Allergan In-Licensing Agreement

6 Months Ended

Jun. 30, 2018

In-Licensing Agreement [Abstract]

Allergan In-Licensing Agreement

ALLERGAN IN-LICENSING AGREEMENT

In 2009, Warner Chilcott Company, Inc., now a subsidiary of Allergan, acquired the commercial rights to Vitaros in the United States. In September 2015, the Company entered into a license agreement and amendment to the original agreement with Warner Chilcott Company, Inc., granting the Company exclusive rights to develop and commercialize Vitaros in the United States in exchange for a $1.0 million upfront payment, paid in September 2015, and a $1.5 million regulatory milestone payment, paid in September 2017 following the FDA’s acknowledgment of receipt of the Company’s NDA resubmission. Since the intangibles acquired in the license agreement do not have an alternative future use, all costs incurred including the upfront payment and the regulatory milestone payment, were treated as research and development expense.

As part of the license agreement, Allergan has the right to exercise a one-time opt-in right to assume all future commercialization activities in the United States, assuming FDA approval, in exchange for a total of $25.0 million in upfront and potential launch milestone payments owed to the Company, plus a high double-digit royalty in the ten to twenty percent range on Allergan’s net sales of the product. If Allergan elects not to exercise its opt-in right, the Company expects to commercialize Vitaros by partnering with a pharmaceutical company with established sales and marketing capabilities.

In 2008, the FDA issued a CRL (the “2008 CRL”) for the Vitaros NDA, identifying certain deficiencies in the application. Based on the Company’s subsequent interactions with the FDA and after completion of further drug-device engineering and other activities intended to address issues previously raised in the 2008 CRL, which included human factor testing and new non-clinical studies, the Company resubmitted the Vitaros NDA in August 2017.

On February 15, 2018, the FDA issued the 2018 CRL, identifying deficiencies related to chemistry, manufacturing and controls (“CMC”) and indicating that the modest treatment effect did not outweigh certain safety concerns specific to the 2.5% concentration of its permeation enhancer NexACT (DDAIP.HCl) contained in the current formulation.

In April 2018, the Company met with the FDA and confirmed that two new Phase 3 clinical efficacy trials would be necessary at a lower formulation concentration in order to reach approval. The Company has initiated discussions with interested parties for the U.S. Vitaros rights to enable its continued development and potential approval in exchange for financial terms commensurate with a development stage asset.