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TABLE OF CONTENTS
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PART IV

Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K

(Mark One)  
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended
December 31, 2020
OR
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: 001-35726
Radius Health, Inc.
(Exact name of registrant as specified in its charter)
Delaware 80-0145732
(State or other jurisdiction of(I.R.S. Employer
incorporation or organization) Identification No.)

22 Boston Wharf Road, 7th Floor
Boston, Massachusetts 02210
(Address of principal executive offices)

617-551-4000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: Common Stock
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.0001 per shareRDUSThe Nasdaq Global Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes     No 
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     No 
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     No 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes     No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
        
Large accelerated filerAccelerated filer 
Non-accelerated filer Smaller reporting company 
Emerging growth company 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes     No 
The aggregate market value of the registrant’s common stock, $0.0001 par value per share (“Common Stock”), held by non-affiliates of the registrant, based on the last sale price of the Common Stock at the close of business on June 30, 2020 was $0.6 billion. For the purpose of the foregoing calculation only, all directors and executive officers of the registrant are assumed to be affiliates of the registrant.
Number of shares outstanding of the registrant’s common stock, par value $0.0001 per share, as of February 22, 2021: 46,894,429
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive Proxy Statement for its 2021 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report on Form 10-K.


Table of Contents
Radius Health, Inc.
Annual Report on Form 10-K
For the Fiscal Year Ended December 31, 2020
INDEX
 



Table of Contents
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
        This report, including in the sections titled “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business,” contains, in addition to historical information, forward-looking statements. We may, in some cases, use words such as “project,” “believe,” “anticipate,” “plan,” “expect,” “estimate,” “intend,” “continue,” “should,” “would,” “could,” “potentially,” “will,” “may” or similar words and expressions that convey uncertainty of future events or outcomes to identify these forward-looking statements. Forward-looking statements in this Annual Report on Form 10-K may include, among other things, statements about:
our expectations regarding commercialization of TYMLOS® in the U.S., including our market access coverage expectations;
the therapeutic benefits and effectiveness of TYMLOS and our investigational product candidates and the potential indications and market opportunities therefor;
our ability to obtain U.S. and foreign regulatory approval for our product candidates, including supplemental regulatory approvals for TYMLOS, and the timing thereof;
our ability to compete with other companies that are or may be developing or selling products that are competitive with TYMLOS or our investigational product candidates;
the direct and indirect impact of the COVID-19 pandemic on the U.S. and global economies and our business and operations, including sales, expenses, supply chain, manufacturing, research and development costs, clinical trials and employees;
our plans with respect to collaborations and licenses related to the development, manufacture or sale of TYMLOS and our investigational product candidates;
our goals and expectations with respect to development and commercialization of RAD011, our newly acquired assets related to formulations of cannabidiol (“CBD”) related to the oral administration of a solution of CBD for therapeutic use in humans or animals;
our plans with respect to expanding our product portfolio;
our plans and expectations with respect to our intellectual property profile;
our expectations regarding the timing of our regulatory submissions;
our expectations for our Phase 3 studies of abaloparatide-SC for men and abaloparatide transdermal system (abaloparatide-TD) or our other clinical trials, including projected costs, study designs or the timing for initiation, recruitment, completion, or reporting top-line data;
the progress of, timing of and amount of expenses associated with our research, development and commercialization activities;
the safety profile and related adverse events of TYMLOS and our investigational product candidates;
our expectations regarding federal, state and foreign regulatory requirements;
our expectations as to future financial performance, expense levels, future payment obligations and liquidity sources; and
our ability to attract, motivate, and retain key personnel;
        The outcome of the events described in these forward-looking statements is subject to known and unknown risks, uncertainties and other important factors that could cause actual results to differ materially from the results anticipated by these forward-looking statements. These important factors include our financial performance, the uncertainties inherent in commercializing pharmaceutical products or the initiation, execution and completion of clinical trials, uncertainties surrounding the timing of availability of data from our clinical trials, ongoing discussions with and actions by regulatory authorities and patent and trademark authorities and offices, our ability to attract and retain customers, our development activities and those other factors we discuss in Item 1A of this Annual Report on Form 10-K under the caption “Risk Factors.” You should read these factors and the other cautionary statements made in this report as being applicable to all related forward-looking statements wherever they appear in this report. These risk factors are not exhaustive and other sections of this report may include additional factors which could adversely impact our business and financial performance.
1

Table of Contents
PART I
ITEM 1.    BUSINESS.
        Unless otherwise provided in this report, all references in this report to “we,” “us,” “Radius,” “our company,” “our,” or the “Company” refer to Radius Health, Inc. and our subsidiaries.
Overview
We are a science-driven fully integrated biopharmaceutical company that is committed to developing and commercializing innovative endocrine and other therapeutics.
In April 2017, our first commercial product, TYMLOS (abaloparatide) injection, was approved by the U.S. Food and Drug Administration (“FDA”) for the treatment of postmenopausal women with osteoporosis at high risk for fracture defined as history of osteoporotic fracture, multiple risk factors for fracture, or patients who have failed or are intolerant to other available osteoporosis therapy. In May 2017, we commenced U.S. commercial sales of TYMLOS and as of January 1, 2021, TYMLOS was available and covered for approximately 267 million U.S. insured lives, representing approximately 99% of U.S. Commercial and 83% of Medicare Part D insured lives.
We are conducting additional research towards potential additional indications for TYMLOS, including a clinical trial in men with osteoporosis and a bone histomorphometry study evaluating the early effects of TYMLOS on tissue-based indices of formation in postmenopausal women. We are also developing an abaloparatide transdermal system (“abaloparatide-TD”), for potential use in the treatment of postmenopausal women with osteoporosis. We initiated our Phase 3 wearABLe study of abaloparatide-TD in August 2019 and completed enrollment in September 2020.
As part of our ongoing initiatives to expand our product portfolio, in December 2020, our wholly owned subsidiary, Radius Pharmaceuticals, Inc., entered into an Asset Purchase Agreement with Fresh Cut Development, LLC and Benuvia Therapeutics Inc. for the acquisition of certain assets related to formulations of cannabidiol (“CBD”) related to the oral administration of a solution of CBD for therapeutic use in humans or animals (“RAD011”). RAD011 was granted fast track designation by the FDA in 2017 and orphan drug designation in August 2020 for the treatment of hyperphagia behavior and weight loss in patients with Prader-Willi syndrome (“PWS”).
In July 2020, we entered into a license agreement with Berlin-Chemie AG, a company of the Menarini Group (“Berlin-Chemie”), under which we granted Berlin-Chemie an exclusive license to develop and commercialize products containing elacestrant (RAD1901), a selective estrogen receptor degrader (“SERD”), worldwide. Elacestrant is being developed for potential use in the treatment of hormone receptor-positive breast cancer.
Completing the divestment of our oncology program, in September 2020 we sold RAD140, our internally discovered non-steroidal selective androgen receptor modulator (“SARM”) to Ellipses Pharma. Pursuant to the Asset Purchase Agreement (“APA”), Ellipses Pharma will be responsible for the clinical development and commercialization of the asset. We will be entitled to receive royalties under the APA.
Our Marketed Product and Investigational Product Candidates
The success of our business is primarily dependent upon our ability to maximize the commercialization of TYMLOS and to develop and commercialize our current and future product candidates. We hold worldwide commercialization rights for these product candidates, other than abaloparatide for subcutaneous injection (“abaloparatide-SC”), for which we hold worldwide commercialization rights except in Japan and Canada, where we have entered into exclusive license and development agreements for abaloparatide-SC, and elacestrant, for which we have licensed our rights to Berlin-Chemie. The following table illustrates the current and/or expected status of our clinical trials and investigational product portfolio.
2

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Our Strategy
To achieve our corporate and strategic goals, we plan to:
Expand use of TYMLOS and abaloparatide-SC. We commenced U.S. commercial sales of TYMLOS in May 2017 and we remain focused on growing our U.S.-based sales through a refined focus on patients with a high risk of fracture. We intend to continue to expand our global abaloparatide footprint, including through our collaboration with Teijin Limited (“Teijin”) in Japan.
Expand abaloparatide's market potential through continued abaloparatide research and development activities. We are conducting additional research towards potential additional indications for TYMLOS, including a clinical trial in men with osteoporosis that we initiated in March 2018, which, if successful, will form the basis of a supplemental New Drug Application (“NDA”) seeking to expand the use of TYMLOS to increase bone mass in men with osteoporosis at high risk for fracture. We completed patient enrollment in September 2020 and expect to report top-line data from the study in the second half of 2021. In May 2020, we also announced that our bone histomorphometry study, which evaluated the early effects of TYMLOS on tissue-based indices of formation in postmenopausal women, met its primary endpoint of change from baseline to 3 months in mineralizing surface in the cancellous bone envelope (one of the dynamic indicators of bone formation). We presented data from this study in September 2020.
We are developing our investigational abaloparatide-TD as a short-wear-time transdermal patch. In May 2019, we received a special protocol assessment agreement from the FDA for our Phase 3 (wearABLe) study of abaloparatide-TD, which means the FDA considers the study design to be adequate and well-controlled to support marketing approval provided the study endpoints are achieved. We initiated our Phase 3 wearABLe study of abaloparatide-TD in August 2019 and completed enrollment in September 2020. We expect to report top-line data from the study in the second half of 2021.
Develop our new CBD asset, RAD011. In December 2020, we acquired certain assets related to formulations of CBD related to the oral administration of a solution of CBD for therapeutic use in humans or animals. RAD011 was granted fast track designation by the FDA in 2017 and orphan drug designation in August 2020 for the treatment of hyperphagia behavior and weight loss in patients with PWS. We plan to request a meeting with the FDA to discuss initiation of a pivotal Phase 2/3 study for treatment of PWS.
Continue to expand our product portfolio.  We plan to leverage our drug development expertise to discover and develop additional investigational product candidates. We may consider opportunistically expanding our product portfolio within these areas through in-licensing, acquisitions or partnerships.
Abaloparatide
We have developed or are developing two formulations of abaloparatide: abaloparatide-SC and abaloparatide-TD.
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Abaloparatide-SC
In April 2017, the FDA approved TYMLOS (abaloparatide-SC) for the treatment of postmenopausal women with osteoporosis at high risk for fracture defined as history of osteoporotic fracture, multiple risk factors for fracture, or patients who have failed or are intolerant to other available osteoporosis therapy. The first commercial sales of TYMLOS in the United States occurred in May 2017 and as of January 1, 2021, TYMLOS was available and covered for approximately 267 million U.S. insured lives, representing approximately 99% of U.S. Commercial and 83% of Medicare Part D insured lives.
We are commercializing TYMLOS in the United States through our commercial organization. We hold worldwide commercialization rights to abaloparatide-SC, except for Japan and Canada, where we are entitled to receive milestones and royalties based on the development and commercialization of abaloparatide-SC under our license and development agreements.
In July 2017, we entered into a license and development agreement with Teijin for abaloparatide-SC in Japan. Pursuant to the agreement, we received an upfront payment and may receive additional milestone payments upon the achievement of certain regulatory and sales milestones, and a fixed low double-digit royalty based on net sales of abaloparatide-SC in Japan during the royalty term. In February 2020, we elected not to exercise our option to negotiate for a co-promotion agreement with Teijin for abaloparatide-SC in Japan. In May 2020, we announced that Teijin submitted an NDA for abaloparatide-SC in Japan for the treatment of osteoporosis in patients who are at high risk for fracture. The application is based on the positive results of the Phase 3 clinical trial of abaloparatide-SC in Japan in women and men with osteoporosis, which achieved its primary efficacy endpoint.
In March 2018, we initiated a clinical trial in men with osteoporosis which, if successful, will form the basis of a supplemental NDA seeking to expand the use of TYMLOS to increase bone mass in men with osteoporosis at high risk for fracture. We completed patient enrollment in September 2020 and expect to report top-line data from the study in the second half of 2021. The study is a randomized, double-blind, placebo-controlled trial that has enrolled 228 men with osteoporosis. The primary endpoint is change in lumbar spine BMD at 12 months compared with placebo. In previous clinical trials, TYMLOS has demonstrated increases in BMD in postmenopausal women. The study includes specialized high-resolution imaging to examine the effect of abaloparatide on bone structure, such as the hip, in a subset of the study participants.
In May 2020, we announced that our bone histomorphometry study, which evaluated the early effects of TYMLOS on tissue-based indices of formation in postmenopausal women, met its primary endpoint of change from baseline to 3 months in mineralizing surface in the cancellous bone envelope (one of the dynamic indicators of bone formation). We presented data from this study in September 2020.
On July 30, 2020 the United States Patent Office extended the term of US patent 7,803,770 (Method of Treating Osteoporosis Comprising Administration of PTHRP Analog) by 1,303 days. As a result, the term of U.S. Patent No. 7,803,770 has been extended until April 28, 2031. US Patent 7,803,770 is listed in the FDA Orange book and covers TYMLOS.
Abaloparatide-TD
We are also developing abaloparatide-TD, based on Kindeva’s patented Microstructured Transdermal System technology, for potential use as a short wear-time transdermal patch. We hold worldwide commercialization rights to the abaloparatide-TD technology, except in Canada, where we have entered into an exclusive license agreement with respect to abaloparatide-TD, and are developing abaloparatide-TD toward future global regulatory submissions to build upon the potential success of TYMLOS. Our development strategy for abaloparatide-TD is to bridge to the established efficacy and safety of our approved abaloparatide-SC formulation.
In May 2019, we received a special protocol assessment (“SPA”) agreement from the FDA for our Phase 3 study of abaloparatide-TD, which means the FDA considers the study design to be adequate and well-controlled to support marketing approval provided the study endpoints are achieved. We initiated our Phase 3 wearABLe study of abaloparatide-TD in August 2019 and completed enrollment in September 2020. We expect to report top-line data from the study in the second half of 2021. The wearABLe study is a single, pivotal, randomized, open label, active-controlled, BMD non-inferiority bridging study with an enrollment of approximately 500 patients with postmenopausal osteoporosis at high risk of fracture, which if successful, will support an NDA submission. The primary endpoint of the study is percentage change in lumbar spine BMD at 12 months. Non-inferiority of abaloparatide-TD to abaloparatide-SC will be concluded if the lower bound of the 2-sided 95% confidence interval for the estimated treatment difference (abaloparatide-TD minus abaloparatide-SC) in the percentage change from baseline in lumbar spine BMD at 12 months is above -2.0%.
In July 2019, we obtained preliminary results from a patient assessment study which evaluated self-administration of abaloparatide-TD over 29 days in 22 post-menopausal women with low bone density. Study patients were observed at a study site on the first, 15th and 29th day of the study. Top-line results showed that study patients were able to follow the instructions for use (“IFU”) and applied the patches accurately on 99.7% of all applications. The safety data from this study showed that
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most of the study patients had mild, transient redness at the application site. The mean subject acceptability score on a 5-point scale was 4.5, 4.6 and 4.5 on day 1, 15 and 29, respectively. The laboratory data from this study included an exploratory assessment of PINP, a biomarker that indicates bone formation. At baseline the median PINP level in this study was 50.5 ng/ml, increasing to a median value of 100.1 ng/ml at day 29, while, by comparison, the median PINP values observed with abaloparatide-SC in the ACTIVE study were 50.6 ng/ml at baseline and 100.5 ng/ml at one month.
In December 2019, we aligned with the FDA on requirements for NDA filing.
Our new CBD asset, RAD011
As part of our ongoing initiatives to expand our product portfolio, on December 30, 2020, our wholly-owned subsidiary, Radius Pharmaceuticals, Inc., entered into an Asset Purchase Agreement with Fresh Cut Development, LLC and Benuvia Therapeutics Inc. for the acquisition of certain assets related to oral liquid formulations of cannabidiol (“CBD”) related to the oral administration of an oral liquid formulation of CBD for therapeutic use in humans or animals (“RAD011”). RAD011 was granted fast track designation by the U.S. Food and Drug Administration (“FDA”) in 2017 and orphan drug designation in August 2020 for the treatment of hyerphagia behavior and weight loss in patients with Prader-Willi syndrome (“PWS”). We plan to request a meeting with the FDA to discuss initiation of a pivotal Phase 2/3 study for treatment of PWS.
Our Oncology Portfolio
Given our refined focus on growing our TYMLOS and abaloparatide-SC business and expanding our product portfolio, we evaluated all strategic options for our oncology assets in 2020 and entered into a license agreement with Berlin-Chemie AG, a company of the Menarini Group, for the exclusive license of elacestrant, and completed the divestment of our oncology program in September 2020, when we sold RAD140, our internally discovered SARM, to Ellipses Pharma.
Manufacturing
We do not own or operate manufacturing facilities for the production of TYMLOS or any of our investigational product candidates, nor do we have plans to develop our own manufacturing operations in the foreseeable future.
Abaloparatide, the active pharmaceutical ingredient (“API”) for both TYMLOS and abaloparatide-TD, is manufactured for us on a contract basis by Polypeptide Laboratories Holding (PPL) AB (“PPL”), as successor-in-interest to Lonza Group Ltd., using a solid phase peptide synthesis assembly process, and purification by high pressure liquid chromatography. Abaloparatide for TYMLOS is supplied as a liquid in a multi-dose cartridge for use in a pen delivery device. The components of the pen delivery device are manufactured by Ypsomed AG (“Ypsomed”). The multi-dose cartridges and pen delivery device are filled, assembled and packaged by Vetter International GmbH (“Vetter”).
Abaloparatide-TD drug product is manufactured by Kindeva, based on their patented microneedle technology to administer drugs through the skin, as an alternative to subcutaneous injection. In partnership with 3M, prior to 3M’s sale of its drug delivery business to Kindeva, we selected Thermo Fisher to conduct the abaloparatide-TD coating process and packaging operations.
Manufacturing is subject to extensive regulations that impose various procedural and documentation requirements, which govern the methods used in, and the facilities and controls used for, the manufacture, processing, packing and holding of drugs. FDA and International Conference on Harmonisation (“ICH”) current Good Manufacturing Practice (“cGMP”) requirements include those pertaining to record keeping, manufacturing processes and controls, personnel, quality control and quality assurance, among others. Our contract manufacturing organizations are required to manufacture TYMLOS and our investigational product candidates under cGMP conditions. cGMP is a regulatory standard for the production of human pharmaceuticals that imposes extensive substantive, procedural and record keeping requirements on the manufacturing processes, testing methodology, and associated production and testing facilities.
Intellectual Property
We strive to protect the proprietary technology that we believe is important to our business, including seeking and maintaining patents intended to cover our investigational product candidates and compositions, their methods of use and processes for their manufacture and any other inventions that are commercially important to the development of our business. We also rely on trade secrets to protect aspects of our business that are not amenable to, or that we do not consider appropriate for, patent protection.
Our success will significantly depend on our ability to obtain and maintain patent and other proprietary protection for commercially important technology and inventions and know-how related to our business, defend and enforce our patents, preserve the confidentiality of our trade secrets, and operate without infringing the valid and enforceable patents and proprietary
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rights of third parties. We also rely on know-how and continuing technological innovation to develop and maintain our proprietary position.
Abaloparatide
We acquired and maintain exclusive worldwide rights, excluding development and commercialization rights for Japan and Canada, to certain patents, data and technical information related to abaloparatide through a license agreement with an affiliate of Ipsen Pharma SAS ("Ipsen"). Patents covering the composition of matter of abaloparatide (e.g., U.S. Patent No. 5,969,095), expired in 2016. The subcutaneous formulation of abaloparatide for use in treating osteoporosis is covered by Orange Book-listed U.S. Patent No. 7,803,770, which expires on April 28, 2031. The therapeutic formulation for abaloparatide-SC is covered by Orange Book-listed U.S. Patent No. 8,148,333 until November 8, 2027 and Orange Book-listed U.S. Patent No. 8,748,382 until October 3, 2027. Related patents granted in Australia, Brazil, China, Europe, Hong Kong, Israel, Japan, South Korea, Mexico, Norway, New Zealand, and Singapore and additional patent applications pending in Brazil and Canada, will have a patent expiration date of 2027, not taking into account extension under any applicable laws. Patent applications covering various aspects of abaloparatide for microneedle application have been granted in the United States and additional patent applications are currently pending in the United States, Australia, Brazil, Canada, China, Europe, Hong Kong, Israel, Japan, South Korea, Mexico, New Zealand, and Singapore. These patents and applications are co-owed with, and licensed from, Kindeva. The issued patents and any patents that might issue from the pending applications will have a statutory expiration dates of 2036, not taking into account extension under any applicable laws.
We own the federal trademark registration in the United States for Radius® in association with pharmaceuticals and TYMLOS® for use in the treatment of bone diseases. In addition, we own the federal trademark registrations for TYMLOS in Canada, the European Union and Mexico; Radius in Mexico and Europe; and trademark applications on potential brand names for our product candidates in the U.S. and in other countries.
Elacestrant (RAD1901)
In July 2020, we entered into a license agreement with Berlin-Chemie AG, a company of the Menarini Group (“Berlin-Chemie”), under which we granted Berlin-Chemie an exclusive license to develop and commercialize products containing elacestrant worldwide.
RAD011
In December 2020, our wholly owned subsidiary, Radius Pharmaceuticals, Inc., entered into an Asset Purchase Agreement with Fresh Cut Development, LLC and Benuvia Therapeutics Inc. for the acquisition of certain assets related to formulations of cannabidiol (“CBD”) related to the oral administration of a liquid formulation of CBD for therapeutic use in humans or animals (“RAD011”). The acquired assets include issued patents in Australia and Japan and pending patent applications in Australia, Canada, the People’s Republic of China, the European Patent Office, Japan, Israel, Mexico, New Zealand, South Africa, and the U.S.
Competition
The development and commercialization of new products to treat the targeted indications of our marketed and investigational product candidates is faces some competition from major pharmaceutical, biotechnology and specialty pharmaceutical companies that currently market and/or are seeking to develop products for similar indications. Many of our competitors have comparable resources to us, including financial, manufacturing, marketing, research and drug development resources. In addition, some of these companies have longer operating histories and more experience than us in preclinical and clinical development, manufacturing, regulatory and global commercialization, while others have less experience.
Abaloparatide
Osteoporosis drugs currently available in the United States include anti-resorptive agents, anabolic agents, and an agent that has both anabolic and anti-resorptive characteristics. Anti-resorptive agents including bisphosphonates, estrogen, SERMs and Amgen's Prolia are the most common treatments for osteoporosis. Teriparatide, marketed by Lilly under the name Forteo/Forsteo (outside the U.S.), is one of two other anabolic drug targeting the PTH receptor approved in the United States for the treatment of osteoporosis. In 2020, Pfenex, Inc., which was acquired by Ligand Inc., along with its commercialization partner Alvogen began marketing another teriparatide injection drug, Bonsity. We are aware of companies pursuing development in the United States of biosimilar and/or generic versions of teriparatide through various regulatory pathways, including Teva Pharmaceutical Industries, Ltd., under regulatory review and APOTEX, under regulatory review. We believe other companies may be in earlier stages of development of a generic version of teriparatide. Romosozumab, an anti-sclerostin monoclonal antibody for the treatment of osteoporosis, marketed by Amgen and UCB under the name Evenity, received marketing approval in Japan in January 2019, the United States in April 2019, and the European Union in December 2019. In
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addition, we may also face competition from companies that seek to market generic versions of TYMLOS through an abbreviated new drug (“ANDA”) application.
Other organizations are also working to develop new therapies to treat osteoporosis. For example, we are aware that Corium is developing a transdermal formulation of parathyroid hormone (“PTH”) (1-34) that is in Phase 2 clinical development and which, if approved, would compete with abaloparatide-TD, if approved.
RAD011
We expect to develop RAD011 for treatment of hyperphagia related to Prader-Willi syndrome. While there is no treatment for Prader-Willi syndrome (“PWS”) currently approved in the United States, there have been select competitive molecules in development, including intranasal carbetocin for the treatment of hyperphagia and behavior associated with PWS, by Levo Therapeutics Inc.; intranasal oxytocin for the treatment of hyperphagia in PWS by Montefiore Medical Center; cannabidivarin for treatment of irritability, restricted/repetitive behaviors, hyperphagia in PWS, by GW Pharmaceuticals plc; CSTI-500 for the treatment of hyperphagia in PWS, by ConSynance Therapeutics Inc.; HM04 for the treatment of hyperphagia in PWS, by Helsinn Group; GDD3898 for the treatment of etabolic conditions associated with PWS, by Lipidio Pharmaceuticals Inc.; NS200 to suppress food intake and mood disorders in PWS, by Neuracle Science; OPN-300 for the treatment of PWS, by OptiNose Inc.; RM-853 for the treatment of PWS, by Rhythm Pharmaceuticals; and Tesomet for the treatment of hyperphagia in PWS, by Saniona AB.
We cannot assure you that any of our current investigational product candidates, if successfully developed and approved, will be able to compete effectively against these, or any other competing therapeutics that may become available on the market.
Collaborations and License Agreements
Kindeva
In February 2018, the Company entered into a Scale-Up and Commercial Supply Agreement (the “Supply Agreement”) with 3M Company and 3M Innovative Properties Company (collectively with 3M Company, “3M”), pursuant to which 3M agreed to exclusively manufacture Phase 3 and global commercial supplies of an abaloparatide-coated transdermal patch product (“Product”) and associated applicator devices (“Applicator”). In May 2020, 3M announced that it completed its sale of its drug delivery business to Kindeva Drug Delivery (“Kindeva”), an affiliate of Altaris Capital Partners, LLC (“Altaris”). The Supply Agreement was assigned to Kindeva as part of the transaction. Under the Supply Agreement, Kindeva will manufacture Product and Applicator for the Company according to agreed-upon specifications in sufficient quantities to meet the Company’s projected supply requirements. Kindeva will manufacture commercial supplies of Product at unit prices that decrease with an increase in the quantity the Company orders. The Company will pay Kindeva a mid-to-low single-digit royalty on worldwide net sales of Product and reimburse Kindeva for certain capital expenditures incurred to establish commercial supply of Product. The Company is responsible for providing, at its expense, supplies of abaloparatide drug substance to be used in manufacturing Product. During the term of the Supply Agreement, Kindeva and the Company have agreed to work exclusively with each other with respect to the delivery of abaloparatide, parathyroid hormone (“PTH”), and/or PTH related proteins via active transdermal, intradermal, or microneedle technology.
The initial term of the Supply Agreement began on its effective date, February 27, 2018, and will continue for five years after the first commercial sale of Product. The Supply Agreement then automatically renews for successive three-year terms, unless earlier terminated pursuant to its terms or upon either party’s notice of termination to the other 24 months prior to the end of the then-current term. The Supply Agreement may be terminated by either party upon an uncured material breach of its terms by the other party, or due to the other party’s bankruptcy, insolvency, or dissolution. The Company may terminate the Supply Agreement upon the occurrence of certain events, including for certain clinical, technical, or commercial reasons impacting Product, if it is unable to obtain U.S. regulatory approval for Product within a certain time period, or if it ceases development or commercialization of Product. Kindeva may terminate the Supply Agreement upon the occurrence of certain events, including if there are certain safety issues related to Product, if the Company is unable to obtain U.S. regulatory approval for Product within a certain time period, or if the Company fails to order Product for a certain period of time after commercial launch of the Product in the U.S. Upon certain events of termination, Kindeva is required to transfer the manufacturing processes for Product and Applicator to the Company or a mutually agreeable third party and continue supplying Product and Applicator for a period of time pursuant to the Company’s projected supply requirements.
In partnership with 3M, prior to 3M’s sale of its drug delivery business to Kindeva, the Company selected Thermo Fisher to conduct the abaloparatide-TD coating process and packaging operations. In October 2018, the Company committed to fund 3M’s purchase of capital equipment totaling approximately $9.6 million in preparation for manufacturing Phase 3 and potential commercial supplies of Product. Milestone payments for the equipment commenced in the fourth quarter of 2018 and are expected to be paid in full in the second quarter of 2021. In addition, there are cancellable purchase commitments in place to
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fund the facility build out and future purchases of capital equipment. The Company has paid 3M and Kindeva approximately $30.0 million, in the aggregate, through December 31, 2020 with respect to performance under the Supply Agreement, including the purchase of capital equipment.
In June 2009, the Company entered into a Development and Clinical Supplies Agreement with 3M, as amended (the “Development Agreement”), under which Product and Applicator development activities occur and 3M has manufactured phase 1 and 2 clinical trial supplies on an exclusive basis. The initial term of the Development Agreement remained in effect until June 2019, after which it automatically renews for successive one-year terms, unless earlier terminated, until the earliest of (i) the expiration or termination of the Supply Agreement, (ii) the mutual written agreement of the parties, or (iii) prior written notice by either party to the other party at least ninety days prior to the end of the then-current term of the Development Agreement that such party declines to extend the term. Either party may terminate the agreement in the event of an uncured material breach by the other party. The Company pays 3M for services delivered pursuant to the agreement on a fee-for-service or a fee-for-deliverable basis as specified in the agreement. The Company has paid 3M approximately $30.2 million, in the aggregate, through December 31, 2020 with respect to services and deliverables delivered pursuant to the Development Agreement.
Ipsen Pharma
In September 2005, the Company entered into a license agreement (the “License Agreement”), as amended, with an affiliate of Ipsen Pharma SAS (“Ipsen”) under which the Company exclusively licensed certain Ipsen compound technology and related patents covering abaloparatide to research, develop, manufacture, and commercialize certain compounds and related products in all countries, except Japan and France (where the Company’s commercialization rights were subject to certain co-marketing and co-promotion rights exercisable by Ipsen, provided that certain conditions included in the License Agreement were met). The Company believes that Ipsen’s co-marketing and co-promotion rights in France have permanently expired. Ipsen also granted the Company an exclusive right and license under the Ipsen compound technology and related patents to make, and have made, compounds or products in Japan. Ipsen further granted the Company an exclusive right and license under certain Ipsen formulation technology and related patents solely for purposes of enabling the Company to develop, manufacture, and commercialize compounds and products covered by the compound technology license in all countries, except Japan and France (as discussed above).
In consideration for these rights, to date, the Company has made nonrefundable, non-creditable payments in the aggregate of $13.0 million to Ipsen, including payment in recognition of certain milestones having been achieved through December 31, 2020. The License Agreement provides for further payments upon the achievement of certain future regulatory and commercial milestones. Total additional milestone payments that could be payable under the agreement are €24.0 million (approximately $29.5 million). In connection with the FDA’s approval of TYMLOS in April 2017, the Company paid Ipsen a milestone of €8.0 million (approximately $8.7 million on the date paid) under the License Agreement, which the Company recorded as an intangible asset within the consolidated balance sheet and will amortize over the remaining patent life or the estimated useful life of the underlying product. The agreement also provides that the Company will pay to Ipsen a fixed five percent royalty based on net sales of the product by the Company or its sublicensees on a country-by-country basis until the later of the last to expire of the licensed patents or for a period of 10 years after the first commercial sale in such country. The royalty expense was $10.4 million, $8.7 million and $5.0 million for the twelve months ended December 31, 2020, 2019 and 2018, respectively, and is included within cost of sales within the consolidated statement of operations and comprehensive loss. The date of the last to expire of the abaloparatide patents licensed from or co-owned with Ipsen, barring any extension thereof, is expected to be March 26, 2028.
If the Company sublicenses abaloparatide to a third party, then the agreement provides that the Company would pay Ipsen a percentage of certain payments received from such sublicensee (in lieu of milestone payments not achieved at the time of such sublicense). The applicable percentage is in the low double-digit range. In addition, if the Company or its sublicensees commercialize a product that includes a compound discovered by it based on or derived from confidential Ipsen know-how, then the agreement provides that the Company would pay to Ipsen a fixed low single-digit royalty on net sales of such product on a country-by-country basis until the later of the last to expire of licensed patents that cover such product or for a period of 10 years after the first commercial sale of such product in such country.
The License Agreement expires on a country-by-country basis on the later of (1) the date the last remaining valid claim in the licensed patents expires in that country, or (2) a period of 10 years after the first commercial sale of the licensed products in such country, unless it is sooner terminated in accordance with its terms.
The License Agreement may be terminated by us with prior notice to Ipsen. The License Agreement may be terminated by Ipsen upon notice to us with immediate effect, if we, in any country of the world, bring an action or proceeding to challenge any Ipsen patent. The License Agreement can also be terminated by Ipsen if we fail to use reasonable commercial efforts to develop the licensed product for sale and commercialization in those countries within the territory where it is commercially
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reasonable to do so as contemplated by the License Agreement, or fail to use reasonable commercial efforts to perform our obligations under the latest revised version of the development plan approved by the joint steering committee, or fail to use reasonable commercial efforts to launch and sell one licensed product in those countries within the territory where it is commercially reasonable to do so. Either party may also terminate the License Agreement upon an uncured material breach by the other party. Ipsen may terminate the License Agreement if the License Agreement is assigned or sublicensed, if a third party acquires us, or if we acquire control over a PTH or a PTHrP compound that is in clinical development or is commercially available in the territory, and if following such assignment, sublicense, acquisition, or acquisition of control by us, such assignee, sublicensee, acquirer or we, fail to meet the timetable under the latest revised version of the development plan approved by the joint steering committee under the License Agreement.
Pursuant to a June 2018 final decision in arbitration proceedings with Ipsen in connection with the License Agreement, the Company paid Ipsen $10.0 million (and pre-award interest of $0.8 million) and is obligated to pay Ipsen (i) $5.0 million if abaloparatide receives marketing approval in Japan, and (ii) a fixed mid single-digit royalty based on net sales of abaloparatide in Japan. The Company recorded the $10.8 million payment to other operating expenses in its consolidated statement of operations and comprehensive loss in the second quarter of 2018. The $5.0 million payment upon abaloparatide receiving marketing approval in Japan will be accrued in the period in which the approval is determined to be probable. Royalties based on net sales of abaloparatide in Japan will be accrued during the period that revenue for such sales, which is subject to a royalty arrangement, is recognized and will be presented as cost of sales within the Company’s consolidated statement of operations and comprehensive loss.
The arbitration decision does not impact the Company’s rights under the License Agreement or its license agreement with Teijin for abaloparatide-SC in Japan, under which the Company previously received a $10.0 million upfront payment and is entitled to receive up to an aggregate of $40.0 million upon the achievement of certain regulatory and sales milestones, and a fixed low double-digit royalty based on net sales of abaloparatide-SC in Japan.
Teijin Limited
In July 2017, the Company entered into a license and development agreement (the “Teijin Agreement”) with Teijin Limited (“Teijin”) for abaloparatide-SC in Japan.
Pursuant to the Teijin Agreement, the Company granted Teijin: (i) an exclusive payment-bearing license under certain of the Company’s intellectual property to develop and commercialize abaloparatide-SC in Japan, (ii) a non-exclusive payment-bearing license under certain of the Company’s intellectual property to manufacture abaloparatide-SC for commercial supply in Japan, (iii) a right of reference to certain of the Company’s regulatory data related to abaloparatide-SC for purposes of developing, manufacturing and commercializing abaloparatide-SC in Japan, (iv) a manufacture transfer package, upon Teijin’s request, consisting of information and the Company’s know-how that is necessary for the manufacture of active pharmaceutical ingredient and abaloparatide-SC, (v) a right to request that the Company manufacture (or arrange for a third party to manufacture) and supply (or arrange for a third party to supply) the active pharmaceutical ingredient for the clinical supply of abaloparatide-SC in sufficient quantities to enable Teijin to conduct its clinical trials in Japan, and (vi) a right to request that the Company arrange for Teijin to directly enter into commercial supply agreements with the Company’s existing contract manufacturers on the same pricing terms and on substantially similar commercial terms to those set forth in the Company’s existing agreements with such contract manufacturers. In consideration for these rights, the Company received an upfront payment of $10.0 million, and may receive further payments upon the achievement of certain regulatory and sales milestones, as well as a fixed low double-digit royalty based on net sales of abaloparatide-SC in Japan during the royalty term, as defined below.
Pursuant to the Teijin Agreement, the parties may further collaborate on new indications for abaloparatide-SC, and the Company also maintains full global rights to its development program for abaloparatide-TD, which is not part of the Teijin Agreement.
Unless earlier terminated, the Teijin Agreement expires on the later of the (i) date on which the use, sale or importation of abaloparatide-SC is no longer covered by a valid claim under the Company’s patent rights licensed to Teijin in Japan, (ii) expiration of marketing or data exclusivity for abaloparatide-SC in Japan, or (iii) 10th anniversary of the first commercial sale of abaloparatide-SC in Japan.
Berlin-Chemie
In July 2020, the Company entered into a license agreement (“License Agreement”) with Berlin-Chemie under which the Company granted Berlin-Chemie an exclusive license to develop and commercialize products containing elacestrant (RAD1901) worldwide.
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Pursuant to the terms of the License Agreement, Berlin-Chemie made a nonrefundable initial license fee payment to the Company of $30.0 million in July 2020. The Company is also eligible to receive up to $20.0 million in development and regulatory milestone payments and up to $300.0 million in sales milestone payments, with such payments contingent on the achievement of specified milestones with respect to the licensed products. The Company is also eligible to receive tiered royalties on sales of licensed products at percentages ranging from low to mid-teens, subject to certain reductions. Royalties on net sales will be payable on a product-by-product and country-by-country basis until the latest of the expiration date of the last to expire of the relevant patent rights, the expiration of regulatory exclusivity, or ten years from such first commercial sale.
The License Agreement will continue on a licensed product-by-licensed product and country-by-country basis until the last to expire royalty term. Either party may terminate the License Agreement for an uncured material breach by the other party or upon the bankruptcy or insolvency of the other party. The Company may terminate the License Agreement for certain patent challenges or if no development, manufacture or commercialization activity occurs in any given 24-month period. Berlin-Chemie may terminate the License Agreement at its discretion for any reason by delivering 180 days’ prior written notice to the Company; provided that such termination will not be effective prior to the third anniversary of the effective date.
The Company and Berlin-Chemie simultaneously entered into a Transition Services Agreement (the “TSA”), pursuant to which the Company agreed to perform certain services for Berlin-Chemie related to the EMERALD Phase 3 monotherapy study until the earlier of the completion of the contemplated services or the filing with the FDA of a New Drug Application for elacestrant. Pursuant to the TSA, Berlin-Chemie agreed to reimburse the Company for all out-of-pocket and full-time employee costs in performing the services, for total estimated reimbursements of $111.5 million. The Company will continue to incur research and development expenses in support of scale up costs under the TSA.
Supply and Manufacturing Agreements
In June 2016, we entered into a Supply Agreement with Ypsomed AG (“Ypsomed”), pursuant to which Ypsomed agreed to supply commercial and clinical supplies of a disposable pen injection device customized for subcutaneous injection of abaloparatide, the API for TYMLOS. We agreed to purchase a minimum number of devices at prices per device that decrease with an increase in quantity supplied. In addition, we made milestone payments for Ypsomed’s capital developments in connection with the initiation of the commercial supply of the device and paid a one-time capacity fee. All costs and payments under the agreement are delineated in Swiss Francs. The agreement has an initial term of three years which began on June 1, 2017, after which, it automatically renewed for a two-year term. Following its current term, the agreement automatically renews for additional two-year terms unless either party terminates the agreement upon 18 months’ notice prior to the end of the then-current term. For the two-year term beginning May 2020, we are required to purchase a minimum number of batches CHF 1.9 million ($2.2 million).
In June 2016, we entered into a Commercial Supply Agreement with Vetter Pharma International GmbH (“Vetter”), pursuant to which Vetter has agreed to formulate the finished abaloparatide-SC drug product, to fill cartridges with the drug product, to assemble the pen delivery device, and to package and label the pen for commercial distribution. We agreed to purchase the cartridges and pens in specified batch sizes at a price per unit. For labeling and packaging services, the Company has agreed to pay a per unit price dependent upon the number of pens loaded with cartridges that are labeled and packaged. These prices are subject to an annual price adjustment. The agreement had an initial term of five years, which began on January 1, 2016, after which, it automatically renewed for a two-year term and will automatically renew for additional two-year terms thereafter unless either party notifies the other party two years before the end of the then-current term that it does not intend to renew.
In July 2016, we entered into a Manufacturing Services Agreement with Polypeptide Laboratories Holding AB (“PPL”), as successor-in-interest to Lonza Group Ltd., pursuant to which PPL has agreed to manufacture the commercial and clinical supplies of the API for abaloparatide. The Company has agreed to purchase the API in batches at a price per gram in euros, subject to an annual increase by PPL. The agreement has an initial term of six years, which began on June 28, 2016, after which, it automatically renews for three-year terms unless either party provides notice of non-renewal 24 months before the end of the then-current term. The Company was required to purchase a minimum number of batches annually, equal to €2.9 million ($3.6 million) per year, subject to any annual price adjustments, during the initial term, except in calendar years 2019 and 2020. The Company was not subject to the minimum purchase requirement in 2019 and 2020.
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Government Regulation
United States—FDA Product Approval Process
The research, development, testing, manufacture, labeling, promotion, marketing, advertising, and distribution, among other things, of our products and product candidates are extensively regulated by governmental authorities in the United States and other countries. In the United States, the U.S. Food and Drug Administration (“FDA” or the “Agency”) regulates drugs under the Federal Food, Drug, and Cosmetic Act (the “FDCA”) and its implementing regulations. Failure to comply with the applicable United States requirements may subject us to administrative or judicial sanctions, such as FDA refusal to approve pending new drug applications (“NDAs”), imposition of clinical holds, warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, and/or criminal prosecution. We have active investigational new drug (“IND”) applications for abaloparatide, elacestrant and RAD011 in the United States, with the goal of filing an NDA for each product candidate.
Approval Process—We are not permitted to market our product candidates in the United States until we receive FDA approval of an NDA. The steps required to be completed before a drug may be marketed in the United States include, among others:
preclinical laboratory tests, animal studies, and formulation studies, all performed in accordance with the FDA’s Good Laboratory Practice (“GLP”) regulations;
submission to the FDA of an IND application for human clinical testing, which must become effective before human clinical trials may begin and for which progress reports must be submitted annually to the FDA;
approval by an independent institutional review board (“IRB”) or Ethics Committee at each clinical trial site before each trial may be initiated;
adequate and well-controlled human clinical trials, conducted in accordance with applicable IND regulations, Good Clinical Practices (“GCP”), and other clinical trial related regulations, to establish the safety and efficacy of the drug for each proposed indication to FDA’s satisfaction;
submission to the FDA of an NDA and payment of user fees for FDA review of the NDA (unless a fee waiver applies);
satisfactory completion of an FDA pre-approval inspection of one or more clinical trial site(s) at which the drug was studied in a clinical trial(s) and/or of us as a clinical trial sponsor to assess compliance with GCP regulations;
satisfactory completion of an FDA pre-approval inspection of the manufacturing facility or facilities at which the drug is produced to assess compliance with current Good Manufacturing Practices (“cGMPs”) regulations;
agreement with FDA on the final labeling for the product and the design and implementation of any required Risk Evaluation and Mitigation Strategy (“REMS”); and
FDA review and approval of the NDA, including satisfactory completion of an FDA advisory committee review, if applicable, based on a determination that the drug is safe and effective for the proposed indication(s).
Preclinical tests include laboratory evaluation of product chemistry, toxicity, and formulation, as well as animal studies. The conduct of the preclinical tests and formulation of the compounds for testing must comply with federal regulations and requirements, including GLP regulations. The results of the preclinical tests, together with manufacturing information and analytical data, are submitted to the FDA as part of an IND application, which must become effective before human clinical trials may begin. An IND application will automatically become effective 30 days after receipt by the FDA, unless before that time the FDA raises concerns or questions about issues such as the conduct of the trials as outlined in the IND application, and places the clinical trial(s) on a clinical hold. In such a case, the IND application sponsor and the FDA must resolve any outstanding FDA concerns or questions before clinical trials can proceed. We cannot be certain that submission of an IND application will result in the FDA allowing clinical trials to begin.
Clinical trials necessary for product approval are typically conducted in three sequential phases, but the Phases may overlap or be combined. The study protocol and informed consent information for study subjects in clinical trials must also be approved by an IRB for each institution where the trials will be conducted, and each IRB must monitor the study until completion. Study subjects must provide informed consent and sign an informed consent form before participating in a clinical trial. Clinical testing also must satisfy the extensive GCP regulations for, among other things, informed consent and privacy of individually identifiable information.
Phase 1—Phase 1 clinical trials involve initial introduction of the study drug in a limited population of healthy human volunteers or patients with the target disease or condition. These studies are typically designed to test the safety, dosage tolerance, absorption, metabolism and distribution of the study drug in humans, evaluate the side effects associated with increasing doses, and, if possible, to gain early evidence of effectiveness.
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Phase 2—Phase 2 clinical trials typically involve administration of the study drug to a limited patient population with a specified disease or condition to evaluate the preliminary efficacy, optimal dosages and dosing schedule and to identify possible adverse side effects and safety risks. Multiple Phase 2 clinical trials may be conducted to obtain information prior to beginning larger and more expensive Phase 3 clinical trials.
Phase 3—Phase 3 clinical trials typically involve administration of the study drug to an expanded patient population to further evaluate dosage, to provide substantial evidence of clinical efficacy and to further test for safety, generally at multiple geographically dispersed clinical trial sites. These clinical trials are intended to establish the overall risk/benefit ratio of the study drug and to provide an adequate basis for product approval. Generally, two adequate and well-controlled Phase 3 clinical trials are required by the FDA for approval of an NDA.
Post-approval trials, sometimes referred to as Phase 4 clinical trials, may be conducted after receiving initial marketing approval. These trials are used to gain additional experience from the treatment of patients in the intended therapeutic indication and are commonly intended to generate additional safety data regarding use of the product in a clinical setting. In certain instances, the FDA may mandate the performance of Phase 4 clinical trials as a condition of approval of an NDA or, in certain circumstances, post-approval.
Information about certain clinical trials, including details of the protocol and eventually study results, also must be submitted within specific time frames to the National Institutes of Health for public dissemination on the Clinicaltrials.gov data registry.
The FDA has various programs, including fast track designation, breakthrough therapy designation, priority review and accelerated approval, which are intended to expedite or simplify the process for the development, and FDA’s review of drugs (e.g., approving an NDA on the basis of surrogate endpoints subject to post-approval trials). Generally, drugs that may be eligible for one or more of these programs are those intended to treat serious or life-threatening diseases or conditions, those with the potential to address unmet medical needs for those disease or conditions, and/or those that provide a meaningful benefit over existing treatments. For example, a sponsor may be granted FDA designation of a drug candidate as a “breakthrough therapy” if the drug candidate is intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. If a drug is designated as breakthrough therapy, FDA will take actions to help expedite the development and review of such drug. Moreover, if a sponsor submits an NDA for a product intended to treat certain rare pediatric or tropical diseases or for use as a medical countermeasure for a material threat, and that meets other eligibility criteria, upon approval such sponsor may be granted a priority review voucher that can be used for a subsequent NDA. From time to time, we anticipate applying for such programs where we believe we meet the applicable FDA criteria. A company cannot be sure that any of its drugs will qualify for any of these programs, or even if a drug does qualify, that the review time will be reduced.
The results of the preclinical studies and of the clinical studies, together with other detailed information, including information on the manufacture and composition of the drug, are submitted to the FDA in the form of an NDA requesting approval to market the product for one or more proposed indications. The testing and approval process requires substantial time, effort and financial resources. Unless the applicant qualifies for an exemption, the filing of an NDA typically must be accompanied by a substantial “user fee” payment to the FDA. To support marketing approval, the data submitted must be sufficient in quality and quantity to establish the safety and efficacy of the product in the proposed patient population to the satisfaction of the FDA. After an NDA is accepted for filing, the FDA substantively reviews the application and may deem it to be inadequate, and companies cannot be sure that any approval will be granted on a timely basis, if at all. The FDA may also refer the application to an appropriate advisory committee, typically a panel of clinicians, for review, evaluation and a recommendation as to whether the application should be approved, but is not bound by the recommendations of the advisory committee.
Before approving an NDA, the FDA usually will inspect the facility or the facilities at which the drug is manufactured and determine whether the manufacturing and production and testing facilities are in compliance with cGMP regulations. The FDA also may audit the clinical trial sponsor and one or more sites at which clinical trials have been conducted to determine compliance with GCPs and data integrity. If the NDA and the manufacturing facilities are deemed acceptable by the FDA, it may issue an approval letter, and, if not, the Agency may issue a Complete Response Letter (“CRL”). An approval letter authorizes commercial marketing of the drug with specific prescribing information for a specific indication(s). A CRL indicates that the review cycle of the application is complete and the application is not ready for approval. A CRL may require additional clinical data and/or an additional pivotal Phase 3 clinical trial(s), and/or other significant, expensive and time-consuming requirements related to clinical trials, preclinical studies or manufacturing. Even if such additional information is submitted, the
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FDA may ultimately decide that the NDA does not satisfy the criteria for approval. The FDA could also require, as a condition of NDA approval, post-marketing testing and surveillance to monitor the drug’s safety or efficacy or impose other conditions, or a REMS that may include both special labeling and controls, known as Elements to Assure Safe Use, on the distribution, prescribing, dispensing and use of a drug product. Once issued, the FDA may withdraw product approval if, among other things, ongoing regulatory requirements are not met, certain defects exist in the NDA, or safety or efficacy problems occur after the product reaches the market.
After approval, certain changes to the approved product, such as adding new indications, making certain manufacturing changes or making certain additional labeling claims, are subject to further FDA review and approval. Before a company can market products for additional indications, it must obtain an approval from the FDA for each indication. Obtaining approval for a new indication generally requires that additional clinical studies be conducted. A company cannot be sure that any additional approval for new indications for any product will be approved on a timely basis, or at all. In addition, FDA may require certain labeling changes based on its receipt of new safety or efficacy information, such as additional warnings and information on reduced effectiveness.
Post-Approval Requirements Even after a drug has been approved by the FDA, the FDA may impose certain post-approval requirements, including the conduct of additional clinical studies. If such post-approval conditions are not satisfied, the FDA may withdraw its approval of the drug. In addition, holders of an approved NDA are required to comply with ongoing regulatory requirements governing manufacturing, labeling, packaging, storage, distribution, safety surveillance, advertising, promotion, recordkeeping and reporting of adverse events and other post-market information. These requirements include registration with the FDA, as well as continued compliance with current GCP regulations for any clinical trials that we conduct post-approval. In addition, manufacturers of drug products and their facilities are subject to continual review and periodic inspections by the FDA and other regulatory authorities for compliance with GMP requirements relating to manufacturing, quality control, quality assurance and corresponding maintenance of records and documents. Future FDA inspections may identify compliance issues at the facilities of our third-party contract manufacturers that may disrupt production or distribution or require substantial resources to correct. In addition, discovery of problems with a product after approval may result in restrictions on a product, including recall or withdrawal of the product from the market, labeling changes, imposition of REMS, or the requirement to conduct additional studies.
Hatch-Waxman Act—Under the Drug Price Competition and Patent Term Restoration Act of 1984, also known as the Hatch-Waxman Act, Congress created an abbreviated FDA review process for generic versions of pioneer (brand name) drug products under section 505(j) of the FDCA. Section 505(j) provides for approval of an abbreviated new drug application (“ANDA”) that contains information to show that the proposed product is identical in active ingredient, dosage form, strength, route of administration, labeling, quality, performance characteristics, and intended use, among other things, to a previously approved drug (commonly known as the reference drug). In considering whether to approve such a generic drug product, the FDA requires that an ANDA applicant demonstrate, among other things, that the proposed generic drug product’s active ingredient is the same as that of the reference product, that the proposed generic is bioequivalent to the reference product, that any impurities in the proposed product do not affect the product’s safety or effectiveness, and that its manufacturing processes and methods ensure the consistent potency and purity of its proposed product.
The Hatch-Waxman Act provides five years of data exclusivity for new chemical entities (“NCE”) referred to as NCE exclusivity, which generally (except as discussed below) prevents the FDA from accepting ANDAs containing the protected active ingredient or active moiety for five years after initial approval of the NCE. A drug is a NCE if the FDA has not previously approved an NDA for another drug that contains the same active moiety, which FDA defines to mean the molecule or ion (excluding certain specified appended portions) responsible for the physiological or pharmacological action of the drug substance. TYMLOS qualified as an NCE, thus received five years of NCE exclusivity following the FDA’s approval in April 2017. Under FDA’s “umbrella policy,” NCE exclusivity protects all drug products that contain the qualifying NCE, so if abaloparatide-TD is approved prior to the expiration to the NCE exclusivity granted to TYMLOS, we would expect abaloparatide-TD to be protected by any remaining NCE exclusivity period.
Additionally, the Hatch-Waxman Act requires NDA applicants and NDA holders to submit certain information about patents related to their drugs for listing in the FDA’s list of Approved Drug Products with Therapeutic Equivalence Evaluations (commonly known as the Orange Book).
European Union—Product Approval Process
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In the European Union (“EU”), medicinal products are subject to a variety of EU and EU Member States regulations governing clinical trials, commercial sales, and distribution. Pharmaceutical companies are required to obtain marketing authorization in the EU before they can market their medicinal products. The conduct of clinical trials in the EU is governed by, among others, Directive 2001/20/EC and the EU Good Clinical Practice rules. These impose legal and regulatory obligations that are similar to those provided in applicable U.S. laws. The conduct of clinical trials in the EU must be approved by the competent authorities of each of the EU Member States in which the clinical trials take place following the submission of a related clinical trial application. In addition, an application for a positive opinion must be submitted to the competent Ethics Committee in these EU Member States and a related positive opinion must be obtained prior to initiation of the conduct of the clinical trial. The objective of Directive 2001/20/EC was to harmonize the EU clinical trials regulatory framework. The actual authorization procedure and its duration vary, however, between the EU Member States. This is due to the fact that the transposition of the Directive into the national laws of the EU Member States is not always uniform. To address this issue, the EU legislator adopted Regulation (EU) No 536/2014 (the “Clinical Trials Regulation”) in 2014. The new EU Clinical Trials Regulation, which will replace the EU Clinical Trials Directive, introduces a complete overhaul of the existing regulation of clinical trials for medicinal products in the EU, including a new coordinated procedure for authorization of clinical trials that is reminiscent of the mutual recognition procedure for marketing authorization of medicinal products, and increased obligations on sponsors to publish clinical trial results. The Clinical Trials Regulation is not expected to start to apply before early 2022.
In the EU, medicinal products are authorized following a similar demanding process as that required in the United States and applications for marketing authorization must be submitted based on the ICH Common Technical Document format. The applicable legislation in the EU also requires applicants to either conduct clinical trials in a pediatric population in accordance with a Pediatric Investigation Plan (“PIP”) approved by the Pediatric Committee of the European Medicines Agency (“EMA”) or to obtain a waiver or deferral from the conduct of these studies by this Committee. In the European Economic Area (“EEA”) (comprising 27 EU Member States plus Iceland, Liechtenstein and Norway), medicines can be authorized by using either the centralized authorization procedure or national authorization procedures, albeit through the decentralized or mutual recognition procedure to gain access to two or more EEA Member States. The marketing authorization process is essentially the same in both types of procedures and its maximum duration is 210 days, excluding clock-stops.
Centralized procedure—Under the centralized procedure governed by Regulation (EC) 726/2004, a single marketing authorization application is submitted to the EMA for its scientific evaluation of the safety, quality and efficacy. The CHMP then carries out a scientific assessment of the application and issues an opinion on the approvability of the medicine. Following adoption of the CHMP’s opinion, the European Commission, as the EU licensing authority, will adopt a legally binding decision on granting of a centralized marketing authorization which is valid across the EU and through the EEA Agreement, the Member States of the EEA. The centralized procedure is mandatory for human medicines derived from certain biotechnology processes, advanced therapy medicinal products (such as gene therapy, somatic cell therapy and tissue engineered products), medicines containing a new active substance falling within the mandatory centralized procedure such as those which are indicated for the treatment of certain diseases, such as HIV/AIDS, cancer, or neurodegenerative disorders, diabetes, autoimmune diseases and other immune dysfunctions, viral diseases, and orphan-designated medicines. The centralized procedure is optional for applicants seeking marketing authorizations for medicines which contain a new active substance which is not authorized in the EEA. Alternatively, a medicine which is shown to constitute a significant therapeutic, scientific or technical innovation, or if its authorization via the centralized procedure would be in the interest of public health in the EEA would be considered as eligible for centralized assessment. Accelerated evaluation may be sought by an applicant and granted by the CHMP in exceptional cases in relation to medicinal products that are expected to be of a “major public health interest” provided that three cumulative criteria are fulfilled. These relate to the seriousness of the disease; the absence or insufficiency of an appropriate alternative therapeutic approach; and the anticipated high therapeutic benefit of the medicinal product. CHMP delivers its opinion within 150 days in the framework of accelerated procedures.
National authorization procedure—Pure national authorization procedure is applicable where the applicant intends to market the product only in one Member State. However, if an applicant intends to market the product in two or more Member States, there are two other possible regulatory procedures for products that fall outside the scope of the mandatory or the optional centralized procedure:
Decentralized procedure.  Where a medicinal product has not been authorized anywhere in the EEA and the product does not fall within the mandatory centralized procedure, an applicant may request a Member State to act as the Reference Member State to lead the assessment of the marketing authorization for it to be considered by the selected number of Member States which are concerned by the procedure. A positive decision adopted during the decentralized procedure will result in national marketing authorizations being granted by the Reference and Concerned Member States. Concerned Member States may refuse to approve the assessment made by the Reference Member State only on the basis of a potential serious risk to public health. In these circumstances, the disputed elements are be referred to the Heads of Medicines Agencies (“CMDh”) for review. This review, which
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may also be escalated to the CHMP in case of disagreement in CMDh would result in a decision by the European Commission. This decision is binding on all EU Member States.
Mutual recognition procedure.  Where the medicinal product has been authorized in an EU Member State, the applicant can request the Member State to act as the Reference Member State for the national marketing authorization to be recognized progressively in the other Concerned Member States.
Under both decentralized and mutual recognition procedures, the Reference Member State leads the assessment for it to be recognized by the national authorities in Member States concerned by the procedure. A satisfactory conclusion of a procedure will result in granting of a national marketing authorization.
Marketing authorizations granted in the EU are initially valid for five years and can be subsequently renewed and remain valid for an unlimited period unless the national competent authorities of the EU Member State or the European Commission decides on justified grounds to proceed with one additional five-year renewal period. The renewal of a marketing authorization is subject to a re-evaluation of the risk-benefit balance of the product by the national competent authorities of the EU Member State or the EMA.
Good manufacturing practices—Like the FDA, the EMA, the competent authorities of the EU Member States and other regulatory agencies regulate and inspect equipment, facilities and processes used in the manufacture of pharmaceutical and biologic products. Prior to the CHMP adopting an opinion with respect to approvability of an application for marketing authorization, the EMA, acting upon the advice of the CHMP, may decide to coordinate an inspection to be undertaken by the designated EU Supervising Authority of the proposed manufacturing site to verify the manufacturer’s compliance with EU GMP principles and guidelines or to investigate a specific GMP-related matter that may arise from the assessment of the application. If there is a material change in manufacturing equipment, location, or process, affecting the quality of the product, additional regulatory review and approval may be required from the relevant competent regulatory authority. Once we or our partners commercialize products, we will be required to comply with GMP with regard to manufacture and control, and product-specific requirements according to the terms of the marketing authorization. Also, like the FDA, the EMA (as a coordinating body for centrally authorized medicinal products), the competent authorities of the EU Member States and other regulatory agencies also conduct regular, periodic visits to re-inspect equipment, facilities, and processes following the initial approval of a product. If it is determined that the equipment, facilities, or processes used to manufacture our product do not comply with applicable regulations and conditions of product approval, regulatory agencies may seek civil, criminal or administrative sanctions, or enforcement actions and/or remedies against the manufacturer holding the requisite manufacturing authorization and us, including the suspension of our manufacturing operations or the withdrawal of our product from the market, which in turn could potentially result in the suspension or withdrawal of the related marketing authorization for the medicinal product.
Data and market exclusivity—Similar to the United States, there is a process for approval of generic versions of innovator drug products in the EU. Abridged applications for the authorization of generic versions of drugs authorized centrally by the European Commission can be submitted to the EMA through the centralized procedure referencing the innovator’s non-clinical and clinical data to support generic approval provided always that the following conditions are met: the generic product has the same qualitative and quantitative composition in the active substances and the same pharmaceutical form as the reference innovator drug product and the generic product is shown to be bioequivalent to the reference product.
Medicinal products authorized in the EU on the basis of a full marketing authorization application (as opposed to an application for marketing authorization that relies on data available in the marketing authorization dossier for another, previously approved, medicinal product) and not falling within the scope of the so-called “global marketing authorization” will benefit from eight years of data protection within which the generic applicant cannot rely on the non-clinical and clinical data contained in the dossier of the reference product to support product approval, and two years of market protection within which the generic applicant is not permitted to place the generic product on the market even if it is approved. This period of data and market protection can be extended to a maximum of eleven years if during the first eight years of those ten years, the marketing authorization holder obtains an authorization for one or more new therapeutic indications which during the scientific assessment prior to their authorization are held to bring a significant benefit in comparison with existing therapies.
Other International Markets—Drug approval process
In some international markets (e.g., China or Japan), although data generated in U.S. or EU trials may be submitted in support of a marketing authorization application, additional clinical trials conducted in the host territory, or studying people of the ethnicity of the host territory, may be required prior to the filing or approval of marketing applications within the country.
Pricing and Reimbursement
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In the United States and internationally, the commercial success of any products we market, or may market in the future, is dependent, in significant part, on the scope of coverage and amount of reimbursement from third-party payors such as government health programs and private health insurance. Third-party payors are increasingly focused on controlling the costs of drug products by managing utilization and reducing payments for drugs. Third party payor initiatives to do so include establishing formularies that limit coverage of drug products and create financial incentives for patients to use lower cost drugs (through implementation of differential cost-sharing) or requiring prescribing physicians to demonstrate medical necessity for a drug product for a particular patient before coverage will be authorized (prior authorization). Pharmaceutical manufacturers may be required by law or market conditions to provide discounts or rebates to third party payors or purchasers in order to ensure coverage or sales of drug products. Coverage and payment of drug products is subject to ongoing scrutiny and reform efforts. Future legislation or other action by government authorities in the United States and other jurisdictions could affect pricing, coverage and reimbursement for the products we market and may develop in the future. Any such legislation could impact, in a significant way, our ability to generate revenues from sales of products that, if successfully developed, we bring to market.
Within the United States, coverage and reimbursement for products can differ significantly from third-party payor to third-party payor. One third party payor’s decision to cover a particular drug product does not ensure that other payors will also provide coverage for the drug product. As a result, the coverage determination process usually requires manufacturers to provide scientific and clinical support for the use of their products to each payor separately and can be a time consuming process. Additionally, obtaining coverage does not mean that reimbursement for covered drugs will be adequate. A significant proportion of patients eligible for TYMLOS are Medicare beneficiaries. Drugs like TYMLOS that are dispensed by pharmacies to patients for self-administration are potentially eligible for coverage under Medicare Part D. Medicare Part D is a voluntary program that offers prescription drug coverage through private plans to members enrolled with the plan. Medicare Part D coverage may vary from plan to plan and the plans may implement formularies and certain utilization management activities as well as negotiate rebates with pharmaceutical manufacturers to manage access and costs. Manufacturers must also provide discounts on Medicare Part D brand name prescription drugs sold to Medicare beneficiaries in the Medicare Part D coverage gap (i.e., the so called “donut hole”).
Decisions on pricing and reimbursement of medicinal products in the European Union are based upon national rules subject to the control of the Transparency Directive, (Council Directive 89/105/EEC) which aims to ensure the transparency of measures established by EU countries to control the pricing and reimbursement of medicinal products. It defines a series of procedural requirements designed to verify that national pricing and reimbursement decisions do not create obstacles to the pharmaceutical trade within the EU’s Internal Market. The competent authorities of each of the 27 EU Member States have adopted individual national measures aimed at regulating the pricing and reimbursement of medicinal products in their territory. These measures often vary widely in nature, scope and application. However, a major element that they have in common is an increased move toward reduction in the reimbursement price of medicinal products, a reduction in the number and type of products selected for reimbursement, and an increased preference for generic products over innovative products. These efforts have mostly been executed through these countries’ existing price-control methodologies, including price cuts, mandatory rebates, value-based pricing, and reference pricing (i.e., referencing prices in other countries and using those reference prices to set a price). It is increasingly common in many EU Member States for Marketing Authorization Holders to be required, in order to get support for reimbursement under national health schemes and, therefore, access to the market, to demonstrate the cost effectiveness or otherwise added value benefit of their products as compared to products (which are considered as standard of care) already subject to pricing and reimbursement in specific countries. In order for drugs to be evaluated positively under such criteria, pharmaceutical companies may need to re-examine, and consider altering, a number of traditional functions relating to the selection, study, and management of drugs, whether currently marketed, under development, or being evaluated as candidates for research and/or development.
Many EU Member States review periodically their decisions concerning the pricing and reimbursement of medicinal products. The outcome of this review cannot be predicted and it could have an adverse effect on the pricing and reimbursement of our medicinal products in the EU Member States. Potential reductions in prices and changes in reimbursement levels could be the result of different factors, including reference pricing systems, parallel distribution and parallel trade. It could also result from the application of external reference pricing mechanisms, which consist of arbitrage between low-priced and high-priced countries. Reductions in the pricing of our medicinal products in one EU Member State could affect the price in other EU Member States and, thus, have a negative impact on our financial results.
Health Technology Assessment (“HTA”) of medicinal products in the EU is an essential element of the pricing and reimbursement decision-making process in a number of EU Member States. This includes most of the big markets in the EU, such as France, Germany and Sweden. HTA is currently mainly governed by the national laws of the EU Member States. The HTA authorities of the EU Member States assess the public health impact, therapeutic benefit and the economic and societal impact of use of a given medicinal product in the national healthcare system of the individual country. The outcome of HTA has a direct impact on the pricing and reimbursement status granted to the medicinal product. The extent of this impact varies
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between the EU Member States. Moreover, a negative HTA by a leading and recognized HTA body concerning a medicinal product could undermine the prospects to obtain reimbursement for such product not only in the EU Member State in which the negative assessment was issued, but also in other EU Member States.
In 2011, Directive 2011/24/EU was adopted at the EU level. This Directive establishes a voluntary network of national authorities or bodies responsible for HTA in the individual EU Member States. The network facilitates and supports the exchange of scientific information concerning HTAs. Further to this, on January 31, 2018, the European Commission adopted a proposal for a regulation on HTA. This legislative proposal is intended to boost cooperation among EU Member States in assessing health technologies, including new medicinal products, and providing the basis for cooperation at the EU level for joint clinical assessments in these areas. The European Commission has stated that the role of the draft HTA regulation is not to influence pricing and reimbursement decisions in the individual EU Member States. However, this consequence cannot be excluded.
Future legislation, including the current versions being considered at the federal and state level in the United States and at the national level in EU Member States, or regulatory actions implementing recent or future legislation may have a significant effect on our business. Our ability to successfully commercialize products depends in part on the extent to which coverage and reimbursement for the costs of our products and related treatments will be available in the United States and worldwide from government health administration authorities, private health insurers and other organizations. Substantial uncertainty exists as to the reimbursement status of newly approved healthcare products by third-party payors. In addition, negotiating prices with government authorities under current and proposed legislation can delay the commercialization of our product candidates.
Sales and Marketing
The FDA regulates all advertising and promotion activities for products under its jurisdiction both prior to and after approval. If a product is approved, we must also comply with post-marketing requirements, including, but not limited to, compliance with advertising and promotion requirements, which include restrictions on promoting products for unapproved uses or patient populations (known as ‘‘off-label use’’), monitoring and record-keeping activities, reporting of adverse events, product sampling and distribution restrictions, and limitations on industry sponsored scientific and educational activities. Although physicians may prescribe legally available products for off-label uses, manufacturers may not market or promote such uses. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant liability. If there are any modifications to the product, including changes in indications, labeling or manufacturing processes or facilities, we may be required to submit and obtain FDA approval of a new NDA or an NDA supplement, which may require us to develop additional data or conduct additional pre-clinical studies and clinical trials.
Within the United States, we are subject to various federal, state and local laws targeting fraud and abuse in the healthcare industry, including anti-kickback and false claims laws. Violations of fraud and abuse laws may be punishable by criminal or civil sanctions, including fines and civil monetary penalties, and/or exclusion from federal health care programs (including Medicare and Medicaid). Federal and state authorities are paying increased attention to enforcement of these laws within the pharmaceutical industry, and private individuals have been active in alleging violations of the laws and bringing suits on behalf of the government under the federal False Claims Act (“FCA”). Violations of these laws can result in imprisonment, criminal fines, penalties or exclusion from participation in government health care programs. Given the broad scope of these laws, our activities could be subject to scrutiny under the laws. If we were subject to allegations concerning, or were convicted of violating, these laws, our business could be harmed.
The federal anti-kickback statute generally prohibits, among other things, a pharmaceutical manufacturer from directly or indirectly soliciting, offering, receiving, or paying any remuneration in cash or in kind where one purpose is either to induce the referral of an individual for, or the purchase or prescription of, a particular drug that is payable by a federal health care program. A person or entity does not need to have actual knowledge of the statute or a specific intent to violate the statute. A claim arising from a violation of the federal Anti-Kickback Statute also constitutes a false or fraudulent claim for purposes of the FCA.
Federal and state false claims laws generally prohibit anyone from knowingly and willfully, among other activities, presenting, or causing to be presented for payment to third party payors (including Medicare and Medicaid) claims for drugs or services that are false or fraudulent (which may include claims for services not provided as claimed or claims for medically unnecessary services). There is also a criminal FCA statute by which individuals or entities that submit false claims can face criminal penalties. In addition, under the federal civil monetary penalty law, the Department of Health and Human Services Office of Inspector General has the authority to exclude from participation in federal health care programs or to impose civil penalties against any person who, among other things, knowingly presents, or causes to be presented, certain false or otherwise improper claims. A federal healthcare fraud statute prohibits the knowing and willful execution, or attempt to execute, a
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scheme to defraud a health care benefit program, including private health plans, or obtain, through false or fraudulent pretenses, money or property owned by, or under the custody or control of, such a health care benefit program.
The majority of states also have anti-kickback, false claims, and similar fraud and abuse laws and although the specific provisions of these laws vary, their scope is generally broad, and there may not be regulations, guidance or court decisions that apply the laws to particular industry practices.
Laws and regulations have also been enacted by the federal government and various states to regulate the sales and marketing practices of pharmaceutical manufacturers. The laws and regulations generally limit financial interactions between manufacturers and health care providers; require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the U.S. federal government; and/or require disclosure to the government and/or public of financial interactions (so-called “sunshine laws”). State laws may also require disclosure of pharmaceutical pricing information and marketing expenditures. Manufacturers must also submit information to the FDA on the identity and quantity of drug samples requested and distributed by a manufacturer during each year. Many of these laws and regulations contain ambiguous requirements or require administrative guidance for implementation. Given the lack of clarity in laws and their implementation, our activities could be subject to the penalty provisions of the pertinent federal and state laws and regulations.
The advertising of medicinal products in the EU and the United Kingdom (“UK”) is subject to strict regulation set out in the EU, EU Member States’ and UK national laws, including, among others, the laws governing the promotion of medicinal products, interactions with physicians, misleading and comparative advertising and unfair commercial practices. Promotional materials for medicinal products must comply with the Summary of Product Characteristics (“SmPC”) as approved by the competent authorities. The SmPC is the document that provides information to physicians concerning the safe and effective use of the medicinal product and forms an intrinsic and integral part of the related marketing authorization. Promotional materials that do not comply with the SmPC are considered to constitute off‑label promotion which is prohibited. The direct‑to‑consumer advertising of prescription‑only medicinal products is also prohibited in the EU and the UK.
Interactions between pharmaceutical companies and physicians in the EU and the UK are subject to strict laws, regulations, industry self‑regulation codes of conduct and physicians’ codes of professional conduct in the individual EU Member States and the UK, including the anti-corruption laws. These rules prohibit the provision of benefits or advantages to physicians to induce or encourage the prescription, recommendation, endorsement, purchase, supply, order or use of medicinal products.
In the UK, the Bribery Act 2010 applies to any company incorporated in or “carrying on business” in the UK, irrespective of where in the world the alleged bribery activity occurs and could have implications for company’s interactions with physicians in and outside the UK.
In addition, transfers of value to physicians in certain EU Member States and the UK must be publicly disclosed. Agreements with physicians must often be the subject of prior notification and approval by the physician’s employer, his/her competent professional organization, and/or the competent authorities of the individual EU Member States and the UK.
Prohibited promotion of medicinal products in the EU and the UK, prohibited interactions with healthcare professionals or failures to publicly disclose transfers of value to healthcare professionals in the EU and the UK could lead to restriction of the promotional activities conducted by a company and the imposition of administrative penalties, fines and imprisonment.
Similar rigid restrictions are imposed on the promotion and marketing of medicinal products in other countries. Laws (including those governing promotion, marketing and anti-kickback provisions), industry regulations and professional codes of conduct often are strictly enforced. Even in those countries where we are not directly responsible for the promotion and marketing of our products, inappropriate activity by our international distribution partners can have adverse implications for us.
Other Laws and Regulatory Processes
We are subject to a variety of financial disclosure and securities trading regulations as a public company in the United States, including laws relating to the oversight activities of the Securities and Exchange Commission (“SEC”) and the regulations of the Nasdaq Global Market or any national securities exchange on which our capital stock may be traded. In addition, the Financial Accounting Standards Board (“FASB”) the SEC and other bodies that have jurisdiction over the form and content of our accounts, our consolidated financial statements and other public disclosure are constantly discussing and interpreting proposals and existing pronouncements designed to ensure that companies best display relevant and transparent information relating to their respective businesses.
Our international operations are subject to compliance with the Foreign Corrupt Practices Act (the “FCPA”) which prohibits corporations and individuals from paying, offering to pay, or authorizing the payment of anything of value to any
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foreign government official, government staff member, political party, or political candidate in an attempt to obtain or retain business or to otherwise influence a person working in an official capacity. We also may be implicated under the FCPA for activities by our partners, collaborators, clinical research organizations, vendors or other agents.
Our present and future business has been and will continue to be, subject to various other laws and regulations. Various laws, regulations and recommendations relating to safe working conditions, laboratory practices, the experimental use of animals, and the purchase, storage, movement, import and export and use and disposal of hazardous or potentially hazardous substances used in connection with our research work are or may be applicable to our activities. Certain agreements entered into by us involving exclusive license rights or acquisitions may be subject to national or supranational antitrust regulatory control, the effect of which cannot be predicted. The extent of government regulation, which might result from future legislation or administrative action, cannot accurately be predicted.
Human Capital
At Radius, attracting and developing high-performing team members is key to our success. As of December 31, 2020, we employed 310 full-time employees. Of the total 310 employees, 79 were engaged in research and development activities, 56 were engaged in support administration, including business development and finance, and 175 were part of our commercial organization. We use and intend to continue using clinical research organizations and other third parties to perform our clinical studies and manufacturing.
We also seek to build a diverse and inclusive workplace. Our employee base was comprised of 58% females and 42% males, and was comprised of the following ethnicities as of December 31, 2020: 78% White, 8% Asian, 7% Hispanic, 4% Black, 2% two or more races, and 0.3% additional groups (including American Indian or Alaska Native). We will continue to support the diversification of our workforce through recruiting, retention, employee development and inclusion efforts.
Our compensation package is competitive and designed to attract, retain, and motivate talented and high-performing team members who have relevant, critical skills and experience which are important to the achievement of our business objectives. Our employees’ total compensation package includes market-competitive salary, bonuses or sales commissions, and equity. We also offer a wide range of benefits across areas such as health, family, and finance, which include but are not limited to healthcare, financial wellness and retirement planning programs, employee assistance programs, generous paid time off, and fitness benefits.
Corporate Information
We were incorporated in the state of Delaware on February 4, 2008 under the name MPM Acquisition Corp. In May 2011, we entered into a reverse merger transaction, or the Merger, with our predecessor, Radius Health, Inc., a Delaware corporation formed on October 3, 2003 (the “Former Operating Company”) pursuant to which the Former Operating Company became a wholly-owned subsidiary of ours. Immediately following the Merger, the Former Operating Company was merged with and into us and we assumed the business of the Former Operating Company and changed our name to Radius Health, Inc.
Legal Proceedings
From time to time, we are party to litigation arising in the ordinary course of our business. As of February 1, 2021, we were not party to any significant litigation.
Investor Information
Financial and other information about us is available on our website at www.radiuspharm.com. We make available on our website, free of charge, copies of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. In addition, we have previously filed registration statements and other documents with the SEC. Any document we file may be inspected at the SEC’s internet address at www.sec.gov. These website addresses are not intended to function as hyperlinks, and the information contained in our website and in the SEC’s website is not intended to be a part of this filing.
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ITEM 1A.    RISK FACTORS.
        Our business faces significant risks and uncertainties. Certain important factors may have a material adverse effect on our business prospects, financial condition and results of operations, and you should carefully consider them. Accordingly, in evaluating our business, we encourage you to consider the following discussion of risk factors, in its entirety, in addition to other information contained in or incorporated by reference into this Annual Report on Form 10-K and our other public filings with the SEC.
Risk Factors Summary
The following is a summary of the principal risks that could adversely affect our business, conditions and financial results.
Risks Related to Our Financial Position and Need for Capital
We are not currently profitable and may never become profitable.
Unless and until we become profitable, we may need to raise additional capital, which may not be available on favorable terms, if at all, in order to continue operating our business.
Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our technologies or product candidates.
Risks Related to the Commercialization and Development of Our Product Candidates
We are heavily dependent on the commercial success of TYMLOS; we may not be able to meet expectations with respect to TYMLOS sales or attain or maintain profitability and positive cash-flow from operations.
Our current and future product candidates may never receive regulatory approval.
We may never receive approval for, or commercialize, our products outside of the United States.
Any collaboration arrangements that we may enter into in the future may not be successful, which could adversely affect our ability to develop and commercialize our product candidates.
We have sold or licensed our oncology assets; however there can be no assurance that those or other transactions will yield additional value for stockholders.
The results of clinical trials may not support our product candidate claims.
If serious adverse or undesirable side effects are identified during the development or commercialization of our product candidates, we may need to abandon our development or commercialization of some of our product candidates or products.
Any product candidate for which we have or obtain marketing approval, including TYMLOS, is subject to restrictions or potential withdrawal from the market and we may be subject to penalties if we fail to comply with regulatory requirements or if we experience unanticipated problems with our products, when and if any of them are approved.
The commercial success of TYMLOS and any product candidates that we may develop and that may be approved will depend upon the degree of market acceptance by regulators, key opinion leaders, physicians, patients, third-party payors and others in the medical community.
Our ability to successfully commercialize products depends in part on the extent to which coverage and reimbursement for the costs of our products and related treatments will be available in the United States and worldwide from government authorities and health benefit programs, private health insurers and other organizations.
We may expend resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success.
Risks Related to Our Dependence on Third Parties
We currently rely on third parties to manufacture TYMLOS and to produce our product candidates; our dependence on these parties, including any inability on our part to accurately anticipate product demand and timely secure manufacturing capacity to meet commercial or clinical product demand may impair the commercialization of TYMLOS and the research and development activities and potential commercialization of our product candidates.
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We have entered into, and in the future may enter into, licenses and/or collaborations with third parties for the development and commercialization of our product candidates. If those licenses and/or collaborations, are not successful, we may not be able to capitalize on the market potential of these product candidates.
Risks Related to Marketing and Sale of Our Products
If we are unable to maintain appropriate and effective commercial capabilities on our own or through partnerships or collaborations, we may not be able to continue to successfully commercialize TYMLOS or any of our product candidates or generate product revenue.
If we cannot compete successfully against other drug companies, we may not achieve sufficient product revenues and our business will suffer.
We may incur substantial liabilities and may be required to limit commercialization of our products in response to product liability lawsuits.
Risks Related to Our Intellectual Property
If we fail to comply with our obligations in our intellectual property licenses with third parties, we could lose license rights that are important to our business.
If our efforts to protect our intellectual property related to TYMLOS/abaloparatide-SC, abaloparatide-TD, and/or our other current or future product candidates fail to adequately protect these assets or if we are unable to secure all necessary intellectual property, we may lose the ability to license or successfully commercialize one or more of these products or product candidates.
Patent terms may be inadequate to protect our competitive position on our product candidates for an adequate amount of time.
Intellectual property litigation could cause us to spend substantial resources and distract our personnel from their normal responsibilities.
Risks Related to Legislation and Administrative Actions
Healthcare reform may have a material adverse effect on our industry and our results of operations.
We are subject to healthcare laws, regulation and enforcement, and our failure to comply with those laws could have a material adverse effect on our results of operations and financial conditions.
Risks Related to Employee Matters and Managing Our Workforce
If we are unable to successfully maintain and further develop internal commercialization capabilities, sales of TYMLOS may be negatively impacted.
We rely on key executive officers and scientific and medical advisors, and their knowledge of our business and technical expertise would be difficult to replace.
Risks Relating to Our Securities
Our stock price may be volatile, and the value of an investment in our common stock may decline.
Our ability to utilize our net operating loss carryforwards and certain other tax attributes may be limited.
For a more complete discussion of the material risks facing our business, see below.
Risks Related to Our Financial Position and Need for Capital

We are not currently profitable and may never become profitable.

We are not currently profitable and may never become profitable. We had net losses of $109.2 million, $133.0 million, and $221.3 million for the years ended December 31, 2020, 2019, and 2018, respectively. As of December 31, 2020, we had an accumulated deficit of $1.3 billion. Even if we succeed in our efforts in continuing to commercialize TYMLOS, we may incur losses and never achieve or maintain profitability. We also may incur additional operating and capital expenses as we:
continue to maintain and build our internal infrastructure, including hiring additional personnel that may be required for our existing or any future product candidates, including product candidates that we acquire from other companies;
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continue to commercialize TYMLOS or any product candidates, if approved;
continue to undertake preclinical development and clinical trials for product candidates; and
seek regulatory approvals for product candidates.
Unless and until we become profitable, we may need to raise additional capital to continue to operate our business. Our failure to achieve or maintain profitability or to raise additional capital could negatively impact the value of our securities.
Unless and until we become profitable, we may need to raise additional capital, which may not be available on favorable terms, if at all, in order to continue operating our business.
Our ability to become profitable depends upon our ability to generate sufficient revenue. Despite our commercialization of TYMLOS, we may not be able to generate sufficient revenue to attain or maintain profitability. Our ability to generate profits from sales of TYMLOS is subject to our ability to manufacture commercial quantities of TYMLOS with third parties at acceptable cost levels and maintain sales and marketing capabilities. Even though TYMLOS has been approved by the FDA for marketing and commercial sale for the treatment of postmenopausal women with osteoporosis, it may not sufficiently gain or maintain market acceptance, leadership or commercial success. For the foreseeable future, we expect to fund our operations and capital expenditures with our product revenues, existing cash and cash equivalents and short and long-term marketable securities, or through strategic financing opportunities.
Based upon our cash, cash equivalents and marketable securities balance as of December 31, 2020 and funds available to us through our credit facilities, we believe that, prior to the consideration of proceeds from partnering and/or collaboration activities, we have sufficient capital to fund our development plans, U.S. commercial and other operational activities for at least twelve months from the date of this filing. We have based this estimate on assumptions that may prove to be wrong, and we could use up our available capital resources sooner than we currently expect. If we fail to obtain additional capital, should we need it, we may be forced to reduce or forego sales and marketing efforts for TYMLOS or may be unable to complete our planned preclinical and clinical trials and obtain approval of our product candidates from the FDA and foreign regulatory authorities. In addition, we could be forced to discontinue product development or forego attractive business opportunities or discontinue our operations entirely. Any additional sources of financing may not be available or may not be available on favorable terms and will likely involve the issuance of additional equity securities, which will have a dilutive effect on stockholders. Our future capital requirements will depend on many factors, including the scope and progress made in our research and development activities and our clinical studies.
Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our technologies or product candidates.
If we are unable to generate substantial product revenues, we may need to finance our cash needs through a combination of collaborations, strategic alliances, licensing arrangements, other marketing and distribution arrangements, equity offerings, royalty-based financing arrangements 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 of these securities may include liquidation or other preferences that adversely affect your rights as a stockholder. Debt financing, if available and to the extent permitted under our existing January 2020 senior and secured Credit and Security Agreements with MidCap Financial Trust (“MidCap”), may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. For example, our financing agreements with MidCap contain affirmative and negative covenants customarily applicable to senior secured credit facilities, including covenants that, among other things, will limit or restrict our ability, subject to negotiated exceptions, to incur additional indebtedness and additional liens on our assets, engage in mergers or acquisitions or dispose of assets, pay dividends or make other distributions, voluntarily prepay other indebtedness, enter into transactions with affiliated persons, make investments, and change the nature of our businesses. If we raise additional funds through marketing and distribution arrangements or other collaborations, strategic alliances or licensing arrangements with third parties or royalty-based financing arrangements, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates, or we may need to grant licenses on terms that may not be favorable to us. We have and may in the future engage in collaborations, sponsored research agreements, and other arrangements with academic researchers and institutions that have received and may receive funding from U.S. government agencies. As a result of these arrangements, the U.S. government or certain third parties may have rights in certain inventions developed during the course of the performance of such collaborations and agreements as required by law or by such agreements. If we are unable to raise additional funds when needed, we may be required to delay, limit, reduce or terminate our commercialization or product development efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Our financial results may fluctuate from quarter to quarter, which makes our results difficult to predict and could cause our results to fall short of expectations.
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Our financial results may fluctuate as a result of a number of factors, many of which are outside of our control. For these reasons, comparing our financial results on a period-to-period basis may not be meaningful, and you should not rely on our past results as an indication of our future performance. Particularly over the near term as we continue to maintain and refine our commercial capabilities and commercialize TYMLOS, our revenues may fluctuate from quarter to quarter and our future quarterly and annual expenses as a percentage of our revenues may be significantly different from those we have recorded in the past or which we expect for the future. Our financial results in some quarters may fall below expectations. Any of these events as well as the various risk factors listed in this “Risk Factors” section could adversely affect our financial results and cause our stock price to fall.
We are subject to foreign currency risk.
A significant portion of our clinical trial activities, in addition to our contract manufacturing processes in support of TYMLOS, are conducted outside of the United States and a large portion of the costs incurred with these activities are denominated in the local currency of the country in which the activity is being conducted. As such, these costs could be subject to fluctuations in foreign exchange rates. At present, we do not engage in hedging transactions to protect against uncertainty in future exchange rates between foreign currencies and the U.S. dollar. A decline in the value of the U.S. dollar against currencies in geographies in which we conduct clinical trials or contract manufacturing activities could have a negative impact on our research and development costs, our future inventory valuations, or our future cost of sales. We cannot predict the impact of foreign currency fluctuations, and foreign currency fluctuations in the future may adversely affect our business and our results of operations. For further discussion of our foreign currency risks, see “Item 7A. Quantitative and Qualitative Disclosures About Market Risk”.
An adverse determination in any current or future lawsuits or arbitration proceedings to which we or partners or suppliers
are a party could have a material adverse effect on our business.

We or our partners or suppliers may be the target of claims asserting violations of securities fraud and derivative actions, or other litigation or arbitration proceedings, including with respect to intellectual property rights. Any litigation or arbitration proceedings could result in substantial costs and divert management’s attention and resources. These lawsuits or arbitration proceedings may result in injunctive relief, large judgments or settlements against us, or our partners or suppliers, any of which could have a material adverse effect on our business, operating results, financial condition and liquidity.
We are also subject to a variety of other types of potential claims, proceedings, investigations and litigation which may be initiated by government agencies or third parties. These include compliance matters, product regulation or safety, taxes, employee benefit plans, employment discrimination, health and safety, environmental, antitrust, customs, import/export, government contract compliance, financial controls or reporting, intellectual property, allegations of misrepresentation, false claims or false statements, commercial claims, claims regarding promotion of our product candidates, or other similar matters. In addition, government investigations related to the use of products, but not the efficacy themselves, may cause reputational harm to us. Negative publicity-whether accurate or inaccurate-about the efficacy, safety or side effects of our product candidates or product categories, whether involving us or a competitor, could materially reduce market acceptance for our product candidates, cause consumers to seek alternatives to our product candidates, result in product withdrawals and cause our stock price to decline. Negative publicity could also result in an increased number of product liability claims, whether or not these claims have a basis in scientific fact. Any such claims, proceedings, investigations or litigation, regardless of the merits, might result in substantial costs, restrictions on product use or sales, or otherwise injure our business.
Risks Related to the Commercialization and Development of Our Product Candidates
We are heavily dependent on the commercial success of TYMLOS; we may not be able to meet expectations with respect to TYMLOS sales or attain or maintain profitability and positive cash-flow from operations.
Our ability to continue to successfully commercialize TYMLOS, our first and currently only approved product, is critical to the execution of our business strategy. TYMLOS may not maintain market acceptance in the United States, or in any international markets where it may subsequently be approved, among physicians, patients, and third-party payors, and may not be or remain commercially successful. The degree of market acceptance and commercial success of TYMLOS will depend on a number of factors, including the following:
the acceptance of TYMLOS by patients and the medical community and the availability, perceived advantages and relative cost, safety and efficacy of alternative and competing treatments;
the cost-effectiveness of TYMLOS, availability and level of coverage and reimbursement by third-party payors, including state and federal governments, pharmacy benefit managers and health insurance plans, the willingness and ability of patients to pay for TYMLOS, and the commensurate discounts, price concessions or rebates required to secure coverage and reimbursement by third-party payors;
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the effectiveness of our marketing, sales, and distribution strategy and efforts and the degree to which the approved labeling supports promotional initiatives for commercial success;
the occurrence of any side effects, adverse reactions or misuse, or any unfavorable publicity in these areas;
the ability of our third-party manufacturer(s) to manufacture commercial supplies of TYMLOS at acceptable costs, to remain in good standing with regulatory agencies, and to develop, validate and maintain commercially viable manufacturing processes that are, to the extent required, compliant with current good manufacturing practice regulations;
our ability to remain compliant with laws and regulations that apply to us and our commercial activities;
our ability to comply with changes in legislation or regulations in state or federal government programs that increase manufacturer financial obligations;
our ability to obtain marketing approvals from foreign regulatory authorities, where and as applicable;
FDA-mandated package inserts or labeling requirements;
the actual market size for TYMLOS, which may be different than expected;
the sufficiency of our drug supply to meet commercial and clinical demands which could be negatively impacted if our projections regarding the potential number of patients are inaccurate, we are subject to unanticipated regulatory requirements, our current drug supply is destroyed or negatively impacted at our manufacturing sites, storage sites or in transit, or any significant portion of our TYMLOS supply expires before we are able to sell it; and
our ability to maintain, enforce and defend third-party challenges to our intellectual property rights in and to TYMLOS.
We may experience fluctuations in sales of TYMLOS from period to period and, ultimately, we may never generate sufficient revenues from TYMLOS to reach or maintain profitability or sustain our anticipated levels of operations. Any inability on our part to continue to successfully commercialize TYMLOS in the United States and any international markets where it may subsequently be approved, or any significant delay, could have a material adverse impact on our ability to execute upon our business strategy.
Our current and future product candidates may never receive regulatory approval.
Other than TYMLOS, we have no drug products for sale and may never be able to develop additional approved and marketable drug products. The research, testing, manufacturing, labeling, approval, sale, marketing and distribution of drug products are subject to extensive regulation by the FDA in the United States and by comparable foreign regulatory authorities. We cannot assure you that we will receive the approvals necessary to commercialize any additional product candidates, including any product candidates we are currently developing or may acquire or develop in the future.
Obtaining approval of a product candidate is an extensive, lengthy, expensive and uncertain process, and may be delayed, limited or denied for many reasons, including:
we may not be able to demonstrate that the product candidate is safe and effective to the satisfaction of the FDA or comparable foreign regulatory authorities;
the results of our clinical studies may not meet the level of statistical or clinical significance required for marketing approval;
the FDA or comparable foreign regulatory authorities may disagree with the number, design, size, conduct or implementation of our clinical studies;
we may be unable to demonstrate that the product candidate’s clinical and other benefits outweigh its safety risks;
the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from our preclinical studies and clinical studies or may require that we conduct additional studies;
the FDA may not accept clinical data from clinical trials conducted by individual investigators or in countries where the standard of care is potentially different from the United States; and
the FDA or comparable foreign regulatory authorities may identify deficiencies in the manufacturing processes or facilities of our third-party manufacturers.
In addition, the FDA or foreign regulatory authorities may change their approval policies or adopt new regulations or guidance.
We have a global pharmacovigilance agreement with Teijin Limited, or Teijin, a Japanese pharmaceutical company, that provides for the exchange of information related to serious and non-serious adverse reactions to abaloparatide. The purpose of the agreement is to enable safety reporting to global health agencies. Teijin is conducting a Phase 3 clinical trial of abaloparatide-SC in Japan for the treatment of postmenopausal osteoporosis. Should Teijin advise us in accordance with our agreement of a serious adverse event experienced by patients enrolled in their study, we would need to report the serious adverse event to the FDA, which could adversely affect or delay our ability to maintain or obtain regulatory approval in the United States.
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The approval process may also be delayed by changes in government regulation, future legislation or administrative action or changes in policy or guidance that occur prior to or during the FDA or comparable foreign regulatory authority’s review. Delays in obtaining regulatory approvals may prevent us from commercializing our product candidates.
We may never receive approval for, or commercialize, our products outside of the United States.
Approval procedures vary among countries and can involve additional product testing and additional administrative review periods. The time required to obtain approval in other countries might differ from that required to obtain FDA approval. The regulatory approval process in other countries may include additional risks not detailed in these Risk Factors. Regulatory approval in one country does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one country may have a negative effect on the regulatory process in others.
Any collaboration arrangements that we may enter into in the future may not be successful, which could adversely affect our ability to develop and commercialize our product candidates.
The continued development and commercialization of our product candidates will require substantial cash to fund expenses. For some of our product candidates, we may decide to collaborate with pharmaceutical and biotechnology companies for the development and potential commercialization of those product candidates. We will face significant competition in seeking appropriate collaborators and/or partners. Moreover, licensing arrangements are complex and time consuming to negotiate, document and implement. We may not be successful in our efforts to establish and implement such arrangements should we so choose to enter into such arrangements.
The terms of any collaborations or other arrangements that we may establish may not be favorable to us. If that were to occur or if we are not successful in entering into collaborations or other arrangements, we may have to curtail the development of a particular product candidate, reduce or delay its development program or one or more of our other development programs, delay its potential commercialization or reduce the scope of our sales or marketing activities, or increase our expenditures and undertake development or commercialization activities at our own expense. If we elect to increase our expenditures to fund development or commercialization activities on our own, we may need to obtain additional capital, which may require us to divert capital from our other business strategies and initiatives, or may not be available to us at all. If we do not have sufficient funds, we will not be able to bring our product candidates to market and generate additional product revenue.
Any future collaborations or other arrangement that we enter into may not be successful. The success of our collaboration or other arrangements will depend heavily on the efforts and activities of our future collaborators and/or partners. Collaborators and/or partners generally have significant discretion in determining the efforts and resources that they will apply to these collaborations or other arrangements. If a collaborator or partner fails to provide sufficient effort and resources to a development program, we may not realize the full potential or intended benefit of the collaboration or arrangement, and the development program may be delayed or curtailed.
Pre-clinical studies and clinical trials are very expensive, time-consuming and difficult to design and implement.
Pre-clinical studies and human clinical trials are very time consuming, expensive and difficult to design and implement, in part because they are subject to rigorous regulatory requirements. Furthermore, failure can occur at any stage of the trials. The commencement and completion of pre-clinical studies and clinical trials may be delayed by several factors, including:
changes in government regulation or guidance with respect to pre-clinical studies or clinical trials that change the requirements for approval, including the size of any such trials;
unforeseen safety issues or lack of effectiveness during clinical trials;
unforeseen issues with drug supply, including batch failures and other supply chain issues;
actions, or failures to act, by clinical research organizations or other organizations contracted to perform services for pre-clinical studies or clinical trials;
slower than expected rates of patient recruitment and enrollment in the overall population or other prespecified populations;
failure of sites to comply with requirements for conducting clinical trials;
inability to monitor patients adequately during or after treatment; and
inability or unwillingness of medical investigators to follow our clinical protocols.
There can be no assurance that Phase 1, Phase 2 or Phase 3 testing will be completed successfully within any specified period of time, if at all. For example, delays in subject enrollment or interruptions in clinical trial supplies or investigational product may significantly extend a trial past its anticipated end date. In addition, we, the FDA, or other equivalent regulatory authorities and ethics committees with jurisdiction over our studies may suspend our clinical trials at any time if it appears that we are exposing participants to unacceptable health risks or if the FDA or foreign regulatory authorities find deficiencies in our regulatory submissions or the conduct of these trials. Therefore, we cannot predict with any certainty the schedule for existing
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or future clinical trials. Any such unexpected expenses or delays in our clinical trials could increase our need for additional capital, which may not be available on favorable terms or at all.
We have sold or licensed our oncology assets; however there can be no assurance that those or other transactions will yield additional value for stockholders.
During 2020, we executed on our strategic goal to divest our oncology assets by entering into an exclusive license agreement with Berlin-Chemie AG – Menarini Group (“Berlin-Chemie”) for elacestrant and selling RAD140 to Ellipses Pharma (“Ellipses”). While both the Berlin-Chemie and Ellipses transactions provided for certain upfront payments, much of the consideration payable to us is in the form of development and sales milestones and royalties. There can be no assurances that we, Berlin-Chemie or Ellipses will be able to meet the conditions necessary for such milestones or royalties to be paid. Further, under our license agreement with Berlin-Chemie we retained certain ongoing obligations with respect to elacestrant, which may be time-consuming, distracting to management and disruptive to our business operations, and if we are unable to effectively manage the process, our business, financial condition, and results of operations could be adversely affected.
Any strategic acquisition or divestment decision involves risks and uncertainties, and we cannot guarantee that any completed or potential transaction or other strategic option, if identified, evaluated and consummated, will provide greater value to our stockholders than that reflected in our current stock price. The success of any completed or potential transaction would be dependent upon a number of factors that may be beyond our control, including, among other factors, market conditions, industry trends and the interest of third parties in our assets, which may be in the early stages of clinical development.
Any uncertainties related to consummating any future transaction may result in the loss of potential business opportunities and may make it more difficult for us to attract and retain qualified personnel and business partners.
The results of clinical trials may not support our product candidate claims.
Even if our clinical trials are completed as planned, we cannot be certain that the results will support regulatory approval of our product candidates. Success in preclinical testing and early clinical trials does not ensure that later clinical trials will be successful, and we cannot be sure that the results of later clinical trials will replicate the results of prior clinical trials and preclinical testing. The clinical trial process may fail to demonstrate that our product candidates are safe for humans and effective for proposed uses. This failure would cause us to abandon a product candidate and may delay development of other product candidates. Any delay in, or termination of, our clinical trials will delay the submission of our NDAs to the FDA or equivalent applications to foreign regulatory authorities and, ultimately, our ability to commercialize our product candidates and generate product revenues. In addition, our clinical trials to date have generally involved small patient populations. Because of the small sample sizes, the results of these clinical trials may not be indicative of future results.
In addition, third parties could conduct clinical trials using the product candidates we license. We would have no control over how these trials are conducted and the results could potentially contradict the results we have obtained, or will obtain, from the clinical trials we conduct.
If serious adverse or undesirable side effects are identified during the development or commercialization of our product candidates, we may need to abandon our development or commercialization of some of our product candidates or products.
Undesirable side effects caused by our product candidates could cause us, regulatory authorities, and/or ethics committees to interrupt, delay or halt clinical trials and could result in a more restrictive label or cause the delay or denial of regulatory approval by the FDA or other comparable foreign authorities. If our product candidates result in undesirable side effects or have characteristics that are unexpected, we may need to abandon their development. Drug-related side effects could affect patient recruitment or the ability of enrolled patients to complete the trial or result in potential product liability claims. Any of these occurrences may harm our business, financial condition and prospects significantly.
Additionally, if we or others later identify undesirable side effects caused by TYMLOS or any product candidate that may receive marketing approval, a number of potentially significant negative consequences could result, including:
regulatory authorities may withdraw approvals of such product;
regulatory authorities may require additional warnings on the label;
regulatory authorities may require us to adopt a Risk Evaluation and Mitigation Strategy, or REMS;
regulatory authorities may require us to conduct additional post-market studies, including clinical studies, to assess the safety of the product;
we could be sued and held liable for harm caused to patients; and
our reputation may suffer.
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Any of these events could prevent us from achieving or maintaining market acceptance of the particular product or product candidate and could significantly harm our business, results of operations and prospects.
Any product candidate for which we have or obtain marketing approval, including TYMLOS, is subject to restrictions or potential withdrawal from the market and we may be subject to penalties if we fail to comply with regulatory requirements or if we experience unanticipated problems with our products, when and if any of them are approved.
TYMLOS and any product candidate for which we have or obtain marketing approval is subject to continuing requirements of and review by the FDA and foreign regulatory authorities. These requirements include submissions of safety and other post-marketing information and reports, registration and listing requirements, cGMP requirements relating to quality control, quality assurance and corresponding maintenance of records and documents, and requirements regarding the distribution of drug products, including drug samples to physicians and recordkeeping. Marketing approval of TYMLOS and any product candidate for which we obtain marketing approval may be subject to limitations on the indicated uses for which the product candidate may be marketed or to the conditions of approval, or contain requirements for costly post-marketing testing and surveillance to monitor the safety and/or efficacy of the product.
The FDA closely regulates the post-approval marketing and promotion of drugs to ensure drugs are marketed only for the approved indications and in accordance with the provisions of the approved labeling. The FDA imposes stringent restrictions on manufacturers’ communications regarding off-label use and, if we market TYMLOS or any of our product candidates which may be approved for other than their approved indications, we may be subject to enforcement action for off-label marketing.
In addition, later discovery of previously unknown problems with our products, manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may yield various results, including:
restrictions on the marketing or manufacturing of a product, withdrawal of a product from the market, or voluntary or mandatory product recalls;
restrictions on the labeling of a product;
requirements to conduct post-marketing clinical trials;
fines, warning or untitled letters or hold on clinical trials;
refusal to approve pending applications or supplements to approved applications that we submit;
suspension or withdrawal of marketing approvals;
refusal to permit the import or export of our products;
product seizure; or
injunctions or the imposition of civil or criminal penalties.
In addition, the FDA’s policies may change and additional government regulations may be enacted that could prevent, limit, or delay regulatory approval of our product 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 are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained and we may not achieve or sustain profitability, which would adversely affect our business.
The commercial success of TYMLOS and any product candidates that we may develop and that may be approved will depend upon the degree of market acceptance by regulators, key opinion leaders, physicians, patients, third-party payors and others in the medical community.
Even if the FDA or foreign regulatory authorities approve one or more of our product candidates, physicians may not prescribe our products and patients may not use them. Acceptance and use of any of our products will depend upon a number of factors including:
perceptions by members of the healthcare community, including physicians and key opinion leaders, about the safety and effectiveness of our drug;
the approved indicated uses for our product;
cost-effectiveness of our product relative to competing products;
availability and level of coverage and reimbursement by third-party payors, including state and federal governments, pharmacy benefit managers and health insurance plans, the willingness and ability of patients to pay for TYMLOS, and the commensurate discounts, price concessions or rebates required to secure coverage and reimbursement by third-party payors; and
effectiveness of marketing and distribution efforts by us and our licensees and distributors, if any.
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If any product candidate is approved but does not achieve or maintain an adequate level of acceptance by physicians, hospitals, healthcare payors and patients, we may not generate sufficient revenue from these products and we may not become or remain profitable, which would have a material adverse effect on our business.
Our ability to successfully commercialize products depends in part on the extent to which coverage and reimbursement for the costs of our products and related treatments will be available in the United States and worldwide from government authorities and health benefit programs, private health insurers and other organizations.
Our ability to continue to successfully commercialize TYMLOS or any of our product candidates, if approved, will depend in large part on the scope of coverage and amount of reimbursement by third-party payors. Government authorities and third-party payors, such as private health plans, decide which drugs they will cover and establish reimbursement levels. Coverage and reimbursement may vary among third-party payors. Coverage may not be available, and reimbursement may not be adequate, for our current and any future products that we may develop and commercialize. Also, coverage and reimbursement policies may reduce the demand for, or the price paid for, our products. Patients who are prescribed medications for the treatment of their conditions, and their prescribing physicians, generally rely on third-party payors to reimburse all or part of the costs associated with their prescription drugs. Patients are unlikely to use our or our partners’ products unless coverage is provided, and reimbursement is adequate to cover a significant portion of the cost of such products. Third-party payors may limit coverage or impose conditions on coverage. A third-party payor’s decision to provide coverage for a drug product does not imply that an adequate reimbursement rate will apply or patient copayment will be at an acceptable level. In addition, pharmaceutical manufacturers are required by law to offer certain purchasers discounts and rebates and often also need to offer third party payors discounts or rebates on the cost of drugs dispensed to the payors’ members in order to increase the possibility of favorable coverage and adequate cost sharing thresholds for patients. We may be required to provide such rebates to some third-party payors in relation to our product(s). Adequate third-party reimbursement, taking into account such rebates as applicable, may not be available and we may not be able to maintain price levels sufficient to realize an appropriate profit, including a return on our investment in product development. See “Government Regulation-Pricing and Reimbursement”.
We expect to experience pricing pressures in connection with the sale of our current and future products due to the healthcare reforms discussed below, the trend toward initiatives aimed at reducing healthcare costs, the increasing influence of managed care, the scrutiny of pharmaceutical pricing, the ongoing debates on reducing government spending and additional legislative proposals. There has been significant scrutiny of pharmaceutical pricing and the resulting costs of pharmaceutical products that could cause significant operational and reimbursement changes for the pharmaceutical industry. There have been a number of federal and state efforts to address drug costs, which generally have focused on increasing transparency around drug costs or limiting drug prices, price increases or other related costs. Healthcare reform efforts or any future legislation or regulatory actions aimed at controlling and reducing healthcare costs, including through measures designed to limit reimbursement, restrict access or impose unfavorable pricing modifications on pharmaceutical products, could impact our ability to obtain or maintain reimbursement for our products at satisfactory levels, or at all, which could materially harm our business and financial results.
Decisions in the European Union on pricing and reimbursement of medicinal products are based upon national rules subject to the control of the Transparency Directive, which aims to ensure the transparency measures established by EU countries to control the pricing and reimbursement of medicinal products. The Transparency Directive defines a series of procedural requirements designed to verify that national pricing and reimbursement decisions do not create obstacles to the pharmaceutical trade within the EU’s Internal Market. The competent authorities of each of the EU Member States have adopted individual policies and rules regulating the pricing and reimbursement of medicinal products in their territory. These national measures controlling pricing and reimbursement often vary widely in nature, scope and application. However, a major element that they have in common is an increased move toward reduction in the reimbursement price of medicinal products, a reduction in the number and type of products selected for reimbursement, and an increased preference for generic products over innovative products. These efforts have mostly been executed through these countries’ existing price-control methodologies, including price cuts, mandatory rebates, value-based pricing, and reference pricing (i.e., referencing prices in other countries and using those reference prices to set a price). It is increasingly common in many EU Member States for Marketing Authorization Holders to be required, in order to obtain support for reimbursement under national health systems and, therefore, practical access to the market to demonstrate the cost-effectiveness or added value benefit of their products as compared to products (which are considered as standard of care) already subject to pricing and reimbursement in specific countries. In order for drugs to be evaluated positively under such criteria, pharmaceutical companies may need to re-examine, and consider altering, a number of traditional functions relating to the selection, study, and management of drugs, whether currently marketed, under development, or being evaluated as candidates for research and/or development.
Future legislation, including the current versions being considered at the federal and state level in the United States and at the national level in EU Member States, or regulatory actions implementing recent or future legislation may have a significant
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effect on our business. If government and other healthcare payors do not provide adequate coverage and reimbursement levels for TYMLOS or our product candidates, once approved, market acceptance of our products could be reduced. In addition, negotiating prices with government authorities under current and proposed legislation can delay the commercialization of our product candidates.
We may expend resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success.
We narrowly focus on research programs and product candidates that we identify for specific indications. As a result, we may forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and future research and development programs and product candidates for specific indications may not yield any commercially viable products. If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate.
If we experience delays in the enrollment of patients in our clinical trials, our clinical trials and receipt of necessary regulatory approvals could be delayed or prevented.
We may not be able to initiate or continue clinical trials for some of our product candidates if we are unable to locate and enroll a sufficient number of eligible patients to participate in these trials as required by the FDA or foreign regulatory authorities. In addition, many of our competitors have ongoing clinical trials for product candidates that could be competitive with our product candidates, and patients who would otherwise be eligible for our clinical trials may instead enroll in clinical trials of our competitors’ product candidates. In addition, our ability to enroll patients may be significantly delayed by the evolving COVID-19 pandemic and we do not know the extent and scope of such delays at this point.
Enrollment delays in our clinical trials may result in increased development costs for our product candidates, which would cause the value of our company to decline and limit our ability to obtain additional financing.
The ongoing COVID-19 pandemic is having and is expected to continue to have an adverse impact on our business, financial condition and results of operations, including our commercial operations and sales, clinical trials, preclinical studies, and employees.
Since December 2019, a novel strain of coronavirus, SARS-CoV-2, which causes coronavirus disease 2019 (COVID-19), has spread worldwide, including the United States. The COVID-19 pandemic is evolving, and to date has led to the implementation of various responses, including government-imposed quarantines, travel restrictions and other public health safety measures.
In response to the spread of SARS-CoV-2 and COVID-19, in March 2020, we closed our administrative offices. Our employees continue to work remotely and will continue to do so indefinitely. We have selectively resumed in-person interactions by our customer-facing personnel in compliance with local and state restrictions. We also continue to engage with customers virtually as we seek to continue to support healthcare professionals and patient care. However, our ability to engage in personal interactions with physicians and customers remains limited, and it is unknown when in-person interactions will be fully resumed.
We continue to monitor our operations and applicable government recommendations, and we have made modifications to our normal operations because of the COVID-19 pandemic, including requiring most employees to work remotely. Notwithstanding these measures, the COVID-19 pandemic could affect the health and availability of our workforce as well as those of the third parties we rely on taking similar measures. If members of our management and other key personnel in critical functions across our organization are unable to perform their duties or have limited availability due to COVID-19, we may not be able to execute on our business strategy and/or our operations may be negatively impacted.
Business interruptions from the current COVID-19, or a future, pandemic may also adversely impact the third parties we solely rely on to sufficiently manufacture TYMLOS and to produce our product candidates in quantities we require, which may adversely impact the commercialization of TYMLOS and our research and development activities and potential commercialization of our product candidates.
Many of the regions in which we operate are currently being, or may in the future be, affected by the COVID-19 pandemic. We are following health authority guidance regarding missed study visits and procedures. Some factors from the COVID-19 outbreak that may delay or otherwise further adversely affect enrollment in the clinical trials of our product candidates, as well as adversely impact our business generally, include:
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delays or difficulties in enrolling and retaining patients in our clinical trials;
delays or difficulties in patient and site adherence to all protocol-specified procedures;
diversion of healthcare resources away from the conduct of clinical trials to focus on pandemic concerns;
limitations on travel that could interrupt key trial activities, such as clinical trial site initiations and monitoring, domestic and international travel by employees, contractors or patients to clinical trial sites, including any government-imposed travel restrictions or quarantines that may impact the ability or willingness of patients, employees or contractors to travel to our clinical trial sites or secure visas or entry permissions, any of which could delay or adversely impact the conduct or progress of our clinical trials;
potential interruption or delays in the operations of the FDA and comparable foreign regulatory authorities, or independent review boards or ethics committees, which may impact review and approval timelines;
potential interruption of, or delays in receiving, supplies of our product candidates from our contract manufacturing organizations due to staffing shortages, production slowdowns or stoppages and disruptions in delivery systems; or in the clinical trial sites’ ability to maintain continuous supply of product candidates to patients;
longer payment and reimbursement cycles and uncertainties regarding the collectability of accounts receivable; and
business disruptions caused by potential workplace, laboratory and office closures and an increased reliance on employees working from home, disruptions to or delays in ongoing laboratory experiments and operations, staffing shortages, travel imitations or mass transit disruptions, any of which could adversely impact our business operations or delay necessary interactions with local regulators, ethics committees and other important agencies and contractors.
These and other factors arising from the COVID-19 pandemic could worsen in countries that are afflicted with COVID-19, could continue to spread to additional countries, or could return to countries where the pandemic has been partially contained, each of which could further adversely impact our ability to conduct clinical trials and our business generally, and could have a material adverse impact on our operations and financial condition and results. In addition, the trading prices for our common stock and other biopharmaceutical companies have been, and will likely continue to be, highly volatile as a result of the COVID-19 pandemic, and may limit our ability to raise additional capital.
The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition will depend on future developments that are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning COVID-19, the actions taken to contain it or treat its impact and the economic impact on local, regional, and national markets.
Any product candidates we develop that incorporate CBD will be subject to U.S. controlled substance laws and regulations and failure to comply with these laws and regulations, or the cost of compliance with these laws and regulations, may adversely affect the results of our business operations, both during clinical development and post approval, and our financial condition.
We have acquired certain assets related to formulations of CBD related to the oral administration of a solution of CBD for therapeutic use in humans or animals. CBD as an ingredient in a prescription drug product has been classified as a controlled substance as defined in the federal Controlled Substances Act of 1970 (“CSA”). Controlled substances are subject to a high degree of regulation under the CSA, which establishes, among other things, certain registration, manufacturing quotas, security, recordkeeping, reporting, import, export and other requirements administered by the federal Drug Enforcement Agency (“DEA”). The DEA classifies controlled substances into five schedules: Schedule I, II, III, IV or V substances. Schedule I substances by definition have a high potential for abuse, have no currently “accepted medical use” in the United States, lack accepted safety for use under medical supervision, and may not be prescribed, marketed or sold in the United States. Pharmaceutical products approved for use in the United States may be listed as Schedule II, III, IV or V, with Schedule II substances considered to present the highest potential for abuse or dependence and Schedule V substances the lowest relative risk of abuse among such substances. To date, the only FDA-approved prescription drug with CBD as an active ingredient has been listed as Schedule V.
If and when any of our product candidates receive FDA approval, the DEA will make a scheduling determination. If the FDA or any comparable foreign regulatory authority determines that our product candidate may have potential for abuse, it may require us to generate more clinical or other data than we currently anticipate.
Facilities conducting research, manufacturing, distributing, importing or exporting, or dispensing controlled substances must be registered (licensed) to perform these activities and have the security, control, recordkeeping, reporting and inventory mechanisms required by the DEA to prevent drug loss and diversion. All these facilities must renew their registrations annually, except dispensing facilities, which must renew every three years. The DEA conducts periodic inspections of certain registered establishments that handle controlled substances. Obtaining the necessary registrations may result in delay of the importation, manufacturing or distribution of any CBD-based drug candidates we may develop.
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The states also maintain separate controlled substance laws and regulations, including licensing, recordkeeping, security, distribution, and dispensing requirements. State authorities, including Boards of Pharmacy, regulate use of controlled substances in each state. Failure to maintain compliance with applicable requirements, particularly as manifested in the loss or diversion of controlled substances, can result in enforcement action that could have a material adverse effect on our business, operations and financial condition. The DEA may seek civil penalties, refuse to renew necessary registrations, or initiate proceedings to revoke those registrations.
Risks Related to Our Dependence on Third Parties
Our drug development programs depend upon third-party researchers, investigators and collaborators who are outside our control.
We depend upon independent researchers, investigators and collaborators, to conduct our preclinical studies and clinical trials under agreements with us. These third parties are not our employees and we cannot control the amount or timing of resources that they devote to our programs. We and our third-party researchers, investigators and collaborators are required to comply with good clinical practice, or GCP, requirements, which are regulations and guidelines enforced by the FDA, the Competent Authorities of the Member States of the European Economic Area, or EEA, and comparable foreign regulatory authorities for all of our products in clinical development. Regulatory authorities enforce these GCPs through periodic inspections of trial sponsors, principal investigators and trial sites. If we or any of these third parties fail to comply with applicable GCPs, the clinical data generated in our clinical trials may be deemed unreliable and the FDA, EMA or other comparable foreign regulatory authorities may require us to perform additional clinical trials before approving our marketing applications or require a more restrictive label for the product. We cannot assure you that upon inspection by a given regulatory authority, such regulatory authority will determine that any of our clinical trials comply with GCP regulations. In addition, our clinical trials must be conducted with product produced under cGMP regulations. Our or our contract manufacturers’ failure to comply with these regulations may delay ongoing or planned clinical trials or require us to repeat clinical trials, which would delay the regulatory approval process. Failure by us or by third parties we engage to comply with regulatory requirements can also result in fines, adverse publicity, and civil and criminal sanctions. Moreover, our business may be implicated if any of these third parties violates federal or state fraud and abuse or false claims laws and regulations or healthcare privacy and security laws. If outside collaborators fail to devote sufficient time and resources to our drug-development programs, or if their performance is substandard, the approval of our FDA or foreign regulatory authority applications, if any, and our introduction of new drugs, if any, will be delayed. These collaborators may also have relationships with other commercial entities, some of whom may compete with us. If our collaborators assist competitors at our expense, our competitive position would be harmed.
We currently rely on third parties to manufacture TYMLOS and to produce our product candidates; our dependence on these parties, including any inability on our part to accurately anticipate product demand and timely secure manufacturing capacity to meet commercial or clinical product demand may impair the commercialization of TYMLOS and the research and development activities and potential commercialization of our product candidates.
We have no experience in drug formulation or manufacturing and do not intend to establish our own manufacturing facilities. We lack the resources and expertise to internally formulate or manufacture TYMLOS or our product candidates in the quantities needed to meet commercial demand for TYMLOS, or to internally conduct our research and development activities and clinical trials for our product candidates. Therefore, we rely on, and expect to continue relying on for the foreseeable future, a limited number of third parties to manufacture and supply materials (including raw materials and subunits), drug substance, or API, and drug product, as well as to perform additional steps in the manufacturing process, such as filling, labeling, and storage of TYMLOS and our product candidates.
We have entered into agreements with contract manufacturers to manufacture TYMLOS in the quantities needed to meet commercial demand and our product candidates for use in research and development activities and clinical trials. These contract manufacturers are currently our only source for the production and formulation of TYMLOS and our product candidates. If our contract manufacturers are unable to produce, in a timely manner, adequate supplies of TYMLOS or our product candidates to meet our needs, we would be required to seek new contract manufacturers that may require us to modify our finished product formulation and modify or terminate our clinical studies. Any modification of our finished product or modification or termination of our clinical studies could adversely affect the commercial potential of TYMLOS or any product candidate that may be approved and impair our ability to obtain necessary regulatory approvals, which would materially harm our business and impair our ability to raise capital.
In addition, the facilities and processes and controls used by our contract manufacturers to manufacture TYMLOS and our product candidates must be approved by the EMA and by the FDA pursuant to inspections that will be conducted following our regulatory approval submissions. We do not control the facilities or manufacturing process and are completely dependent on our contract manufacturing partners for compliance with cGMPs for manufacture of both active drug substances and finished drug products. If our contract manufacturers cannot successfully manufacture material that conforms to our specifications and
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the strict regulatory requirements of the FDA or other regulatory authorities, they will not be able to secure and/or maintain regulatory approval for their manufacturing facilities. In addition, we have no control over the ability of our contract manufacturers to maintain adequate quality control, quality assurance and qualified personnel. If the FDA or a comparable foreign regulatory authority does not approve our contract manufacturers for the manufacture of our product candidates or if they withdraw any such approval in the future, we may need to find alternative manufacturing facilities, which would significantly impact our ability to develop, obtain regulatory approval for or market, with respect to TYMLOS, or for our product candidates, if approved.
We depend on a number of single source contract manufacturers to supply key components of abaloparatide. For example, we depend on PPL, which has agreed to produce supplies of abaloparatide API to support the abaloparatide-SC and abaloparatide-TD clinical studies and the commercial supplies of TYMLOS. We also depend on Vetter and Ypsomed for the production of finished drug product clinical and commercial supplies of TYMLOS, Kindeva for the production of abaloparatide-TD. If our relationship with any of these contract manufacturers is terminated, or if they are unable to produce abaloparatide or related components in required quantities, on a timely basis or at all, and/or in compliance with the terms of our agreements, our business and financial condition would be materially harmed. Because the manufacturing process for abaloparatide-TD requires the use of Kindeva's proprietary technology, Kindeva is the sole source for supplies of abaloparatide-TD.
Our anticipated future reliance on a limited number of third-party manufacturers exposes us to the following risks:
We may be unable to identify manufacturers on acceptable terms, or at all, because the number of potential manufacturers is limited and the FDA must inspect any manufacturers for cGMP compliance as part of our application.
A new manufacturer would have to be educated in, or develop substantially equivalent processes for, production of our products after receipt of FDA approval, if any.
Our third-party manufacturers might be unable to formulate and manufacture our drugs or related components in the volume and of the quality required to meet our clinical needs and commercial needs.
Our contract manufacturers may not perform as agreed or may not remain in the contract manufacturing business for the time required.
Manufacturers are subject to ongoing periodic unannounced inspection by the FDA and corresponding state agencies to ensure strict compliance with cGMP, and other government regulations and corresponding foreign standards, and we do not have control over third-party manufacturers’ compliance with these regulations and standards.
We may not own, or may have to share, the intellectual property rights to any improvements made by our third-party manufacturers in the manufacturing process for our product candidates.
Our third-party manufacturers may be subject to litigation or arbitration with respect to the manufacturing and supply of our products, including claims of intellectual property infringement by third parties.
Each of these risks could delay our clinical trials, the approval of our product candidates by the FDA or foreign regulatory authorities or the commercialization of TYMLOS or any of our product candidates that may be approved or result in higher costs or deprive us of potential product revenues.
We have entered into, and in the future may enter into, licenses and/or collaborations with third parties for the development and commercialization of our product candidates. If those licenses and/or collaborations, are not successful, we may not be able to capitalize on the market potential of these product candidates.
We have in the past, currently have, and may in the future, seek third-party licensees and/or collaborators for the development and commercialization of some of our product candidates on a selective basis. Our likely licensees and/or collaborators for any arrangements include large and mid-size pharmaceutical companies, regional and national pharmaceutical companies and biotechnology companies.
To the extent we have, and if we do enter into any further such arrangements with any third parties, we will likely have limited control over the amount and timing of resources that our licensees and/or collaborators dedicate to the development or commercialization of our product candidates. Our ability to generate revenues from our license and/or collaboration arrangements will depend on our licensees’ and/or collaborators’ abilities and efforts to successfully perform the functions assigned to them in these arrangements. Licenses and collaborations involving our product candidates would pose numerous risks to us, including the following:
licensees and/or collaborators have significant discretion in determining the efforts and resources that they will apply to these arrangements and may not perform their obligations as expected;
licensees and/or collaborators may deemphasize or not pursue development and commercialization of our product candidates or may elect not to continue or renew development or commercialization programs based on clinical trial results, changes in their strategic focus, including as a result of a sale or disposition of a business unit or development
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function, or available funding or external factors such as an acquisition that diverts resources or creates competing priorities;
licensees and/or collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a product candidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing;
licensees and/or collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our products or product candidates if they believe that competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than ours; license or collaboration arrangements may subject us to exclusivity provisions which could restrict our ability to compete in certain territories, including those licensed to the licensee and/or collaborator;
a licensee or collaborator with marketing and distribution rights to multiple products may not commit sufficient resources to the marketing and distribution of our product relative to other products;
licensees or collaborators may not properly obtain, maintain, defend or enforce our intellectual property rights or may use our proprietary information and intellectual property in such a way as to invite litigation or other intellectual property related proceedings that could jeopardize or invalidate our proprietary information and intellectual property or expose us to potential litigation or other intellectual property related proceedings;
disputes may arise between the licensees and/or collaborators and us that result in the delay or termination of the research, development or commercialization of our products or product candidates or that result in costly litigation or arbitration that diverts management attention and resources;
licenses and/or collaborations may be terminated and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable product candidates;
license and/or collaboration agreements may not lead to development or commercialization of product candidates in the most efficient manner or at all; and
if a licensee or collaborator of ours were to be involved in a business combination, the continued pursuit and emphasis on our product development or commercialization program could be delayed, diminished or terminated.
If our license or collaboration arrangements are not successful, our business, financial condition, results of operations, prospects and development and commercialization efforts may be adversely affected. Any termination or expiration of our license or collaboration agreements could adversely affect us financially or harm our business reputation, development and commercialization efforts.
Risks Related to Marketing and Sale of Our Products
If we are unable to maintain appropriate and effective commercial capabilities on our own or through partnerships or collaborations, we may not be able to continue to successfully commercialize TYMLOS or any of our product candidates or generate product revenue.
We established a sales force to market and sell TYMLOS in the United States to specialists and continue to pursue collaborative arrangements to market and sell abaloparatide-SC outside of the United States. Therefore, our future success depends, in part, on our ability to enter into and maintain collaborative relationships for such capabilities, the collaborators’ or partners’ strategic interest in the products under development and such collaborators’ or partners’ ability to successfully develop, market, and sell any such products.
In addition, our ability to maintain effective commercial, medical affairs, marketing, sales, market access, managerial and other non-technical capabilities will depend on a number of factors, including our ability to:
identify, recruit, hire, train, incentivize and retain commercial and medical affairs personnel, including a sales force with appropriate technical expertise;
train our sales representatives, to deliver clear and compelling messages within the scope of the approved labeling and in accordance with other applicable FDA requirements regarding TYMLOS, or any of our product candidates that may be approved, and to be credible and persuasive in educating physicians on the appropriate situations to consider prescribing as set forth in the approved labeling;
ensure our commercial customer-facing team, including sales, market access, and field logistics professionals, effectively build relationships with their respective customers;
manage a geographically dispersed national commercial customer-facing organization; and
manage our growth and the integration of new personnel.
If we cannot compete successfully against other drug companies, we may not achieve sufficient product revenues and our business will suffer.
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The market for our product candidates is characterized by intense competition and rapid technological advances. TYMLOS and any of our product candidates that may receive FDA or foreign regulatory authority approval will compete with a number of existing and future drugs and therapies developed, manufactured and marketed by others. Existing or future competing products may provide greater therapeutic convenience or clinical or other benefits for a specific indication than our products, or may offer comparable performance at a lower cost. If TYMLOS or any of our potential products fail to capture and maintain market share, we may not achieve sufficient product revenues and our business will suffer.
TYMLOS competes in the U.S. against well-known treatment options, including teriparatide, marketed by Lilly in the U.S. as Forteo. TYMLOS may also face competition from generic or biosimilar versions of teriparatide. The availability of a generic or biosimilar teriparatide on the market would likely exert pricing and reimbursement pressure on the anabolic class in which TYMLOS competes. In order to compete successfully, we will have to demonstrate to patients, physicians and third-party payors that the treatment of postmenopausal women with osteoporosis at high risk of fracture with TYMLOS is worthwhile and is a better alternative to existing or new therapies.
We may also face competition from companies that seek to market generic versions of TYMLOS through an ANDA application.
We face significant competition from many fully integrated pharmaceutical companies and smaller companies that are collaborating with larger pharmaceutical companies, academic institutions, government agencies and other public and private research organizations. Many of these competitors have compounds already approved or in development. In addition, many of these competitors, either alone or together with their collaborative partners, operate larger research and development programs or have substantially greater financial resources than we do, as well as significantly greater experience in:
developing drugs;
undertaking preclinical testing and human clinical trials;
obtaining FDA and other regulatory approvals of drugs;
formulating and manufacturing drugs; and
launching, marketing, distributing, and selling drugs.
Developments by competitors may render our products or technologies obsolete or non-competitive.
The biotechnology and pharmaceutical industries are intensely competitive and subject to rapid and significant technological change. Our product TYMLOS, and our product candidates, if approved, will or may compete against new or existing therapies. In addition, a large number of companies are pursuing the development of pharmaceuticals that target the same diseases and conditions that we are targeting. We face competition from pharmaceutical and biotechnology companies in the United States and abroad. In addition, companies doing business in different but related fields represent substantial competition. Many of these organizations competing with us have substantially greater capital resources, larger research and development staffs and facilities, longer drug development history in obtaining regulatory approvals, and greater manufacturing and marketing capabilities than we do. These organizations also compete with us to attract qualified personnel and parties for acquisitions, joint ventures or other collaborations, and therefore, we may not be able to hire or retain qualified personnel to run all facets of our business. These risks could render our products or technologies obsolete or non-competitive.
We may incur substantial liabilities and may be required to limit commercialization of our products in response to product liability lawsuits.
The testing and marketing of medical products entail an inherent risk of product liability. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit commercialization of our products. Our inability to obtain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims could prevent or inhibit the commercialization of pharmaceutical products we develop, alone or with collaborators.
Risks Related to Our Intellectual Property
If we fail to comply with our obligations in our intellectual property licenses with third parties, we could lose license rights that are important to our business.
We are a party to a number of intellectual property license agreements with third parties and expect to enter into additional license agreements in the future. Our existing license agreements impose, and we expect that any future license agreements will impose, various diligence, milestone payment, royalty, insurance and other obligations on us. If we fail to comply with these obligations, our licensors may have the right to terminate these agreements, in which event we might not be able to develop and market any product that is covered by these agreements. Termination of these licenses or reduction or elimination of our
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licensed rights may result in our having to negotiate new or reinstated licenses with less favorable terms. The occurrence of such events could materially harm our business.
If our efforts to protect our intellectual property related to TYMLOS/abaloparatide-SC, abaloparatide-TD, and/or our other current or future product candidates fail to adequately protect these assets or if we are unable to secure all necessary intellectual property, we may lose the ability to license or successfully commercialize one or more of these products or product candidates.
Our commercial success is significantly dependent on intellectual property related to our portfolio of product and product candidates. We are either the licensee or assignee of numerous issued and pending patent applications that cover various aspects of our assets, including TYMLOS/abaloparatide-SC, abaloparatide-TD, and our other product candidates. We could encounter challenges or difficulties in maintaining and/or defending our intellectual property both in the United States and abroad.
We and Ipsen are also co-assignees to U.S. Patent No. 7,803,770 that we believe provides exclusivity until April 28, 2031 for abaloparatide-SC. We and Ipsen are also co-assignees to U.S. Patent Nos. 8,148,333 and 8,748,382 for the therapeutic formulation for abaloparatide-SC that we believe provides exclusivity until November 8, 2027 and October 3, 2027, respectively.
We and Kindeva are co-assignees to several foreign and corresponding U.S. patents and patent applications, which cover various aspects of abaloparatide for microneedle application. Any issued patents resulting from these applications will have a statutory expiration date of 2036, not taking into account extension under any applicable laws. However, pending patent applications in the United States and elsewhere may not issue since the interpretation of the legal requirements of patentability in view of claimed inventions are not always predictable. Additional intellectual property covering abaloparatide-TD technology exists in the form of proprietary information protected as trade secrets. These can be accidentally disclosed to, independently derived by or misappropriated by competitors, possibly reducing or eliminating the exclusivity advantages of this form of intellectual property, thereby allowing those competitors more rapid entry into the marketplace with a competitive product, which reduces our advantage with abaloparatide-TD. In addition, trade secrets may in some instances become publicly available through required disclosures in regulatory files. Alternatively, competitors may sometimes reverse engineer a product once it becomes available on the market. Even where a competitor does not use an identical technology for the delivery of abaloparatide, it is possible that they could achieve an equivalent or even superior result using another technology. Such occurrences could lead to either one or more alternative competitor products becoming available on the market and/or one or more generic competitor products on the market gaining market share and causing a corresponding decrease in market share and/or price for abaloparatide-TD even if it were to be successfully developed and approved by the FDA.
Since patents are technical legal documents that are frequently subject to intense litigation pressure, there is risk that even if one or more patents related to our products does issue and is asserted that the patent(s) will be found invalid, unenforceable and/or not infringed when subject to said litigation. Finally, the intellectual property laws and practices can vary considerably from one country to another and also can change with time. As a result, we could encounter challenges or difficulties in building, maintaining and defending our intellectual property both in the United States and abroad.
We may become party to, or threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to patents issued or licensed to us, including interference proceedings or post grant or inter partes reviews, reexaminations, or other proceedings before the USPTO. Third parties also may assert infringement claims against us in courts in various jurisdictions. If we are found to infringe a third-party's intellectual property rights, we could be required to obtain a license from such third-party to continue developing and marketing our products and technology. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. We could be forced, including by court order, to cease commercializing the infringing technology or product. In addition, we could be found liable for monetary damages. A finding of infringement could prevent us from commercializing our product candidates or force us to cease some of our business operations, which could materially harm our business. Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar negative impact on our business.
Our trademarks are considered to be material to our business. These trademarks are covered by registrations or pending applications for registration in the U.S. Patent and Trademark Office and in other countries. Trademark protection continues in some countries for as long as the mark is used and, in other countries, for as long as it is registered. Registrations generally are for fixed, but renewable, terms. We cannot assure you that the trademark protection that we have pursued or will pursue in the future will afford us significant commercial protection.
Trade secret protection is available only for trade secrets as defined by applicable laws. Trade secret laws may vary depending upon the jurisdiction and various statutes. Trade secrets do not prevent reverse engineering by competitors. We
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cannot assure you that information that we have sought or will seek to maintain secret is or will be a trade secret under the applicable law or will afford us significant commercial protection.
If we are unable to obtain and maintain patent protection for our technology and products, or if our licensors are unable to obtain and maintain patent protection for the technology or products that we license from them, our competitors could develop and commercialize technology and products similar or identical to ours, and our ability to successfully commercialize our technology and products may be adversely affected.
Our success depends in large part on our and our licensors' ability to obtain and maintain patent protection in the United States and other countries with respect to our proprietary technology and products. In some circumstances, we may not have the right to control the preparation, filing and prosecution of patent applications, or to maintain the patents, covering technology or products that we license from third parties. Therefore, we cannot be certain that these patents and applications will be prosecuted and enforced in a manner consistent with the best interests of our business. In addition, if third parties who license patents to us fail to maintain these patents, or lose rights to those patents, the rights we have licensed may be reduced or eliminated.
The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions and has in recent years been the subject of much litigation. As a result, the issuance, scope, validity, enforceability and commercial value of our and our licensors' patent rights are highly uncertain. Our and our licensors' pending and future patent applications may not result in patents being issued that protect our technology or products or that effectively prevent others from commercializing competitive technologies and products. Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of our patents or narrow the scope of our patent protection. The laws of foreign countries may not protect our rights to the same extent as the laws of the United States. Assuming the other requirements for patentability are met, in the United States, prior to March 16, 2013, the first to make the claimed invention was entitled to the patent, or a "first-to-invent" system, while outside the United States, the first to file a patent application is entitled to the patent, or a "first-to-file" system. With the implementation of the Leahy-Smith America Invents Act, the United States now has a first-to-file system for patent applications filed on or after March 16, 2013. We may become involved in opposition, interference or derivation proceedings challenging our patent rights or the patent rights of others. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. Therefore, we cannot be certain that we or our licensors were the first to make the inventions claimed in our owned and licensed patents or pending patent applications, or that we or our licensors were the first to file for patent protection of such inventions. An adverse determination in any such proceeding could reduce the scope of, or invalidate our patent rights, allow third parties to commercialize our technology or products and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize products without infringing third-party patent rights.
Even if our owned and licensed patent applications issue as patents, they may not issue in a form that will provide us with any meaningful protection, prevent competitors from competing with us or otherwise provide us with any competitive advantage. Our competitors may be able to circumvent our owned or licensed patents by developing similar or alternative technologies or products in a non-infringing manner. The issuance of a patent is not conclusive as to its scope, validity or enforceability, and our owned and licensed patents may be challenged in the courts or patent offices in the United States and abroad. Any challenges may result in patent claims being narrowed, invalidated or held unenforceable, which could limit our ability to stop or prevent us from stopping others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of our technology and products. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are approved or commercialized. As a result, our owned and licensed patents may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.
Of particular concern for a company like ours, having one marketed product, is that third parties may seek to market generic versions of TYMLOS by filing an Abbreviated New Drug Application, or ANDA, with the FDA in which they claim that patents protecting TYMLOS owned or licensed by us and listed with the FDA in what is called "the Orange Book" are invalid, unenforceable and/or not infringed, a so-called Paragraph IV filing. April 28, 2021 is the first opportunity under United States law for a generic company to file an ANDA and make a Paragraph IV filing. If such a filing is made, we may need to defend and/or assert our patents, including by filing lawsuits against the Paragraph IV filer alleging patent infringement. In any of these types of proceedings, a court or other agency with jurisdiction may find our patents invalid, not infringed and/or unenforceable, which would have a material adverse impact on our business and results of operations. During the period in which such litigation is pending, the uncertainty of its outcome may cause investors to disfavor our stock, and our stock price could decline. Even if we are successful in prosecuting such claims, litigation could result in substantial costs and be a distraction to management.
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Patent terms may be inadequate to protect our competitive position on our product candidates for an adequate amount of time.
Patents have a limited lifespan. In the United States, if all maintenance fees are timely paid, the unadjusted or unextended expiration of a patent is generally 20 years from its earliest U.S. non-provisional filing date. Various extensions may be available, but the life of a patent, and the protection it affords, is limited. Even if patents covering our product candidates are obtained, once the patent life has expired for a product candidate, we may be open to competition from competitive medications, including generic medications. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such product candidates might expire before or shortly after such product candidates are commercialized. As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing product candidates similar or identical to ours for a meaningful amount of time, or at all.
The primary composition of matter patent covering TYMLOS in the United States and several additional countries has expired. We own or have licensed rights to a limited number of patents directed toward methods of treating osteoporosis with the therapeutic dose for TYMLOS and for the therapeutic formulation of TYMLOS. We cannot be sure that patents will be granted with respect to any of our pending patent applications for TYMLOS, our other drug candidates, or our research technologies or with respect to any patent applications filed by us in the future; nor can we be sure that any of our existing patents or any patents that may be granted to us in the future will be commercially useful in protecting TYMLOS, our other drug candidates or our other technology.
Payments, fees, submissions and various additional requirements must be met in order for pending patent applications to advance in prosecution and issued patents to be maintained. Rigorous compliance with these requirements is essential to procurement and maintenance of patents integral to our product portfolio.
Periodic maintenance fees, renewal fees, annuity fees and various other governmental fees on patents and/or patent applications will come due for payment periodically throughout the lifecycle of patent applications and issued patents. In order to help ensure that we comply with any required fee payment, documentary and/or procedural requirements as they might relate to any patents for which we are an assignee or co-assignee, we employ competent legal help and related professionals as needed to comply with those requirements. Our outside patent counsel uses third parties for patent annuity payments. Failure to meet a required fee payment, document production or procedural requirement can result in the abandonment of a pending patent application or the lapse of an issued patent. In some instances, the defect can be cured through late compliance but there are situations where the failure to meet the required event cannot be cured. Any failures could compromise the intellectual property protection around our preclinical or clinical candidates and possibly weaken or eliminate our ability to protect our eventual market share for that product.
If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.
In addition to our patented technology and products, we rely on trade secrets, including unpatented know-how, technology and other proprietary information, to maintain our competitive position. We seek to protect these trade secrets, in part, by entering into non-disclosure and confidentiality agreements with parties that have access to our trade secrets, such as our corporate collaborators, outside scientific collaborators, sponsored researchers, contract manufacturers, consultants, advisors and other third parties. We also enter into confidentiality and invention or patent assignment agreements with our employees and consultants. However, any of these parties may breach the agreements and disclose our proprietary information, and we may not be able to obtain adequate remedies for any breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some courts inside and outside the United States are less willing or unwilling to protect trade secrets. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent them from using that technology or information to compete with us. If any of our trade secrets were to be disclosed to, or independently developed by a competitor, our competitive position would be harmed.
If we infringe the rights of third parties, we could be prevented from selling products and could be forced to pay damages and defend against litigation.
If our products, methods, processes and other technologies infringe the proprietary rights of other parties, we could incur substantial costs and may have to:
obtain licenses, which may not be available on commercially reasonable terms, if at all;
abandon an infringing drug candidate;
redesign our products or processes to avoid infringement;
stop using the subject matter claimed in the patents held by others;
pay damages; or
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defend litigation or administrative proceedings which may be costly whether we win or lose, which could result in a substantial diversion of our financial and management resources.
We may become involved in lawsuits to protect or enforce our patents, which could be expensive, time consuming and unsuccessful.
Competitors may infringe our patents or misappropriate our trademarks or trade secrets. To counter infringement, misappropriation, or unauthorized use, we may be required to file proceedings, which can be expensive and time consuming. In addition, in such a proceeding, a court may decide that a patent of ours is invalid and/or unenforceable, confidential information is not a trade secret under the appropriate statute or was not misappropriated, a trademark was not protectable or misappropriated, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in any litigation proceeding could put one or more of our patents or other intellectual property rights at risk, such as by of being invalidated and/or interpreted narrowly. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. In addition, our licensors may have rights to file and prosecute these types of claims, and we may be reliant on them to do so.
We may be subject to claims that our employees have wrongfully used or disclosed alleged trade secrets of their former employers.
Some of our employees were previously employed at universities or other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although we try to ensure that our employees do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or these employees have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such employee's former employer. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management.
Intellectual property litigation could cause us to spend substantial resources and distract our personnel from their normal responsibilities.
Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses and could distract our technical and management personnel from their normal responsibilities, delaying the development of our product candidates. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments, and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock. Litigation or other proceedings could substantially increase our operating losses and reduce our resources available for development activities. We may not have sufficient financial or other resources to adequately conduct any litigation or proceedings. Some of our competitors may be able to sustain the costs of any litigation or proceedings more effectively than we can because of their substantially greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace.
Risks Related to Legislation and Administrative Actions
Healthcare reform may have a material adverse effect on our industry and our results of operations.
In the U.S., federal and state governments continue to propose and pass legislation designed to reform delivery of, or payment for, health care, which include initiatives to reduce the cost of healthcare. For example, in March 2010, the U.S. Congress enacted the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act (the “Healthcare Reform Act”), which expanded health care coverage through Medicaid expansion, implemented the “individual mandate” for health insurance coverage (by imposing a tax penalty on individuals who did not obtain insurance) and changed the coverage and reimbursement of drug products under government healthcare programs. Under the Trump administration, there have been ongoing efforts to modify or repeal all or certain provisions of the Healthcare Reform Act. Tax reform legislation was enacted at the end of 2017 that includes provisions that will affect healthcare insurance coverage and payment, such as the elimination of the tax penalty for individuals who do not maintain sufficient health insurance coverage. The Healthcare Reform Act has also been subject to judicial challenge. The case Texas v. Azar, which challenges the constitutionality of the Healthcare Reform Act, including provisions that are unrelated to healthcare reform but were enacted as part of the Healthcare Reform Act, was argued before the Supreme Court in November 2020. Pending resolution of the litigation, all of the Healthcare Reform Act but the individual mandate to buy health insurance remains in effect.
Beyond the Healthcare Reform Act, there have been ongoing health care reforms efforts, including a number of recent actions. In 2020 and early 2021, the U.S. Department of Health and Human Services issued various rules that affect pricing or
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payment for drug products. For example, effective January, 2022, revisions to the federal anti-kickback statute would remove protection for traditional Medicare Part D discounts offered by pharmaceutical manufacturers to PBMs and health plans. Additional healthcare reform efforts have sought to address certain issues related to the COVID-19 pandemic, including an expansion of telehealth coverage under Medicare and accelerated or advanced Medicare payments to healthcare providers. Some of these changes have been and may continue to be subject to legal challenge. For example, courts temporarily enjoined a new “most favored nation” payment model for select drugs covered under Medicare Part B that was to take effect on January 1, 2021 and would limit payment based on international drug price. The nature and scope of health care reform in the wake of the transition from the Trump administration to the Biden administration remains uncertain. President Biden has temporarily halted implementation of new rules issued immediately prior to the transition that had not yet taken effect (which include a number of health care reforms) to allow for review by the new administration. More generally, President Biden supported reforms to lower drug prices during his campaign for the presidency. Adoption of new healthcare reform legislation at the federal or state level could affect demand for, or pricing of, our products or product candidates if approved for sale. We cannot predict, however, the ultimate content, timing or effect of any healthcare reform legislation or action, or its impact on us, and healthcare reform could increase compliance costs and may adversely affect our future business and financial results.
There have also been efforts by government officials or legislators to implement measures to regulate prices or payment for pharmaceutical products, including legislation on drug importation. Recently, there has been considerable public and government scrutiny of pharmaceutical pricing and proposals to address the perceived high cost of pharmaceuticals. There have also been recent state legislative efforts to address drug costs, which generally have focused on increasing transparency around drug costs or limiting drug prices, including California, Oregon, Vermont, and Nevada. Certain state legislation has been subject to legal challenges. Adoption of new legislation regulating drug pricing at the federal or state level could further affect demand for, or pricing of, our products.
General legislative cost control measures may also affect reimbursement for our products. The Budget Control Act of 2011, as amended, resulted in the imposition of 2% reductions in Medicare (but not Medicaid) payments to providers in 2013 and remains in effect through 2030 (except May 1, 2020 to March 31, 2021) unless additional Congressional action is taken. Any significant spending reductions affecting Medicare, Medicaid or other publicly funded or subsidized health programs that may be implemented and/or any significant taxes or fees that may be imposed on us could have an adverse impact on our results of operations.
The full impact on our business of these laws, or future laws and regulations is uncertain. We cannot predict whether other legislative or administrative changes will be adopted, if any, or how such changes would affect the pharmaceutical industry generally or our business in particular.
We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for our product candidates once approved or additional pricing pressures, and may adversely affect our operating results. Such legislation may also reduce our flexibility in setting prices for our product candidates, or in taking price increases.
We are subject to healthcare laws, regulation and enforcement, and our failure to comply with those laws could have a material adverse effect on our results of operations and financial conditions.
Our business operations and current and future arrangements with investigators, healthcare professionals, consultants, third-party payors, patient organizations and customers, may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations now or in the future. These laws may constrain the business or financial arrangements and relationships through which we conduct our operations, including how we research, market, sell and distribute our product candidates, if approved. Within the U.S., such laws include:
The federal anti-kickback statute makes it illegal for any person or entity to knowingly and willfully, directly or indirectly, solicit, receive, offer, or pay any remuneration that is in exchange for or to induce the referral of business, including the purchase, order, lease of any good, facility, item or service for which payment may be made under a federal healthcare program, such as Medicare or Medicaid. The term “remuneration” has been broadly interpreted to include anything of value.
Federal false claims and false statement laws, including the federal civil False Claims Act, prohibits, among other things, any person or entity from knowingly presenting, or causing to be presented, for payment to, or approval by, federal programs, including Medicare and Medicaid, claims for items or services, including drugs, that are false or fraudulent.
The federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), as amended, which prohibits executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters and which also imposes certain requirements relating to the privacy, security and transmission of individually
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identifiable health information on certain types of entities, which include many healthcare providers and health plans with which we interact;
The Federal Food, Drug, and Cosmetic Act, which among other things, strictly regulates drug product and medical device marketing, prohibits manufacturers from marketing such products prior to approval or for unapproved indications and regulates the distribution of samples;
Federal laws, including the Medicaid Drug Rebate Program, that require pharmaceutical manufacturers to report certain calculated product prices to the government or provide certain discounts or rebates to government authorities or private entities, often as a condition of reimbursement under government healthcare programs; and
The so-called “federal sunshine” law, which requires pharmaceutical and medical device companies to monitor and report certain financial interactions with physicians and teaching hospitals (and additional categories of healthcare practitioners beginning with reports submitted in 2022) to the federal government for re-disclosure to the public.
Also, many states have similar laws and regulations, such as anti-kickback and false claims laws that may be broader in scope and may apply to claims reimbursed by private payors as well as government programs or regardless of reimbursement. Additionally, we may be subject to state laws that require pharmaceutical companies to comply with the federal government’s and/or pharmaceutical industry’s voluntary compliance guidelines, impose specific restrictions on interactions between pharmaceutical companies and healthcare providers or require pharmaceutical companies to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures. Other state laws may require pharmaceutical companies to file reports relating to pricing and marketing information and state and local laws that require the registration of pharmaceutical sales representatives. Finally, there are state laws governing the privacy and security of health information, many of which differ from each other in significant ways and often are not preempted by HIPAA. Many of these laws and regulations also contain ambiguous requirements or require administrative guidance for implementation.
Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs. Given the breadth of the laws and regulations, limited guidance for certain laws and regulations and evolving government interpretations of the laws and regulations, governmental authorities may possibly conclude that our operations and commercial activities in connection with TYMLOS or any product candidate that may be approved may not comply with such laws. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, exclusion from government funded healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of our operations. Further, defending against any such actions can be costly, time-consuming and may require significant personnel resources. Therefore, even if we are successful in defending against any such actions that may be brought against us, our business may be impaired.
We may be exposed to liability claims associated with the use of hazardous materials and chemicals.
Our research and development activities may involve the controlled use of hazardous materials and chemicals. Although we believe that our safety procedures for using, storing, handling and disposing of these materials comply with federal, state and local laws and regulations, we cannot completely eliminate the risk of accidental injury or contamination from these materials. In the event of such an accident, we could be held liable for any resulting damages and any liability could materially adversely affect our business, financial condition and results of operations. In addition, the federal, state and local laws and regulations governing the use, manufacture, storage, handling and disposal of hazardous or radioactive materials and waste products may require us to incur substantial compliance costs that could materially adversely affect our business, financial condition and results of operations.
Recent decisions from the European General Court on public access to clinical trial data held by the EMA could result in disclosure of our pre-clinical and clinical trial data to competitors, or other third parties, which could harm our business, financial condition or results of operations.
In the EU, Regulation 1049/2001/EC, commonly known as the EU Freedom of Information Regulation or Public Access Regulation (the “Transparency Regulation”), allows any EU citizens and any natural or legal persons residing or having their headquarters in an EU country to request access to the documents held by a EU institution on grounds relating to public interest. The Transparency Regulation applies to the EMA, which has implemented the provisions in its established policy. The EMA policy favors public access, subject to certain limited exceptions if disclosure undermines, among others, the protection of commercial interests. The EMA policy has been the subject of a number of recent rulings of the EU General Court in the following cases: Pari Pharma GmbH v EMA (Case T-235/1); MSD Animal Health Innovation and Intervet International v EMA(Case T-729/15); PTC Therapeutics International v EMA (Case T-718/15); Intercept Pharma and Intercept Pharmaceuticals v EMA (Case T-377/18); and Amicus Therapeutics UK and Amicus Therapeutics v EMA (Case T-33/17). These decisions responded to demands for greater transparency and disclosure of pre-clinical and clinical data and validated the EMA’s transparency policy to provide greater public access to information held and documents drawn up by the EMA. These decisions clarified that there is no presumption of confidentiality of documents held by the EMA, that the potential risk of
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misuse of the data by a competitor is not relevant to an assessment of confidentiality under the Transparency Regulation and the argument that data exclusivity or protection in countries outside the EU may be lost due to use of the disclosed documents does not make the data in question confidential. In two of these cases, the rulings of the General Court were appealed to the Court of Justice of the European Union (Cases C-178/18 P - MSD Animal Health Innovation and Intervet International v EMA and C-175/18 P - PTC Therapeutics International v EMA). The Court of Justice upheld the rulings of the General Court and dismissed the appeals.
The potential risk to our business under the Transparency Regulation is significant. For example, our marketing authorisation application for abaloparatide-SC in the EU was reviewed centrally by the EMA and its advisory committees, which application was rejected in January 2019. According to the established EMA policy, the information contained in our marketing authorisation application, responses we provided to the questions raised by the EMA and its advisory committees as well as the assessment reports drawn up by the EMA and its advisory committees were not disclosed during the course of the EMA’s review. However, now that the EMA has completed its review of our marketing application, such information may now be susceptible to disclosure to third parties, including to our competitors, in light of the recent rulings of the General Court and the Court of Justice in relation to the Transparency Regulation. The potential disclosure of such information to third parties, including our competitors, and the potential loss of data exclusivity or protections in countries outside the EU could adversely affect our business, financial condition, operating results and cash flows.
The EMA has also implemented a policy for the proactive publication of clinical data submitted by pharmaceutical companies to support their applications for marketing authorization. The implementation of this policy is currently suspended due to Brexit and the relocation of the EMA to the Netherlands. While, due to this suspension, the clinical data contained in our application for marketing authorization for abaloparatide-SC in the EU was not published, such proactive publication by the EMA cannot be excluded should the implementation of the EMA policy for the proactive publication of clinical data be resumed by the EMA.
We are subject to anti‑corruption laws, as well as export control laws, customs laws, sanctions laws and other laws governing our operations. If we fail to comply with these laws, we could be subject to civil or criminal penalties, other remedial measures and legal expenses, be precluded from developing manufacturing and selling certain products outside the United States or be required to develop and implement costly compliance programs, which could adversely affect our business, results of operations and financial condition.
Our operations are subject to anti‑corruption laws, including the U.S. Foreign Corrupt Practices Act, or FCPA, the U.K. Bribery Act 2010, or Bribery Act, and other anti‑corruption laws that apply in countries where we do business and may do business in the future. The FCPA, Bribery Act and these other laws generally prohibit us, our officers, and our employees and intermediaries from bribing, being bribed or making other prohibited payments to government officials or other persons to obtain or retain business or gain some other business advantage. Compliance with the FCPA, in particular, is expensive and difficult, particularly in countries in which corruption is a recognized problem. In addition, the FCPA presents particular challenges in the pharmaceutical industry, because, in many countries, hospitals are operated by the government, and doctors and other hospital employees are considered foreign officials. Certain payments to hospitals in connection with clinical trials and other work have been deemed to be improper payments to government officials. Our clinical trials are conducted around the world, and our payments to hospitals may lead to FCPA enforcement actions.
Though we currently do not have any partners that commercialize our products in other countries, we may in the future operate in jurisdictions that pose a high risk of potential FCPA or Bribery Act violations, and we may participate in collaborations and relationships with third parties whose actions could potentially subject us to liability under the FCPA, Bribery Act or local anti‑corruption laws. In addition, we cannot predict the nature, scope or effect of future regulatory requirements to which our international operations might be subject or the manner in which existing laws might be administered or interpreted. If we expand our operations outside of the United States, we will need to dedicate additional resources to comply with numerous laws and regulations in each jurisdiction in which we plan to operate.
We are also subject to other laws and regulations governing our international operations, including regulations administered by the governments of the UK and the United States, and authorities in the EU Member States, including applicable export control regulations, economic sanctions on countries and persons, customs requirements and currency exchange regulations, collectively referred to as the Trade Control laws. In addition, various laws, regulations and executive orders also restrict the use and dissemination outside of the United States, or the sharing with certain non‑U.S. nationals, of information classified for national security purposes, as well as certain products and technical data relating to those products. If we expand our presence outside of the United States, it will require us to dedicate additional resources to comply with these laws, and these laws may preclude us from developing, manufacturing, or selling certain products and product candidates outside of the United States, which could limit our growth potential and increase our development costs.
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There is no assurance that we will be completely effective in ensuring our compliance with all applicable anti‑corruption laws, including the FCPA, the Bribery Act or other legal requirements, including Trade Control laws. If we are not in compliance with the FCPA, Bribery Act and other anti‑corruption laws or Trade Control laws, we may be subject to criminal and civil penalties, disgorgement and other sanctions and remedial measures, and legal expenses, which could have an adverse impact on our business, financial condition, results of operations and liquidity. The SEC also may suspend or bar issuers from trading securities on U.S. exchanges for violations of the FCPA’s accounting provisions. Any investigation of any potential violations of the FCPA, the Bribery Act, other anti‑corruption laws or Trade Control laws by U.S., U.K. or other authorities could also have an adverse impact on our reputation, our business, results of operations and financial condition.
We may fail to comply with evolving European Union and other privacy laws, which could adversely affect our business, results of operations and financial condition.
We are subject to the General Data Protection Regulation, (EU) 2016/679, or GDPR, which became effective on May 25, 2018. GDPR deals with the processing of personal data and on the free movement of such data. The GDPR imposes a broad range of strict requirements on companies subject to the GDPR, including requirements relating to having legal bases for processing personal information relating to identifiable individuals and transferring such information outside the EEA, including to the United States, providing details to those individuals regarding the processing of their personal information, keeping personal information secure, having data processing agreements with third parties who process personal information on our behalf, responding to individuals’ requests to exercise their rights in respect of their personal information, reporting security breaches involving personal data to the competent national data protection authority and affected individuals, appointing data protection officers, conducting data protection impact assessments, and record-keeping. The GDPR increases substantially the penalties to which we could be subject in the event of any non-compliance, including fines of up to 10,000,000 Euros or up to 2% of our total worldwide annual turnover for certain comparatively minor offenses, or up to 20,000,000 Euros or up to 4% of our total worldwide annual turnover for more serious offenses. Given the limited enforcement of the GDPR to date, we face uncertainty as to the exact interpretation of the new requirements on our trials and we may be unsuccessful in implementing all measures required by data protection authorities or courts in interpretation of the new law.
In particular, national laws of member states of the EU have implemented national laws which may partially deviate from the GDPR and impose different and more restrictive obligations from country to country, so that we do not expect to operate in a uniform legal landscape in the EU. Also, as it relates to processing and transfer of genetic data, the GDPR specifically allows member state nations to enact laws that impose additional and more specific requirements or restrictions, and European laws have historically differed quite substantially in this field, leading to additional uncertainty.
In addition, we must also ensure that we maintain adequate safeguards to enable the transfer of personal data outside of the EEA, in particular to the United States, in compliance with EU data protection laws. We expect that we will continue to face uncertainty as to whether our efforts to comply with our obligations under EU privacy laws will be sufficient. If we are investigated by an EU Member State data protection authority, we may face fines and other penalties. Any such investigation or charges by EU Member State data protection authorities could have a negative effect on our existing business and on our ability to attract and retain new clients or pharmaceutical partners. We may also experience hesitancy, reluctance, or refusal by European or multi-national clients or pharmaceutical partners to continue to use our products and solutions due to the potential risk exposure as a result of the current (and, in particular, future) data protection obligations imposed on them by certain data protection authorities in interpretation of current law, including the GDPR. Such clients or pharmaceutical partners may also view any alternative approaches to compliance as being too costly, too burdensome, too legally uncertain, or otherwise objectionable and therefore decide not to do business with us. Any of the foregoing could materially harm our business, prospects, financial condition and results of operations.
For more information concerning the implications of Brexit for our activities in compliance with the EU data protection laws, please refer to the Risk Factor entitled “The United Kingdom’s exit from the European Union may have a negative effect on global economic conditions, financial markets and our business”.
Risks Related to Employee Matters and Managing Our Workforce
We may encounter difficulties with managing the size and makeup of our workforce, which could adversely affect our results of operations.
Although we have already added several capabilities, we may need to add additional qualified personnel and resources as we continue to grow our TYMLOS business and expand into other therapeutic areas. In particular, we may need to grow or transition our internal sales, marketing, and distribution capabilities to market TYMLOS and any other drug that we may successfully develop. That growth or transition would impose significant added responsibilities on members of management, including the need to identify, recruit, maintain and integrate additional employees, and may take time away from running other aspects of our business, including development and commercialization of our product candidates.
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In connection with our acquisition of certain RAD011, our newly acquired assets related to formulations of cannabidiol (“CBD”) related to the oral administration of a solution of CBD for therapeutic use in humans or animals, we have hired or entered into consulting agreements with certain individuals who will provide assistance with the management and oversight of the assets’ assimilation into our current product portfolio and its development and commercialization. There can be no guarantee that these individuals will smoothly and successfully integrate into our workforce or workstreams or accomplish the development or commercialization activities assigned to them within the desired timelines.
Our future financial performance and our ability to commercialize our product candidates and to compete effectively will depend, in part, on our ability to manage our workforce effectively. In particular, as our commercialization plans and strategies change and develop, we will recruit and train new personnel. To that end, we must be able to:
manage our development efforts effectively;
integrate additional management, administrative and manufacturing personnel; and
maintain sufficient administrative, accounting and management information systems and controls.
We may not be able to accomplish these tasks or successfully manage our operations and, accordingly, may not achieve our research, development, and commercialization goals. Our failure to accomplish any of these goals could harm our financial results and prospects.
If we are unable to successfully maintain and further develop internal commercialization capabilities, sales of TYMLOS may be negatively impacted.
We have built a commercial team and established the organizational infrastructure we believe necessary for successful commercialization of TYMLOS in the United States. We will need to commit significant time, financial and managerial resources to maintain and further develop our marketing and sales force to ensure they have the technical expertise required to address any challenges we may face with our continued commercialization of TYMLOS. Factors that may inhibit our efforts to maintain and develop our commercialization capabilities include:
an inability to retain an adequate number of effective commercial personnel;
our ability to train new sales personnel, who may have limited experience with our company or TYMLOS, to deliver a consistent and compliant message regarding TYMLOS that will be compelling to physicians who may prescribe TYMLOS;
an inability to equip sales personnel with effective materials, including medical and sales literature to help them educate physicians and our healthcare providers regarding TYMLOS and its proper administration;
unforeseen costs and expenses associated with maintaining and further developing an independent sales and marketing organization.
If we are not successful in maintaining an effective commercial infrastructure, we may have difficulty generating product revenue, which could adversely affect our business and financial condition.
We may enter into or seek to enter into business combinations and acquisitions which may be difficult to integrate, disrupt our business, divert management attention or dilute stockholder value.
We may enter into business combinations and acquisitions as part of the continued expansion of our product portfolio. We have limited experience in making acquisitions, which are typically accompanied by a number of risks, including:

the difficulty of integrating the operations and personnel of the acquired companies;
the potential disruption of our ongoing business and distraction of management;
the potential for unknown liabilities and expenses;
the failure to achieve the expected benefits of the combination or acquisition;
the maintenance of acceptable standards, controls, procedures and policies; and
the impairment of relationships with employees as a result of any integration of new management and other personnel.
If we are not successful in completing acquisitions that we may pursue in the future, we would be required to reevaluate our business strategy and we may have incurred substantial expenses and devoted significant management time and resources in seeking to complete the acquisitions. In addition, we could use substantial portions of our available cash as all or a portion of the purchase price, or we could issue additional securities as consideration for these acquisitions, which could cause our stockholders to suffer significant dilution.
We rely on key executive officers and scientific and medical advisors, and their knowledge of our business and technical expertise would be difficult to replace.
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We are highly dependent on our chief executive officer and our principal scientific, regulatory and medical advisors. We do not have "key person" life insurance policies for any of our officers. The loss of the technical knowledge and management and industry expertise of any of our key personnel could result in delays in product development, loss of customers and sales and diversion of management resources, which could adversely affect our operating results.
If we are unable to hire additional qualified personnel, our ability to grow our business may be harmed.
We will need to hire additional qualified personnel with expertise in preclinical testing, clinical research and testing, government regulation, formulation and manufacturing and sales and marketing. We compete for qualified individuals with numerous biopharmaceutical companies, universities and other research institutions. Competition for such individuals is intense, and we cannot be certain that our search for such personnel will be successful. Attracting and retaining qualified personnel will be critical to our success.
Significant disruptions of information technology systems or breaches of data security could adversely affect our business.
Our business is increasingly dependent on critical, complex and interdependent information technology systems to support business processes as well as internal and external communications. Our computer systems are vulnerable to breakdown, malicious intrusion and computer viruses. Any failure to protect against breakdowns, malicious intrusions and computer viruses may result in the impairment of production and key business processes. In addition, our systems are potentially vulnerable to data security breaches, whether by employees or others, which may expose sensitive data to unauthorized persons. Such data security breaches could lead to the loss of trade secrets or other intellectual property, or could lead to the public exposure of personal information of our employees, clinical trial patients, customers, and others. Such disruptions and breaches of security could expose us to liability and have a material adverse effect on the operating results and financial condition of our business.
Risks Relating to Our Securities
Our stock price may be volatile, and the value of an investment in our common stock may decline.
The trading price of our common stock may be subject to wide fluctuations in response to various factors, some of which are beyond our control, including:
actions or delays by the FDA, EMA or other foreign regulatory authority in respect of any NDA, MAA or other application we may submit for any of our product candidates;
results of clinical trials of our product candidates or those of our competitors;
our operating performance and the operating performance of similar companies;
the success of competitive products;
the overall performance of the equity markets;
the number of shares of our common stock publicly owned and available for trading;
threatened or actual litigation;
changes in laws or regulations relating to our products, including changes in the structure of healthcare payment systems;
any major change in our board of directors or management;
publication of research reports about us or our industry or positive or negative recommendations or withdrawal of research coverage by securities analysts;
large volumes of sales or other transfers of our shares of common stock by existing stockholders;
general political, economic and market conditions; and
the other factors described in this "Risk Factors" section.
In addition, the stock market in general has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the companies whose shares trade in the stock market. Securities class action litigation has often been instituted against companies following periods of volatility in the overall market and in the market price of a company's securities. Such litigation, if instituted against us, could result in very substantial costs, divert our management's attention and resources and harm our business, operating results and financial condition.
Because we do not anticipate paying any cash dividends on our common stock in the foreseeable future, capital appreciation, if any, will be your sole source of gain.
We have never declared or paid cash dividends on our common stock. We currently intend to retain all of our future earnings, if any, to finance the growth and development of our business. As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.
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Future sales and issuances of our common stock or rights to purchase common stock, including pursuant to our equity incentive plans, could result in additional dilution of the percentage ownership of our stockholders and could cause our stock price to fall.
Additional capital will be needed in the future to continue our planned operations. To the extent we raise additional capital by issuing equity securities, our stockholders may experience substantial dilution. We may sell common stock, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from time to time. If we sell common stock, convertible securities or other equity securities in more than one transaction, investors may be materially diluted by subsequent sales. These sales may also result in material dilution to our existing stockholders, and new investors could gain rights superior to our existing stockholders.
Pursuant to our equity incentive plan, our management is authorized to grant stock options and other equity-based awards to our employees, directors and consultants and pursuant to our employee stock purchase plan, eligible employees may also participate in an employee stock purchase plan sponsored by us. All such awards will become eligible for sale in the public market in the future, subject to certain legal and contractual limitations, which will result in dilution to our existing shareholders.
We may be required to pay severance benefits to our employees who are terminated in connection with a change in control, which could harm our financial condition or results.
Each of our executive officers is party to an employment agreement, and each of our other employees is party to an agreement or participates in a plan, which provides change in control severance benefits including cash payments for severance and other benefits and acceleration of vesting of stock options and other equity awards in the event of a termination of employment in connection with a change in control of us. The payment of these severance benefits could harm our financial condition and results. The accelerated vesting of options and equity awards could result in dilution to our existing stockholders and harm the market price of our common stock.
Anti-takeover provisions contained in our restated certificate of incorporation and amended and restated bylaws, as well as provisions of Delaware law, could impair a takeover attempt.
Our restated certificate of incorporation and our amended and restated bylaws contain provisions that could delay or prevent a change in control of our company. These provisions could also make it more difficult for stockholders to elect directors and take other corporate actions. These provisions include:
a staggered board of directors;
authorizing the board to issue, without stockholder approval, preferred stock with rights senior to those of our common stock;
authorizing the board to amend our bylaws and to fill board vacancies until the next annual meeting of the stockholders;
prohibiting stockholder action by written consent;
limiting the liability of, and providing indemnification to, our directors and officers;
eliminating the ability of our stockholders to call special meetings; and
requiring advance notification of stockholder nominations and proposals.
Section 203 of the Delaware General Corporation Law prohibits, subject to some exceptions, "business combinations" between a Delaware corporation and an "interested stockholder," which is generally defined as a stockholder who becomes a beneficial owner of 15% or more of a Delaware corporation's voting stock, for a three-year period following the date that the stockholder became an interested stockholder.
These and other provisions in our restated certificate of incorporation and our amended and restated bylaws under Delaware law could discourage potential takeover attempts, reduce the price that investors might be willing to pay in the future for shares of our common stock and result in the market price of our common stock being lower than it would be without these provisions.
Our ability to utilize our net operating loss carryforwards and certain other tax attributes may be limited.
As of December 31, 2020, we had $1,026.0 million of federal and $702.1 million of state net operating loss carryforwards available to offset future taxable income. Under Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, 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 and other pre-change tax attributes to offset its post-change income may be limited. We have completed studies through December 31, 2015, to determine whether any ownership change has occurred since our formation and have determined that transactions have
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resulted in two ownership changes, as defined under Section 382. There could be additional ownership changes in the future that could further limit the amount of net operating loss and tax credit carryforwards that we can utilize.
Under the Tax Cuts and Jobs Act (the “Tax Act”), the amount of post-2017 net operating loss carryforwards that we are permitted to deduct in any taxable year is limited to 80% of our taxable income in such year, where taxable income is determined without regard to the net operating loss carryforward deduction itself.  The Tax Act generally eliminates the ability to carry back any net operating loss to prior taxable years, while allowing post-2017 unused net operating loss carryforwards to be carried forward indefinitely.  There is a risk that due to changes under the Tax Act, regulatory changes or other unforeseen reasons, our existing net operating loss carryforwards could expire or otherwise be unavailable to offset future income tax liabilities.
General Risk Factors
The United Kingdom’s exit from the European Union may have a negative effect on global economic conditions, financial markets and our business.
In June 2016, the UK held a referendum in which voters approved an exit from the EU, commonly referred to as “Brexit,” The announcement of Brexit caused significant volatility in global stock markets and currency exchange rate fluctuations that resulted in the strengthening of the U.S. dollar against foreign currencies in which we conduct business. The strengthening of the U.S. dollar relative to other currencies may adversely affect our operating results. This withdrawal has created political and economic uncertainty, particularly in the UK and the EU. While the UK’s withdrawal from the EU was completed on January 31, 2020, there remains considerable uncertainty about the terms of the UK’s trade agreements and other relationships with the EU following the transition period which ends December 31, 2020. During the transition period, which could be extended to December 31, 2022 by the agreement of the UK and all EU Member States, the UK will continue to follow all of the EU’s rules and will maintain its current trading relationship with the EU. We expect that uncertainty over the terms of the trade and other agreements between the UK and EU will continue to cause political and economic uncertainty, which could harm our business and financial results. The withdrawal could, among other outcomes, disrupt the free movement of goods, personal data, services and people between the UK and the EU, and result in increased legal and regulatory complexities, as well as potential higher costs of conducting business in Europe. Until the terms of the free trade and other agreements that the UK will eventually enter into with the EU are known, it is not possible to determine the impact that the UK’s departure from the EU and/or any related matters may have on us; however, any of these effects of Brexit, and others we cannot anticipate, could adversely affect our business, business opportunities, results of operations, financial condition and cash flows. Likewise, similar actions taken by European and other countries in which we operate could have a similar or even more profound impact.
For example, Brexit could result in the UK significantly altering its regulations affecting the clearance or approval of our product candidates and the transfer of personal data between the EU and the UK as the UK determines which EU laws to replace or replicate. Any new regulations could add time and expense to the conduct of our business, the transfer of personal data between the EU and the UK, as well as the process by which our products receive regulatory approval in the UK, the EU and elsewhere. In addition, the announcement of Brexit and the withdrawal of the UK from the EU have had and may continue to have a material adverse effect on global economic conditions and the stability of global financial markets, and may significantly reduce global market liquidity and restrict the ability of key market participants to operate in certain financial markets. Any of these effects of Brexit, among others, could adversely affect our business, our results of operations, liquidity and financial condition.
If securities or industry analysts cease to publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.
The trading market for our common stock depends in part on the research and reports that securities or industry analysts publish about us or our business. If one or more of the analysts who cover us downgrade our stock or publish inaccurate or unfavorable research about our business, our stock price would likely decline. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, demand for our stock could decrease, which might cause our stock price and trading volume to decline.
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ITEM 1B.    UNRESOLVED STAFF COMMENTS.
None.
ITEM 2.    PROPERTIES.
Details of each of our principal properties as of December 31, 2020, are provided below:
LocationFunctionSize (approximate
square feet)
Property
Interest
Boston, MA, USACorporate Headquarters2,500 Leased
Waltham, MA, USAOffice space26,553 Leased
Wayne, PA, USAOffice space26,401 Subleased

ITEM 3.    LEGAL PROCEEDINGS.
From time to time, we are party to litigation arising in the ordinary course of our business. As of February 1, 2021, we were not party to any significant litigation.
ITEM 4.    MINE SAFETY DISCLOSURES.
Not applicable.
PART II
ITEM 5.    MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
The information required to be disclosed by Item 201(d) of Regulation S-K, “Securities Authorized for Issuance Under Equity Compensation Plans,” is incorporated herein by reference. Refer to Item 12 of Part III of this Annual Report on Form 10-K for additional information.
Market Information
Our common stock has been traded on The Nasdaq Global Market under the symbol “RDUS” since the initial public offering of our common stock on June 6, 2014. Prior to that time there was no public market for our common stock.
On February 22, 2021, the closing price of our common stock was $18.60 per share as reported on The Nasdaq Global Market.
Stock Performance Graph
        This performance graph is furnished and shall not be deemed “filed” with the SEC or subject to Section 18 of the Exchange Act, nor shall it be deemed incorporated by reference in any filings under the Securities Act of 1933, as amended.
The graph set forth below compares the cumulative total stockholder return on our common stock between June 6, 2014 (the date of the initial public offering of our common stock) and December 31, 2020, with the cumulative total return of (a) the Nasdaq Biotechnology Index and (b) the Nasdaq Composite Index, over the same period. This graph assumes the investment of $100 on June 6, 2014 in our common stock, the Nasdaq Biotechnology Index and the Nasdaq Composite Index and assumes the reinvestment of dividends, if any. The graph assumes our closing sales price on June 6, 2014 of $8.01 per share as the initial value of our common stock and not the initial offering price to the public of $8.00 per share.
The comparisons shown in the graph below are based upon historical data. We caution that the stock price performance shown in the graph below is not necessarily indicative of, nor is it intended to forecast, the potential future performance of our common stock. Information used in the graph was obtained from the Nasdaq Stock Market LLC, a financial data provider and a source believed to be reliable. The Nasdaq Stock Market LLC is not responsible for any errors or omissions in such information.
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*    $100 invested on June 6, 2014 in stock or index
Holders
As of February 22, 2021, there were 16 holders of record of our common stock. The actual number of stockholders is greater than this number of record holders, and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers and other nominees. This number of holders of record also does not include stockholders whose shares may be held in trust by other entities.
Dividends
We have not paid any cash dividends on our common stock since inception and do not anticipate paying cash dividends in the foreseeable future.
Recent Sales of Unregistered Securities
We did not make any sales of unregistered securities during the year ended December 31, 2020.
Purchases of Equity Securities by the Issuer or Affiliated Purchasers
There were no such repurchases of shares of common stock made during the fiscal year ended December 31, 2020.
ITEM 6. SELECTED FINANCIAL DATA
None.
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ITEM 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
You should read the following discussions in conjunction with our consolidated financial statements and related notes included in this report. This discussion includes forward-looking statements that involve risk and uncertainties. As a result of many factors, such as those set forth under "Risk Factors," actual results may differ materially from those anticipated in these forward-looking statements.
Executive Overview
We are a science-driven fully integrated biopharmaceutical company that is committed to developing and commercializing innovative endocrine and other therapeutics.
In April 2017, our first commercial product, TYMLOS (abaloparatide) injection, was approved by the U.S. Food and Drug Administration (“FDA”) for the treatment of postmenopausal women with osteoporosis at high risk for fracture defined as history of osteoporotic fracture, multiple risk factors for fracture, or patients who have failed or are intolerant to other available osteoporosis therapy. In May 2017, we commenced U.S. commercial sales of TYMLOS and as of January 1, 2021, TYMLOS was available and covered for approximately 267 million U.S. insured lives, representing approximately 99% of U.S. Commercial and 83% of Medicare Part D insured lives.

We are conducting additional research towards potential additional indications for TYMLOS, including a clinical trial in men with osteoporosis and a bone histomorphometry study evaluating the early effects of TYMLOS on tissue-based indices of formation in postmenopausal women. We are also developing an abaloparatide transdermal system (“abaloparatide-TD”), for potential use in the treatment of postmenopausal women with osteoporosis. We initiated our Phase 3 wearABLe study of abaloparatide-TD in August 2019 and completed enrollment in September 2020.
As part of our ongoing initiatives to expand our product portfolio, in December 2020, our wholly owned subsidiary, Radius Pharmaceuticals, Inc., entered into an Asset Purchase Agreement with Fresh Cut Development, LLC and Benuvia Therapeutics Inc. for the acquisition of certain assets related to formulations of cannabidiol (“CBD”) related to the oral administration of a solution of CBD for therapeutic use in humans or animals (“RAD011”). RAD011 was granted fast track designation by the FDA in 2017 and orphan drug designation in August 2020 for the treatment of hyperphagia behavior and weight loss in patients with Prader-Willi syndrome (“PWS”).
In July 2020, we entered into a license agreement with Berlin-Chemie AG, a company of the Menarini Group (“Berlin-Chemie”), under which we granted Berlin-Chemie an exclusive license to develop and commercialize products containing elacestrant (RAD1901), a selective estrogen receptor degrader (“SERD”), worldwide. Elacestrant is being developed for potential use in the treatment of hormone receptor-positive breast cancer.
Completing the divestment of our oncology program, in September 2020 we sold RAD140, our internally discovered non-steroidal selective androgen receptor modulator (“SARM”) to Ellipses Pharma. Pursuant to the Asset Purchase Agreement (“APA”), Ellipses Pharma will be responsible for the clinical development and commercialization of the asset. We will be entitled to receive royalties under the APA.
Abaloparatide
We have developed or are developing two formulations of abaloparatide: abaloparatide-SC and abaloparatide-TD.
Abaloparatide-SC
In April 2017, the FDA approved TYMLOS (abaloparatide-SC) for the treatment of postmenopausal women with osteoporosis at high risk for fracture defined as history of osteoporotic fracture, multiple risk factors for fracture, or patients who have failed or are intolerant to other available osteoporosis therapy. The first commercial sales of TYMLOS in the United States occurred in May 2017 and as of January 1, 2021, TYMLOS was available and covered for approximately 267 million U.S. insured lives, representing approximately 99% of U.S. Commercial and 83% of Medicare Part D insured lives. In October 2018, the FDA approved a labelling supplement for TYMLOS to reflect that after 24 months of open-label alendronate therapy, the vertebral fracture risk reduction achieved with TYMLOS therapy was maintained.
We are commercializing TYMLOS in the United States through our commercial organization. We hold worldwide commercialization rights to abaloparatide-SC, except for Japan and Canada, where we are entitled to receive milestones and royalties based on the development and commercialization of abaloparatide-SC in Japan under our license and development agreements.
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In July 2017, we entered into a license and development agreement with Teijin for abaloparatide-SC in Japan. Pursuant to the agreement, we received an upfront payment and may receive additional milestone payments upon the achievement of certain regulatory and sales milestones, and a fixed low double-digit royalty based on net sales of abaloparatide-SC in Japan during the royalty term. In February 2020, we elected not to exercise our option to negotiate for a co-promotion agreement with Teijin for abaloparatide-SC in Japan. In May 2020, we announced that Teijin submitted an NDA for abaloparatide-SC in Japan for the treatment of osteoporosis in patients who are at high risk for fracture. The application is based on the positive results of the Phase 3 clinical trial of abaloparatide-SC in Japan in women and men with osteoporosis, which achieved its primary efficacy endpoint.
In March 2018, we initiated a clinical trial in men with osteoporosis which, if successful, will form the basis of a supplemental NDA seeking to expand the use of TYMLOS to increase bone mass in men with osteoporosis at high risk for fracture. We completed patient enrollment in September 2020 and expect to report top-line data from the study in the second half of 2021. The study is a randomized, double-blind, placebo-controlled trial that has enrolled 228 men with osteoporosis. The primary endpoint is change in lumbar spine BMD at 12 months compared with placebo. In previous clinical trials, TYMLOS has demonstrated increases in BMD in postmenopausal women. The study includes specialized high-resolution imaging to examine the effect of abaloparatide on bone structure, such as the hip, in a subset of the study participants.
In May 2020, we announced that our bone histomorphometry study, which evaluated the early effects of TYMLOS on tissue-based indices of formation in postmenopausal women, met its primary endpoint of change from baseline to 3 months in mineralizing surface in the cancellous bone envelope (one of the dynamic indicators of bone formation). We presented data from this study in September 2020.
On July 30, 2020 the United States Patent Office extended the term of US patent 7,803,770 (Method of Treating Osteoporosis Comprising Administration of PTHRP Analog) 1,303 days to April 28, 2031. US Patent 7,803,770 is listed in the FDA Orange book and covers TYMLOS.
Abaloparatide-TD
We are also developing abaloparatide-TD, based on Kindeva’s patented Microstructured Transdermal System technology, for potential use as a short wear-time transdermal patch. We hold worldwide commercialization rights to the abaloparatide-TD technology, except in Canada, where we have entered into an exclusive license agreement with respect to abaloparatide-TD, and are developing abaloparatide-TD toward future global regulatory submissions to build upon the potential success of TYMLOS. Our development strategy for abaloparatide-TD is to bridge to the established efficacy and safety of our approved abaloparatide-SC formulation.
In May 2019, we received a special protocol assessment (“SPA”) agreement from the FDA for our Phase 3 study of abaloparatide-TD, which means the FDA considers the study design to be adequate and well-controlled to support marketing approval provided the study endpoints are achieved. We initiated our Phase 3 wearABLe study of abaloparatide-TD in August 2019 and completed enrollment in September 2020. We expect to report top-line data from the study in the second half of 2021. The wearABLe study is a single, pivotal, randomized, open label, active-controlled, BMD non-inferiority bridging study with an enrollment of approximately 500 patients with postmenopausal osteoporosis at high risk of fracture, which if successful, will support an NDA submission. The primary endpoint of the study is percentage change in lumbar spine BMD at 12 months. Non-inferiority of abaloparatide-TD to abaloparatide-SC will be concluded if the lower bound of the 2-sided 95% confidence interval for the estimated treatment difference (abaloparatide-TD minus abaloparatide-SC) in the percentage change from baseline in lumbar spine BMD at 12 months is above -2.0%.
In July 2019, we obtained preliminary results from a patient assessment study which evaluated self-administration of abaloparatide-TD over 29 days in 22 post-menopausal women with low bone density. Study patients were observed at a study site on the first, 15th and 29th day of the study. Top-line results showed that study patients were able to follow the instructions for use (“IFU”) and applied the patches accurately on 99.7% of all applications. The safety data from this study showed that most of the study patients had mild, transient redness at the application site. The mean subject acceptability score on a 5-point scale was 4.5, 4.6 and 4.5 on day 1, 15 and 29, respectively. The laboratory data from this study included an exploratory assessment of PINP, a biomarker that indicates bone formation. At baseline the median PINP level in this study was 50.5 ng/ml, increasing to a median value of 100.1 ng/ml at day 29, while, by comparison, the median PINP values observed with abaloparatide-SC in the ACTIVE study were 50.6 ng/ml at baseline and 100.5 ng/ml at one month.
In December 2019, we aligned with the FDA on requirements for NDA filing.
RAD011
As part of our ongoing initiatives to expand our product portfolio, on December 30, 2020, our wholly-owned subsidiary, Radius Pharmaceuticals, Inc., entered into an Asset Purchase Agreement with Fresh Cut Development, LLC and Benuvia
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Therapeutics Inc. for the acquisition of certain assets related to formulations of cannabidiol (“CBD”) related to the oral administration of a solution of CBD for therapeutic use in humans or animals (“RAD011”). RAD011 was granted fast track designation by the U.S. Food and Drug Administration (“FDA”) in 2017 and orphan drug designation in August 2020 for the treatment of hyerphagia behavior and weight loss in patients with Prader-Willi syndrome (“PWS”). We plan to request a meeting with the FDA to discuss initiation of a pivotal Phase 2/3 study for treatment of PWS.
Financial Overview
Product Revenue
Product revenue is derived from sales of our product, TYMLOS®, in the United States.
License Revenue
License revenue is derived from payments received from contracts with customers, which include upfront payments for licenses.
Cost of Product Revenue
Cost of product revenue consists primarily of costs associated with the manufacturing of TYMLOS, royalties owed to our licensor for such sales, and certain period costs.
Research and Development Expenses
Research and development expenses consist primarily of clinical testing costs, including payments made to contract research organizations, or CROs, salaries and related personnel costs, fees paid to consultants and outside service providers for regulatory and quality assurance support, licensing of drug compounds and other expenses relating to the manufacture, development, testing, and enhancement of our investigational product candidates. We expense our research and development costs as they are incurred.
None of the research and development expenses, in relation to our investigational product candidates, are currently borne by third parties. Abaloparatide represents the largest portion of our research and development expenses for our investigational product candidates since our inception. We began tracking program expenses for abaloparatide-SC in 2005, and program expenses from inception to December 31, 2020 were approximately $239.7 million. We began tracking program expenses for abaloparatide-TD in 2007, and program expenses from inception to December 31, 2020 were approximately $144.5 million. We began tracking program expenses for elacestrant in 2006, and program expenses from inception to December 31, 2020 were approximately $128.1 million. We began tracking program expenses for RAD140 in 2008, and program expenses from inception to December 31, 2020 were approximately $18.3 million. We began tracking program expenses for RAD011 in 2020, and program expenses from inception to December 31, 2020 were approximately $16.0 million. These expenses relate primarily to external costs associated with manufacturing, preclinical studies, and clinical trial costs.
Costs related to facilities, depreciation, stock-based compensation and research and development support services are not directly charged to programs as they benefit multiple research programs that share resources.
The following table sets forth our research and development expenses related to abaloparatide-SC, abaloparatide-TD, elacestrant, RAD140, and RAD011 for the years ended December 31, 2020, 2019 and 2018 (in thousands):
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 Year Ended December 31,
 202020192018
Program-specific costs - external:
Abaloparatide-SC$9,252 $8,234 $7,591 
Abaloparatide-TD66,133 26,185 10,112 
Elacestrant15,366 27,267 17,433 
RAD1401,143 2,126 4,055 
RAD01116,000 — — 
Total program-specific costs - external$107,894 $63,812 $39,191 
Shared-services costs - external:
R&D support costs14,264 13,217 11,554 
Other operating costs765 2,152 2,468 
Total shared-services costs - external:$15,029 $15,369 $14,022 
Shared-services costs - internal:
Personnel-related costs28,530 26,114 32,094 
Share-based compensation6,654 8,769 11,657 
Occupancy costs1,083 1,853 1,914 
Depreciation522 840 1,033 
Total shared-services costs - internal:$36,789 $37,576 $46,698 
Total R&D costs$159,712 $116,757 $99,911 
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist primarily of salaries and related expenses for pre-launch and post-launch commercial operations, executive, finance and other administrative personnel, professional fees, business insurance, rent, general legal activities, including the cost of maintaining our intellectual property portfolio, and other corporate expenses.
Our results also include stock-based compensation expense as a result of the issuance of stock option, restricted stock unit, and performance unit grants to our employees, directors and consultants. The stock-based compensation expense is included in the respective categories of expense in our consolidated statements of operations and comprehensive loss (i.e., research and development or general and administrative expenses). We expect to record additional non-cash compensation expense in the future, which may be significant.
Other Operating Expenses
Other operating expenses reflect a payment we made to Ipsen in November 2018, pursuant to a final decision in arbitration proceedings with Ipsen.
Interest Income and Other Income
Interest income reflects interest earned on our cash, cash equivalents and marketable securities.
Interest Expense
Interest expense consists of interest expense related to the aggregate $305.0 million principal amount of Convertible Notes the Company issued in a registered underwritten public offering on August 14, 2017 (“Convertible Notes”). A portion of the interest expense on the Convertible Notes is non-cash expense relating to accretion of the debt discount and amortization of issuance costs.
Critical Accounting Policies and Estimates
Our management’s discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which we have prepared in accordance with the rules and regulations of the Securities and
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Exchange Commission ("SEC") and generally accepted accounting principles in the United States ("U.S. GAAP"). The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenues and expenses during the reporting periods. We evaluate our estimates and judgments on an ongoing basis. Estimates include useful lives with respect to long-lived assets and intangible assets, revenue recognition, inventory obsolescence, accounting for stock-based compensation, contingencies, tax valuation reserves, fair value measures, and accrued expenses. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Our actual results may differ from these estimates under different assumptions or conditions.
While our significant accounting policies are more fully described in Note 2 to our consolidated financial statements appearing at the end of this Annual Report on Form 10-K, we believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating our financial condition and results of operations.
Accrued Clinical Expenses
When preparing our consolidated financial statements, we are required to estimate our accrued clinical expenses. This process involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of actual cost. Payments under some of the contracts we have with parties depend on factors such as successful enrollment of certain numbers of patients, site initiation and the completion of clinical trial milestones. Examples of estimated accrued clinical expenses include:
fees paid to investigative sites and laboratories in connection with clinical studies;
fees paid to CROs in connection with clinical studies, if CROs are used; and
fees paid to contract manufacturers in connection with the production of clinical trial materials.
When accruing clinical expenses, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If possible, we obtain information regarding unbilled services directly from our service providers. However, we may be required to estimate the cost of these services based only on information available to us. If we underestimate or overestimate the cost associated with a trial or service at a given point in time, adjustments to research and development expenses may be necessary in future periods. Historically, our estimated accrued clinical expenses have approximated actual expense incurred. Subsequent changes in estimates may result in a material change in our accruals.
Revenue recognition
On April 28, 2017, the FDA approved TYMLOS in the U.S. After receiving FDA approval, we entered into a limited number of arrangements with wholesalers in the U.S. (collectively, our “Customers”) to distribute TYMLOS. These arrangements are our initial contracts with customers and, as a result, we adopted Accounting Standards Codification (“ASC”) Topic 606 - Revenue from Contracts with Customers (“Topic 606”). There is no transition to Topic 606 because we had no historical revenue. This standard applies to all contracts with customers, except for contracts that are within the scope of other standards, such as leases, insurance, collaboration arrangements, and financial instruments. Under Topic 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to be entitled in exchange for those goods or services.
To determine revenue recognition for arrangements that an entity determines are within the scope of Topic 606, the entity performs the following five steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation. We only apply the five-step model to arrangements that meet the definition of a contract under Topic 606, including when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services we transfer to our customer. At contract inception, once the contract is determined to be within the scope of Topic 606, we assess the goods or services promised within each contract and determine those that are performance obligations and assess whether each promised good or service is distinct. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.
Product Revenue, Net
We sell TYMLOS to our Customers. These Customers subsequently resell our products to specialty pharmacy providers, as well as other retail pharmacies and certain medical centers or hospitals. In addition to distribution agreements with
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Customers, we enter into arrangements with specialty pharmacies, health care providers and payors that provide for government mandated and/or privately negotiated rebates, chargebacks, and discounts with respect to the purchase of our products.
We recognize revenue on product sales when the Customer obtains control of our product, which occurs at a point in time (upon delivery). Product revenues are recorded net of applicable reserves for variable consideration, including discounts and allowances. Payment from Customers is typically due within 31 calendar days of the invoice date.
If taxes should be collected from Customers relating to product sales and remitted to governmental authorities, they will be excluded from revenue. We expense incremental costs of obtaining a contract when incurred, if the expected amortization period of the asset that we would have recognized is one year or less. However, no such costs were incurred during the twelve months ended December 31, 2020.
Reserves for Variable Consideration
Revenues from product sales are recorded at the net sales price (transaction price), which includes estimates of variable consideration for which reserves are established. Components of variable consideration include trade discounts and allowances, product returns, provider chargebacks and discounts, government rebates, payor rebates, and other incentives, such as voluntary patient assistance, and other allowances that are offered within contracts between us and our Customers, payors, and other indirect customers relating to the sale of our products. These reserves, as detailed below, are based on the amounts earned, or to be claimed on the related sales, and are classified as reductions of accounts receivable (if the amount is payable to the Customer) or a current liability (if the amount is payable to a party other than a Customer). These estimates take into consideration a range of possible outcomes which are probability-weighted in accordance with the expected value method in Topic 606 for relevant factors such as current contractual and statutory requirements, specific known market events and trends, industry data, and forecasted customer buying and payment patterns. Overall, these reserves reflect our best estimates of the amount of consideration to which it is entitled based on the terms of the respective underlying contracts.
The amount of variable consideration which is included in the transaction price may be constrained, and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized under the contract will not occur in a future period. Our analyses also contemplated application of the constraint in accordance with the guidance, under which it determined a material reversal of revenue would not occur in a future period for the estimates detailed below as of December 31, 2020 and, therefore, the transaction price was not reduced further during the twelve months ended December 31, 2020. Actual amounts of consideration ultimately received may differ from our estimates. If actual results in the future vary from our estimates, we will adjust these estimates, which would affect net product revenue and earnings in the period such variances become known.
Trade Discounts and Allowances
We generally provide Customers with discounts which include incentive fees that are explicitly stated in our contracts and are recorded as a reduction of revenue in the period the related product revenue is recognized.
Product Returns
Consistent with industry practice, we generally offer Customers a limited right of return for product that has been purchased from us based on the product’s expiration date, which lapses upon shipment to a patient. We estimate the amount of product sales that may be returned by our Customers and record this estimate as a reduction of revenue in the period the related product revenue is recognized, as well as reductions to trade receivables, net on the consolidated balance sheets. We currently estimate product return liabilities using available industry data and our own sales information, including our visibility into the inventory remaining in the distribution channel. We have received an immaterial amount of returns to date and believe that returns of product in future periods will be minimal.
Our limited right of return policy allows for eligible returns of TYMLOS from Customers in the following circumstances:
Shipment errors that were the result of an error by us;
Quantity delivered that is greater than the quantity ordered;
Product distributed by us that is damaged in transit prior to receipt by the customer;
Expired product, previously purchased directly from us, that is returned during the period beginning six months prior to the product’s expiration date and ending twelve months after the product’s expiration date;
Product subject to a recall; and
Product that we, at our sole discretion, have specified to be returned.
In addition, our limited right of return policy allows for eligible returns of TYMLOS from indirect purchasers in the following circumstances:
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Expired product that is returned during the period beginning six months prior to the product’s expiration date and ending twelve months after the product’s expiration date;
Product subject to a recall; and
Product that we, at our sole discretion, have specified to be returned.
Provider Chargebacks and Discounts
Chargebacks for fees and discounts to providers represent the estimated obligations resulting from contractual commitments to sell products to qualified healthcare providers at prices lower than the list prices charged to Customers who directly purchase the product from us. Customers charge us for the difference between what they pay for the product and the ultimate selling price to the qualified healthcare providers. These reserves are established in the same period that the related revenue is recognized, resulting in a reduction of product revenue and trade receivables, net. Chargeback amounts are generally determined at the time of resale to the qualified healthcare provider by Customers, and we generally issue credits for such amounts within a few weeks of the Customer’s notification to us of the resale. Reserves for chargebacks consist of credits that we expect to issue for units that remain in the distribution channel inventories at each reporting period-end that we expect will be sold to qualified healthcare providers, and chargebacks that Customers have claimed, but for which we have not yet issued a credit.
Government Rebates
We are subject to discount obligations under state Medicaid programs and Medicare. These reserves are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability which is included in accrued expenses and other current liabilities on the consolidated balance sheets. For Medicare, we also estimate the number of patients in the prescription drug coverage gap for whom we will owe an additional liability under the Medicare Part D program. Our liability for these rebates consist of invoices received for claims from prior quarters that have not been paid or for which an invoice has not yet been received, estimates of claims for the current quarter, and estimated future claims that will be made for product that has been recognized as revenue, but which remains in the distribution channel inventories at the end of each reporting period.
Payor Rebates
We contract with certain private payor organizations, primarily insurance companies and pharmacy benefit managers, for the payment of rebates with respect to utilization of our products. We estimate these rebates and record such estimates in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability.
Other Incentives
Other incentives which we offer include voluntary patient assistance programs, such as our co-pay assistance program, which are intended to provide financial assistance to qualified commercially-insured patients with prescription drug co-payments required by payors. The calculation of the accrual for co-pay assistance is based on an estimate of claims and the cost per claim that we expect to receive associated with product that has been recognized as revenue, but remains in the distribution channel inventories at the end of each reporting period. The adjustments are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability which is included as a component of accrued expenses and other current liabilities on the consolidated balance sheets.
Licenses of Intellectual Property
We enter into out-licensing agreements within the scope of Topic 606, under which we license certain rights to our product candidates to third parties. Such agreements may include the transfer of intellectual property rights in the form of licenses, transfer of technological know-how, delivery of drug substances, research and development services, and participation on certain committees with the counterparty. Payments made by the customers may include one or more of the following: non-refundable, up-front license fees; payments upon the exercise of customer options; development, regulatory, and commercial milestone payments; payments for manufacturing supply services we provide through our contract manufacturers; and royalties on net sales of licensed products if they are successfully approved and commercialized. Each of these payments may result in license, collaboration, or other revenue, except revenue from royalties on net sales of licensed products, which would be classified as royalty revenue.
In determining the appropriate amount of revenue to be recognized as we fulfill our obligations under each of our out-licensing agreements, we perform the following steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv)
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allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) we satisfy each performance obligation. At contract inception, once the contract is determined to be within the scope of Topic 606, we assess the goods or services promised within each contract and determines those that are performance obligations, and assess whether each promised good or service is distinct. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.
If the license to our intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, we recognize revenue from the transaction price allocated to the license when the license is transferred to the customer and the customer is able to use and benefit from the license. We evaluate all other promised goods or services in the agreement to determine if they are distinct. If they are not distinct, they are combined with other promised goods or services to create a bundle of promised goods or services that is distinct. Optional future services where any additional consideration paid to us reflects their standalone selling prices do not provide the customer with a material right and, therefore, are not considered performance obligations. If optional future services are priced in a manner which provides the customer with a significant or incremental discount, they are material rights, and are accounted for as performance obligations.
We utilize judgment to determine the transaction price. In connection therewith, we evaluate contingent milestones at contract inception to estimate the amount which is not probable of a material reversal to include in the transaction price using the most likely amount method. Milestone payments that are not within our control, such as regulatory approvals, are not considered probable of being achieved until those approvals are received and, therefore, the variable consideration is constrained. At the end of each reporting period, we re-evaluate the probability of achieving development milestone payments which may not be subject to a material reversal and, if necessary, adjust our estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect license and other revenue, as well as earnings, in the period of adjustment.
The transaction price is then allocated to each performance obligation on a relative stand-alone selling price basis, for which we recognize revenue as or when the performance obligations under the contract are satisfied.
We then determine whether the performance obligations or combined performance obligations are satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, upfront fees. We evaluate the measure of progress, as applicable, each reporting period and, if necessary, adjust the measure of performance and related revenue recognition. When consideration is received, or such consideration is unconditionally due, from a customer prior to transferring goods or services to the customer under the terms of a contract, a contract liability is recorded within deferred revenue. Contract liabilities within deferred revenue are recognized as revenue after control of the goods or services is transferred to the customer and all revenue recognition criteria have been met.
For arrangements that include sales-based royalties, including sales-based milestone payments, and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of when the related sales occur or when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). To date, we have not recognized any royalty revenue resulting from our out-licensing arrangements.
Manufacturing Supply Services
Arrangements that include a promise for future supply of drug substance or drug product for either clinical development or commercial supply, at the customer’s discretion, are generally considered as options. We assess if these options provide a material right to the licensee and, if so, they are accounted for as separate performance obligations. If we are entitled to additional payments when the licensee exercises these options, any additional payments are recorded in license, collaboration, or other revenue when the customer obtains control of the goods, which is upon delivery.
Results of Operations
The following discussion summarizes the key factors our management team believes are necessary for an understanding of our consolidated financial statements.
Years Ended December 31, 2020 and December 31, 2019
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Years Ended December 31,Change
20202019$%
(in thousands)
Revenues:
Product revenue, net$208,395 $173,317 $35,078 20 %
License revenue30,250 — 30,250 100 %
Total revenue238,645 173,317 65,328 38 %
Operating expenses:   
Cost of sales - product16,403 15,287 1,116 %
Cost of sales - intangible amortization798 798 — — %
Research and development159,712 116,757 42,955 37 %
Selling, general and administrative144,154 152,704 (8,550)(6)%
Loss from operations(82,422)(112,229)29,807 (27)%
Other (expense) income:    
Other (expense) / income, net(212)242 (454)(188)%
Interest (expense) / income, net(26,574)(21,006)(5,568)27 %
Net loss$(109,208)$(132,993)$23,785 (18)%
Product revenue—We began commercial sales of TYMLOS within the United States in May 2017, following receipt of FDA marketing approval on April 28, 2017. For the year ended December 31, 2020 we recorded approximately $208.4 million of net product revenue compared to $173.3 million for the year end December 31, 2019. The increase in product revenue was primarily driven by a combination of price and sales volume.
License revenue—We entered into the License Agreement with Berlin-Chemie on July 23, 2020. For the year ended December 31, 2020, we recorded $30.0 million of license revenue in connection with this agreement compared to none for the year end December 31, 2019.
Cost of sales—For the year ended December 31, 2020, cost of sales was $17.2 million compared to $16.1 million for the year end December 31, 2019. The increase in cost of sales was primarily driven by the increase in product revenue.
Research and development expenses—For the year ended December 31, 2020, research and development expense was $159.7 million, as compared to $116.8 million for the year ended December 31, 2019, an increase of $43.0 million, or 37%. This increase was primarily a result of an increase of $39.9 million in program spending for the abaloparatide-TD program, a $1.1 million increase in professional services, a $1.0 million increase in program spending for the abaloparatide-SC program, and an increase of $16.0 million in other costs due to the Benuvia licensing expense. These increases were partially offset by a $0.9 million decrease in program spending for RAD-140 program, a $1.0 million decrease in occupancy and depreciation, a $1.3 million decrease in compensation related costs, and a $11.9 million decrease in program spending for elacestrant research which is a result of $39.3 million of reimbursable expenses offsetting year to date expenses. We are being reimbursed for the costs incurred in connection with the elacestrant project pursuant to the terms of the TSA with Berlin-Chemie, under which the Company will perform certain services for Berlin-Chemie related to the EMERALD Phase 3 monotherapy study until the earlier of the completion of the contemplated services or the filing with the FDA of a NDA for elacestrant.
Selling, general and administrative expenses—For the year ended December 31, 2020, selling, general, and administrative expense was $144.2 million, as compared to $152.7 million for the year ended December 31, 2019, a decrease of $8.6 million, or 6%. This decrease was primarily due to a $6.3 million decrease in professional fees related to commercial operations and general and administrative activities, a $4.0 million decrease in compensation and travel entertainment costs. These decrease were partially offset by an increase of $1.7 million in other costs.
Other Income, net— For the year ended December 31, 2020, other expense, net of other income, was $0.2 million, as compared to $0.2 million during the year ended December 31, 2019. Other expense, net of other income, of $0.2 million for the year ended December 31, 2020 consisted primarily of other foreign currency revaluation losses. The $0.2 million of other expense, net of income, for the year ended December 31, 2019 consisted primarily of other foreign currency revaluation gains.
Interest income (expense), net—For the year ended December 31, 2020, net interest expense was $26.6 million, as compared to net interest expense of $21.0 million during the year ended December 31, 2019, a total change of $5.6 million, or
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27%. This change was primarily the result of the increasing interest expense incurred over the term of the convertible notes that was partially offset by the interest income earned on investments.
Years Ended December 31, 2019 and December 31, 2018
 Years Ended December 31,Change
 20192018$%
 (in thousands)
Revenues:
Product revenue, net$173,317 $99,239 74,078 75 %
License revenue— — — — %
Total revenue173,317 99,239 74,078 75 %
Operating expenses:
Cost of sales - product15,287 7,627 7,660 100 %
Cost of sales - intangible amortization798 799 (1)— %
Research and development116,757 99,911 16,846 17 %
Selling, General and administrative152,704 184,164 (31,460)(17)%
Other operating expense — 10,801 (10,801)100 %
Loss from operations(112,229)(204,063)91,834 (45)%
Other (expense) income:   
Other income / (expense), net242 59 183 310 %
Interest (expense) / income, net(21,006)(17,333)(3,673)21 %
Net loss$(132,993)$(221,337)88,344 (40)%
Product revenue— We began commercial sales of TYMLOS within the United States in May 2017, following receipt of FDA marketing approval on April 28, 2017. For the year ended December 31, 2019 we recorded approximately $173.3 million of net product revenue compared to $99.2 million for the year end December 31, 2018. The increase in product revenue was primarily driven by an increase in sales volume as a result of greater market penetration.
Cost of sales—For the year ended December 31, 2019, cost of sales of $16.1 million compared to $8.4 million for the year end December 31, 2018. The increase in cost of sales was driven by the increase in product revenue.
Research and development expenses—For the year ended December 31, 2019, research and development expense was $116.8 million compared to $99.9 million for the year ended December 31, 2018, an increase of $16.8 million, or 17%. This increase was primarily a result of an increase of $16.1 million in program spending for the abaloparatide-TD program, a $9.8 million increase in program spending for elacestrant research, a $1.7 million increase in professional services, and $0.6 million increase in program spending for the abaloparatide-SC program. These increases were partially offset by a $1.9 million decrease in program spending for RAD-140 program, a $0.3 million decrease in R&D support costs as well as an $9.2 million decrease in compensation related costs.
Selling, General and administrative expenses—For the year ended December 31, 2019, general and administrative expense was $152.7 million compared to $184.2 million for the year ended December 31, 2018, a decrease of $31.5 million, or 17%. This decrease was primarily due to a $10.0 million decrease in professional fees related to commercial operations and general and administrative activities, a $17.9 million decrease in compensation and travel entertainment costs and a $3.6 million decrease in other costs.
Other operating expenses—For the year ended December 31, 2019, other operating expenses were approximately $0.0 million compared to $10.8 million for the year ended December 31, 2018, an increase of $10.8 million. This decrease was the result of a $10.8 million payment made to Ipsen pursuant to a final decision in arbitration proceedings with Ipsen during the second quarter of 2018.
Other (expense) income, net—For the year ended December 31, 2019, other expense, net of other income, was $0.2 million, as compared to $0.1 million during the year ended December 31, 2018. Other expense, net of other income, of $0.2 million for the year ended December 31, 2019 consisted primarily of other taxes. The $0.1 million of other expense, net of income, for the year ended December 31, 2018 was primarily due to other taxes and foreign currency revaluation losses.
Interest (expense) income—For the year ended December 31, 2019, interest expense was $21.0 million, as compared to $17.3 million in interest income during the year ended December 31, 2018, a total change of $3.7 million, or 21%. This change
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was a result of the issuance of the convertible notes during the year ended December 31, 2019, which resulted in the Company incurring interest expense charges to partially offset the interest income earned on investments. During the prior year, no debt was outstanding and the Company was earning interest on investments.
Liquidity and Capital Resources
From inception to December 31, 2020, we have incurred an accumulated deficit of $1.3 billion, primarily as a result of expenses incurred through a combination of research and development activities related to our various investigational product candidates and expenses supporting those activities. Our total cash, cash equivalents and marketable securities balance as of December 31, 2020 was $114.7 million. We have financed our operations since inception primarily through the public offerings of our common stock, private sale of preferred stock, convertible debt, and borrowing under credit facilities. Following our U.S. commercial launch of TYMLOS in May 2017, we have begun financing a portion of our operations through product revenue.
Based upon our cash, cash equivalents, marketable securities, and investments balance as of December 31, 2020 and funds available to us through our credit facilities, we believe that, prior to the consideration of potential proceeds from partnering and/or collaboration activities, we have sufficient capital to fund our development plans, U.S. commercial and other operational activities for at least twelve months from the date of this filing. We expect to finance the future U.S. commercial activities and development costs of our clinical product portfolio with our existing cash, cash equivalents, marketable securities, and investments, as well as through future product sales, or through strategic financing opportunities, that could include, but are not limited to partnering or other collaboration agreements, future offerings of equity, royalty-based financing arrangements, the incurrence of additional debt, or other alternative financing arrangements, which may involve a combination of the foregoing. On January 10, 2020, we entered into entered into a secured, non-dilutive credit facility for up to an aggregate amount of $95 million, comprised of a term loan of up to $55.0 million and a $20.0 million revolving credit facility based on accounts receivable and inventory, with the right, subject to certain conditions, to increase the revolver by $20.0 million.
There is no guarantee that any of these strategic or financing opportunities will be executed or executed on favorable terms, and some could be dilutive to existing stockholders. Our future capital requirements will depend on many factors, including the scope of and progress in our research and development and commercialization activities, the results of our clinical trials, and the review and potential approval of our products by the FDA or other foreign regulatory authorities. The successful development of our product candidates is subject to numerous risks and uncertainties associated with developing drugs, which could have a significant impact on the cost and timing associated with the development of our product candidates. If we fail to obtain additional future capital, we may be unable to complete our planned commercialization activities or complete preclinical and clinical trials and obtain approval of any of our product candidates from the FDA and foreign regulatory authorities.
TYMLOS is our only approved product and our business currently depends heavily on its successful commercialization. Successful commercialization of an approved product is an expensive and uncertain process. See “Risk Factors - Risks Related to the Commercialization and Development of Our Product Candidates” set forth in Part I, “Item 1A. Risk Factors” in this Annual Report.
The following table sets forth the major sources and uses of cash for each of the periods set forth below (in thousands):
 Years ended December 31,
 202020192018
Net cash (used in) provided by:   
Operating activities$(73,948)$(82,414)$(204,726)
Investing activities67,485 87,277 134,316 
Financing activities28,013 5,709 11,672 
Net increase in cash and cash equivalents$21,550 $10,572 $(58,738)
Cash Flows from Operating Activities
Net cash used in operating activities during the year ended December 31, 2020 was $73.9 million, which was primarily the result of a net loss of $109.2 million, partially offset by net changes in working capital of $12.5 million and $47.7 million of net non-cash adjustments to reconcile net loss to net cash used in operations. The $47.7 million net non-cash adjustments to reconcile net loss to net cash used in operations included stock-based compensation expense of $24.7 million, amortization of the value of debt discount and issuance costs of $18.1 million, and depreciation and amortization of $1.7 million, impairment charge for the right of use operating lease of $2.4 million, and loss of fixed assets disposal of $0.6 million offset by amortization of premiums (discounts) on marketable securities of $0.3 million.
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Net cash used in operating activities during the year ended December 31, 2019 was $82.4 million, which was primarily the result of a net loss of $133.0 million, partially offset by net changes in working capital of $8.7 million and $41.9 million of net non-cash adjustments to reconcile net loss to net cash used in operations. The $133.0 million net loss was primarily due to costs related to the continued commercial operations for TYMLOS such as compensation costs, professional support costs, and consulting fees as well as ongoing research and development costs. The $41.9 million net non-cash adjustments to reconcile net loss to net cash used in operations included stock-based compensation expense of $23.6 million, amortization of debt discount and issuance costs of $15.8 million, depreciation and amortization of $2.3 million, impairment charge for the right of use operating lease of $0.3 million, and loss on disposal of fixed assets of $0.2 million offset by amortization of premiums (discounts) on marketable securities of $0.4 million.
Net cash used in operating activities during the year ended December 31, 2018 was $204.7 million, which was primarily the result of a net loss of $221.3 million, partially offset by net changes in working capital of $28.4 million and $45.0 million of net non-cash adjustments to reconcile net loss to net cash used in operations. The $221.3 million net loss was primarily due to costs related to the continued commercial operations for TYMLOS such as compensation costs, professional support costs, and consulting fees as well as ongoing research and development costs. The $45.0 million net non-cash adjustments to reconcile net loss to net cash used in operations included stock-based compensation expense of $28.7 million, amortization of debt discount and issuance costs of $13.8 million, and depreciation and amortization of $2.9 million, offset by amortization of discounts on marketable securities of $0.4 million.
Cash Flows from Investing Activities
Net cash provided by investing activities for the year ended December 31, 2020 was $67.5 million, as compared to net cash used in investing activities of $87.3 million for the year ended December 31, 2019.
The net cash provided by investing activities during the year ended December 31, 2020 was primarily a result of $107.4 million of net proceeds received from the sale or maturity of marketable securities, offset by $39.9 million in purchases of marketable securities. The net cash provided by investing activities during the year ended December 31, 2019 was primarily a result of $206.8 million of net proceeds received from the sale or maturity of marketable securities, offset by $119.5 million in purchases of marketable securities.
Our investing cash flows will be impacted by the timing of purchases and sales of marketable securities. All of our marketable securities have contractual maturities of less than one year. Due to the short-term nature of our marketable securities, we would not expect our operational results or cash flows to be significantly affected by a change in market interest rates due to the short-term duration of our investments.
Cash Flows from Financing Activities
Net cash provided by financing activities for the year ended December 31, 2020 was $28.0 million as compared to $5.7 million of net cash provided by financing activities for the year ended December 31, 2019.
Net cash provided by financing activities during the year ended December 31, 2020 consisted of $25.0 million of proceeds received from the issuance of the term loan offset by issuance costs, $1.5 million of proceeds as the result of stock option exercises, and $1.6 million of proceeds received from the issuance of stock in connection with the employee stock purchase plan.
 Net cash provided by financing activities during the year ended December 31, 2019 consisted of $3.9 million of proceeds as the result of stock option exercises, and $1.8 million of proceeds received from the issuance of stock in connection to the stock purchase plan.
Borrowings and Other Liabilities
In August 2017, we issued $300.0 million aggregate principal amount of the Convertible Notes, as discussed in more detail in Note 9, “Convertible Notes Payable,” to our consolidated financial statements included in this Annual Report on Form 10-K. We received net proceeds of approximately $290.8 million from the sale of the Convertible Notes, after deducting fees and expenses of $9.2 million. In addition, in September 2017, we issued an additional $5.0 million aggregate principal amount of the Convertible Notes pursuant to the exercise of an over-allotment option granted to the underwriters in the offering. We received net proceeds of approximately $4.8 million from the exercise of the over-allotment option, after deducting fees and expenses of $0.2 million.
Future minimum payments on our long-term debt as of December 31, 2020 were as follows (in thousands):
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Year ended December 31,Future Minimum Payments
2021$9,150 
20229,150 
20239,150 
2024 and thereafter
314,150 
Total minimum payments
$341,600 
Less: interest
(36,600)
Less: unamortized discount
(91,355)
Less: current portion
— 
Long Term Debt
$213,645 
In January 2020, we entered into the Term Loan, as discussed in more detail in Note 10, “Term Loan and Credit Facility,” to our consolidated financial statements included in this Annual Report on Form 10-K.
Future minimum payments on our Term Loan as of December 31, 2020 are as follows (in thousands):
Years ended December 31,
Future Minimum Payments
2021$1,864 
20221,964 
202317,610 
20249,027 
Total minimum payments
$30,465 
Less: interest
(5,465)
Less: unamortized issuance costs
(95)
Less: current portion
— 
Long Term Debt
$24,905 
Leases
We adopted ASC 842 effective January 1, 2019, as discussed in more detail in Note 18, “Leases,” to our consolidated financial statements included in this Annual Report on Form 10-K.
Future payments of operating lease liabilities as of December 31, 2020 are as follows (in thousands):
Year ending December 31,
2021$2,780 
20221,131 
2023980 
20241,005 
Thereafter857 
Total Lease payments$6,753 
Less: effect of discounted cash flows during the period(745)
Total$6,008 
In June 2016, the Massachusetts Life Sciences Center awarded us approximately $0.5 million of tax incentives under its Life Science Tax Incentive Program, which allows us a cash refund equivalent to $0.5 million of state research and development tax credits. We received this payment in the first quarter of 2017. In exchange for these incentives, we hired an incremental 35 employees in Massachusetts and agreed to maintain the additional headcount through at least December 31, 2020. Failure to do so could result in us being required to repay some or all of these incentives. This contingent obligation has not been included in the above table as we cannot estimate if, or when, it will become payable.
Contractual Obligations and Commitments
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Contractual obligations represent future cash commitments and liabilities under agreements with third parties and exclude contingent liabilities for which we cannot reasonably predict future payment. We enter into contracts in the normal course of business for marketing and promotion, commercial related activities, preclinical and clinical research studies, research supplies, and other services and products for operating purposes. These contracts generally provide for termination on notice, and therefore are cancellable contracts and not included in the table of contractual obligations and commitments. In addition, we have certain obligations to make future payments to third parties that become due and payable on the achievement of certain development, regulatory and commercial milestones, such as the start of a clinical trial, filing of an NDA, approval by the FDA, or product launch. The disclosed balances below exclude the potential payments we may be required to make under our agreements because the timing of payments and actual amounts paid under those agreements may be different depending on the timing of receipt of goods or services or changes to agreed-upon terms or amounts for some obligations, and those agreements are cancellable upon written notice by us and therefore, not long-term liabilities. Additionally, the expected timing of payment of the obligations discussed below is estimated based on current information.
Supply and Manufacturing Agreements—In June 2016, we entered into a Supply Agreement with Ypsomed AG (“Ypsomed”), pursuant to which Ypsomed agreed to supply commercial and clinical supplies of a disposable pen injection device customized for subcutaneous injection of abaloparatide. We agreed to purchase a minimum number of devices at prices per device that decrease with an increase in quantity supplied. In addition, we made milestone payments for Ypsomed’s capital developments in connection with the initiation of the commercial supply of the device and paid a one-time capacity fee. All costs and payments under the agreement are delineated in Swiss Francs. The agreement has an initial term of three years which began on June 1, 2017, after which, it automatically renews for two-year terms unless either party terminates the agreement upon 18 months’ notice prior to the end of the then-current term. The Company will purchase the device subject to minimum annual quantity requirements over the initial three-year term of the agreement. The Company is required to purchase a minimum number of batches for CHF 1.9 million ($2.2 million) through the year ended December 31, 2022.
In June 2016, we entered into a Commercial Supply Agreement with Vetter Pharma International GmbH (“Vetter”), pursuant to which Vetter has agreed to formulate the finished abaloparatide-SC drug product, to fill cartridges with the drug product, to assemble the pen delivery device, and to package the pen for commercial distribution. We agreed to purchase the cartridges and pens in specified batch sizes at a price per unit. For labeling and packaging services, the Company has agreed to pay a per unit price dependent upon the number of pens loaded with cartridges that are labeled and packaged. These prices are subject to an annual price adjustment. The agreement had an initial term of five years, which began on January 1, 2016, after which it automatically renewed for a two-year term and will automatically renew for additional two-year terms thereafter unless either party notifies the other party two years before the end of the then-current term that it does not intend to renew.
In July 2016, we entered into a Manufacturing Services Agreement with Polypeptide Laboratories Holding AB (“PPL”), as successor-in-interest to Lonza Group Ltd., pursuant to which PPL has agreed to manufacture the commercial and clinical supplies of the API for abaloparatide. The Company has agreed to purchase the API in batches at a price per gram in euros, subject to an annual increase by PPL. The Company is also required to purchase a minimum number of batches annually, equal to €2.9 million ($3.6 million) per year and $17.2 million in total through the year ended December 31, 2022. The agreement has an initial term of a six years, after which, it automatically renews for three-year terms unless either party provides notice of non-renewal 24 months before the end of the then-current term.
License Agreement Obligations
TYMLOS (Abaloparatide)
In September 2005, we entered into a License Agreement with Ipsen Pharma SAS, as amended, under which we exclusively licensed certain Ipsen compound technology and related patents covering abaloparatide to research, develop, manufacture and commercialize certain compounds and related products in all countries, except Japan and France (where our commercialization rights were subject to certain co-marketing and co-promotion rights exercisable by Ipsen, provided that certain conditions included in the License Agreement were met). We believe that Ipsen’s co-marketing and co-promotion rights in France have permanently expired. Ipsen also granted us an exclusive right and license under the Ipsen compound technology and related patents to make and have made compounds or product in Japan. Ipsen further granted us an exclusive right and license under certain Ipsen formulation technology and related patents solely for purposes of enabling us to develop, manufacture and commercialize compounds and products covered by the compound technology license in all countries, except Japan and France (as discussed above).
In consideration for these rights, we made nonrefundable, non-creditable payments in the aggregate of $13.0 million to Ipsen, including payment in recognition of certain milestones having been achieved through December 31, 2020. The License Agreement provides for further payments upon the achievement of certain future regulatory and commercial milestones. Total additional milestone payments that could be payable under the agreement are €24.0 million (approximately $29.5 million). In connection with the FDA’s approval of TYMLOS in April 2017, we paid Ipsen a milestone of €8.0 million (approximately $8.7
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million) under the License Agreement, which we recorded as an intangible asset within the consolidated balance sheet and will amortize over the remaining patent life or the estimated useful life of the underlying product. The License Agreement provides that we are obligated to pay to Ipsen a fixed five percent royalty based on net sales of products containing abaloparatide by us or our sublicensees on a country-by-country basis until the later of the last to expire of the licensed patents or for a period of 10 years after the first commercial sale in such country. The royalty expense was approximately $10.4 million for the year ended December 31, 2020. The date of the last to expire of the abaloparatide patents licensed from or co-owned with Ipsen, barring any extension thereof, is expected to be March 26, 2028.
If we sublicense abaloparatide to a third party, the agreement provides that we would pay a percentage of certain payments received from such sublicensee (in lieu of milestone payments not achieved at the time of such sublicense). The applicable percentage is in the low double-digit range. In addition, if we or our sublicensees commercialize a product that includes a compound discovered by us based on or derived from confidential Ipsen know-how, the agreement provides that we would pay to Ipsen a fixed low single-digit royalty on net sales of such product on a country-by-country basis until the later of the last to expire of our patents that cover such product or for a period of 10 years after the first commercial sale of such product in such country.
The License Agreement expires on a country-by-country basis on the later of (1) the date the last remaining valid claim in the licensed patents expires in that country, or (2) a period of 10 years after the first commercial sale of the licensed products in such country, unless it is sooner terminated in accordance with its terms.
Prior to executing the License Agreement for abaloparatide with Radius, Ipsen licensed the Japanese rights for abaloparatide to Teijin. Teijin has initiated a Phase 3 clinical trial of abaloparatide-SC in Japan for the treatment of postmenopausal osteoporosis. We maintain full global rights to our development program for abaloparatide-TD, except in Canada.
Pursuant to a final decision in arbitration proceedings with Ipsen in connection with the License Agreement, we are obligated to pay Ipsen $5.0 million if abaloparatide receives marketing approval in Japan and a fixed mid single-digit royalty based on net sales of abaloparatide in Japan.
Abaloparatide-SC (Teijin Limited)
In July 2017, we entered into a license and development agreement with Teijin for abaloparatide-SC in Japan (the “Teijin Agreement”). Teijin is developing abaloparatide-SC in Japan under an agreement with Ipsen and has initiated a Phase 3 trial in Japanese patients with osteoporosis. Pursuant to the Teijin Agreement, we granted Teijin (i) an exclusive payment bearing license under certain of our intellectual property to develop and commercialize abaloparatide-SC in Japan, (ii) a non-exclusive payment bearing license under certain of our intellectual property to manufacture abaloparatide-SC for commercial supply in Japan, (iii) a right of reference to certain of our regulatory data related to abaloparatide-SC for purposes of developing, manufacturing and commercializing abaloparatide-SC in Japan, (iv) a manufacture transfer package, upon Teijin’s request, consisting of information and our know-how that is necessary for the manufacture of active pharmaceutical ingredient and abaloparatide-SC, (v) a right to request that we manufacture (or arrange for a third party to manufacture) and supply (or arrange for a third party to supply) the active pharmaceutical ingredient for the clinical supply of abaloparatide-SC in sufficient quantities to enable Teijin to conduct its clinical trials in Japan, and (vi) a right to request that we arrange for Teijin to directly enter into commercial supply agreements with our existing contract manufacturers on the same pricing terms and on substantially similar commercial terms to those set forth in our existing agreements with such contract manufacturers.
In consideration for these rights, we received an upfront payment of $10.0 million. The Teijin Agreement also provides for additional payments to us of up to an aggregate of $40.0 million upon the achievement of certain regulatory and sales milestones, and requires Teijin to pay us a fixed low double-digit royalty based on net sales of abaloparatide-SC in Japan during the royalty term, as defined below. 
Teijin granted us (i) an exclusive license under certain of Teijin’s intellectual property to develop, manufacture and commercialize abaloparatide-SC outside Japan and (ii) a right of reference to certain of Teijin’s regulatory data related to abaloparatide-SC for purposes of developing, manufacturing and commercializing abaloparatide-SC outside Japan. Except in Canada, we maintain full global rights to our development program for abaloparatide-TD, which is not part of the Teijin Agreement. Pursuant to the Teijin Agreement, the parties may further collaborate on new indications for abaloparatide-SC.
Unless earlier terminated, the Teijin Agreement expires on the later of the (i) date on which the use, sale or importation of abaloparatide-SC is no longer covered by a valid claim under our patent rights licensed to Teijin in Japan, (ii) expiration of marketing or data exclusivity for abaloparatide-SC in Japan, or (iii) 10th anniversary of the first commercial sale of abaloparatide-SC in Japan.
Abaloparatide-TD
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In February 2018, we entered into a Scale-Up and Commercial Supply Agreement (the “Supply Agreement”) with 3M Company and 3M Innovative Properties Company (collectively with 3M Company, “3M”), pursuant to which 3M agreed to exclusively manufacture Phase 3 and global commercial supplies of abaloparatide-coated transdermal patch product (“Product”) and associated applicator devices (“Applicator”). In May 2020, 3M announced that it completed its sale of its drug delivery business, which manufactures clinical trial supplies of abaloparatide-TD, to Kindeva Drug Delivery (“Kindeva”), an affiliate of Altaris Capital Partners, LLC (“Altaris”). Under the Supply Agreement, Kindeva manufactures Product and Applicator for us according to agreed-upon specifications in sufficient quantities to meet our projected supply requirements. 3M agreed to manufacture commercial supplies of Product at unit prices that decrease with an increase in the quantity we order. We are obligated to pay Kindeva a mid-to-low single-digit royalty on worldwide net sales of Product and reimburse Kindeva for certain capital expenditures incurred to establish commercial supply of Product. We are responsible for providing, at our expense, supplies of abaloparatide drug substance to be used in manufacturing Product. During the term of the Supply Agreement, Kindeva and Radius have agreed to work exclusively with each other with respect to the delivery of abaloparatide, parathyroid hormone (“PTH”), and/or PTH related proteins via active transdermal, intradermal, or microneedle technology. In October 2018, the Company committed to fund 3M’s purchase of capital equipment totaling approximately $9.6 million in preparation for manufacturing Phase 3 and potential commercial supplies of Product. Milestone payments for the equipment commenced in the fourth quarter of 2018 and are expected to be paid in full in the second quarter of 2021.
The initial term of the Supply Agreement began on its effective date and will continue for five years after the first commercial sale of Product. The Supply Agreement then automatically renews for successive three-year terms, unless earlier terminated pursuant to its terms or upon either party’s notice of termination to the other 24 months prior to the end of the then-current term. The Supply Agreement may be terminated by either party upon an uncured material breach of its terms by the other party, or due to the other party’s bankruptcy, insolvency, or dissolution. We may terminate the Supply Agreement upon the occurrence of certain events, including for certain clinical, technical, or commercial reasons impacting Product, if we are unable to obtain U.S. regulatory approval for Product within a certain time period, or if we cease development or commercialization of Product. Kindeva may terminate the Supply Agreement upon the occurrence of certain events, including if there are certain safety issues related to Product, if we are unable to obtain U.S. regulatory approval for Product within a certain time period, or if we fail to order Product for a certain period of time after commercial launch of the Product in the U.S. Upon certain events of termination, Kindeva is required to transfer the manufacturing processes for Product and Applicator to us or a mutually agreeable third party and continue supplying Product and Applicator for a period of time pursuant to our projected supply requirements.
In June 2009, we entered into a Development and Clinical Supplies Agreement with 3M, as amended (the “Development Agreement”), under which Product and Applicator development activities occur and 3M has manufactured phase 1 and 2 clinical trial supplies for us on an exclusive basis. The term of the Development Agreement runs until June 2019 and then automatically renews for additional one-year terms, unless earlier terminated, until the earliest of (i) the expiration or termination of the Supply Agreement, (ii) the mutual written agreement of the parties, or (iii) prior written notice by either party to the other party at least ninety days prior to the end of the then-current term of the Development Agreement that such party declines to extend the term. Either party may terminate the agreement in the event of an uncured material breach by the other party. We pay 3M for services delivered pursuant to the agreement on a fee-for-service or a fee-for-deliverable basis as specified in the agreement. We have paid 3M approximately $30.2 million, in the aggregate, through December 31, 2020 with respect to services and deliverables delivered pursuant to the Development Agreement.
Elacestrant (RAD1901)
In June 2006, we entered into a license agreement with Eisai Co. Ltd.(the “Eisai Agreement’). Under the Eisai Agreement, Eisai granted us an exclusive right and license to research, develop, manufacture and commercialize elacestrant and related products from Eisai in all countries, except Japan. In consideration for the rights to elacestrant, we paid Eisai an initial license fee of $0.5 million, which was expensed during 2006. In March 2015, we entered into an amendment to the Eisai Agreement (the “Eisai Amendment”) in which Eisai granted us the exclusive right and license to research, develop, manufacture and commercialize elacestrant in Japan. In consideration for the rights to elacestrant in Japan, we paid Eisai a license fee of $0.4 million upon execution of the Eisai Amendment, which was recognized as research and development expense in 2015. The Eisai Agreement, as amended, also provides for additional payments of up to $22.3 million, payable upon the achievement of certain clinical and regulatory milestones. To date, the Company has paid Eisai approximately $1.0 million in connection with the achievement of certain milestones.
Under the Eisai Agreement, as amended, should a product covered by the licensed technology be commercialized, we will be obligated to pay to Eisai royalties in a variable mid-single digit range based on net sales of the product on a country-by-country basis. The royalty rate will be reduced, on a country-by-country basis, at such time as the last remaining valid claim in the licensed patents expires, lapses or is invalidated and the product is not covered by data protection clauses. In addition, the royalty rate will be reduced, on a country-by-country basis, if, in addition to the conditions specified in the previous sentence,
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sales of lawful generic versions of such product account for more than a specified minimum percentage of the total sales of all products that contain the licensed compound during a calendar quarter. The latest licensed patent is expected to expire, barring any extension thereof, on August 18, 2026.
The Eisai Agreement, as amended, also grants us the right to grant sublicenses with prior written approval from Eisai. If we sublicense the licensed technology to a third party, we will be obligated to pay Eisai, in addition to the milestones referenced above, a fixed low double digit percentage of certain fees received from such sublicensee and royalties in the low single digit range based on net sales of the sublicensee. In connection with the Berlin-Chemie exclusive license, we granted to Berlin-Chemie to develop and commercialize products containing elacestrant (RAD1901) worldwide and we are obligated to pay Eisai a fee of $3.0 million in accordance with the Eisai Agreement. The license agreement expires on a country-by-country basis on the later of (1) the date the last remaining valid claim in the licensed patents expires, lapses or is invalidated in that country, the product is not covered by data protection clauses, and the sales of lawful generic versions of the product account for more than a specified percentage of the total sales of all pharmaceutical products containing the licensed compound in that country; or (2) a period of 10 years after the first commercial sale of the licensed products in such country, unless it is sooner terminated.
Elacestrant (Duke)
In December 2017, we and Duke University (“Duke”) entered into a License Agreement (the “Duke Agreement”) pursuant to which we acquired the exclusive worldwide license to certain Duke patents associated with elacestrant (RAD1901) related to the use of elacestrant in the treatment of breast cancer as a monotherapy and in a combination therapy (collectively “Duke Patents”).
In consideration for these rights, we incurred non-refundable, non-creditable obligations to pay Duke, totaling $1.3 million, which were expensed as research and development costs during 2017. The Duke Agreement provides for further payments upon the achievement of certain future regulatory and commercial milestones totaling up to $3.8 million. The agreement provides that we would pay Duke a fixed low single-digit royalty based on net sales, on a country-by-country basis, beginning in August 2029 and ending upon expiration of the last patent rights to expire.
If we sublicense the Duke Patents to a third party, the agreement provides that we will pay Duke a percentage of certain payments we received from such sublicensee(s). The applicable percentage is in the high single-digit range on certain payments received in excess of a pre-specified amount. The Duke Agreement may be terminated by either party upon an uncured material breach of the agreement by the other party. We may terminate the agreement upon 60 days written notice to Duke, if we suspend our manufacture, use and sale of the licensed products.
Net Operating Loss Carryforwards
As of December 31, 2020, we had federal and state net operating loss carryforwards of approximately $1,026.0 million and $702.1 million, respectively, the use of which may be limited, as described below. If not utilized, the net operating loss carryforwards will expire at various dates through 2036.
Under Section 382 of the Internal Revenue Code of 1986, or Section 382, substantial changes in our ownership may limit the amount of net operating loss carryforwards that could be used annually in the future to offset taxable income. We have completed studies through December 31, 2015, to determine whether any ownership change has occurred since our formation and have determined that transactions have resulted in two ownership changes, as defined under Section 382. There could be additional ownership changes in the future that could further limit the amount of net operating loss and tax credit carryforwards that we can utilize. A full valuation allowance has been recorded against our net operating loss carryforwards and other deferred tax assets, as the realization of the deferred tax asset is uncertain.
As a result, we have not recorded any federal or state income tax benefit in our consolidated statements of operations.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements or any relationships with unconsolidated entities of financial partnerships, such as entities often referred to as structured finance or special purpose entities.
Accounting Standards Updates
For a discussion of recent accounting standards updates, see Note 2, “Summary of Significant Accounting Policies,” in the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.

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ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are exposed to market risk related to changes in the dollar/euro exchange rate because a portion of our development costs are denominated in euros. We do not hedge our foreign currency exchange rate risk. However, an immediate 10 percent adverse change in the dollar/euro exchange rate would not have a material effect on financial results.
We are exposed to market risk related to changes in interest rates. As of December 31, 2020, we had cash, cash equivalents and short-term marketable securities of $114.7 million, consisting of cash, money market funds, domestic corporate debt securities, and agency bonds. This exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates, particularly because our investments are in marketable securities. Due to the short-term duration of our investment portfolio and the low risk profile of our investments, an immediate 10% change in interest rates would not have a material effect on the fair market value of our portfolio. We generally have the ability to hold our investments until maturity, and therefore we would not expect our operating results or cash flows to be affected to any significant degree by the effect of a change in market interest rates on our investments. We carry our investments based on publicly available information. As of December 31, 2020, we do not have any hard to value investment securities or securities for which a market is not readily available or active.
We are not subject to significant credit risk as this risk does not have the potential to materially impact the value of assets and liabilities.
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ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
FINANCIAL STATEMENTS
Radius Health, Inc.
Index to Consolidated Financial Statements
 PAGE

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Report of Independent Registered Public Accounting Firm
To the stockholders and the Board of Directors of Radius Health, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Radius Health, Inc. and subsidiaries (the "Company") as of December 31, 2020, the related consolidated statements of operations and comprehensive loss, and stockholders' equity (deficit), for the year ended December 31, 2020, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020, and the results of its operations and its cash flows for the year ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 25, 2021, expressed an unqualified opinion on the Company's internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Reserves for variable consideration for Medicare Part D, Medicare Part D coverage gap, third-party payor rebates, and product returns - Refer to “Note 2 – Revenue Recognition” and “Note 12 – Product Revenue Returns and Allowances” to the financial statements
Critical Audit Matter Description
Revenues from product sales are recorded at the net sales price (transaction price), which includes estimates of variable consideration for which reserves are established. Components of variable consideration include trade discounts and allowances, product returns, provider chargebacks and discounts, government rebates, third-party payor rebates, and other incentives. These reductions are offered within contracts between the Company and its customers, payors, and other indirect customers relating to the Company’s sale of its products. The reserves are based on the amounts earned, or to be claimed on the related sales, and are classified as reductions of accounts receivable (if the amount is payable to the customer) or a current liability (if the amount is payable to a party other than a customer). Chargebacks, discounts, fees, and returns are recorded as reductions of accounts receivables, net on the consolidated balance sheets. Government and other rebates are recorded as a component of accrued expenses and other current liabilities on the consolidated balance sheets.
Certain of the reserves for variable consideration related to Medicare Part D, Medicare Part D coverage gap, third-party payor rebates, and product returns (the “Reserves”) involve the use of significant assumptions and judgments in their calculation. These significant assumptions and judgments include consideration of (i) current contractual and statutory requirements, (ii)
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expected rebate or return rate, (iii) expected utilization of rebates by plan participants, and (iv) payor mix of the Company’s product sales.
Given the complexity and significant management judgment in determining the significant assumptions used in calculating the Reserves, auditing these estimates involved especially subjective judgment in performing the audit procedures related to these estimates.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the Reserves included the following, among others:
We tested the effectiveness of internal controls over the Company’s estimate of the Reserves, including underlying assumptions and key inputs into the Company’s models used to calculate the Reserves.
We evaluated the appropriateness and consistency of the Company’s methods and assumptions used to calculate the Reserves.
We tested significant assumptions and key inputs used to calculate the Reserves by
i.performing sensitivity analyses addressing certain assumptions and subjective inputs utilized in the Reserves calculations to evaluate the impact on the estimated Reserves
ii.reviewing contracts and modifications thereto with certain of the Company’s customers
iii.developing an independent expectation of the estimated Reserves, including a comparison of rates used in management’s calculation to rates in the underlying contracts
iv.performing lookback analyses by comparing amounts invoiced to and paid by the Company to corresponding Reserves recorded by the Company
v.performing testing, on a sample basis, of the activity within accounts receivable and current liabilities made throughout the year and evaluating whether such activity was recorded in accordance with the contractual terms of the Company’s rebate programs and returns policy, and if applicable, statutory requirements.
We tested the mathematical accuracy of the Reserve model

/s/ Deloitte & Touche LLP 

Boston, Massachusetts
February 25, 2021

We have served as the Company’s auditors since 2020.









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Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Radius Health, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Radius Health, Inc. (the “Company”) as of December 31, 2019, the related consolidated statements of operations and comprehensive loss, stockholders’ equity (deficit), and cash flows for each of the two years in the period ended December 31, 2019, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2019, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2019, in conformity with U.S. generally accepted accounting principles.
Adoption of ASU No. 2016-02
As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for leases in 2019 due to the adoption of Accounting Standards Update (ASU) No. 2016-02, Leases, and related amendments.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Ernst & Young LLP
We served as the Company's auditor from 2005 until August 2020.

Boston, Massachusetts
February 27, 2020
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Radius Health, Inc.
Consolidated Balance Sheets
(In thousands, except share and per share amounts)
 December 31, 2020December 31, 2019
ASSETS 
Current assets: 
Cash and cash equivalents$91,436 $69,886 
Restricted cash567 567 
Marketable securities23,280 91,015 
Accounts receivable, net20,310 23,289 
Inventory9,174 5,323 
Prepaid expenses13,279 12,131 
Other current assets22,502 846 
Total current assets180,548 203,057 
Property and equipment, net796 2,293 
Intangible assets5,785 6,583 
Right of use assets - operating leases3,933 6,704 
Other assets520 514 
Total assets$191,582 $219,151 
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable$9,925 $6,030 
Accrued expenses and other current liabilities59,758 53,030 
Deferred revenue1,000  
Operating lease liability, current2,490 2,198 
Total current liabilities73,173 61,258 
Convertible notes payable213,645 195,591 
Term loan24,905  
Operating lease liability, long term3,518 4,581 
Total liabilities$315,241 $261,430 
Commitments and contingencies