ITEM 1. BUSINESS
GENERAL
ImmuLogic Pharmaceutical Corporation (ImmuLogic or the Company) is a
biopharmaceutical company developing novel products with a primary emphasis on
the treatment of allergies and autoimmune diseases. ImmuLogic's technological
approach is based on proprietary discoveries and an advanced understanding of
the molecular events controlling the human immune system. The Company is
developing its ALLERVAX(R) family of allergy therapeutics, with the ALLERVAX(R)
CAT and ALLERVAX(R) RAGWEED therapeutics, the lead products in the family, both
in advanced clinical development stages. Three earlier stage ALLERVAX(R)
products for the treatment of house dust mite, spring grasses and Japanese
cedar pollen have been defined. The autoimmune disease program is focused on
developing therapeutics to treat T cell mediated autoimmune diseases. As a
result of recently announced changes in management and the composition of the
Company's Board of Directors, the Company has redefined its priorities for
product development and plans to focus most of its resources in 1997 on the
development of its ALLERVAX(R) RAGWEED and ALLERVAX(R) CAT therapeutics.
The Company was incorporated under the laws of the State of Delaware on
March 26, 1987. None of the Company's products have completed human clinical
testing, therefore the Company does not expect to market any product
commercially for at least several years.
THE IMMUNE RESPONSE
The immune system is a major biological defense system responsible for
protection against disease. It functions through a complex interplay of
components which allow the body to detect and defend against foreign invaders.
These invaders include bacteria, viruses, parasites and other substances. The
immune system recognizes and distinguishes foreign substances (non-self),
generally termed antigens, from the body's own tissue (self). The immune system
is able to react continually to a wide variety of antigens, to "remember" a
foreign substance to which it has been exposed previously, and to rid the body
of the foreign substance and its effects on the biological system.
The recognition and memory processes of the immune system are
controlled by the activity of two types of cells, T cells and B cells. T cells
are pivotal control cells for the entire antigen-specific immune response
system, playing a critical role in recognizing the antigen, initiating the
immune response and regulating the resulting cascade of immunological events. B
cells secrete antibodies, which play a role in recognizing and in neutralizing
the foreign invader.
When a foreign substance enters the body, antigen presenting cells
physically engulf the foreign antigen. The foreign antigen which triggers immune
responses is commonly a protein, which is composed of a linear sequence of
smaller molecular building blocks called amino acids. The antigen also has a
three-dimensional conformation, determined by the chemical interactions among
the amino acids. Foreign antigens engulfed by antigen-presenting cells are
broken down by enzymes, and smaller fragments of the foreign antigen, called
peptides, are formed. A specific peptide is transported to the cell surface of
the antigen presenting cell and presented, bound to receptors called the HLA
(human leukocyte antigen) complex, to T cells which recognize a specific amino
acid sequence within the peptide called the T cell epitope. HLA molecules are
found on the surface of a variety of cells in the body. The HLA
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molecules are encoded by a gene complex called the Major Histocompatibility
Complex, or MHC. The terms HLA and MHC are sometimes used interchangeably.
Specificity of this recognition of the HLA-epitope complex by T cells occurs
through a receptor on the cell surface, the T cell receptor. The Company refers
to the molecular complex consisting of a T cell, epitope-containing peptide
bound to the HLA molecule, and the T cell receptor as the recognition triad.
The formation of the recognition triad initiates a series of events
characteristic of all immune responses designed to eliminate the foreign
substances. Although the immune system is designed to be beneficial, the system
can mount inappropriate reactions to foreign antigens such as cat dander or
ragweed pollen and to self antigens such as proteins in the body. When these
antigens are perceived incorrectly as harmful, allergies and autoimmune
disease can result.
TECHNOLOGY AND PRODUCT CANDIDATES
PRIMARY THERAPEUTIC APPROACH: T CELL DOWN REGULATION
ImmuLogic's primary therapeutic approach is to intervene at the
recognition triad, the starting point of the aberrant immune response. The
Company's potential therapeutic products target the underlying cause of disease
by modulating the antigen-specific T cell responses involved in initiating and
maintaining the immune cascade through administration of T cell
epitope-containing peptides derived from the disease-causing antigen. ImmuLogic
is designing drugs targeted at the antigen-specific components that provoke an
undesirable immune response. Accordingly, the Company believes that its products
are unlikely to cause general suppression of the immune system while
down-regulating the undesirable immune response in an antigen-specific manner.
In its allergy program, ImmuLogic has obtained experimental evidence in
animals showing that administration of T cell epitope-containing peptides
derived from a known allergen reduces the responsiveness of the T cells
responsible for stimulation of the immune response to that antigen.
Experimental results from other researchers in the field provide support for
the Company's findings and for its belief that the T cell down regulation
approach represents an opportunity to develop therapies to treat allergies and
autoimmune diseases, which are caused by inappropriate immune responses to
innocuous environmental antigens or self antigens.
ALLERGY PROGRAM
Overview. Allergy can be thought of as inappropriate immune system
responses to certain substances which do not in themselves cause disease. Most
individuals mount an immune response to pollens, certain animal proteins and
other environmental antigens. However, in non-allergic individuals, the immune
system responds in a way that does not result in allergic symptoms. In allergic
individuals, the immune system responds inappropriately, resulting in the
sneezing associated with allergic rhinitis and the wheezing associated with
asthma. In a severe allergic reaction, anaphylaxis, which can involve extreme
respiratory distress and vascular collapse, can result.
An allergen, such as a pollen protein, enters the body and is processed
by antigen-presenting cells. T cells bind to the HLA-peptide complex, forming
the recognition triad. Cytokines are released by the activated T cells and act
as signaling agents which regulate the ongoing and subsequent responses of the
immune system such as cell proliferation, inflammation and antibody production.
These cytokines can either stimulate or prevent the migration of additional
immune cells into the area, resulting in tissue inflammation and swelling
associated with allergic responses. Cytokines also play a role in regulating B
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cells to produce antibodies. In allergic diseases, it is the production of IgE
antibodies to the allergen which is responsible for the development and
persistence of allergic responses. The IgE antibodies bind to effector cells
(blood basophils and tissue mast cells) which store and release histamine and
other inflammatory activators upon exposure to allergens. The release of
histamine and other mediators results in allergic symptoms.
Allergic Diseases - Market Opportunity. Allergic symptoms include
rhinitis, asthma and skin eruptions. Allergies afflict substantial numbers of
people worldwide, including approximately 50 million or 20% of the U.S.
population. The Company estimates that 11 million allergy sufferers in the
United States each year seek a physician's care for allergic rhinitis and other
allergy symptoms. Most are treated symptomatically with either antihistamines,
decongestants, steroids, prescription or non-prescription cough and cold
medications, or a combination of these drugs. For many patients, these
medications cause side effects such as drowsiness, are inconvenient to take, and
fail to eliminate symptoms completely.
In the United States, two to three million people receive allergy
shots, called immunotherapy. Immunotherapy consists of a series of
desensitization injections which contain extracts of whole allergens and are
administered weekly or monthly for three to five years with the risk of
significant side-effects.
The Company believes that there is a strong desire on the part of
allergy sufferers and physicians for new treatments for allergic diseases.
Although immunotherapy treatments can be effective, relatively few patients,
generally only the most severely affected, are willing to undergo this therapy,
primarily because the shots must be given frequently over a prolonged period of
time. The lengthy treatment protocols have been developed in large part because
immunotherapy carries a risk that a severe allergic reaction, including
anaphylaxis, may occur if effective doses are given too rapidly. Conventional
drug treatments are palliative, must be taken indefinitely, and frequently fail
to offer adequate symptomatic relief. The Company's ALLERVAX(R) products will
initially target patients who are identified as candidates for immunotherapy,
but have chosen not to receive immunotherapy or who have terminated treatment.
Over half of the candidates for immunotherapy (approximately two to three
million people) discontinue or choose not to receive immunotherapy.
Although there are hundreds of substances in the environment to which
people are allergic, important allergens, including those in cat dander, house
dust mite and common pollens, are similar around the world. This similarity
enables the ALLERVAX(R) products to be developed for worldwide use.
ALLERVAX(R) Products. ImmuLogic is developing a new class of allergy
therapeutic products to be administered via subcutaneous injection which it
believes will provide substantial improvement in effectiveness, safety and
convenience over existing immunotherapy. The Company's approach has been to
identify the proteins that cause the allergic response and to define the
relevant T cell epitopes from each of these proteins. ImmuLogic's ALLERVAX(R)
products contain peptides which have been shown to be part of the recognition
triad in allergic humans. The Company believes that these peptides will down
regulate the immune response, thereby alleviating the symptoms associated with
specific allergies. The Company has shown in animal studies that it is possible,
through subcutaneous administration of T cell epitope-containing peptides
derived from an allergen, to down regulate T cell responses responsible for
initiating and maintaining the allergen-specific immune response. The Company
believes that clinical data demonstrate that the peptides are well tolerated and
are able to down regulate allergen-specific T cell activation in these patients.
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The Company, in cooperation with several university-based
collaborators, has cloned and sequenced relevant allergenic proteins of cat
dander, ragweed pollen, house dust mite, Japanese Cedar pollen, and certain
grass pollens. ImmuLogic has successfully identified the T cell epitopes of
these antigens which cause the immune response resulting in allergic symptoms.
ImmuLogic has chosen certain of these epitopes, each approximately 20 to 27
amino acids in length, to synthesize and combine to create the ALLERVAX(R)
products for each specific allergy.
Approximate Approximate
percentage of size of
Allergy population population
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Cat (1) ..................... 2% 5 million
Ragweed (1) ................. 10% 25 million
House dust mite (1) ......... 6% 15 million
Grasses (1) ................. 10% 25 million
Japanese Cedar pollen (2) ... 10% 13 million
- -----------------
(1) U.S. population. (Source: NHANES II National Health Survey Series 11,
No. 235)
(2) Japanese population.
Cat: Cat allergy is particularly troublesome because it can be
manifested as asthmatic as well as rhinitic symptoms, and because of the chronic
nature of exposure.
Ragweed: Ragweed allergy is a major allergy in North America. It can
cause debilitating symptoms during a season of six to eight weeks in the late
summer and early fall when the ragweed plant releases pollen into the air.
House dust mite: Dust mite allergy is an important worldwide allergy.
Dust mites are ubiquitous in homes, thriving in beds, draperies and carpets.
Allergic individuals are constantly exposed to this allergen. As with cat
allergy, this constant exposure may cause the allergic condition to worsen with
time. Dust mite allergies are associated with asthmatic symptoms.
Grasses: It is estimated that five species of grass are responsible for
most spring grass allergies. Work performed by ImmuLogic and others indicates
that there appears to be a high degree of similarity among the relevant
allergens in different grass species. For this reason, ImmuLogic believes that a
single therapy may be effective against allergy to several grasses.
Japanese Cedar pollen: Japanese Cedar pollen allergy is one of the most
troubling allergies in Japan, causing debilitating symptoms during a season of
approximately three months when this tree releases pollen.
For its cat allergy product, ALLERVAX(R) CAT, the Company has been
conducting human clinical studies since April 1992. The Company has completed a
number of Phase I and Phase II clinical studies. The Company has chosen the cat
room model as the appropriate clinical model in which to establish efficacy. Two
cat room trials have been completed, the first in March 1994. In this cat room
trial, the Company studied 92 cat allergic patients in a controlled dander
environment and compared their symptoms to placebo recipients before and after
treatment. The trial results demonstrated a statistically significant
improvement in patients' self-rated symptoms in the two high dose groups.
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Based on these results and additional information attained from other
clinical studies, the Company conducted a second cat room challenge trial
completed in 1996. The results of this 270 patient, multi-center,
placebo-controlled trial were reported in April 1996 and showed that patients in
the most intensive treatment group, those receiving four 750 microgram doses,
two times a week for two weeks, reported a statistically significant
improvement in total allergy symptom scores, the primary endpoint of the study
compared to placebo recipients.
Following the results of this cat room challenge trial the Company met
with the FDA to discuss future development plans for the product. As a result
of these discussions, the Company will be required to conduct additional
clinical trial or trials prior to filing a Product License Application for the
ALLERVAX(R) CAT product. These trials will be designed to maximize
pulmonary symptom improvement and will include objective measurements of
efficacy along with symptom ratings. Pending the results of further
discussions with FDA, the Company expects to initiate these trials in 1997.
For its ragweed allergy product, ALLERVAX(R) RAGWEED, the Company began
human clinical testing in 1994. The Company has completed both Phase I and Phase
II trials of the ALLERVAX (R) RAGWEED product and conducted in-season clinical
trials of the ALLERVAX(R) RAGWEED product during the 1995 and 1996 ragweed
allergy seasons (August-October). Nasal, rhinoconjunctival (nasal and eyes) and
total allergy symptoms were evaluated during the 1995 ragweed allergy season. In
February 1996, the Company reported positive results obtained in the 1995
trials. Data from the double-blind, placebo-controlled trials conducted in 960
patients at 27 centers in the United States and Canada, showed that the
ALLERVAX(R) RAGWEED product was well tolerated and decreased allergy symptoms
over the total allergy season.
The Company met with the FDA in mid 1996 to discuss plans for a 1996
ragweed season trial. The trial was designed with input from the FDA and was
initiated in July, prior to the start of the ragweed season. It was a
double-blind, placebo-controlled trial of 500 patients at 22 centers in the U.S.
Results from this trial were reported in January 1997. The results show that
eight doses of 250 micrograms of the ALLERVAX(R) RAGWEED administered prior to
the start of the ragweed season improved symptoms across the allergy season and
reduced the use of antihistamine and decongestant medications during the season.
Based on the results of this trial and pending the outcome of further
discussions with the FDA, the Company plans to conduct additional clinical
trials, including pivotal trial or trials, in 1997. Because ragweed allergies
are a seasonal condition, these trials must be commenced no later than late
summer 1997 when the ragweed season begins.
The Company has defined the composition of house dust mite, grass
pollen and Japanese Cedar pollen product candidates. These three candidates will
be advanced in development if and when a partner is identified.
ImmuLogic believes that it will be able to conduct the steps necessary
to initiate and conduct clinical studies with its product candidates, but there
can be no assurance that approvals will be obtained, or that the results of
future clinical trials in humans will be sufficient to establish the safety
and efficacy of any product candidates or will confirm or be consistent with
the results obtained in earlier trials.
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AUTOIMMUNE DISEASE PROGRAM
Overview. Autoimmune diseases result from the failure of the immune
system to correctly distinguish self from non-self, resulting in an immune
attack on the body's own tissue. Autoimmune diseases include, among others,
multiple sclerosis, in which immune responses cause destruction of the myelin
sheath covering the nerves of the central nervous system, resulting in paralysis
and debility, Type I (insulin-dependent) diabetes, in which the pancreatic
islets are destroyed, thus preventing the body from making a key hormone
required for regulation of blood sugar, and rheumatoid arthritis, in which
inflammation and subsequent deterioration of joints results in pain and lack of
mobility. These diseases are chronic, require lifelong treatment, and are often
progressive.
The autoimmune response begins by the coupling of an autoantigen or
foreign antigen which mimics an autoantigen to an antigen-presenting cell. In
autoimmune diseases, it is generally believed that a T cell epitope derived from
the autoantigen is presented by an HLA molecule. This HLA-epitope complex is
recognized by a receptor on an autoreactive T cell ("helper" T cell), forming
the recognition triad. The T cell becomes activated and produces cytokines which
cause T and B cell responses, resulting in inflammation. Activation of a
specific type of T cell (cytotoxic or "killer" T cell) can result in a direct
attack on cells bearing the autoantigenic epitope on their surface, leading to
destruction of specific tissues or organs (myelin in the case of multiple
sclerosis).
ImmuLogic's primary technological approach is to develop therapeutics
to prevent the initiation or progression of autoimmune diseases through down
regulation of autoantigen specific immune responses. ImmuLogic has initiated
proprietary programs aimed at the identification of the specific autoantigens
that cause multiple sclerosis and other autoimmune diseases. Characterization of
autoantigens makes it possible to identify T cell reactive epitopes of these
autoantigens and to develop therapies with the potential to modulate these
aberrant immune responses. This approach is similar in principle to that being
employed in the ALLERVAX(R) program. Data from the ALLERVAX(R) program, both
from preclinical and clinical research, provide support for a peptide-based
approach to treat autoimmune diseases.
Multiple Sclerosis. The Company's principal effort in the autoimmune
disease area is in developing a peptide-based therapeutic to treat multiple
sclerosis. It is estimated that at least 300,000 people in North America suffer
from multiple sclerosis. The Company has obtained pre-clinical data results
through a collaboration with Stanford University that support the concept of T
cell modulation in autoimmune diseases. In an animal model of multiple
sclerosis, experimental administration of peptides derived from autoantigens
not only prevented disease but also ameliorated the symptoms of the ongoing
disease and improved survival. In December 1996, ImmuLogic filed an IND
application to begin clinical trials of an injectable peptide immunotherapeutic
to treat multiple sclerosis. In connection with the reorganization of the
Company's development plans in March 1997 and the decision to focus most of the
Company's resources on the ALLERVAX(R) RAGWEED and ALLERVAX(R) CAT
therapeutics, the Company is reviewing plans for the efficient development of
its multiple sclerosis product.
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OTHER PROGRAMS
Substance Abuse Program. The Company is utilizing more traditional
vaccine approaches to develop therapeutic products to help motivated
individuals recover from substance dependence. The vaccine is expected to
induce specific antibodies which are capable of binding the substances in the
blood and minimizing the passage of the substances into the brain. The Company
published preclinical studies relating to its cocaine vaccine program in the
October 1996 issue of the journal Nature Medicine. The published data show that
antibodies against cocaine can significantly decrease drug-seeking behavior for
cocaine in an animal model of addiction. Also, the vaccine decreased the
passage of cocaine into the brain in animals receiving cocaine intravenously, a
route comparable to that used by human abusers of the drug. ImmuLogic received
a $700,000 Small Business Innovation Research grant from the National Institute
on Drug Abuse (NIDA) in August 1996 to fund the early development of this
vaccine.
Contact Hypersensitivity Program. Applying the same concept as in
allergies and autoimmune diseases, the Company has conducted research and
preclinical studies to develop a therapeutic to treat contact hypersensitivity
to poison ivy and poison oak.
Poison ivy and poison oak are widespread, resulting in various degrees
of morbidity. Such hypersensitivity, caused by a substance called urushiol found
in the poison ivy/oak plant, may compromise management of medical conditions and
disrupt productivity in the workplace. The effector cells responsible for
hypersensitivity to poison ivy and poison oak are urushiol-specific T cells. The
Company has focused on an immunotherapeutic approach to down-regulate
urushiol-specific T cells. To devote sufficient resources to other late stage
clinical development candidates, the Company has suspended development of the
poison ivy/poison oak sensitivity product and may make this product candidate
available for license to third-parties.
COLLABORATION AGREEMENTS
Hoechst Marion Roussel, Inc. (formerly Marion Merrell Dow Inc.). In
February 1992, the Company entered into a collaboration agreement with Hoechst
Marion Roussel, Inc. (HMR) (formerly Marion Merrell Dow, Inc.) relating to the
worldwide development and commercialization of the Company's family of five
injectable ALLERVAX(R) allergy therapeutic products (the Collaboration
Agreement). In March 1995, the Company and HMR signed a letter agreement for the
joint manufacture of ALLERVAX(R) products. On March 7, 1996, HMR notified the
Company that it was withdrawing from the Collaboration Agreement, effective
September 7, 1996. The Company and HMR worked together to effect an orderly
transition of responsibilities as the ALLERVAX(R) program shifted entirely to
the Company. On October 30, 1996, the Company received a payment in the amount
of $7,000,000, resolving all obligations relating to the program in a manner
agreeable to both the Company and HMR. In addition, HMR transferred ALLERVAX(R)
CEDAR and MITE peptide inventories to the Company to be used in future product
development activities. No value has been attributed to these peptides in the
Company's December 31, 1996 balance sheet as the Company is still considering
plans to develop these programs beyond the research stage. Under the terms of
the Collaboration Agreement, upon termination of the collaboration, the Company
regained all rights to the Company's ALLERVAX(R) allergy program including all
injectable and oral therapeutics and complimentary recombinant allergy
diagnostics.
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At the time of execution of the Collaboration Agreement, HMR made a
$7,000,000 payment to the Company and through December 31, 1996 had made license
and milestone payments of $17,000,000 and a final settlement payment of
$7,000,000 which is recorded as other revenues in the Company's 1996 statement
of operations. In addition, HMR purchased, in December 1991, 1,000,000 shares of
the Company's Common Stock for $18,000,000. As of March 22, 1996, HMR had sold
these shares on the open market.
Schering AG, Germany. In March 1995, the Company signed a collaboration
agreement with Schering AG for the joint development and commercialization of
the Company's peptide therapeutic to treat multiple sclerosis. Under this
agreement, the Company would have received up to $7,500,000 in research support
($4,375,000 of which has been received through December 31, 1996) and up to
$20,000,000 in milestone payments. The Company would pay one-third of the costs
associated with clinical development and would receive a substantial royalty on
net sales, if any. During 1996, the parties agreed in concept to changes in the
collaboration agreement under which milestone payments will be restructured to
payments made after successful product demonstration and annual research
support funding from Schering AG during 1997 will be reduced from $2,500,000 to
$1,250,000. This funding will be dedicated exclusively to the development of a
nonparenterally administered therapeutic product for multiple sclerosis. The
Company will fund all clinical development costs for the injectable therapeutic
product for multiple sclerosis. Schering AG has the right, at its election, to
participate in the development and commercialization of the injectable dosage
form. If Schering AG elects to participate, it will be required to reimburse
the Company for a significant portion of these development costs and will be
obligated to make certain milestone payments to the Company upon achievement
of development milestones. Schering AG has the right to terminate the
collaboration agreement upon 30 days prior written notice to the Company. See
Factors Which May Affect Future Results -- Relationship with Schering AG.
In addition, Schering Berlin Venture Corporation purchased 1,042,345
shares of the Company's Common Stock for $8,000,000 at the time of entering into
the agreement. In April 1996, ImmuLogic registered these shares under the
Securities Act of 1933 pursuant to the registration rights granted to Schering
Berlin Venture Corporation in the stock purchase agreement. Upon registration,
Schering Berlin Venture Corporation sold these shares on the open market.
COMPETITION
The pharmaceutical and biotechnology industries are characterized by
rapidly evolving technology and intense competition. Many companies, including
major pharmaceutical and chemical companies, as well as specialized
biotechnology companies, are engaged in activities similar to those of the
Company. Certain of these companies have substantially greater financial and
other resources, larger research and development staffs, and more extensive
marketing and manufacturing organizations than the Company. Many of these
companies have significant experience in preclinical testing, conducting human
clinical trials and other regulatory approval procedures. In addition, colleges,
universities, governmental agencies and other public and private research
organizations conduct research and may market commercial products on their own
or through joint ventures. These institutions are becoming more active in
seeking patent protection and licensing arrangements to collect royalties for
use of technology that they have developed. These institutions also compete with
the Company in recruiting and retaining highly-qualified scientific personnel.
There is substantial competition for the Company's products in the
allergy area. Many pharmaceutical companies have programs focused on enhancing
current therapies, such as non-sedating antihistamines, and on developing
products which affect immune system mediators further down the
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allergic cascade. Most of these approaches are aimed at relieving symptoms,
reducing side effects, and addressing the inconvenience to the patient. While
the Company believes that its ALLERVAX(R) products, if successfully developed,
would have therapeutic advantages over currently available treatments, there can
be no assurance that such advantages will materialize. The Company expects that
its ALLERVAX(R) products could encounter significant competition.
There are numerous pharmaceutical and biotechnology companies
developing therapies to treat autoimmune diseases. Many pharmaceutical companies
are working on products to treat multiple sclerosis. Current therapies improve
disease symptoms or delay the time between exacerbations. Other potential
therapeutics which target the underlying disease state include oral tolerance
therapy. Autoimmune diseases are a major target for many companies developing
therapeutics, and it is unclear which approaches will work best.
The Company believes that its ability to compete effectively will be
based on its ability to create and maintain scientifically advanced technology,
attract and retain scientific personnel with a broad range of expertise, obtain
patent protection or otherwise develop proprietary products or processes, obtain
required government approvals on a timely basis, select and pursue research and
development projects in areas in which significant market opportunities exist or
are likely to develop, manufacture its products on a cost-effective basis and
successfully market its products either alone or through third parties. Many of
the Company's competitors have substantially greater financial resources, more
clinical and regulatory experience, manufacturing facilities and sales and
marketing organizations than the Company.
PATENTS, TRADEMARKS, AND PROPRIETARY RIGHTS
The Company's strategy is to pursue aggressively a strong patent
portfolio. As of December 31, 1996, the Company had ownership rights to
approximately 60 patent applications in the United States. Of these
applications, 46 have corresponding applications on file with the World
Intellectual Property Organization (WIPO) or in one or more of the following
national or regional patent offices: Canada, Japan, Australia, Finland, Norway,
Mexico, South Africa, Portugal, New Zealand, Israel, South Korea, Taiwan and
Europe. Of these original patent applications: 8 have general application in
allergy and autoimmune disease including the technology licensed from the
Massachusetts Institute of Technology ("MIT") as described below; 37 are related
to the Company's allergy program; 8 are related to the Company's autoimmune
disease program; and the remaining 7 are related to other inventions. In
addition, the Company owns or has exclusive rights to 8 United States patents, 6
Australian patents, 1 Canadian patent, 1 European patent, 8 South African
patents and 1 New Zealand patent.
The Company has entered into a number of licensing arrangements
pursuant to which it has obtained exclusive rights to certain technologies. In
1987, ImmuLogic licensed a patent application from MIT claiming methods and
compositions for modulating the immune response of a cellular system. One United
States patent was issued in May, 1991, with claims related to methods for use of
compositions as vaccines and therapeutics. A United States patent application
covering other aspects of the original MIT patent application is pending. The
issued claims relate to potential approaches to vaccine therapy and are
unrelated to the Company's current research programs in allergy and autoimmune
diseases. Under its agreement with MIT, as amended, ImmuLogic is required to
make certain benchmark and royalty payments to MIT, including a $750,000 patent
allowance fee due in installments.
In addition, the Company has obtained exclusive licenses from the
University of North Carolina, TVW Telethon ICHR (Perth, Australia) and
University of Melbourne covering inventions and patent applications relating to
therapeutic uses of allergenic proteins and peptides of ragweed, house dust mite
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and grasses, respectively. Under these license agreements, the Company is
required to pay royalties based on sales of products derived from the licensed
inventions. The Company cannot at this time make a meaningful estimate of its
total future costs under the MIT license and its other licensing arrangements
because such costs depend on several factors, including the level of future
product sales.
ImmuLogic has filed or licensed patent applications on the protein
sequences for specific allergenic proteins and portions thereof, use of the
sequences, and the use of certain T cell epitopes from these sequences in
therapeutic compositions. This work was primarily based on extensive in vitro
studies using human samples, as well as in vivo animal work, to determine the
manner in which T cells respond to allergens and their epitopes.
Patent applications have also been filed on work conducted at ImmuLogic
relating to the multiple sclerosis, contact hypersensitivity and drugs of abuse
therapeutic programs. ImmuLogic has licensed patents pertaining to the drugs of
abuse therapeutic program for which the Company pays royalties.
There can be no assurance that patent applications owned by or licensed
to the Company will issue or that, if issued, they will provide the Company
with significant protection against competitors. In addition, the Company is
aware of one issued European patent and one pending European patent application
belonging to third parties which may adversely affect the Company's ability to
commercialize its multiple sclerosis therapeutic candidate. If the claims
contained in these patents are sustained, the Company may need to acquire
licenses to those technologies in order to commercialize its multiple sclerosis
therapeutic candidate in Europe. The cost or availability of licenses for these
technologies is unknown. There may be additional domestic and foreign patent
applications pending of which the Company is unaware at this time and which may
affect the Company's ability to commercialize any of its products if
corresponding patents are issued. There can be no assurance that ImmuLogic will
not need to acquire licenses under patents belonging to others for technology
potentially useful or necessary to ImmuLogic and, with the exception of the
Cohen-Boyer patents on recombinant DNA under which ImmuLogic has acquired a
non-exclusive license, the cost or availability of such potential licenses is
currently unknown. Moreover, there can be no assurance that any patents issued
to or licensed by the Company will not be infringed upon or designed around by
others.
Some of the Company's know-how and technology is not patentable. To
protect its rights, the Company requires all employees, consultants, advisors
and collaborators to enter into confidentiality agreements with ImmuLogic. There
can be no assurance, however, that these agreements will provide meaningful
protection for the Company's trade secrets, know-how or other proprietary
information in the event of any unauthorized use or disclosure. Further, in the
absence of patent protection, the Company's business may be adversely affected
by competitors who independently develop substantially equivalent technology.
GOVERNMENT REGULATION
The production and marketing of the Company's products and its research
and development activities are subject to regulation for safety and
effectiveness by numerous governmental authorities in the United States and
other countries. Pharmaceutical products intended for therapeutic or diagnostic
use in humans are governed by FDA regulations in the United States and by
comparable regulations in foreign countries. The process of completing clinical
testing and obtaining FDA approval for a new human drug or biological product
requires a number of years and the expenditure of substantial resources.
The steps required before a new human pharmaceutical product may be
marketed in the United States include (1) preclinical laboratory and animal
tests, (2) the submission to the FDA of an application for an IND, (3) adequate
and well-controlled human clinical trials to establish the safety and
effectiveness of the drug, (4) the submission of a Product License Application
(PLA) or a New Drug Application (NDA) to the FDA, and (5) FDA approval of the
PLA or NDA prior to any commercial sale or shipment of the drug.
Preclinical studies are commonly conducted in a laboratory in animal
models or on human samples in vitro. The results of these studies are submitted
to the FDA as part of the IND application
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prior to commencement of clinical testing in humans. Clinical trials are
characterized by three stages. Phase I trials are designed to provide
information about product safety and pharmacology. Phase II trials are designed
to provide additional information on safety, preliminary evidence of clinical
efficacy and definition of an effective dosing regimen. Phase III trials are
large-scale studies designed to provide statistical evidence of effectiveness
and safety in humans at the designated dose and dosing regimen. Upon completion
of clinical testing, which must demonstrate that the product is safe and
effective for a specific indication, a PLA or NDA may be filed with the FDA.
This application includes details of the manufacturing and testing processes,
preclinical studies and clinical trials. FDA approval of the application is
required before the applicant may market the new product.
Even after initial FDA approval has been obtained, further studies may
be required to provide additional data on safety or effectiveness. Also, the FDA
may require post-marketing and surveillance programs to monitor the drug's
effects.
In addition to obtaining FDA approval for each product, each
manufacturing establishment for new drugs and biologics must receive some form
of approval by the FDA. Under current rules for biologics, the facility must
obtain an approved Established License Application (ELA) from the FDA. The
facility must be inspected by the FDA, and the approval obtained, prior to
interstate marketing of any product. Among the conditions for such approval is
the requirement that the prospective manufacturer's quality control and
manufacturing procedures conform to the FDA's Good Manufacturing Practice (GMP)
regulations, which must be followed at all times. Manufacturing establishments,
both foreign and domestic, also are subject to inspections by or under the
authority of the FDA and by other federal, state or local agencies. The Company
currently has the capability to manufacturing GMP-grade materials at its
headquarters in Waltham, Massachusetts for the production of human clinical
trial materials and, in the event the Company receives the necessary regulatory
approvals to market the ALLERVAX(R) CAT product, for production of materials for
the product launch. Filling and packaging will be sub-contracted to a third
party who must comply with GMP's.
In addition to regulations enforced by the FDA, the Company also is
subject to regulation relating to occupational health and safety, environmental
protection, hazardous substance control, radioactive materials control and waste
management and disposal. Although the Company believes that its safety
procedures for handling and disposing of hazardous and radioactive materials
comply with federal, state and local regulations, the risk of accidental
contamination or injury from these materials cannot be eliminated.
For marketing outside the United States, the Company will be subject to
foreign regulatory requirements governing human clinical trials and marketing
approval for drugs and devices. The requirements relating to the conduct of
clinical trials, product licensing, pricing and reimbursement vary widely from
country to country, and may differ from requirements in the United States.
Results of clinical trials conducted outside the United States, if any, may have
bearing on the U.S.
regulatory processes.
There can be no assurance that FDA approval of any ELA, NDA or PLA
submitted by the Company will be obtained, or that if obtained, that any such
approval will be obtained in a timely manner.
FACTORS WHICH MAY AFFECT FUTURE RESULTS
Development Stage of the Company's Products. None of the Company's
products has completed human clinical testing. Although the Company's two lead
products, ALLERVAX(R) CAT and
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ALLERVAX(R) RAGWEED, are in clinical development, significant additional
development, laboratory and clinical testing will be required for all of the
Company's potential products prior to commercialization. In particular, the
Company will be required to conduct pivotal clinical trials for both its
ALLERVAX(R) CAT and ALLERVAX(R) RAGWEED products. Consequently, the Company
does not expect regulatory approval for commercial sales of any of its products
for several years. In addition, results of clinical trials conducted to date
relating to the ALLERVAX(R) CAT and ALLERVAX(R) RAGWEED products are not
necessarily indicative of the results that will be obtained in future clinical
trials and there can be no assurance that regulatory approval to commercialize
any product will be granted. Clinical trials may be terminated at any time for
many reasons including unanticipitated toxicity, significant adverse events or a
lack of efficacy.
Additional Financing Requirements and Access to Capital. ImmuLogic has
funded its operations to date primarily through the sale of equity securities,
sponsored research revenues, license payments and earnings on invested capital.
The Company has expended substantial funds for the research and development of
its products, and will in the future expend substantial funds for further
research and development, establishment of commercial-scale manufacturing
capabilities, and the marketing of its products. The Company will seek to obtain
additional funds for these purposes through equity or debt financings,
collaborative arrangements with corporate partners or from other sources.
However, such additional funds may not be available to the Company for such
purposes on acceptable terms, if at all. Insufficient funds could require the
Company to delay, scale back or eliminate certain of its research and
development programs or to license third parties to commercialize products or
technologies that the Company would otherwise develop or commercialize itself.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources".
Relationship with Schering AG. The Company has entered into a
collaboration agreement with Schering AG for the joint development and
commercialization of the Company's peptide therapeutic to treat multiple
sclerosis. All funding from Schering AG will be dedicated to the development of
a nonparenterally administered therapeutic product for multiple sclerosis. The
Company will fund all clinical costs for the development of the injectable
therapeutic product, including any clinical trials. Although Schering AG has
the right, at its election, to participate in the development and
commercialization of the injectable dosage form (in which event it would be
required to provide additional research funding and make milestone payments
after successful product demonstration relating to the injectable product),
there can be no assurance that Schering AG will elect to participate.
Furthermore, Schering AG has the right to terminate the collaboration agreement
upon 30 days prior written notice to the Company. There can be no assurance
that Schering AG will not terminate the collaboration agreement, or that it
will devote the resources necessary to develop and commercialize any products
resulting from the collaboration.
Product Liability. The testing, marketing and sale of human health care
products entail an inherent risk of allegations of product defects, and there
can be no assurance that substantial product liability claims will not be
asserted against the Company. To manage its potential liability, the Company
maintains clinical trial liability insurance coverage (although it does not
currently maintain product liability coverage) and seeks to include indemnity
provisions in its contracts with clinical investigators. These indemnities
generally do not protect the Company against certain of its own actions such as
those involving its negligence or misconduct. In some cases, the Company is
required to indemnify its investigators and others against its own actions. All
such indemnities are subject to negotiation and their terms and scope may vary.
The Company bears the risk that an indemnifying party may not have the
financial resources to fulfill its obligations. In addition, the Company could
be materially and adversely affected if it were required to pay damages or
incur defense expenses (a) in connection with an indemnity claim, or (b) beyond
the level of its insurance coverage. There is also no assurance that adequate
product liability insurance will be available at acceptable cost, if at all, if
and when the Company's products are commercialized.
Patents and Proprietary Rights. The patent position of biotechnology
and pharmaceutical firms is highly uncertain and involves complex legal and
factual questions. There is no consistent policy regarding the breadth of claims
allowed in biotechnology patents. Accordingly, there can be no assurance that
patent applications relating to the Company's products or technology will result
in patents being issued or that, if issued, the patents will afford protection
against competitors with similar technology. In addition, companies that obtain
patents claiming products or processes that are necessary for or useful to the
development of the Company's products can bring legal actions against the
Company claiming infringement. The Company may be required to obtain licenses
from others to develop, manufacture or market its products. There can be no
assurance that the Company will be able to obtain such licenses on commercially
reasonable terms, if at all, or that the patents underlying the licenses will be
valid and enforceable.
In addition, the Company is aware of one issued European patent and
one pending European patent application belonging to third parites which may
adversely affect the Company's ability to commercialize its multiple sclerosis
therapeutic candidate. If the claims contained in these patents are sustained,
the Company may need to acquire licenses to those technologies in order to
commercialize its multiple sclerosis therapeutic candidate in Europe. The cost
or availability of licenses for these technologies is unknown. There may be
additional domestic and foreign patent applications pending of which the
Company in unaware at this time and which may affect the Company's ability to
commercialize any of its products if corresponding patents are issued.
Some of the Company's know-how and technology is not patentable. To
protect its rights, the Company requires all employees, consultants, advisors
and collaborators to enter into confidentiality agreements. There can be no
assurance, however, that these agreements will provide meaningful protection for
the Company's trade secrets, know-how or other proprietary information in the
event of any unauthorized use or disclosure. Further, in the absence of patent
protection, the Company's business may be adversely affected by competitors who
independently develop substantially equivalent technology. See "Business -
Patents and Proprietary Rights".
Manufacturing and Marketing. The Company has not yet commercialized any
products and has limited manufacturing experience. The Company has built a GMP
grade manufacturing area in its Waltham, Massachusetts facility for the
production of ALLERVAX(R) products. To date, the Company has manufactured the
ALLERVAX(R) CAT product to be used in its clinical trials as well as its cocaine
vaccine, and the Company has relied upon third party contractors to manufacture
its ALLERVAX(R) RAGWEED and multiple sclerosis therapeutics for use in its
clinical trials. Filling and packing of the Company's products have been and
will in all likelihood continue to be conducted by third party
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contractors. The Company expects to utilize its manufacturing capacity, upon
receiving the necessary regulatory approval, for the product launches of
ALLERVAX(R) CAT and ALLERVAX(R) RAGWEED. No assurance can be given that the
Company will be able to manufacture the required clinical or commercial
quantities of the ALLERVAX(R) products. To the extent that the Company relies
upon contract manufacturers, there can be no assurance that such parties will
perform their obligations in a timely manner.
The Company currently has no direct sales or marketing capability. If
the Company elects to commercialize and market its products itself, the Company
will need to develop additional capabilities, and there can be no assurance that
the Company will be successful in developing such capabilities. If the Company
elects to commercialize any products with third parties, there can be no
assurance that the Company will be successful in reaching satisfactory
arrangements with such parties.
Competition. The biotechnology and pharmaceutical industries are
subject to rapid and significant technological change. Competitors of the
Company in the United States and abroad are numerous and include, among others,
major pharmaceutical and chemical companies, specialized biotechnology firms,
universities and other research institutions. There can be no assurance that the
Company's competitors will not succeed in developing technologies and products
that are more effective than any which are being developed by the Company or
which would render the Company's technology and products obsolete and
noncompetitive. Many of these competitors have substantially greater financial
and technical resources and production and marketing capabilities than the
Company. In addition, many of the Company's competitors have significantly
greater experience than the Company in preclinical testing and human clinical
trials or pharmaceutical products and obtaining the United States Food and Drug
Administration (FDA) and other regulatory approvals of products for use in
health care. Accordingly, the Company's competitors may succeed in obtaining FDA
approval for products more rapidly than the Company. If the Company commences
significant commercial sales of its products, it will also be competing with
respect to manufacturing efficiency and marketing capabilities, areas in which
it has limited or no experience. See "Business - Competition".
Attraction and Retention of Key Employees and Consultants. As the
Company continues its research, development and clinical testing and expands
into areas and activities requiring additional expertise such as production and
marketing, recruiting and retaining qualified scientific and other personnel
will be critical to the Company's success. There can be no assurance that the
Company will be able to attract and retain such personnel on acceptable terms.
The failure to attract and retain management personnel or to develop additional
expertise could adversely affect the Company's business.
Government Regulation. The production and marketing of the Company's
products and its ongoing research and development activities are subject to
regulation by numerous governmental authorities in the United States and other
countries. The rigorous preclinical and clinical testing requirements and
regulatory approval process can take a number of years and require the
expenditure of substantial resources. Delays in obtaining regulatory approvals
would adversely affect the marketing of products developed by the Company and
the Company's ability to receive product revenues or royalties. In addition, the
Company cannot predict the extent to which government regulations might have an
adverse effect on the production and marketing of the Company's products. See
"Business - Government Regulation".
Third-Party Reimbursement. In both the domestic and foreign markets,
sales of the Company's proposed products will depend in part on the availability
of reimbursement from third-party payers such as government health
administration authorities, private health insurers and other organizations.
Third-
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party payers are increasingly challenging the price and cost effectiveness of
medical products and services. Significant uncertainty exists as to the
reimbursement status of newly approved health care products. Legislation and
regulations affecting the pricing of pharmaceuticals may change before any of
the Company's proposed products are approved for marketing. Adoption of such
legislation could further limit reimbursement for medical products and services.
EMPLOYEES
As of December 31, 1996, the Company had 151 full-time employees, 23 of
whom hold Ph.D. degrees. The Company considers its relations with its employees
to be good. No Company employee is covered by a collective bargaining agreement.
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