ITEM 1. BUSINESS
Ascent Pediatrics, Inc. ("Ascent" or the "Company") is a drug
development and marketing company focused exclusively on the pediatric market.
The Company's strategy is to address unmet medical needs of children through the
development of differentiated, proprietary products based on approved compounds
with well known clinical profiles. The Company introduced its first two
products, Feverall(R) acetaminophen suppositories and Pediamist(R) nasal saline
spray, to the market in the second half of 1997 and began to copromote a third
product, Duricef(R) oral suspension, with Bristol-Myers Squibb U.S.
Pharmaceuticals Group ("Bristol-Myers Squibb") in March 1998. Ascent has four
other principal products in development. The Company markets its products in the
United States through a direct sales force consisting of over 60 representatives
focused exclusively on the pediatric market.
The pharmaceuticals that Ascent is developing are designed to improve
upon currently available products for common pediatric illnesses through the
application of the Company's drug delivery and reformulation technologies. The
Company is developing most of these products for sale on a prescription basis.
By developing products based on currently approved drugs, rather than new
chemical entities, Ascent believes that it can reduce regulatory and development
risks and shorten the product development cycle. In addition, Ascent believes
that market acceptance of its products will be enhanced by the familiarity of
pediatricians with the compounds that serve as the basis of these products.
The Company has four principal products in various stages of
development:
- Primsol(R) trimethoprim solution, a prescription antibiotic
for the treatment of ear infections in patients age six months
to 12 years, for which the Company filed a New Drug
Application ("NDA") in October 1996.
- Orapred syrup, a prednisolone-based liquid steroid for the
treatment of inflammation, including inflammation resulting
from respiratory conditions, for which the Company filed
Abbreviated New Drug Applications ("ANDAs") in July 1997.
- Feverall(R) controlled-release beads, an acetaminophen-based
analgesic and antipyretic for the treatment of pain and fever
in children, for which the Company filed an NDA with the FDA
in December 1997.
- Pediavent(R) albuterol controlled-release suspension, a
bronchodilator for the treatment of asthma that currently is
in Phase III clinical trials.
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ASCENT'S STRATEGY
Ascent's objective is to be a leader in the development and marketing
of improved and differentiated pediatric pharmaceuticals. The Company is
developing a broad product line of proprietary products that are based on
approved compounds with well known clinical profiles. Ascent seeks to improve
these compounds by reducing their dosing frequency, increasing their
palatability, improving the method of administration or developing them as
substitutes for products with less favorable side effect profiles, all with the
goal of increasing patient compliance, improving therapeutic results or reducing
side effects. Key elements of Ascent's strategy include:
Focus Exclusively on Pediatric Market. Ascent's business is focused
exclusively on developing pharmaceuticals for children and marketing these
products to pediatricians, pediatric nurses and other pediatric caregivers. The
United States market for prescription pharmaceutical products for children age
16 years and under was estimated to be approximately $3.7 billion in 1997. The
Company believes that this market has been underserved in comparison with the
adult pharmaceutical market in terms of both development of specially designed
products and targeted promotion and represents an attractive market opportunity.
Select Products Based on Market Needs. Ascent actively evaluates the
pediatric pharmaceutical industry on an ongoing basis to assess product usage
and to identify unmet medical needs of children, particularly for prescription
drugs for the most common pediatric illnesses. Ascent's program to identify
pediatric product opportunities includes conducting focus groups with
pediatricians, pediatric nurses and parents, consulting with the Company's
scientific and medical advisors and evaluating drug delivery and other technical
developments for their applicability to the field of pediatric pharmaceuticals.
Ascent uses this information to select compounds as product development
candidates that it believes may be improved through the application of its
technologies and reformulation expertise and then successfully commercialized.
Develop Proprietary Formulations of Approved Compounds. Ascent selects
as product candidates approved compounds that have well known clinical profiles
and are not covered by third party patents. By developing products based on
approved compounds rather than new chemical entities, the Company believes that
it can reduce regulatory and development risks and shorten the product
development cycle. In addition, Ascent believes that market acceptance of its
products will be enhanced by the familiarity of pediatricians with the drugs
that serve as the basis of these products.
Establish a Corporate Identity for Ascent in the Pediatric Market.
Ascent believes that an important part of fulfilling its mission of becoming a
leader in the development and marketing of pediatric pharmaceuticals is the
establishment of a corporate identity. Accordingly, even before the launch of
its first products, Ascent initiated a program to familiarize pediatricians with
the Ascent name. This program included a direct mail campaign and journal
advertising directed at office-based pediatricians. The Company believes that
establishing a corporate identity will distinguish it from its competitors and
accelerate market awareness and penetration of its products.
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Create a Specialty Pediatric Sales Force. Ascent markets its products
in the United States through a direct sales force focused exclusively on the
pediatric pharmaceutical market. Ascent established its domestic sales
organization at the time that it introduced its initial two products in the
second half of 1997. Because pediatricians and pediatric nurses are concentrated
in group practices in urban and suburban centers and advertising may be
disseminated through a limited number of specialty pediatric publications,
Ascent believes that it can reach much of the domestic pediatric market with a
moderately sized sales force and carefully controlled marketing expenditures.
Acquire or In-License Additional Pediatric Products. Ascent intends to
acquire or in-license from third parties pediatric pharmaceuticals that permit
it to extend its product lines and leverage its marketing and sales
capabilities. Ascent is particularly seeking prescription pharmaceuticals that
either already have features that increase patient compliance, improve
therapeutic efficacy or reduce side effects or that can be further developed by
Ascent to incorporate such features through the application of the Company's
technologies. Ascent believes that its exclusive focus on the pediatric market
may facilitate its efforts to acquire product rights from third parties. As an
example of this strategy, in July 1997, the Company purchased the Feverall line
of acetaminophen rectal suppository products from Upsher-Smith Laboratories,
Inc. ("Upsher-Smith").
Establish Copromotion or Other Marketing Arrangements for Third Party
Products. Ascent intends to leverage its marketing and sales capabilities,
including its domestic sales force, by entering into arrangements to promote
third party pharmaceutical products to pediatricians. As an example of this
strategy, in February 1998 Ascent entered into a copromotion agreement with
Bristol-Myers Squibb pursuant to which Ascent promotes Bristol-Myers Squibb's
Duricef oral suspension product to pediatricians in the United States.
Establish Collaborations for International and Adult Markets. Ascent
plans to enter into licensing and distribution arrangements for the marketing
and sale of its products in international markets to leverage the established
international marketing, sales and distribution capabilities of third party
collaborators. Ascent plans to enter into similar arrangements with respect to
any adult applications of its products.
Obtain Competitive Protections. Ascent seeks to protect many of its
products by applying for use or formulation patents or employing technologies
that are covered by patents or patent applications owned by or licensed to the
Company or its suppliers. In addition, some of Ascent's products will require
NDA approval. Competition for such products may be limited by clinical and
formulation development challenges and, in certain cases, three-year protection
against approval of a potential competitor's ANDA under the Drug Price
Competition and Patent Term Restoration Act of 1984 (the "Waxman-Hatch Act").
Ascent also seeks to keep confidential as a trade secret important know-how
involved in the formulation and production of certain of its products. Finally,
Ascent applies for trademark registrations to protect the brand recognition of
its products and, as of March 1, 1998, owned ten registered U.S. trademarks.
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ASCENT TECHNOLOGIES
Ascent is developing therapeutic pharmaceutical products that are
designed to be more appropriate for pediatric patients. Ascent has developed
internally or acquired rights through in-licensing or supply arrangements to a
range of technologies that it applies in its product development efforts. These
technologies include:
Taste masking. Ascent has developed technology to mask the
objectionable or unpleasant taste of various common ingredients used in
pediatric pharmaceuticals. The Company believes that a drug's taste is a
critical factor in pediatric patient compliance, particularly when frequent
dosing is required. The Company is applying its taste masking technology to
liquid dosage forms of product candidates because of the widespread use of
liquids in the pediatric pharmaceutical market. The Company believes that this
technology also may be applicable to solid dosage forms. Ascent's taste masking
technology is based on a complex three-tiered system that entails dissolving the
drug through the addition of a polymer, adding carefully selected debittering
agents to neutralize the taste and then adding pleasant flavors which are
compatible with the physical characteristics of the formulation. Ascent has
received a notice of allowance of claim from the United States Patent and
Trademark Office with respect to a patent application relating to the Company's
taste masking technology.
Controlled-release. Ascent has developed its own controlled-release
technology and has in-licensed controlled-release technology from a third party.
In general, these technologies involve coating the active drug with certain
approved substances in a manner that allows the substance to be released in the
patient at specific rates over time. The controlled-release manufacturing
procedures also provide certain taste masking characteristics to the product.
Ascent is applying these technologies to reduce the dosing frequency and, in
some cases, improve the taste of its products, in order to increase patient
compliance.
Bioadhesion. Ascent is using commercially available bioadhesives to
deliver topical drugs in a manner that is designed to enhance the efficacy of
the active ingredient. Bioadhesives are substances, such as polymers, which are
mixed with drugs in order to anchor the drug to the mucous layer of tissue. When
a drug is so anchored, the body's normal clearance mechanism is slowed, thereby
permitting the drug to have a more rapid and prolonged effect, which may reduce
dosing frequency.
Intranasal delivery device. Ascent has developed a product using a
metering device supplied by a third party that facilitates intranasal use in
pediatric patients by delivering a small volume of fluid under low pressure.
Because the metering device delivers 20% of the amount of solution delivered by
most high volume metered systems, there is less drainage of excess solution from
the nose. The Company believes that this device will increase product acceptance
among children and assure delivery of a consistent volume of spray.
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The following table lists the technologies described above, the
principal benefit being sought and the products or product candidates to which
Ascent is applying these technologies.
TECHNOLOGY ANTICIPATED BENEFIT PRODUCT
Taste masking Improved taste Primsol trimethoprim solution
Orapred syrup
Cough/Cold products
Just For Kids Vitamin Drops
Controlled-release Reduced dosing frequency Feverall controlled-release beads
Pediavent albuterol suspension
Bioadhesion Improved efficacy Cromolyn products
Intranasal delivery device Ease of administration Pediamist nasal saline spray
PRODUCTS AND PRODUCTS UNDER DEVELOPMENT
The following table lists the principal products developed, currently under
development, acquired or marketed by the Company. This table is qualified in its
entirety by reference to the more detailed descriptions of these products
elsewhere in this Annual Report.
PRODUCT INDICATION DEVELOPMENT STATUS(1) KEY FEATURES
Feverall(R) acetaminophen rectal Pain and fever Currently marketed Alternate form of administration
suppositories
Pediamist(R) nasal saline spray Nasal dryness Currently marketed Low pressure and volume spray;
reduced stinging
Duricef(R) oral suspension (2) Upper respiratory and Currently marketed Twice a day administration;
urinary tract infections pleasant tasting liquid
Primsol(R) trimethoprim solution Acute middle ear NDA filed (3) Reduced toxicity profile; pleasant
(50mg strength) infections tasting liquid
Orapred syrup Inflammation, ANDAs filed in July 1997 Significant taste improvement
including respiratory
problems
Feverall(R) controlled-release Pain and fever NDA filed Reduced dosing frequency;
beads improved taste
Pediavent(R) albuterol controlled- Asthma Phase III clinical trials Reduced dosing frequency;
release suspension improved taste
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(1) Phase III clinical trials. The product is administered to an expanded
patient population to (i) test the product for safety, (ii) evaluate
clinical effectiveness and (iii) provide an adequate basis for
labeling.
ANDA. Abbreviated New Drug Application to the FDA for marketing
approval relating to a new drug that is the same as a drug for which
the FDA has already approved an NDA and whose patent and marketing
exclusivity periods have expired.
NDA. New Drug Application to the FDA for marketing approval for a new
drug for which an ANDA is not permitted.
(2) Ascent is copromoting this product to pediatricians in the United
States pursuant to a copromotion agreement with Bristol-Myers Squibb.
See "License and Marketing Agreements."
(3) The FDA has approved the Company's NDA relating to a 25mg strength of
Primsol solution.
The Company has conducted a number of clinical trials of its product
candidates in children. The Company plans to continue to conduct such trials,
both in situations in which the trials are required by the FDA and in which the
Company believes that the clinical trial data will be of assistance in marketing
the product to pediatricians. The need to conduct clinical trials in children
under applicable FDA rules is determined on a product-by-product basis. In some
circumstances, the FDA may accept safety and efficacy data that are extrapolated
from adults in support of regulatory approval applications in children.
Because the Company's products are not based on new chemical entities,
Ascent believes that it can reduce regulatory and development risks and shorten
the product development cycle. As to certain product candidates, the Company
expects to be permitted to file an ANDA instead of an NDA. An ANDA is less
complex than an NDA, and, in some circumstances, only limited clinical trial
data or no clinical trial data are required for the application. For products
that contain active ingredients that have received FDA approval, after
expiration of any applicable patents and period of statutory protection under
the Waxman-Hatch Act, Ascent may use data from the NDA of the "pioneer" drug
concerning the safety and efficacy of the drug substance in support of its NDA
or ANDA. Finally, many nonprescription products do not require FDA pre-marketing
approval if the product is within an applicable FDA Over-the-Counter Drug
Monograph ("OTC Monograph"). See "Government Regulation."
Feverall(R) Acetaminophen Rectal Suppositories
In July 1997, Ascent began marketing the Feverall line of over-the-counter
acetaminophen rectal suppositories for the treatment of pain and fever. Ascent
acquired this product line from Upsher-Smith in July 1997. The Feverall product
line was originally introduced by Upsher-Smith in 1989 and consists of four
formulations, 80mg, 160mg, 325mg and 650mg. Acetaminophen rectal suppositories
are used in patients, primarily children or adolescents, who cannot take
acetaminophen orally as a result of regurgitation caused by influenza or an
inability to tolerate the taste of currently available liquid forms of
acetaminophen. The Feverall suppositories product line is covered by an
effective NDA.
IMS America, Ltd., a marketing research firm ("IMS"), estimates that the
1995 United States pediatric market for acetaminophen rectal suppositories was
approximately $5,800,000. Other acetaminophen rectal suppositories currently on
the market in the United
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States include "Acephen," which is marketed by G&W Laboratories, and "Neopap,"
which is marketed by PolyMedica Industries, Inc., as well as certain generic
brands. The Company had net product revenues in 1997 from sales of its Feverall
product line of $2,023,000.
Ascent acquired this product line because this dosage form of acetaminophen
permits administration to children who would otherwise be unable to take the
drug. In recent years, Upsher-Smith promoted this product line primarily through
the use of advertising and telemarketing programs during the fall of each year.
Ascent believes that it is possible to increase market penetration for this
product line through personal sales calls to pediatricians and pediatric nurses,
although there can be no assurance that Ascent will be successful in doing so.
In addition, under the acquisition agreement, Ascent acquired the Feverall
trademark to use in connection with other acetaminophen products that it is
currently developing, such as its acetaminophen controlled-release beads
products, which the Company intends to market as Feverall controlled-release
beads. Ascent believes that the name recognition of this trademark will be
useful in marketing these other acetaminophen products and in enhancing the
Company's profile in the pediatric market generally.
The purchase price for this product line and certain related assets,
including the Feverall trademark and certain inventory, was $11,905,000,
including related acquisition costs. Upsher-Smith has agreed to supply the
Company with its requirements of Feverall acetaminophen rectal suppositories,
and the Company has agreed to purchase from Upsher-Smith all amounts of such
product as it may require, for a period of five years.
Pediamist(R) Nasal Saline Spray
Ascent began marketing Pediamist nasal saline spray, an over-the-counter
product to relieve nasal dryness associated with low humidity, in October 1997.
This product is administered by a metering device that the Company believes is
particularly appropriate for use by children. No FDA pre-marketing approval was
required for Ascent to market this product in the United States.
Pediatricians frequently recommend nasal saline sprays instead of
decongestant sprays because decongestant sprays contain vasoconstrictors that
can cause "rebound," a phenomenon in which nasal congestion resulting from the
use of the drug is more intense than the original symptoms. Nasal saline sprays
are often an effective alternative therapy for this indication and are widely
recognized as safe.
There are a number of nasal saline spray products that are currently
available for nasal dryness associated with low humidity. All of these products
are designed primarily for use by adults and deliver a high volume of spray at
high pressure through a device sized for adult nasal openings. Moreover, certain
of these products are formulated with materials that are known to cause local
stinging.
Pediamist nasal spray is administered by a metering device specifically
designed to deliver saline solution in a low volume fine mist under low
pressure. This device includes a special actuator that determines the volume and
pressure of the saline to be delivered. Because the Pediamist nasal spray device
delivers approximately 20% of the amount of
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saline solution delivered by most high volume metered systems, there is less
drainage of excess saline from the nose. The Company believes that this device
will increase product acceptability among children and assure delivery of a
consistent volume of spray. Ascent has formulated Pediamist nasal spray with
glycerine to reduce stinging.
Duricef(R) Oral Suspension
In March 1998, Ascent began marketing Duricef oral suspension to
pediatricians in the United States pursuant to a four-year copromotion agreement
with Bristol-Myers Squibb. See "License and Marketing Agreements." Duricef oral
suspension is a prescription cephalosporin antibiotic for the treatment of
urinary tract infections, upper respiratory infections, including specifically
pharyngitis/tonsillitis, and infections of the skin and skin structure . The
Company believes that Duricef oral suspension's dosing regimen (twice a day),
pleasant taste and established reputation make it an attractive product for
pediatricians to prescribe. Duricef oral suspension is covered by an effective
NDA.
Duricef oral suspension is one of a number of cephalosporin oral suspension
products indicated for the treatment of urinary tract infections, upper
respiratory infections and infections of the skin and skin structure.
Scott-Levin estimates that sales of cephalosporin oral suspension products for
all indications in the United States were approximately $522 million in 1997.
Scott-Levin estimates that sales of Duricef were approximately $20.5 million in
1997.
The Company agreed to copromote Duricef oral suspension as part of its
strategy to leverage its marketing and sales capabilities, including its
domestic sales force. In recent years, Bristol-Myers Squibb has promoted Duricef
oral suspension to a range of medical specialties. The Company believes that it
can increase the market penetration of Duricef oral suspension in the pediatric
market through marketing activities directed exclusively at the pediatric
market. Moreover the Company believes that Duricef oral suspension strengthens
its product line and complements Primsol, which is being developed for the
treatment of acute otitis media ("AOM"), or middle ear infection.
Primsol(R) Trimethoprim Solution
Ascent has developed Primsol trimethoprim solution, containing the
antibiotic trimethoprim, as a prescription drug for the treatment of AOM in
children age six months to 12 years. Trimethoprim for the treatment of AOM in
children is currently only available in combination with the sulfa compound
sulfamethoxazole. The sulfa component of this combination therapy is associated
with allergic reactions that may be severe, or even fatal. In clinical trials
conducted by the Company, Primsol solution, which does not contain this sulfa
component, was shown to be as effective as the combination therapy for the
treatment of AOM in children, but with a more favorable side effect profile.
Because of this improved side effect profile, the Company believes that
pediatricians will be more likely to prescribe an antibiotic comprised only of
trimethoprim for the treatment of AOM in children than they historically have
been to prescribe the combination therapy.
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In 1996, Ascent filed two NDA's with the FDA covering the 25mg and 50mg
strengths of Primsol solution, respectively. In June 1997, the FDA approved the
Company's NDA for its 25mg strength of Primsol solution. The Company's NDA for
its 50mg strength of Primsol solution is still pending. In February 1998, the
Company received a letter from the FDA citing certain deficiencies in the
Company's NDA for the 50mg strength of Primsol. The Company is currently in the
process of preparing a response to this letter. Ascent plans to introduce the
50mg strength as the Primsol solution product that it brings to market. However,
if approval of its NDA for the 50mg strength is significantly delayed, the
Company may consider introducing its 25mg strength, which is less concentrated
and requires less than optimal dosing volumes, as the Primsol solution product
that it brings to market.
Acute infections are the most frequent illness treated by pediatricians.
AOM is the most common of these infections. By three years of age, approximately
80% of children in the United States have developed at least one ear infection.
In 1996, there were approximately 26,000,000 pediatric patient visits to doctors
in the United States for the treatment of AOM.
There are a number of currently available antibiotics for the treatment of
AOM in children. Most pediatricians initially prescribe amoxicillin, a form of
penicillin, unless the patient is allergic to the drug or the drug has
previously failed to provide a therapeutic effect in the patient. In such cases,
the pediatrician selects a second line antibiotic from a series of alternative
choices, including the trimethoprim/sulfa compound combination therapy (sold
under brand names such as Bactrim and Septra), cephalosporins (such as Ceclor),
a combination of amoxicillin and clavulanic acid (such as Augmentin) or newer
macrolides (such as Zithromax or Biaxin).
Scott-Levin estimates that the United States market for liquid antibiotics
for the treatment of AOM was approximately $485,800,000 in 1997. Of such amount,
approximately $55,400,000 was from the sale of amoxicillin (reflecting
approximately 11,000,000 prescriptions), approximately $16,100,000 was from the
sale of trimethoprim/sulfa compound combination products (reflecting
approximately 2,900,000 prescriptions) and approximately $414,300,000 was from
the sale of other liquid antibiotics (reflecting approximately 11,900,000
prescriptions), including cephalosporins and macrolides. The Company believes
that almost all liquid antibiotics are taken by children.
Ascent has developed Primsol solution as an antibiotic containing
trimethoprim only, thereby eliminating the potential for an allergic response to
the sulfa component of the combination product. Ascent has sought to facilitate
administration of this product by formulating it as an oral solution. Because
Primsol solution does not need to be shaken prior to administration, it does not
suffer from problems associated with suspensions, such as dose inconsistency.
The Company plans to market Primsol solution as a second line of therapy to
amoxicillin and as an alternative to trimethoprim combination products such as
Bactrim and Septra. Ascent believes that Primsol solution also may be an
attractive alternative to other antibiotics, such as cephalosporins and newer
macrolides, for pediatricians and managed care providers because the Company
plans to offer Primsol solution at a price that is significantly lower than the
current market prices of these other antibiotics.
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In December 1995, Ascent completed multicenter Phase III clinical trials of
Primsol solution for the treatment of AOM and uncomplicated urinary tract
infection ("UTI") in children age six months to twelve years. These clinical
trials, which included over 500 children, compared the 25mg strength of Primsol
solution with a commercially available trimethoprim/sulfamethoxazole combination
therapy. Primsol solution proved to be as clinically effective as the
combination therapy in alleviating the signs and symptoms commonly associated
with AOM or uncomplicated UTI. No statistically significant differences were
noted in response rates of valuable pediatric patients receiving either Primsol
solution or the combination therapy, and the bacteriologic cure rates were
similar for both types of therapies. However, there were statistically
significantly fewer treatment related side effects reported with Primsol
solution than with the combination therapy, particularly a lower incidence of
skin rash.
The FDA has granted Ascent three years of protection under the Waxman-Hatch
Act ending in June 2000 against the approval of a competitor's ANDA for a
generic version of the 25mg strength of Primsol solution for the treatment of
AOM in children age six months to twelve years.
Orapred Syrup
Ascent is developing Orapred syrup as a prescription steroid for the
treatment of inflammation associated with a variety of diseases, principally
those of the respiratory system, such as asthma and bronchitis. Currently
available liquid steroid products for the treatment of inflammation have a very
unpleasant taste. As a result, compliance problems frequently result, even
though these products are used for the treatment of serious and, in
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some cases, life threatening diseases. Ascent has applied its taste masking
technology to develop a steroid product with a pleasant taste. Ascent filed
ANDAs for two strengths of this product in July 1997.
Scott-Levin estimates that in 1997 approximately 3,200,000 prescriptions
for liquid steroids were written in the United States, of which approximately
59% were written by pediatricians, and that the 1997 United States pediatric
market for liquid steroids was approximately $26,100,000. The Company believes
that almost all liquid steroids are taken by children.
A number of currently available steroids are widely used in pediatrics
because of the anti-inflammatory properties of these drugs. Orapred syrup
contains the active ingredient prednisolone. Physicians generally prefer
prednisolone and prednisone to other products due to the greater margin of
safety of these two drugs and generally prefer prednisolone to prednisone
because prednisolone is more reliable, particularly if the patient suffers from
certain liver disorders.
Currently available liquid steroid brands are available in 5mg/5ml and
15mg/5ml strengths. Ascent is developing Orapred syrup in both of these
strengths. Ascent has conducted a pediatric study for marketing purposes to
compare the taste of its product with that of a currently-marketed prednisolone
sodium phosphate liquid product. In the study testing the 15mg/5ml strength
against an existing product with the same strength, 27 of the 35 participating
children preferred the taste of the Ascent product.
Feverall(R) Controlled-Release Beads
Ascent is developing Feverall controlled-release beads as an
over-the-counter acetaminophen product for the treatment of pain and fever in
children. The Company has designed this product to permit dosing every eight
hours, rather than the four hours required by currently available products.
Ascent filed an NDA for this product in December 1997.
FIND/SVP estimates that sales of pediatric forms of pain/fever medications
in the United States approximate $300,000,000 per annum. There are a number of
currently available acetaminophen products for the treatment of pain and fever
in children. Most of these products are in the form of a liquid or chewable
tablet. The product with the largest market share in the United States is
Tylenol liquid for children. None of the pediatric products currently on the
market is available in a controlled-release formulation. Accordingly, these
products are absorbed quickly from the gastrointestinal tract into the blood and
quickly cleared from the body, necessitating dosing every four hours. As a
result, if administered at bedtime, the patient needs an additional dose before
morning. If administered during the day, parents often must rely on school
nurses or day care providers to administer the medication. In addition, under
the applicable FDA OTC Monograph, only five doses of acetaminophen may be given
in each 24-hour period. Therefore, if the medication requires four hour dosing,
treatment may only be given for 20 hours in each 24-hour period.
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Ascent is developing Feverall beads with a proprietary controlled-release
technology that releases the acetaminophen at specific rates over time in order
to provide a therapeutic effect (reduction in fever and pain) for eight hours.
Ascent believes that dosing every eight hours may significantly increase
compliance and permit therapeutic coverage for the full 24-hours of each day. To
facilitate administration, Ascent has formulated this product in the form of
small beads that either can be sprinkled on a food that is appealing to the
child, such as applesauce, or delivered in a liquid, such as water.
Ascent has completed three Phase I definitive pharmacokinetic trials
comparing Feverall beads to Tylenol extended relief caplets and immediate
release Tylenol tablets. These trials involved 63 healthy adults. In these
trials, Feverall beads exhibited equivalent bioavailability to the Tylenol
product to which they were compared.
In December 1996, Ascent completed a Phase III clinical trial that
evaluated Feverall beads for the reduction of dental pain. This study was
conducted in 125 adults and was double blinded, with the control group receiving
an equivalent amount of Tylenol extended relief caplets. A single dose was
administered to each patient over an eight-hour period. The data from this study
indicated that Feverall beads provided consistent pain relief over the full
eight-hour period that was comparable to the pain relief provided over a shorter
period of time by Tylenol extended relief caplets.
A second Phase III clinical trial of this product for the treatment of
fever in children commenced in June 1996 and was completed in February 1997.
This study involved 100 febrile children between the ages of two and 11 years
old. In this second Phase III clinical trial, Feverall beads were compared on a
double blinded basis with an immediate release presentation of acetaminophen for
efficacy (reduction in fever) and safety. The data from this study indicated
that Feverall beads provided fever control over an eight hour period that was
comparable to the fever control provided by the immediate release presentation
of acetaminophen and that during the fourth to sixth hours of treatment the
fever control provided by the Feverall beads was more effective than the fever
control provided by the immediate release presentation.
The Company's NDA will need to be approved by the FDA for Ascent to market
this product in the United States. Ascent expects to submit a request to the FDA
for three years of protection under the Waxman-Hatch Act against the approval of
a competitor's ANDA for the treatment of pain and fever in children under 12
years of age.
Pediavent(R) Albuterol Controlled-Release Suspension
Ascent is developing Pediavent albuterol controlled-release suspension as a
prescription product for the treatment of asthma. Ascent is formulating the
product in a controlled-release suspension to permit twice-a-day administration
and to mask the normal bitterness of albuterol. Ascent is conducting Phase III
clinical trials of this product.
Asthma is the leading cause of pediatric hospital admissions. It is a
debilitating disease that causes swollen and inflamed airways that are prone to
constrict suddenly and violently. Asthmatic attacks can be life-threatening and,
in some cases, fatal.
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A common treatment for asthma is the administration of a beta agonist
bronchodilator, of which albuterol is the most widely prescribed. Scott-Levin
estimates that the 1997 U.S. pediatric market for all forms of beta agonists was
approximately $191,100,000, with oral liquid forms comprising approximately
12.7% of this market ($24,250,000). Albuterol is available in various dosage
forms, including tablets and liquids, which are generally used for chronic
administration, and inhalers, which are generally used for acute incidents.
Tablet formulations are typically not used by young children, as they are
difficult to swallow and must be administered every four or eight hours. The
only currently available controlled-release tablet (Volmax) is not approved for
use in patients under six years of age. Liquid albuterol formulations have an
unpleasant taste and must be dosed three to four times per day.
Ascent is developing its albuterol product as a suspension in the form of
granules which contain the drug in a coating. The coating allows the albuterol
to be released at a specific controlled rate and masks the normal bitterness of
the drug. To enhance patient compliance, the Company is designing this product
for twice-a-day administration.
In 1995, Ascent conducted Phase I open-label, single dose pharmacokinetic
studies of this product in Europe comparing this product's bioavailability
profile with that of Volmax. These studies involved 12 healthy adult subjects at
one site. The results of this study indicated that the pharmacokinetics of two
of the formulations being developed by Ascent were indistinguishable from Volmax
in terms of bioavailability. In February 1997, Ascent conducted a Phase I
clinical trial in the United States involving 12 healthy adults in February 1997
which confirmed the results of the European bioavailability study. Following
completion of the second study, in the second half of 1997, the Company
commenced Phase III clinical trials of the product to evaluate control of asthma
symptoms, lung efficiency and safety of Pediavent in children with asthma. This
study will involve over 60 asthmatic children. The Company expects that this
study will be completed in the first half of 1998.
An NDA will need to be approved by the FDA for Ascent to market this
product in the United States. Ascent plans to submit a request to the FDA for
three years of protection under the Waxman-Hatch Act against the approval of a
competitor's ANDA for the treatment of asthma in children under 12 years of age
which is based on the Company's clinical trial results.
Other Programs
In addition to the products and product development programs described
above, the Company also is engaged in the development of a number of other
pediatric pharmaceutical products. These programs include the following:
Cough/Cold and Other OTC Products. Ascent is developing a line of improved
flavor over-the-counter cough/cold products. Many of the over-the-counter
products for the treatment of coughs and congestion due to colds and influenza
contain the active ingredients guaifenisen, dextromethorphan or the decongestant
pseudoephedrine, which have a bitter taste.
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Ascent is applying its taste masking technology to the development of a
line of cough/cold products containing guaifenisen, dextromethorphan and
pseudoephedrine. Ascent already has completed the development of a guaifenisen
cough syrup. In a taste study involving 81 children age three to six years
comparing Ascent's cough syrup containing guaifenisen to Robitussin, a leading
liquid guaifenisen product, the participants showed a statistically significant
preference for Ascent's product.
The Company believes that it is preferable to introduce its cough/cold
products to the market as an integrated product line. Accordingly, Ascent does
not plan to introduce its guaifenisen cough syrup until it has completed
development of additional products, which the Company estimates will occur no
sooner than late 1999. Because these products are being formulated within the
applicable FDA over-the-counter monographs, Ascent expects that they will not
require FDA approval prior to marketing.
Cromolyn Products. Ascent is developing two cromolyn products for the
treatment of conditions that have an allergic element: cromolyn sodium cream as
a prescription drug for symptoms associated with moderate to severe contact
dermatitis caused by exposure to poison ivy or oak, insect bites and bee stings
and other allergic and non-allergic reactions; and a cromolyn sodium
controlled-release nasal spray as a prescription product for the prevention of
allergic rhinitis associated with conditions such as hay fever. An NDA will need
to be approved by the FDA for Ascent to market either of these products in the
United States.
Just For Kids Vitamin Drops. Ascent is developing Just For Kids Vitamin
Drops as an over-the-counter nutritional supplement for infants. The Company is
applying its taste masking technology to develop this product as a liquid
vitamin with a pleasant taste.
PRODUCT DEVELOPMENT
Ascent actively evaluates the pediatric pharmaceutical industry on an
ongoing basis to assess product usage and to identify unmet medical needs of
children, particularly for prescription drugs for the most common pediatric
illnesses. Ascent's program to identify pediatric product opportunities includes
conducting focus groups with pediatricians, pediatric nurses and parents,
consulting with the Company's scientific and medical advisors and evaluating
drug delivery and other technical developments for their applicability to the
field of pediatric pharmaceuticals. Ascent uses this information to select
compounds as product development candidates that it believes may be improved
through the application of its technologies and reformulation expertise and then
successfully commercialized. Ascent reviews the anticipated development
difficulty, time frame and cost, required technologies,
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applicable regulatory requirements, competitive environment and anticipated
marketing and sales approach in evaluating each development candidate.
Ascent selects as product candidates approved compounds that have well
known clinical profiles and are not covered by third party patents and that it
believes may be improved through the application of the Company's drug delivery
and reformulation technologies. Ascent then seeks to improve these products
through optimized formulations or new delivery technologies with the goal of
differentiating them from competitive products on the market. By developing
products based on approved compounds rather than new chemical entities, the
Company believes that it can reduce regulatory and development risks and shorten
the product development cycle.
Ascent identifies third party manufacturers or academic institutions that
have the required analytical expertise, technology, manufacturing capabilities
and personnel to perform much of the design and formulation work for the
Company's products. To expedite the regulatory process, Ascent seeks to enter
into arrangements with product manufacturers that extend from pilot production
for product stability testing through clinical trials and ultimately to
commercial production. Ascent works closely with these third parties in
connection with product design and formulation and monitors manufacturing
activities, including compliance with Good Manufacturing Practice ("GMP") and
Good Laboratory Practice ("GLP") rules of the FDA.
Ascent contracts with clinical research organizations for the conduct of
the Company's clinical trials. Ascent conducts clinical trials of many of its
products in children not only to comply with FDA requirements but also because
the Company believes that pediatricians will be more willing to prescribe
products for which specific efficacy and safety information is available with
respect to the effect of the drug on pediatric patients. To facilitate enrolling
children in the Company's clinical trials, Ascent has established a network of
relationships with influential pediatricians, industry associations and
pediatric research organizations specializing in conducting clinical trials in
children.
SALES AND MARKETING
Ascent established its domestic sales organization, coincident with the
introduction of its initial two products, Feverall acetaminophen rectal
suppositories and Pediamist nasal saline spray, to the market during the second
half of 1997. As of March 13, 1998, Ascent's sales force consisted of six
regional sales managers, 48 full-time sales representatives and 15 flex-time (or
part-time) sales representatives.
Ascent believes that its exclusive focus on the development and marketing
of pediatric pharmaceutical products meaningfully differentiates the Company
from other pharmaceutical companies in the pediatric medical community. Even
before the launch of its first products, Ascent initiated a program to
familiarize pediatricians with Ascent's corporate identity. This program has
included a direct mail campaign and journal advertising directed at private
pediatricians. The primary focus of the Company's marketing and sales efforts
are pediatricians and pediatric nurses, who are responsible for most
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prescriptions written for children in the United States and play a central role
in recommending over-the-counter medications for children.
Ascent has chosen to establish its own domestic sales force instead of
using third party sales organizations. The Company believes that marketing and
sales initiatives can be more efficiently and effectively implemented through a
direct sales force. Because pediatricians and pediatric nurses are concentrated
in group practices in urban and suburban centers and advertising may be
disseminated through a limited number of specialty pediatric publications,
Ascent believes that it can reach much of the domestic pediatric market with a
moderately sized sales force and carefully controlled marketing expenditures.
Ascent plans to expand this sales force in the future as it introduces
additional products.
The Company is using its sales force to promote products to high
prescribing pediatricians, influential pediatricians and nurses in
pediatricians' offices through personal sales calls by its sales representatives
and attendance by its sales representatives at industry conferences, seminars
and other meetings. Ascent plans to supplement these activities with a
telemarketing program designed to reach pediatricians and pediatric nurses in
geographic areas beyond the coverage of the Company's sales force and
pediatricians and pediatric nurses who are not targeted for one-on-one visits.
Ascent expects to advertise its products through direct mail and advertisements
in speciality pediatric journals.
Because more than 60% of patients are covered by a managed care program,
such as a health maintenance organization, preferred provider organization or
state Medicaid program, Ascent also is promoting its products directly to
managed care providers with the goal of obtaining inclusion of these products on
the providers' formularies.
Ascent is seeking to leverage its marketing and sales capabilities by
entering into arrangements to promote third party pharmaceutical products to
pediatricians. As an example of this strategy, Ascent has entered into a
four-year copromotion agreement with Bristol-Myers Squibb pursuant to which
Ascent is promoting Bristol-Myers Squibb's Duricef oral suspension product, a
cephalosporin antibiotic for the treatment of upper respiratory and urinary
tract infections, to pediatricians in the United States. The Company plans to
continue to evaluate additional third-party products for copromotion.
Ascent plans to enter into licensing and distribution arrangements for the
marketing and sale of its products in international markets to leverage the
established international marketing, sales and distribution capabilities of
third party collaborators. Ascent plans to enter into similar arrangements with
respect to any adult applications of its products.
MANUFACTURING AND DISTRIBUTION
The Company relies upon third parties to manufacture the Company's products
for preclinical tests, clinical trials and commercial purposes. Accordingly, the
Company does not have any manufacturing facilities and has not sought to employ
direct manufacturing personnel. The components of the Company's products
generally are available from a variety of commercial suppliers and are
inexpensive. The production of most of these
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products involves known manufacturing techniques, although the Company has
developed certain proprietary manufacturing technologies that it seeks to
protect as trade secrets.
Ascent believes that there are a number of third party manufacturers, both
in the United States and abroad, with the capability of manufacturing products
for the Company. The Company intends to establish supply agreements with
manufacturers that comply with the FDA's GMP requirements and other regulatory
standards. Certain of the Company's supply arrangements require that Ascent buy
all of the Company's requirements of a particular product exclusively from the
other party to the contract. Moreover, FDA regulations provide that a
manufacturer cannot supply a product to the Company and the Company cannot sell
the product unless the manufacturer is qualified (i.e., demonstrates to the FDA
that it can manufacture the product in accordance with applicable regulatory
standards). For many of its products, Ascent has qualified only one supplier,
even though the contractual arrangement with the supplier may permit Ascent to
qualify an alternative manufacturer. Any interruption in supply from any of its
manufacturers or the inability of these manufacturers to manufacture the
Company's products in accordance with GMP could have a material adverse effect
on the Company's business, financial condition and operating results.
To date, the Company has entered into several agreements with third parties
for the manufacture of the Company's products. In particular, the Company is a
party to a supply agreement with Lyne Laboratories, Inc. ("Lyne"), under which
Lyne has agreed to manufacture Primsol trimethoprim solution for the Company,
and the Company has agreed to purchase all amounts of such product as it may
require for sale in the United States from Lyne in accordance with an agreed
upon price schedule. The agreement may be terminated by either party on three
months' notice any time after October 17, 2004. See "License and Marketing
Agreements" for a description of the Company's agreement with Recordati S.A.
Chemical and Pharmaceutical Company ("Recordati") relating to the manufacture of
Pediavent albuterol controlled-release suspension and "Products and Products
under Development -- Feverall Acetaminophen Suppositories" for a description of
the Company's arrangements with Upsher-Smith for the manufacture of Feverall
acetaminophen rectal suppositories.
In the future, the Company may, if it becomes economically attractive to do
so, establish its own manufacturing facilities. In order for the Company to
establish a manufacturing facility, the Company would require substantial
additional funds and be required to hire and retain significant additional
personnel and comply with the extensive GMP regulations of the FDA.
Ascent distributes its products through a third party distribution
warehouse. Under this arrangement, the manufacturers of the Company's products
ship the products to the distribution warehouse, which performs various
functions on behalf of the Company, including order entry, customer service and
collection of accounts receivable. The Company may seek to develop the
capability to perform some or all of these functions through its own personnel
in the future.
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COMPETITION
Competition in the pediatric pharmaceutical market is intense. Although the
Company believes that no competitor focuses its commercial activities and
research and development efforts exclusively on the pediatric pharmaceutical
market, several large pharmaceutical companies with significant research,
development, marketing and manufacturing operations market pediatric products.
These competitors include Glaxo Wellcome Inc., Eli Lilly and Company, the
Ortho-McNeil Pharmaceutical Division of Johnson & Johnson Inc., Pfizer Inc., the
Ross Laboratories Division of Abbott Laboratories Inc., Schering-Plough
Corporation and the Wyeth-Lederle Vaccines and Pediatrics Division of American
Home Products, Inc.
Key competitive factors affecting the success of the Company include the
efficacy, side effect profile, taste, dosing frequency, method of
administration, patent or other proprietary protection, brand name recognition
and price of its products. The timing of market introduction of the Company's or
competitive products is another important competitive factor. Earlier entrants
in the market often obtain and maintain significant market share relative to
later entrants. Accordingly, the relative speed with which Ascent can develop
products, complete the clinical trials and approval processes and supply
commercial quantities of the products to the market is expected to be an
important competitive factor. The Company's competitive position will also
depend on its ability to attract and retain qualified personnel, to obtain
patent protection or otherwise protect the competitive positions of its products
and to secure sufficient capital resources for its operations.
Many of Ascent's potential competitors have substantially greater name
recognition and greater financial, technical and human resources than Ascent. In
addition, many of these competitors have significantly greater experience than
the Company in undertaking preclinical testing and human clinical trials of
pharmaceutical products and obtaining FDA and other regulatory approvals of
products for use in health care. Accordingly, the Company's competitors may
succeed in obtaining FDA or other regulatory approvals for products more rapidly
than the Company. Furthermore, subject to obtaining required regulatory
clearances, Ascent will compete against these larger companies with respect to
manufacturing efficiency and marketing capabilities, areas in which Ascent has
limited or no experience. Ascent's competitors may introduce competitive pricing
pressures that may adversely affect Ascent's sales levels and margins. Moreover,
many of these competitors offer well established, broad product lines and
services not offered by the Company. Many of the products offered by these
competitors have well known brand names that have been promoted over many years.
The Company expects to market many of its product candidates as alternative
treatments for pediatric indications for which products with the same active
ingredient are well-entrenched in the market. For example, the Company intends
to market Primsol trimethoprim solution, a trimethoprim antibiotic, for the
treatment of AOM, for which pediatricians often prescribe the well-known
combination therapies Bactrim and Septra, which also contain trimethoprim.
Similarly, Feverall controlled-release beads would compete against Tylenol
liquid for children. The Company's product candidates also will face competition
from other products that do not contain the same active ingredient but are used
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for the same indication and are well entrenched within the pediatric market. For
example, Primsol solution will compete against other antibiotics, including
amoxicillin. Moreover, many of the Company's potential products that are
reformulations of existing drugs of other manufacturers may have significantly
narrower patent or other competitive protection. There can be no assurance that
pediatricians, pediatric nurses and third party payors will prefer the Company's
products to existing products.
LICENSE AND MARKETING AGREEMENTS
The Company is a party to certain license and other arrangements under
which it has obtained rights to manufacture and/or market certain products or
product candidates. Set forth below is a summary of those arrangements that the
Company believes are material to its business.
The Company is a party to a development and license agreement with
Recordati pursuant to which the Company holds a license under certain Recordati
patents and patent applications to clinically test, register, market, distribute
and sell a controlled-release suspension system formulation of albuterol in the
form of coated granules. The license is exclusive in all countries other than
Italy and Spain. The Company may sublicense its license rights under this
agreement, subject to certain restrictions in certain countries. Ascent and
Recordati have agreed to collaborate on the development, clinical testing and
regulatory approval of this albuterol product in the United States and in any
other country in which the Company elects to pursue the commercial development
of such product by providing Recordati notice of such intent within 24 months of
filing for regulatory approval in the United States. All license rights with
respect to (i) countries in which the Company does not so notify Recordati of
its intention to commercially develop such product and (ii) countries in which a
joint development committee comprised of two members from each of the Company
and Recordati determine that commercial development of the product is not
technically feasible, revert to Recordati. Recordati will own any intellectual
property resulting from the collaboration other than clinical research data,
product applications and regulatory approvals obtained by Ascent, which the
Company will own. This agreement has an initial term expiring 15 years from the
date of FDA approval of the product and may be extended at the Company's
election for an additional five year term. During the term of this agreement,
Recordati has agreed to supply such quantities of the product as the Company may
require. The Company is required to pay Recordati certain up-front license fees
and to purchase the product from Recordati at unit prices based upon net sales
in a given country. During the term of this agreement, the Company has agreed
not to develop, manufacture or sell other oral liquid controlled-release
suspension system formulations of a beta agonist.
The Company is a party to a copromotion agreement with Bristol-Myers Squibb
under which the Company has agreed to promote Bristol-Myers Squibb's Duricef
oral suspension product to pediatricians in the United States. Under the
agreement, the parties have established a sales/marketing committee comprised of
members of both the Company and Bristol-Myers Squibb to develop and coordinate
the marketing strategy and the promotional plans for the product. As
compensation for the Company's copromotional efforts, Bristol-Myers Squibb has
agreed to pay the Company a specified percentage of net sales of the
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product attributed to pediatricians (as defined in the agreement) on sales above
a specified minimum number of prescriptions for the product. In addition,
Bristol-Myers Squibb has agreed to reimburse the Company for a specified amount
of the Company's marketing costs during each year of the agreement. The term of
the agreement expires on February 28, 2002, unless terminated earlier under
specified circumstances.
The licenses and other third party product arrangements to which the
Company is a party may impose various commercialization, sublicensing, royalty
and other payment, insurance and other obligations on the Company. Failure of
the Company to comply with these requirements could result in termination of the
applicable agreement, which could have a material adverse effect on the Company.
PATENTS, TRADE SECRETS, LICENSES AND TRADEMARKS
The Company's success will depend in part on its ability to develop
patentable products and obtain patent or other proprietary rights protection for
its products, both in the United States and in other countries. The Company's
policy is to file patent applications to protect technology, inventions and
improvements that are considered novel and important to the development of its
business. The Company also relies upon trade secrets, know-how, continuing
technological innovation and licensing opportunities to develop and maintain its
competitive position. Ascent also plans to seek three year protection for
certain products under the Waxman-Hatch Act from the approval of a possible
competitor's ANDA which is based on the Company's clinical trial results as well
as trademark protection for its brand names. There can be no assurance, however,
that any steps taken by the Company to protect its proprietary position will be
effective.
The Company holds 10 issued United States patents, has filed three
patent applications and has received a notice of allowance of claims
with respect to one of such patent applications. One of the issued patents
relates to the Company's formulation of Primsol trimethoprim solution, and five
of the issued patents relate to the Company's cromolyn sodium cream product
candidate. The claims in the patent application as to which the Company has
received a notice of allowance relate to the Company's taste masking
technologies. One of the other two patent applications relates to the Company's
cromolyn sodium cream product candidate and the third patent application relates
to taste masking technologies. Four of the issued patents relate to product
development candidates which the Company currently is not planning to pursue.
The Company has sought foreign patent protection in other major industrial
countries in respect of its most commercially important technologies. All of the
Company's issued United States and foreign patents expire from 2002 to 2016,
although certain United States patents may be extended for specified periods,
and the Company's United States and foreign patents could lapse if certain
applicable fees are not paid.
The patent positions of pharmaceutical firms, including Ascent, are
generally uncertain and involve complex legal and factual questions.
Consequently, even though Ascent currently is prosecuting its patent
applications with the United States Patent and Trademark Office and certain
foreign patent authorities, the Company does not know whether any of its
remaining applications will result in the issuance of any patents or, if any
patents are
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issued, whether they will provide significant proprietary protection or will be
circumvented or invalidated. Since the Company's products and product candidates
represent reformulations of off-patent drugs, any patents which cover such
products would be use or formulation patents, and the Company's products would
therefore be afforded a significantly narrower level of protection than a patent
on the active ingredient itself. Since patent applications in the United States
are maintained in secrecy until patents issue, and since publication of
discoveries in the scientific or patent literature tend to lag behind actual
discoveries by several months or years, Ascent cannot be certain that it was the
first creator of inventions claimed by pending patent applications or that it
was the first to file patent applications for such inventions. Generally, in the
United States, the first to invent is entitled to the patent, whereas in the
European Economic Community, the first to file is entitled to the patent.
Competitors of the Company and other third parties hold issued patents and
pending patent applications relating to aspects of the Company's technology, and
it is uncertain whether these patents and patent applications will require the
Company to alter its products or processes, pay licensing fees or cease
activities. See "Governmental Regulation -- FDA Approvals."
Ascent's practice is to require its employees, consultants, outside
scientific collaborators and sponsored researchers and other advisors to execute
confidentiality and invention assignment agreements upon the commencement of
employment or consulting relationships with the Company. These agreements
provide that all confidential information developed pursuant to such
relationships or made known to the individual by Ascent during the course of the
individual's relationship with Ascent is to be kept confidential and not
disclosed to third parties, subject to a right to publish certain information in
the scientific literature in certain circumstances and subject to other specific
exceptions. In the case of employees, the agreements provide that all inventions
conceived by the individual relating to the business of the Company shall be the
exclusive property of the Company. There can be no assurance, however, that
these agreements will provide meaningful protection for the Company's trade
secrets or adequate remedies in the event of unauthorized use or disclosure of
such information.
Ascent engages in collaborations and sponsored research agreements and
enters into preclinical and clinical testing agreements with academic and
research institutions to take advantage of their technical expertise and staff
and to gain access to clinical evaluation models, patients, and related
technology. Ascent may be required to negotiate a license to any developments or
results arising out of such collaborations or agreements in order to
commercialize products incorporating them. There can be no assurance that the
Company will be able successfully to obtain any such license at a reasonable
cost or that such developments and results will not be made available to
competitors of the Company on an exclusive or nonexclusive basis. See "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Certain Factors That May Affect Future Results -- Uncertainty
Regarding Patents and Proprietary Rights."
Because it believes that promotion of pediatric pharmaceutical products
under a brand name can be an important competitive factor, Ascent plans to seek
trademark protection for its products, both in the United States and, to the
extent the Company deems appropriate, in major foreign countries. To date,
Ascent has obtained eight trademark registrations from
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the United States Patent and Trademark Office, including for the marks "ASCENT,"
"PEDIAMIST," "PEDIATEMP," "PEDIAVENT " and "PRIMSOL." The "FEVERALL" trademark
of Upsher-Smith was included in the assets that the Company purchased as part of
the Company's acquisition of Upsher-Smith's Feverall line of acetaminophen
rectal suppositories in July 1997. All other brand names or trademarks appearing
in this Annual Report Form on 10-K are the property of their respective owners.
GOVERNMENT REGULATION
The testing, manufacture, labeling, distribution, sale, marketing,
promotion and advertising of the Company's products and its ongoing product
development activities are subject to extensive and rigorous regulation by
governmental authorities in the United States and other countries.
FDA Approval
In the United States, pharmaceutical products intended for therapeutic use
in humans are subject to rigorous and extensive FDA regulation before and after
approval. The process of completing preclinical studies and clinical trials and
obtaining FDA approvals for a new drug can take several years and requires the
expenditure of substantial resources. There can be no assurance that any product
will receive such approval on a timely basis, if at all. See "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Certain Factors That May Affect Future Results -- No Assurance of
Regulatory Approval; Extensive Government Regulation."
The steps required before a new drug for human use may be marketed in the
United States include (i) preclinical tests, (ii) submission to the FDA of an
Investigation New Drug ("IND") application, which must become effective before
human clinical trials may commence, (iii) adequate and well-controlled human
clinical trials to establish the safety and effectiveness of the product, (iv)
submission of an NDA to the FDA, which application is not automatically accepted
for consideration by the FDA, and (v) FDA approval of the NDA prior to any
commercial marketing, sale or shipment of the product. A new drug in generic
form for use in humans may be marketed in the United States following FDA
approval of an ANDA. ANDA approval requires that if (i) such drug has the same
active ingredient, dosage form, route of administration, strength and conditions
of use as a "pioneer" drug that was previously approved by the FDA as safe and
effective, and (ii) any applicable patents and statutory period of protection
under the Waxman-Hatch Act have expired. Through a petition process, the FDA may
permit the filing of an ANDA for a generic version of an approved "pioneer" drug
with variations in active ingredient, dosage form, route of administration and
strength (but not in conditions of use), unless, among other reasons, (i)
clinical investigations must be conducted to demonstrate the safety and
effectiveness of the drug, (ii) an ANDA would provide inadequate information to
permit the approval of the variation or (iii) significant labelling changes
would be necessary to address new safety or effectiveness concerns raised by
changes in the product.
Preclinical tests include laboratory evaluation of product chemistry and
animal studies to gain preliminary information of a product's pharmacology and
toxicology and to identify any safety problems that would preclude testing in
humans. Preclinical safety tests must be
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conducted by laboratories that comply with FDA regulations regarding GLP. The
results of the preclinical tests are submitted to the FDA as part of an IND
application and are reviewed by the FDA prior to the commencement of human
clinical trials. Unless the FDA objects to, or makes comments or raises
questions concerning, an IND and places it on clinical hold, the IND will become
effective 30 days following its receipt by the FDA and initial clinical studies
may begin, although companies often receive FDA comments before beginning such
studies. There can be no assurance that submission of an IND to the FDA will
result in the IND becoming effective so that clinical trials may commence. See
"Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Certain Factors That May Affect Future Results -- Products in
Development; Technological Uncertainty."
Clinical trials involve the administration of the investigational new drug
to healthy volunteers and to patients under the supervision of a qualified
principal investigator. Clinical trials must be conducted in accordance with
applicable FDA regulations under protocols that detail, among other things, the
objectives of the study, the parameters to be used to monitor safety, and the
effectiveness criteria to be evaluated. Each protocol must be submitted to the
FDA as part of the IND. Further, each clinical study must be conducted under the
auspices of an Institutional Review Board ("IRB"). The IRB will consider, among
other things, ethical factors, the safety of human subjects, the possible
liability of the institution and the informed consent disclosure which must be
made to participants in the clinical trial.
Clinical trials are typically conducted in sequential phases, although the
phases may overlap. In Phase I, the investigational new drug usually is
administered to healthy human subjects (10 to 50 persons) and is tested for
safety (adverse effects), dosimetry, tolerance, metabolism, distribution,
excretion and pharmacokinetics (clinical pharmacology). Phase II involves
studies in a limited patient population (approximately 10 to 70 persons) to (i)
evaluate the effectiveness of the investigational new drug for specific
indications, (ii) determine dose response and optimal dosage and (iii) identify
possible adverse effects and safety risks. When an investigational new drug is
found to have an effect at an optimal dose and to have an acceptable safety
profile in Phase II evaluation, Phase III trials are undertaken to further test
for safety, further evaluate clinical effectiveness and to obtain additional
information for labeling within an expanded patient population at geographically
dispersed clinical study sites. There can be no assurance that Phase I, Phase II
or Phase III testing will be completed successfully within any specified time
period, if at all, with respect to any of the Company's products subject to such
testing. Furthermore, the FDA may at any time impose a clinical hold on ongoing
clinical trials, or the IRB or the Company may suspend clinical trials at any
time if it is felt that the participants are being exposed to an unanticipated
or unacceptable health risk. If the FDA imposes a clinical hold, clinical trials
may not recommence without prior FDA authorization and then only under the terms
authorized by the FDA.
The results of the pharmaceutical development, preclinical studies and
clinical studies, the chemistry and manufacturing data, and the proposed
labeling, among other things, are submitted to the FDA in the form of an NDA for
approval of the marketing and commercial shipment of the product. The FDA may
refuse to accept the NDA for filing if administrative
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and NDA content criteria are not satisfied, and even after accepting the NDA for
review, the FDA may require additional testing or information before approving
the NDA. The FDA must deny an NDA if applicable regulatory requirements are not
ultimately satisfied. Moreover, if regulatory approval of a product is granted,
such approval may be conditioned on post-marketing testing and surveillance to
monitor the safety of the product or may entail limitations on the indicated
uses for which it may be marketed. Finally, product approvals may be suspended
or withdrawn if, among other reasons, compliance with regulatory is not
maintained, new information raises safety or effectiveness questions or problems
occur following initial marketing.
The Waxman-Hatch Act permits the use of an abbreviated FDA approval
procedure by authorizing the filing of an ANDA for any drug product that has the
same active ingredient as a drug that was approved by the FDA as safe and
effective, subject to certain exclusions (such as drugs that are still protected
by patent or market exclusivity). Approval of a pharmaceutical product through
an ANDA does not require the conduct of preclinical tests on pharmacology or
toxicology or Phase I, II or III clinical trials to prove the safety and
effectiveness of such product, but instead is based upon a showing of
bioequivalence with the "pioneer" drug and adequate manufacturing. Therefore,
compared to an NDA, the filing of an ANDA may result in reduced research and
development costs associated with bringing a product to market.
An ANDA can be filed in cases where there is an existing patent on an
approved "pioneer" drug. The applicant is obligated to notify the patent holder
of the filing of the ANDA, which then starts a 45-day period during which the
patent holder can file a patent infringement suit against the applicant if the
patent holder believes that its patent would be infringed by the applicant's
product. If patent litigation is brought against the applicant, the FDA will
still review the ANDA, however, any FDA approval of the ANDA can not become
effective until the earlier of (i) a determination that the existing patent is
invalid, unenforceable or not infringed, (ii) such litigation has been dismissed
or (iii) 30 months after the ANDA filing.
The Waxman-Hatch Act also provides for a period of statutory protection for
new drugs which receive NDA (but not ANDA) approval from the FDA. If a new drug
receives NDA approval, and the FDA has not previously approved any other new
drug containing the same active ingredient, then the Waxman-Hatch Act does not
permit an ANDA to be submitted by another company for a generic version of such
drug for a period of five years (or four years if an ANDA applicant certifies
invalidity or non-infringement of the patent covering such drug) from the date
of approval of the NDA. Similarly, if NDA approval is received for a new drug
containing an active ingredient that was previously approved by the FDA, and if
such NDA approval was dependent upon the submission to the FDA of new clinical
investigations (other than bioavailability studies) by the applicant, then the
Waxman-Hatch Act prohibits the FDA from making effective the approval of an ANDA
for a generic version of such drug by another company for a period of three
years from the date of such NDA approval. The statutory protection provided
pursuant to the Waxman-Hatch Act will not prevent the filing or approval of an
NDA (as opposed to an ANDA) for any drug, including, for example, a drug with
the same active ingredient, dosage form, route of administration, strength and
conditions of use as a drug protected under the act.
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However, in order to obtain an NDA, a competitor would have had to have
conducted its own clinical trials. As the Company's products and product
candidates are based upon approved compounds for which the FDA has previously
granted NDA approval, the Company expects that any of its products which qualify
for statutory protection under the Waxman-Hatch Act will be afforded only a
three year period of protection.
The Company has completed clinical trials and submitted NDAs with respect
to two of its product candidates. No assurance can be given that the Company's
clinical trials with respect to any of its product candidates will be completed
on a timely basis, if at all, that the clinical trials will demonstrate safety
or effectiveness, that the clinical results will be accepted for consideration
by the FDA, that the FDA will find the data submitted adequate or that an NDA or
ANDA will be ultimately approved. See "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Certain Factors
That May Affect Future Results -- Unproven Safety and Effectiveness of Potential
Products; Uncertainties Related to Clinical Trials."
As part of the drug approval process, the FDA must inspect and find that
the Company's or its supplier's drug manufacturing facilities comply with GMP
before an NDA or an ANDA can be approved by the FDA for marketing in the United
States. The FDA will review the manufacturing procedures and inspect the
manufacturer's facilities and equipment for compliance with GMP and other
requirements. After an NDA is approved, any material change in the manufacturing
process, equipment or location would necessitate additional data, then FDA
review and approval before marketing.
Certain of the Company's products, such as guaifenisen cough syrup, fall
within the FDA's OTC Monograph system, rather than the IND/NDA system, and may
be marketed without the Company first obtaining FDA approval of an NDA or ANDA,
provided such product complies with the specifications set forth in the OTC
Monograph for the applicable product category. OTC drugs must also be
manufactured in compliance with GMP, but premarket approval is not required.
In addition, once a product is approved, any changes in manufacturing that
have substantial potential to adversely affect the safety or effectiveness of
the product, for example, certain changes in the formulation of a drug, will
require supplemental approval by the FDA, as may changes in labeling or
promotion.
Even after approval, all marketed products and their manufacturers are
subject to continual government review. Subsequent discovery of previously
unrecognized problems or failure to comply with applicable regulatory
requirements could result in, among other things, restrictions on manufacturing
or marketing of the product, product recall or withdrawal, fines, seizure of
product, or civil or criminal prosecution, as well as withdrawal or suspension
of regulatory approvals.
Foreign Regulatory Approval
Whether or not FDA approval has been obtained, approval of a pharmaceutical
product by comparable governmental regulatory authorities in foreign countries
must be obtained
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prior to the commencement of clinical trials and subsequent marketing of such
product in such countries. The approval procedure varies from country to
country, and the time required may be longer or shorter than that required for
FDA approval. Although there are some procedures for unified filing for certain
European countries, in general, each country has its own procedures and
requirements.
Under the FDA Export Reform and Enhancement Act of 1996, pharmaceutical
products generally may be freely exported from the United States before the FDA
has approved the product for marketing in the United States for use in
investigation in 24 listed countries and for marketing in any country after at
least one of the 24 listed countries has approved the product for marketing.
EMPLOYEES
As of December 31, 1997, Ascent had 83 full-time employees. Fourteen of
these employees are engaged in product development and quality control,
including medical and regulatory affairs, 53 are employed in sales and marketing
and 16 are employed in finance, business development and general and
administrative activities. Many of the Company's management and professional
employees have had prior experience with pharmaceutical, biotechnology or
medical products companies. None of the Company's employees is covered by a
collective bargaining agreement, and management considers relations with its
employees to be good.
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