Treatment Group
** Results
were analyzed by lesion type across all treatment groups
Safety Profile
The most common adverse events with treatment
were local injection site reactions, fever, fatigue, decreased appetite, with resolution within a few days. Treatment emergent
serious adverse events (defined as any SAE occurring or worsening on or after the first dose of study drug and within 35 days after
the last dose of study drug) associated with OK-432 treatment were reported in 4.1% of patients, with the most severe events being
airway obstruction and facial paralysis due to massive swelling post-injection that required tracheostomy and hospitalization.
Both of these events were reported as resolved
The safety findings from the Sponsor-conducted
retrospective analysis are consistent with the original analysis reported in Smith et al. 2009, and with safety data in published
studies in approximately 865 patients with LMs after treatment with OK-432.
Preclinical Development:
A comprehensive preclinical
development program for OK-432, including in vitro and in vivo pharmacology and toxicology studies, was conducted
by Chugai Pharmaceutical to support the filing of a new drug application with the Japan Pharmaceuticals and Medical Devices Agency.
We plan to discuss with the FDA the ability to rely on these studies for the submission of a BLA for TARA-002.
Regulatory Interactions:
In July 2020, the U.S.
Food and Drug Administration, or FDA, granted Rare Pediatric Disease designation for TARA-002 for the treatment of LMs. The FDA
grants Rare Pediatric Disease designation for serious diseases that primarily affect children ages 18 years or younger and fewer
than 200,000 persons in the United States. Under the FDA’s Rare Pediatric Disease Priority Review Voucher program, a sponsor who
receives an approval of a new drug application or biologics license application for a product for the prevention or treatment of
a rare pediatric disease may be eligible for a voucher, which can be redeemed to obtain priority review for any subsequent marketing
application or may be sold or transferred.
We plan to utilize
the robust dataset for OK-432 in LMs to support the potential filing of a Biological License Application (BLA) for TARA-002 in
lymphatic LMs. We are encouraged by the progress to date and, at the FDA’s request, have submitted the full Clinical Study
Report (CSR) of the randomized Phase 2 study of OK-432 in LMs led by the University of Iowa. We continue to prepare for a potential
BLA filing in the second half of 2021, or to initiate additional clinical work as required by FDA.
Manufacturing Plans:
TARA-002 will be manufactured
using an equivalent, but modernized, proprietary manufacturing process as is used to produce OK-432 by Chugai Pharmaceutical.
Starting with a master cell line propagated by us but utilizing the same genetically distinct strain of Streptococcus pyogenes
(A group, type 3) Su strain as OK-432. We have contracted a contract development and manufacturing organization (CDMO), to
manufacture TARA-002. TARA-002 has received initial comparability to OK-432 from the FDA. We are currently conducting confirmatory
large scale GMP manufacturing comparability, which are scheduled to be completed in 2021.
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IV Choline Chloride for the treatment of Intestinal
Failure Associated Liver Disease
Background:
IV Choline Chloride is
an intravenous (IV) substrate replacement therapy initially in development for patients receiving parenteral (typically intravenous)
nutrition (PN) who have intestinal failure associated liver disease (IFALD).
Choline is a known important
substrate for phospholipids that are critical for healthy liver function. Because patients receiving PN cannot sufficiently absorb
adequate levels of choline and no available PN components contain sufficient amounts of choline to correct this deficit, they often
experience a prolonged progression to hepatic failure and death, with the only known intervention being a dual small bowel / liver
transplant. If approved, IV Choline Chloride would be the first approved therapy for IFALD. It has been granted Orphan Drug Designations
(ODDs) by the FDA for the treatment of IFALD and the prevention of choline deficiency in PN patients. We are currently undertaking
a prevalence study in partnership with a very large home health organization in the United States to enhance understanding of the
PN patient population.
We have entered into a
license agreement with Dr. Alan Buchman for exclusive rights to the IND, ODDs and other regulatory assets related to IV Choline
Chloride, as well as exclusive rights to the data from previously conducted phase 1 and phase 2 clinical trials led by Dr. Buchman.
The results of a randomized,
controlled, phase 2 clinical trial demonstrated that treatment with IV Choline Chloride resulted in normalization of plasma-free
choline concentrations, improvement of hepatic steatosis, and a clinically meaningful and statistically significant improvement
in cholestasis in patients dependent on PN.
We had an end of phase 2 meeting with the FDA
in November 2018 and received the FDA’s support for the design of studies necessary to complete the registration package
for IV Choline Chloride for the treatment of IFALD, including a Phase 1 pharmacokinetic study followed by Phase 3 trial.
Disease Overview:
Intestinal Failure Associated
Liver Disease or IFALD is a rare hepatic/metabolic disease. IFALD, which occurs in patients dependent upon PN, is characterized
by choline deficiency, hepatic steatosis, cholestasis, and rapid progression of liver disease through to hepatic failure and death,
in the absence of intestine-liver transplant. IFALD carries a relatively poor prognosis, with a 15-34% death rate within one to
four years. When IFALD presents in children, mortality is even higher, with studies reporting death rates of 23-40% within 18 months.
A patient is considered to have IFALD if she/he:
●
is dependent on PN for more than six months (e.g., has chronic intestinal failure);
●
has evidence of steatosis, determined by imaging techniques or histologic assessments;
●
has evidence of cholestasis (e.g., elevated alkaline phosphatase (ALP), elevated bilirubin and/or histology); and
●
may have evidence of ongoing, progressive liver injury on the basis of multiple abnormal liver function tests, in conjunction with findings of fibrosis, cirrhosis, and/or end-stage liver disease (ESLD).
According to recent Medicare diagnosis data, we estimate that
there are about 5,000 IFALD patients in the U.S.
Many patients receiving
PN are entirely dependent on PN for their nutritional needs. PN delivers nearly all the macro and micro-nutrients necessary for
survival in their patients, with the notable exception of choline. Consequently, patients dependent on PN support have been shown
to be choline deficient. Patients dependent upon PN are unable to synthesize sufficient levels of choline and malabsorption limits
the bioavailability of choline chloride from the PN diet. The American Society for Parenteral and Enteral Nutrition and the Academy
of Nutrition and Dietetics’ Dietitians in Nutrition Support both recommend that choline be required in PN products; however,
there are currently no FDA-approved choline chloride PN products.
Dependence on PN and resulting
choline deficiency often leads to IFALD, which is the most common adverse outcome in chronic PN adult patients that is associated
with death. Low free choline plasma concentrations are associated with alanine aminotransferase (“ALT”), aspartate
aminotransferase (“AST”), and alkaline phosphatase (“ALP”) elevations as well as steatosis (fatty liver)
and Cholestasis (when bile from the liver stops or slows), all indicators of ongoing liver damage.
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Clinical History:
In a Phase 2 randomized,
double-blind, controlled 24-week clinical trial, patients (n=15) receiving nightly PN for > 85% of their nutritional needs (for
at least 12 weeks prior to entry) were randomized to receive via IV infusion (10-12 hours) their usual PN with placebo (n = 8),
or PN to which 2g IV Choline Chloride was added (n = 7).
In the IV Choline Chloride
group, mean choline levels were within or greater than the estimated normal range (i.e., 6.7 to 26.9 nmol/mL) throughout the 24-week
trial and quickly returned to baseline levels when treatment was discontinued.
Steatosis:
Upon conversion of the
quantification of computed tomography (CT) values to magnetic resonance imaging proton density fat fraction (MRI-PDFF), significant
differences in the least square (LS) mean change from baseline in estimated MRI-PDFF were observed in the IV Choline Chloride group
in comparison to placebo group at Week 4 through Week 24, demonstrating a clinically meaningful and statistically significant reduction
in steatosis. When LS mean percent changes from baseline in MRI-PDFF were compared between treatment groups, significant differences
in LS mean changes (range, 31.7% to 53.6%) were observed from Weeks 4 to 24 with p-values of 0.0009 to 0.0297 favoring the IV Choline
Chloride group.
Figure 3. Liver CT Images: Before and After Treatment with
IV Choline Chloride
Alkaline Phosphatase:
At baseline, LS mean ALP
concentration was 239.3 ± 118.93 in the IV Choline Chloride group and 148.1 ± 100.2 in the placebo group. The MMRM
analyses demonstrated statistically significant decreases in ALP concentrations at Week 12 (p = 0.008), Week 16 (p = 0.005), Week
20 (p = 0.007), and Week 24 (p = 0.005) for the IV Choline Chloride group, demonstrating a reduction in cholestasis. A trend towards
significance was observed at Week 4 (p = 0.076) and Week 6 (p = 0.056). At Week 34, 10 weeks after discontinuation of IV Choline
Chloride treatment, LS mean change from baseline in ALP concentrations still demonstrated statistically significant decreases (p
= 0.002), demonstrating a significant improvement in cholestasis with treatment with IV Choline Chloride (Figure 4).
In the subgroup of subjects with ALP concentration
> 1.5x upper limit of normal (ULN) at baseline, (n=7), mean values at baseline were comparable between the IV Choline Chloride
and placebo groups (294.20 ± 87.947 versus 277.00 ± 128.693, respectively). In the sub-group analysis, improvement
in ALP was consistent and substantial, with 20-30% improvement over 12-24 weeks of treatment.
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Figure 4. Improvement in Cholestasis 1 :
All Patients
1 Protara Therapeutics re-analysis of patient CRF’s, data
on file
* mixed model for repeated
measurement (“MMRM”) method used for imputation
ǂ A
placebo subject was excluded from all analyses due to likely IV contrast-induced imaging
abnormalities, confirmed by independent radiologist in subsequent re-analysis.
Preclinical Development:
Table 1. Preclinical Studies Conducted by us
for IV Choline Chloride
Study Type
Brief Description
In vitro protein binding
Evaluation of Protein Binding by Choline Chloride in Plasma Using Rapid Equilibrium Dialysis
In vitro cardiac ion channel study
In Vitro Assessment of the Effect of Choline on Currents Mediated by hERG, Cav1.2, and Peak and Late Nav1.5 Channels Expressed in Human Embryonic Kidney (HEK) Cells
In vitro drug-drug interaction
Evaluation of Transporter Inhibition by Choline Chloride in Transporter-Transfected HEK293 Cells
Evaluation of OCT2, MATE1 and MATE2-K Inhibition by Choline Chloride in Transporter-Transfected HEK293 Cells
Evaluation of Transporter Inhibition by Choline Chloride in Caco-2 Cells
Evaluation of Time Dependent Cytochrome P450 Inhibition (IC50 Shift) by Choline Chloride in Human Liver Microsomes
Evaluation of Direct Cytochrome P450 Inhibition by Choline Chloride in Human Liver Microsomes
Evaluation of Cytochrome P450 Induction by Choline Chloride in Human Hepatocytes
Evaluation of Transporter Inhibition by Choline Chloride in Caco-2 Cells
Evaluating of Cytochrome P450 2C8, 2C9, and 2C19 mRNA Induction by Choline Chloride in Human Hepatocytes
In vitro BSEP inhibition
Assessment of Choline as an Inhibitor of Human BSEP Mediated Transport
Assessment of Choline as a Substrate of Human BSEP Mediated Transport
Nonclinical pharmacology studies
Non-GLP Pilot Single Dose, Escalating Dose Tolerance Study of Choline by Intravenous Infusion in Male Beagle Dogs
GLP Single-dose IV Cardiovascular Study in Surgically Instrumented Male Dogs Monitored by Telemetry
GLP Combined Single-dose IV Neurobehavioral and Respiratory Study
11
Clinical Development Plan:
We have reached
agreement with FDA on a number of key aspects of the overall clinical program necessary for registration, including a Phase 1
pharmacokinetic study and a Phase 3 study. We are currently undertaking a prevalence study in partnership with a large home
health organization in the United States to enhance understanding of the PN patient population, and plans to use this
information to determine the appropriate next steps for the development program.
Manufacturing Plans:
We have manufactured sufficient
amounts of GMP drug substance and drug product to initiate the planned clinical trials. Scale up for commercial demand is ready
and will commence when appropriate. Our end-to-end manufacturing of IV Choline Chloride is conducted in the United States by a
GMP-compliant CDMO.
Vonapanitase
As a result of the Merger,
we acquired the product candidate, vonapanitase, a recombinant human elastase that we previously pursued development for the improvement
of vascular access outcomes in patients with chronic kidney disease, undergoing or preparing for hemodialysis, and as a treatment
for patients with symptomatic peripheral artery disease. We are reviewing the research, preclinical and clinical data of vonapanitase
and has not yet determined whether to pursue any further development of this product candidate in the future.
Collaborations and License Agreements
Chugai Agreement
On June 17, 2019, we entered
into an agreement (the “Chugai Agreement”) with Chugai Pharmaceutical, a company organized and existing under the laws
of Japan. Chugai Pharmaceutical has developed and commercialized a therapeutic product, OK-432 (Existing Product), in Japan and
Taiwan (the “Chugai Territory”), and owns and controls certain materials and documents related to the Existing Product
(the “Chugai Materials”). Pursuant to the Chugai Agreement, Chugai Pharmaceutical will provide us with certain materials
and documents relating to the Existing Product and will provide certain technical services to us for our development and commercialization
in territories other than the Chugai Territory (the “Protara Territory”) of a new therapeutic product (the “New
Product” or “TARA-002”) comparable to the Existing Product beginning on the effective date of the Chugai Agreement
and ending on June 30, 2020, or any other date to be agreed to by the parties (the “Chugai Service Period”), Chugai
Pharmaceutical will exclusively provide the Existing Product and Chugai Materials to us and will not provide the Existing Product
or Chugai Materials to any third parties during the Chugai Service Period, other than for medical, compassionate use and/or non-commercial
research purposes. Additionally, beginning on the effective date of the Chugai Agreement and ending on the fifth anniversary of
such date or upon the termination of the Chugai Agreement, whichever comes earlier, Chugai Pharmaceutical shall not provide Chugai
Materials or technical support to any third party for the purpose of development and commercialization in the Protara Territory
of a therapeutic product comparable to the Existing Product. We are responsible, at our sole cost and expense, for the development
and commercialization of the New Product in the Protara Territory.
On July 14, 2020, we entered
into an amended agreement with Chugai Pharmaceutical (the “Amended Chugai Agreement”) with an effective date as of
June 30, 2020. The Chugai Amendment extended the date through which Chugai will exclusively provide the Existing Product and materials
to us from June 30, 2020 to June 30, 2021, extended the date through which Chugai will not provide materials or technical support
to any third party for the purpose of development and commercialization in a given area from the fifth anniversary to the eleventh
anniversary of the original effective date (extended to June 17, 2030) and provides that, in addition to the designated fee provided
upon the initial indication approval in the Chugai Pharmaceutical Agreement, we will pay Chugai a designated fee for each additional
indication approval.
As consideration for Chugai
Pharmaceutical’s performance under the Chugai Agreement, we agreed to pay Chugai Pharmaceutical a payment in the low, single-digit
millions, which payments shall be made in two installments with an initial payment in July 2020, and the remaining majority of
the payment payable upon FDA approval of the New Product.
We granted Chugai Pharmaceutical
a right of first refusal on terms to be negotiated between the parties for a license related to the New Product-relevant information,
data and documentation and inventions to develop and commercialize the New Product in the Chugai Territory. We will be responsible
for manufacturing and supplying or causing our CDMO to manufacture and supply the New Product to Chugai Pharmaceutical.
The Chugai Agreement shall
remain in full force and effect until the first anniversary of the date of FDA approval of the New Product, unless terminated sooner
(the “Chugai Term”). Following the Chugai Service Period and during the Chugai Term, Chugai Pharmaceutical may terminate
the Chugai Agreement, in whole or in part, without cause, by providing us 90 days prior written notice. Following such termination,
we would maintain exclusive access to Chugai Materials, subject to the termination clauses outlined below. We may terminate the
Chugai Agreement, in whole only, by providing Chugai Pharmaceutical 90 days prior written notice if (i) we decide to discontinue
the New Product development; (ii) we decide that the FDA’s requirements for the New Product are not likely to be met; or
(iii) the FDA identifies a safety issue regarding the New Product.
12
In addition, either party
may terminate the Chugai Agreement, in whole or in part, in the event that the other party materially breaches the Chugai Agreement
and fails to cure the breach within 30 days of written notice. Either party may terminate the Chugai Agreement in its entirety
immediately upon notice to the other party if such other party: (i) is dissolved or liquidated or takes any corporate action for
such purpose; (ii) becomes insolvent or is generally unable to pay, or fails to pay, its debts as they become due; (iii) files
or has filed against it a petition for voluntary or involuntary bankruptcy or otherwise becomes subject to any proceeding under
any domestic or foreign bankruptcy or insolvency laws; (iv) makes or seeks to make a general assignment for the benefit of creditors;
or (v) applies for or has a receiver, trustee, custodian or similar agent appointed by order of any court to take charge of or
sell any material portion of its property or business.
In the event that we undergo
a change of control, Chugai Pharmaceutical may terminate the Chugai Agreement upon 90 days written notice to us, absent a written
pledge by the new controlling party of its agreement to fulfill and undertake all obligations of ours and to be bound by the Chugai
Agreement.
Sponsored Research and License Agreement
On November 28, 2018,
we entered into a sponsored research and license agreement (the “Research Agreement”) with The University of Iowa (the
“University”), pursuant to which the University will provide access to certain program data related to Chugai Pharmaceutical’s
OK-432 and will assist us in conducting certain clinical studies. As consideration for the University’s performance under
the Research Agreement, we will pay the University $30,000 per year in funding for the project, taking into consideration the time
spent by University employees required for the Project. The parties also agree to discuss in good faith potential additional funding
required for completion of the project pursuant to the Research Agreement as applicable and necessary. In addition, within 45 days
of approval of the TARA-002 BLA by the FDA, we will pay a one-time approval milestone to the University, the amount of which depends
on the usefulness of the program data in TARA-002’s BLA filing, and the milestone amount will range from $0 to $1 million.
We will also be responsible for certain tiered royalties on annual net sales of products for the indication, which royalty rates
are in the low single digit percentages. These royalty rates are also subject to a reduction in the event that regulatory authorities
determine that the program data is not sufficient for regulatory approval on its own and additional pediatric efficacy and safety
clinical studies are required. In the event that the annual net sales surpass certain dollar amount thresholds, we will need to
make certain additional milestone payments following the close of the calendar quarter in which each milestone is reached, with
the payments ranging from $62,500 to $125,000.
We may terminate the Research
Agreement upon 30 days prior written notice to the University. Either party may terminate the project under the Research Agreement
and all commitments and obligations with respect thereto upon 30 days prior written notice to the other party. In the event of
any termination of the project under the Research Agreement by the University, (a) the University agrees to complete certain phases
of the project and (b) we will continue to provide annual funding until the completion of the second phase of the project. Upon
termination of the project by us, the Agreement will terminate and we will reassign to the University the IND.
Choline License Agreement
On September 27, 2017,
we entered into a choline license agreement (the “Choline Agreement”) with Alan L. Buchman, M.D., pursuant to which
Dr. Buchman granted us an exclusive, worldwide, non-transferable license in and to certain licensed orphan designations, certain
licensed IND, certain existing study data and to certain licensed know-how to develop, make, use, sell, offer for sale and import
the licensed product during the term of the Choline Agreement. We are solely responsible for all fees and expenses related to the
undertaking of the Choline Agreement, including all due diligence obligations, regulatory authority fees, attorney fees and consulting
fees. During the term of the Choline Agreement, Dr. Buchman may not work with any third parties on any product competing with the
licensed product. In consideration for the rights and licenses granted under the Agreement, we made an initial upfront payment
of $50,000 payable to Dr. Buchman.
We
will also owe Dr. Buchman certain milestone and royalty payments . Pursuant to the Choline
Agreement, we paid Dr. Buchman $50,000 in October 2019 because we had not received at least $5 million in working capital from
any source or in any manner as of October 15, 2019. Also, we paid Dr. Buchman an additional $550,000 upon the closing of the Private
Placements following the consummation of the Merger because we received at least $5 million in working capital.
Regardless of whether
development or commercialization is undertaken by us under the Choline Agreement, commencing on November 21, 2022 and during the
term of the Choline Agreement, we shall pay Dr. Buchman a minimum annual royalty that ranges between $25,000 and $75,000.
13
We owe Dr. Buchman sales royalties based on aggregate net sales
of IV Choline Chloride in each calendar quarter, with the royalty rates ranging from 5.0% to 10.5% based on the amount of net sales.
In the event of development or commercialization activity by any sublicensees, we also agreed to pay Dr. Buchman a royalty in the
mid-single digit percentage of (i) net cash receipts after payment of taxes received by us from sublicensees for their sales of
licensed products and (ii) any other consideration received by us from such sublicensees; in each case, including a fair monetary
value for any transaction that is not a bona fide arms-length transaction or that is for consideration other than monetary. Further,
in the event of a sale or transfer of a priority review voucher regarding the license product, regardless of whether any development
or commercialization activity is undertaken by us or our sublicensees, we agreed to pay Dr. Buchman a milestone payment representing
the mid-single digit percentage of (i) net cash receipts after payment of taxes and (ii) any other consideration; in each case,
received by us, our affiliates, or our sublicensees, including a fair monetary value for any transaction that is not a bona fide
arms-length transaction or that is for consideration other than monetary.
We shall also pay Dr.
Buchman up to an aggregate of up to $775,000 in additional milestone payments upon the achievement of various regulatory approval
milestones.
The Choline Agreement
will remain in full force and effect until the last sale of the licensed product under the Choline Agreement. After we received
the FDA’s written minutes regarding its initial FDA meeting concerning the development of the first licensed product for
one or more of the licensed indications, we paid an additional payment of $100,000 to Dr. Buchman and elected not terminate the
Choline Agreement. The Choline Agreement may be terminated by Dr. Buchman if, following regulatory approval of a licensed product,
we have not made our first sale of a licensed product within such country within a specified time period. We may terminate the
Choline Agreement for convenience upon 90 days prior written notice to Dr. Buchman. Dr. Buchman may terminate the Choline Agreement
effective immediately for non-payment of any payment due that has not been cured. Either party may terminate the Choline Agreement
effective immediately if the other party is in material breach and has not cured such breach within 60 days’ notice. In addition,
Dr. Buchman may terminate the Choline Agreement effective immediately upon 60 days prior written notice if (a) we cease or threaten
to cease to carry on its business; (b) a petition or resolution for the making of an administration order or for the bankruptcy,
winding-up or dissolution of us is presented or passed; (c) we file a voluntary petition in bankruptcy or insolvency; (d) a receiver
or administrator takes possession of our assets or (e) any similar procedure is commenced against us in the United States.
License Agreement
On December 22, 2017,
we entered into a license agreement (the “License Agreement”) with The Feinstein Institute for Medical Research, a
not-for-profit corporation organized and existing under the laws of New York (the “Institute”). The Institute owns,
by assignment, a U.S. patent related to the treatment of fatty liver disease in humans. Pursuant to the License Agreement, the
Institute granted us an exclusive, worldwide license, with the right to grant sublicenses to non-affiliate third parties, to develop,
make, have made, use, sell, offer for sale and import certain products for use in the field of fatty liver disease in humans receiving
total parenteral nutrition, by administering, as monotherapy, a pharmaceutical composition comprising intravenous choline, wherein
the fatty liver disease is selected from IFALD, non-alcoholic fatty liver, non-alcoholic steatohepatitis (“NASH”),
NASH-associated liver fibrosis, or non-alcoholic cirrhosis. Notwithstanding the exclusive rights granted to us, the Institute shall
retain the right to make, use and practice such patents in its own laboratories solely for non-commercial scientific purposes and
for continued non-commercial research.
As consideration for the
license grant, we agreed to pay the Institute tiered royalties of between 1.0% and 1.5% of all net sales. In addition, we agreed
to pay the Institute a low double digit percentage of net proceeds resulting from agreements entered into within two years from
the effective date of the License Agreement and a mid-single digit percentage of net proceeds resulting from agreements entered
into thereafter. We also agreed to make certain license maintenance payments of $15,000 beginning on the second anniversary of
the effective date of the License Agreement and continuing upon every anniversary thereafter until the first commercial sale of
a licensed product. Beginning on the first anniversary of the effective date of the License Agreement after the first commercial
sale of a licensed product and every anniversary of the effective date of the License Agreement thereafter, we shall pay the Institute
$30,000 as a license maintenance fee. Such license maintenance fees are non-refundable but are creditable against future royalty
payments due to the Institute during the 12-month period following each such anniversary.
We agreed to make certain
one-time milestone payments in the aggregate amount of $375,000 upon the achievement of certain regulatory approval milestones,
of which $100,000 was paid on January 28, 2020 upon us having consummated the Private Placements.
Unless terminated earlier,
the License Agreement will expire upon the expiration of the last to expire patent under the License Agreement. We may terminate
the License Agreement by giving the Institute 60 days prior notice. Either party may terminate the License Agreement in the event
of a default or breach by the other party that has not been cured within 60 days of such notice. If we (i) make an assignment for
the benefit of creditors or if proceedings for a voluntary bankruptcy are instituted on behalf of us; (ii) is declared bankrupt
or insolvent or (iii) is convicted of a felony relating to the manufacture, use or sale of the licensed products or a felony relating
to moral turpitude, the Institute may terminate the License Agreement.
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Intellectual Property
Our intellectual property
is critical to our business and we strive to protect it, including by obtaining and maintaining patent protection in the U.S. and
internationally for our product candidates, novel biological discoveries, epitopes, new therapeutic approaches and potential indications,
and other inventions that are important to our business. Throughout the development of our product candidates, we will seek to
identify additional means of obtaining patent protection that would potentially enhance commercial success.
The patent positions of
biotechnology companies like us are generally uncertain and involve complex legal, scientific and factual questions. We recognize
that the ability to obtain patent protection and the degree of such protection depends on a number of factors, including the extent
of the prior art, the novelty and non-obviousness of the invention, and the ability to satisfy the enablement requirement of the
patent laws. In addition, the coverage claimed in a patent application can be significantly reduced before the patent is issued,
and its scope can be reinterpreted after issuance. Consequently, we may not obtain or maintain adequate patent protection for any
of our product candidates. Any patents that we hold may be challenged, circumvented or invalidated by third parties.
Our commercial success
will also depend in part on not infringing the proprietary rights of third parties. In addition, we have licensed rights under
proprietary technologies of third parties to develop, manufacture and commercialize specific aspects of our products and services.
It is uncertain whether the issuance of any third-party patent would require us to alter our development or commercial strategies,
alter our processes, obtain licenses or cease certain activities. The expiration of patents or patent applications licensed from
third parties or our breach of any license agreements or failure to obtain a license to proprietary rights that it may require
to develop or commercialize our future technology may have a material adverse impact on it. If third parties prepare and file patent
applications in the United States that also claim technology to which we have rights, we may have to participate in interference
proceedings in the United States Patent and Trademark Office (the “USPTO”) to determine priority of invention. For
a more comprehensive discussion of the risks related to our intellectual property, please see “ Risk Factors—Risks
Related to Our Intellectual Property. ”
TARA-002:
TARA-002 is a genetically
distinct Su strain of Streptococcus pyogenes (group A, type 3). TARA-002 is produced through a proprietary manufacturing
process. We believe a significant barrier to entry exists, as it believes only Chugai Pharmaceutical and us have the specific strain
and possess the know-how to manufacture the product. We anticipate that, if approved by the FDA, TARA-002 will be protected by
12 years of biologic exclusivity.
IV Choline Chloride:
With respect to IV Choline
Chloride, we have acquired an exclusive, worldwide license to U.S. Patent 8,865,641 B2 from the Feinstein Institute for Medical
Research providing protection in the United States until 2035. The patent applies to a method of treating a fatty liver disease
in a subject. In particular, the method comprises administering to the subject an effective amount of a cholinergic pathway stimulating
agent, wherein the fatty liver disease is selected from non-alcoholic fatty liver (NAFL), alcoholic fatty liver (AFL), non-alcoholic
steatohepatitis (NASH), alcoholic steatohepatitis (ASH), NASH-associated liver fibrosis, ASH-associated liver fibrosis, non-alcoholic
cirrhosis and alcoholic cirrhosis.
The term of individual
patents depends upon the legal term of the patents in the countries in which they are obtained. In most countries in which we may
file, the patent term is 20 years from the earliest date of filing a non-provisional patent application related to the patent.
A U.S. patent also may be accorded a patent term adjustment under certain circumstances to compensate for delays in obtaining the
patent from the USPTO. In some instances, such a patent term adjustment may result in a U.S. patent term extending beyond 20 years
from the earliest date of filing a non-provisional patent application related to the U.S. patent. In addition, in the United States,
the term of a U.S. patent that covers an FDA-approved drug may also be eligible for patent term extension, which permits patent
term restoration as compensation for the patent term lost during the FDA regulatory review process. The Hatch-Waxman Act permits
a patent term extension of up to five years beyond the expiration of the patent. The length of the patent term extension is related
to the length of time the drug is under regulatory review. Patent term extension cannot extend the remaining term of a patent beyond
a total of 14 years from the date of product approval and only one patent applicable to an approved drug may be extended. Similar
provisions are available in Europe and other foreign jurisdictions to extend the term of a patent that covers an approved drug.
In the future, if and when our products receive FDA approval, we expect to apply for patent term extensions on patents covering
certain of those products, when applicable.
We also rely on trade
secrets relating to product candidates and seek to protect and maintain the confidentiality of proprietary information to protect
aspects of our business that are not amenable to, or that we do not consider appropriate for, patent protection. Although we take
steps to protect our proprietary information and trade secrets, including through contractual means with our employees and consultants,
third parties may independently develop substantially equivalent proprietary information and techniques or otherwise gain access
to our trade secrets, including through breaches of such agreements with our employees and consultants. Thus, we may not be able
to meaningfully protect our trade secrets. It is our policy to require our employees, consultants, outside scientific partners,
sponsored researchers and other advisors to execute confidentiality agreements upon the commencement of employment or consulting
relationships with us. These agreements provide that all confidential information concerning our business or financial affairs
developed or made known to the individual during the course of the individual’s relationship with us is to be kept confidential
and not disclosed to third parties except in specific circumstances. Our agreements with employees also provide that all inventions
conceived by the employee in the course of employment with us or from the employee’s use of our confidential information
are our exclusive property.
15
Manufacturing
We rely on contract development
and manufacturing organizations (“CDMOs”) to produce our drug candidates in accordance with current Good Manufacturing
Practices (“cGMP”), regulations for use in clinical trials and commercial product. The manufacture of pharmaceuticals
is subject to extensive cGMP regulations, which impose various procedural and documentation requirements and govern all areas of
record keeping, production processes and controls, personnel and quality control.
The CDMOs that we partner
with have the capability to produce clinical supply required for clinical trials, as well as support commercial scale up activities
for both products.
Both TARA-002 and Choline
Chloride will be produced in the United States. The starting materials for TARA-002 were provided to us pursuant to an agreement
with Chugai Pharmaceutical. The regulatory starting materials for Choline Chloride are available commercially.
Sales and Marketing
We plan to become a
fully integrated biopharmaceutical company pursuing our mission of supporting and improving the lives of patients suffering
from cancer and rare diseases.
If approved by the FDA,
we plan to commercialize both of our current product candidates in the U.S. first and then move to other geographies. As we advance
TARA-002 and IV Choline Chloride through our respective clinical development programs, we plan to grow our commercial organization
in support of anticipated product launches.
Competition
The process for commercialization
of new drugs is very competitive, and we could potentially face worldwide competition from other pharmaceutical companies, biotechnology
companies and ultimately generic products. Our potential competitors may develop or market therapies that are more clinically effective,
safer or less expensive than any therapeutic products we develop.
Government Regulation and Product Approval
The FDA and other regulatory
authorities at federal, state, and local levels, as well as in foreign countries, extensively regulate, among other things, the
research, development, testing, manufacture, quality control, import, export, safety, effectiveness, labeling, packaging, storage,
distribution, record keeping, approval, advertising, promotion, marketing, post-approval monitoring, and post-approval reporting
of drugs and biologics such as those we are developing. We, along with third-party contractors, will be required to navigate the
various preclinical, clinical and commercial approval requirements of the governing regulatory agencies of the countries in which
we wish to conduct studies or seek approval or licensure of our product candidates.
In the United States,
the FDA regulates drugs under the Federal Food, Drug and Cosmetic Act (“FDCA”) and biologics additionally under the
Public Health Services Act (“PHSA”) as well as their respective implementing regulations. The process required by the
FDA before biopharmaceutical product candidates may be marketed in the United States generally involves the following:
●
completion of preclinical laboratory tests and animal studies performed in accordance with the FDA’s current Good Laboratory Practices (“GLP”) regulations;
●
submission to the FDA of an IND, which must become effective before clinical trials may begin and must be updated annually or when significant changes are made;
●
approval by an independent Institutional Review Board (“IRB”) or ethics committee at each clinical site before the trial is commenced;
●
performance of adequate and well-controlled human clinical trials to establish the safety and efficacy of a drug product candidate and the safety, purity and potency of the proposed biologic product candidate for its intended purpose;
●
preparation of and submission to the FDA of an NDA or BLA after completion of all pivotal clinical trials that includes substantial evidence of safety, purity and potency or efficacy from results of nonclinical testing and clinical trials;
●
a determination by the FDA within 60 days of its receipt of an NDA or BLA to file the application for review;
●
satisfactory completion of an FDA Advisory Committee review, if applicable;
●
satisfactory completion of an FDA pre-approval inspection of the manufacturing facility or facilities at which the proposed product is produced to assess compliance with cGMP, and of selected clinical investigation sites to assess compliance with Good Clinical Practices (“GCP”); and
●
FDA review and approval, or licensure, of the NDA or BLA to permit commercial marketing of the product for particular indications for use in the United States.
16
Preclinical and Clinical Development
Prior to beginning the
first clinical trial with a product candidate, we must submit an IND to the FDA. An IND is a request for authorization from the
FDA to administer an investigational new drug product to humans. The central focus of an IND submission is on the general investigational
plan and the protocol(s) for clinical trials. The IND also includes results of animal and in vitro studies assessing the
toxicology, pharmacokinetics, pharmacology, and pharmacodynamic characteristics of the product candidate; chemistry, manufacturing,
and controls information; and any available human data or literature to support the use of the investigational product. An IND
must become effective before human clinical trials may begin. The IND automatically becomes effective 30 days after receipt by
the FDA, unless the FDA, within the 30-day time period, raises safety concerns or questions about the proposed clinical trial.
In such a case, the IND may be placed on clinical hold and the IND sponsor and the FDA must resolve any outstanding concerns or
questions before the clinical trial can begin. Submission of an IND therefore may or may not result in FDA authorization to begin
a clinical trial.
Clinical trials involve
the administration of the investigational product to human subjects under the supervision of qualified investigators in accordance
with GCPs, which include the requirement that all research subjects provide their informed consent for their participation in any
clinical trial. Clinical trials are conducted under protocols detailing, among other things, the objectives of the trial, the parameters
to be used in monitoring safety and the effectiveness criteria to be evaluated. A separate submission to the existing IND must
be made for each successive clinical trial conducted during product development and for any subsequent protocol amendments. Furthermore,
an independent IRB for each site proposing to conduct the clinical trial must review and approve the plan for any clinical trial
and its informed consent form before the clinical trial begins at that site, and must monitor the trial until completed. Regulatory
authorities, the IRB or the sponsor may suspend a clinical trial at any time on various grounds, including a finding that the subjects
are being exposed to an unacceptable health risk or that the trial is unlikely to meet its stated objectives. Some studies also
include oversight by an independent group of qualified experts organized by the clinical trial sponsor, known as a data safety
monitoring board, which provides authorization for whether or not a trial may move forward at designated check points based on
access to certain data from the trial and may halt the clinical trial if it determines that there is an unacceptable safety risk
for subjects or other grounds, such as no demonstration of efficacy. There are also requirements governing the reporting of ongoing
clinical trials and clinical trial results to public registries.
Human clinical trials
are typically conducted in three sequential phases that may overlap.
●
Phase 1—The investigational product is initially introduced into healthy human subjects or patients with the target disease or condition. These trials are designed to test the safety, dosage tolerance, absorption, metabolism, distribution and elimination of the investigational product in humans, the side effects associated with increasing doses, and, if possible, to gain early evidence on effectiveness.
●
Phase 2—The investigational product is administered to a limited patient population with a specified disease or condition to evaluate the preliminary efficacy, optimal dosages and dosing schedule and to identify possible adverse side effects and safety risks. Multiple Phase 2 clinical trials may be conducted to obtain information prior to beginning larger and more expensive Phase 3 clinical trials.
●
Phase 3—The investigational product is administered to an expanded patient population to further evaluate dosage, to provide statistically significant evidence of clinical efficacy and to further test for safety, generally at multiple geographically dispersed clinical trial sites. These clinical trials are intended to establish the overall risk/benefit ratio of the investigational product and to provide an adequate basis for product approval.
In some cases, the FDA
may require, or companies may voluntarily pursue, additional clinical trials after a product is approved to gain more information
about the product. These so- called Phase 4 trials may be made a condition to approval of the NDA or BLA. Concurrent with clinical
trials, companies may complete additional animal studies and develop additional information about the biological characteristics
of the product candidate, and must finalize a process for manufacturing the product in commercial quantities in accordance with
cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the product candidate
and, among other things, must develop methods for testing the identity, strength, quality and purity of the final product, or for
biologics, the safety, purity and potency. Additionally, appropriate packaging must be selected and tested and stability studies
must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life.
17
Application Submission, Review and Approval
Assuming successful completion
of all required testing in accordance with all applicable regulatory requirements, the results of product development, nonclinical
studies and clinical trials are submitted to the FDA as part of an NDA or BLA requesting approval to market the product for one
or more indications. The NDA or BLA must include all relevant data available from pertinent preclinical and clinical trials, including
negative or ambiguous results as well as positive findings, together with detailed information relating to the product’s
chemistry, manufacturing, controls, and proposed labeling, among other things. The submission of an NDA or BLA requires payment
of a substantial application user fee to FDA, unless a waiver or exemption applies.
Once an NDA or BLA has
been submitted, the FDA’s goal is to review standard applications within ten months after it accepts the application for
filing, or, if the application qualifies for priority review, six months after the FDA accepts the application for filing. In both
standard and priority reviews, the review process is often significantly extended by FDA requests for additional information or
clarification. The FDA reviews the application to determine, among other things, whether a product is safe, pure and potent and
the facility in which it is manufactured, processed, packed, or held meets standards designed to assure the product’s continued
safety, purity and potency. The FDA may convene an advisory committee to provide clinical insight on application review questions.
Before approving an NDA or BLA, the FDA will typically 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. Additionally, before
approving an NDA or BLA, the FDA will typically inspect one or more clinical sites to assure compliance with GCP. If the FDA determines
that the application, manufacturing process or manufacturing facilities are not acceptable, it will outline the deficiencies in
the submission and often will request additional testing or information. Notwithstanding the submission of any requested additional
information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval.
The FDA may issue an approval
letter or a Complete Response letter. An approval letter authorizes commercial marketing of the product with specific prescribing
information for specific indications. A Complete Response letter will describe all of the deficiencies that the FDA has identified
in the NDA or BLA. In issuing the Complete Response letter, the FDA may recommend actions that the applicant might take to place
the application in condition for approval, including requests for additional information or clarification. The FDA may delay or
refuse approval of an application if applicable regulatory criteria are not satisfied, require additional testing or information
and/or require post-marketing testing and surveillance to monitor safety or efficacy of a product.
If regulatory approval
of a product is granted, such approval will be granted for particular indications and may entail limitations on the indicated uses
for which such product may be marketed. For example, the FDA may impose a Risk Evaluation and Mitigation Strategy (REMS), to ensure
the benefits of the product outweigh its risks. A REMS is a safety strategy to manage a known or potential serious risk associated
with a product and to enable patients to have continued access to such medicines by managing their safe use, and could include
medication guides, physician communication plans, or elements to assure safe use, such as restricted distribution methods, patient
registries and other risk minimization tools. The FDA also may condition approval on, among other things, changes to proposed labeling
or the development of adequate controls and specifications. Once approved, the FDA may withdraw the product approval if compliance
with pre- and post-marketing requirements is not maintained or if problems occur after the product reaches the marketplace. The
FDA may require one or more Phase 4 post-market trials and surveillance to further assess and monitor the product’s safety
and effectiveness after commercialization, and may limit further marketing of the product based on the results of these post-marketing
trials.
Orphan Drug Designation
Under the Orphan Drug
Act, the FDA may grant orphan designation to a drug or biologic intended to treat a rare disease or condition, which is a disease
or condition that affects fewer than 200,000 individuals in the United States, or more than 200,000 individuals in the United States
for which there is no reasonable expectation that the cost of developing and making available in the United States a drug or biologic
for this type of disease or condition will be recovered from sales in the United States for that drug or biologic. Orphan designation
must be requested before submitting an NDA or BLA. After the FDA grants orphan designation, the generic identity of the therapeutic
agent and its potential orphan use are disclosed publicly by the FDA. The orphan drug designation does not convey any advantage
in, or shorten the duration of, the regulatory review or approval process.
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If a product that has
orphan designation subsequently receives the first FDA approval for the disease for which it has such designation, the product
is entitled to orphan exclusivity, which means that the FDA may not approve any other applications, including a full NDA or BLA,
to market the same product for the same indication for seven years, except in limited circumstances, such as a showing of clinical
superiority to the product with orphan drug exclusivity. Orphan exclusivity does not prevent FDA from approving a different drug
or biologic for the same disease or condition, or the same drug or biologic 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 BLA application fee.
A designated orphan product
may not receive orphan exclusivity if it is approved for a use that is broader than the indication for which it received orphan
designation. In addition, exclusive marketing rights in the United States may be lost if the FDA later determines that the request
for designation was materially defective or if the manufacturer is unable to assure sufficient quantities of the product to meet
the needs of patients with the rare disease or condition.
The FDA incentivizes the
development of drugs and biologics that meet the definition of a “rare pediatric disease,” defined to mean a serious
or life-threatening disease in which the serious of life-threatening manifestations primarily affect individuals aged from birth
to 18 years and the disease affects fewer than 200,000 individuals in the United States or affects 200,000 or more in the United
States and for which there is no reasonable expectation that the cost of developing and making in the United States a drug for
such disease or condition will be received from sales in the United States of such drug. The sponsor of a product candidate for
a rare pediatric disease may be eligible for a voucher that can be used to obtain a priority review for a subsequent human drug
or biologic application after the date of approval of the rare pediatric disease drug product, referred to as a priority review
voucher, or PRV. A rare pediatric disease designation does not guarantee that a sponsor will receive a PRV upon approval of its
NDA or BLA. If a PRV is received, it may be sold or transferred an unlimited number of times. Congress has extended the PRV program
until September 30, 2024, with the potential for PRVs to be granted until September 30, 2026.
Post-Approval Requirements
Any products manufactured
or distributed pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including, among other
things, requirements relating to quality control and quality assurance, record-keeping, reporting of adverse experiences, periodic
reporting, product sampling and distribution, and advertising and promotion of 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. There
also are continuing user fee requirements, under which FDA assesses an annual program fee for each product identified in an approved
NDA or BLA. Biopharmaceutical manufacturers and their subcontractors are required to register their establishments with the FDA
and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance
with cGMP, which impose certain procedural and documentation requirements upon sponsors and their third-party manufacturers. Changes
to the manufacturing process are strictly regulated, and, depending on the significance of the change, may require prior FDA approval
before being implemented. FDA regulations also require investigation and correction of any deviations from cGMP and impose reporting
requirements upon sponsor and third-party manufacturers. Accordingly, manufacturers must continue to expend time, money and effort
in the area of production and quality control to maintain compliance with cGMP and other aspects of regulatory compliance.
The FDA may withdraw 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 trials to assess new safety risks; or imposition of
distribution restrictions or other restrictions under a REMS program. Other potential consequences include, among other things:
●
restrictions on the marketing or manufacturing of a product, mandated modification of promotional materials or issuance of corrective information, issuance by FDA or other regulatory authorities of safety alerts, Dear Healthcare Provider letters, press releases or other communications containing warnings or other safety information about the product, or complete withdrawal of the product from the market or product recalls;
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fines, warning or untitled letters or holds on post-approval clinical trials;
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refusal of the FDA to approve pending applications or supplements to approved applications, or suspension or revocation of existing product approvals;
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product seizure or detention, or refusal of the FDA to permit the import or export of products; or
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injunctions, consent decrees or the imposition of civil or criminal penalties.
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The FDA closely regulates
the marketing, labeling, advertising and promotion of biopharmaceuticals. A company can make only those claims relating to safety
and efficacy, purity and potency of a biopharmaceutical that are approved by the FDA and in accordance with the provisions of the
approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses.
Failure to comply with these requirements can result in, among other things, adverse publicity, warning letters, corrective advertising
and potential civil and criminal penalties. Physicians may prescribe legally available products for uses that are not described
in the product’s labeling and that differ from those approved by the FDA. Such off-label uses are common across medical specialties.
Physicians may believe that such off-label uses are the best treatment for many patients in varied circumstances. The FDA does
not regulate the behavior of physicians in their choice of treatments. The FDA does, however, restrict manufacturer’s communications
on the subject of off-label use of their products.
Biosimilars and Reference Product Exclusivity
The Patient Protection
and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (ACA), signed into law in 2010, includes
a subtitle called the Biologics Price Competition and Innovation Act of 2009 (BPCIA), which created an abbreviated approval pathway
for biological products that are biosimilar to or interchangeable with an FDA-approved reference biological product. To date, a
number of biosimilars have been licensed under the BPCIA, and numerous biosimilars have been approved in Europe. The FDA has issued
several guidance documents outlining its approach to the review and approval of biosimilars.
Biosimilarity, which requires
that there be no clinically meaningful differences between the biological product and the reference product in terms of safety,
purity, and potency, can be shown through analytical studies, animal studies, and a clinical trial or trials. Interchangeability
requires that a product is biosimilar to the reference product and the product must demonstrate that it can be expected to produce
the same clinical results as the reference product in any given patient and, for products that are administered multiple times
to an individual, the biologic and the reference biologic may be alternated or switched after one has been previously administered
without increasing safety risks or risks of diminished efficacy relative to exclusive use of the reference biologic. Complexities
associated with the larger, and often more complex, structures of biological products, as well as the processes by which such products
are manufactured, pose significant hurdles to implementation of the abbreviated approval pathway that are still being worked out
by the FDA.
Under the BPCIA, an application
for a biosimilar product may not be submitted to the FDA until four years following the date that the reference product was first
licensed by the FDA. In addition, the approval of a biosimilar product may not be made effective by the FDA until 12 years from
the date on which the reference product was first licensed. During this 12-year period of exclusivity, another company may still
market a competing version of the reference product if the FDA approves a full BLA for the competing product containing that applicant’s
own preclinical data and data from adequate and well-controlled clinical trials to demonstrate the safety, purity and potency of
its product. The BPCIA also created certain exclusivity periods for biosimilars approved as interchangeable products. At this juncture,
it is unclear whether products deemed “interchangeable” by the FDA will, in fact, be readily substituted by pharmacies,
which are governed by state pharmacy law.
The BPCIA is complex and
continues to be interpreted and implemented by the FDA. In addition, recent government proposals have sought to reduce the 12-year
reference product exclusivity period. Other aspects of the BPCIA, some of which may impact the BPCIA exclusivity provisions, have
also been the subject of recent litigation. As a result, the ultimate impact, implementation, and impact of the BPCIA is subject
to significant uncertainty.
Other U.S. Healthcare Laws and Compliance
Requirements
In the United States,
our current and future operations are subject to regulation by various federal, state and local authorities in addition to the
FDA, including but not limited to, the Centers for Medicare &Medicaid Services (“CMS”), other divisions of
the U.S. Department of Health and Human Services (“HHS”) (such as the Office of Inspector General, Office for Civil
Rights and the Health Resources and Service Administration), the U.S. Department of Justice (“DOJ”) and individual
U.S. Attorney offices within the DOJ, and state and local governments. For example, our clinical research, sales, marketing and
scientific/educational grant programs will need to comply with the anti-fraud and abuse provisions of the Social Security Act,
the false claims laws, the privacy and security provisions of the Health Insurance Portability and Accountability Act (“HIPAA”),
and similar state laws, each as amended, as applicable.
The federal Anti-Kickback
Statute prohibits, among other things, any person or entity, from knowingly and willfully offering, paying, soliciting or receiving
any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce or in return for purchasing, leasing,
ordering or arranging for the purchase, lease or order of any item or service reimbursable, in whole or in part, under Medicare,
Medicaid or other federal healthcare programs. The term remuneration has been interpreted broadly to include anything of value.
The Anti-Kickback Statute has been interpreted to apply to arrangements between therapeutic product manufacturers on one hand and
prescribers, purchasers, and formulary managers on the other. There are a number of statutory exceptions and regulatory safe harbors
protecting some common activities from prosecution. The exceptions and safe harbors are drawn narrowly and practices that involve
remuneration that may be alleged to be intended to induce prescribing, purchasing or recommending may be subject to scrutiny if
they do not qualify for an exception or safe harbor. Failure to meet all of the requirements of a particular applicable statutory
exception or regulatory safe harbor does not make the conduct per se illegal under the Anti-Kickback Statute. Instead, the legality
of the arrangement will be evaluated on a case-by-case basis based on a cumulative review of all of its facts and circumstances.
Our practices may not in all cases meet all of the criteria for protection under a statutory exception or regulatory safe harbor.
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Additionally, the intent
standard under the Anti-Kickback Statute was amended by the Patient Protection and Affordable Care Act, as amended by the Health
Care and Education Reconciliation Act of 2010 (the “Affordable Care Act”) to a stricter standard such that a person
or entity no longer needs to have actual knowledge of the statute or specific intent to violate it in order to have committed a
violation. In addition, the Affordable Care Act codified case law that a claim including items or services resulting from a violation
of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal False Claims Act (the
“FCA”) (discussed below).
The federal false claims,
including the FCA, and civil monetary penalty laws, which imposes significant penalties and can be enforced by private citizens
through civil qui tam actions, prohibit any person or entity from, among other things, knowingly presenting, or causing to be presented,
a false or fraudulent claim for payment to, or approval by, the federal government, including federal healthcare programs, such
as Medicare and Medicaid, knowingly making, using, or causing to be made or used a false record or statement material to a false
or fraudulent claim to the federal government, or knowingly making a false statement to improperly avoid, decrease or conceal an
obligation to pay money to the federal government. A claim includes “any request or demand” for money or property presented
to the U.S. government. For instance, historically, pharmaceutical and other healthcare companies have been prosecuted under these
laws for allegedly providing free product to customers with the expectation that the customers would bill federal programs for
the product. Other companies have been prosecuted for causing false claims to be submitted because of the companies’ marketing
of the product for unapproved, off-label, and thus generally non-reimbursable, uses.
HIPAA created additional
federal criminal statutes that prohibit, among other things, knowingly and willfully executing, or attempting to execute, a scheme
to defraud or to obtain, by means of false or fraudulent pretenses, representations or promises, any money or property owned by,
or under the control or custody of, any healthcare benefit program, including private third-party payors, willfully obstructing
a criminal investigation of a healthcare offense, and knowingly and willfully falsifying, concealing or covering up by trick, scheme
or device, a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of
or payment for healthcare benefits, items or services. Like the Anti-Kickback Statute, the Affordable Care Act amended the intent
standard for certain healthcare fraud statutes under HIPAA such that a person or entity no longer needs to have actual knowledge
of the statute or specific intent to violate it in order to have committed a violation.
Also, many states have
similar, and typically more prohibitive, fraud and abuse statutes or regulations that apply to items and services reimbursed under
Medicaid and other state programs, or, in several states, apply regardless of the payor.
We may be subject to data
privacy and security regulations by both the federal government and the states in which it conducts business. HIPAA, as amended
by the Health Information Technology for Economic and Clinical Health Act (HITECH) and its implementing regulations, imposes requirements
on “covered entities,” including certain healthcare providers, health plans, and healthcare clearinghouses, as well
as their respective “business associates” that create, receive, maintain or transmit individually identifiable health
information for or on behalf of a covered entity as well as their covered subcontractors relating to the privacy, security and
transmission of individually identifiable health information. Among other things, HITECH makes HIPAA’s privacy and security
standards directly applicable to business associates, independent contractors, or agents of covered entities that receive or obtain
protected health information in connection with providing a service on behalf of a covered entity. HITECH also created four 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 HIPAA
and seek attorneys’ fees and costs associated with pursuing federal civil actions. In addition, many state laws govern the
privacy and security of health information in specified circumstances, many of which differ from each other in significant ways,
are often not pre-empted by HIPAA, and may have a more prohibitive effect than HIPAA, thus complicating compliance efforts.
We may develop
products that, once approved, may be administered by a physician. Under currently applicable U.S. law, certain products not usually
self-administered (including injectable drugs) may be eligible for coverage under Medicare through Medicare Part B. Medicare Part
B is part of original Medicare, the federal health care program that provides health care benefits to the aged and disabled, and
covers outpatient services and supplies, including certain biopharmaceutical products, that are medically necessary to treat a
beneficiary’s health condition. As a condition of receiving Medicare Part B reimbursement for a manufacturer’s eligible
drugs, the manufacturer is required to participate in other government healthcare programs, including the Medicaid Drug Rebate
Program and the 340B Drug Pricing Program. The Medicaid Drug Rebate Program requires pharmaceutical manufacturers to enter into
and have in effect a national rebate agreement with the Secretary of HHS as a condition for states to receive federal matching
funds for the manufacturer’s outpatient drugs furnished to Medicaid patients. Under the 340B Drug Pricing Program, the manufacturer
must extend discounts to entities that participate in the program.
In addition, many pharmaceutical
manufacturers must calculate and report certain price reporting metrics to the government, such as average sales price (“ASP”)
and best price. Penalties may apply in some cases when such metrics are not submitted accurately and timely. Further, these prices
for drugs may be reduced by mandatory discounts or rebates required by government healthcare programs or private payors and by
any future relaxation of laws that presently restrict imports of drugs from countries where they may be sold at lower prices than
in the United States. It is difficult to predict how Medicare coverage and reimbursement policies will be applied to our products
in the future and coverage and reimbursement under different federal healthcare programs are not always consistent. Medicare reimbursement
rates may also reflect budgetary constraints placed on the Medicare program.
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Additionally, the federal
Physician Payments Sunshine Act (the “Sunshine Act”), within the Affordable Care Act, and its implementing regulations,
require that certain manufacturers of drugs, devices, biological and medical supplies for which payment is available under Medicare,
Medicaid or the Children’s Health Insurance Program (with certain exceptions) report annually to CMS information related
to certain payments or other transfers of value made or distributed to physicians (defined to include doctors, dentists, optometrists,
podiatrists and chiropractors) and teaching hospitals, or to entities or individuals at the request of, or designated on behalf
of, the physicians and teaching hospitals and to report annually certain ownership and investment interests held by physicians
and their immediate family members. Beginning in 2022, applicable manufacturers also will be required to report such information
regarding its relationships with physician assistants, nurse practitioners, clinical nurse specialists, anesthesiologist assistants,
certified registered nurse anesthetists and certified nurse midwives during the previous year. Failure to report accurately could
result in penalties. In addition, many states also govern the reporting of payments or other transfers of value, many of which
differ from each other in significant ways, are often not pre-empted, and may have a more prohibitive effect than the Sunshine
Act, thus further complicating compliance efforts.
In order to distribute
products commercially, we must comply with state laws that require the registration of manufacturers and wholesale distributors
of drug and biological products in a state, including, in certain states, manufacturers and distributors who ship products into
the state even if such manufacturers or distributors have no place of business within the state. Some states also impose requirements
on manufacturers and distributors to establish the pedigree of product in the chain of distribution, including some states that
require manufacturers and others to adopt new technology capable of tracking and tracing product as it moves through the distribution
chain. Several states and/or localities have enacted legislation requiring pharmaceutical and biotechnology companies to establish
marketing compliance programs, file periodic reports with the state, make periodic public disclosures on sales, marketing, pricing,
clinical trials and other activities, and/or register their sales representatives, as well as to prohibit pharmacies and other
healthcare entities from providing certain physician prescribing data to pharmaceutical and biotechnology companies for use in
sales and marketing, and to prohibit certain other sales and marketing practices. All of our activities are potentially subject
to federal and state consumer protection and unfair competition laws.
Ensuring business arrangements
with third parties comply with applicable healthcare laws and regulations is a costly endeavor. If our operations are found to
be in violation of any of the federal and state healthcare laws described above or any other current or future governmental regulations
that apply to it, it may be subject to penalties, including without limitation, significant civil, criminal and/or administrative
penalties, damages, fines, disgorgement, imprisonment, exclusion from participation in government programs, such as Medicare and
Medicaid, injunctions, private “qui tam” actions brought by individual whistleblowers in the name of the government,
or refusal to allow it to enter into government contracts, contractual damages, reputational harm, administrative burdens, diminished
profits and future earnings, additional reporting obligations and oversight if we become subject to a corporate integrity agreement
or other agreement to resolve allegations of non-compliance with these laws, and the curtailment or restructuring of its operations,
any of which could adversely affect our ability to operate our business and our results of operations.
Coverage, Pricing and Reimbursement
Significant uncertainty
exists as to the coverage and reimbursement status of any product candidates for which we may obtain regulatory approval. In the
United States and in foreign markets, sales of any products for which we receive regulatory approval for commercial sale will depend,
in part, on the extent to which third-party payors provide coverage and establish adequate reimbursement levels for such products.
In the United States, third-party payors include federal and state healthcare programs, private managed care providers, health
insurers and other organizations. Adequate coverage and reimbursement from governmental healthcare programs, such as Medicare and
Medicaid in the United States, and commercial payors are critical to new product acceptance.
Our ability to commercialize
any products successfully also will depend in part on the extent to which coverage and reimbursement for these products and related
treatments will be available from government health administration authorities, private health insurers and other organizations.
Government authorities and other third-party payors, such as private health insurers and health maintenance organizations, decide
which therapeutics they will pay for and establish reimbursement levels. Coverage and reimbursement by a third-party payor may
depend upon a number of factors, including the third-party payor’s determination that use of a therapeutic is:
●
a covered benefit under its health plan;
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safe, effective and medically necessary;
●
appropriate for the specific patient;
●
cost-effective; and
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neither experimental nor investigational.
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We cannot be sure that
reimbursement will be available for any product that it commercializes and, if coverage and reimbursement are available, what the
level of reimbursement will be. Coverage may also be more limited than the purposes for which the product is approved by the FDA
or comparable foreign regulatory authorities. Reimbursement may impact the demand for, or the price of, any product for which we
obtain regulatory approval.
Third-party payors are
increasingly challenging the price, examining the medical necessity, and reviewing the cost-effectiveness of medical products,
therapies and services, in addition to questioning their safety and efficacy. Obtaining reimbursement for our products may be particularly
difficult because of the higher prices often associated with branded drugs and drugs administered under the supervision of a physician.
We may need to conduct expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness
of our products, in addition to the costs required to obtain FDA approvals. Our product candidates may not be considered medically
necessary or cost-effective. Obtaining coverage and reimbursement approval of a product from a government or other third-party
payor is a time-consuming and costly process that could require us to provide to each payor supporting scientific, clinical and
cost-effectiveness data for the use of our product on a payor-by-payor basis, with no assurance that coverage and adequate reimbursement
will be obtained. A payor’s decision to provide coverage for a product does not imply that an adequate reimbursement rate
will be approved. Further, one payor’s determination to provide coverage for a product does not assure that other payors
will also provide coverage for the product. Adequate third-party reimbursement may not be available to enable us to maintain price
levels sufficient to realize an appropriate return on our investment in product development. If reimbursement is not available
or is available only at limited levels, we may not be able to successfully commercialize any product candidate that it successfully
develops.
Different pricing and
reimbursement schemes exist in other countries. In the European Union, governments influence the price of biopharmaceutical products
through their pricing and reimbursement rules and control of national health care systems that fund a large part of the cost of
those products to consumers. Some jurisdictions operate positive and negative list systems under which products may only be marketed
once a reimbursement price has been agreed. To obtain reimbursement or pricing approval, some of these countries may require the
completion of clinical trials that compare the cost effectiveness of a particular product candidate to currently available therapies.
Other member states allow companies to fix their own prices for medicines but monitor and control company profits. The downward
pressure on health care costs has become 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 a commercial pressure on pricing within
a country.
The marketability of any
product candidates for which we receive regulatory approval for commercial sale may suffer if the government and third-party payors
fail to provide adequate coverage and reimbursement. In addition, emphasis on managed care, the increasing influence of health
maintenance organizations, and additional legislative changes in the United States has increased, and we expect will continue to
increase, the pressure on healthcare pricing. The downward pressure on the rise in healthcare costs in general, particularly prescription
medicines, medical devices and surgical procedures and other treatments, has become very intense. Coverage policies and third-party
reimbursement rates may change at any time. Even if favorable coverage and reimbursement status is attained for one or more products
for which we receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.
Healthcare Reform
In the United States and
some foreign jurisdictions, there have been, and continue to be, several legislative and regulatory changes and proposed changes
regarding the healthcare system that could prevent or delay marketing approval of product candidates, restrict or regulate post-approval
activities, and affect the ability to profitably sell product candidates for which marketing approval is obtained. Among policy
makers and payors in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems
with the stated goals of containing healthcare costs, improving quality and/or expanding access. In the United States, the pharmaceutical
industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives.
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For example, the Affordable
Care Act has substantially changed healthcare financing and delivery by both governmental and private insurers. Among the Affordable
Care Act provisions of importance to the pharmaceutical and biotechnology industries, in addition to those otherwise described
above, are the following:
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an annual, nondeductible fee on any entity that manufactures or imports certain specified branded prescription drugs and biologic agents apportioned among these entities according to their market share in some government healthcare programs;
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an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program to 23.1% and 13% of the average manufacturer price for most branded and generic drugs, respectively, and capped the total rebate amount for innovator drugs at 100% of the Average Manufacturer Price (the “AMP”);
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a new Medicare Part D coverage gap discount program, in which manufacturers must now agree to offer 70% point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturers’ outpatient drugs to be covered under Medicare Part D;
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extension of manufacturers’ Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations;
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expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals and by adding new mandatory eligibility categories for individuals with income at or below 133% of the federal poverty level, thereby potentially increasing manufacturers’ Medicaid rebate liability;
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expansion of the entities eligible for discounts under the 340B Drug Discount Program;
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a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research;
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expansion of healthcare fraud and abuse laws, including the FCA and the Anti-Kickback Statute, new government investigative powers, and enhanced penalties for noncompliance;
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a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted, or injected;
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requirements to report certain financial arrangements with physicians and teaching hospitals;
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a requirement to annually report certain information regarding drug samples that manufacturers and distributors provide to physicians;
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establishment of a Center for Medicare and Medicaid Innovation at CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending; and
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a licensure framework for follow on biologic products.
There remain legal and
political challenges to certain aspects of the Affordable Care Act. Since January 2017, the Trump administration signed several
executive orders and other directives designed to delay, circumvent, or loosen certain requirements mandated by the Affordable
Care Act. In December 2017, Congress repealed the tax penalty for an individual’s failure to maintain Affordable Care Act-mandated
health insurance as part of a tax reform bill. Further, the 2020 federal spending package permanently eliminated, effective January
1, 2020, the Affordable Care Act-mandated “Cadillac” tax on high-cost employer-sponsored health coverage and medical
device tax and, effective January 1, 2021, also eliminated the health insurer tax. On December 14, 2018, a U.S. District Court
Judge in the Northern District of Texas ruled that the individual mandate is a critical and inseverable feature of the Affordable
Care Act, and therefore, because it was repealed as part of the tax reform bill, the remaining provisions of the Affordable Care
Act are invalid as well. Additionally, on December 18, 2019, the U.S. Court of Appeals for the 5th Circuit upheld the District
Court ruling that the individual mandate was unconstitutional and remanded the case back to the District Court to determine whether
the remaining provisions of the Affordable Care Act are invalid as well. The U.S. Supreme Court is currently reviewing this case,
although it is unclear when a decision will be made. Although the U.S. Supreme Court has yet ruled on the constitutionality of
the ACA, on January 28, 2021, President Biden issued an executive order to initiate a special enrollment period from February 15,
2021 through May 15, 2021 for purposes of obtaining health insurance coverage through the Affordable Care Act marketplace. The
executive order also instructs certain governmental agencies to review and reconsider their existing policies and rules that limit
access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work
requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or
the Affordable Care Act. It is unclear how the Supreme Court ruling, other such litigation, and the healthcare reform measures
of the Biden administration will impact the ACA and our business.
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We anticipate that the
Affordable Care Act, if substantially maintained in its current form, will continue to result in additional downward pressure on
coverage and the price that we receive for any approved product, and could seriously harm our business. Any reduction in reimbursement
from Medicare and other government programs may result in a similar reduction in payments from private payors. The implementation
of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability,
or commercialize our products. Such reforms could have an adverse effect on anticipated revenue from product candidates that we
may successfully develop and for which we may obtain regulatory approval and may affect our overall financial condition and ability
to develop product candidates.
Further legislation or
regulation could be passed that could harm our business, financial condition and results of operations. Other legislative changes
have been proposed and adopted since the Affordable Care Act was enacted. For example, in August 2011, President Obama signed into
law the Budget Control Act of 2011, which, among other things, created the Joint Select Committee on Deficit Reduction to recommend
to Congress proposals in spending reductions. The Joint Select Committee on Deficit Reduction did not achieve a targeted deficit
reduction of at least $1.2 trillion for fiscal years 2012 through 2021, triggering the legislation’s automatic reduction
to several government programs. This includes aggregate reductions to Medicare payments to providers of up to 2% per fiscal year,
which went into effect beginning on April 1, 2013 and will stay in effect through 2030 unless additional Congressional action is
taken. However, COVID-19 pandemic relief legislation has suspended the 2% Medicare sequester from May 1, 2020 through March 31,
2021. In January 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, further reduced
Medicare payments to several types of providers, including hospitals, imaging centers and cancer treatment centers, and increased
the statute of limitations period for the government to recover overpayments to providers from three to five years.
Additionally, there has
been increasing legislative and enforcement interest in the United States with respect to specialty drug pricing practices. Specifically,
there have been several recent U.S. Congressional inquiries and proposed 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. At the federal level, the
Trump administration’s budget proposal for fiscal year 2021 includes a $135 billion allowance to support legislative proposals
seeking to reduce drug prices, increase competition, lower out-of-pocket drug costs for patients, and increase patient access to
lower-cost generic and biosimilar drugs. Further, the Trump administration previously released a “Blueprint , ”
or plan, to lower drug prices and reduce out of pocket costs of drugs that contains additional proposals to increase drug manufacturer
competition, increase the negotiating power of certain federal healthcare programs, incentivize manufacturers to lower the list
price of their products, and reduce the out of pocket costs of drug products paid by consumers. Several final rules have been recently
promulgated that seek to implement several of the Trump administration’s proposals. However, it is unclear whether the Biden
administration will work to reverse these measures or pursue similar policy initiatives. Individual states in the United States
have also become increasingly active in passing legislation and implementing regulations designed to control biopharmaceutical
product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing
cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk
purchasing. Further, it is possible that additional government action is taken in response to the COVID-19 pandemic.
The Foreign Corrupt Practices Act
The Foreign Corrupt Practices
Act (the “FCPA”), prohibits any U.S. individual or business from paying, offering, or authorizing payment or offering
of anything of value, directly or indirectly, to any foreign official, political party or candidate for the purpose of influencing
any act or decision of the foreign entity in order to assist the individual or business in obtaining or retaining business. The
FCPA also obligates companies whose securities are listed in the United States to comply with accounting provisions requiring us
to maintain books and records that accurately and fairly reflect all transactions of the corporation, including international subsidiaries,
and to devise and maintain an adequate system of internal accounting controls for international operations.
Additional Regulation
In addition to the foregoing,
state and federal laws regarding environmental protection and hazardous substances, including the Occupational Safety and Health
Act, the Resource Conservancy and Recovery Act and the Toxic Substances Control Act, affect our business. These and other laws
govern our use, handling and disposal of various biological, chemical and radioactive substances used in, and wastes generated
by, our operations. If our operations result in contamination of the environment or expose individuals to hazardous substances,
we could be liable for damages and governmental fines. We believe that we are in material compliance with applicable environmental
laws and that continued compliance therewith will not have a material adverse effect on our business. We cannot predict, however,
how changes in these laws may affect our future operations.
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Other Regulations
We are also subject to
numerous federal, state and local laws relating to such matters as safe working conditions, manufacturing practices, environmental
protection, fire hazard control, and disposal of hazardous or potentially hazardous substances. We may incur significant costs
to comply with such laws and regulations now or in the future.
Employees
As of March 11, 2021,
we had twenty-nine employees, twenty-seven of whom were full-time employees and two of whom were contract employees. As of March
11, 2021, twelve of our employees were engaged in research and development activities and seventeen of our employees were engaged
in business development, finance, commercial, information systems, facilities, human resources or administrative support. As of
March 11, 2021, all of our employees were located in the U.S. None of our U.S. employees are represented by any collective bargaining
agreements. We believe that we maintain good relations with our employees.
COVID-19
The ultimate impact of
the current COVID-19 pandemic or a similar health epidemic is highly uncertain and subject to change. We have experienced delays,
but may experience additional future delays that impact our business, our research and development activities, healthcare systems
and the global economy as a whole. However, we will continue to monitor the COVID-19 situation closely should the effects have
a material impact on our operations, liquidity and capital resources.
In response to public
health directives and orders, we have implemented work-from-home policies for our employees and temporarily modified our operations
to comply with applicable social distancing recommendations. Similar health directives and orders are affecting third parties with
whom we do business, including the third parties that we have contracted with to conduct studies for TARA-002. The effects of the
orders and our related adjustments in our business are likely to negatively impact productivity, disrupt our business and delay
our timelines, the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations
on our ability to conduct our business in the ordinary course.
Severe and/or long-term
disruptions in our operations will negatively impact our business, operating results and financial condition in other ways, as
well. Specifically, we anticipate that the stress of COVID-19 on healthcare systems around the globe will negatively impact our
ability to conduct clinical trials in the near term due primarily to the lack of resources at clinical trial sites and the resulting
inability to enroll patients in the trials. We also anticipate that the global impact of COVID-19 will negatively impact our ability
to conduct nonclinical studies due primarily to laboratory closures and limited availability of personnel. In addition, while the
potential economic impact brought by, and the duration of, COVID-19 may be difficult to assess or predict, it has significantly
disrupted global financial markets, and may limit our ability to access capital, which could in the future negatively affect our
liquidity. A recession or market correction resulting from the spread of COVID-19 could materially affect our business and the
value of our common stock.
Corporate Information
On January 9, 2020, Protara
Therapeutics, Inc. (formerly ArTara Therapeutics, Inc., formerly Proteon Therapeutics, Inc. the “Company” or “Protara”),
and privately-held ArTara Subsidiary, Inc. (“Private ArTara”), completed the merger and reorganization, or the Merger,
in accordance with the terms of the Agreement and Plan of Merger and Reorganization, dated September 23, 2019, or the Merger Agreement,
by and among the Company, Private ArTara and REM 1 Acquisition, Inc., a wholly owned subsidiary of the Company (“Merger Sub”),
whereby Merger Sub merged with and into Private ArTara, with Private ArTara surviving as a wholly owned subsidiary of the Company.
The Merger was structured as a reverse merger and Private ArTara was determined to be the accounting acquirer based on the terms
of the Merger and other factors.
Refer to Note 3, Reverse
Merger with Protara and Recapitalization, to our financial statements appearing elsewhere in this Annual Report on Form 10-K for
additional information.
We were originally incorporated
in Delaware in March 2006, and at that time, acquired Proteon Therapeutics, LLC, the predecessor of Protara, which was formed in
June 2001.
Our principal executive
offices are located at 345 Park Avenue South, 3 rd Floor, New York, New York 10010, our telephone number is (646) 844-0337
and our website address is www.protaratx.com.
Unless the context requires
otherwise, references in this Annual Report to “Protara”, “TARA”, “we”, “us”, the
“Company” and “our” refer to Protara Therapeutics, Inc. (formerly ArTara Therapeutics, Inc., formerly Proteon
Therapeutics, Inc.) and our subsidiaries.
Available Information
Annual Reports on Form
10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed pursuant to Sections 13(a) and
15(d) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, will be made available free of charge on our website
as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange
Commission, or SEC. The contents of our website are not incorporated into this Annual Report and our reference to the URL for our
website is intended to be an inactive textual reference only. The information contained on, or that can be accessed through, our
website is not a part of this document.
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