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Prior to the first stage in the life-cycle of our drugs, we perform a significant amount ofworkusingour proprietary antisense
technology todesign chemical compounds that interactwith specific genes that are good targets for drugdiscovery. From these
research efforts, we hope to identify a development candidate. The designationof a development candidate is the first stage in the
life-cycle of our drugs. Adevelopment candidate is a chemical compound that has demonstrated the necessary safety and efficacy in
preclinical animal studies towarrant further study inhumans. During the first stepof the development stage, we or our partners study
our drugs in IND-enabling studies, which are animal studies intended to support an InvestigationalNewDrug, or IND, application
and/or the foreign equivalent. An approved IND allows us or our partners to studyour development candidate inhumans. If the
regulatory agency approves the IND, we or our partners initiatePhase 1 clinical trials inwhichwe typically enroll a small number of
healthyvolunteers to ensure the development candidate is safe for use inpatients. Ifwe or our partners determine that a development
candidate is safe based on the Phase 1data, we or our partners initiate Phase 2 studies that are generally larger scale studies inpatients
with the primary intent of determining the efficacy of the development candidate. The final step in the development stage is Phase 3
studies togather the necessary safety and efficacy data to requestmarketing approval from the FDA and/or foreign equivalents. The
Phase 3 studies typically involve large numbers of patients and can take up to several years to complete. If the data gatheredduring
the trials demonstrates acceptable safety and efficacy results, we or our partnerwill submit an application to theFDA and/or its
foreign equivalents formarketing approval. This stage of the drug’s life-cycle is the regulatory stage. If a drug achievesmarketing
approval, itmoves into the commercialization stage, duringwhichour partnerwillmarket and sell the drug topatients. Althoughour
partnerwill ultimatelybe responsible formarketing and selling the partnereddrug, our efforts todiscover anddevelop a drug that is
safe, effective and reliable contributes significantly to our partner’s ability to successfully sell the drug. TheFDA and its foreign
equivalents have the authority to impose significant restrictions on an approveddrug through the product label andon advertising,
promotional anddistribution activities. Therefore, our efforts designing and executing the necessary animal andhuman studies are
critical to obtaining claims in the product label from the regulatory agencies thatwould allowour partner to successfully
commercialize our drug. Further, the patent protection affordedour drugs as a result of our initial patent applications and related
prosecution activities in theUnitedStates and foreign jurisdictions are critical to our partner’s ability to sell our drugswithout
competition fromgeneric drugs. The potential sales volume of an approveddrug is dependent on several factors including the size of
the patient population,market penetrationof the drug, and the price charged for the drug.
Generally, themilestone events contained inour partnership agreements coincidewith the progressionof our drugs from
development, to regulatory approval and then to commercialization. The process of successfullydiscovering a newdevelopment
candidate, having it approved andultimately sold for a profit is highlyuncertain. As such, themilestone paymentswemay earn from
our partners involve a significant degree of risk to achieve. Therefore, as a drugprogresses through the stages of its life-cycle, the
value of the druggenerally increases.
Developmentmilestones inour partnershipsmay include the following types of events:
Designationof a development candidate. Following the designationof a development candidate, IND-enabling animal
studies for a newdevelopment candidate generally take 12 to18months to complete;
Initiationof aPhase 1 clinical trial. Generally, Phase 1 clinical trials take one to two years to complete;
Initiationor completion of aPhase 2 clinical trial. Generally, Phase 2 clinical trials take one to three years to complete;
Initiationor completion of aPhase 3 clinical trial. Generally, Phase 3 clinical trials take two to four years to complete.
Regulatorymilestones inour partnershipsmay include the following types of events:
Filingof regulatory applications formarketing approval such as anNDA in theUnitedStates or anMAA inEurope.
Generally, it takes six to twelvemonths toprepare and submit regulatory filings.
Marketing approval in amajormarket, such as theUnitedStates, Europe or Japan. Generally it takes one to two years
after an application is submitted toobtain approval from the applicable regulatory agency.
Commercializationmilestones inour partnershipsmay include the following types of events:
First commercial sale in a particularmarket, such as in theUnitedStates or Europe.
Product sales in excess of a pre-specified threshold, such as annual sales exceeding $1billion. The amount of time to
achieve this type ofmilestone depends on several factors includingbut not limited to the dollar amount of the threshold,
the pricingof the product and the pace atwhich customers beginusing the product.
