Attached files

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EX-23.1 - EX-23.1 - Paratek Pharmaceuticals, Inc.prtk-ex231_659.htm
EX-32.1 - EX-32.1 - Paratek Pharmaceuticals, Inc.prtk-ex321_662.htm
EX-10.7 - EX-10.7 - Paratek Pharmaceuticals, Inc.prtk-ex107_657.htm
EX-32.2 - EX-32.2 - Paratek Pharmaceuticals, Inc.prtk-ex322_663.htm
EX-10.8 - EX-10.8 - Paratek Pharmaceuticals, Inc.prtk-ex108_658.htm
EX-10.1A - EX-10.1A - Paratek Pharmaceuticals, Inc.prtk-ex101a_656.htm
EX-31.2 - EX-31.2 - Paratek Pharmaceuticals, Inc.prtk-ex312_661.htm
EX-31.1 - EX-31.1 - Paratek Pharmaceuticals, Inc.prtk-ex311_660.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-K

 

x

Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended: December 31, 2015

or

¨

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission file number: 001-36066

 

PARATEK PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

33-0960223

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

75 Park Plaza

Boston, MA 02116

(617) 807-6600

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive office)

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Name of exchange on which registered

Common Stock, par value $0.001 per share

 

The NASDAQ Global Market

 

Securities registered pursuant to Section 12(g) of the Act: None

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ¨    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.    Yes  ¨    No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨.

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

¨

Accelerated filer

¨

 

 

 

 

Non-accelerated filer

¨   (Do not check if a smaller reporting company)

Smaller reporting company

x

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ¨    No  x

The aggregate market value of the common stock of the registrant held by non-affiliates of the registrant on June 30, 2015, the last business day of the registrant’s second fiscal quarter was: $362,589,647.

As of February 29, 2016 there were 17,608,615 shares of the registrant’s common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive proxy statement for the registrant’s 2016 Annual Meeting of Stockholders to be filed pursuant to Regulation 14A within 120 days of the registrant’s year ended December 31, 2015 are incorporated herein by reference into Part III of this Annual Report on Form 10-K.

 

 

 

 


 

TABLE OF CONTENTS

 

 

Item No.

 

 

 

Page No.

 

 

 

 

 

 

PART I

 

 

 

 

 

 

 

 

 

 

1.

 

Business

 

1

 

 

 

 

 

 

 

1A.

 

Risk Factors

 

31

 

 

 

 

 

 

 

1B.

 

Unresolved Staff Comments

 

57

 

 

 

 

 

 

 

2.

 

Properties

 

57

 

 

 

 

 

 

 

3.

 

Legal Proceedings

 

58

 

 

 

 

 

 

 

4.

 

Mine Safety Disclosures

 

59

 

 

 

 

 

 

PART II

 

 

60

 

 

 

 

 

 

 

5.

 

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities

 

60

 

 

 

 

 

 

 

6.

 

Selected Financial Data

 

61

 

 

 

 

 

 

 

7.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

63

 

 

 

 

 

 

 

7A.

 

Quantitative and Qualitative Disclosures About Market Risk

 

79

 

 

 

 

 

 

 

8.

 

Financial Statements and Supplementary Data

 

80

 

 

 

 

 

 

 

9.

 

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 

119

 

 

 

 

 

 

 

9A.

 

Controls and Procedures

 

119

 

 

 

 

 

 

 

9B.

 

Other Information

 

121

 

 

 

 

 

 

PART III

 

 

122

 

 

 

 

 

 

 

10.

 

Directors, Executive Officers and Corporate Governance

 

122

 

 

 

 

 

 

 

11.

 

Executive Compensation

 

122

 

 

 

 

 

 

 

12.

 

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 

122

 

 

 

 

 

 

 

13.

 

Certain Relationships and Related Transactions, and Director Independence

 

122

 

 

 

 

 

 

 

14.

 

Principal Accountant Fees and Services

 

122

 

 

 

 

 

 

PART IV

 

 

123

 

 

 

 

 

 

 

15.

 

Exhibits and Financial Statement Schedules

 

123

 

 

 

 

 

 

SIGNATURES

 

124

 

 

 

 

 

 

EXHIBIT INDEX

 

125

 

 

i


 

Special Note Regarding Forward-Looking Statements

This Annual Report on Form 10-K contains forward-looking statements that are based upon current expectations within the meaning of the Private Securities Litigation Reform Act of 1995. Paratek Pharmaceuticals, Inc. intends that such statements be protected by the safe harbor created thereby. Forward-looking statements involve risks and uncertainties and actual results and the timing of events may differ significantly from those results discussed in the forward-looking statements. Examples of such forward-looking statements include, but are not limited to, statements about or relating to:

 

·

The timing, scope and anticipated initiation, enrollment and completion of our ongoing and planned clinical trials and any other future clinical trials that we may conduct

 

·

the plans, strategies and objectives of management for future operations

 

·

proposed new products or developments;

 

·

future economic conditions or performance;

 

·

the therapeutic and commercial potential of our product candidates;

 

·

the timing of regulatory discussions and submissions, and the anticipated timing, scope and outcome of related regulatory actions or guidance;

 

·

our ability to establish and maintain potential new collaborative, partnering or other strategic arrangements for the development and commercialization of our product candidates;

 

·

the anticipated progress of our clinical programs, including whether our ongoing clinical trials will achieve clinically relevant results;

 

·

our ability to obtain regulatory approvals of our product candidates and any related restrictions, limitations and/or warnings in the label of an approved product candidate;

 

·

our ability to market, commercialize and achieve market acceptance for our product candidates, if approved;

 

·

our ability to protect our intellectual property and operate our business without infringing upon the intellectual property rights of others;

 

·

our estimates regarding the sufficiency of our cash resources, expenses, capital requirements and needs for additional financing, and our ability to obtain additional financing; and

 

·

our projected financial performance.

In some cases, you can identify forward-looking statements by terms such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would” and similar expressions intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance, time frames or achievements to be materially different from the information set forth in these forward-looking statements. While we believe that we have a reasonable basis for each forward-looking statement, we caution you that these statements are based on a combination of facts and factors currently known by us and our projections of the future, about which we cannot be certain. We discuss many of these risks in the “Risk Factors” section and elsewhere in this Annual Report on Form 10-K. Given these risks, uncertainties and other factors, you should not place undue reliance on these forward-looking statements. Any of the events anticipated by the forward-looking statements may not occur or, if any of them do, the impact they will have on our business, results of operations and financial condition is uncertain. We hereby qualify all of our forward-looking statements by these cautionary statements.

Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

Paratek Pharmaceuticals, Inc. is our registered and unregistered trademark in the United States and other jurisdictions. Intermezzo is a registered and unregistered trademark of Purdue Pharmaceutical Products L.P. and associated companies in the United States and other jurisdictions and is a registered and unregistered trademark of ours in certain other jurisdictions. Other trademarks and trade names referred to in this Annual Report on Form 10-K are the property of their respective owners.

All references to “Paratek,” “we,” “us,” “our” or the “Company” in this Annual Report on Form 10-K mean Paratek Pharmaceuticals, Inc. and its subsidiaries.

 

 

 

ii


 

PART I

 

 

Item 1.

Business

Corporate History

Merger of Novacea, Inc. and Transcept Pharmaceuticals, Inc.

We are a Delaware corporation that was incorporated in February 2001 as D-Novo Therapeutics, Inc., which later changed its corporate name to Novacea, Inc., or Novacea. Novacea previously traded on The NASDAQ Global Market under the ticker symbol “NOVC.” On January 30, 2009, Novacea completed a business combination with privately-held Transcept Pharmaceuticals, Inc., or Old Transcept, pursuant to which Old Transcept became a wholly-owned subsidiary of Novacea, and the corporate name of Novacea was changed to Transcept Pharmaceuticals, Inc., or Transcept. In connection with the closing of such transaction, Transcept common stock began trading on The NASDAQ Global Market under the ticker symbol “TSPT” on February 3, 2009.

Merger of Transcept Pharmaceuticals, Inc. and Paratek Pharmaceuticals, Inc.

On October 30, 2014, Transcept completed a business combination with privately-held Paratek Pharmaceuticals, Inc., or Old Paratek, in accordance with the terms of the Agreement and Plan of Merger and Reorganization, dated as of June 30, 2014, by and among Transcept, Tigris Merger Sub, Inc., or Merger Sub, Tigris Acquisition Sub, LLC, or Merger LLC, and Old Paratek, or the Merger Agreement, pursuant to which Merger Sub merged with and into Old Paratek, with Old Paratek surviving as a wholly-owned subsidiary of Transcept, followed by the Merger of Old Paratek with and into Merger LLC, with Merger LLC surviving as a wholly-owned subsidiary of Transcept (we refer to these mergers together as the Merger). Immediately following the Merger, Transcept changed its name to “Paratek Pharmaceuticals, Inc.”, and Merger LLC changed its name to “Paratek Pharma, LLC.” In connection with the closing of the Merger, our common stock began trading on The NASDAQ Global Market under the ticker symbol “PRTK” on October 31, 2014.

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Overview

We are a clinical stage biopharmaceutical company focused on the development and commercialization of innovative therapeutics based upon tetracycline chemistry. We have used our expertise in biology and tetracycline chemistry to create chemically diverse and biologically distinct small molecules derived from the minocycline core structure. Our two lead product candidates are the antibacterials omadacycline and sarecycline. Omadacycline entered Phase 3 clinical development for the treatment of acute bacterial skin and skin structure infections, or ABSSSI, in June 2015. On November 9, 2015, we announced that the first patient was dosed in a Phase 3 clinical study of omadacycline for the treatment of community-acquired bacterial pneumonia, or CABP.  We continue to progress our Phase 3 studies consistent with our plan and anticipate results for ABSSSI and CABP in the middle of 2016, and the second half of 2017, respectively. We also plan to initiate our first “oral only” studies for omadacycline, notably with a Phase 1 clinical study in UTI in the second quarter of 2016 and a Phase 1 clinical study in acute sinusitis in the second half of 2016. Sarecycline entered Phase 3 clinical development in December 2014. The following table summarizes the primary therapeutic applications for our product candidates: 

 

 

(1)

We own worldwide commercial rights

(2)

Urinary tract infection (UTI) program in pre-clinical development + Qualified Infectious Disease Product (QIDP) for complicated urinary tract infection (cUTI)

(3)

We own ex-U.S. commercial rights

Omadacycline

If omadacycline completes clinical development and is approved, it will represent a new class of aminomethycycline antibiotics.  Omadacycline is a broad-spectrum, well-tolerated once-daily intravenous, or IV, and oral antibiotic. We believe that omadacycline has the potential to become the primary antibiotic choice of physicians for use as a monotherapy antibiotic for ABSSSI, CABP, or UTI, and other serious community-acquired bacterial infections, where resistance is of concern. We believe omadacycline, if approved, will be used in the emergency room, hospital and community care settings. We have designed omadacycline to provide potential advantages over existing antibiotics, including activity against resistant bacteria, broad spectrum antibacterial activity, IV and oral formulations with once-daily dosing, no known drug interactions, and a favorable safety and tolerability profile. Omadacycline entered Phase 3 clinical development for the treatment of ABSSSI in June 2015. In January, we announced that the top-line data read-out for this trial will occur in the middle of 2016.  Further, an independent data-safety monitoring board has recommended that this trial continue forward as designed.  On November 9, 2015, we announced that the first patient was dosed in a Phase 3 clinical study of omadacycline for the treatment of CABP. We anticipate results for CABP in the second half of 2017. We also plan to initiate our first “oral only” studies for omadacycline, notably with a Phase 1 clinical study in UTI in the second quarter of 2016 and a Phase 1 clinical study in acute sinusitis in the second half of 2016.

We have reached an agreement with the U.S. Food and Drug Administration, or the FDA, for two separate Special Protocol Assessment, or SPA, agreements (updated in November 2013) with regard to Phase 3 registration trial designs for omadacycline in both ABSSSI and CABP. An SPA agreement documents the FDA’s agreement that the design and planned analysis of the Phase 3 clinical trial reviewed under the SPA process, if the trial is successfully completed, will support a new drug application, or an NDA, submission.  An SPA agreement is intended to provide greater assurance that if the agreed upon clinical trial protocols are followed, the clinical trial endpoints are achieved, and there is a favorable risk-benefit profile, the data may serve as the primary basis for an

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efficacy claim in support of NDA approval. An SPA agreement may only be changed through a written agreement between the sponsor and the FDA or if the FDA becomes aware of new public health concerns. SPA agreements are not a guarantee of an approval of a product candidate or any permissible claims about the product candidate, and final determinations of approvability will not be made until the FDA completes its review of the entire NDA. In April 2015, we received confirmation from the FDA that our Phase 3 ABSSSI and CABP protocols, as submitted, continue to be covered by the SPA agreements. In addition, the FDA confirmed that sufficiently positive data from the individual studies for both ABSSSI and CABP would be required to support approval of omadacycline for both indications in the United States. If one of the trials does not meet the pre-specified non-inferiority margins to confirm efficacy, there may not be substantial evidence of efficacy for either indication.  

On November 4, 2015, the FDA granted omadacycline fast track designation for the development of omadacycline in ABSSSI, CABP, and cUTI. Fast track designation facilitates the development, and expedites the review of drugs which treat serious or life-threatening conditions and fills an unmet medical need. In February 2016, we reached agreement with the FDA on the terms of the pediatric program associated with the Pediatric Research and Equity Act.  The FDA has granted Paratek a waiver from conducting studies with omadacycline in children less than eight years old and a deferral in conducting studies in children eight years and older until safety and efficacy is established in adults.  

Recent scientific advice received through the centralized procedure in Europe confirmed general agreement on the design and choice of comparators of the Phase 3 trials for ABSSSI and CABP and noted that approval based on a single study in each indication could be possible but would be subject to more stringent standards than programs that conduct two studies per indication. We are continuing to execute on our current Phase 3 development strategy while evaluating this guidance and the potential for including additional data in support of a European Union submission.

Sarecycline

Our second Phase 3 antibacterial product candidate, sarecycline, previously known as WC3035, is a new, once-daily, tetracycline-derived compound designed for use in the treatment of acne and rosacea. We believe that, based upon the data generated to-date, sarecycline possesses favorable anti-inflammatory activity, plus narrow-spectrum antibacterial activity relative to other tetracycline-derived molecules, oral bioavailability, does not cross the blood-brain barrier, and possesses favorable pharmacokinetic, or PK, properties that we believe make it particularly well-suited for the treatment of inflammatory acne in the community setting. We have exclusively licensed U.S. development and commercialization rights to sarecycline for the treatment of acne to Allergan plc, or Allergan, while retaining development and commercialization rights in the rest of the world. Allergan has informed us that sarecycline entered Phase 3 clinical trials in December 2014 for acne vulgaris. We have also granted Allergan an exclusive license to develop and commercialize sarecycline for the treatment of rosacea in the United States, which converted to a non-exclusive license in December 2014 after Allergan did not exercise its development option with respect to rosacea. There are currently no clinical trials with sarecycline in rosacea underway.

3


 

The Antibiotics Market and Limitations of Current Therapies

Physicians commonly prescribe antibiotics to treat patients with acute and chronic infectious diseases that are either known, or presumed, to be caused by bacteria. The World Health Organization has identified the development of worldwide resistance to currently available antibacterial agents as being one of the three greatest threats to human health in this decade. In data issued by the Alliance for the Prudent Use of Antibiotics (“APUA”) and Cook County Hospital in October 2009 titled “Hospital and Societal Costs of Antimicrobial Resistant Infections in a Chicago Teaching Hospital: Implications for Antibiotic Stewardship,” it was estimated that antibiotic-resistant infections cost the U.S. healthcare system in excess of $20.0 billion annually. In addition, these infections result in more than $35.0 billion in societal costs and over eight million additional days spent in the hospital. Historically, the majority of life-threatening infections resulting from antibiotic-resistant bacteria were acquired in the hospital setting. According to two recent reports issued by Decision Resources Group, “Hospital-Treated Infections” published in 2014 and “Community Acquired Bacterial Pneumonia” published in 2012, approximately seven million antibiotic-treated events occur annually in the three combined indications of ABSSSI, UTI, and CABP in U.S. hospitals. Furthermore, research conducted by us suggests that in ABSSSI, there are approximately 1.1 million and 2.4 million patients treated in the U.S hospital and community settings, respectively, who have elevated risk factors (defined as elderly, immuno-compromised, co-morbidity e.g., diabetes, history of treatment failure, recent hospitalization, resident of a nursing home) and who have a known or suspected antibiotic resistant pathogen such as Methicillin-resistant Staphylococcus aureus (“MRSA”). In CABP, the same research suggests that there are approximately 460 thousand and 540 thousand patients in the U.S. hospital and community settings, respectively, that have these same elevated risk factors and a known or suspected anti-biotic resistant pathogen such as penicillin-resistant S. pneumonia (“PRSP”). The evolving emergence of multi-drug resistant pathogens in the community setting further emphasizes the need for novel agents capable of overcoming antibiotic resistance. IMS data issued in 2014 reported that approximately 75 million retail prescriptions for the top five generic broad spectrum oral antibiotics, levofloxacin, co-amoxyclav, azithromycin, ciprofloxacin, and clarithromycin, were written in 2013 in the United States alone, with approximately two-thirds being in respiratory indications. Global sales in 2010 for these five antibiotics ranged from $3.4 billion for levofloxacin, the only one of these agents still under patent protection that year, to $1.4 billion for clarithromycin, and approximately 65% or more of these sales were generated for their oral formulations as a result of step-down therapy or oral use only.

Bacteria are often broadly classified as gram-positive bacteria, including antibiotic-resistant bacteria such as MRSA and MDR-SP; gram-negative bacteria, including antibiotic-resistant bacteria such as ESBL-producing Enterobacteriaceae; atypical bacteria, including Chlamydophila pneumoniae and Legionella pneumophila; and anaerobic bacteria, including Bacteroides and Clostridia. Antibiotics that are active against both gram-positive and gram-negative bacteria are referred to as “broad spectrum,” while antibiotics that are active only against a select subset of gram-positive or gram-negative bacteria are referred to as “narrow spectrum”. Today, because many of the currently prescribed antibiotics that have activity against resistant organisms typically are “narrow spectrum,” they cannot be used as an empiric monotherapy treatment of serious infections where gram-negative, atypical or anaerobic bacteria may also be involved. Empiric monotherapy refers to the use of a single, antibacterial agent to begin treatment of an infection before the specific pathogen causing the infection has been identified. We believe omadacycline, if approved, will be used in the emergency room, hospital and community care settings.  Based on studies published by the Cleveland Clinic Foundation, the National Institutes of Health (“NIH”), and American Academy of Family Physicians, rates of infections involving organisms other than gram-positive bacteria have been found to be as much as 15% in ABSSSI, up to 40% in CABP and 70% to 90% in UTI.

When a patient goes to the emergency room or hospital for treatment of a serious infection, the physician’s selection of which IV antibiotic to use is often based on the severity of infection, the pathogen(s) believed most likely to be involved and the probability of a resistant pathogen(s) being present. After initial IV therapy and once the infection begins to respond to treatment, hospitals and physicians face strong pressures to discharge patients from the hospital in order to reduce costs, limit hospital-acquired infections and improve the patient’s quality of life. In order to transition patients out of the hospital and home to complete the course of therapy, physicians typically prefer to have the option to prescribe a bioequivalent oral formulation of the same antibiotic.

4


 

Antibiotics used to treat ABSSSI, CABP, UTI and other serious, community-acquired bacterial infections must satisfy a wide range of criteria on a cost-effective basis. For example, we believe that existing treatment options for ABSSSI, including vancomycin, linezolid, daptomycin and tigecycline; for CABP, including levofloxacin, moxifloxacin, azithromycin, ceftriaxone, ceftaroline and tigecycline; and for UTI, including levofloxacin, ciprofloxacin, and trimethoprim/sulfamethoxazole, have one or more of the following significant limitations:

 

·

Limited spectrum of antibacterial activity. Since it may take as long as 48 to 72 hours to identify the pathogen(s) causing an infection and most of the currently available options that cover resistant pathogens are only narrow-spectrum treatments, physicians frequently initially prescribe two or more antibiotics to treat a broad spectrum of potential pathogens. For example, vancomycin, linezolid and daptomycin, the most frequently prescribed treatments for certain serious bacterial skin infections, are narrow-spectrum treatments active only against gram-positive bacteria. The currently available treatment with a more appropriate spectrum for use as a monotherapy against serious and antibiotic-resistant bacterial infections is tigecycline, but it has other significant limitations, including twice-daily IV-only dosing and tolerability concerns, including nausea and vomiting.

 

·

Lack of both oral and IV formulations. The most common treatments for serious bacterial infections, vancomycin, daptomycin, ceftriaxone and tigecycline are only available as injectable or IV formulations. The lack of an effective bioequivalent oral formulation of these and many other commonly prescribed antibiotics requires continued IV therapy, which is inconvenient for the patient and may result in longer hospital stays and greater cost. Alternatively, because of the absence of the same antibiotic in an oral, well-tolerated formulation, physicians may switch the patient to a different orally available antibiotic at the time of hospital discharge. This carries the risk of new side effects and possible treatment failure if the oral antibiotic does not cover the same bacteria that was being effectively treated by the IV antibiotic therapy. While linezolid is a twice-daily IV and oral therapy, it is a narrow-spectrum treatment that is associated with increasing bacterial resistance, side effects from interactions with other therapies and other serious safety concerns.

 

·

Safety/tolerability concerns and side effects. Concerns about antibiotic safety and tolerability are among the leading reasons why patients stop treatment and fail therapy. The most commonly used antibiotics, such as vancomycin, linezolid, daptomycin, levofloxacin, moxifloxacin, azithromycin and tigecycline, are associated with safety and tolerability concerns. For example, vancomycin, which requires frequent therapeutic monitoring of blood levels and corresponding dose adjustments, is associated with allergic reactions and can cause kidney damage, loss of balance, loss of hearing, vomiting and nausea in certain patients. Linezolid is associated with bone marrow suppression and loss of vision and should not be taken by patients who are also on many commonly prescribed anti-depressants, such as monoamine oxidase inhibitors and serotonin reuptake inhibitors. Daptomycin has been associated with a reduction of efficacy in patients with moderate renal insufficiency and has a side effect profile that includes muscle damage. Tigecycline is associated with tolerability concerns because of vomiting and nausea. Levofloxacin and moxifloxacin are associated with tendon rupture and peripheral neuropathy. Additionally, a May 2012 article in the New England Journal of Medicine indicated that a small number of patients treated with azithromycin and quinolones, such as levofloxacin or moxifloxacin, may experience sudden death due to cardiac arrhythmia, which is often predicted by a prolongation of the corrected QT interval, or QTc. The FDA issued a Drug Safety Communication on March 12, 2013 titled “Azithromycin (Zithromax or Zmax) and the risk of potentially fatal heart rhythms,” and the azithromycin drug label warnings were strengthened to address this concern. In November 2015, the FDA held an advisory committee to discuss further strengthening of current label warning language for quinolones as it relates to irreversible, idiosyncratic neurologic damage and tendon ruptures observed when this class of antibiotics is used.

 

·

Increasing bacterial resistance. Bacterial resistance to the most frequently prescribed antibiotics (branded or generic) has limited their potential to treat infections, which prevents their use as an empiric monotherapy. We believe that MRSA and multi-drug resistant Streptococcus pneumoniae (“MDR-SP”) in the community have posed treatment challenges because of resistance to penicillins (resistance rate up to 100% for both), cephalosporins (100% and 11%, respectively, for ceftriaxone), macrolides (83% and 86%, respectively, for erythromycin/azithromycin) and quinolones (73% and 2%, respectively, for levofloxacin), particularly in ABSSSI and CABP. There have also been recent reports of resistance developing during treatment with daptomycin and concerns about an increasing frequency of strains of Staphylococcus aureus with reduced susceptibility to vancomycin. Additionally, linezolid use has been associated with drug resistance, including reports of outbreaks of resistance among Staphylococcus aureus and Enterococcus strains. The increasing occurrence of multi-drug resistant, ESBL-producing, gram-negative bacteria in community-acquired UTIs has severely curtailed the oral antibiotic treatment options available to physicians for these UTIs. For example, in a recent survey, 95% and 76% of the ESBL isolates of Escherichia coli found in UTIs, respectively, were resistant to ceftriaxone and levofloxacin.

These limitations can ultimately lead to longer hospital stays, greater healthcare costs and increased morbidity and mortality due to lower cure rates and increased side effects. While certain antibiotics address some of these outcomes, we do not believe there is one superior treatment option that satisfies all outcomes. We believe that it is essential for the treatment of patients with serious,

5


 

community-acquired bacterial infections that physicians prescribe the right antibiotic the first time, as ineffective antibiotics can quickly lead to progressively more severe and invasive infections or even death.

Our Product Candidates

Omadacycline

In order to address some of the limitations of current antibiotics, we have designed omadacycline to be a new broad-spectrum antibiotic for potential use as an empiric monotherapy option for patients suffering from serious, community-acquired bacterial infections, such as ABSSSI, CABP and UTI, where antibiotic resistance is of concern for treating physicians. We believe omadacycline may enable physicians to prescribe an antibiotic that will increase the chance for reliable cure rates, the potential to avoid hospitalization and possible shorter hospital stays through the completion of therapy with an oral antibiotic at home, all of which may reduce overall healthcare costs. Potential advantages of omadacycline include:

 

·

Once-daily oral and IV formulations to support “step-down” therapy. Previous to the two on-going clinical trials, we have studied once-daily IV and oral formulations of omadacycline in approximately 700 subjects to-date across multiple Phase 1, Phase 2 and Phase 3 clinical trials, and we plan to use both of these formulations in our Phase 3 clinical trials. The bioequivalence of the IV and oral formulations may permit step-down therapy, which could allow patients to start treatment on the IV formulation then “step down” to the oral formulation of the same antibacterial agent once the infection is responding. We believe that step-down therapy has the potential to avoid the concerns that can accompany switching from an IV agent to a different class of oral antibiotic and to facilitate the continuance of curative therapy at home. We believe that our SPA agreements with the FDA will permit us to submit for approval of both IV and oral formulations of omadacycline.

 

·

Broad spectrum of antibacterial activity. Omadacycline has demonstrated in vitro activity against all common pathogens found in ABSSSI, such as Staphylococcus aureus, including MRSA, Streptococci (including Group A Streptococci), anaerobic pathogens and many gram-negative organisms. Omadacycline is also active in vitro against the key pathogens found in CABP, such as Streptococcus pneumoniae, including MDR-SP, Staphylococcus aureus, Haemophilus influenzae and atypical bacteria, including Legionella pneumophila. On the basis of the in vitro spectrum of activity demonstrated by omadacycline against a range of pathogens in our pre-clinical testing, we believe omadacycline has the in vitro spectrum of coverage needed to potentially become the primary antibiotic choice of physicians and serve as an empiric monotherapy option for ABSSSI, CABP, UTI and other serious, community-acquired bacterial infections where resistance is of concern, if approved by the FDA.

 

·

Favorable safety and tolerability profile. To date, we have observed omadacycline to be generally well tolerated in studies involving approximately 700 subjects. We have conducted a thorough QTc study, as defined by FDA guidance to assess prolongation of QTc, an indicator of cardiac arrhythmia. This study suggests no prolongation of QTc by omadacycline at three times the therapeutic dose. There has been observations of a transient, self-limited increase in heart rate, primarily in normal healthy volunteer subjects.  These effects appear to be related to peak plasma concentration (“Cmax”) and to a specific antagonist effect on the M2 subtype of the muscarinic receptor.  There were no Adverse Events (“AEs”) of ventricular arrhythmia, QT prolongation, seizures, syncope, or sudden death in the completed studies. Further, in clinical studies, omadacycline does not appear to adversely affect blood cell production, nor does it appear to metabolize in the liver or anywhere else in the body, thus reducing the likelihood of causing drug-to-drug interactions. Additionally, omadacycline has resulted in low rates of diarrhea, and we have not observed Clostridium difficile infection, which can frequently occur from the use of broad-spectrum antibiotics.

 

·

Designed to overcome bacterial resistance. We designed omadacycline to overcome the two major mechanisms of tetracycline resistance, known as pump efflux and ribosome protection. This approach was via structure-activity relationship chemistry-based modifications of the seven and nine positions of minocycline. Our attempts to generate resistance to omadacycline in the laboratory suggest a low potential for developing resistance. In addition, our testing of thousands of bacterial samples in the laboratory suggests that omadacycline has not been affected to date by clinically relevant mechanisms of resistance to tetracyclines or to any other class of antibiotics.

We have generated innovative small molecule therapeutic candidates based upon medicinal chemistry-based modifications, according to structure-based activity, of all positions of the core tetracycline molecule. These efforts have yielded molecules with broad-spectrum antibiotic properties and narrow-spectrum antibiotic properties, and molecules with potent anti-inflammatory properties to fit specific therapeutic applications. This proprietary chemistry platform has produced many compounds that have shown interesting characteristics in various in vitro and in vivo efficacy models. Omadacycline and sarecycline are examples of molecules that were synthesized from this chemistry discovery platform.

6


 

In addition to its broad spectrum of antibacterial activity and its availability in once-daily oral and IV formulations, omadacycline appears to penetrate tissues broadly, including the lungs, muscle and kidneys, thereby achieving high concentrations at the sites of infection. Since omadacycline is eliminated from the body (as unchanged parent compound) via the kidneys and intestine in a balanced manner, we believe it may potentially be used in patients with diminished kidney and liver function, without dose adjustment. In addition, we have completed pre-clinical work evaluating omadacycline for the potential treatment of sinusitis, also known as a sinus infection or rhinosinusitis. We intend to continue exploring the potential use of omadacycline for the treatment of patients with sinusitis.

Completed Omadacycline Clinical Trials

Early Terminated Phase 3 Clinical Trial in cSSSI

Design. We designed our Phase 3 clinical trial pursuant to the then-current 1998 FDA guidance on developing antimicrobial drugs for the treatment of complicated skin and skin structure infections, or cSSSI. The primary objective of the clinical trial was to establish that omadacycline as a monotherapy was not inferior to linezolid, with or without moxifloxacin, as a treatment for patients with serious skin infections. Following randomization, patients initially received either IV therapy with 100 milligrams, or mg, of omadacycline every 24 hours, or 600 mg of linezolid every 12 hours. For patients with infections suspected or documented as involving gram-negative bacteria, the blinded physician had the option of providing patients with additional antibiotic therapy, with patients assigned to the linezolid arm receiving 400 mg of moxifloxacin every 24 hours and patients assigned to omadacycline receiving a placebo, since omadacycline has activity against some of the most common gram-negative bacteria that commonly cause these infections, to match the dosing regimen of linezolid-treated patients.

Patients who were enrolled in this clinical trial had one of three major infection types: wound infection, cellulitis or major abscess. Enrollment of patients with major abscess was limited to 20% of the total enrollment. Patients were initially treated with the applicable study drug intravenously and then, based on the physician’s assessment of the response of the infection to treatment, patients could be switched to oral therapy. For oral step-down therapy, patients randomized to linezolid received one 600 mg tablet of linezolid every 12 hours, and if treatment for suspected gram-negative bacteria was still required, one 400 mg tablet of moxifloxacin every 24 hours. Patients randomized to omadacycline received 300 mg of omadacycline (dosed as two 150 mg tablets) every 24 hours, plus placebo where gram-negative bacteria was suspected. Patients transitioned to oral therapy after receiving an average of 4.8 days of IV therapy. We intended to evaluate the trial’s primary endpoint by analyzing the clinical success rates in the intent-to-treat, or ITT, and the clinically evaluable, or CE, populations. The ITT population in this clinical trial refers to all enrolled subjects who received at least one dose of study drug, and the CE population refers to all ITT subjects who had a qualifying infection as defined in the protocol, received the study drug for more than five days, had all protocol-defined clinical evaluations and had not received non-study antibiotics. As a result of the study being terminated prior to completion due to FDA changes in regulatory guidance for the primary endpoint, we did not enroll a sufficient number of patients to determine non-inferiority or superiority.

Patient characteristics. Of the 143 subjects randomized, 140 patients received at least one dose of study drug. Of those 140 subjects, 68 were randomized to omadacycline and 72 were randomized to linezolid. Cellulitis was present in 92 of the 140 patients who received at least one dose of study drug. The maximal dimension of the infection at baseline exceeded 10 cm for 125 of the 140 patients, and for these patients the mean maximal lesion dimension exceeded 20 cm.

Efficacy . Although we terminated this trial before reaching its enrollment goal, thus precluding any statistical conclusions with regard to non-inferiority, the table below shows the clinical success rates in omadacycline- and linezolid-treated patients in the two primary analysis populations, ITT and CE. The overall clinical success rates in the ITT population were between 85% and 90% in both omadacycline- and linezolid-treated patients. In the CE population, the overall clinical success rates were in the mid-90% range for both omadacycline- and linezolid-treated patients. In the microbiologically evaluable population, which includes patients included in the CE population from whom a bacterial pathogen was isolated at baseline enrollment, the clinical success rates for MRSA and methicillin-susceptible Staphylococcus aureus, or MSSA, infections were greater than 90% in both omadacycline- and linezolid-treated patients. Although not statistically significant, these data are congruent with the comparative efficacy activity seen in our Phase 2 clinical trial of omadacycline in cSSSI.

 

 

 

Omadacycline

 

 

Linezolid

 

Population

 

Clinical

Success

(N)

 

 

Total

(N)

 

 

Clinical

Success

(%)

 

 

Clinical

Success

(N)

 

 

Total

(N)

 

 

Clinical

Success

(%)

 

Intent-to-Treat

 

 

58

 

 

 

68

 

 

 

85.3

%

 

 

64

 

 

 

72

 

 

 

88.9

%

Clinically Evaluable

 

 

58

 

 

 

60

 

 

 

96.7

%

 

 

64

 

 

 

67

 

 

 

95.5

%

 

Note: The table above shows data from our Phase 3 non-registration clinical trial, which did not have a sufficient number of patients enrolled to determine statistical non-inferiority.

7


 

We also analyzed subgroups of CE patients defined by the category of complicated skin infection experienced by those patients. The table below shows the clinical success rates at the test-of-cure, or TOC, in CE patients for each of the three major categories of serious skin infections (wound, cellulitis and major abscess). Although not intended for statistical interpretation, these data showed that for each of the categories of serious skin infection, omadacycline treatment resulted in approximately the same cure rate as linezolid treatment, thus suggesting consistent activity across the major ABSSSI subtypes that we intend to study in the Phase 3 clinical trials.

 

 

 

Omadacycline

 

 

Linezolid

 

Population

 

Clinical

Success

(N)

 

 

Total

(N)

 

 

Clinical

Success

(%)

 

 

Clinical

Success

(N)

 

 

Total

(N)

 

 

Clinical

Success

(%)

 

All CE Patients at TOC

 

 

58

 

 

 

60

 

 

 

96.7

%

 

 

64

 

 

 

67

 

 

 

95.5

%

Wound

 

 

13

 

 

 

13

 

 

 

100

%

 

 

12

 

 

 

13

 

 

 

92.3

%

Cellulitis

 

 

38

 

 

 

39

 

 

 

97.4

%

 

 

44

 

 

 

45

 

 

 

97.8

%

Major Abscess

 

 

7

 

 

 

8

 

 

 

87.5

%

 

 

8

 

 

 

9

 

 

 

88.9

%

 

Note: The table above shows data from our Phase 3 non-registration clinical trial, which did not have a sufficient number of patients enrolled to determine statistical non-inferiority.

Safety and tolerability. The overall incidence of adverse events was similar in both treatment groups. There were no clinically significant alterations of cardiovascular, renal or hepatic safety laboratory values. One death occurred in a patient randomized to omadacycline who presented with undiagnosed metastatic lung cancer after being assessed as cured following the TOC visit. Study investigators did not consider any of the serious adverse events reported to be related to either omadacycline or linezolid. The table below shows the adverse events reported by 10% or more of either omadacycline-treated patients or linezolid-treated patients.

 

 

 

Omadacycline

(N = 68)

 

 

Linezolid

(N = 72)

 

Adverse Event

 

N

 

 

Patients

Reporting

AE (%)

 

 

N

 

 

Patients

Reporting

AE (%)

 

Nausea

 

 

18

 

 

 

26.5

%

 

 

19

 

 

 

26.4

%

Headache

 

 

16

 

 

 

23.5

%

 

 

5

 

 

 

6.9

%

Dizziness

 

 

7

 

 

 

10.3

%

 

 

6

 

 

 

8.3

%

Vomiting

 

 

6

 

 

 

8.8

%

 

 

11

 

 

 

15.3

%

Diarrhea

 

 

3

 

 

 

4.4

%

 

 

13

 

 

 

18.1

%

 

Post-hoc efficacy analysis. In October 2013, the FDA issued the current guidance for ABSSSI removing elimination of fever and defining the early clinical response, or ECR, as a ≥ 20% reduction in lesion size within 48 to 72 hours of initial therapy compared to the baseline measurement in ITT patients as the primary endpoint for efficacy. We conducted a post-hoc retrospective analysis of the Phase 3 cSSSI non-registration trial data to assess the ECR rate in omadacycline- versus linezolid-treated patients. All ITT patients who had a lesion measurement taken within 48 to 72 hours following the initiation of treatment at an end-of-IV visit, or EOIV, were included in this retrospective analysis. As with our Phase 2 clinical trial, the protocol required that lesion size be measured by recording the maximal lesion dimension at baseline. Twenty-one omadacycline-treated patients and 21 linezolid-treated patients were identified that fit the criteria for analysis. The mean percent reduction in lesion size in each of these patient groups at the EOIV and at the end-of-treatment, or EOT, visit are shown in the table below. Of the 21 omadacycline-treated patients analyzed, 100% showed a reduction in lesion size of 20% or more compared to baseline measurements within 48 to 72 hours compared to 95.2% of patients in the linezolid-treatment arm. Both patient treatment arms showed comparable high ECR rates as well as additional lesion size reduction at the EOT visit. Taken together with the post-hoc efficacy analysis we conducted in the Phase 2 clinical trial, we believe that this analysis supports our belief that lesion size will be reduced at a comparable rate to that observed with linezolid and supports our belief that comparable activity to linezolid with the newly required ECR endpoint will be shown in the Phase 3 registration trial.

 

 

 

Omadacycline

(N = 21)

 

 

Linezolid

(N = 21)

 

Mean % change in lesion size at EOIV (48-72 hours after

   baseline)

 

 

(62.3

)%

 

 

(57.4

)%

Mean % change in lesion size at EOT

 

 

(90.8

)%

 

 

(90.1

)%

ECR (>20% reduction in lesion size 48-72 hours after

   baseline)

 

 

100

%

 

 

95.2

%

 

8


 

Pharmacokinetics. PK data from our terminated Phase 3 clinical trial, together with the data collected in our Phase 2 clinical trial, suggest that we achieved comparable drug levels in both healthy Phase 1 healthy volunteer subjects and subjects with serious skin infections at the doses utilized in the trial.

Summary. Although we terminated our Phase 3 clinical trial before we reached its enrollment goal due to the FDA’s decision to change the primary endpoint of skin infection trials to the ECR endpoint, we believe that the results of the Phase 3 clinical trial further support the belief that omadacycline will be well tolerated and effective as a treatment of patients with serious skin infections. Combined with those patients treated in the randomized Phase 2 clinical trial, we have treated a total of 179 patients with skin infections with omadacycline in these two studies. Further, we believe that data from our post-hoc analyses of the newly required ECR endpoint support our belief that omadacycline will demonstrate comparable activity to linezolid within the ABSSSI study design in our planned Phase 3 ABSSSI SPA agreement with the FDA.

Phase 2 Clinical Trial in cSSSI

We designed and conducted and completed a randomized Phase 2 clinical trial with the primary objective of comparing the safety and tolerability of omadacycline to linezolid in patients with cSSSI. Our key secondary objectives involved comparing the efficacy of omadacycline to linezolid and assessing the PK properties of omadacycline.

Following randomization, patients initially received IV therapy with 100 mg of omadacycline every 24 hours, or 600 mg of linezolid every 12 hours. For patients with infections suspected or documented as involving gram-negative bacteria, the blinded physician had the option of providing patients with additional IV antibiotic therapy, with patients assigned to the linezolid group also receiving two grams of aztreonam every 12 hours, and patients assigned to the omadacycline group receiving a placebo to match the dosing regimen of linezolid-treated patients. Based on a blinded physician’s assessment of the appropriateness of hospital discharge and continuation of oral therapy, most patients then transitioned to oral therapy. For oral therapy, patients randomized to omadacycline received 200 mg of omadacycline (dosed as two 100 mg capsules) every 24 hours. Patients randomized to linezolid received one 600 mg tablet of linezolid every 12 hours. Patients in both groups received an average of five to six days of oral therapy following an average of 4.3 days of IV therapy.

Patient characteristics. Of the 219 patients that received at least one dose of the study drug in our Phase 2 clinical trial, 111 patients were randomly selected to be treated with omadacycline and 108 were randomly selected to be treated with linezolid. Two-thirds (66.2%, or 145) of the patients suffered from major abscesses. About 17.4%, or 38, of the patients suffered from wound infections, and the majority of these infections (29/38, or 76.3%) were due to traumatic injuries. Another approximately 8.2%, or 18 patients, suffered from cellulitis, and approximately 8.2%, or 18 patients, suffered from lower extremity lesions. Over two-thirds of the patients exhibited moderate to severe reddening of the skin, or erythema; hardness, or induration, of the infected area; and pain at baseline.

Efficacy. We measured clinical responses in two study populations, ITT and CE. The ITT population in this clinical trial refers to all enrolled subjects who received at least one dose of study drug, and the CE population refers to all ITT subjects who had a qualifying infection and were treated and evaluated as defined in the protocol. The table below summarizes the rates of successful clinical response for each of the two study populations and shows that in both populations the successful clinical response rates in omadacycline-treated patients were comparable to those in linezolid-treated patients. Analyses of clinical responses by category of serious infection also showed that favorable outcomes with omadacycline appeared to be consistent across infection types. The leading cause of infection was Staphylococcus aureus, the majority of which were MRSA isolates. In the microbiologically evaluable population, the clinical success rates for MRSA and MSSA infections were greater than 90% in both omadacycline- and linezolid-treated patients.

 

 

 

Omadacycline

 

 

Linezolid

 

Population

 

Clinical

Success

(N)

 

 

Total

(N)

 

 

Clinical

Success

(%)

 

 

Clinical

Success

(N)

 

 

Total

(N)

 

 

Clinical

Success

(%)

 

Intent-to-Treat

 

 

98

 

 

 

111

 

 

 

88.3

%

 

 

82

 

 

 

108

 

 

 

75.9

%

Clinically Evaluable

 

 

98

 

 

 

100

 

 

 

98.0

%

 

 

82

 

 

 

88

 

 

 

93.2

%

 

9


 

Safety and tolerability. There were three serious adverse events reported in this clinical trial, one in an omadacycline-treated patient and two in linezolid-treated patients. The study investigator considered the event in the omadacycline-treated patient, which involved worsening confusion, to be unrelated to the study therapy. Among the 111 omadacycline-treated patients, 46 (41.4%) experienced one or more treatment-emergent adverse events and 24 (21.6%) experienced one or more adverse events assessed as potentially treatment-related. By comparison, among the 108 linezolid-treated patients, 55 (50.9%) experienced one or more treatment-emergent adverse events and 33 (30.6%) experienced adverse events assessed as potentially treatment-related. In both arms of the clinical trial, the most frequently involved organ system was the gastrointestinal tract, with adverse events reported in 21 (18.9%) omadacycline-treated patients and 20 (18.5%) linezolid-treated patients. There were no significant alterations of cardiovascular, renal or hepatic safety laboratory values. The table below lists 10 specific treatment-emergent adverse events that occurred in five or more patients in either treatment group.

 

 

 

Omadacycline

(N = 111)

 

 

Linezolid

(N = 108)

 

Adverse Event

 

N

 

 

%

 

 

N

 

 

%

 

Nausea

 

 

13

 

 

 

11.7

%

 

 

8

 

 

 

7.4

%

Headache

 

 

7

 

 

 

6.3

%

 

 

9

 

 

 

8.3

%

Constipation

 

 

5

 

 

 

4.5

%

 

 

2

 

 

 

1.9

%

Fatigue

 

 

5

 

 

 

4.5

%

 

 

2

 

 

 

1.9

%

Rash / rash erythematous

 

 

5

 

 

 

4.5

%

 

 

2

 

 

 

1.9

%

Vomiting

 

 

5

 

 

 

4.5

%

 

 

4

 

 

 

3.7

%

Dizziness

 

 

4

 

 

 

3.6

%

 

 

5

 

 

 

4.6

%

Alanine aminotransferase increased(1)

 

 

3

 

 

 

2.7

%

 

 

7

 

 

 

6.5

%

Aspartate aminotransferase increased(1)

 

 

3

 

 

 

2.7

%

 

 

5

 

 

 

4.6

%

Diarrhea

 

 

3

 

 

 

2.7

%

 

 

6

 

 

 

5.6

%

 

(1)

Refers to an elevated level of this specific liver enzyme.

Post-hoc efficacy analysis. In October 2013, the FDA issued the current guidance for ABSSSI defining the ECR as ≥ 20% reduction in lesion size within 48 to 72 hours of initial therapy compared to the baseline measurement in ITT patients as the primary endpoint for efficacy. We conducted a retrospective analysis of the Phase 2 cSSSI data to assess the early clinical response rate in omadacycline- versus linezolid-treated patients. All ITT patients who had a lesion measurement taken within 48 to 72 hours following the initiation of treatment at an EOIV were included in this retrospective analysis. Also in accordance with FDA guidance, patients with diabetic foot infections were excluded from the analysis; these patients were excluded from enrollment in the Phase 3 clinical trial and are excluded from enrollment in the upcoming Phase 3 ABSSSI clinical trial. The Phase 2 protocol required that lesion size be measured by recording the maximal lesion dimension at baseline. Nineteen omadacycline-treated patients and 24 linezolid-treated patients were identified that fit the criteria for analysis. The mean percent reduction in lesion size in each of these patient groups at the EOIV and at the EOT visit are shown in the table below. Of the 19 omadacycline patients analyzed, 84.2% showed a reduction in lesion size of 20% or more compared to baseline measurements within 48 to 72 hours compared to 83.3% of patients in the linezolid arm. Both patient treatment arms showed a comparable ECR rate as well as additional lesion size reduction at the EOT visit. While our previous Phase 2 and 3 clinical trials were not designed to test statistical significance for the new ECR endpoint, we believe the results of the previous Phase 2 and 3 clinical trials, when considered together, support the hypothesis that omadacycline will demonstrate comparable efficacy to linezolid at the ECR endpoint.

 

 

 

Omadacycline

(N = 19)

 

 

Linezolid

(N = 24)

 

Mean % change in lesion size at EOIV (48-72 hours after

   baseline)

 

 

(39.0

)%

 

 

(44.5

)%

Mean % change in lesion size at EOT

 

 

(82.2

)%

 

 

(68.5

)%

ECR (>20% reduction in lesion size 48-72 hours after

   baseline)

 

 

84.2

%

 

 

83.3

%

 

Pharmacokinetics. We observed that omadacycline exposure at the doses utilized in this study was similar to that measured in the earlier Phase 1 clinical trials in healthy volunteers. We believe these results are consistent with achieving therapeutic exposures using a once-daily regimen of omadacycline in both the IV and oral formulations.

10


 

Summary. In treating patients with serious infections involving the skin and surrounding tissues, we believe that IV and oral formulations of omadacycline appeared to demonstrate comparable safety, tolerability and activity to linezolid. Based on this work, we conducted an End-of-Phase 2 meeting with the FDA in 2008, and we determined to progress omadacycline into Phase 3 clinical trials for the treatment of cSSSI. Further, we believe that data from the post-hoc analyses of the ECR endpoint would support the belief that omadacycline will demonstrate comparable activity to linezolid within the ABSSSI study design in the SPA agreement with the FDA.

Combined Data from Phase 2 and Phase 3 Non-Registration Clinical Trials in Serious Bacterial Skin Infections

 

 

 

Omadacycline

 

 

Linezolid

 

Population(1)

 

Clinical

Success(2)

(N)

 

 

Total

(N)

 

 

Clinical

Success

(%)

 

 

Adverse

Events

(N)

 

 

 

Adverse

Events

(%)

 

 

Clinical

Success(2)

(N)

 

 

Total

(N)

 

 

Clinical

Success

(%)

 

 

Adverse

Events

(N)

 

 

 

Adverse

Events

(%)

 

Intent-to-Treat

 

 

156

 

 

 

179

 

 

 

87.2

%

 

 

102

 

 

 

 

57

%

 

 

146

 

 

 

180

 

 

 

81.1

%

 

 

113

 

 

 

 

63

%

Clinically Evaluable

 

 

156

 

 

 

160

 

 

 

97.5

%

 

 

 

(3)

 

 

 

 

 

146

 

 

 

155

 

 

 

94.2

%

 

 

 

(3)

 

 

 

 

(1)

An ITT population refers to all enrolled subjects, as defined in the protocol, who received at least one dose of the study drug. A CE population refers to all ITT subjects who had a qualifying infection, as defined in the protocol, received the study drug for more than five days, had all protocol-defined clinical evaluations and had not received non-study antibiotics.

(2)

Clinical Success refers to the continued improvement or complete resolution of baseline signs and symptoms in the ITT or CE population, assessed by the clinical investigator 10 to 17 days after the last dose of the study drug. This assessment is known as the TOC.

(3)

Adverse events are evaluated for all patients who received more than one dose of the study drug, and as such, are based on the ITT population.

Note: The table above shows combined data from our Phase 2 and Phase 3 non-registration clinical trials, neither of which had a sufficient number of patients enrolled to determine statistical non-inferiority.

Phase 1 Clinical Trials

We assessed omadacycline in 17 single-dosing and multiple-dosing Phase 1 clinical trials for both the IV and oral formulations, involving more than 500 healthy volunteer subjects. We believe that the results of these Phase 1 clinical trials appeared to show that omadacycline:

 

·

was well tolerated, without complaints of nausea or vomiting in subjects treated with the commercial ready IV or oral formulations being used in Phase 3 clinical trials at the planned therapeutic dose;

 

·

was associated with asymptomatic increases in heart rate in healthy volunteer subjects but that were not evident in Phase 2 and Phase 3 non-registration clinical trials in patients with cSSSI;

 

·

was associated with mild reversible increases in alanine aminotransferase, a liver enzyme, at doses above the therapeutic doses used in Phase 2 and Phase 3 non-registration clinical trials;

 

·

was bioequivalent in both IV and oral formulations;

 

·

was without induction or inhibition of CYP enzymes;

 

·

had PK properties sufficient to support once-daily dosing regimens;

 

·

had minimal variations in bioavailability among men and women and patients at varying weights and sizes, supporting fixed dose formulations;

 

·

did not affect the QTc interval as demonstrated in a thorough QTc study;

 

·

would not require dosage adjustment in patients with hepatic impairment;

 

·

has reduced oral bioavailability by food if tablets are taken too close after a meal or if a meal is eaten too soon after taking a tablet (currently requiring oral dosing six hours after a meal and no food for two hours after oral dosing to minimize any potential PK interference by food); and

 

·

was excreted as active drug (unchanged parent compound without metabolism) with sufficient concentrations in urine to contemplate development for UTI.

11


 

From our End-of-Phase 2 meeting with the FDA regarding omadacycline, the FDA stated that our anticipated preclinical package for this product candidate could be acceptable to support the submission and review of an NDA. We are currently conducting Phase 1 clinical trials to evaluate exposure levels of omadacycline in patients with impaired kidney function and a small Phase 1 bronchoalveolar lavage/epithelial lining fluid clinical trial to evaluate the PK properties of omadacycline in the lungs. In addition, we plan to conduct a limited number of additional Phase 1 studies in subjects with cystitis and acute sinusitis. We also intend to initiate a pediatric PK study prior to submission of the omadacycline NDA in order to meet Pediatric Research Equity Act, or PREA, requirements. On February 16, 2016 we reached agreement with the FDA on the terms of the pediatric program associated with PREA.  FDA has granted Paratek a waiver from conducting studies with omadacycline in children less than 8 years old and a deferral in conducting studies in children 8 years and older until safety and efficacy is established in adults.  

Preclinical Studies

We have conducted preclinical studies to assess the safety of omadacycline, including thirteen week IV and oral studies in rats and monkeys to assess for efficacy in animal models of bacterial infections. In vitro and in vivo testing indicated the potential clinical utility of omadacycline in ABSSSI, CABP and UTI. The following table in the Microbiology sections shows the in vitro activity of omadacycline against a broad range of bacterial pathogens found in ABSSSI, CABP and UTI, as assessed in independent laboratories using bacteria isolated from clinical specimens.

Clinical bacterial isolate minimum inhibitory concentration, or MIC, data from Phase 3 clinical trials will determine the susceptibility or resistance breakpoint levels of omadacycline for the bacteria noted in the following tables in the Microbiology sections. MIC values are indicative of a bacterium’s susceptibility or resistance to a particular antibiotic. A lower MIC value indicates potentially greater potency in vitro. Susceptibility and resistance data from other tetracycline-like compounds provide some guidance with regard to expected results for omadacycline. Historically, with older tetracyclines, MIC values for gram-positive bacteria were considered susceptible up to two micrograms per milliliter, or µg/mL, and for most gram-negative bacteria up to four µg/mL. Traditionally, bacteria considered resistant had MIC values for gram-positive bacteria of eight µg/mL and above, while gram-negative bacteria were considered resistant with MIC values of 16 µg/mL and higher.

Pharmacodynamic Characteristics Supporting Omadacycline Clinical Development in CABP

The microbiologic attributes of omadacycline, its effectiveness in non-neutropenic animal infection models, and its human pharmacokinetics suggest that omadacycline will be efficacious in CABP. Omadacycline has demonstrated in vitro activity against the most common bacterial pathogen, Streptococcus pneumoniae (MIC90=0.06 to 0.12 µg/ml) and against H. influenzae (MIC90= 1.0 µg/ml) and Legionella pneumophila (MIC90= 0.25 µg/ml). Based on pharmacodynamics modeling using animal infection models, and taking into consideration an intact immune system, the projected efficacious plasma area under the curve (“AUC”) to be attained in pneumonia would be between 0.5 and 1.1 µg*hr/ml. This would correspond to an AUC/MIC ratio between 4.3-8.9. In humans, omadacycline has been shown to have a steady-state plasma AUC of approximately 10 µg*hr/ml—well above the AUC required for projected clinical efficacy based upon these animal models. Other factors may also contribute to efficacy, including low protein binding (< 20% in humans) and high tissue concentrations (in rats, omadacycline concentrations are 5.8 times greater than the plasma concentrations).

The microbiologic and pharmacokinetic attributes of omadacycline also compare favorably to tigecycline, which was approved for the treatment of moderate to severe CABP (IV-only) with robust clinical efficacy. Whereas the activity of omadacycline against S. pneumoniae is similar (0.06-0.125 µg/ml compared to 0.06 for tigecycline), the human plasma AUC (approximately 4.7 µg*hr/ml for tigecycline versus approximately 10 µg*hr/ml for omadacycline) and human protein binding (>80% for tigecycline and <20% for omadacycline). Human lung concentrations for tigecycline are approximately twice the concentration attained in plasma. Although human data for lung concentrations of omadacycline are not available, in rat studies, the lung concentrations were 5.8 times greater than in plasma, consistent with robust penetration into lung tissues. The estimated AUC/MIC ratio necessary for efficacy for tigecycline is approximately 12.8. Using the S. pneumoniae MIC90 of 0.06 ug/ml, which suggests that a plasma AUC of at least 0.8 µg*hr/ml, is required for clinical efficacy of tigecycline and is within the calculated range of efficacious plasma AUC levels for omadacycline based on animal studies noted above. These data suggest that the pharmacodynamics characteristics of omadacycline compare favorably to tigecycline and support the clinical development of omadacycline in CABP.

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In Vitro Microbiology Studies

In the tables below, the column labeled “Number of Isolates” indicates the number of patients from whom an isolate of the organism was obtained. MIC90 indicates the concentration of drug that inhibits 90% of the pathogens in vitro, while MIC50 indicates the concentration of drug that inhibits 50% of the pathogens in vitro.

 

Class

 

Organism

 

Number

of Isolates

 

 

MIC50

(µg / mL)

 

 

MIC90

(µg / mL)

 

Gram-positive pathogens

 

Staphylococcus aureus (MSSA)

 

 

52

 

 

 

0.25

 

 

 

0.25

 

 

 

Staphylococcus aureus (MRSA)

 

 

111

 

 

 

0.25

 

 

 

0.25

 

 

 

Coagulase-negative staphylococci

 

 

152

 

 

 

0.25

 

 

 

1.00

 

 

 

Enterococcus faecalis (VSE)(1)

 

 

107

 

 

 

0.25

 

 

 

0.50

 

 

 

Enterococcus faecalis (VRE)(2)

 

 

47

 

 

 

0.12

 

 

 

0.25

 

 

 

Enterococcus faecium (VSE)

 

 

56

 

 

 

0.12

 

 

 

0.12

 

 

 

Enterococcus faecium (VRE)

 

 

100

 

 

 

0.12

 

 

 

0.12

 

 

 

Streptococcus pneumoniae

 

 

104

 

 

 

0.12

 

 

 

0.12

 

 

 

Streptococcus pneumoniae (PRSP)(3)

 

 

51

 

 

 

0.12

 

 

 

0.12

 

 

 

Streptococcus pyogenes

 

 

104

 

 

 

0.12

 

 

 

0.12

 

 

 

Streptococcus agalactiae

 

 

53

 

 

 

0.12

 

 

 

0.25

 

Gram-negative pathogens

 

Haemophilus influenzae

 

 

105

 

 

 

0.50

 

 

 

1.00

 

 

 

Moraxella catarrhalis

 

 

105

 

 

 

0.25

 

 

 

0.25

 

 

 

Escherichia coli

 

 

203

 

 

 

2.00

 

 

 

4.00

 

 

 

Klebsiella pneumoniae

 

 

204

 

 

 

2.00

 

 

 

8.00

 

 

 

Acinetobacter baumannii

 

 

53

 

 

 

0.25

 

 

 

4.00

 

Anaerobic pathogens

 

Bacteroides fragilis

 

 

100

 

 

 

1.00

 

 

 

2.00

 

 

 

Clostridium perfringens

 

 

100

 

 

 

1.00

 

 

 

4.00

 

 

 

Anaerobic gram-positive cocci

 

 

101

 

 

 

0.25

 

 

 

0.50

 

Atypical pathogens

 

Legionella pneumophila

 

 

25

 

 

 

0.25

 

 

 

0.25

 

 

 

Chlamydia pneumoniae

 

 

5

 

 

 

 

 

0.125-0.25

 

 

(1)

Vancomycin-sensitive enterococcus (“VSE”)

(2)

Vancomycin-resistant enterococcus (“VRE”)

(3)

Penicillin-resistant s. pneumonia (“PRSP”)

The tables below compare the in vitro activity of omadacycline and various antibiotics for ABSSSI, CABP and UTI pathogens against various strains of bacteria, including those resistant to current antibiotics.

Key Pathogens—ABSSSI

 

 

 

MIC90 (µg/ml)

Organism (Number of Isolates)

 

Omadacycline

 

 

Ceftriaxone

 

 

 

Linezolid

 

 

Levofloxacin

 

 

Vancomycin

 

 

Amox-

Clav(1)

 

 

Azithromycin

Staphylococcus aureus (MRSA) (111)

 

 

0.25

 

 

>64

 

(2)

 

 

4

 

 

>8

 

 

 

1

 

 

>8

 

 

>8

Staphylococcus aureus (MSSA) (52)

 

 

0.25

 

 

 

4

 

 

 

 

2

 

 

 

2

 

 

 

1

 

 

 

1

 

 

>8

Streptococcus pyogenes (104)

 

 

0.12

 

 

 

0.03

 

 

 

 

2

 

 

 

1

 

 

 

0.5

 

 

 

0.015

 

 

>4

 

(1)

Amoxicillin-clavulanic acid.

(2)

“>” indicates the highest concentration tested.

Key Anaerobe Pathogens—ABSSSI

 

 

 

MIC90 (µg/ml)

 

Organism (Number of Isolates)

 

Omadacycline

 

 

Cefotaxime

 

 

Metronidazole

 

 

Clindamycin

 

 

Amox-

Clav

 

Anaerobic gram-positive cocci (101)

 

 

0.5

 

 

 

16

 

 

>64

(1)

 

 

8

 

 

 

16

 

 

(1)

“>” indicates the highest concentration tested.

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Key Typical Pathogens—CABP

 

 

 

MIC90 (µg/ml)

 

 

Organism (Number of Isolates)

 

Omadacycline

 

 

Ceftriaxone

 

 

 

Linezolid

 

 

 

Levofloxacin

 

 

Vancomycin

 

 

Amox-

Clav

 

 

Azithromycin

 

 

Staphylococcus aureus (MRSA) (111)

 

 

0.25

 

 

>64

 

(1)

 

 

4

 

 

 

>8

 

 

 

1

 

 

>8

 

 

>8

 

 

Streptococcus pneumoniae, PRSP (51)

 

 

0.12

 

 

 

2

 

 

 

 

2

 

 

 

 

1

 

 

 

1

 

 

 

8

 

 

>4

 

(1)

Haemophilus influenzae (105)

 

 

1

 

 

 

0.008

 

 

 

N/A

 

(2)

 

 

0.03

 

 

N/A

 

 

 

1

 

 

 

4

 

 

Moraxella catarrhalis (105)

 

 

0.25

 

 

 

1

 

 

 

 

8

 

 

 

 

0.06

 

 

N/A

 

 

 

0.25

 

 

 

0.06

 

 

 

(1)

“>” indicates the highest concentration tested.

(2)

“N/A” indicates that the antibiotic is not indicated against this organism and/or has no useful therapeutic activity.

Key Atypical Pathogens—CABP

 

 

 

MIC90 (µg/ml)

 

Organism (Number of Isolates)

 

Omadacycline

 

 

Ceftriaxone

 

 

Linezolid

 

Moxifloxacin

 

 

Vancomycin

 

Amox-

Clav

 

Azithromycin

 

Legionella pneumophila (25)

 

 

0.25

 

 

N/A

(1)

 

N/A

 

≤ 0.03

(2)

 

N/A

 

N/A

 

 

0.5

 

 

(1)

“N/A” indicates that the antibiotic is not indicated against this organism and/or has no useful therapeutic activity.

(2)

DuBois, J. et al. 2006. Activity of MK-2764/PTK 0796 Against Legionella spp. 46th ICAAC. Poster F1-1972

Key Pathogens—UTI

 

 

 

MIC90 (µg/ml)

 

Organism (Number of Isolates)

 

Omadacycline

 

 

Ceftriaxone

 

 

 

Linezolid

 

 

 

Levofloxacin

 

Vancomycin

 

 

Amox-

clav

 

Escherichia coli ESBL pos. (102)

 

 

4

 

 

 

128

 

 

 

N/A

 

(3)

 

>16

 

N/A

 

 

 

16

 

Staphylococcus aureus (MRSA) (111)

 

 

0.25

 

 

>64

 

(2)

 

 

4

 

 

 

>8

 

 

1

 

 

>8

 

CoNS, MR (114)(1)

 

 

1

 

 

>64

 

 

 

 

2

 

 

 

>8

 

 

2

 

 

 

8

 

Enterococcus species (310)

 

 

0.25

 

 

>64

 

 

 

 

4

 

 

 

>8

 

>32

 

 

>8

 

 

(1)

CoNS, MR: Coagulase-negative Staphylococcus species (not Staphylococcus aureus), methicillin resistant.

(2)

“>” indicates the highest concentration tested.

(3)

“N/A” indicates that the antibiotic is not indicated against this organism and/or has no useful therapeutic activity.

In a U.S. Medacorp survey issued in 2013, 97.1% of the 103 surveyed physicians believed that their patients with a resistant E.coli could benefit from a new well tolerated bioequivalent IV/oral antibiotic. Furthermore, surveyed physicians suspected high levels of multi-drug resistant E-coli (“MDR-E”) resistant to oral antibiotics in community UTIs. Almost half of the physicians surveyed suspected a MDR-E in 10-20% of community UTIs and 12% suspect MDR-E in greater than 20% of community UTIs. The U.S. Medacorp survey confirmed MDR-E resistant to oral antibiotics in the treatment of community UTIs is high, with 19% resistance to trimethoprim/sulfamethoxazole, 16% to beta-lactams (ESBL +ve) only, 18% to quinolones only, 14% to at least two of the three traditional classes, and 10% resistant to all three classes of antibiotic.

Omadacycline may provide a potential treatment option in patients with MDR-E. Further clinical trial investigation is planned given omadacycline’s renal clearance >40% with parent compound and potentially well-tolerated once-daily IV/oral profile.

Phase 3 Omadacycline Clinical Trials

We have conformed our Phase 3 clinical trial designs for omadacycline to incorporate changes in regulatory guidance from the FDA over the last five years for the development of antibiotics as treatment for both ABSSSI and CABP. Following modification of the FDA’s guidance, we reached agreements in November 2013 with the FDA in the form of SPA amendment agreements for both a planned Phase 3 ABSSSI clinical trial and a planned Phase 3 CABP clinical trial. Subsequently, in late 2013 and early 2014, the FDA published new guidance for the industry on developing drugs for ABSSSI and draft guidance for the industry for developing drugs for CABP, both of which are consistent with the SPA that we received in November 2013. In April 2015, we received confirmation from the FDA that our protocols, as submitted, continue to be covered by the SPA agreements. To safeguard patient safety, which is

14


 

customary in studies with vulnerable populations, we have assembled a Data Safety Monitoring Committee (DSMC).  This DSMC meets at specified intervals of data collection in our ABSSSI and CABP studies.  

ABSSSI Trial

The Phase 3 clinical trial of omadacycline for the treatment of ABSSSI is designed to be a randomized, controlled and double-blinded multi-center study targeting the enrollment of approximately 650 patients globally, in which we will compare IV and oral forms of omadacycline to linezolid. The clinical trial design contemplates two IV doses of 100 mg of omadacycline (dosed at a 12 hour interval) on the first day of treatment, followed by one 100 mg IV dose of omadacycline every 24 hours on subsequent days, with a potential switch to one 300 mg oral dose (two 150 mg tablets) of omadacycline every 24 hours, compared to one 600 mg IV dose of linezolid every 12 hours, with a potential switch to one 600 mg oral dose every 12 hours. All subjects may be treated for up to 14 days. All medications will follow a double-blinded and double-dummy blinding design.

The primary endpoint for this clinical trial is non-inferiority of omadacycline compared to linezolid in the modified intent-to-treat, or mITT, population using a 10% non-inferiority margin. The mITT population refers to all randomized subjects without a potentially causative gram-negative causative pathogen at baseline. The primary endpoint for FDA purposes in this clinical trial will be ECR, which, according to the most recent FDA guidance issued in October 2013, refers to a greater than or equal to 20% reduction in lesion size compared to baseline assessed at 48 to 72 hours after initiation of treatment. For European Medicines Agency, or EMA, purposes, the primary endpoint will be clinical response at TOC, determined 16 to 20 days after the initial dose. Secondary endpoints include microbiological response and safety. In addition, drug levels in plasma will be assessed in a subset of the patients enrolled in the clinical trial. Major skin infection subclasses that will be allowed in the study include cellulitis, wound and major abscesses, all with a minimum infection lesion total surface area of contiguous involvement of greater than or equal to 75 square centimeters, or cm. The proportion of patients enrolled with major abscesses will not exceed 30% of the total enrolled population. Patients who have previously taken effective long half-life (24 hours or greater) antibiotics for the treatment of an infection within 72 hours of receiving the first dose of study medication will be excluded from enrollment. While we anticipate that all patients will be initiated with IV treatment in a hospital setting, depending on physician assessment, patients may be subsequently discharged to oral therapy for both treatment arms.

CABP Trial

The Phase 3 clinical trial of omadacycline for the treatment of CABP, pursuant to our SPA agreement with the FDA, is designed to be a randomized, controlled and double-blinded multi-center study targeting the enrollment of approximately 750 patients globally, in which we compare IV and oral forms of omadacycline to moxifloxacin. The clinical trial design contemplates two 100 mg IV doses of omadacycline (dosed at a 12 hour interval) on the first day of treatment, followed by one 100 mg IV dose of omadacycline every 24 hours on subsequent days, with a potential switch to one 300 mg oral dose (two 150 mg tablets) of omadacycline every 24 hours, compared to one 400 mg IV dose of moxifloxacin every 24 hours, with a potential switch to one 400 mg oral dose every 24 hours. All subjects may be treated for up to 14 days. All medications will follow a double-blind and double-dummy blinding design.

The primary endpoint for this study is non-inferiority of omadacycline compared to moxifloxacin in the ITT population using a 10% non-inferiority margin. The ITT population in this clinical trial refers to all randomized patients. The primary endpoint for FDA purposes in this clinical trial will be the improvement in at least two of four patient-reported symptoms (cough, sputum production, chest pain and shortness of breath) without deterioration in any of the four symptoms at 72 to 120 hours after initiation of treatment, which is referred to as ECR in relation to CABP. For EMA purposes, the primary endpoint will be clinical response at TOC, determined 16 to 20 days after the initial dose. Key secondary endpoints include microbiological response, safety and all-cause mortality. At least 85% of the patients in the study will be required to have moderate-to-severe CABP, as defined by the protocol. Patients who have previously taken a dose of a short acting, potentially effective antibiotic for the treatment of an infection within 72 hours of receiving the first dose of study medication will be allowed for enrollment but only up to 25% of the total ITT population. While we anticipate that all patients will be initiated on IV treatment in a hospital setting, depending on physician assessment, patients may be subsequently discharged to oral therapy for both treatment arms.

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Sarecycline

Sarecycline is a novel, next-generation tetracycline that we designed specifically for dermatological use. We exclusively licensed the U.S. rights to sarecycline for the treatment of acne to Allergan, who funds all U.S. development costs for this program. In exchange for license rights, we earn milestone payments upon the achievement of development and regulatory progress, of which a $4.0 million payment for the initiation of Phase 3 in December 2014 was received in January 2015, with $17.0 million remaining to be achieved, and a royalty on eventual net sales, if any. The next milestone is $5.0 million upon NDA submission. We retain development and commercialization rights outside of the United States, which are available for licensing to other partners in key international markets, such as the European Union, Japan, the rest of Asia, Canada, and Latin America. Allergan completed a Phase 2 clinical trial in early 2013 of sarecycline for the treatment of acne, the results of which were recently presented at an Allergan investor day conference in February 2015. Allergan initiated Phase 3 clinical trials of sarecycline in December 2014 for acne. In addition, we granted Allergan an exclusive license to develop and commercialize sarecycline for the treatment of rosacea in the United States, which converted to a non-exclusive license in December 2014 after Allergan did not exercise its development option with respect to rosacea. There are currently no clinical trials in rosacea under way.

Market

Both acne and rosacea can be disfiguring conditions with significant social and medical costs. According to IMS sales data, over $3.0 billion was spent on treatments for acne in 2013. In excess of $1.3 billion was spent in 2011 on various oral formulations of doxycycline or minocycline to treat these conditions. Periostat, reformulated doxycycline, and Solodyn, reformulated minocycline, recorded peak sales of approximately $300 million in 2012 and $750 million in 2011, respectively. In November 2015, at an investor day conference, Allergan estimated peak U.S. revenue for sarecycline to potentially reach $250 to $300 million.

The most common oral treatments prescribed by dermatologists are tetracycline derivatives, which dermatologists widely accept as a therapy for moderate to severe acne. A common side effect associated with the use of any broad-spectrum antibacterial agent is gastrointestinal upset and antibiotic-associated infections caused by the destruction of the normal bacterial flora. In addition, we believe there is a growing concern and awareness of the development of antibiotic-resistant bacteria from the heavy use of broader-spectrum antibiotics, such as the older-generation tetracyclines, when broad-spectrum antibacterial therapy is not necessary. Similarly, for patients with severe acne, we believe that oral retinoid drugs are the leading option, but these drugs are not universally effective and also can carry potentially serious side effects. Therefore, we believe there is an unmet need for an improved tetracycline for this market.

Development

In the treatment of acne, we believe a new product that targets a narrower spectrum of bacterial types, including Propionibacterium acnes, a key bacterium associated with acne, would offer advantages over the existing therapies, including older tetracycline derivatives. As compared to existing tetracyclines being used for the treatment of acne, preclinical studies suggest that sarecycline may have an improved profile that includes a narrow spectrum of antibacterial activity, oral bioavailability, anti-inflammatory activity, favorable GI tolerability, and favorable PK properties.

Other Product Candidates

We also have discovered and developed a series of product candidates through to proof-of-concept stage in animal models. Some of these tetracycline-derived, novel molecular entities were designed to utilize the recognized immune-modulation, anti-inflammatory and other beneficial properties of the tetracycline class. These research stage programs include potential product candidates for multiple sclerosis, spinal muscular atrophy, systemic inflammatory diseases such as rheumatoid arthritis and inflammatory bowel diseases, and an oral, narrow-spectrum, tetracycline-derived compound with activity against Clostridium difficile in vitro and in a rodent model of Clostridium difficile-associated diarrhea. We are currently evaluating which of these programs, if any, we may elect to develop further.

Commercialization Strategy

Assuming approval from regulatory authorities, we currently intend to market omadacycline as an empiric monotherapy that will be commercialized worldwide for the treatment of serious, community-acquired bacterial infections. We retain worldwide commercial rights to omadacycline. In the United States and Europe, we continue to reserve the right to either commercialize omadacycline alone, through one or more pharmaceutical companies that have established commercial capabilities, or some combination thereof.

16


 

We believe that there is a similar rapidly growing need in other markets throughout the world, including established Asian markets such as Japan, Korea and Taiwan, as well as emerging markets, such as China, Russia, South America and India. We plan to pursue expansion of omadacycline to these markets through partnerships.

We exclusively licensed U.S. rights to Allergan to develop and commercialize sarecycline for the treatment of acne. In addition, we granted Allergan an exclusive license to develop and commercialize sarecycline for the treatment of rosacea in the United States, which converted to a non-exclusive license in December 2014 after Allergan did not exercise its development option with respect to rosacea. There are currently no clinical trials in rosacea under way. We retain development and commercialization rights to sarecycline in all other regions of the globe. We plan to leverage the existing development and commercialization infrastructure of one or more potential partners to advance sarecycline through registration and commercialization.

Competition

Our potential competitors include large pharmaceutical and biotechnology companies, specialty pharmaceutical companies and generic drug companies. We believe that our product candidates offer key potential advantages over competitive products that could enable our product candidates, if approved, to capture meaningful market share from our competitors.

If approved by the FDA, omadacycline will compete with other antibiotics in the serious bacterial skin infection market. These include vancomycin, marketed as a generic by Abbott laboratories and others; linezolid, marketed as Zyvox by Pfizer Inc.; daptomycin, marketed as Cubicin by Merck Pharmaceuticals, Inc.; dalbavancin, approved in May 2014 and marketed as Dalvance by Allergan; tedizolid, marketed as Sivextro by Merck Pharmaceuticals, Inc.; oritavancin, approved in August 2014 and marketed as Orbactiv by The Medicines Company; quinupristin/dalfopristin, marketed as Synercid by Pfizer, Inc.; tigecycline, marketed as Tygacil by Pfizer Inc.; telavancin, marketed as Vibativ by Theravance, Inc.; ceftaroline, marketed as Teflaro by Allergan; and generic trimethoprim/sulfamethoxazole.

Further, we expect that product candidates currently in Phase 3 clinical development, or that could enter Phase 3 clinical development in the near future, may represent significant competition if approved. These include delafloxacin and radezolid, under development by Melinta Therapeutics; CG-400549, under development by Crystal Genomics; GSK2140944, under development by GSK; nemonoxacin, under development by TaiGen Biotechnology; avarofloxacin, under development by Allergan; and brilacidin, under development by Cellceutix.

If approved by the FDA, omadacycline will also compete with other antibiotics in the community-acquired pneumonia market. These include azithromycin, marketed as Zithromax and Z-PAK by Pfizer Inc. and available as a generic; clarithromycin, marketed as Biaxin by Abbott Laboratories and available as a generic; moxifloxacin, marketed as Avelox by Bayer AG; levofloxacin, marketed as Levaquin by Johnson & Johnson and available as a generic; tigecycline, marketed as Tygacil by Pfizer Inc.; linezolid, marketed as Zyvox by Pfizer Inc.; ceftriaxone, marketed as Rocephin by F. Hoffman-La Roche Ltd and available as a generic; and ceftaroline, marketed as Teflaro by Allergan. We are also aware of various drugs that are or may eventually be under development for the treatment of CABP, delafloxacin and radezolid, under development by Melinta Therapeutics; solithromycin, under development by Cempra, Inc.; GSK2140944, under development by GSK; lefamulin, under development by NabrivaTherapeutics; nemanoxacin, under development by TaiGen Biotechnology; and avarofloxacin, under development by Allergan.

A number of competitors exist in the UTI indication. Generic potential competitors include levofloxacin, ciprofloxacin, trimethoprim/sulfamethoxazole, ceftriaxone and amoxicillin/clavulanic acid. Several branded injectable-only antibiotics are also used in hospitals, including imipenem/cilastatin, piperacillin/tazobactam and gentamicin brands. A limited number of companies are developing new oral antibiotics for the treatment of UTI infections, including eravacycline by Tetraphase Pharmaceuticals and finafloxacin by MerLion Pharmaceuticals.

Many of our potential competitors have substantially greater financial, technical and human resources than we do, as well as greater experience in the discovery and development of product candidates, obtaining FDA and other regulatory approvals of products and the commercialization of those products. Our competitors’ drugs may be more effective, or more effectively marketed and sold, than any product candidate we may commercialize and may render our product candidates obsolete or non-competitive before we can recover the expenses of our development and commercialization. We anticipate that we will face intense and increasing competition as new drugs enter the market and advanced technologies become available. Finally, the development of new treatment methods for the diseases we are targeting could render our product candidates non-competitive or obsolete.

Manufacturing

We do not own or operate current Good Manufacturing Practices manufacturing facilities for the production of any of our product candidates, nor do we have plans to develop our own manufacturing operations in the foreseeable future. We generally

17


 

develop the initial synthesis routes for our compounds and partner with third-party manufacturers to scale-up and develop these processes, analytical methods and formulations. Our product candidates have to date been organic compounds of low molecular weight, commonly referred to as small molecules. They are manufactured in synthetic processes from starting materials that have to date been generally available. We currently rely on a small number of third-party contract manufacturers for all of our required raw materials, drug substance and finished product for our preclinical research and clinical trials. We do not have long-term commercial supply agreements with any of these third parties. We also do not have any current contractual relationships for the manufacture of commercial supplies of any of our product candidates should they be approved. We intend to enter into agreements with third-party contract manufacturers for the commercial production of those product candidates to ensure that commercial supply is available at the time of regulatory approval.

For omadacycline, the manufacturing process has been refined to commercial scale. The active pharmaceutical ingredient manufacturing process is an efficient three-step synthesis followed by purification and salt formation. The starting material is minocycline, which is a well characterized generic active ingredient. We have produced stable IV and oral drug product formulations. These products are currently undergoing stability testing and have demonstrated room temperature stability through at least three years. We have identified qualified commercial manufacturers for omadacycline, and we intend to use those manufacturers to complete process validation in support of potential market authorization filing, approval and launch. Our commercial manufacturers have scheduled the production of omadacycline drug substance and drug product registration batches in 2016.

Research and Development

We have and will continue to make substantial investments in research and development. Our research and development expenses totaled $50.8 million and $5.0 million in 2015 and 2014, respectively.

In the ordinary course of business, we enter into agreements with third parties, such as contract research organizations, medical institutions, clinical investigators and contract laboratories, to conduct our clinical trials and aspects of our research and preclinical testing. These third parties provide project management and monitoring services and regulatory consulting and investigative services.

Intellectual Property

The proprietary nature of, and protection for, our proprietary drug development platform, our product candidates and our discovery programs, processes and know-how are important to our business. We seek patent protection in the United States and internationally for areas such as composition of matter and the chemistries that allow for the synthesis of novel, substituted tetracycline compounds that exhibit significant antibacterial and/or anti-inflammatory activity, and any other technology to which we have rights, where available and when appropriate. Our policy is to pursue, maintain and defend patent rights, whether developed internally or licensed from third parties, and to protect the technology, inventions and improvements that are commercially important to the development of our business. We also rely on trade secrets that may be important to the development of our business.

Our commercial success will depend in part on obtaining and maintaining patent protection and trade secret protection of our proprietary technologies and compounds, our current and future product candidates and the methods used to develop and manufacture them, as well as successfully defending these patents against third-party challenges. Our ability to prevent third parties from making, using, selling, offering to sell or importing our products and technology depends on the extent to which we have rights under valid and enforceable patents or trade secrets that cover these activities. We cannot be sure that patents will be granted with respect to any of our pending patent applications or with respect to any patent applications filed by us in the future, nor can we be sure that any of our existing patents or any patents that may be granted to us in the future will be commercially useful in protecting our technology.

As of December 31, 2015, our patent portfolio of owned or exclusively licensed patents and applications includes 56 issued U.S. patents, 27 pending U.S. patent applications and corresponding foreign national or regional counterpart patents or applications. We expect that the patents and patent applications in this portfolio, if issued, and if the appropriate maintenance, renewal, annuity or other government fees are paid, would expire between 2020 and 2035, excluding any additional terms from patent term adjustments or patent term extensions under the Hatch-Waxman Amendments.

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Omadacycline

The patent portfolio for omadacycline is directed to cover compositions of matter, formulations, salts and polymorphs, manufacturing methods and methods of use. The patents and patent applications covering omadacycline include patents and patent applications owned by us. In some corresponding foreign patents and patent applications, omadacycline is covered along with other compounds in patents and patent applications that are owned jointly by us and Tufts University that are subject to a license agreement we have with Tufts University. The issued composition of matter patent in the United States (U.S. Patent No. 7,553,828), if the appropriate maintenance, renewal, annuity, or other governmental fees are paid, is expected to expire in 2023. We believe that an additional term of potentially up to five years for one of our omadacycline patents may result from the patent term extension provision of the Hatch-Waxman Amendments of 1984. Omadacycline has received qualified infectious disease product, or QIDP, designation under the Generating Antibiotic Incentives Now Act, or the GAIN Act. This may provide up to an additional five years of market exclusivity layered with protection provided by the Hatch-Waxman Amendments, which enables exclusivity to 2028. We expect that the other patents and patent applications in this portfolio, if issued, and if the appropriate maintenance, renewal, annuity or other governmental fees are paid, would expire between 2021 and 2029, excluding any additional terms from patent term adjustments or patent term extensions under the Hatch-Waxman Amendments.

Sarecycline

The patent portfolio for our acne and rosacea program is directed to cover compositions of matter, methods of use, as well as salts and polymorphs of sarecycline. As of December 31, 2015, our patent portfolio includes issued U.S. Patent No. 8,318,706, or the ‘706 Patent, which covers composition of matter of sarecycline and issued U.S. Patent No. 8,513,223, or the ‘223 Patent, and corresponding foreign national or regional counterpart applications. The ‘706 Patent is expected to expire in 2031, and the ‘223 Patent is expected to expire in 2029, if the appropriate maintenance, renewal, annuity or other governmental fees are paid. We may also be entitled to an extension of the patent term for one of the patents covering sarecycline pursuant to the patent term extension provision of the Hatch-Waxman Amendments, as described in the section “U.S. Government Regulation – Patent Term Restoration and Marketing Exclusivity.”

 

Intermezzo

As of December 31, 2015, our patent portfolio of owned or exclusively licensed patents and applications includes four issued U.S. patents, two pending U.S. patent applications and corresponding foreign national or regional counterpart patents and applications which are directed to formulations and methods of use. The issued U.S. patents expire between 2025 and 2029.

Trade Secrets

In addition to patents, we rely on trade secrets and know-how to develop and maintain our competitive position. Trade secrets and know-how can be difficult to protect. We seek to protect our proprietary technology and processes, in part, by confidentiality agreements and invention assignment agreements with our employees, consultants, scientific advisors, contractors and commercial partners. These agreements are designed to protect our proprietary information and, in the case of the invention assignment agreements, to grant us ownership of technologies that are developed through a relationship with a third party. We also seek to preserve the integrity and confidentiality of our data, trade secrets and know-how by maintaining physical security of our premises and physical and electronic security of our information technology systems.

Trademarks

We have registered service marks for PARATEK in the United States, European Union, and Japan, which we use in connection with our pharmaceutical research and development.  We also have pending trademark and service mark applications for PARATEK and PARATEK & HEXAGON DESIGN in the United States, the European Union, Japan, and other international jurisdictions, which we presently use or may use in connection with our pharmaceutical research and development as well as with our product candidates.  The PARACYCLINE mark is registered in the European Union and Japan. In addition, we have registered the service mark THE ANTIBIOTIC RESISTANCE COMPANY in the European Union and Japan, which may be used in connection with the research and development of pharmaceuticals, drugs and antibiotics and the test, evaluation research and development of antibiotics and other pharmaceutical products, respectively.  In connection with the ongoing development and advancement of our products and services in the United States and in various international jurisdictions, we routinely seek to create protection for our marks and enhance their value by pursuing trademarks and service marks where available and when appropriate.    

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Collaborations and License Agreements

Our commercial strategy is to partner with established pharmaceutical companies to develop and market products for the larger community markets, while retaining certain rights to products aimed at concentrated markets, such as hospital-based products, where we may seek to participate in development and commercialization.

Allergan plc

In July 2007, we and Warner Chilcott Company, Inc. (now part of Allergan plc, or Allergan), entered into a collaborative research and license agreement, or the Allergan Collaboration Agreement, under which we granted Allergan an exclusive license to research, develop and commercialize tetracycline products for use in the United States for the treatment of acne and rosacea. Since Allergan did not exercise its development option with respect to the treatment of rosacea prior to initiation of a Phase 3 trial for the product, the license grant to Allergan converted to a non-exclusive license for the treatment of rosacea as of December 2014. Under the terms of the Allergan Collaboration Agreement, we and Allergan are responsible for, and are obligated to use, commercially reasonable efforts to conduct specified development activities for the treatment of acne and, if requested by Allergan, we may conduct certain additional development activities to the extent we determine in good faith that we have the necessary resources available for such activities. Allergan has agreed to reimburse us for its costs and expenses, including third-party costs, incurred in conducting any such development activities.

Under the terms of the Allergan Collaboration Agreement, Allergan is responsible for and is obligated to use commercially reasonable efforts to develop and commercialize tetracycline compounds that are specified in the agreement for the treatment of acne. Allergan failed to elect to advance the development of sarecycline for the treatment of rosacea in accordance with the terms of the agreement so the license granted to Allergan was converted to a non-exclusive license for the treatment of rosacea We have agreed during the term of the Allergan Collaboration Agreement not to directly or indirectly develop or commercialize any tetracycline compounds in the United States for the treatment of acne and rosacea, and Allergan has agreed during the term of the Allergan Collaboration Agreement not to directly or indirectly develop or commercialize any tetracycline compound included as part of the agreement for any use other than as provided in the agreement.

We earned an upfront fee in the amount of $4.0 million upon the execution of the Allergan Collaboration Agreement, $1.0 million upon filing of an Investigational New Drug Application in 2010, and $2.5 million upon initiation of Phase 2 trials in 2012. In December 2014, we also earned $4.0 million upon initiation of Phase 3 trials associated with the Allergan Collaboration Agreement. In addition, Allergan may be required to pay us an aggregate of approximately $17.0 million upon the achievement of specified future regulatory milestones, the next being $5.0 million upon acceptance by the FDA, of a New Drug Application, or NDA, submission. Allergan is also obligated to pay us tiered royalties, ranging from the mid-single digits to the low double digits, based on net sales of tetracycline compounds developed under the Allergan Collaboration Agreement, with a standard royalty reduction post patent expiration for such product for the remainder of the royalty term. Allergan’s obligation to pay us royalties for each tetracycline compound it commercializes under the Allergan Collaboration Agreement expires on the later of the expiration of the last to expire patent that covers the tetracycline compound in the United States and the date on which generic drugs that compete with the tetracycline compound reach a certain threshold market share in the United States.

Either we or Allergan may terminate the Allergan Collaboration Agreement for certain specified reasons at any time after Allergan has commenced development of any tetracycline compound, including if Allergan determines that it would not be commercially viable to continue to develop or commercialize the tetracycline compound and/or that it is unlikely to obtain regulatory approval of the tetracycline compound, and, in any case, no backup tetracycline compound is in development or ready to be developed and the parties are unable to agree on an extension of the development program or an alternative course of action. Either we or Allergan may terminate the Allergan Collaboration Agreement for the other party’s uncured breach of a material term of the agreement on 60 days’ notice (unless the breach relates to a payment term, which requires a 30-day notice) or upon the bankruptcy of the other party that is not discharged within 60 days. Upon the termination of the Allergan Collaboration Agreement by Allergan for our breach, Allergan’s license will continue following the effective date of termination, subject to the payment by Allergan of the applicable milestone and royalty payments specified in the agreement unless our breach was with respect to certain specified obligations, in which event the obligation of Allergan to pay us any further royalty or milestone payments will terminate. Upon the termination of the Allergan Collaboration Agreement by us for Allergan’s breach or the voluntary termination of the agreement by Allergan, Allergan’s license under the agreement will terminate.

 

Tufts University

In February 1997, we and Tufts University, or Tufts, entered into a license agreement under which we acquired an exclusive license to certain patent applications and other intellectual property of Tufts related to the drug resistance field to develop and commercialize products for the treatment or prevention of bacterial or microbial diseases or medical conditions in humans or animals

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or for agriculture. We subsequently entered into nine amendments to that agreement, collectively the Tufts License Agreement, to include patent applications filed after the effective date of the original license agreement, to exclusively license additional technology from Tufts, to expand the field of the agreement to include disinfectant applications, and to change the royalty rate and percentage of sublicense income paid by us to Tufts under sublicense agreements with specified sublicensees. Our obligated under the Tufts License Agreement to provide Tufts with annual diligence reports and a business plan and to meet certain other diligence milestones. We have the right to grant sublicenses of the licensed rights to third parties, which will be subject to the prior approval of Tufts unless the proposed sublicensee meets a certain net worth or market capitalization threshold. We are primarily responsible for the preparation, filing, prosecution and maintenance of all patent applications and patents covering the intellectual property licensed under the Tufts License Agreement at its sole expense. We have the first right, but not the obligation, to enforce the licensed intellectual property against infringement by third parties.

We issued Tufts 1,024 shares of our common stock on the date of execution of the original license agreement, and we may be required to make certain payments of up to $0.3 million to Tufts upon the achievement by products developed under the agreement of specified development and regulatory approval milestones. We have already made a payment of $50,000 to Tufts for achieving the first milestone following commencement of the Phase 3 non-registration clinical trial for omadacycline. We are also obligated to pay Tufts a minimum royalty payment in the amount of $25,000 per year. In addition, we are obligated to pay Tufts royalties based on gross sales of products, as defined in the agreement, ranging in the low single digits depending on the applicable field of use for such product sale. If we enter into a sublicense under the Tufts License Agreement, we will be obligated to pay Tufts a percentage, ranging from the low-to-mid teens based on the applicable field of use for such product, of the license maintenance fees or sublicense issue fees paid to us by the sublicensee and the lesser of a percentage, ranging from the low tens to the high twenties based on the applicable field of use for such product, of the royalty payments made to us by the sublicensee or the amount of royalty payments that would have been paid by us to Tufts if we had sold the products.

Unless terminated earlier, the Tufts License Agreement will expire at the same time as the last-to-expire patent in the patent rights licensed to us under the agreement and after any such expiration we will continue to have an exclusive, fully-paid-up license to such intellectual property licensed from Tufts. Tufts has the right to terminate the agreement upon 30 days’ notice should we fail to make a material payment under the Tufts License Agreement or commit a material breach of the agreement and not cure such failure or breach within such 30 day period, or if, after we have started to commercialize a product under the Tufts License Agreement, we cease to carry on its business for a period of 90 consecutive days. We have the right to terminate the Tufts License Agreement at any time upon 180 days’ notice. Tufts has the right to convert our exclusive license to a non-exclusive license if we do not commercialize a product licensed under the agreement within a specified time period.

Purdue Pharma L.P.

In July 2009, we and Purdue Pharma L.P., or Purdue Pharma, entered into a collaboration agreement, or the Purdue Collaboration Agreement, that grants an exclusive license to Purdue Pharma to commercialize Intermezzo in the United States and pursuant to which:

 

·

Purdue Pharma paid us a $25.0 million non-refundable license fee in August 2009;

 

·

Purdue Pharma paid us a $10.0 million non-refundable intellectual property milestone in December 2011 when the first of two issued formulation patents was listed in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations, or Orange Book;

 

·

Purdue Pharma paid us a $10.0 million non-refundable intellectual property milestone in August 2012 when the first of two issued methods of use patents was listed in the FDA’s Orange Book;

 

·

We transferred the Intermezzo NDA to Purdue Pharma, and Purdue Pharma is obligated to assume the expense associated with maintaining the NDA and further development of Intermezzo in the United States, including any expense associated with post-approval studies;

 

·

Purdue Pharma is obligated to commercialize Intermezzo in the United States at its expense using commercially reasonable efforts;

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·

Purdue Pharma is obligated to pay us tiered base royalties on net sales of Intermezzo in the United States ranging from the mid-teens up to the mid-20% level, with each such royalty tiers subject to an increase by a percentage in the low single digits upon a specified anniversary of regulatory approval of Intermezzo. The base royalty is tiered depending upon the achievement of certain fixed net sales thresholds by Purdue Pharma, which net sales levels reset each year for the purpose of calculating the royalty. The royalty tiers are subject to reductions upon generic entry and patent expiration. Purdue Pharma is obligated to pay royalties until the later of 15 years from the date of first commercial sale in the United States or the expiration of patent claims related to Intermezzo; and 

 

·

Purdue Pharma is obligated to pay us up to an additional $70.0 million upon the achievement of certain net sales targets for Intermezzo in the United States.

We had an option to co-promote Intermezzo to psychiatrists in the United States and such option was terminated as a result of the Merger.

The Purdue Collaboration Agreement expires on the expiration of Purdue Pharma’s royalty obligations. Purdue Pharma has the right to terminate the Purdue Collaboration Agreement at any time upon advance notice of 180 days. The Purdue Collaboration Agreement is also subject to termination by Purdue Pharma in the event of FDA or governmental action that materially impairs Purdue Pharma’s ability to commercialize Intermezzo or the occurrence of a serious event with respect to the safety of Intermezzo. The Purdue Collaboration Agreement may also be terminated by us upon Purdue Pharma commencing an action that challenges the validity of Intermezzo related patents. We also have the right to terminate the Purdue Collaboration Agreement immediately if Purdue Pharma is excluded from participation in federal healthcare programs. The Purdue Collaboration Agreement may also be terminated by either party in the event of a material breach by or insolvency of the other party.

We also granted Purdue Pharma and an associated company the right to negotiate for the commercialization of Intermezzo in Mexico in 2013 but retained the rights to commercialize Intermezzo in the rest of the world.

In December 2013, Purdue Pharma notified us that it intended to discontinue use of the Purdue Pharma sales force to actively market Intermezzo to healthcare professionals during the first quarter of 2014.

In October 2014, we announced that our board of directors had approved a special dividend of, among other things, the right to receive, on a pro rata basis, 100% of any royalty income received by us pursuant to the Purdue Collaboration Agreement and 90% of any cash proceeds from a sale or disposition of Intermezzo, less fees and expenses incurred in connection with such activity, to the extent that either occurs prior to the second anniversary of the closing date of the Merger.

Shin Nippon Biomedical Laboratories Ltd.

In September 2013, we and Shin Nippon Biomedical Laboratories Ltd., or SNBL, entered into a License Agreement, or SNBL License Agreement, pursuant to which SNBL granted us an exclusive worldwide license to commercialize SNBL’s proprietary nasal drug delivery technology to develop TO-2070. We were developing TO-2070 as a treatment for acute migraine using SNBL’s proprietary nasal powder drug delivery system. Under the SNBL License Agreement, we were required to fund all development and regulatory approval with respect to TO-2070. Pursuant to the SNBL License Agreement, we paid an upfront nonrefundable technology license fee of $1.0 million, and we were also obligated to pay up to an aggregate of $41.5 million upon the achievement of certain development, regulatory and sales milestones, and tiered, low double-digit royalties on annual net sales of TO-2070.

In September 2014, we and SNBL entered into a Termination Agreement and Release, or the SNBL Termination Agreement, pursuant to which, among other things, the SNBL License Agreement was terminated and we assigned all of our rights, interest and title to the TO-2070 assets to SNBL in exchange for a portion of certain future net revenue received by SNBL as set forth in the SNBL Termination Agreement, up to an aggregate of $2.0 million.

Past Collaborations

Novartis International Pharmaceutical Ltd.

In September 2009, we and Novartis International Pharmaceutical Ltd., or Novartis, entered into a Collaborative Development, Manufacture and Commercialization License Agreement, or the Novartis Agreement, for the co-development and commercialization of omadacycline, which included a $70 million upfront payment from Novartis to us, future development and sales milestone payments and future royalty payments, depending on the success of omadacycline. Under the agreement, Novartis was to have led development activities for omadacycline, and we were to have co-developed omadacycline and contributed a share of our development expense.

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The Novartis Agreement provided that Novartis would bear the majority of all direct development costs incurred in connection with omadacycline and would assume all responsibility for the manufacturing of omadacycline. The agreement provided Novartis with a global, exclusive patent license for the development, manufacturing and marketing of omadacycline.

Novartis had the right to terminate the agreement without cause upon providing 60 days’ advance written notice. Novartis provided us with a notice of intent to terminate the agreement on June 29, 2011, and the termination became effective 60 days later. While Novartis terminated the agreement without cause, Novartis indicated that it elected to terminate the agreement due to the then-existing delays and uncertainties experienced in connection with the regulatory pathway for approval of omadacycline in two core indications, ABSSSI and CABP.

In January 2012, we and Novartis entered into a letter agreement, or the Novartis Letter Agreement, in which we reconciled shared development costs and expenses and granted Novartis a right of first negotiation with respect to commercialization rights of omadacycline following approval of omadacycline from the FDA, the European Medicines Agency, or EMA, or any regulatory agency, but only to the extent that we have not previously granted such commercialization rights for omadacycline to another third party as of any such approval.

Under the Novartis Letter Agreement, we agreed to pay Novartis $2.9 million as reconciliation of development costs and expenses. In June 2014, we amended the Novartis Letter Agreement, as amended, and Novartis agreed to convert the full amount of development cost share plus any accrued interest into a 0.25% royalty, to be paid from net sales received by us in any country following the launch of omadacycline in that country and continuing until the later of expiration of the last active valid patent claim covering such product in the country of sale and 10 years from the date of first commercial sale in such country. There are no other payment obligations to Novartis under the Novartis Agreement or the Novartis Letter Agreement.

Global Animal Health Provider

In May 2014, we and a leading global animal health provider terminated an existing collaborative research, license and commercialization agreement. We have no future obligations under this agreement, and the leading global animal health company retains no rights to our technology. As a result of this termination, in 2014, we recognized the remaining $0.3 million of deferred revenue related to the upfront and milestone payments received in 2007 and 2008.

Grant Funding

As we have received funding for our spinal muscular atrophy program from the National Institutes of Health, inventions conceived or first actually reduced to practice during the performance of the research project are subject to the rights and limitations of certain federal statutes and various implementing regulations known generally and collectively as the Bayh-Dole Requirements. As a funding recipient, we have been subject to certain invention reporting requirements and certain limitations are placed on our assignment of the invention rights. In addition, the federal government retains a non-exclusive, irrevocable, paid-up license to practice the invention and, in exceptional cases, the federal government may seek to take title to the invention.

Government Regulation

Government authorities in the United States, at the federal, state and local level, and other countries extensively regulate, among other things, the research, development, testing, manufacture, labeling, packaging, promotion, storage, advertising, distribution, marketing and export and import of products such as those we are developing. Our drugs must be approved by the FDA through the NDA process before they may be legally marketed in the United States.

U.S. Government Regulation

NDA Approval Processes

In the United States, the FDA regulates drugs under the Federal Food, Drug and Cosmetic Act, or the FDCA, and implementing regulations. The process of obtaining regulatory approvals and the subsequent compliance with applicable federal, state, local and foreign statutes and regulation require the expenditure of substantial time and financial resources. Failure to comply with the applicable requirements of the United States at any time during the product development process, approval process or after approval may subject us to administrative or judicial sanctions, any of which could have a material adverse effect on us. These sanctions could include:

 

·

refusal to approve pending applications;

 

·

withdrawal of an approval;

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·

imposition of a clinical hold; 

 

·

warning letters;

 

·

product seizures or recalls;

 

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total or partial suspension of production or distribution; or

 

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injunctions, fines, restitution, disgorgement or civil or criminal penalties.

The process required by the FDA before a drug may be marketed in the United States generally involves the following:

 

·

completion of preclinical laboratory tests, animal studies and formulation studies conducted according to Good Laboratory Practices or other applicable regulations;

 

·

submission to the FDA of an Investigational New Drug application, or IND, which must become effective before human clinical trials may begin;

 

·

performance of adequate and well-controlled human clinical trials to establish the safety and efficacy of the proposed drug for its intended use, conducted in accordance with Good Clinical Practices, which are ethical and scientific quality standards and FDA requirements for conducting, recording and reporting clinical trials to assure that the rights, safety and well-being of trial participants are protected;

 

·

submission to the FDA of an NDA;

 

·

satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product is produced to assess compliance with cGMP requirements to assure that the facilities, methods and controls are adequate to preserve the drug’s safety, identity, strength, quality and purity; and

 

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FDA review and approval of the NDA.

Once a pharmaceutical candidate is identified for development, it enters the preclinical testing stage. Preclinical tests include laboratory evaluations of product chemistry, toxicity and formulation, as well as animal studies. An IND sponsor must submit the results of the preclinical tests, together with manufacturing information and analytical data, to the FDA as part of the IND. Some preclinical or nonclinical testing may continue even after the IND is submitted. In addition to including the results of the preclinical studies, the IND will also include a protocol detailing, among other things, the objectives of the clinical trial, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated if the first phase lends itself to an efficacy determination. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, places the IND on clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before clinical trials can begin. A clinical hold may occur at any time during the life of an IND and may affect one or more specific studies or all studies conducted under the IND.

All clinical trials must be conducted under the supervision of one or more qualified investigators in accordance with current Good Clinical Practices. They must be conducted under protocols detailing the objectives of the trial, dosing procedures, subject selection and exclusion criteria and the safety and effectiveness criteria to be evaluated. Each protocol and any amendments must be submitted to the FDA as part of the IND, and progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA and more frequently in other situations, including the occurrence of serious adverse events. An institutional review board, or an IRB at each institution participating in the clinical trial must review and approve the protocol and any amendments before a clinical trial commences or continues at that institution, approve the information regarding the clinical trial and the consent form that must be provided to each trial subject or his or her legal representative, monitor the study until completed and otherwise comply with IRB regulations.

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Human clinical trials are typically conducted in three sequential phases that may overlap or be combined:

 

·

Phase 1. The drug is initially introduced into healthy human subjects and tested for safety, dosage tolerance, absorption, metabolism, distribution and elimination. In the case of some products for severe or life-threatening diseases, such as cancer, especially when the product may be inherently too toxic to ethically administer to healthy volunteers, the initial human testing is often conducted in patients.

 

·

Phase 2. Clinical trials are initiated in a limited patient population intended to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage.

 

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Phase 3. Clinical trials are undertaken to further evaluate dosage, clinical efficacy and safety in an expanded patient population at geographically dispersed clinical study sites. These studies are intended to establish the overall risk-benefit ratio of the product and provide an adequate basis for regulatory approval and product labeling.

Phase 1, Phase 2 and Phase 3 testing may not be completed successfully within any specified period, if at all. The FDA or the sponsor may suspend a clinical trial at any time for a variety of reasons, including a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associated with unexpected serious harm to patients.

During the development of a new drug, sponsors are given opportunities to meet with the FDA at certain points. These points may be prior to submission of an IND, at the end of Phase 2 and before an NDA is submitted. Meetings at other times may be requested. These meetings can provide an opportunity for the sponsor to share information about the data gathered to date, for the FDA to provide advice and for the sponsor and the FDA to reach agreement on the next phase of development. Sponsors typically use the End-of-Phase 2 meeting to discuss their Phase 2 clinical results and present their plans for the pivotal Phase 3 clinical trial that they believe will support approval of the new drug. If this type of discussion occurred, a sponsor may be able to request an SPA agreement, the purpose of which is to reach agreement with the FDA on the design of the Phase 3 clinical trial protocol and analysis that will form the primary basis of an efficacy claim.

According to FDA guidance for industry on the SPA agreement process, a sponsor that meets the prerequisites may make a specific request for a special protocol assessment and provide information regarding the design and size of the proposed clinical trial. The FDA has a goal of evaluating the protocol within 45 days of the request to assess whether the proposed trial is adequate and that evaluation may result in discussions and a request for additional information. An SPA agreement request must be made before the proposed clinical trial begins, and all open issues must be resolved before the clinical trial begins. If an agreement is reached, it will be documented in writing and made part of the record. The agreement may not be changed by the sponsor or the FDA after the trial begins, except with the documented agreement of the sponsor and the FDA or if the FDA determines that a substantial scientific issue essential to determining the safety or efficacy of the drug was identified after the testing began. Also, if the sponsor makes any unilateral changes to the approved protocol, the agreement will be invalidated. An SPA agreement is intended to provide greater assurance that if the agreed upon clinical trial protocols are followed, the clinical trial endpoints are achieved, and there is a favorable risk-benefit profile, the data may serve as the primary basis for an efficacy claim in support of NDA approval. However, SPA agreements are not a guarantee of an approval of a product candidate or any permissible claims about the product candidate, and final determinations of approvability will not be made until the FDA completes its review of the entire NDA.

The Pediatric Research Equity Act, or PREA, which requires a sponsor to conduct pediatric studies for most drugs and biologicals, for a new active ingredient, new indication, new dosage form, new dosing regimen or new route of administration. Under the PREA, original NDAs, biologics license applications, or BLAs and supplements thereto must contain a pediatric assessment unless the sponsor has received a deferral or waiver. The required assessment must assess the safety and effectiveness of the product for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The sponsor or the FDA may request a deferral of pediatric studies for some or all of the pediatric subpopulations. A deferral may be granted for several reasons, including a finding that the drug or biologic is ready for approval for use in adults before pediatric studies are complete or that additional safety or effectiveness data needs to be collected before the pediatric studies begin. The FDA must send a non-compliance letter to any sponsor that fails to submit the required assessment, keep a deferral current or submit a request for approval of a pediatric formulation. On February 16, 2016 we reached agreement with the FDA on the terms of the pediatric program associated with PREA.  FDA has granted Paratek a waiver from conducting studies with omadacycline in children less than 8 years old and a deferral in conducting studies in children 8 years and older until safety and efficacy is established in adults.  

Concurrent with clinical trials, companies usually complete additional animal safety studies and must also develop additional information about the chemistry and physical characteristics of the drug and finalize a process for manufacturing the product in

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accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the drug candidate and the manufacturer must develop methods for testing the quality, purity and potency of the final drugs. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the drug candidate does not undergo unacceptable deterioration over its shelf-life.

The results of product development, preclinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests conducted on the chemistry of the drug, proposed labeling and other relevant information are submitted to the FDA as part of an NDA requesting approval to market the product. The submission of an NDA is subject to the payment of user fees, but a waiver of such fees may be obtained under specified circumstances. The FDA reviews all NDAs submitted to ensure that they are sufficiently complete for substantive review before it accepts them for filing. It may request additional information rather than accept an NDA for filing. In this event, the NDA must be resubmitted with the additional information. The resubmitted application also is subject to review before the FDA accepts it for filing.

Once the submission is accepted for filing, the FDA begins an in-depth review. NDAs receive either standard or priority review. A drug representing a significant improvement in treatment, prevention or diagnosis of disease may receive priority review. QIDP and Fast Track designation both have provisions which provide priority review for designated products. The FDA may refuse to approve an NDA if the applicable regulatory criteria are not satisfied or may require additional clinical or other data. Even if such data are submitted, the FDA may ultimately decide that the NDA does not satisfy the criteria for approval and issue a complete response letter. The FDA reviews an NDA to determine, among other things, whether a product is safe and effective for its intended use and whether its manufacturing complies with cGMP requirements to assure and preserve the product’s safety, identity, strength, quality and purity. The FDA may refer the NDA to an advisory committee for review and recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendation of an advisory committee, but it generally follows such recommendation. Before approving an NDA, the FDA will inspect the facility or facilities where the product is manufactured and tested.

The FDA may require, as a condition of approval, Risk Evaluation and Mitigation Strategies (REMS), restricted distribution and use, enhanced labeling, special packaging or labeling, expedited reporting of certain adverse events, pre-approval of promotional materials, restrictions on direct-to-consumer advertising or commitments to conduct additional research post-approval. The FDA will issue a complete response letter if the agency decides not to approve the NDA in its present form. The complete response letter usually describes all of the specific deficiencies in the NDA identified by the FDA. If a complete response letter is issued, the applicant may either resubmit the NDA, addressing all of the deficiencies identified in the letter, or withdraw the application.

Expedited Review and Approval

The FDA has various programs, including Fast Track and priority review, which are intended to expedite or simplify the process for reviewing drugs. Even if a drug qualifies for one or more of these programs, the FDA may later decide that the drug no longer meets the conditions for qualification or that the time period for FDA review or approval will not be shortened. Generally, drugs that may be eligible for these programs are those for serious or life-threatening conditions, those with the potential to address unmet medical needs and those that offer meaningful benefits over existing treatments. For example, Fast Track is a process designed to facilitate the development and expedite the review of drugs to treat serious diseases and fill an unmet medical need. Priority r