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`10-K 1 f10k_030714 htm FORM lO-K
`UNITED STATES SECURITIES AND EXCHANGE COMMISSION
`Washington, DC. 20549
`
`(Mark One)
`
`Form 10—K
`
`El
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`ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
`
`For the fiscal year ended December 31, 2013
`
`El
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`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 ofiices,
`including zip code)
`
`30-0520478
`(IRS. Employer
`Identification No.)
`
`20814
`(Zip Code)
`
`(301) 961-3400
`(Registrant Is telephone number)
`
`Securities registered pursuant to Section 12(1)) 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) of 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 I]
`
`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
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`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 |Zl
`No El
`
`Indicate by checkrnark 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 of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b—2 of the Exchange Act.
`Large accelerated filer El
`Accelerated filer IZl
`Non-accelerated filer El
`Smaller reporting company El
`(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 El
`
`No III
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`The aggregate market value of the 12,753,602 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 $83.9 million.
`
`As of March 3, 2014, there were outstanding 43,998,430 shares of the registrant’s class A common stock, par value $0.01 per share.
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`DOCUMENTS INCORPORATED BY REFERENCE:
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`Portions of the registrant’s Proxy Statement for its 2014 Annual Meeting of Stockholders to be held on May 9, 2014, which Proxy Statement is to be filed
`within 120 days after the end of the registrant’s fiscal year ended December 31, 2013, 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
`
`Item 1.
`Item 1A.
`Item 1B.
`Item 2.
`Item 3.
`Item 4.
`
`
`Item 5.
`Item 6.
`Item 7.
`Item 7A.
`Item 8.
`Item 9.
`Item 9A.
`Item 9B.
`
`
`Item 10.
`Item 11.
`Item 12.
`Item 13.
`Item 14.
`
`
`Business
`Risk Factors
`Unresolved Staff Comments
`Properties
`Legal Proceedings
`Mine Safety Disclosures
`
`Part II
`Markets for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
`Selected Financial Data
`Management’s Discussion and Analysis of Financial Condition and Results of Operations
`Quantitative and Qualitative Disclosures About Market Risk
`Financial Statements and Supplementary Data
`Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
`Controls and Procedures
`Other Information
`
`
`Part III
`
`Directors, Executive Officers and Corporate Governance
`Executive Compensation
`Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
`Certain Relationships and Related Transactions, and Director Independence
`Principal Accounting Fees and Services
`
`
`Part IV
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`Exhibits, Financial Statement Schedules
`
`Item 15.
`Signatures
`Index to Consolidated Financial Statements
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`2
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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, discovery, development and commercialization of proprietary drugs based on ion
`channel activators known as prostones. The therapeutic potential of prostones was first discovered by our co-founder, Dr. Ryuji Ueno. Under his leadership we
`have pioneered the field of prostones. Prostones are naturally occurring fatty acid metabolites which were originally thought to be biologically inert. Prostones
`have emerged as a promising compound class with unique physiological activities which can be targeted for the treatment of unmet or underserved medical needs.
`
`We are focused on developing and/or commercializing prostone-based drugs to treat gastrointestinal, ophthalmic, neurologic, 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, clinical development activities and product sales. 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 AMITIZA® (lubiprostone), RESCULA® (unoprostone isopropyl) and other compounds, commercialize our approved products (as
`discussed below) on a global basis and protect our intellectual property.
`
`Our operations are conducted through subsidiaries based in Japan, the United States, Switzerland, the United Kingdom and Luxembourg. 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.
`
`Dr. Ueno and Dr. Sachiko Kuno have direct or indirect interests in our controlling stockholder, S&R Technology Holding, 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 31, 2014. Beginning April 1, 2014, he will be consulting for us as the Co-Founder, Chairman Emeritus and Scientific Advisor. Dr. Kuno
`was a member of our Board of Directors and our executive advisor on international business development through September 30, 2012. Drs. Ueno and Kuno,
`together, directly or indirectly, own a majority of the stock of R-Tech Ueno, Ltd, or 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 and Peter Greenleaf joined us as our Chief Executive Officer
`and Board member.
`
`The Prostone Platform and Related Physiology
`
`Prostones act locally to restore normal function in cells and tissues, and because they are quickly metabolized to an inactive form, their pharmacologic activity
`can be targeted to specific organs and tissues. Prostones possess a unique mechanism of action as highly potent and selective ion channel activators. Ion channels
`are integral parts of cell membranes that regulate the flow of specific ions into and out of cells. This regulation is critical for the functioning of metabolic processes
`and cell survival. As such, prostones are physiological mediators of the restoration of cellular homeostasis and tissue regeneration. There is also evidence that
`prostones have anti-inflammatory properties and can prevent cell death.
`
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`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 broad applicability in many disease states in different organ systems. We have developed synthetic analogs of
`the naturally occurring prostones, which have been optimized 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.
`
`We are the only company developing and commercializing prostone compounds on a global basis. We have established a broad patent estate of over 525 active
`issued patents based on our proprietary prostone technology.
`
`Product Pipeline
`
`The table below summarizes the development status of lubiprostone, unoprostone isopropyl and several other prostone-based product candidates. We currently
`hold all of the commercialization rights to the prostone compounds in our product pipeline, other than for commercialization of AMITIZA in the United States and
`Canada under our collaboration and license agreement with Takeda Pharmaceutical Company Limited, or Takeda, and in Japan under our collaboration and license
`agreement with Abbott Japan Co. Ltd., or Abbott. We hold all commercialization rights for unoprostone isopropyl globally except for Japan, Korea, Taiwan and the
`People’s Republic of China, or R-Tech Territory.
`
`Development Phase
`
` Marketed in the U.S.
`
`
` _____
`
`Next Milestone
`
`Target Indication
`
` Chronic idiopathic constipation (CIC)
`(adults of all ages)
`
`
`
`
`
`
` Irritable bowel syndrome with
`constipation (adult women) (IBS-C)
`
` Opioid-induced constipation (OIC) in
`patients with chronic non-cancer pain
`
`
` Chronic constipation
`
` Liquid formulation
`
`
` Marketed in Switzerland
`
` Marketed in the U.K. Initiated mutual
`recognition process (MRP) for
`approval in other E.U. countries.
`
` Marketed in the U.S.
`
`
` sNDA approved in U.S. in Q2
`2013. MAA submitted in Switzerland
`and U.K. in Q1 2013
`
` Marketed in Japan since Q4 2012
`
` Phase 3 trial initiated
`
`
` _____
`
` Will consider seeking approval for
`AMITIZA in other E.U. countries
`following the MRP
`
` Initiate phase 4 study on higher dosage
`and with additional male subjects
`
` Discuss with MHRA regulatory
`options for obtaining OIC approval in
`the U.K
`
` _____
`
` Complete phase 3 trial; analyze results
`and file NDA
`
` Complete phase 3 program and file
`sNDA
`
` _____
`
`
` Updated label and reauthorization in
`the E.U. and Switzerland
`
` Meet with the U.S. and European
`regulators prior to the interim results
`of Japanese trial
`
` Initiate additional phase 2a trial
`
` Initiate phase 1b trial
`
` Complete phase 1b trial
`
`Product/Product Candidate
`Lubiprostone (AMITIZA ®)
`
`
`
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`
`
`
`
`
`
`
`
`
`
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`
`
`
` Pediatric functional constipation
`
`
` Pivotal phase 3 initiated
`
`
`
`Unoprostone Isopropyl (RESCULA ®) Primary open angle glaucoma and
`ocular hypertension
`
` Glaucoma and ocular hypertension
`
`
`
`
`
` Launched in the U.S. in Q1 2013
`
`
` _____
`
`
`
`
`
` Retinitis pigmentosa
`
`
`IV Ion Channel Activator
`
`PO Ion Channel Activator
`
`Cobiprostone
`
`Our Prostone Products, Approved and in Clinical Development
`
`
` Lumbar spinal stenosis
`
` Lumbar spinal stenosis
`
` Oral mucositis
`
`
`
`
` In phase 3 by development partner R-
`Tech Ueno. Orphan drug status
`obtained in the U.S. and E.U.
`
` Phase 2a completed
`
` Phase 1a completed
`
` Phase 1b initiated
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`AMITIZA (lubiprostone)
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`f10k_030714.htm
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`
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`AMITIZA is well-tolerated and has a well-established efficacy profile. Since 2006, AMITIZA has been dispensed over 8 million times. Post marketing safety
`monitoring indicates that the safety profile is similar to the well-tolerated safety profile for AMITIZA seen in clinical trials. Side effects reported in clinical testing
`were predominantly mild to moderate and transient in nature. The most commonly reported adverse events in the clinical trials for chronic idiopathic constipation,
`or CIC, were nausea, diarrhea, headache, abdominal pain, abdominal distension, and flatulence; for irritable bowel syndrome with constipation, or IBS-C, were
`nausea, diarrhea, and abdominal pain; and for opioid-induced constipation, or OIC, were nausea and diarrhea. AMITIZA users tend to be satisfied with their
`treatment. In market research, the majority of AMITIZA users reported a high level of satisfaction with AMITIZA (scoring 6 or 7 on a 7-point scale).
`
`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 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, or 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.
`
`We and Takeda jointly develop and Takeda commercializes AMITIZA for CIC, IBS-C and OIC in the United States and Canada under the Takeda Agreement.
`More information on our collaboration with Takeda is found under the heading “Takeda Collaboration.”
`
`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, or 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), or 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.
`
` 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 United States, 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
`supplementation.
`
` A
`
`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)
`
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`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 absorption 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.
`
`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, and to
`date is the only oral approved product for the treatment of non-cancer OIC.
`
`There are more than 200 million prescriptions for opioid use in the United States 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 United States.
`
`Japan
`
`In Japan, AMITIZA was approved for the treatment of chronic constipation, or CC, excluding constipation caused by organic diseases, by the Ministry of
`Health, Labour and Welfare, or MHLW, in June 2012. On December 1, 2013, the two-week limitation on prescriptions, generally applied to all new approvals of
`products for the first year after NIH reimbursement price approval, was removed. AMITIZA is Japan’s only prescription medicine for CC.
`
`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 Abbott Agreement. More information on our collaboration with Abbott is found under the heading
`“Abbott Collaboration”.
`
`Europe
`
`
`
`In the United Kingdom, we received approval in September 2012 from the Medicines and Healthcare Products Regulatory Agency, or MHRA, for the use of
`AMITIZA to treat CIC, but in March 2014 we received notification from MHRA that the application for the OIC indication was not approved. We made AMITIZA
`available in the United Kingdom in the fourth quarter of 2013 and we are currently working to achieve National Institute for Health and Care Excellence
`endorsement for CIC.
`
`In Switzerland, AMITIZA was approved to treat CIC in 2009. In 2012, we reached an agreement with the Bundesamt fur Gesundheit, or BAG, 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, or 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. The SL
`limitations that were revised are:
`
`All Swiss physicians, not just gastroenterologists, may prescribe AMITIZA;
`
` ·
`
`·
`
`·
`
`The change in the maximum treatment duration of AMITIZA increased from 12 to 52 weeks before a review is needed by a health insurance health care
`practitioner; and
`
`The BAG removed from AMITIZA’s SL a group limitation pertaining to the number of AMITIZA packs that physicians can prescribe at one time.
`
`
`
`
`
`
`
`We filed for the OIC indication in Switzerland in the first quarter of 2013, and in the United Kingdom in the second quarter of 2013. We were notified on
`March 7, 2014 that the MHRA did not approve the application for the OIC indication in the United Kingdom. We are considering the appropriate next steps with
`MHRA. We anticipate a decision in Switzerland in the first half of 2014. We are considering seeking approval for AMITIZA in other European Union countries
`following the Mutual Recognition Procedure, or MRP.
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`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
`
`
`
`We and Takeda are currently exploring the commercialization of AMITIZA in Canada and we have met with Health Canada to discuss the best ways to
`proceed with AMITIZA registration in this market in the near future.
`
`
`We continue to explore options to develop and commercialize lubiprostone in other geographic regions, inclusive of Latin America, Russia, the Middle East,
`the People’s Republic of China and other Asian countries.
`
`RESCULA (unoprostone isopropyl)
`
`
`In the United States, a sNDA for RESCULA (unoprostone isopropyl ophthalmic solution) 0.15% for the lowering of intraocular pressure, or IOP, in patients
`with open-angle glaucoma or ocular hypertension was approved by the FDA in December 2012. According to the approved product labeling, RESCULA may be
`used as a first-line agent or concomitantly with other topical ophthalmic drug products to lower IOP. RESCULA is a BK channel activator, which is different from
`other IOP lowering agents.
`
`RESCULA provides an alternate route for IOP reduction. It is believed to reduce elevated IOP by increasing the outflow of aqueous humor through the
`trabecular meshwork. The product may also have a local effect on BK channels and ClC-2 chloride channels. Unoprostone isopropyl is a member of our family of
`prostones and is a synthetic docosanoid.
`
`RESCULA has been shown to be an effective medicine in lowering IOP in patients with open-angle glaucoma and ocular hypertension and has demonstrated
`an excellent systemic safety profile and an established ocular side effect profile. RESCULA provides efficacy throughout the day and over the long-term. In pivotal
`trials at 6 months, RESCULA reduced mean IOP by ~3 to 4 mm Hg throughout the day (for 12 hours) with a flat diurnal curve (mean baseline IOP: 23 mm Hg).
`RESCULA had no deleterious effect on cardiovascular or pulmonary function in clinical studies, and minimal systemic absorption and exposure.
`
`RESCULA was originally approved by the FDA in 2000 for the lowering of IOP in open-angle glaucoma and ocular hypertension in patients who are
`intolerant of or insufficiently responsive to other IOP lowering medications. RESCULA first launched in Japan in 1994, and since then over 53 million bottles have
`been shipped. In April 2009, we acquired the commercialization rights to RESCULA for the United States and Canada from R-Tech.
`
`We began commercializing RESCULA in the United States in February 2013. In November 2013 we decided to eliminate our in-house sales force and deploy
`a contract sales force. Beginning in January 2014, we significantly decreased the amount of in-person sales calls for RESCULA by using a contract sales force to
`detail only current RESCULA prescribers. We also use a limited mix of inside sales and other promotional tactics, including digital, to reach the current non-
`prescriber base in an effort to increase prescribers and sales of RESCULA.
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`Our Other Clinical Development Programs
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`Lubiprostone
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`Liquid Formulation
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`In October 2013, we announced the initiation of a pivotal trial of a liquid formulation of lubiprostone 24mcg twice daily in adults with CIC. Upon reviewing
`the results of this trial, which we anticipate to end in the first half of 2014, we plan to file a new drug application for approval.
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`Pediatric Functional Constipation
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`Constipation in children has similar characteristics to that of constipation in adults in that symptoms include infrequent bowel movements, hard stools, large
`diameter stools and painful passage of stools. Rome III diagnostic criteria for childhood functional constipation dictate that such symptoms occur at least once per
`week for at least 2 months prior to diagnosis. Children may also experience fecal retention due to withholding. There is a tendency to avoid defecation and
`withhold bowel movements as a result of pain experienced from the passage of large stools. This withholding of bowel movements can result in episodes of fecal
`incontinence. Ninety percent of pediatric constipation is functional constipation and it occurs in all age groups.
`
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`An analysis of longitudinal data in the United States showed a nearly 4-fold increase in rates of constipation over the last decade. Estimates of the prevalence
`rate of functional constipation in the pediatric population worldwide have varied greatly, from 4 to 37%. Only 50-70% of children with functional constipation
`demonstrate long-term improvement with the current treatments.
`
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`In December 2013, we announced the initiation of the pivotal phase 3 clinical program of AMITIZA in pediatric functional constipation. This is the first of a
`series of global, multicenter phase 3 studies to evaluate the efficacy, safety, and pharmacokinetics of AMITIZA capsules in patients ≥ 6 months through 17 years of
`age with pediatric functional constipation. We also plan to evaluate the long-term safety of AMITIZA in these populations through two open-label extension
`studies. One of the pediatric trials will also use the liquid formulation.
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`Unoprostone Isopropyl
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`We continue to pursue additional intellectual property as well as further clinical development of unoprostone isopropyl. In clinical and preclinical studies,
`unoprostone isopropyl has increased ocular blood flow to the optic nerve and in the choroid; maintained visual field; delayed retinal degeneration induced by
`rhodopsin; inhibited topographic and blood changes in an ischemic optic nerve head; and lowered intraocular pressure. We believe that unoprostone isopropyl
`could potentially be effective in the treatment of other ocular diseases.
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`Retinitis Pigmentosa
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`Retinitis pigmentosa, or RP, is a genetic disease characterized by progressive, irreversible vision loss and decreasing visual acuity. RP represents the most
`common hereditary cause of blindness in people from 20 to 60 years old. As RP progresses, daily life becomes increasingly difficult. Blindness from all causes is
`among the most significant injuries to a patient’s quality of life and is a major driver of patient-based cost of care and lifestyle maintenance.
`
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`We have received orphan drug designation for unoprostone isopropyl from the FDA for the treatment of RP and from EMA. In February 2013, we announced
`that the Japan Science and Technology Agency, or JST, adopted unoprostone isopropyl ophthalmic solution .15% in the Adaptable and Seamless Technology
`Transfer Program. As part of this program, R-Tech, our development partner, has signed an agreement for unoprostone isopropyl with the JST in which the
`Japanese government shall provide the majority of funding for phase 3 clinical development costs for unoprostone isopropyl for RP. In October 2013, we
`announced that R-Tech completed patient enrollment of the phase 3 clinical development for unoprostone isopropyl for RP. We have the rights to the clinical data
`for potential filing in Europe and the United States and will decide on our path forward assuming the Japanese trial is successful. Additionally, we are currently
`evaluating opportunities in other retinal diseases, such as age-related macular degeneration