RISK FACTORS
Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below in
addition to the other information included or incorporated by reference in this prospectus supplement before purchasing our common stock. If any of the following risks actually occurs, our business,
financial condition or results of operations would likely suffer, possibly materially. In that case, the trading price of our common stock could fall, and you may lose all or part of the money you
paid to buy our common stock. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently believe to be
immaterial may also adversely affect our business.
Risks related to this offering
If you purchase shares in this offering, you will suffer immediate and substantial dilution.
If you purchase shares of our common stock in this offering, you will incur immediate and substantial dilution in the as adjusted net tangible
book value of your stock of $36.89 per share as of September 30, 2018, based on an assumed public offering price of $46.93 per share, the last reported sale price of our common stock on the
Nasdaq Global Market on January 11, 2019, because the price that you pay will be substantially greater than the net tangible book value per share of the shares you acquire. You will experience
additional dilution upon the exercise of options and warrants to purchase our common stock, as well as upon the vesting of outstanding restricted stock units, including those options currently
outstanding and those granted in the future, and the issuance of restricted stock or other equity awards under our stock incentive plans. To the extent we raise additional capital by issuing equity
securities, our stockholders will experience substantial additional dilution.
We have broad discretion to determine how to use the funds raised in this offering, and may use them in ways
that may not enhance our operating results or the market price of our common stock.
Our management will have broad discretion over the use of proceeds from this offering, and we could spend the proceeds from this offering in
ways our stockholders may not agree with or that do not yield a favorable return, if at all. We intend to use the net proceeds from this offering for the development of our product candidates and for
other general corporate and working capital purposes. However, our use of these proceeds may differ substantially from our current plans. If we do not invest or apply the proceeds of this offering in
ways that improve our operating results, we may fail to achieve expected financial results, which could cause the market price of our common stock to decline.
Our ability to use net operating loss and tax credit carryforwards and certain built-in losses to reduce
future tax payments is limited by provisions of the Internal Revenue Code, and it is possible that certain transactions or a combination of certain transactions, including this offering, may result in
material additional limitations on our ability to use our net operating loss and tax credit carryforwards.
As of December 31, 2017, we had U.S. federal and state net operating loss carryforwards, or NOL carryforwards, of $438.0 million
and $393.6 million, respectively, available to reduce future taxable income, if any. These federal and state NOL carryforwards expire at various times through 2036. These net operating losses
have been fully offset by a valuation allowance due to uncertainties surrounding our ability to realize these tax benefits. In general, if we experience or have experienced a greater than
50 percent aggregate change in ownership of certain significant stockholders over a three-year period (a Section 382 ownership change), utilization of our pre-change NOL carryforwards
will be subject to an annual limitation under Section 382 of the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"), and similar state laws. Such limitations may result in
expiration of a portion of the NOL carryforwards before utilization and may be substantial. If we experience a Section 382 ownership change in connection with this offering or as a result of
future changes in our stock ownership, some of
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changes are outside our control, the tax benefits related to the NOL carryforwards may be limited or lost.
Under
tax legislation enacted in 2017 commonly known as the "Tax Cuts and Jobs Act" (TCJA), U.S. federal NOLs arising in taxable years ending after December 31, 2017 will not be
subject to expiration. The TCJA also limits the U.S. federal deduction for NOLs arising in taxable years beginning after December 31, 2017 to 80% of current year taxable income, and reduces the
corporate income tax rate to 21%, from a prior rate of 35%. This rate reduction may reduce the potential economic benefit of our NOLs and any other deferred tax assets.
Risks related to our financial position and need for additional capital
We have incurred net operating losses since our inception and anticipate that we will continue to incur
substantial operating losses for the foreseeable future. We may never achieve or sustain profitability.
We have incurred net losses during most fiscal periods since our inception. As of December 31, 2017, we had an accumulated deficit of
$473.0 million. We do not know whether or when we will become profitable. To date, we have not commercialized any products or generated any revenues from the sale of products, and we do not
expect to generate any product revenues in the foreseeable future. Our losses have resulted principally from costs incurred in our discovery and development activities.
We
anticipate that our expenses will increase in the future as we expand our discovery, research, development, manufacturing and commercialization activities. However, we also anticipate
that these increased expenses will be partially offset by milestone and royalty payments we expect to receive under our agreements with Celgene and potentially by payments we may receive under new
collaboration arrangements we may enter into with third parties for ACE-083, ACE-2494 or other therapeutic candidates. If we do not receive the anticipated milestone payments or do not enter into
partnerships for ACE-083, ACE-2494 or other therapeutic candidates on acceptable terms, our operating losses will substantially increase over the next several years as we execute our plan to expand
our discovery, research, development, manufacturing and commercialization activities. There can be no assurance that we will enter into a new collaboration or achieve milestones and, therefore, no
assurance our losses will not increase prohibitively in the future.
To
become and remain profitable, we or our partners must succeed in developing our therapeutic candidates, obtaining regulatory approval for them, and manufacturing, marketing and
selling those products for which we or our partners may obtain regulatory approval. We or they may not succeed in these activities, and we may never generate revenue from product sales that is
significant enough to achieve profitability. Even if we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods. Our failure to become or remain
profitable would depress our market value and could impair our ability to raise capital, expand our business, discover or develop other therapeutic candidates or continue our operations. A decline in
the value of our company could cause you to lose all or part of your investment.
We will require substantial additional financing to achieve our goals, and a failure to obtain this necessary
capital when needed could force us to delay, limit, reduce or terminate our product development or commercialization efforts.
As of December 31, 2017, our cash, cash equivalents and investments were $372.9 million. We believe that we will continue to
expend substantial resources for the foreseeable future developing sotatercept in the PH field, ACE-083, ACE-2494 and new therapeutic candidates. These expenditures will include costs associated with
research and development, potentially acquiring
new technologies, conducting preclinical studies and clinical trials, potentially obtaining regulatory approvals and manufacturing products, as well as marketing and selling products approved for
sale, if any. In addition, other unanticipated costs may arise. Because the outcome of our planned and anticipated clinical trials
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highly uncertain, we cannot reasonably estimate the actual amounts necessary to successfully complete the development and commercialization of our therapeutic candidates.
Celgene
generally pays development, manufacturing and commercialization and certain patent costs for luspatercept and for sotatercept outside of the PH field, however from time to time
we may elect to conduct additional activities to support commercialization of luspatercept at our own expense. Other than those costs, our future capital requirements depend on many factors,
particularly in connection with the development of our other therapeutic candidates including sotatercept in the PH field, ACE-083 and ACE-2494:
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the scope, progress, results and costs of researching and developing our other therapeutic candidates, and conducting preclinical studies and
clinical trials;
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the timing of, and the costs involved in, obtaining regulatory approvals for our other therapeutic candidates if clinical trials are
successful;
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the cost of commercialization activities for our other therapeutic candidates, if any of these therapeutic candidates is approved for sale,
including marketing, sales and distribution costs;
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the cost of manufacturing our other therapeutic candidates for clinical trials in preparation for regulatory approval and in preparation for
commercialization;
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our ability to establish and maintain strategic partnerships, licensing or other arrangements and the financial terms of such agreements;
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the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the
outcome of such litigation; and
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the timing, receipt, and amount of sales of, or royalties on, our future products, if any.
Our
current operating plan may also change as a result of many factors currently unknown to us, and we may need additional funds sooner than planned. In addition, we may seek additional
capital due to favorable market conditions or strategic considerations even if we believe that we have sufficient funds for our current or future operating plans. Additional funds may not be available
when we need them on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timely basis, we may be required to delay, limit, reduce or terminate preclinical
studies, clinical trials or other development activities for one or more of our therapeutic candidates or delay, limit, reduce or terminate our establishment of sales and marketing capabilities or
other activities that may be necessary to commercialize our therapeutic candidates.
Raising additional capital may cause dilution to our existing stockholders, restrict our operations or
require us to relinquish rights to our technologies or therapeutic candidates on terms unfavorable to us.
We may seek additional capital through a variety of means, including through private and public equity offerings and debt financings. To the
extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms may include liquidation or other preferences
that adversely affect your rights as a stockholder. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take certain actions, such as
incurring additional debt, making capital
expenditures or declaring dividends. If we raise additional funds through strategic partnerships with third parties, we may have to relinquish valuable rights to our technologies or therapeutic
candidates, or grant licenses on terms that are not favorable to us. If we are unable to raise additional funds through equity or debt financing when needed, we may be required to delay, limit, reduce
or terminate our product development or commercialization efforts for ACE-083, sotatercept in the PH field, ACE-2494 or any therapeutic candidates other than luspatercept or sotatercept outside of the
PH field, or grant rights to develop and market therapeutic candidates that we would otherwise prefer to develop and market ourselves.
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Risks related to regulatory review and approval of our therapeutic candidates
If we or our partners do not obtain regulatory approval for our current and future therapeutic candidates,
our business will be adversely affected.
Our therapeutic candidates will be subject to extensive governmental regulations relating to, among other things, development, clinical trials,
manufacturing and commercialization. In order to obtain regulatory approval for the commercial sale of any therapeutic candidates, we or our partners must demonstrate through extensive preclinical
studies and clinical trials that the therapeutic candidate is safe and effective for use in each target indication. Clinical testing is expensive, time-consuming and uncertain as to outcome. We or our
partners may gain regulatory approval for sotatercept, luspatercept, ACE-083, ACE-2494 or any other therapeutic candidate in some but not all of the territories available or some but not all of the
target indications or may receive approval with limited labeling or boxed warnings, resulting in limited commercial opportunity for the approved therapeutic candidates, or we or they may never obtain
regulatory approval for these therapeutic candidates.
Delays in the commencement, enrollment or completion of clinical trials of our therapeutic candidates could
result in increased costs to us as well as a delay or failure in obtaining regulatory approval, or prevent us from commercializing our therapeutic candidates on a timely basis, or at all.
We cannot guarantee that clinical trials will be conducted as planned or completed on schedule, if at all. A failure of one or more clinical
trials can occur at any stage of testing. Events that may prevent successful or timely commencement, enrollment or completion of clinical development
include:
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delays by us or our current or future partners in reaching a consensus with regulatory agencies on trial design;
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delays in reaching agreement on acceptable terms with prospective clinical research organizations, or CROs, and clinical trial sites;
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delays in obtaining required Institutional Review Board, or IRB, approval at each clinical trial site;
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delays in recruiting suitable patients to participate in clinical trials;
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imposition of a clinical hold by regulatory agencies for any reason, including safety or manufacturing concerns or after an inspection of
clinical operations or trial sites;
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failure by CROs, other third parties or us or our current or future partners to adhere to clinical trial requirements;
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failure to perform in accordance with the FDA's good clinical practices, or GCP, or applicable regulatory guidelines in other countries;
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delays in the testing, validation, manufacturing and delivery of the therapeutic candidates to the clinical sites;
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delays caused by patients not completing participation in a trial or not returning for post-treatment follow-up;
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clinical trial sites or patients dropping out of a trial;
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occurrence of serious adverse events in clinical trials that are associated with the therapeutic candidates that are viewed to outweigh its
potential benefits;
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delays resulting from the FDA's inability to timely review and process any submissions we or Celgene have filed during the pendency of a whole
or partial U.S. government shutdown; or
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changes in regulatory requirements and guidance that require amending or submitting new clinical protocols.
Delays,
including delays caused by the above factors, can be costly and could negatively affect our or Celgene's ability to complete a clinical trial. If we or Celgene are not able to
successfully complete clinical trials of our therapeutic candidates, we will not be able to obtain regulatory approval and will not be able to commercialize our therapeutic candidates.
There is a high risk of clinical failure at any stage of clinical development, and we may never succeed in
developing marketable products or generating product revenue.
Our encouraging preclinical and clinical results to date for sotatercept, luspatercept, and ACE-083, and our encouraging preclinical results to
date for ACE-2494, are not necessarily predictive of the results of our ongoing or future clinical trials. Promising results in preclinical studies of a drug candidate may not be predictive of similar
results in humans during clinical trials, and successful results from early clinical trials of a drug candidate may not be replicated in later and larger clinical trials or in clinical trials for
different indications. If the results of our or our current or future partners' ongoing or future clinical trials are inconclusive with respect to the efficacy of our therapeutic candidates or if we
or they do not meet the clinical endpoints with statistical significance or if there are safety concerns or adverse events associated with our therapeutic candidates, we or our partner may be
prevented or delayed in obtaining marketing approval for our therapeutic candidates. We routinely develop our therapeutic candidates in multiple indications and our therapeutic candidates are at
multiple stages of development at any given time, and any data, including safety or efficacy data, from any of our clinical trials could have a negative effect on our other clinical trials for the
same or different therapeutic candidates. For example, if we or Celgene observe negative data in any one or more of our luspatercept clinical trials, this data could have an adverse effect on our
ability to complete the clinical trials with luspatercept or to obtain regulatory approval for luspatercept in any indication.
In
addition, data obtained from trials and studies are susceptible to varying interpretations, and regulators may not interpret our data as favorably as we do, which may delay or prevent
regulatory approval. Alternatively, regulators may ask us to conduct more rigorous studies or trials or studies with
endpoints that are different from the studies we are currently conducting. Even if we or our partners obtain regulatory approval, that approval may be for indications or patient populations that are
not as broad as intended or desired or may require labeling that includes significant use or distribution restrictions or safety warnings. We or our partners may also be required to perform additional
or unanticipated clinical trials to obtain approval or be subject to additional post-marketing testing requirements to maintain regulatory approval. In addition, regulatory authorities may withdraw
their approval of a product or impose restrictions on its distribution, such as in the form of a risk evaluation and mitigation strategy.
If we or our current or future partners fail to obtain regulatory approval in jurisdictions outside the
United States, we and they will not be able to market our products in those jurisdictions.
We and our current or future partners intend to market our therapeutic candidates, if approved, in international markets. Such marketing will
require separate regulatory approvals in each market and compliance with numerous and varying regulatory requirements. The approval procedures vary from country-to-country and may require additional
testing. Moreover, the time required to obtain approval may differ from that required to obtain FDA approval. In addition, in many countries outside the United States, a therapeutic candidate must be
approved for reimbursement before it can be approved for sale in that country. Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval
by one foreign regulatory authority does not ensure approval by regulatory authorities in other foreign countries or by the FDA. The foreign regulatory approval process may include all of the risks
associated with obtaining FDA approval. We or our
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or future partners may not obtain foreign regulatory approvals on a timely basis, if at all. We or our partners may not be able to file for regulatory approvals and may not receive necessary
approvals to commercialize our products in any market.
We and, for our Celgene partnered programs, Celgene, regularly request and receive guidance from the FDA and
foreign regulators regarding the design or conduct of clinical trials with our therapeutic candidates. This guidance is not binding on these agencies and their policies and guidance could change
substantially and unpredictably, potentially in a way that makes our clinical trials or our path to regulatory approval longer, more expensive or otherwise more difficult.
Any guidance that we or Celgene receive from the FDA or foreign regulators regarding the design or conduct of our or Celgene's clinical trials
is not necessarily indicative of what these regulators will eventually require from us or Celgene to obtain regulatory approval of our therapeutic candidates. These regulators typically caution that
any guidance received from them represents their then-current thinking, does not create or confer any rights to us or Celgene, and does not operate to bind the regulator. If later guidance that we or
Celgene receive from the FDA or foreign regulators regarding our clinical trial design or conduct is materially different than the current guidance we have received from these regulators, we may need
to change our clinical development plans and it may take longer, be more expensive or otherwise be more difficult to obtain FDA or foreign regulatory approval of our therapeutic candidates and our
business may be materially harmed.
We
undertake no obligation to disclose guidance that we or Celgene may receive from the FDA or foreign regulators. Any guidance from the FDA or foreign regulators that we may disclose
publicly speaks only as of the date of such disclosure. We undertake no obligation to update any disclosure we make regarding regulator guidance to reflect additional regulatory guidance received
after the date of such disclosure or to reflect the occurrence of unanticipated events that may affect the guidance.
Even if we or our current or future partners receive regulatory approval for our therapeutic candidates, such
products will be subject to ongoing regulatory review, which may result in significant additional expense. Additionally, our therapeutic candidates, if approved, could be subject to labeling and other
restrictions, and we or our current or future partners may be subject to penalties if we fail to comply with regulatory requirements or experience unanticipated problems with our products.
Any regulatory approvals that we or our current or future partners receive for our therapeutic candidates may also be subject to limitations on
the approved indicated uses for which the product may be marketed or to conditions of approval, or contain requirements for potentially costly post-marketing testing, including Phase 4 clinical
trials, and surveillance to monitor safety and efficacy. In addition, if the FDA approves any of our therapeutic candidates, the manufacturing processes, labeling, packaging, distribution, adverse
event reporting, storage, advertising, promotion and recordkeeping for the product will be subject to extensive and ongoing regulatory requirements. These requirements include submissions of safety
and other post-marketing information and reports, registration, as well as continued compliance with current good manufacturing practice, or cGMP, and GCP, for any clinical trials that we or our
partners conduct post-approval.
Later
discovery of previously unknown problems with an approved therapeutic candidate, including adverse events of unanticipated severity or frequency, or with manufacturing operations
or processes, or failure to comply with regulatory requirements, may result in, among other things:
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restrictions on the marketing or manufacturing of the product, withdrawal of the product from the market, or voluntary or mandatory product
recalls;
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fines, warning letters, or holds on clinical trials;
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refusal by the FDA to approve pending applications or supplements to approved applications filed by us or our partners, or suspension or
revocation of product license approvals;
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product seizure or detention, or refusal to permit the import or export of products; and
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injunctions or the imposition of civil or criminal penalties.
The
policies of the FDA and other regulatory agencies may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our
therapeutic candidates. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United States or
abroad. If we or our
partners are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or not able to maintain regulatory compliance, we or our partners may lose any
marketing approval that may have been obtained and we may not achieve or sustain profitability, which would adversely affect our business.
A Fast Track designation by the FDA may not actually lead to a faster development or regulatory review or
approval process.
In the United States, luspatercept received Fast Track designation for the treatment of anemia in patients with lower-risk myelodysplastic
syndromes, or MDS, for the treatment of patients with transfusion-dependent beta-thalassemia, and for the treatment of patients with non-transfusion-dependent beta-thalassemia. The FDA grants Fast
Track designation to therapies that are considered capable of addressing unmet medical needs and possess the potential to treat serious or life-threatening disease conditions in order to facilitate
its development and expedite the review procedure. The FDA has broad discretion in granting Fast Track designation, so even if we believe that a particular product candidate is eligible for such
designation, the FDA could decide not to grant it. Even though luspatercept has received Fast Track designation, we may not experience a faster development process, review or approval compared to
conventional FDA procedures. The FDA may also withdraw Fast Track designation if it believes that the designation is no longer supported by data from our clinical development program.
The ongoing clinical trials with luspatercept may be delayed, suspended or terminated, or may not lead to
marketing approval.
Subsequent to the positive readout of primary and secondary endpoints in 2018 in the Phase 3 MEDALIST and BELIEVE trials, Celgene is currently
continuing these trials per protocol for the purpose of obtaining longer-term data regarding the safety and efficacy of luspatercept in these patient populations. In addition to the MEDALIST and
BELIEVE Phase 3 clinical trials with luspatercept, Celgene is currently conducting a Phase 2 clinical trial in non-transfusion-dependent beta-thalassemia patients, referred to as the
"BEYOND" trial, with preliminary topline results currently expected in 2020. Celgene has also initiated a Phase 3 clinical trial, the "COMMANDS" trial, in first-line, lower-risk MDS patients
and enrollment is ongoing. Enrollment is also currently ongoing in a Phase 2 clinical trial for the treatment of patients with myelofibrosis, a rare bone marrow disorder, with preliminary
topline results currently expected in the second half of 2019. Celgene may experience delays in the conduct of these clinical trials, including delays related to patients withdrawing from the trial,
or drug supply. If patients experience adverse events while in clinical trials with luspatercept, then one or more of these trials may be delayed, suspended or terminated. Celgene may not achieve the
remaining secondary endpoints for one or both of the MEDALIST and BELIEVE trials and may not achieve any of the endpoints in the other ongoing trials. Additionally, we and Celgene have announced that
we are planning to evaluate luspatercept in one or more indications beyond MDS, beta-thalassemia and myelofibros. Even though the primary endpoint and key secondary endpoints were achieved in the
MEDALIST and BELIEVE trials, one or more health authorities may not approve luspatercept for the
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indications. The MEDALIST and BELIEVE trials were designed with input from health authorities in many different countries, but this guidance is not binding on these regulators, and it may be
necessary to conduct one or more additional clinical trials in order to achieve marketing authorization in one or more regulatory jurisdictions. Guidance that we or Celgene receive from the FDA or
foreign regulators regarding the design or conduct of the MEDALIST or BELIEVE clinical trials is not necessarily indicative of what these regulators will eventually require from us or Celgene to
obtain regulatory approval of luspatercept in these indications. Any regulatory approvals that we or Celgene receive for luspatercept may also be subject to limitations on the approved indicated uses
for which the product may be marketed or to conditions of approval, or contain requirements for potentially costly post-marketing testing, including Phase 4 clinical trials, and surveillance to
monitor safety and efficacy.
If we or any of our current or future partners violate the guidelines pertaining to promotion and advertising
of any of our therapeutic candidates, if approved, we or they may be subject to disciplinary action by the FDA's Office of Prescription Drug Promotion (OPDP) or other regulatory authorities.
The FDA's Office of Prescription Drug Promotion, or OPDP, is responsible for reviewing prescription drug advertising and promotional labeling to
ensure that the information contained in these materials is not false or misleading. There are specific disclosure requirements, and the applicable regulations mandate that advertisements cannot be
false or misleading or omit material facts about the product. Prescription drug promotional materials must present a fair balance between the drug's effectiveness and the risks associated with its
use. Most warning letters from OPDP cite inadequate disclosure of risk information.
OPDP
prioritizes its actions based on the degree of risk to the public health, and often focuses on newly introduced drugs and those associated with significant health risks. There are
two types of letters that OPDP typically sends to companies that violate its drug advertising and promotional guidelines: untitled letters and warning letters. In the case of an untitled letter, OPDP
typically alerts the drug company of the violation and issues a directive to refrain from future violations, but does not typically demand other corrective action. A warning letter is typically issued
in cases that are more serious or where the company is a repeat offender. Although we have not received any such letters from OPDP, we or any of our current or future partners may inadvertently
violate OPDP's guidelines in the future and be subject to a OPDP untitled letter or warning letter, which may have a negative impact on our business.
Risks related to our reliance on third parties
We are dependent on Celgene for the successful development and commercialization of sotatercept outside of
pulmonary hypertension and our most advanced therapeutic candidate, luspatercept. If Celgene does not devote sufficient resources to the development of luspatercept, discontinues development of
luspatercept, is unsuccessful in its efforts, or chooses to terminate the luspatercept agreement with us, our business will be materially harmed.
We have entered into collaboration agreements with Celgene to develop and commercialize sotatercept and luspatercept. Pursuant to the
sotatercept agreement, responsibility for all clinical and other product development activities for all indications other than for pulmonary hypertension and for manufacturing sotatercept has been
transferred to Celgene. For luspatercept, we are responsible for conducting ongoing Phase 2 clinical trials in MDS and beta-thalassemia, and we are also responsible for manufacturing supplies
for our Phase 1 and Phase 2 studies. Celgene will be responsible for all clinical development and manufacturing activities after such studies are completed. Celgene is responsible for
paying 100% of worldwide development costs for luspatercept and for sotatercept outside of pulmonary hypertension. We will co-promote luspatercept and sotatercept outside of pulmonary hypertension, if
approved by the FDA and its counterparties, in North America, for which our commercialization costs
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be entirely funded by Celgene, and from time to time we may elect to conduct additional activities to support commercialization of luspatercept at our own expense.
Celgene
is obligated to use commercially reasonable efforts to develop and commercialize luspatercept and sotatercept outside of pulmonary hypertension. Celgene may determine that it is
commercially reasonable to develop and commercialize only luspatercept or sotatercept and discontinue the development or commercialization of the other therapeutic candidate, or Celgene may determine
that it is not commercially reasonable to continue development of one or both of sotatercept and luspatercept. This may occur for many reasons, including internal business reasons or because of
unfavorable regulatory feedback. Further, on review of the safety and efficacy data available to date, the FDA may impose requirements on a clinical trial program that would render the program
commercially nonviable. In the event of any such decision, we would be unable to advance such program ourselves.
Under
our collaboration agreements, when Celgene takes over development activities of a therapeutic candidate, it may determine the development plan and activities for that therapeutic
candidate. We may disagree with Celgene about the development strategy it employs, but we will have no rights to impose our development strategy on Celgene. Similarly, Celgene may decide to seek
regulatory approval for, and limit commercialization of, either or both of sotatercept outside of pulmonary hypertension and luspatercept to narrower indications than we would pursue. We would be
prevented from developing or commercializing a candidate in an indication that Celgene has chosen not to pursue, other than sotatercept in pulmonary hypertension. More broadly, if Celgene elects to
discontinue the development of sotatercept outside of pulmonary hypertension and/or luspatercept, we may be unable to advance the products ourselves.
Pursuant
to our collaboration agreement with Celgene for the development of sotatercept in pulmonary hypertension, we will rely on Celgene for many aspects of our development of
sotatercept in pulmonary hypertension, including, for example, drug supply, manufacturing (if elected by Celgene), and regulatory support. If Celgene fails to perform its obligations under the
sotatercept agreement, our ability to develop sotatercept in pulmonary hypertension may be materially harmed.
This
partnership may not be scientifically or commercially successful due to a number of important factors, including the following:
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Celgene has wide discretion in determining the efforts and resources that it will apply to its partnership with us. The timing and amount of
any development milestones, and downstream commercial milestones and royalties that we may receive under such partnership will depend on, among other things, the efforts, allocation of resources and
successful development and commercialization of these therapeutic candidates by Celgene.
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Celgene may develop and commercialize, either alone or with others, products that are similar to or competitive with the therapeutic candidates
that are the subject of its partnerships with us.
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Celgene may terminate its partnership with us without cause and for circumstances outside of our control, which could make it difficult for us
to attract new strategic partners or adversely affect how we are perceived in scientific and financial communities.
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Celgene may develop or commercialize our therapeutic candidates in such a way as to elicit litigation that could jeopardize or invalidate our
intellectual property rights or expose us to potential liability.
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Celgene may not comply with all applicable regulatory requirements, or may fail to report safety data in accordance with all applicable
regulatory requirements.
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If Celgene were to breach its arrangements with us, we may need to enforce our right to terminate the agreement in legal proceedings, which
could be costly and cause delay in our
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ability
to receive rights back to the relevant therapeutic candidates. If we were to terminate an agreement with Celgene due to Celgene's breach or Celgene terminated the agreement without cause, the
development and commercialization of sotatercept and luspatercept could be delayed, curtailed or terminated because we may not have sufficient financial resources or capabilities to continue
development and commercialization of these candidates on our own if we choose not to, or are unable to, enter into a new collaboration for these candidates.
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Celgene may enter into one or more transactions with third parties, including a merger, consolidation, reorganization, sale of substantial
assets, sale of substantial stock or other change in control, which could divert the attention of its management and adversely affect Celgene's ability to retain and motivate key personnel who are
important to the continued development of the programs under the strategic partnership with us. In addition, the third-party to any such transaction could determine to reprioritize Celgene's
development programs such that Celgene ceases to diligently pursue the development of our programs and/or cause the respective partnership with us to terminate.
We and Celgene routinely publicly disclose information about luspatercept and sotatercept, and if our and
Celgene's public disclosures are inconsistent, this could materially harm public and market perception of luspatercept and sotatercept and the value of our common stock.
Through a variety of public forums and media, such as press releases, conference calls, filings with the Securities and Exchange Commission, and
scientific/medical conferences, we and Celgene routinely disclose information about luspatercept and sotatercept. We and Celgene may not agree on information that is disclosed or the interpretation of
that information, and our disclosures may be inconsistent with Celgene's disclosures. If our and Celgene's public disclosures are inconsistent, public and market perception of luspatercept and
sotatercept and the value of our common stock could be materially adversely affected.
We currently have limited marketing, sales and distribution experience and capabilities and, for luspatercept
and, outside of pulmonary hypertension, sotatercept, we will be dependent upon Celgene for commercialization.
For luspatercept and, outside of pulmonary hypertension, sotatercept, we and Celgene share commercialization obligations in the United States
and we are solely dependent on Celgene for commercialization outside of the United States. As a company without any commercial products, we have very limited marketing, sales and distribution
experience and capabilities in the United States. To successfully commercialize luspatercept and outside of pulmonary hypertension, sotatercept, in the United States, we will need to rely extensively
on Celgene, and we will need to establish our own adequate marketing, sales and distribution capabilities. In addition, to successfully commercialize our wholly-owned therapeutic candidates and
sotatercept in pulmonary hypertension in jurisdictions where they may be approved, we will need to establish our own marketing, sales and distribution capabilities. Failure to establish these
capabilities, whether due to insufficient resources or some other cause, will limit or potentially halt our ability to successfully commercialize any therapeutic candidates, and will adversely affect
our financial results. Even if we do develop such capabilities, we will compete with other companies that have more experienced and well-funded marketing, sales and distribution operations.
We and Celgene rely on third parties to conduct preclinical studies and clinical trials for our therapeutic
candidates, and if they do not properly and successfully perform their obligations to us, we may not be able to obtain regulatory approvals for our therapeutic candidates.
We design the clinical trials for ACE-083 and sotatercept outside of pulmonary hypertension and will do so for any future unpartnered
therapeutic candidates such as ACE-2494, and we will continue to work with Celgene on any ongoing or future trials for sotatercept and luspatercept. However, we and
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Celgene
rely on CROs and other third parties to assist in managing, monitoring and otherwise carrying out many of these trials. We and Celgene compete with many other companies for the resources of
these third parties. The third parties on whom we and Celgene rely generally may terminate their engagements at any time, and having to enter into alternative arrangements would delay development and
commercialization of our therapeutic candidates.
The
FDA and foreign regulatory authorities require compliance with regulations and standards, including GCP, for designing, conducting, monitoring, recording, analyzing, and reporting
the results of clinical trials to assure that the data and results are credible and accurate and that the rights, integrity and confidentiality of trial participants are protected. Although we and
Celgene rely on third parties to conduct many of our and their clinical trials, we and Celgene are responsible for ensuring that each of these clinical trials is conducted in accordance with its
general investigational plan, protocol and other requirements.
If
these third parties do not successfully carry out their duties under their agreements, if the quality or accuracy of the data they obtain is compromised due to their failure to adhere
to clinical trial protocols or to regulatory requirements, or if they otherwise fail to comply with clinical trial protocols or meet expected deadlines, the clinical trials of our therapeutic
candidates may not meet regulatory requirements or may be delayed. If clinical trials do not meet regulatory requirements or if these third parties need to be replaced, preclinical development
activities or clinical trials may be extended, delayed, suspended or terminated. If any of these events occur, we or Celgene may not be able to obtain regulatory approval of our therapeutic candidates
on a timely basis or at all.
In addition to our internal manufacturing, we rely on third-party manufacturers in the production and testing
of our therapeutic candidates, and any failure by a third-party manufacturer may delay or impair our ability to complete clinical trials or commercialize our therapeutic candidates.
Manufacturing biologic drugs is complicated and is tightly regulated by the FDA, the European Medicines Agency, or EMA, and comparable
regulatory authorities around the world. We currently manufacture drug substance for our preclinical studies, Phase 1 clinical trials and Phase 2 clinical trials of luspatercept, ACE-083
and ACE-2494. For Phase 3 and commercial supply of our products that we have not partnered, we expect to use contract manufacturing organizations. Successfully transferring complicated
manufacturing techniques to contract manufacturing organizations and scaling up these techniques for commercial quantities will be time consuming and we may not be able to achieve such transfer.
Moreover, the market for contract manufacturing services for therapeutic candidates is highly cyclical, with periods of relatively abundant capacity alternating with periods in which there is little
available capacity. If any need we have for contract manufacturing services increases during a period of industry-wide tight capacity, we may not be able to access the required capacity on a timely
basis or on commercially viable terms.
In
addition, we contract with fill & finishing providers with the appropriate expertise, facilities and scale to meet our needs. Failure to maintain cGMP can result in a
contractor receiving FDA sanctions, which can impact our contractors' ability to operate or lead to delays in our clinical development programs. We believe that our current fill & finish
contractors are operating in accordance with cGMP, but we can give no assurance that FDA or other regulatory agencies will agree. In addition, any delay in contracting for fill & finish
services, or failure of the contract manufacturer to perform the services as needed, may delay clinical trials, registration and launches. Any such issues may have a substantial negative effect on our
business.
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For sotatercept and our most advanced therapeutic candidate, luspatercept, we rely on our collaboration
partner Celgene to manufacture, or contract for the manufacture of, bulk drug substance and finished drug product for use in late stage clinical trials and for commercial supplies of these product
candidates, if approved. Any failure by Celgene or by third-parties with which Celgene contracts may delay or impair the ability to complete late stage clinical trials or commercialize either or both
of sotatercept and luspatercept, if approved.
Celgene is responsible for manufacturing sotatercept outside of pulmonary hypertension and luspatercept for all Celgene-sponsored clinical
trials, and may elect to be responsible for manufacturing sotatercept for clinical trials in pulmonary hypertension. Celgene generally does not
perform the manufacture of the drug substance or drug product for either sotatercept or luspatercept itself. Celgene has used and may continue to use contract manufacturers for the manufacture of drug
substance and drug product for sotatercept and we have no expectation that Celgene plans to perform the manufacture of bulk drug substance or drug product for either sotatercept or luspatercept in the
future. However, Celgene would have the right to manufacture sotatercept or luspatercept, itself or through the use of contract manufacturers. We understand that Celgene has entered into manufacturing
arrangements for clinical and commercial supplies of sotatercept and luspatercept bulk drug substance with contract manufacturers with considerable biotherapeutics manufacturing experience, including
manufacturing monoclonal antibodies through processes similar to those used for sotatercept. If any of these manufacturers is unwilling or unable to manufacture sufficient quantities of sotatercept
and/or luspatercept to meet clinical or commercial demand, either for technical or business reasons, the development and commercialization of sotatercept and/or luspatercept may be delayed.
We may not be successful in establishing and maintaining additional strategic partnerships, which could
adversely affect our ability to develop and commercialize products, negatively impacting our operating results.
In addition to our current collaborations with Celgene, part of our strategy is to evaluate and enter into additional partnerships in the future
for our other product candidates when strategically attractive, including potentially with major biotechnology or pharmaceutical companies. We face significant competition in seeking appropriate
partners for our therapeutic candidates, and the negotiation process is time-consuming and complex. In order for us to successfully partner our therapeutic candidates, potential partners must view
these therapeutic candidates as economically valuable in markets they determine to be attractive in light of the terms that we are seeking and other available products for licensing by other
companies. Even if we are successful in our efforts to establish new strategic partnerships, the terms that we agree upon may not be favorable to us, and we may not be able to maintain such strategic
partnerships if, for example, development or approval of a therapeutic candidate is delayed or sales of an approved product are disappointing. Any delay in entering into new strategic partnership
agreements related to our other therapeutic candidates could delay the development and commercialization of these therapeutic candidates and reduce their competitiveness even if they reach the market.
If
we fail to establish and maintain additional strategic partnerships related to ACE-083, ACE-2494 or other therapeutic candidates, we will bear all of the risk and costs related to the
development of any such therapeutic candidate, and we may need to seek additional financing, hire additional employees and otherwise develop expertise for which we have not budgeted. This could
negatively affect the development of any unpartnered therapeutic candidate.
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Risks related to our intellectual property
If we are unable to obtain or protect intellectual property rights related to our therapeutic candidates, we
may not be able to compete effectively.
We rely upon a combination of patents, trade secret protection and confidentiality agreements to protect the intellectual property related to
our platform technology and therapeutic candidates. The patent position of biotechnology companies is generally uncertain because it involves complex legal and factual considerations. The standards
applied by the United States Patent and Trademark Office, or USPTO, and foreign patent offices in granting patents are not always applied uniformly or predictably. For example, there is no uniform
worldwide policy regarding patentable subject matter or the scope of claims allowable in biotechnology patents. The patent applications that we own or in-license may fail to result in issued patents
with claims that cover our therapeutic candidates in the United States or in other countries. There is no assurance that all potentially relevant prior art relating to our patents and patent
applications has been found. We may be unaware of prior art that could be used to invalidate an issued patent or prevent our pending patent applications from issuing as patents. Even if patents do
successfully issue and even if such patents cover our therapeutic candidates, third parties may challenge their validity, enforceability or scope, which may result in such patents being narrowed or
invalidated. Furthermore, even if they are unchallenged, our patents and patent applications may not adequately protect our intellectual property, provide exclusivity for our therapeutic candidates or
prevent others from designing around our claims. Any of these outcomes could impair our ability to prevent competition from third parties, which may have an adverse impact on our business.
If
patent applications we hold or have in-licensed with respect to our platform or therapeutic candidates fail to issue, if their breadth or strength of protection is threatened, or if
they fail to provide meaningful exclusivity for our therapeutic candidates, it could dissuade companies from collaborating with us. We regularly file patent applications to cover our therapeutic
candidates. We cannot offer any assurances about which, if any, patents will issue, the breadth of any such patents or whether any issued patents will be found invalid and unenforceable or will be
threatened by third parties. Any successful challenge to these patents or any other patents owned by or licensed to us could deprive us of rights necessary for the successful commercialization of any
therapeutic candidate that we or our current or future partners may develop. Since patent applications in the United States and most other countries are confidential for a period of time after filing,
and some remain so until issued, we cannot be certain that we were the first to file any patent application related to a therapeutic candidate. Furthermore, if third parties have filed such patent
applications, an interference proceeding in the United States can be initiated by the USPTO or a third party to determine who was the first to invent any of the subject matter covered by the patent
claims of our applications. In addition, patents have a limited lifespan. In the United States, the natural expiration of a patent is generally 20 years after it is filed. Various extensions
may be available; however, the life of a patent and the protection it affords is limited. If we
encounter delays in obtaining regulatory approvals, the period of time during which we could market a therapeutic candidate under patent protection could be reduced. Even if patents covering our
therapeutic candidates are obtained, once the patent life has expired for a product, we may be open to competition from biosimilar products.
Any
loss of patent protection could have a material adverse impact on our business. We and our current or future partners may be unable to prevent competitors from entering the market
with a product that is similar to or the same as our therapeutic candidates. In addition, the royalty we would receive under our collaboration agreements with Celgene for sotatercept and luspatercept
would be reduced by 50% if such product ceases to be covered by a valid claim of our patents even if no competitor with a similar product has entered the market.
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Third-party claims of intellectual property infringement or misappropriation may prevent or delay our
development and commercialization efforts.
Our commercial success depends in part on us and our current or future partners not infringing the patents and proprietary rights of third
parties. There is a substantial amount of litigation, both within and outside the United States, involving patent and other intellectual property rights in the biotechnology and pharmaceutical
industries, including patent infringement lawsuits, interferences, oppositions and inter partes reexamination proceedings before the USPTO and corresponding foreign patent offices. Numerous U.S. and
foreign issued patents and pending patent applications owned by third parties exist in the fields in which we and our current or future partners are developing and may develop our therapeutic
candidates. As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that our therapeutic candidates may be subject to claims of infringement of the
patent rights of third parties.
Third
parties may assert that we are employing their proprietary technology without authorization. There may be third-party patents or patent applications with claims to materials,
formulations, methods of manufacture or methods for treatment related to the use or manufacture of our therapeutic candidates, that we failed to identify. For example, applications filed before
November 29, 2000 and certain applications filed after that date that will not be filed outside the United States remain confidential until issued as patents. Except for the preceding
exceptions, patent applications in the United States and elsewhere are generally published only after a waiting period of approximately 18 months after the earliest filing. Therefore, patent
applications covering our platform technology or our therapeutic candidates could have been filed by others without our knowledge. Additionally, pending patent applications which have been published
can, subject to certain limitations, be later
amended in a manner that could cover our platform technologies, our therapeutic candidates or the use or manufacture of our therapeutic candidates.
If
any third-party patents were held by a court of competent jurisdiction to cover aspects of our materials, formulations, methods of manufacture or methods for treatment, the holders of
any such patents would be able to block our ability to develop and commercialize the applicable therapeutic candidate until such patent expired or unless we or our partners obtain a license. These
licenses may not be available on acceptable terms, if at all. Even if we or our partners were able to obtain a license, the rights may be nonexclusive, which could result in our competitors gaining
access to the same intellectual property. Ultimately, we or our partners could be prevented from commercializing a product, or be forced to cease some aspect of our business operations, if, as a
result of actual or threatened patent infringement claims, we or our partners are unable to enter into licenses on acceptable terms. If Celgene is required to enter a license agreement with a third
party in order to import, develop, manufacture or commercialize sotatercept or luspatercept, the royalty rate and sales milestone payments that we could receive may be reduced by up to 50%. This could
harm our business significantly.
Parties
making claims against us or our partners may obtain injunctive or other equitable relief, which could effectively block our or our partners' ability to further develop and
commercialize one or more of our therapeutic candidates. Defending against claims of patent infringement or misappropriation of trade secrets could be costly and time consuming, regardless of the
outcome. Thus, even if we were to ultimately prevail, or to settle at an early stage, such litigation could burden us with substantial unanticipated costs. In addition, litigation or threatened
litigation could result in significant demands on the time and attention of our management team, distracting them from the pursuit of other company business. In the event of a successful claim of
infringement against us or our partners, we may have to pay substantial damages, including treble damages and attorneys' fees for willful infringement, pay royalties, redesign our infringing products
or obtain one or more licenses from third parties, which may be impossible or require substantial time and monetary expenditure.
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We
may face a claim of misappropriation if a third party believes that we inappropriately obtained and used trade secrets of such third party. If we are found to have misappropriated a
third party's trade secrets, we may be prevented from further using such trade secrets, limiting our ability to develop our therapeutic candidates, and we may be required to pay damages.
During
the course of any patent or other intellectual property litigation, there could be public announcements of the results of hearings, rulings on motions, and other interim
proceedings in the litigation. If securities analysts or investors regard these announcements as negative, the perceived value of our therapeutic candidates, programs, or intellectual property could
be diminished. Accordingly, the market price of our common stock could decline.
We have in-licensed, and may in the future in-license, a portion of our intellectual property, and, if we
fail to comply with our obligations under these arrangements, we could lose such intellectual property rights or owe damages to the licensor of such intellectual property.
We are a party to a number of license agreements that are important to our business, and we may enter into additional license agreements in the
future. As part of our discovery and development activities, we routinely evaluate in-licenses from academic and research institutions. See "BusinessIntellectual
PropertyIn-Licenses" in our Annual Report on Form 10-K for the year ended December 31, 2017 for a description of our license agreements.
Our
existing license agreements impose, and we expect that future license agreements will impose, various diligence, milestone payment, royalty and other obligations on us. If there is
any conflict, dispute, disagreement or issue of non-performance between us and our licensing partners regarding our rights or obligations under the license agreements, including any such conflict,
dispute or disagreement arising from our failure to satisfy payment obligations under any such agreement, we may owe damages, our licensor may have a right to terminate the affected license, and our
and our partners' ability to utilize the affected intellectual property in our drug discovery and development efforts, and our ability to enter into collaboration or marketing agreements for an
affected therapeutic candidate, may be adversely affected.
Confidentiality agreements with employees and third parties may not prevent unauthorized disclosure of trade
secrets and other proprietary information.
In addition to the protection afforded by patents, we rely on trade secret protection and confidentiality agreements to protect proprietary
know-how that is not patentable or that we elect not to patent, processes for which patents are difficult to enforce and any other elements of our platform technology and discovery and development
processes that involve proprietary know-how, information or technology that is not covered by patents. However, trade secrets can be difficult to protect. We seek to protect our proprietary technology
and processes, in part, by entering into confidentiality agreements with our employees, consultants, and outside scientific advisors, contractors and collaborators. Although we use reasonable efforts
to protect our trade secrets, our employees, consultants, contractors, or outside scientific advisors might intentionally or inadvertently disclose our trade secret information to competitors. In
addition, competitors may otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques.
Enforcing
a claim that a third party illegally obtained and is using any of our trade secrets is expensive and time consuming, and the outcome is unpredictable. In addition, courts
outside the United States sometimes are less willing than U.S. courts to protect trade secrets. Misappropriation or unauthorized
disclosure of our trade secrets could impair our competitive position and may have a material adverse effect on our business.
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Risks related to development and commercialization of our therapeutic candidates
Our future commercial success depends upon attaining significant market acceptance of our therapeutic
candidates, if approved, among physicians, patients, healthcare payers and acceptance by the operators of major medical providers.
Even if we or our current or future partners obtain regulatory approval for any of our existing therapeutic candidates or any therapeutic
candidates that we may develop or acquire in the future, the product may not gain market acceptance among physicians, healthcare payers, patients and
the medical community. Market acceptance of any approved products depends on a number of factors, including:
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the efficacy and safety of the product, as demonstrated in clinical trials;
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the clinical indications for which the product is approved and the label approved by regulatory authorities for use with the product, including
any warnings that may be required on the label;
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acceptance by physicians and patients of the product as a safe and effective treatment;
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decisions by healthcare organizations to utilize the product;
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the cost, safety and efficacy of treatment in relation to alternative treatments;
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the availability of adequate reimbursement and pricing by third party payers and government authorities;
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the continued projected growth of drug markets in our various indications;
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relative convenience and ease of administration;
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the prevalence and severity of adverse side effects; and
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the effectiveness of our and our current or future partners' sales and marketing efforts.
Market
acceptance is critical to our ability to generate significant revenue. Any therapeutic candidate, if approved and commercialized, may be accepted in only limited capacities or not
at all. If any approved products are not accepted by the market to the extent that we expect, we may not be able to generate significant revenue and our business would suffer.
Reimbursement may be limited or unavailable in certain market segments for our therapeutic candidates, which
could make it difficult for us to sell our products profitably.
Market acceptance and sales of any approved therapeutic candidates will depend significantly on the availability of adequate coverage and
reimbursement from third-party payers and may be affected by existing and future healthcare reform measures. Government authorities and third-party payers, such as private health insurers and health
maintenance organizations, decide which drugs they will pay for and establish reimbursement levels. Reimbursement by a third-party payer may depend upon a number of factors, including the third-party
payer's determination that use of a product is:
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a covered benefit under its health plan;
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safe, effective and medically necessary;
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appropriate for the specific patient;
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cost-effective; and
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neither experimental nor investigational.
Obtaining
coverage and reimbursement approval for a product from a government or other third party payer is a time consuming and costly process that could require us to provide
supporting scientific, clinical and cost-effectiveness data for the use of our products to the payer. We or our
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current
or future partners may not be able to provide data sufficient to gain acceptance with respect to coverage and reimbursement. We cannot be sure that coverage or adequate reimbursement will be
available for any of our therapeutic candidates. Also, we cannot be sure that reimbursement amounts will not reduce the demand for, or the price of, our products. If reimbursement is not available or
is available only to limited levels, we may not be able to commercialize certain of our products. In addition in the United States, third-party payers are increasingly attempting to contain healthcare
costs by limiting both coverage and the level of reimbursement of new drugs. As a result, significant uncertainty exists as to whether and how much third-party payers will reimburse patients for their
use of newly approved drugs, which in turn will put pressure on the pricing of drugs.
Price controls and price pressure may be imposed in foreign and U.S. markets, which may adversely affect our
future profitability.
In some countries, particularly member states of the European Union, the pricing of prescription drugs is subject to governmental control. In
these countries, pricing negotiations with governmental authorities can take considerable time after receipt of marketing approval for a product. In addition, there can be considerable pressure by
governments and other stakeholders, including those in the United States, on prices and reimbursement levels, including as part of cost containment measures. Political, economic and regulatory
developments may further complicate pricing negotiations, and pricing negotiations may continue after reimbursement has been obtained. Reference pricing used by various European Union member states
and parallel distribution, or arbitrage between low-priced and high-priced member states, can further reduce prices. In some countries, we or our current or future partners may be required to conduct
a clinical trial or other studies that compare the cost-effectiveness of our therapeutic candidates to other available therapies in order to obtain or maintain reimbursement or pricing approval.
Publication of discounts by third-party payers or authorities may lead to further pressure on the prices or reimbursement levels within the country of publication and other countries. If reimbursement
of our products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our business could be adversely affected.
Recent and future healthcare reform legislation and other changes in the healthcare industry and in
healthcare spending may adversely affect our business model.
Our revenue prospects could be affected by changes in healthcare spending and policy in the United States and abroad. We operate in a highly
regulated industry and new laws, regulations or judicial decisions, or new interpretations of existing laws, regulations or decisions, related to healthcare availability, the method of delivery or
payment for healthcare products and services could negatively impact our business, operations and financial condition. There is significant interest in promoting healthcare reform, as evidenced by the
enactment in the United States of the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act in 2010, and as evidenced by public discourse on the topic. See
"BusinessGovernment Regulation" in our Annual Report on Form 10-K for the year ended December 31, 2017 for a detailed description on recent developments in healthcare
regulations. It is likely that federal and state legislatures within the United States and foreign governments will continue to consider changes to existing healthcare legislation. We cannot predict
the reform initiatives that may be adopted in the future or whether initiatives that have been adopted will be repealed or modified. The continuing efforts of the government, insurance companies,
managed care organizations and other payers of healthcare services to contain or reduce costs of healthcare may adversely affect:
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public and market perceptions of our future business prospects, including future revenue and profitability;
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the demand for any drug products for which we may obtain regulatory approval;
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our ability to set a price that we believe is fair for our products;
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our ability to obtain coverage and reimbursement approval for a product;
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our ability to generate revenues and achieve or maintain profitability; and
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the level of taxes that we are required to pay.
We face substantial competition, which may result in others discovering, developing or commercializing
products before, or more successfully, than we do.
Our future success depends on our or our partners' ability to demonstrate and maintain a competitive advantage with respect to the design,
development and commercialization of
our therapeutic candidates. Our objective is to design, develop and commercialize new products with superior efficacy, convenience, tolerability and safety. In many cases, the therapeutic candidates
that we commercialize with our strategic partners or on our own will compete with existing, market-leading products. See "BusinessCompetition" in our Annual Report on Form 10-K for
the year ended December 31, 2017 for a detailed description of the competitive landscape for our therapeutic candidates.
There
are products currently approved to treat patients with MDS, including iron chelation therapy, immunomodulators and various chemotherapeutic agents. In addition, erythropoiesis
stimulating agents and red blood cell transfusions are extensively used to treat anemia in MDS. Luspatercept, if approved, will compete with these therapies. In addition, one or more products not
currently approved for the treatment of anemia in MDS may in the future be granted marketing approval for the treatment of anemia in MDS or other conditions for which luspatercept might be approved.
While there are currently no drug products approved for the treatment of anemia in beta-thalassemia, red blood cell transfusions are extensively used and luspatercept, if approved, would compete with
this therapy. Further, the future approval, in one or more regions, of a biosimilar product to one of our products could create substantial competition and have a material impact on our business. In
addition, the success of gene and/or cell therapy in beta-thalassemia patients could materially reduce the potential patient population for luspatercept, especially in transfusion dependent patients.
Bluebird Bio's gene therapy program, Lentiglobin, was granted accelerated assessment by the European Medicines Agency for patients with transfusion dependent beta-thalassemia in the fourth quarter of
2018. There are no products currently approved specifically to treat patients with myelofibrosis who have anemia. Ruxolitinib, a JAK 1/JAK2 inhibitor, is approved to treat patients with intermediate
or high risk myelofibrosis, and there are other JAK inhibitors in development from Celgene and Gilead that may also be approved in the future. Other modalities, including Constellation
Pharmaceuticals's BET inhibitor, CPI0610, are also in clinical development to treat patients with myelofibrosis.
If
ACE-083 is approved for the treatment of neuromuscular disorders or other diseases characterized by a loss of muscle function, it could compete with a variety of other approaches to
treating neuromuscular disorders or muscle loss that are currently in clinical trials, including, among others, a monoclonal antibody targeting the activin receptor type IIB, bimagrumab, being
studied by Novartis to treat pathological muscle loss and weakness, and various other approaches to myostatin inhibition, including monoclonal antibodies (such as SRK-015 in Phase 1/2 clinical
trials by Scholar Rock), ligand traps (such as ALG-801 in Phase 1 by Alivegen in partnership with Biogen), and antibody combinations (such as garetosmab/trevogrumab combination in
Phase 1/2 development by Regeneron) are being studied to treat a number of neuromuscular diseases, including muscular dystrophies, disuse muscle atrophy, cancer-related cachexia, and
sarcopenia. We are currently conducting Phase 2 clinical trials with ACE-083 in patients with facioscapulohumeral muscular dystrophy, or FSHD, as well as in patients with Charcot-Marie-Tooth
disease, or CMT. If competitive products prove to be superior to ACE-083, our business may be harmed.
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Many
of our potential competitors have significantly greater financial, manufacturing, marketing, drug development, technical and human resources than we do. Large pharmaceutical
companies, in particular, have extensive experience in clinical testing, obtaining regulatory approvals, recruiting patients and in manufacturing pharmaceutical products. These companies also have
significantly greater research and marketing capabilities than we do and may also have products that have been approved or are in late stages of development, and have collaborative arrangements in our
target markets with leading companies and research institutions. Established pharmaceutical companies may also invest heavily to accelerate discovery and development of novel compounds or to
in-license novel compounds that could make the therapeutic candidates that we develop obsolete. As a result of all of these factors, our competitors may succeed in obtaining patent protection and/or
FDA approval or discovering, developing and commercializing therapeutic candidates before we do. In addition, any new product that competes with an approved product must demonstrate compelling
advantages in efficacy, convenience, tolerability and safety in order to overcome price competition and to be commercially successful. If we are not able to compete effectively against potential
competitors, our business will not grow and our financial condition and operations will suffer.
If our clinical trials fail to demonstrate the safety and efficacy of our therapeutic candidates to the
satisfaction of regulatory authorities or do not otherwise produce positive results, we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the
development and commercialization of our therapeutic candidates.
Undesirable side effects caused by our therapeutic candidates could cause us, Celgene or regulatory authorities to interrupt, delay or halt
clinical trials and could result in the denial of regulatory approval by the FDA or other regulatory authorities and potential products liability claims. We and Celgene are currently conducting a
number of clinical trials for our clinical stage therapeutic candidates. Serious adverse events deemed to be caused by our therapeutic candidates could have a material adverse effect on the
development of our therapeutic candidates and our business as a whole. In the case of placebo-controlled clinical trials, if the rate of an adverse event or serious adverse event observed in the
treatment group exceeds the rate of such adverse event or serious adverse event observed in the placebo-controlled group, then the FDA or other regulatory authorities may require the delay or
termination of such clinical trial, or require the conduct of one or more additional clinical trials to further demonstrate the safety of the therapeutic candidate.
For
a more complete description of the safety profile for our therapeutic candidates, see the description of each of our therapeutic candidates in the "Business" section of our Annual
Report on Form 10-K for the year ended December 31, 2017.
Our
understanding of the relationship between our therapeutic candidates and these events may change as we gather more information, and additional unexpected adverse events may occur.
There can be no assurance that additional adverse events associated with our therapeutic candidates will not be observed. As is typical in drug development, we have a program of ongoing toxicology
studies in animals for our clinical stage therapeutic candidates and cannot provide assurance that the findings from such studies or any ongoing or future clinical trials will not adversely affect our
clinical development activities.
Before
obtaining marketing approval from regulatory authorities for the sale of our therapeutic candidates, we must complete preclinical development and then conduct extensive clinical
trials to demonstrate the safety and efficacy of our therapeutic candidates in humans. Clinical testing is expensive, difficult to design and implement, can take many years to complete and is
uncertain as to outcome. A failure of one or more clinical trials can occur at any stage of testing. The outcome of preclinical testing and early clinical trials may not be predictive of the success
of later clinical trials, and interim results of a clinical trial do not necessarily predict final results. In addition, preclinical and clinical data are often susceptible to varying interpretations
and analyses. Many companies that have
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believed
their therapeutic candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval of their products.
We
or our current or future partners may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our ability to receive marketing
approval or commercialize our therapeutic candidates, including:
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regulators or institutional review boards may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at
a prospective trial site;
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we may have delays in reaching or fail to reach agreement on acceptable clinical trial contracts or clinical trial protocols with prospective
trial sites;
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clinical trials of our therapeutic candidates may produce negative or inconclusive results, and we may decide, or regulators may require us, to
conduct additional clinical trials or abandon product development programs;
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the number of patients required for clinical trials of our therapeutic candidates may be larger than we anticipate; enrollment in these
clinical trials may be slower than we anticipate; or participants may drop out of these clinical trials at a higher rate than we anticipate;
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third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at
all;
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we might have to suspend or terminate clinical trials of our therapeutic candidates for various reasons, including a finding that the
participants are being exposed to unacceptable health risks;
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regulators, institutional review boards, or the data safety monitoring board for such trials may require that we or our investigators suspend
or terminate clinical research for various reasons, including noncompliance with regulatory requirements or a finding that the participants are being exposed to unacceptable health risks;
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the cost of clinical trials of our therapeutic candidates may be greater than we anticipate;
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the supply or quality of our therapeutic candidates or other materials necessary to conduct clinical trials of our therapeutic candidates may
be insufficient or inadequate; and
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our therapeutic candidates may have undesirable side effects or other unexpected characteristics, causing us or our investigators, regulators
or institutional review boards to suspend or terminate the trials.
If
we or our current or future partners are required to conduct additional clinical trials or other testing of our therapeutic candidates beyond those that we currently contemplate, if
we or our current or future partners are unable to successfully complete clinical trials of our therapeutic candidates or other testing, if the results of these trials or tests are not positive or are
only modestly positive or if we or others identify undesirable side effects caused by our therapeutic candidates either before or after receipt of marketing approval, then a number of potentially
significant negative consequences could result, including that we or our current or future partners may:
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be delayed in obtaining or be unable to obtain marketing approval for our therapeutic candidates;
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obtain approval for indications or patient populations that are not as broad as intended or desired;
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be required to provide a medication guide outlining the risks of such side effects for distribution to patients;
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obtain approval with labeling that includes significant use or distribution restrictions or safety warnings, including boxed warnings;
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suffer reputational harm;
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be sued and held liable for harm caused to patients;
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be subject to additional post-marketing testing requirements; or
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have the product removed from the market after obtaining marketing approval.
Product
development costs will also increase if we or our current or future partners experience delays in testing or marketing approvals. We do not know whether any clinical trials will
begin as planned, will need to be restructured or will be completed on schedule, or at all. Significant clinical trial delays also could shorten any periods during which we may have the exclusive
right to commercialize our therapeutic candidates, could allow our competitors to bring products to market before we do, and could impair our ability to successfully commercialize our therapeutic
candidates, any of which may harm our business and results of operations.
Our results to date do not guarantee that any of our therapeutic candidates will be safe or effective, or
receive regulatory approval.
The risk of failure of our current therapeutic candidates is high. To date, the data supporting our clinical development strategy for our
therapeutic candidates are derived solely from laboratory and preclinical studies and limited early-to-mid-stage clinical trials. Later clinical trials may not yield data consistent with earlier
clinical trials. Similarly, clinical responses seen in patients enrolled at early stages of a clinical trial may not be replicated in patients enrolled in that trial at a later time. In addition,
adverse events not observed in early clinical trials may be seen for the first time in later studies, or adverse events observed in a small number of patients in early trials may be seen in a greater
number of patients in later studies and have greater statistical significance than previously anticipated. In the event that our clinical trials do not yield data consistent with earlier experience,
it may be necessary for us to change our development strategy or abandon development of that therapeutic candidate, either of which could result in delays, additional costs and a decrease in our stock
price.
Our
Phase 2 clinical trial results for luspatercept are not necessarily indicative or predictive of the results of Celgene's Phase 3 clinical trials. It is impossible to
predict when or if any of our therapeutic candidates will prove safe or effective in humans or receive regulatory approval. These therapeutic candidates may not demonstrate in patients the chemical
and pharmacological properties ascribed to them in laboratory studies or early-to-mid-stage clinical trials, and they may interact with human biological systems or other drugs in unforeseen,
ineffective or harmful ways. If we are unable to discover or successfully develop drugs that are safe and effective in humans, we will not have a viable business.
We manufacture ACE-083, ACE-2494 and for our Acceleron-sponsored trials, luspatercept, at our manufacturing
facility. If our manufacturing facility is damaged or destroyed or production at this facility is otherwise interrupted, our business and prospects would be negatively affected.
If the manufacturing facility at our corporate headquarters or the equipment in it is damaged or destroyed, or if production at this facility is
otherwise interrupted, we may not be able to quickly or economically replace our manufacturing capacity or replace it at all. In the event of a temporary or protracted loss of this facility or
equipment, we might not be able to transfer manufacturing to a third party. Even if we could transfer manufacturing to a third party, the shift would likely be expensive and time-consuming,
particularly since the new facility would need to comply with the necessary regulatory requirements and we would need approval from the FDA and foreign regulators before administering any products
manufactured at that facility to patients. Such an event could delay our clinical trials.
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Our expanded research activities may not identify new therapeutic candidates, and we may not be successful in
developing any new therapeutic candidates that are identified.
Discovery and development of new therapeutic candidates is an unpredictable activity. We may not succeed in identifying new therapeutic
candidates, and if we are unable to do so, our pipeline of clinical stage therapeutic candidates will be reduced in size, potentially harming our business. Our discovery efforts are primarily focused
on IntelliTrap therapeutic candidates and antibodies. We have limited experience manufacturing and developing antibodies and IntelliTrap proteins, and we may not be
successful at doing so in the future. Manufacturing biologic therapeutic candidates is complex and often requires extensive process development to achieve suitable quality and quantity of drug
substance for clinical development and
commercialization, and we may not succeed in achieving the quality and quantity of drug substance that is required at any particular stage. We may be unable to manufacture these therapeutic
candidates, these therapeutic candidates may show unacceptable toxicity or pharmacokinetic properties, or these therapeutic candidates may not be safe or effective in clinical trials.
Risks related to our business and industry
If we undertake business combinations, collaborations or similar strategic transactions, they may disrupt our
business, divert management's attention, dilute stockholder value or be difficult to integrate.
On a regular basis, we consider various business combination transactions, collaborations, license agreements and strategic transactions with
third parties, including transactions which may result in us acquiring, or being acquired by, a third party. The consummation or performance of any future business combination, collaboration or
strategic transaction may involve risks, such as:
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diversion of managerial attention and resources from day-to-day operations;
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challenges associated with integrating acquired technologies and operations of acquired companies;
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exposure to unforeseen liabilities or increased regulatory and compliance obligations;
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difficulties in the assimilation of different cultures and practices, as well as in the assimilation and retention of broad and geographically
dispersed personnel and operations;
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misjudgment with respect to value, return on investment or strategic fit;
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higher than expected transaction costs; and
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additional dilution to our existing stockholders if we issue equity securities as consideration for any acquisitions.
As
a result of these risks, we may not be able to achieve the expected benefits of any such transaction. Future business combinations could involve the acquisition of significant
intangible assets. We may need to record write-downs from future impairments of identified intangible assets and goodwill. These accounting charges would increase a reported loss or reduce any future
reported earnings. In addition, we could use substantial portions of our available cash to pay the purchase price for company or product candidate acquisitions. We could also incur debt or issue
additional equity securities as consideration for these acquisitions, which could cause our stockholders to suffer significant dilution.
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If we fail to attract and keep senior management and key personnel, we may be unable to successfully develop
our therapeutic candidates, conduct our clinical trials and commercialize our therapeutic candidates.
We are highly dependent on members of our senior management. The loss or transition of services from any member of our senior management could
impede the achievement of our research, development or commercialization objectives.
Recruiting
and retaining qualified scientific, clinical, regulatory, manufacturing, sales and marketing personnel will also be critical to our success. We may not be able to attract and
retain these personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. We also experience competition for the hiring of
scientific and clinical personnel from universities and research institutions. In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating
our research and development and commercialization strategy. Our consultants and advisors may be employed by employers other than us and may have commitments under consulting or advisory contracts
with other entities that may limit their availability to us.
We may encounter difficulties in managing our organizational changes and successfully adjusting our
operations.
As we seek to advance our therapeutic candidates through clinical trials and commercialization, we will need to expand our development,
regulatory, manufacturing, marketing and sales capabilities or contract with third parties to provide these capabilities for us. As our operations expand, we expect that we will need to manage
additional relationships with various strategic partners, suppliers and other third parties. Future growth will impose significant added responsibilities on members of management. Our future financial
performance and our ability to commercialize our therapeutic candidates and to compete effectively will depend, in part, on our ability to manage any future growth effectively. To that end, we must be
able to manage our development efforts and clinical trials effectively and hire, train and integrate additional management, administrative and, if necessary, sales and marketing personnel. We may not
be able to accomplish these tasks, and our failure to accomplish any of them could prevent us from successfully growing our company.
If product liability lawsuits are brought against us, we may incur substantial liabilities and may be
required to limit commercialization of our therapeutic candidates.
We face an inherent risk of product liability as a result of the clinical testing of our therapeutic candidates and will face an even greater
risk if we commercialize any products. For
example, we may be sued if any product we develop allegedly causes injury or is found to be otherwise unsuitable during product testing, manufacturing, marketing or sale. Any such product liability
claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability, and a breach of warranties. Claims
could also be asserted under state consumer protection acts. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit
commercialization of our therapeutic candidates. Even a successful defense would require significant financial and management resources. Regardless of the merits or eventual outcome, liability claims
may result in:
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injury to our reputation;
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withdrawal of clinical trial participants;
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costs to defend the related litigations;
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a diversion of management's time and our resources;
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substantial monetary awards to trial participants or patients;
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product recalls, withdrawals, or labeling, marketing or promotional restrictions;
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loss of revenue;
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the inability to commercialize our therapeutic candidates; and
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a decline in our stock price.
Failure
to obtain and retain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims could prevent or inhibit the
commercialization of products we develop. We currently carry product liability insurance covering our clinical trials. Although we maintain such insurance, any claim that may be brought against us
could result in a court judgment or settlement in an amount that is not covered, in whole or in part, by our insurance or that is in excess of the limits of our insurance coverage. Our insurance
policies also have various exclusions, and we may be subject to a product liability claim for which we have no coverage. We will have to pay any amounts awarded by a court or negotiated in a
settlement that exceed our coverage limitations or that are not covered by our insurance, and we may not have, or be able to obtain, sufficient capital to pay such amounts.
We could be subject to securities class action litigation.
In the past, securities class action litigation has often been brought against companies following a decline in the market price of their
securities. This risk is especially relevant for us because biopharmaceutical companies have experienced significant stock price volatility in recent years. If we face such litigation, it could result
in substantial costs and a diversion of management's attention and resources, which could harm our business.
Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.
Under Section 382 of the Internal Revenue Code of 1986, as amended, if a corporation undergoes an "ownership change," generally defined
as a greater than 50% change (by value) in its equity ownership over a three-year period, the corporation's ability to use its pre-change net operating loss carryforwards, or NOLs, and other
pre-change tax attributes (such as research tax credits) to offset its post-change income may be limited. We have completed several financings since our inception which may have resulted in a change
in control as defined by IRC Section 382. We may also experience ownership changes in the future as a result of subsequent shifts in our stock ownership. As a result, if we earn net taxable
income, our ability to use our pre-change net operating loss carryforwards to offset U.S. federal taxable income may be subject to limitations, which could potentially result in increased future tax
liability to us. In addition, at the state level, there may be periods during which the use of NOLs is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed.
We must comply with environmental laws and regulations, and failure to comply with these laws and regulations
could expose us to significant liabilities.
We are subject to a variety of federal, state and local laws and regulations governing the use, generation, manufacture, distribution, storage,
handling, treatment and disposal of materials that we use in our manufacturing process. Although we believe our safety procedures for handling and disposing of these materials and waste products
comply with these laws and regulations, we cannot eliminate the risk of accidental injury or contamination from the use, manufacture, distribution, storage, handling, treatment or disposal of
hazardous materials. In the event of contamination or injury, or failure to comply with environmental, occupational health and safety and export control laws and regulations, we could be held liable
for any resulting damages and any such liability could exceed our assets and resources. We are uninsured for third-party contamination injury.
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Unfavorable global economic conditions could adversely affect our business, financial condition or results of
operations.
Our results of operations could be adversely affected by general conditions in the global economy and in the global financial markets. A severe
or prolonged economic downturn could result in a variety of risks to our business, including, weakened demand for our therapeutic candidates and our ability to raise additional capital when needed on
acceptable terms, if at all. Weak global economic conditions, especially in Europe, could decrease the number of clinical trial sites available to us and hinder our ability to conduct clinical trials,
which would have a material adverse effect on our business and the development of our therapeutic candidates. A weak or declining economy could also strain our suppliers, possibly resulting in supply
disruption, or cause our customers to delay making payments for our services. Any of the foregoing could harm our business and we cannot anticipate all of the ways in which the current economic
climate and financial market conditions could adversely impact our business.
Our internal computer systems, or those of our partners, third-party CROs or other contractors or
consultants, may fail or suffer data breaches and cyber-attacks, which could compromise our intellectual property or other sensitive information and could result in a material disruption of our
therapeutic candidate development programs.
In the ordinary course of our business, we collect, maintain and transmit sensitive data on our networks and systems and on the networks and
systems of our partners, third-party CROs and other contractors or consultants, including our intellectual property and proprietary or confidential business information (such as research data and
employee personal information) and confidential information with respect to our vendors and our partners. The secure maintenance of this information is critical to our business and reputation. We
believe that companies have been increasingly subject to a wide variety of security incidents, cyber-attacks and other attempts to gain unauthorized access. These threats can come from a variety of
sources, ranging in sophistication from an individual hacker to a state-sponsored attack. Cyber threats may be generic, or they may be custom-crafted against our information systems. Over the past few
years, cyber-attacks have become more prevalent and much harder to detect and defend against.
Our
network and storage applications and those of our clinical research organizations, collaborators and vendors may be subject to unauthorized access by hackers or breached due to
operator error, malfeasance or other system disruptions. It is often difficult to anticipate or immediately detect such incidents and the damage caused by such incidents. These data breaches and any
unauthorized access or disclosure of our information or intellectual property could compromise our intellectual property and expose sensitive business information. A data security breach could also
lead to public exposure of personal information of our employees. Cyber-attacks could cause us to incur significant remediation costs, result in product development delays, disrupt key business
operations and divert attention of management and key information technology resources. Our network security and data recovery measures and those of our clinical research organizations, collaborators
and vendors may not be adequate to protect against such security breaches and disruptions. These incidents could also subject
us to liability, expose us to significant expense and cause significant harm to our reputation and business. While we have not experienced any such material security breaches or disruptions to date,
if such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our development programs and our business operations. For example, the loss of
clinical trial data from completed or future clinical trials could result in delays in our or our partners' regulatory approval efforts and significantly increase our costs to recover or reproduce the
data.
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Risks related to our common stock
The market price of our common stock may be highly volatile, and you may not be able to resell your shares at
or above the price at which you purchased them.
Since our initial public offering, the price of our common stock as reported on The Nasdaq Global Market has ranged from a low of $16.78 on
November 6 and 8, 2013 to a high of $59.59 on September 21, 2018. The market price of shares of our common stock could be subject to wide fluctuations in response to many risk factors
listed in this section, and others beyond our control, including:
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results of clinical trials of our therapeutic candidates, including luspatercept, sotatercept, ACE-083 and ACE-2494;
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the timing of the release of results of our clinical trials that are being conducted by Celgene;
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results of clinical trials of our competitors' products;
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regulatory actions with respect to our products or our competitors' products;
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actual or anticipated fluctuations in our financial condition and operating results;
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publication of research reports by securities analysts about us or our competitors or our industry;
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our failure or the failure of our competitors to meet analysts' projections or guidance that we or our competitors may give to the market;
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additions and departures of key personnel;
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strategic decisions by us or our competitors, such as acquisitions, divestitures, spin-offs, joint ventures, strategic investments or changes
in business strategy;
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the passage of legislation or other regulatory developments affecting us or our industry;
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fluctuations in the valuation of companies perceived by investors to be comparable to us;
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sales of our common stock by us, our insiders or our other stockholders;
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speculation in the press or investment community;
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announcement or expectation of additional financing efforts;
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changes in accounting principles;
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terrorist acts, acts of war or periods of widespread civil unrest;
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natural disasters and other calamities;
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actual or perceived changes in current or future market conditions for biopharmaceutical stocks; and
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changes in general market and economic conditions.
In
addition, the stock market has recently experienced significant volatility, particularly with respect to pharmaceutical, biotechnology and other life sciences company stocks. The
volatility of pharmaceutical, biotechnology and other life sciences company stocks often does not relate to the operating performance of the companies represented by the stock. As we operate in a
single industry, we are especially vulnerable to these factors to the extent that they affect our industry or our products, or to a lesser extent our markets. In the past, securities class action
litigation has often been initiated against companies following periods of volatility in their stock price. This type of litigation could result in substantial costs and divert our management's
attention and resources, and could also require us to make substantial payments to satisfy judgments or to settle litigation.
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We incur significant costs as a result of operating as a public company and complying with the Sarbanes-Oxley
Act, and our management is required to devote substantial time to compliance initiatives. If we fail to maintain an effective system of internal control over financial reporting in the future, we may
not be able to accurately report our financial condition, results of operations or cash flows, which may adversely affect investor confidence in us and, as a result, the value of our common stock.
As a public company, we incur significant legal, accounting and other expenses. In addition, the Sarbanes-Oxley Act, and rules of the SEC and
those of Nasdaq have imposed various requirements on public companies including requiring establishment and maintenance of effective disclosure and financial controls. Our management and other
personnel devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations have increased and will continue to increase our legal and financial compliance
costs and will make some activities more time-consuming and costly. We currently do not have an internal audit group, and we may need to hire additional accounting and financial staff with appropriate
public company experience and technical accounting knowledge.
The
Sarbanes-Oxley Act requires, among other things, that we maintain effective internal controls for financial reporting and disclosure controls and procedures. We are required, under
Section 404 of the Sarbanes-Oxley Act, to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting. This assessment must include
disclosure of any material weaknesses identified by our management in our internal control over financial reporting. A material
weakness is a control deficiency, or combination of control deficiencies, in internal control over financial reporting that results in more than a reasonable possibility that a material misstatement
of annual or interim financial statements will not be prevented or detected on a timely basis. In addition, we are required to have our independent registered public accounting firm attest to the
effectiveness of our internal control over financial reporting.
During
the evaluation and testing process, if we identify one or more material weaknesses in our internal control over financial reporting, we will be unable to assert that our internal
control over financial reporting is effective. We cannot assure you that there will not be material weaknesses or significant deficiencies in our internal control over financial reporting in the
future. Any failure to maintain internal control over financial reporting could severely inhibit our ability to accurately report our financial condition, results of operations or cash flows. If we
are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm determines we have a material weakness or significant
deficiency in our internal control over financial reporting, we could lose investor confidence in the accuracy and completeness of our financial reports, the market price of our common stock could
decline, and we could be subject to sanctions or investigations by the Nasdaq, the SEC or other regulatory authorities. Failure to remedy any material weakness in our internal control over financial
reporting, or to implement or maintain other effective control systems required of public companies, could also restrict our future access to the capital markets.
We do not expect to pay any cash dividends for the foreseeable future.
You should not rely on an investment in our common stock to provide dividend income. We do not anticipate that we will pay any cash dividends to
holders of our common stock in the foreseeable future. Instead, we plan to retain any earnings to maintain and expand our operations. In addition, any future debt financing arrangement may contain
terms prohibiting or limiting the amount of dividends that may be declared or paid on our common stock. Accordingly, investors must rely on sales of their common stock after price appreciation, which
may never occur, as the only way to realize any return on their investment. As a result, investors seeking cash dividends should not purchase our common stock.
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Provisions in our restated certificate of incorporation, our amended and restated by-laws and Delaware law
may have anti-takeover effects that could discourage an acquisition of us by others, even if an acquisition would be beneficial to our stockholders, and may prevent attempts by our stockholders to
replace or remove our current management.
Our restated certificate of incorporation, amended and restated by-laws and Delaware law contain provisions that may have the effect of delaying
or preventing a change in control of us or changes in our management. Our restated certificate of incorporation and by-laws include provisions that:
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authorize "blank check" preferred stock, which could be issued by our board of directors without stockholder approval and may contain voting,
liquidation, dividend and other rights superior to our common stock;
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create a classified board of directors whose members serve staggered three-year terms;
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specify that special meetings of our stockholders can be called only by our board of directors;
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prohibit stockholder action by written consent;
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establish an advance notice procedure for stockholder approvals to be brought before an annual meeting of our stockholders, including proposed
nominations of persons for election to our board of directors;
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provide that our directors may be removed only for cause;
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provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum;
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specify that no stockholder is permitted to cumulate votes at any election of directors;
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expressly authorize our board of directors to modify, alter or repeal our amended and restated by-laws; and
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require supermajority votes of the holders of our common stock to amend specified provisions of our restated certificate of incorporation and
amended and restated by-laws.
These
provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our management.
In
addition, we are subject to the provisions of Section 203 of the Delaware General Corporation Law, which prohibits a publicly-held Delaware corporation from engaging in a
"business combination" with an "interested stockholder" for a three-year period following the time that this stockholder becomes an interested stockholder, unless the business combination is approved
in a prescribed manner. As a result, you may lose your ability to sell your stock for a price in excess of the prevailing market price due to these protective measures and efforts by stockholders to
change the direction or management of the company may be unsuccessful.
Any
provision of our restated certificate of incorporation or amended and restated by-laws or Delaware law that has the effect of delaying or deterring a change in control could limit
the opportunity for our stockholders to receive a premium for their shares of our common stock, and could also affect the price that some investors are willing to pay for our common stock.
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Our restated certificate of incorporation designates the Court of Chancery of the State of Delaware and
federal court within the State of Delaware as the exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders' ability to
obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
Our restated certificate of incorporation provides that, subject to limited exceptions, the Court of Chancery of the State of Delaware and
federal court within the State of Delaware will be exclusive forums for (1) any derivative action or proceeding brought on our behalf, (2) any action asserting a claim of breach of a
fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, (3) any action asserting a claim against us arising pursuant to any provision of the Delaware
General Corporation Law, our restated certificate of incorporation or our amended and restated by-laws, or (4) any other action asserting a claim against us that is governed by the internal
affairs doctrine. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and to have consented to the provisions of our
restated certificate of incorporation described above. This choice of forum provision may limit a stockholder's ability to bring a claim in a judicial forum that it finds favorable for disputes with
us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and employees. Alternatively, if a court were to find these provisions of
our restated certificate of incorporation inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with
resolving such matters in other jurisdictions, which could adversely affect our business and financial condition.
Sales of our common stock by our employees, including our executive officers, could cause our stock price to
fall or prevent it from increasing for numerous reasons, and sales by such persons could be viewed negatively by other investors.
In accordance with the guidelines specified under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended, and our policies
regarding stock transactions, a number of our employees, including executive officers, have adopted and may continue to adopt stock trading plans pursuant to which they have arranged to sell shares of
our common stock from time to time in the future. Generally, sales under such plans by our executive officers and directors require public filings. Sales of our common stock by such persons could
cause the price of our common stock to fall or prevent it from increasing. If sales by employees, executive officers or directors cause a substantial number of shares of our common stock to become
available for purchase in the public market, the
price of our common stock could fall or may not increase. Also, sales by such persons could be viewed negatively by holders and potential purchasers of our common stock.
If securities analysts do not publish research or reports about our business or if they publish negative, or
inaccurate, evaluations of our stock, the price of our stock and trading volume could decline.
The trading market for our common stock may be impacted, in part, by the research and reports that securities or industry analysts publish about
us or our business. There can be no assurance that analysts will cover us, continue to cover us or provide favorable coverage. If one or more analysts downgrade our stock or change their opinion of
our stock, our share price may decline. In addition, if one or more analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial
markets, which could cause our share price or trading volume to decline.
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