ITEM 1. BUSINESS
Overview
BioCryst Pharmaceuticals, Inc. is a biotechnology company focused on designing,
optimizing and developing novel small molecule pharmaceuticals that block key
enzymes essential for cancer, cardiovascular diseases and viral infections. Our
most advanced drug candidate, BCX-1777, is an investigational purine nucleoside
phosphorylase (PNP) inhibitor for the treatment of T-cell mediated disorders.
Our Business Strategy
Our business strategy is to use structure-based drug design technologies to
develop innovative, small-molecule pharmaceuticals to treat a variety of
diseases and disorders. We focus our drug development efforts on building
potent, selective inhibitors of enzymes associated with targeted diseases.
Enzymes are proteins that cause or enable biological reactions necessary for the
progression of the disease or disorder. The specific enzymes on which we focus
are called enzyme targets. BioCryst aims to design compounds that will inhibit
an enzyme target by fitting the active site of a particular enzyme. Inhibition
means interfering with the functioning of an enzyme target, thereby stopping or
slowing the progression of the disease or disorder. The principal elements of
our strategy are:
Select and License Promising Enzyme Targets for the Development of
Small-Molecule Pharmaceuticals.We use our technical expertise and network of
academic and industry contacts to evaluate and select promising enzyme targets
to license for the development of small-molecule pharmaceuticals. We choose
enzyme targets that meet as many of the following criteria as possible:
serve important functions in disease pathways;
have well-defined active sites;
have known animal models that would be indicative of results in
humans; and
have the potential for short duration clinical trials.
Focus on High Value-Added Structure-Based Drug Design Technologies. We
focus our drug discovery activities and expenditures on applications of
structure-based drug design technologies to design and develop drug candidates.
Structure-based drug design is a process by which we design a drug candidate
through detailed analysis of the enzyme target, which the drug candidate must
inhibit in order to stop the progression of the disease or disorder. We believe
that structure-based drug design is a powerful tool for efficient development of
small-molecule drug candidates that have the potential to be safe, effective and
relatively inexpensive to manufacture. Our structure-based drug design
technologies typically allow us to design and synthesize multiple drug
candidates that inhibit the same enzyme target. We believe this strategy can
lead to broad patent protection and enhance the competitive advantages of our
compounds.
Develop Inhibitors that are Promising Candidates for
Commercialization. We test multiple compounds to identify those that are most
promising for clinical development. We base our selection of promising
development candidates on desirable product characteristics, such as initial
indications of safety and efficacy. We believe that this focused strategy allows
us to eliminate unpromising candidates from consideration sooner without
incurring substantial clinical costs. In addition, we select drug candidates on
the basis of their potential for relatively efficient Phase I and Phase II
clinical trials that require fewer patients to initially indicate safety and
efficacy. We will consider, however, more complex candidates with longer
development cycles if we believe that they offer promising commercial
opportunities.
An important element of our business strategy is to control fixed costs and
overhead through contracting and entering into license agreements with other
parties. We maintain a streamlined corporate infrastructure that focuses
exclusively on our strongest areas of expertise. By contracting with other
specialty organizations, we believe that we can control costs, enable our drug
candidates to reach the market more quickly and reduce our business risk. Key
elements of our contracting strategy include:
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Entering Into Relationships with Academic Institutions and
Biotechnology Companies. Many academic institutions and biotechnology companies
perform extensive research on the molecular and structural biology of potential
drug development targets. By entering into relationships with these
institutions, we believe we can significantly reduce the time, cost and risks
involved in drug target development. Our collaborative relationships with such
organizations may lead to the licensing of one or more drug targets or
compounds. Upon licensing a drug target from one of these institutions, the
scientists from the institution typically become working partners as members of
our structure-based drug design teams. We believe this makes us a more
attractive development partner to these scientists. In addition, we collaborate
with outside experts in a number of areas, including crystallography, molecular
modeling, combinatorial chemistry, biology, pharmacology, oncology, cardiology,
immunology and infectious diseases. These collaborations enable us to complement
our internal capabilities without adding costly overhead. We believe this
strategy allows us to save valuable time and expense, and further diversify and
strengthen our portfolio of drug candidates. An example of such a collaborative
relationship is the arrangement that we have with The University of Alabama at
Birmingham, or UAB, which has resulted in the initiation of several of our early
drug development programs.
Licensing Drug Development Candidates to Other Parties. We generally
plan to advance drug candidates through initial and/or early-stage drug
development, then license them to pharmaceutical or biotechnology partners for
final development and global marketing. We believe partnerships are a good
source of development payments, license fees, milestone payments and royalties.
They also reduce the costs and risks, and increase the effectiveness, of
late-stage product development, regulatory approval, manufacturing and
marketing. We believe that focusing on discovery and early-stage drug
development while benefiting from our partners' proven development and
commercialization expertise will reduce our internal expenses and allow us to
have a larger number of drug candidates progress to late-stage drug development.
However, after establishing a lead product candidate, we are willing to license
that candidate during any stage of the development process we determine to be
beneficial to the company and to the ultimate development and commercialization
of that drug candidate.
Products in Development
The following table summarizes BioCryst's development projects as of February
28, 2003:
Program and Candidate
Disease Delivery Development Worldwide
Category/Indication Form Stage Rights
PNP Inhibitor (BCX-1777) Intravenous Phase I BioCryst
Autoimmune, inflammation/
T-cell related diseases
Tissue Factor/FactorVIIa Intravenous Preclinical BioCryst
Inhibitors Oral (BCX-3607) BioCryst
Cardiovascular/Acute Lead Optimization
coronary events,
anticoagulation
Complement Component C1s Intravenous Lead Optimization BioCryst/3-D
Inhibitors Pharmaceuticals
Cardiovascular,
inflammation/
Acute coronary events,
rheumatoid arthritis
Hepatitis C Polymerase Oral Lead Optimization BioCryst
Inhibitors
Viral/Hepatitis C
PNP Inhibitor (BCX-1777)
T-cell Related Diseases
Overview. The link between T-cell proliferation and the purine nucleoside
phosphorylase, or PNP, enzyme was first discovered approximately twenty-five
years ago when a patient, who was genetically deficient in PNP, exhibited
limited T-cell activity, but reasonably normal activity of other immune
functions. In other patients lacking PNP activity, the T-cell population was
selectively depleted; however, B-cell function tended to be normal. Based on
these findings and the results of cell culture studies, inhibiting PNP produces
selective suppression of T-cells without significantly impairing the function of
other cells.
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The human immune system employs specialized cells, including T-cells, to control
infection by recognizing and attacking disease-causing viruses, bacteria and
parasites. T-cells are an essential part of the body's immune system that serve
a dual purpose to both orchestrate and participate in the body's immune
response. For the most part, this system works flawlessly to protect the body.
However, when T-cells multiply uncontrollably, T-cell proliferative diseases,
including T-cell cancers, occur.
Acute Lymphoblastic Leukemia. The most common form of leukemia in children is
acute lymphoblastic leukemia (also known as ALL). According to the American
Cancer Society, 3,600 new cases (adult and children combined) will be diagnosed
in the United States in 2003. ALL results from an acquired injury to the DNA of
a single cell in the bone marrow.
T-cell Lymphoma. Lymphoma is a general term for a group of cancers that
originate in the lymphatic system. About 53,000 Americans will be diagnosed with
a non-Hodgkin's lymphoma in 2003 and approximately 15% of these will be
considered T-cell lymphomas. T-cell lymphoma results when a T-lymphocyte (a type
of white blood cell) undergoes a malignant change and begins to multiply,
eventually crowding out healthy cells and creating tumors, which enlarge the
lymph nodes and invade other sites in the body.
PNP Inhibition. PNP is an enzyme that plays an important role in T-cell
proliferation, because it is necessary to maintain normal DNA synthesis in
T-cells. Selective inhibition of PNP has an accumulation effect on certain
nucleosides, including deoxyguanosine. As the concentration of deoxyguanosine
increases within T-cells, it is converted by specific enzymes to deoxyguanosine
triphosphate. A high concentration of deoxyguanosine triphosphate in T-cells
blocks DNA synthesis and thus inhibits cell division.
Our PNP Inhibitor
Background. In June 2000, we licensed a series of potent inhibitors of purine
nucleoside phosphorylase from Albert Einstein College of Medicine of Yeshiva
University (AECOM) and Industrial Research, Ltd, New Zealand. The lead drug
candidate from this collaboration, BCX-1777, is a more potent inhibitor of human
lymphocyte proliferation than other known PNP inhibitors. Extensive preclinical
studies and early patient data indicate that BCX-1777 can modulate T-cell
activities. BCX-1777 is an investigational PNP inhibitor for the potential
treatment of T-cell mediated disorders, including T-cell cancers, psoriasis, and
rheumatoid arthritis.
Current Development Strategy
Overview. The first clinical trial with an intravenous formulation of BCX-1777
is a Phase I clinical trial for patients with relapsed or refractory acute
lymphoblastic leukemia (ALL) and T-cell lymphoma. The Phase I trial is an
open-label dose-escalation study of BCX-1777 in relapsed or refractory
aggressive T-cell malignancies, which are among the most difficult cancers to
treat by current therapies. Because of the clinical results seen to this point
and a recent discovery by our colleagues at the M.D. Anderson Cancer Center, we
filed four additional protocols with the FDA to expand this trial in 2003 by
adding other types of hematologic malignancies and cutaneous T-cell lymphoma. We
are currently working with the Institutional Review Boards of multiple sites to
approve these expanded protocols. These findings indicate that BCX-1777 induces
the same biochemical changes in various other types of leukemia cells that are
responsible for the inhibition of T-leukemia cells, which suggest that BCX-1777
may be even more broadly applicable than originally expected. Our strategy for
future development of BCX-1777 is to apply to the FDA for both orphan drug and
fast-track designations.
BCX-1777 Clinical Development for Aggressive T-cell Malignancies. The Phase I
clinical trial was developed in close collaboration with experts at The
University of Texas M. D. Anderson Cancer Center. Despite encouraging results
observed with other T-cell specific agents, the prognosis for patients with
relapsed or refractory leukemia or lymphoma is poor and treatment options remain
limited. The goal of the Phase I clinical trial is to determine the safety,
biochemical and metabolic profile and therapeutic effect produced by BCX-1777 as
it relates to the proposed mechanism of action in the inhibition of
proliferating T-lymphocytes in patients with ALL or T-cell lymphoma.
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Tissue Factor/FactorVIIa
Overview
A series of complicated reactions take place in the body whenever a blood clot
begins to form. The major initiator of these reactions is an enzyme system
called the Tissue Factor/Factor VIIa (TF/FVIIa) complex. Animal tests show that
various inhibitors of the TF/FVIIa complex can minimize blood clot formation as
well as inflammatory responses. This sort of inhibition has been tested with a
number of biological agents including the natural inhibitor of the pathway,
various mutants of tissue factor and antibodies against factor VIIa. However,
there are no small molecule drugs currently on the market that intervene at the
TF/FVIIa level.
We believe that small molecule inhibitors of TF/FVIIa may potentially be useful
for treating acute coronary syndromes and complications associated with
cardiovascular procedures, such as coronary angioplasty and stent insertions,
because any type of damage to arteries and blood vessels exposes tissue factor,
which then triggers clot formation. Myocardial infarction, unstable angina, and
restenosis during and following angioplasty procedures are all potential
treatment targets.
Background. We have an agreement with Sunol Molecular Corp. to expedite the
discovery of new drug candidates designed to inhibit TF/FVIIa. Under the terms
of this agreement, Sunol supplies us protein for our drug design program.
Current Development Strategy
Our TF/FVIIa inhibitor project has emerged as our highest priority discovery
program. We have designed and synthesized a group of compounds that are potent
and selective inhibitors of TF/FVIIa and further optimization is ongoing.
Currently, we have identified one compound (BCX-3607) for clinical development.
The goal is to advance BCX-3607 into clinical development for treatment of
unstable angina during 2003, while seeking a partner to develop and potentially
commercialize this class of inhibitors.
Complement Inhibitors
Complement Cascade
Overview. The human body is equipped with defense mechanisms that respond
aggressively to infection or injury. This response is uniquely designed for each
challenge, whether caused by viruses, bacteria, or other matter harmful to the
body. One of these mechanisms, called the complement system, is a system of
functionally linked proteins that interact with one another in a highly
regulated manner.
The complement system functions as a "cascade" of enzymes that assist in the
removal of bacteria or destruction of cells that the body does not recognize as
its own. For example, once the immune system recognizes a "foreign invader,"
complement is activated to destroy or remove it. There are two pathways of
complement activation, the classical pathway and the alternative pathway.
Antigen-antibody complexes usually initiate the classical pathway, while the
alternative pathway is activated by bacterial, viral, parasite and membrane
surfaces.
Complement is designed to keep us healthy by fighting infection and injury.
However, this same mechanism, if inappropriately activated, can cause a
significant amount of tissue damage as a result of the rapid and aggressive
enzyme activity. The tissue damage can result in acute medical reactions,
including inflammatory reactions that accompany post heart attack reperfusion
injury. Due to the biochemical mechanism of the complement cascade, BioCryst
believes complement inhibitors may have therapeutic applications in several
acute and chronic immunological disorders.
Our Complement Inhibitors
Background. In October 1996, we established a collaborative drug discovery
effort with 3-Dimensional Pharmaceuticals, Inc. in Philadelphia. Then, in 1997,
working closely with scientists at UAB, we characterized the three-dimensional
structure of one of the components of the complement cascade. Using X-ray
crystallographic and molecular modeling techniques, we then designed and
synthesized a class of small molecule compounds that are highly potent
inhibitors of complement and certain other blood enzymes.
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However, these compounds had to be administered at concentrations that were too
close to toxicologic limits in order to be used clinically. Discovery work
continues to design and develop small molecule inhibitors to block activation of
the complement cascade.
Current Development Strategy
BioCryst and 3-Dimensional Pharmaceuticals, Inc., have developed a number of
small molecule compounds that have potent activity against the complement enzyme
C1s. Lead optimization is underway with a select group of inhibitors to identify
a promising candidate for preclinical testing. We expect to advance a lead
candidate during 2003 and believe we may be able to file an Investigational New
Drug application with the Food and Drug Administration within the next twelve
months. The goal is to pursue a development path to address reperfusion injury.
Other therapeutic opportunities include rheumatoid arthritis, lupus, and
psoriasis.
Hepatitis C
Overview
Hepatitis C virus (HCV) infection has been described in the New England Journal
of Medicine as the nation's most common chronic blood-borne infection. Up to 3%
of the world population has been infected with HCV. According to the National
Centers for Disease Control, as many as 75-85% of those infected with HCV will
have chronic infection and 70% of those will develop chronic liver disease.
While there are several approved treatments for chronic HCV using a combination
therapy of interferon and ribavirin, there are some potentially severe side
effects to these treatments.
Background. In June 2000, we licensed intellectual property from Emory
University related to the Hepatitis C polymerase target associated with
Hepatitis C viral infections. Under the terms of the agreement, the research
investigators from Emory provide us with materials and technical insight into
the target.
Current Development Strategy
We are targeting HCV polymerase through collaborative and in-house efforts.
Specifically, we are focused on development of orally active inhibitors against
the RNA-dependent RNA polymerase. Competition for this target is less intense
than for the HCV protease target and history suggests the likelihood of
designing an inhibitor against this target is better than for the more difficult
serine protease.
Currently, we are screening a number of potential compounds against HCV
polymerase. Specifically, our scientists are measuring the potency and ability
of potential drug candidates to block the replication of HCV polymerase in
vitro, or in test tubes. These experiments measure the potency of each selected
compound's ability to block replication. Advanced screening is also underway to
measure the fit of promising compounds in the HCV polymerase active site using
X-ray crystallography and computer molecular modeling. The goal is to identify a
series of compounds that are potent in vitro inhibitors of the active site of
the HCV polymerase for further testing and lead optimization.
Structure-Based Drug Design
Structure-based drug design is a drug discovery approach by which we design
synthetic compounds from detailed structural knowledge of the active sites of
enzyme targets associated with particular diseases. Enzymes are proteins that
act as catalysts for many vital biological reactions. Our goal generally is to
design a compound that will fit in the active site of an enzyme (the active site
of an enzyme is the area into which a chemical or biological molecule fits to
initiate a biochemical reaction) and thereby interfere with the progression of
disease.
Our structure-based drug design involves the application of both traditional
biology and medicinal chemistry and an array of advanced technologies. We use
X-ray crystallography, computer modeling of molecular structures and advanced
chemistry techniques to focus on the three-dimensional molecular structure and
active site characteristics of the enzymes that control cellular biology.
We believe that structure-based drug design technologies are superior to drug
screening techniques. By identifying the target enzyme in advance and by
discovering the chemical and molecular structure of the enzyme, we believe it is
possible to design a better drug to interact with the enzyme. In addition, the
structural data obtained by X-ray crystallographic analysis allow additional
analysis and compound modification at each stage of the biological evaluation.
This capability makes structure-based drug design a powerful tool for efficient
development of drugs that are highly specific for particular enzyme target
sites.
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Research and Development
We initiated our research and development program in 1986, with drug synthesis
beginning in 1987. We have assembled a scientific research staff with expertise
in a broad base of advanced research technologies including protein
biochemistry, X-ray crystallography, chemistry and pharmacology. Our research
facilities include protein biochemistry and organic synthesis laboratories,
testing facilities, X-ray crystallography, computer and graphics equipment and
facilities to make drug candidates on a small scale.
During the years ended December 31, 2000, 2001 and 2002, we spent an aggregate
of $38.1 million on research and development. Approximately $25.8 million of
that amount was spent on in-house research and development, and $12.3 million
was spent on contract research and development.
Collaborative Relationships
Corporate Alliances
3-Dimensional Pharmaceuticals, Inc.
In October 1996, we signed a research collaboration agreement with 3-Dimensional
Pharmaceuticals. Under this agreement, the companies will share resources and
technology to expedite the discovery of new drug candidates for our complement
inhibition program. The agreement combines our capabilities in structure-based
drug design with the selection power of 3-Dimensional Pharmaceuticals' Directed
Diversity technology, a proprietary method of directing combinatorial chemistry
and high throughput screening toward specific molecular targets. In June 1999,
we updated and renewed our original agreement to concentrate on selected
complement enzymes as targets for the design of inhibitors. Under the terms of
the 50-50 agreement, we conduct joint research to identify inhibitors of key
serine proteases, which represent promising targets for inhibition of complement
activation. If a drug candidate emerges as a result of the joint research, the
companies will negotiate the product development and commercialization rights
and responsibilities.
Sunol Molecular Corp.
In April 1999, we entered into an agreement with Sunol. This agreement requires
Sunol to conduct research and supply us with protein targets for drug design to
expedite the discovery of new drug candidates designed to inhibit Tissue
Factor/Factor VIIa for our cardiovascular program.
Academic Alliances
The University of Alabama at Birmingham
We have had a close relationship with The University of Alabama at Birmingham
(UAB), since our formation. Our Chairman and Chief Executive Officer,
Dr. Charles E. Bugg, was the previous Director of the UAB Center for
Macromolecular Crystallography, and our President, Chief Operating Officer and
Medical Director, Dr. J. Claude Bennett, was the former President of UAB, the
former Chairman of the Department of Medicine at UAB and a former Chairman of
the Department of Microbiology at UAB. Several of our consultants are employed
by UAB. UAB has one of the largest X-ray crystallography centers in the world
with approximately 115 full-time staff members and approximately $14 million in
research grants and contract funding in 2002. Several of our early programs
originated at UAB, including our current complement inhibitor program.
We currently have agreements with UAB for influenza neuraminidase and complement
inhibitors. Under the terms of these agreements, UAB performed specific research
for us in return for research payments and license fees. UAB has granted us
certain rights to any discoveries in these areas resulting from research
developed by UAB or jointly developed with us. We have agreed to pay royalties
on sales of any resulting product and to share in future payments received from
other third-party collaborators. UAB received a portion of license fees and
milestone payments we received from RWJPRI and Ortho-McNeil for our former
influenza collaboration. UAB would receive a portion of any future license fees,
milestone payments and royalties if we were to obtain another partner for our
influenza program. We have completed the research under the UAB influenza
agreement. We funded the research program under the complement inhibitors
agreement through March 2002, which entitled us to an assignment of, or a right
to an exclusive license for, any inhibitors of specified complement enzymes
developed by UAB scientists during the period of support or for a one-year
period thereafter. These two agreements have initial 25-year terms, are
automatically renewable for five-year terms throughout the life of the last
patent and are terminable by us upon three-month's notice and by UAB under
certain circumstances.
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Albert Einstein College of Medicine of Yeshiva University and Industrial
Research, Ltd, New Zealand
In June 2000, we licensed a series of potent inhibitors of purine nucleoside
phosphorylase, or PNP, from Albert Einstein College of Medicine of Yeshiva
University and Industrial Research, Ltd., New Zealand. The lead drug candidate
from this collaboration is BCX-1777. We have the rights to develop and
ultimately distribute this, or any other, drug candidate that might arise from
research on these inhibitors. We have agreed to pay certain milestone payments
for future development of these inhibitors, pay certain royalties on sales of
any resulting product, and to share in future payments received from other
third-party collaborators, if any. We can terminate this agreement at any time
by giving 60 days advance notice.
Emory University
In June 2000, we licensed intellectual property from Emory University related to
the Hepatitis C polymerase target associated with Hepatitis C viral infections.
Under the terms of the agreement, the research investigators from Emory provide
us with materials and technical insight into the target. We have agreed to pay
Emory royalties on sales of any resulting product and to share in future
payments received from other third party collaborators, if any. We can terminate
this agreement at any time by giving 90 days advance notice.
Patents and Proprietary Information
Our success will depend in part on our ability to obtain and enforce patent
protection for our products, methods, processes and other proprietary
technologies, preserve our trade secrets, and operate without infringing on the
proprietary rights of other parties, both in the United States and in other
countries. We own or have rights to certain proprietary information, proprietary
technology, issued and allowed patents and patent applications which relate to
compounds we are developing. We actively seek, when appropriate, protection for
our products, proprietary technology and proprietary information by means of
U.S. and foreign patents, trademarks and contractual arrangements. In addition,
we rely upon trade secrets and contractual arrangements to protect certain of
our proprietary information, proprietary technology and products.
As of February 28, 2003, we have been issued 17 U.S. patents that expire between
2009 and 2018 and that relate to our PNP and neuraminidase inhibitor compounds.
We have also filed patent applications for new processes to prepare certain PNP
inhibitors. Two U.S. patent applications on neuraminidase have been granted, but
not published yet. Additionally, we have 11 U.S. patent applications pending
related to PNP, neuraminidase, RNA viral polymerase, paramyxovirus
neuraminidase, and serine protease inhibitors. Our pending applications may not
result in issued patents, and our patents may not provide us with sufficient
protection against competitive products or otherwise be commercially available.
Our success is also dependent upon the skills, knowledge and experience of our
scientific and technical personnel, none of which is patentable. To help protect
our rights, we require all employees, consultants, advisors and collaborators to
enter into confidentiality agreements which prohibit the disclosure of
confidential information to anyone outside of our company and requires
disclosure and assignment to us of their ideas, developments, discoveries and
inventions. These agreements may not provide adequate protection for our trade
secrets, know-how or other proprietary information in the event of any
unauthorized use or disclosure or the lawful development by others of such
information.
Marketing and Sales
We lack experience in marketing, distributing and selling pharmaceutical
products. Our general strategy is to rely on collaborators, licensees or
arrangements with others to provide for the marketing, distribution and sales of
any products we may develop. We may not be able to establish and maintain
acceptable commercial arrangements with collaborators, licensees or others to
perform such activities. For example, In September 1998, BioCryst entered a
worldwide license agreement with The R.W. Johnson Pharmaceutical Research
Institute (RWJPRI) and Ortho-McNeil Pharmaceutical Inc. (Ortho-McNeil) both
Johnson & Johnson companies, for development and commercialization of our
influenza neuraminidase inhibitors, including peramivir.
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On April 30, 2001, BioCryst announced that Ortho-McNeil and RWJPRI, gave four
months prior notice of termination of the worldwide license agreement with
BioCryst to develop and market products to treat and prevent viral influenza.
Subsequently, all rights to peramivir returned to BioCryst.
Competition
The pharmaceutical and biotechnology industries are intensely competitive. Many
companies, including biotechnology, chemical and pharmaceutical companies, are
actively engaged in activities similar to ours, including research and
development of drugs for the treatment of infectious, inflammatory and
cardiovascular diseases and disorders. Many of these companies have
substantially greater financial and other resources, larger research and
development staffs, and more extensive marketing and manufacturing organizations
than we do. In addition, some of them have considerable experience in
preclinical testing, clinical trials and other regulatory approval procedures.
There are also academic institutions, governmental agencies and other research
organizations that are conducting research in areas in which we are working.
They may also market commercial products, either on their own or through
collaborative efforts.
We expect to encounter significant competition for any of the pharmaceutical
products we plan to develop. Companies that complete clinical trials, obtain
required regulatory approvals and commence commercial sales of their products
before their competitors may achieve a significant competitive advantage. In
addition, several pharmaceutical and biotechnology firms, including major
pharmaceutical companies and specialized structure-based drug design companies,
have announced efforts in the field of structure-based drug design and in the
fields of PNP and complement inhibitors, Hepatitis C, and Tissue Factor/Factor
VIIa.
In order to compete successfully, we must develop proprietary positions in
patented drugs for therapeutic markets that have not been satisfactorily
addressed by conventional research strategies and, in the process, expand our
expertise in structure-based drug design. Our products, even if successfully
tested and developed, may not be adopted by physicians over other products and
may not offer economically feasible alternatives to other therapies.
Government Regulation
The FDA regulates the pharmaceutical and biotechnology industries in the United
States, and our drug candidates are subject to extensive and rigorous domestic
government regulations prior to commercialization. The FDA regulates, among
other things, the development, testing, manufacture, safety, efficacy,
record-keeping, labeling, storage, approval, advertising, promotion, sale and
distribution of pharmaceutical products. In foreign countries, our products are
also subject to extensive regulation by foreign governments. These government
regulations will be a significant factor in the production and marketing of any
pharmaceutical products that we develop. Failure to comply with applicable FDA
and other regulatory requirements at any stage during the regulatory process may
subject us to sanctions, including:
delays;
warning letters;
fines;
product recalls or seizures;
injunctions;
penalties;
refusal of the FDA to review pending market approval applications or
supplements to approval applications;
total or partial suspension of production;
civil penalties;
withdrawals of previously approved marketing applications; and
criminal prosecutions.
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The regulatory review and approval process is lengthy, expensive and uncertain.
Before obtaining regulatory approvals for the commercial sale of any products,
we or our licensees must demonstrate that our product candidates are safe and
effective for use in humans. The approval process takes many years, substantial
expenses may be incurred and significant time may be devoted to clinical
development.
Before testing potential candidates in humans, we carry out laboratory and
animal studies to determine safety and biological activity. After completing
preclinical trials, we must file an investigational new drug application,
including a proposal to begin clinical trials, with the FDA. We have filed nine
investigational new drug applications to date and plan to file, or rely on
future partners to file, additional investigational new drug applications in the
future as our potential drug candidates advance to that stage of development.
Thirty days after filing an investigational new drug application, a Phase I
human clinical trial can start unless the FDA places a hold on the study.
Our Phase I trials are designed to determine safety in a small group of patients
or healthy volunteers. We also assess tolerances and the metabolic and
pharmacologic actions of our drug candidates at different doses. After we
complete the initial trials, we conduct Phase II trials to assess safety and
efficacy and establish the optimal dose in patients. If Phase II trials are
successful, we or our licensees conduct Phase III trials to verify the results
in a larger patient population. Phase III trials are required for FDA approval
to market a drug. A Phase III trial may require hundreds or even thousands of
patients and is the most expensive to conduct. The goal in Phase III is to
collect enough safety and efficacy data to obtain FDA approval for treatment of
a particular disease.
Initiation and completion of the clinical trial phases are dependent on several
factors including things that are beyond our control. For example, the clinical
trials are dependent on patient enrollment, but the rate at which patients
enroll in the study depends on:
the size of the patient population we intend to treat;
the availability of patients;
the willingness of patients to participate; and
the patient meeting the eligibility criteria.
Delays in planned patient enrollment may result in increased expense and longer
development timelines.
After completion of the clinical trials of a product, we or our licensees must
submit a new drug application to the FDA for marketing approval before
commercialization of the product. The FDA may not grant approval on a timely
basis, if at all. The FDA, as a result of the Food and Drug Administration
Modernization Act of 1997, has six months to review and act upon license
applications for priority therapeutics that are for a life-threatening or unmet
medical needs. Standard reviews can take between one and two years, and can even
take longer if significant questions arise during the review process. The FDA
may withdraw any required approvals, once obtained.
In addition to clinical development regulations, we and our contract
manufacturers and collaborators must comply with the applicable FDA current good
manufacturing practice ("GMP") regulations. GMP regulations include requirements
relating to quality control and quality assurance as well as the corresponding
maintenance of records and documentation. Manufacturing facilities are subject
to inspection by the FDA. Such facilities must be approved before we can use
them in commercial manufacturing of our potential products. We or our contract
manufacturers may not be able to comply with the applicable GMP requirements and
other FDA regulatory requirements. If we or our contract manufacturers fail to
comply, our business, financial condition and results of operations will be
materially adversely affected.
Human Resources
As of February 28, 2003, we had 44 employees, of whom 31 were engaged in
research and development and 13 were in general and administrative functions.
Our scientific staff, 20 of whom hold Ph.D. or M.D. degrees, has diversified
experience in biochemistry, pharmacology, X-ray crystallography, synthetic
organic chemistry, computational chemistry, and medicinal chemistry. We consider
our relations with our employees to be satisfactory.
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Scientific Advisory Board and Consultants
Our scientific advisory board is comprised of five scientific advisors who are
leaders in certain of our core disciplines or who otherwise have specific
expertise in our therapeutic focus areas. We also have consulting agreements
with a number of other scientists with expertise in our core disciplines or who
are specialists in diseases or treatments on which we focus. The scientific
advisory board meets as a group at scheduled meetings and the consultants meet
more frequently, on an individual basis, with our scientific personnel and
management to discuss our ongoing research and drug discovery and development
projects. The scientific advisory board consists of the following individuals:
Name Position
Albert F. LoBuglio, M.D. Professor of Medicine and the Director of The
(Chairman) University of Alabama at Birmingham
Comprehensive Cancer Center.
Gordon N. Gill, M.D. Professor of Medicine, Director of the Cancer
Center and Chair of the Faculty of Basic
Biomedical Sciences at the University of
California, San Diego School of Medicine.
Lorraine J. Gudas, Ph.D. Professor and Chairman of the Department of
Pharmacology of Cornell Medical College and the
Revlon Pharmaceutical Professor of Pharmacology
and Toxicology.
Herbert A. Hauptman, Ph.D. President of the Hauptman-Woodward Medical
Research Institute, Inc. (formerly the Medical
Foundation (Buffalo), Inc.), and Research
Professor in Biophysical Sciences at the State
University of New York (Buffalo). Recipient of
the Nobel Prize in Chemistry (1985).
Hamilton O. Smith, M.D. Professor, Molecular Biology and Genetics
Department at The Johns Hopkins University
School of Medicine, retired, and Scientific
Director of The Institute for Bioenergy
Alternatives. Recipient of the Nobel Prize in
Medicine (1978).
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The scientific advisors and the consultants are reimbursed for their expenses
and receive nominal cash compensation in connection with their service and have
been issued options and/or shares of common stock. The scientific advisors and
the consultants are all employed by or have consulting agreements with entities
other than us, some of which may compete with us in the future. The scientific
advisors and the consultants are expected to devote only a small portion of
their time to our business, although no specific time commitment has been
established. They are not expected to participate actively in our affairs or in
the development of our technology. Several of the institutions with which the
scientific advisors and the consultants are affiliated may adopt new regulations
or policies that limit the ability of the scientific advisors and the
consultants to consult with us. The loss of the services of the scientific
advisors and the consultants could adversely affect us to the extent that we are
pursuing research or development in areas relevant to the scientific advisors'
and consultants' expertise. To the extent members of our scientific advisory
board or the consultants have consulting arrangements with or become employed by
any of our competitors, we could be materially adversely affected.
Any inventions or processes independently discovered by the scientific advisors
or the consultants may not become our property and will probably remain the
property of such persons or of such persons' employers. In addition, the
institutions with which the scientific advisors and the consultants are
affiliated may make available the research services of their personnel,
including the scientific advisors and the consultants, to our competitors
pursuant to sponsored research agreements. We require the scientific advisors
and the consultants to enter into confidentiality agreements which prohibit the
disclosure of confidential information to anyone outside of our company and
require disclosure and assignment to us of their ideas, developments,
discoveries or inventions. However, our competitors may gain access to trade
secrets and other proprietary information developed by us and disclosed to the
scientific advisors and the consultants.
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