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`f1 Ok_030515.htm
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`lO-K 1 f10k_030515.htm FORM lO-K
`UNITED STATES SECURITIES AND EXCHANGE COMMISSION
`
`(Mark One)
`
`Washington, D.C. 20549
`
`Form 10—K
`
`IZI ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
`
`For the fiscal year ended December 31, 2014
`
`El TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
`
`For the transition period from
`
`to
`
`Commission File Number: 001—33609
`
`SUCAMPO PHARMACEUTICALS, INC.
`(Exact name ofregistrant as specified in its charter)
`
`Delaware
`
`(State or otherjurisdiction of
`incorporation or organization)
`
`4520 East-West Highway, 3rd Floor
`Bethesda, MD 20814
`(Address ofprincipal executive offices,
`including zip code)
`
`30-0520478
`
`(IRS. Employer
`Identification No.)
`
`20814
`(Zip Code)
`
`(301) 961-3400
`(Registrants telephone number)
`
`Securities registered pursuant to Section 12(b) of the Act:
`
`Title of each class
`Class A common stock, par value $0.01
`
`Name of each exchange on which registered
`The NASDAQ Global Market
`
`Securities registered pursuant to Section 12(g) 0f the Exchange Act: None
`
`Indicate by check mark if the registrant is a well—known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes El No IZl
`
`Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes El No IZI
`
`Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
`
`Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and
`(2) has been subject to such filing requirements for the past 90 days Yes IZI No El
`
`Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
`Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the
`preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes IZI No El
`
`Indicate by a check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not
`contained herein, and will not be contained,
`to the best of registrant’s knowledge,
`in definitive proxy or information statements
`incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. El
`
`Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
`reporting company. See the definitions oflarge accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of
`
`the Exchange Act.
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`ALCON 2063
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`Argentum Pharm. LLC v. Alcon Research, Ltd.
`Case IPR2017-01053
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`11/29/2017
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`Large accelerated filer o
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`f10k_030515.htm
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`Accelerated filer þ
`
`
`Smaller reporting company o
`Non-accelerated filer o
`(Do not check if a smaller reporting company)
`
`
`
`
`Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ
`
`The aggregate market value of the 14,441,083 shares of class A common stock held by non-affiliates of the registrant (based on the
`closing price of the registrant’s class A common stock on the last business day of the registrant’s most recently completed second fiscal
`quarter) was $99.6 million.
`
`As of March 2, 2015, there were 44,900,719 shares of the registrant’s class A common stock outstanding, par value $0.01 per share.
`
`DOCUMENTS INCORPORATED BY REFERENCE:
`
`Portions of the registrant’s Proxy Statement for its 2015 Annual Meeting of Stockholders to be held on May 29, 2015, which Proxy
`Statement is to be filed within 120 days after the end of the registrant’s fiscal year ended December 31, 2014, are incorporated by reference
`in Part III of this Annual Report on Form 10-K.
`
`
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`Sucampo Pharmaceuticals, Inc.
`
`Form 10-K
`Table of Contents
`
`
`Part I
`
`11/29/2017
`
`Business
`Item 1.
`Item 1A. Risk Factors
`Item 1B. Unresolved Staff Comments
`Item 2.
`Properties
`Item 3.
`Legal Proceedings
`Item 4. Mine Safety Disclosures
`
`
`Part II
`Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
`Item 6.
`Selected Financial Data
`Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
`Item 7A. Quantitative and Qualitative Disclosures About Market Risk
`Item 8.
`Financial Statements and Supplementary Data
`Item 9.
`Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
`Item 9A. Controls and Procedures
`Item 9B. Other Information
`
`
`
`Part III
`Item 10. Directors, Executive Officers and Corporate Governance
`Item 11. Executive Compensation
`Item 12.
`Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
`Item 13. Certain Relationships and Related Transactions, and Director Independence
`Item 14.
`Principal Accounting Fees and Services
`
`
`
`Item 15. Exhibits, Financial Statement Schedules
`Signatures
`Index to Consolidated Financial Statements
`
`
`
`Part IV
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`
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`2
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`Page
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`PART I
`
`
`
`This Annual Report on Form 10-K, including the section entitled “Management’s Discussion and Analysis of Financial Condition
`and Results of Operations,” contains forward-looking statements regarding us and our business, financial condition, results of operations
`and prospects within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified
`by the words “project,” “believe,” “anticipate,” “plan,” “expect,” “estimate,” “intend,” “should,” “would,” “could,” “will,” “may” or
`other similar expressions. In addition, any statements that refer to projections of our future financial performance, our anticipated growth
`and trends in our business and other characterizations of future events or circumstances are forward-looking statements. We cannot
`guarantee that we will achieve the plans, intentions or expectations expressed or implied in our forward-looking statements. There are a
`number of important factors that could cause actual results, levels of activity, performance or events to differ materially from those
`expressed or implied in the forward-looking statements we make. These important factors are described under “Risk Factors” set forth
`below. In addition, any forward-looking statements we make in this document speak only as of the date of this document, and we do not
`intend to update any such forward-looking statements to reflect events or circumstances that occur after that date.
`
`ITEM 1. BUSINESS
`
`Overview
`
`We are a global biopharmaceutical company focused on innovative research, and development of proprietary drugs to treat
`gastrointestinal, ophthalmic, and oncology-based inflammatory disorders, and we are also considering other potential therapeutic
`applications of our drug technologies.
`
`We currently generate revenue mainly from product royalties, development milestone payments, product sales and clinical
`development activities. We expect to continue to incur significant expenses for the next several years as we continue our research and
`development activities, seek additional regulatory approvals and additional indications for our approved products and other compounds,
`seek global partnering opportunities for our approved products and compounds and seek strategic opportunities for non-prostone clinical
`candidates.
`
`Our operations are conducted through subsidiaries based in Japan, the U.S., Switzerland and the U.K. Our reportable geographic
`segments are Asia, the Americas and Europe and we evaluate the performance of these segments based primarily on income (loss) from
`operations, as well as other factors that depend on the growth of these segments. Such measures include the progress of research and
`development activities, collaboration and licensing efforts, commercialization activities and other factors.
`
`Drs. Ryuji Ueno and Sachiko Kuno have direct or indirect interests in our controlling stockholder, S&R Technology Holdings, LLC,
`and are married to each other. Dr. Ueno stepped down as our Chief Executive Officer, Chairman of the Board of Directors, and Board
`member effective March 3, 2014 and as Chief Scientific Officer effective March 18, 2014. Drs. Ueno and Kuno, together, directly or
`indirectly, own a majority of the stock of R-Tech Ueno, Ltd (R-Tech), a pharmaceutical research, development and manufacturing
`company in Japan. R-Tech is responsible for the manufacture and supply of all of our drug products for commercial use and clinical
`development.
`
`Effective March 3, 2014, Daniel P. Getman, Ph.D. became Chairman of the Board of Directors (Board) and Peter Greenleaf joined us
`as our Chief Executive Officer and Board member. On December 10, 2014, John H. Johnson was appointed to the Board and the number
`of directors was increased from seven to eight members.
`
`Our Clinical Development Focus
`
`Our current pipeline is focused on prostone compounds. Prostones are naturally-occurring fatty acid metabolites which originally were
`thought to be biologically inactive and have now emerged as a promising compound class with physiological activities that can be targeted
`for the treatment of unmet or underserved medical needs. Prostones are believed to act locally to restore normal function in cells and
`tissues, and hence, their pharmacologic activity may be targeted to specific organs and tissues. They are believed to possess a mechanism
`of action as highly potent and selective ion channel activators based on in vitro studies and are physiological mediators that may have a
`role in the restoration of cellular homeostasis and tissue regeneration.
`
`Our prostone-based compounds target the ClC-2 (chloride) and big potassium, or BK, ion channels. Because these ion channels play
`an important role in physiology, targeted dosing of prostones may have applicability in many disease states in different organ systems. We
`have developed synthetic analogs of the naturally occurring prostones, which have been developed to be more potent, selective, and stable,
`thus enabling their use as drugs. These synthetic prostones are very selective for their molecular targets, and the approved prostone-based
`compounds are well-tolerated and generally safe.
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`Our Strategy
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`f10k_030515.htm
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`
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`Our strategy is focused on becoming a leading biopharmaceutical company. We are built on the ongoing pursuit of scientific
`innovation and an unwavering passion for changing the lives of patients, their family members and their caregivers for the better. We are
`committed to harnessing the success of our history to maximize in-market revenues, focus our clinical development efforts, and enhance
`our scientific capabilities.
`
`After launching our new strategy in August 2014, we executed and accomplished the following key milestones to drive the
`achievement of that strategy.
`
`Securing Our Foundation
`In 2014, we made major gains to solidify our base business and focus our efforts on our core strengths in clinical development.
`
`Strengthening the management team was a key priority, and throughout 2014, we added experienced industry leaders who have
`successful track records in leading and growing biopharmaceutical companies. The addition of such experienced biopharmaceutical
`executives equipped us with the depth of scientific leadership necessary to expedite our transformation and to execute on our priorities,
`including leveraging our strengths in drug development, securing and growing revenue from sales of AMITIZA® (lubiprostone),
`increasing our pace of current pipeline development and diversifying our portfolio through the acquisition of new science.
`
`Partnerships are essential in driving the global growth of AMITIZA, and in 2014, we announced the following agreements, including
`global partnerships and resolution of generic litigation, designed to enhance mid- to long-term brand growth for the product:
`
`An exclusive license, development, commercialization and supply agreement (Global License Agreement) for lubiprostone with
`Takeda Pharmaceutical Company Limited (Takeda), where Takeda has the exclusive rights to further develop and commercialize
`AMITIZA in all global markets, except the U.S., Canada, Japan and the People’s Republic of China;
`An amendment to the original existing collaboration and license agreement (North America Takeda Agreement) with Takeda
`covering the U.S. and Canada. The North America Takeda Agreement included various modifications to the original collaboration
`agreement, such as the extension of the current term, a change to the royalty percentage during the extension period, minimum
`commercial investment by Takeda during the current term and various governance changes, which would allow Takeda to have
`additional flexibility in commercializing our flagship product;
`Along with Takeda and R-Tech, we settled our patent litigation dispute in the U.S. with Anchen Pharmaceuticals, Inc. (Anchen),
`Par Pharmaceutical, Inc. (Par Pharmaceutical) and Par Pharmaceutical Companies, Inc. (Anchen and the Par Pharmaceuticals
`entities collectively, Par) with respect to AMITIZA pursuant to a settlement agreement and license agreement allowing us to
`maintain brand exclusivity during the current term of the North America Takeda Agreement and realize royalty revenue from
`2021 to 2027 from generic or authorized generic sales by Par; and
`An exclusive global manufacturing and supply agreement with R-Tech for clinical and commercial supplies of AMITIZA in most
`global markets that provides for a lower cost of goods for the Global License Agreement.
`
`
`
`
`
`
`
`
`
`•
`
`•
`
`•
`
`•
`
`
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`Lastly, during 2014, we re-evaluated and accelerated our pipeline, focusing on clinical programs that we believe hold the most
`promise for patients, the highest likelihood for regulatory approval, and the strongest potential for commercial return. We accelerated a
`lifecycle management program of AMITIZA, made the decision to exit all direct manufacturing and selling of RESCULA, which provided
`low return for our shareholders, and resolved Par’s generic challenge to RESCULA in early 2015. However, we will continue to explore
`the scientific properties of unoprostone isopropyl, the active pharmaceutical ingredient of RESCULA, and apply them to other programs in
`our pipeline.
`
`Build The Growth Platform
`The next element of our strategy is to advance our business through the diversification of our investor base, continue to strengthen our
`capability in clinical development, and to execute on our pipeline opportunities. Our key priority is to continue to advance our AMITIZA
`life cycle management programs. In addition, we will continue to optimize and explore our investment in our prostone programs such as
`cobiprostone for oral mucositis (OM) and non-erosive reflux disease (NERD) and unoprostone for retinitis pigmentosa (RP) and
`geographic atrophy (GA). We will also enrich our pipeline by acquiring new development-stage programs that complement our current
`therapeutic areas.
`
`Transform the Business
`Finally, through the launch of our AMITIZA lifecycle management programs and new pipeline compounds and the creation of a
`sustainable pipeline of drug candidates with near-term launch opportunities, we will seek transformative growth by launching additional
`products for new therapeutic areas, strengthening an already sizable revenue base, and creating a sustainable company that is built to last.
`
`We have commenced an assessment of external programs that complement our existing product pipeline. We continue to seek
`opportunities for strategic partnerships to augment our existing pipeline and diversify our science. It is our vision to develop into a fully
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`employees.
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`Our Competitive Strengths
`
`Product Pipeline
`
`
`
`The table below summarizes the development status of lubiprostone, unoprostone isopropyl and several other product candidates. We
`currently hold all of the commercialization rights to the compounds in our product pipeline, other than for commercialization of AMITIZA
`globally, which is covered by our agreements with Takeda and Abbott Japan Co. Ltd. (Abbott), and other than for unoprostone isopropyl,
`which is licensed to us by R-Tech outside of Japan, Korea, Taiwan and the People’s Republic of China. Commercialization of each product
`candidate may be implemented after successful completion of clinical studies and approval from appropriate governmental agencies.
`
`Target Indication
`Product/Product Candidate
`Lubiprostone (AMITIZA ®)
` Chronic idiopathic constipation
`(CIC) (adults of all ages)
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
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`Unoprostone Isopropyl
`
`
`
`
`Cobiprostone
`
`
`
`
`
`
`
`
`
`Irritable bowel syndrome with
`constipation (adult women)
`(IBS-C)
`
`
` Opioid-induced constipation
`(OIC) in patients with chronic
`non-cancer pain
`
`
`
` Chronic constipation
`
`
` New formulation
`
`
` Pediatric functional constipation
`(6 years - 17 years)
`
`
` Pediatric functional constipation
`(6 months - 6 years)
`
`
` Retinitis pigmentosa
`
`
`
` Geographic Atrophy
`
`
` Oral mucositis
`
`
` Non-erosive reflux disease
`(NERD)
`
`
`
`
`Development Phase
`
` Marketed in the U.S.
`
`
`
`
`_____
`
`Next Milestone
`
`
`
` Marketed in Switzerland
`
`
` Marketed in the U.K.
`Received mutual recognition
`procedure (MRP)
`recommendation for marketing
`authorization in select E.U.
`countries.
`Filed with Health Canada.
`
`
` Marketed in the U.S.
`
`
`
` Marketed in the U.S. and
`Switzerland.
`In the U.K., the application is
`under additional review with
`the MHRA.
`Filed with Health Canada.
`
`
` Marketed in Japan
`
`
`
`In non-clinical development
`
`
` Pivotal and open label Phase 3
`trials ongoing
`
`
` New formulation in
`development
`
`In phase 3 by development
`partner R-Tech Ueno. Orphan
`drug status obtained in the U.S.
`and E.U.
`
`
` Pre-clinical
`
`
` Phase 1b completed
`
`
` Phase 2 initiated
`
`
`
`
`
`
`
`_____
`
`
` Obtain national marketing
`authorization from each country
`included in the MRP
`application. Obtain decision
`from Health Canada.
`
`
`
`
`
`Initiate phase 4 study on higher
`dosage and with additional male
`subjects
`
`
` Obtain decision from the
`U.K. Obtain decision from
`Health Canada.
`
`
`
`
`_____
`
`
`Initiate phase 3 trial
`
`
`
` Complete pivotal and open label
`phase 3 trials
`
`Initiate phase 3 program
`
`
`
`
`
`
` Receive interim data from R-
`Tech's phase 3 trial in Japan and
`make a go/no go decision for the
`U.S. and E.U. development.
`
`
`Initiate phase 1/2 (POC) trial
`
`
`
`Initiate phase 2 trial
`
`
`
` Complete phase 2 trial
`
`
`
`
`
`
`
`
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`Our Prostone Products (Approved and in Clinical Development)
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`AMITIZA (lubiprostone)
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`AMITIZA is a ClC-2 chloride channel activator and is a highly differentiated product with the broadest label in the constipation
`market. AMITIZA has three indications that cover three distinct patient types: chronic idiopathic constipation (CIC), irritable bowel
`syndrome with constipation (IBS-C), and opioid-induced constipation (OIC), and it is well-tolerated and has an established safety profile.
`Since 2006, AMITIZA has been dispensed over 9 million times, and it is the only product currently on the market with a dual mechanism
`of action: AMITIZA increases intestinal fluid secretion, and it stimulates recovery of mucosal barrier function. AMITIZA users tend to be
`satisfied with their treatment and post marketing safety monitoring indicates that as seen in the clinical trials, AMITIZA is well-tolerated
`by patients. AMITIZA addresses a large market with significant unmet need as there are over 48 million total annual prescriptions in the
`prescription constipation market alone, with an additional $800 million in annual sales in the over-the-counter constipation market. Market
`research demonstrates that patients are not satisfied with their current treatments, and the accelerating growth of AMITIZA well into its
`lifecycle is evidence of its value proposition for patients, physicians, and payers.
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`Previously, three medicines used to treat CIC and IBS and one opioid antagonist for OIC were either removed from the market or had
`severely reduced labeling due to safety concerns. An important consideration in any medicine for chronic constipation is having an
`established safety profile. We believe new medicines indicated for chronic treatment of CIC, IBS or OIC will have to demonstrate a post-
`marketing safety profile prior to extensive first line use.
`
`United States
`
`AMITIZA was the first chloride channel activator approved by the U.S. Food and Drug Administration (FDA) for the chronic
`treatment of CIC in adults of both genders and for IBS-C in women aged 18 years and older with demonstrated safety and efficacy for use
`beyond 12 weeks.
`
`In April 2013, we received approval for a supplemental new drug application (sNDA) for AMITIZA at dosage strength of 24
`micrograms twice daily as the first and only oral medication for the treatment of OIC, in adult patients with chronic, non-cancer pain. In
`September 2014, we and Takeda launched a pilot direct-to-consumer advertising campaign for AMITIZA in select U.S. markets for adults
`with CIC which will run through the second half of 2015. In October 2014, we signed an amendment to the North America Takeda
`Agreement which, among other things, extended the term beyond December 2020, and during the extended term, we will share the annual
`net sales revenue with Takeda on branded AMITIZA sales. In addition, as of April 1, 2015, Takeda will no longer reimburse us for the
`product detailing of healthcare professionals or for promotional materials used by us.
`
`We and Takeda jointly develop and Takeda commercializes AMITIZA for CIC, IBS-C and OIC, in the U.S. and Canada under the
`North America Takeda Agreement. More information on our collaboration with Takeda is found under the heading “North America
`Takeda Agreement.”
`
`Chronic Idiopathic Constipation (CIC)
`
`Constipation is characterized by infrequent and difficult passage of stool and becomes chronic when a patient suffers specified
`symptoms for over 12 non-consecutive weeks within a 12-month period. Chronic constipation (CC) is idiopathic if it is not caused by other
`diseases or by use of medications. Symptoms of CIC include straining, hard stools, bloating and abdominal pain or discomfort. Some
`patients suffering from occasional constipation may be treated with lifestyle modification, dietary changes and increased fluid and fiber
`intake, although there is very limited well-controlled clinical trial data in support of these alternatives in CIC or IBS-C patients. For
`patients who fail to respond to these approaches, physicians may recommend laxatives, most of which are available over-the-counter (not
`prescription) (OTC) for acute use. These agents do not have approved indications for long-term use by CIC or IBS-C patients nor is such
`use supported by long-term, well-controlled pivotal clinical trial data.
`
`
`A meta-analysis published in The American Journal of Gastroenterology in September 2011 estimates that approximately 14% of
`adults over 15 years of age, or over 30 million people, in the U.S., suffer from CIC. By the time most CIC patients seek care from a
`physician they have typically tried dietary and lifestyle changes as well as a number of available OTC remedies and remain unsatisfied.
`OTC medications include laxatives, stool softeners or fiber supplements.
`
`Irritable Bowel Syndrome with Constipation (IBS-C)
`
`IBS is a disorder of the intestines with symptoms that include severe cramping, pain, bloating and changes of bowel habits, such as
`diarrhea or constipation. Patients diagnosed with IBS are commonly classified as having one of four forms: IBS-C, IBS with diarrhea,
`mixed-pattern IBS alternating between constipation and diarrhea, and unspecified irritable bowel syndrome. Currently, IBS in all its forms
`is considered to be one of the most common gastrointestinal disorders. Like CIC, some patients suffering from IBS-C may be treated with
`dietary measures, such as increasing fiber and fluid intake, or, if these measures prove ineffective, laxatives are frequently used for the
`management of this condition, though they are not approved for IBS-C.
`
`Opioid-Induced Constipation (OIC)
`
`OIC is a common adverse effect of chronic opioid use affecting patients taking opioids. Binding of opioids to peripheral opioid
`receptors in the gastrointestinal tract results in reduction of secretion of electrolytes, such as chloride, and subsequent reduction in small
`intestinal fluid. In addition, activation of enteric opioid receptors results in abnormal gastrointestinal motility. Together, these processes
`result in OIC, which is characterized by infrequent and incomplete evacuation of stool, hard stool consistency, and straining associated
`with bowel movements.
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`Current treatment options for OIC include the use of stool softeners, enemas, suppositories and peristaltic stimulants such as senna,
`which stimulate muscle contractions in the bowel. Additionally, the standard prescription option for OIC is osmotic laxatives. The
`effectiveness of these products for the treatment of OIC is limited due to the severity of the constipation caused by opioids. In addition,
`physicians often cannot prescribe peristaltic stimulants for the duration of narcotic treatment because of the potential for dependence upon
`these stimulants. Opioid drugs are known to suppress firing of secretomotor neurons in the gut which reduces intestinal fluid secretion
`resulting in drier, harder stools. Lubiprostone bypasses the opioid effect to work locally in the gut to reestablish fluid secretion thus
`alleviating OIC. As a result, we believe that AMITIZA holds a competitive advantage over drugs that do not work through this mechanism
`of action.
`
`There are more than 200 million prescriptions for opioid use in the U.S. annually, and a substantial number of these prescriptions are
`for non-cancer chronic pain. Market research indicates that there are approximately 2.5-4.5 million moderate to severe sufferers of OIC,
`and 40-80% of patients taking opioids chronically for non-cancer pain report constipation in the U.S.
`
`Japan
`
`In June 2012, AMITIZA was approved for the treatment of chronic constipation (CC) excluding constipation caused by organic
`diseases, by the Ministry of Health, Labour and Welfare (MHLW). In December 2013, the two-week limitation on prescriptions, generally
`applied to all new approvals of products for the first year after U.S. National Institutes of Health (NIH) reimbursement price approval, was
`removed. AMITIZA is Japan’s only prescription medicine for CC. On February 27, 2015, Abbott Laboratories, Inc. and Mylan, Inc.
`(Mylan), closed Mylan’s purchase of Abbott’s non-U.S. developed markets specialty and branded generics business which included the
`license, commercialization and supply agreement with us dated February 19, 2009 (Japan Abbott Agreement). We do not expect any
`significant changes in the commercialization of AMITIZA in Japan as a result of such transfer. Under the terms of the Japan Abbott
`Agreement, we received a commercial milestone payment of $2.5 million during the third quarter of 2014 when annual net sales of
`AMITIZA in Japan exceeded ¥5.0 billion.
`
`Chronic Constipation (CC)
`
`
`
`According to MHLW epidemiology data, millions of people in Japan may live daily with the pain and discomfort of chronic
`constipation, yet not seek physician care. Medical attention could mean early diagnosis and effective, long-term treatment.
`
`It is estimated that approximately 14.3% of the Japanese population, or over 18 million people, suffer from chronic constipation.
`
`In Japan, AMITIZA is currently marketed under the Japan Abbott Agreement. More information on our collaboration with Abbott is
`found under the heading “Abbott Collaboration”.
`
`Europe
`
`In September 2012, we received approval from the Medicines and Healthcare Products Regulatory Agency (MHRA) in the United
`Kingdom (U.K.) for the use of AMITIZA to treat CIC, and we made AMITIZA available in the U.K. in the fourth quarter of 2013. We
`subsequently filed for approval for the OIC indication, but in March 2014 we received notification from MHRA that the application for the
`OIC indication was not approved and after meeting MHRA have requested MHRA to review our application based on the concerns raised
`during the meeting. We currently await MHRA’s decision on the OIC indication. In July 2014, the National Institute of Health and Care
`Excellence (NICE) published the technology appraisal guidance recommending the use of AMITIZA in the treatment of CIC and
`associated symptoms in adults who have failed laxatives. In January 2015, we successfully completed the European Mutual Recognition
`Procedure (MRP) for AMITIZA for the treatment of CIC in Austria, Belgium, Germany, Italy, Ireland, Luxembourg, Netherlands and
`Spain, resulting in a recommendation for marketing authorization in these markets. Ireland has notified us that it has approved AMITIZA
`for CIC.
`
`
`In Switzerland, AMITIZA was approved to treat CIC in 2009. In 2012, we reached an agreement with the Bundesamt fur Gesundheit
`(BAG), the Federal Office of Public Health in Switzerland, on a reimbursement price and limitations for AMITIZA in Switzerland, and
`began active marketing in the first quarter of 2013. In February 2014, we announced that the BAG revised several reimbursement
`limitations with which AMITIZA was first approved for reimbursement and inclusion in the Specialitätenliste (SL) to allow all Swiss
`physicians to prescribe AMITIZA to patients who have failed previous treatments with at least two laxatives over a nine month period.
`
`
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`
`In Switzerland, AMITIZA was approved for the treatment of OIC in chronic, non-cancer adult patients in July 2014 by the
`Swissmedic, the Swiss Agency for Therapeutic Products.
`
`Under the terms of the Global License Agreement, Takeda will request from the regulatory authorities that the market authorizations
`for U.K. and Switzerland be transferred to Takeda in the first half of 2015.
`
`
`Chronic Idiopathic Constipation (CIC)
`
`
`
`A meta-analysis published in The American Journal of Gastroenterology in September 2011 estimates that approximately 16% of
`adults over 15 years of age, or over 42 million people, in Northern Europe suffer from CIC.
`
` A
`
` study published in Alimentary Pharmacology and Therapeutics in 2012 was conducted in ten European countries, including
`Switzerland, which demonstrated that approximately 28% of the participants suffering from constipation for at least 6 months were
`dissatisfied with their current treatment options using laxatives. As a result, approximately 83% of these patients are interested in seeking
`alternative methods to relieve their constipation. Additionally, patients in this study reported they want relief from all of their symptoms
`and to feel normal.
`
`Other Global Markets
`
`
`
`In August 2014, we signed an exclusive global manufacturing and supply agreement with R-Tech for clinical and commercial supplies
`of AMITIZA in most global markets. More information on our collaboration with R-Tech is found under the heading “Manufacturing.”
`
`In