Cephalon, Inc. is an international biopharmaceutical company dedicated to the discovery, development and commercialization of innovative products in four core therapeutic areas: central nervous system ("CNS"), pain, oncology and inflammatory disease. In addition to conducting an active research and development program, we market seven proprietary products in the United States and numerous products in various countries throughout Europe and the world. Consistent with our core therapeutic areas, we have aligned our approximately 775-person U.S. field sales and sales management teams by area. We have a sales and marketing organization numbering approximately 335 persons that supports our presence in nearly 50 countries in Europe, the Middle East and Africa and have a strong presence in the five key European pharmaceutical markets: France, Germany, Italy, Spain and the United Kingdom, and affiliates in Benelux and Poland. For the year ended December 31, 2009, our total revenues and net income attributable to Cephalon, Inc. were $2.2 billion and $342.6 million, respectively. Our revenues from U.S. and European operations are detailed in Note 19 to our Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.
On January 31, 2010, we entered into a Share Purchase Agreement with Mepha Holding AG pursuant to which we agreed to purchase all of the issued share capital of Mepha AG ("Mepha"), a privately-held, Swiss-based pharmaceutical company, for CHF 622.5 million (or approximately US$590 million) in cash, subject to certain closing adjustments. The closing of the transaction is subject to customary closing conditions, including receipt of the applicable antitrust approvals. The transaction is expected to close in the second quarter of 2010. Founded in 1949, Mepha markets branded and non-branded generics as well as specialty products in more than 50 countries. Mepha develops and manufactures its products in Aesch/Basel, Switzerland with a focus on Swiss-quality standards. Mepha's research and development focuses on the development of improved and innovative generics providing additional benefits for patients. Furthermore, Mepha is active in malaria research offering innovative life-saving therapies for adults and children. Mepha is the leading company on the Swiss generic market, with more than 120 products in over 500 packaging forms. Mepha has operational subsidiaries in Portugal and the Baltics. Through partnerships, Mepha markets its products in other European countries, in the Middle East, Africa, South and Central America as well as in Asia. Mepha employs approximately 1,000 people worldwide, 500 of them in Switzerland.
We have recently completed certain transactions designed to build a portfolio of potential products targeted to treat inflammatory diseases. In 2009, we (i) acquired Arana Therapeutics Limited, an Australian company, whose lead domain antibody compound, CEP-37247, is in Phase II development for patients with certain inflammatory diseases; (ii) acquired an exclusive, worldwide license to the ImmuPharma investigational compound, LUPUZOR™, which is in Phase IIb development for the treatment of systemic lupus erythematosus; (iii) purchased an option to acquire privately-held Ception Therapeutics, Inc., whose lead humanized monoclonal antibody compound, reslizumab, is in Phase II development for eosinophilic asthma; and (iv) purchased an option to acquire privately-held BioAssets Development Corporation, which has an intellectual property estate around use of TNF inhibitors for sciatic pain in patients with intervertebral disk herniation, as well as other spinal disorders, which intellectual property we expect to utilize to develop CEP-37247 as a possible treatment of sciatica. For more information regarding these transactions, please see Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations—Recent Acquisitions and Transactions."
Our most significant products are our wakefulness products, PROVIGIL® (modafinil) Tablets [C-IV] and NUVIGIL® (armodafinil) Tablets [C-IV], which comprised 51% of our total consolidated net sales for the year ended December 31, 2009, of which 94% was in the U.S. market. For the year ended December 31, 2009, combined consolidated net sales of PROVIGIL and NUVIGIL increased 11% over the year ended December 31, 2008. In June 2007, we secured final U.S. Food and Drug Administration (the "FDA") approval of the NUVIGIL indication for the treatment of excessive sleepiness associated with narcolepsy, obstructive sleep apnea/hypopnea syndrome ("OSA/HS") and shift work sleep disorder ("SWSD"). We launched NUVIGIL on June 1, 2009. In March 2009, we announced positive results from a Phase II clinical trial of NUVIGIL as adjunctive therapy for treating major depressive disorder in adults with bipolar I disorder and our plan to advance to Phase III trials for this indication. In April 2009, we announced positive results from a Phase III clinical trial of NUVIGIL as a treatment for excessive sleepiness associated with jet lag disorder and filed a supplemental new drug application (an "sNDA") for this indication with the FDA in June 2009. We expect a response from the FDA by March 29, 2010. In May 2009, we announced positive results from a Phase IV study of NUVIGIL in obstructive sleep apnea and co-morbid major depressive disorder requiring ongoing antidepressant therapy.
On a combined basis, our two next most significant products are FENTORA® (fentanyl buccal tablet) [C-II] and ACTIQ® (oral transmucosal fentanyl citrate) [C-II] (including our generic version of ACTIQ ("generic OTFC")). Together, these products comprise 17% of our total consolidated net sales for the year ended December 31, 2009, of which 80% was in the U.S. market. In October 2006, we launched FENTORA in the United States. FENTORA is indicated for the management of breakthrough pain in patients with cancer who are already receiving and are tolerant to opioid therapy for their underlying persistent cancer pain. In April 2008, we received marketing authorization from the European Commission for EFFENTORA™ for the same indication as FENTORA and launched the product in certain European countries in January 2009. We have focused our clinical strategy for FENTORA on studying the product in opioid-tolerant patients with breakthrough pain associated with chronic pain conditions, such as neuropathic pain and back pain. In November 2007, we submitted an sNDA to the FDA seeking approval to market FENTORA for the management of breakthrough pain in opioid tolerant patients with chronic pain conditions. In early April 2009, we submitted a Risk Evaluation and Mitigation Strategy (the "REMS Program") with respect to FENTORA. Subject to the timing and nature of further discussions with the FDA, we expect to receive a response from the FDA regarding the FENTORA REMS Program by the middle of 2010. For more information regarding our FENTORA REMS Program, please see "Pain—FENTORA" below. With respect to ACTIQ, its sales have been meaningfully eroded by the launch of FENTORA and by generic OTFC products sold since June 2006 by Barr Laboratories, Inc. and by us through our sales agent, Watson Pharmaceuticals, Inc. We expect this erosion will continue. In September 2009, our obligation to supply Barr with generic OTFC ended pursuant to the terms of a license and supply agreement we entered into with Barr in July 2004. In October 2009, we understand that the FDA approved ANDAs by Barr and by Covidien to market and sell generic OTFC. We submitted our REMS Program for ACTIQ and generic OTFC in early April 2009. We expect to receive a response from the FDA by the middle of 2010.
In March 2008, the FDA granted an orphan drug approval for TREANDA® (bendamustine hydrochloride) for the treatment of patients with chronic lymphocytic leukemia ("CLL") and, in April 2008, the product was launched. In October 2008, we received FDA approval of TREANDA for treatment of patients with indolent B-cell non-Hodgkin's lymphoma ("NHL") who have progressed during or within six months of treatment with rituximab or a rituximab-containing regimen. TREANDA comprised 10% of our total consolidated net sales for the year ended December 31, 2009, all of which were in the U.S. market. While not a currently approved indication by the FDA, TREANDA was recently listed in the 2010 NCCN clinical practice guidelines as a front-line treatment for NHL. We believe the guidelines listing was the result of an independent Phase III clinical study conducted by the German Study Group for Indolent Lymphomas ("StiL Group") in Giessen, Germany. The StiL Group's study results announced in December 2009 indicated better tolerability and more than a 20-month improvement in median progression free survival in patients treated with TREANDA in combination with rituximab versus cyclophosphamide, doxorubicin, vincristine, and prednisolone (commonly known as CHOP) in combination with rituximab for the first-line treatment of patients with advanced follicular, indolent, and mantle cell lymphomas, each of which is not currently an FDA-approved indication.
In August 2007, we acquired exclusive North American rights to AMRIX® (cyclobenzaprine hydrochloride extended-release capsules) from E. Claiborne Robins Company, Inc., a privately-held company d/b/a ECR Pharmaceuticals ("ECR"). Two dosage strengths of AMRIX (15 mg and 30 mg) were approved in February 2007 by the FDA for short-term use as an adjunct to rest and physical therapy for relief of muscle spasm associated with acute, painful musculoskeletal conditions. We made the product available in the United States in October 2007 and commenced a full U.S. launch in November 2007. In June 2008, the U.S. Patent and Trademark Office (the "PTO") issued a pharmaceutical formulation patent for AMRIX, which expires in February 2025.
In late 2005 and early 2006, we entered into PROVIGIL patent settlement agreements with certain generic pharmaceutical companies. As part of these separate settlements, we agreed to grant to each of these parties a non-exclusive royalty-bearing license to market and sell a generic version of PROVIGIL in the United States, effective in April 2012, subject to applicable regulatory considerations. Under the agreements, the licenses could become effective prior to April 2012 only if a generic version of PROVIGIL is sold in the United States prior to this date. We filed each of the settlements with both the U.S. Federal Trade Commission (the "FTC") and the Antitrust Division of the U.S. Department of Justice (the "DOJ") as required by the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the "Medicare Modernization Act"). The FTC conducted an investigation of each of the PROVIGIL settlements and, in February 2008, filed suit against us challenging the validity of the settlements and related agreements. The complaint alleges a violation of Section 5(a) of the Federal Trade Commission Act and seeks to permanently enjoin us from maintaining or enforcing these agreements and from engaging in similar conduct in the future. We believe the FTC complaint is without merit and we have filed a motion to dismiss the case. While we intend to vigorously defend ourselves and the propriety of the settlement agreements, these efforts will be both expensive and time consuming and, ultimately, due to the nature of litigation, there can be no assurance that these efforts will be successful. For more information regarding our PROVIGIL settlements and related litigation, please see Note 16 to our Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K, which is incorporated herein by reference.
In September 2008, as part of our settlement with the U.S. government regarding their investigation of our promotional practices with respect to ACTIQ, GABITRIL and PROVIGIL, we entered into a five-year Corporate Integrity Agreement (the "CIA") with the Office of Inspector General of the Department of Health and Human Services. The CIA provides criteria for establishing and maintaining compliance with federal laws governing the marketing and promotion of our products. We are also subject to periodic reporting and certification requirements attesting that the provisions of the CIA are being implemented and followed.
We have significant discovery research programs focused on developing therapeutics to treat cancers. Our technology principally focuses on an understanding of kinases and proteases and the role they play in cellular integrity survival and proliferation. We have coupled this knowledge with a library of novel, small, orally-active synthetic molecules that inhibit the activities of specific kinases. We also have reinforced our commitment to the treatment of inflammatory diseases through the use of biologics. Our entry into the biologics space combined with our efforts with our small molecule products creates opportunities to address unmet medical needs. We also work with our collaborative partners to provide a more diverse therapeutic breadth and depth to our research efforts.
While we seek to increase profitability and cash flow from operations, we will need to continue to achieve growth of product sales and other revenues sufficient for us to attain these objectives. The rate of our future growth will depend, in part, upon our ability to obtain and maintain adequate intellectual property protection for our currently marketed products, and to successfully develop or acquire and commercialize new product candidates.
We are a Delaware corporation with our principal executive offices located at 41 Moores Road, P.O. Box 4011, Frazer, Pennsylvania 19355. Our telephone number is (610) 344-0200 and our web site address is http://www.cephalon.com. Our research and development headquarters are in West Chester, Pennsylvania and we also have offices in Wilmington, Delaware, Salt Lake City, Utah, suburban Minneapolis-St. Paul, Minnesota, France, the United Kingdom, Ireland, Denmark, Germany, Italy, the Netherlands, Poland, Spain, Switzerland, Australia, Hong Kong and certain other countries. We have manufacturing facilities in France for the production of modafinil, which is used in the production of PROVIGIL. We also have manufacturing facilities in Salt Lake City, Utah, for the production of FENTORA, EFFENTORA, ACTIQ and generic OTFC for worldwide distribution and sale, and Eden Prairie and Brooklyn Park, Minnesota, for the production of orally disintegrating versions of drugs for pharmaceutical company partners.
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports are available free of charge through the Investor Information section of our web site as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission. We include our web site address in this Annual Report on Form 10-K only as an inactive textual reference and do not intend it to be an active link to our web site.
CENTRAL NERVOUS SYSTEM DISORDERS
Our CNS disorders portfolio includes three FDA-approved and marketed products: NUVIGIL, for improving wakefulness in patients with excessive sleepiness associated with narcolepsy, OSA/HS and SWSD; PROVIGIL, for the same labeled indications as NUVIGIL; and GABITRIL, for use as adjunctive therapy in the treatment of partial seizures in epileptic patients.
An important focus of our modafinil strategy has been the development of our next-generation compound, NUVIGIL, a single-isomer formulation of modafinil. In June 2007, we received final FDA approval to market NUVIGIL for the treatment of excessive sleepiness associated with narcolepsy, OSA/HS and SWSD. The product is protected by a composition of matter patent that will expire on December 18, 2023 and covers a novel polymorphic form of armodafinil, the active pharmaceutical ingredient in NUVIGIL. We launched NUVIGIL on June 1, 2009. In March 2009, we announced positive results from a Phase II clinical trial of NUVIGIL as adjunctive therapy for treating major depressive disorder in adults with bipolar I disorder and our plan to advance to Phase III trials for this indication. In April 2009, we announced positive results from a Phase III clinical trial of NUVIGIL as a treatment for excessive sleepiness associated with jet lag disorder and filed a supplemental new drug application (an "sNDA") for this indication with the FDA in June 2009. We expect a response from the FDA by March 29, 2010. In May 2009, we announced positive results from a Phase IV study of NUVIGIL in obstructive sleep apnea and comorbid major depressive disorder requiring ongoing antidepressant therapy.
We also have ongoing clinical studies for NUVIGIL focused on adjunctive treatment to atypical anti-psychotics in schizophrenia patients, adjunctive treatment for bi-polar depression and excessive sleepiness associated with traumatic brain injury. In clinical studies, NUVIGIL was generally well-tolerated. The most common side effects were mainly mild to moderate in severity and included nausea, headaches, dizziness, diarrhea, decreased appetite and upset stomach.
Modafinil, the active ingredient in PROVIGIL, is the first in a new class of wake-promoting agents. While its exact mechanism of action remains to be fully elucidated, modafinil appears to act selectively in regions of the brain believed to regulate normal sleep and wakefulness. The FDA approved PROVIGIL to improve wakefulness in patients with excessive daytime sleepiness associated with narcolepsy, and we launched the product in the United States in February 1999. In January 2004, we received FDA approval to expand the label for PROVIGIL to include improving wakefulness in patients with excessive sleepiness associated with OSA/HS and SWSD. In clinical studies, PROVIGIL was generally well-tolerated, with a low incidence of adverse events relative to placebo. The most commonly observed adverse events were headache, infection, nausea, nervousness, anxiety and insomnia.
Outside of the U.S., modafinil currently is approved in more than 30 countries, including France, the United Kingdom, Ireland, Italy and Germany, for the treatment of excessive daytime sleepiness associated with narcolepsy. In certain of these countries, we also have approval to market modafinil to treat excessive daytime sleepiness in patients with OSA/HS and/or SWSD.
Narcolepsy: Narcolepsy is a debilitating, lifelong sleep disorder whose symptoms often first arise in late childhood. Its most common symptom is an uncontrollable propensity to fall asleep during the day. PROVIGIL has been recognized by the American Academy of Sleep Medicine as a standard of therapy for the treatment of excessive daytime sleepiness associated with narcolepsy.
Obstructive Sleep Apnea/Hypopnea Syndrome (OSA/HS): Individuals with OSA/HS experience frequent awakenings, sometimes occurring hundreds of times during the night as a result of blockage of the airway passage, usually caused by the relaxation and collapse of the soft tissue in the back of the throat during sleep. Continuous positive airway pressure ("CPAP"), a medical device that blows air through the nasal passage, is the primary treatment for OSA/HS. However, approximately 30 percent of patients that use CPAP continue to experience excessive sleepiness, for which PROVIGIL and NUVIGIL may be an appropriate adjunctive treatment.
Shift Work Sleep Disorder (SWSD): SWSD is defined as a persistent or recurrent pattern of sleep disruption that leads to excessive sleepiness or insomnia due to a mismatch between the natural circadian sleep-wake pattern and the sleep-wake schedule required by a person's environment. SWSD particularly affects those who frequently rotate shifts or work at night, which is contrary to the body's natural circadian rhythms.
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Intellectual Property Position
We own various U.S. and foreign patent rights that expire between 2014 and 2015 and cover pharmaceutical compositions and uses of modafinil, including the commercial formulation of PROVIGIL. We also hold rights to other patents and patent applications directed to polymorphs, manufacturing processes, formulations, and uses of modafinil and to next-generation modafinil products. We also own rights to PROVIGIL and other various trademarks for our pharmaceutical products containing the active drug substance modafinil. Ultimately, these patents and patents related to our other products and product candidates might be found invalid if challenged by a third party, or a potential competitor could develop a competing product that avoids infringement of these patents.
With respect to NUVIGIL, we successfully obtained issuance of a U.S. patent in November 2006 claiming the Form I polymorph of armodafinil, the active drug substance in NUVIGIL. This patent is currently set to expire in 2023. Foreign patent applications directed to the Form I polymorph of armodafinil and its use in treating sleep disorders are pending in Europe and elsewhere. In addition, the particle size patent described above for PROVIGIL also covers NUVIGIL. We also received a three year period of marketing exclusivity (until early 2010). We also hold rights to other patent applications directed to other polymorphic forms of armodafinil and to the manufacturing process related to armodafinil. We hold rights to the NUVIGIL trademark.
Regarding our ongoing NUVIGIL patent lawsuits and PROVIGIL settlements and related lawsuits, please see Note 16 to our Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K, which is incorporated herein by reference. While we intend to vigorously defend the NUVIGIL intellectual property rights and the propriety of the PROVIGIL settlements, these efforts will be both expensive and time consuming and, ultimately, due to the nature of litigation, there can be no assurance that these efforts will be successful.
Manufacturing and Product Supply
We have third party agreements with four companies to supply us with modafinil (which requirements include certain minimum purchase requirements) and two companies to supply us with finished commercial supplies of PROVIGIL. With respect to NUVIGIL, we have three third parties who manufacture the active drug substance armodafinil and one qualified manufacturer of finished supplies of NUVIGIL tablets. At our manufacturing facility in Mitry-Mory, France, we produce modafinil for use in the production of PROVIGIL. We seek to maintain inventories of active drug substance and finished products to protect against supply disruptions. Any future change in manufacturers or manufacturing processes requires regulatory approval.
With respect to PROVIGIL and NUVIGIL, there are several other products used for the treatment of excessive sleepiness or narcolepsy in the United States. Many of these products, including methylphenidate products, have been available for a number of years and are available in inexpensive generic forms. We also are aware of numerous companies seeking to develop products to treat excessive sleepiness.
GABITRIL is a selective GABA (gamma-aminobutyric acid) reuptake inhibitor approved for use as adjunctive therapy in the treatment of partial seizures in epileptic patients. Epilepsy is a chronic disorder characterized by seizures that cause sudden, involuntary, time-limited alteration in behavior, including changes in motor activities, autonomic functions, consciousness or sensations, and accompanied by an abnormal electrical discharge in the brain. We currently have worldwide product rights to GABITRIL, excluding Canada and Latin America, and we market GABITRIL in the United States, France, the United Kingdom and Germany, among other countries. We have one third-party manufacturer of the active drug substance in GABITRIL and finished commercial supplies of the product. We seek to maintain inventories of finished products to protect against supply disruptions.
GABITRIL is covered by U.S. and foreign patents that are held by Novo-Nordisk A/S. The U.S. patents have been licensed in the United States exclusively to Abbott Laboratories. We have an exclusive sublicense from Abbott to these patents in the United States and exclusive licenses from Novo-Nordisk to corresponding foreign patents. The U.S. composition-of-matter patents covering the currently approved product include: a patent claiming tiagabine, the active drug substance in GABITRIL; a patent claiming crystalline tiagabine hydrochloride monohydrate and its use as an anti-epileptic agent; a patent claiming the pharmaceutical formulation; and a patent claiming anhydrous crystalline tiagabine hydrochloride and processes for its preparation. These patents currently are set to expire in 2011, 2012, 2016 and 2017, respectively. Supplemental Protection Certificates based upon corresponding foreign patents covering this product are set to expire in 2011. We also hold rights to the GABITRIL trademark, which is used in connection with pharmaceuticals containing tiagabine as the active drug substance.
Our pain therapeutics portfolio currently includes four marketed products in the United States. We market AMRIX, a once-a-day, extended-release version of cyclobenzaprine hydrochloride, the active ingredient in the brand FLEXERIL®. AMRIX is indicated for relief of muscle spasm associated with acute, painful musculoskeletal conditions.
We also market three products, FENTORA, ACTIQ, and generic OTFC, which focus on treating breakthrough cancer pain in opioid-tolerant patients. One of the most challenging components of cancer pain is breakthrough pain. Breakthrough pain is a transitory flare of moderate to severe pain that "breaks through" the medication patients use to control their persistent pain. Breakthrough cancer pain typically develops rapidly, can reach maximum intensity in three to five minutes and typically lasts for 30 to 60 minutes. Breakthrough pain may be related to a specific activity, or may occur spontaneously and unpredictably. Cancer patients who suffer from breakthrough pain may suffer a number of episodes every day. Breakthrough pain can have a profound impact on an individual's physical and psychological well-being and is often associated with a more severe and difficult to treat pain condition.
In August 2007, we acquired exclusive North American rights to AMRIX from E. Claiborne Robins Company, Inc., a privately-held company d/b/a ECR Pharmaceuticals ("ECR"). Two dosage strengths of AMRIX (15 mg and 30 mg) were approved in February 2007 by the FDA for short-term use as an adjunct to rest and physical therapy for relief of muscle spasm associated with acute, painful musculoskeletal conditions. With convenient, once-daily dosing, AMRIX provides relief from muscle spasm comparable to that with cyclobenzaprine hydrochloride taken three times daily. We made the product available in the United States in October 2007 and commenced a full U.S. launch in November 2007. AMRIX is intended for use up to two or three weeks. The most common side effects of AMRIX in Phase III clinical trials were dry mouth, dizziness, fatigue, constipation, nausea and dyspepsia.
We received FDA approval of FENTORA in late September 2006 and launched the product in the United States in early October 2006. FENTORA is indicated for the management of breakthrough pain in patients with cancer who are already receiving and are tolerant to opioid therapy for their underlying persistent cancer pain. FENTORA is the first and only buccal tablet approved for this indication. In April 2008, we received marketing authorization from the European Commission for EFFENTORA for the same indication as FENTORA and launched the product in certain European countries in January 2009.
We have focused our clinical strategy for FENTORA on studying the product in opioid-tolerant patients with breakthrough pain associated with chronic pain conditions, such as neuropathic pain and back pain. In November 2007, we submitted an sNDA to the FDA seeking approval to market FENTORA for the management of breakthrough pain in opioid tolerant patients with chronic pain conditions. In May 2008, an FDA Advisory Committee voted not to recommend approval of the FENTORA sNDA. In September 2008, we received a complete response letter, in which the FDA requested that we implement and demonstrate the effectiveness of proposed enhancements to the current FENTORA risk management program. In December 2008, we also received a supplement request letter from the FDA requesting that we submit a Risk Evaluation and Mitigation Strategy (the "REMS Program") with respect to FENTORA. We submitted our REMS Program to the FDA in early April 2009. To address the FDA's requests in its September 2008 and December 2008 letters, we plan to implement SECURE Access™, a first-of-its-kind initiative designed to minimize the potential risk of overdose from an opioid through appropriate patient selection, as part of our REMS Program. In July 2009, we exchanged correspondence with the FDA regarding elements of our REMS Programs for FENTORA and ACTIQ and have been engaged in ongoing discussions with the agency. Subject to the timing and nature of further discussions with the FDA, we expect to receive a response from the FDA by the middle of 2010. We believe that, by working with the FDA, we can design and implement a REMS Program to meet the FDA's requests and possibly to provide a potential avenue for approval of the sNDA. We anticipate initiating the REMS Program upon receipt of approval from the FDA.
In clinical trials, FENTORA was generally well tolerated. Most adverse events occurring with FENTORA are typical opioid side effects. The most serious adverse events associated with all opioids are respiratory depression (potentially leading to apnea or respiratory arrest), circulatory depression, hypotension, and shock. The most common (greater or equal to 10 percent) adverse events observed in clinical trials of FENTORA in patients with cancer were nausea, vomiting, application site abnormalities, fatigue, anemia, dizziness, constipation, edema, asthenia, dehydration, and headache. In clinical trials in patients with other chronic pain conditions, the most common (greater or equal to 10 percent) adverse events were nausea, vomiting, back pain, dizziness, headache, and somnolence. Application site adverse events were reported in 12 percent of patients. Most side effects were mild to moderate in severity.
ACTIQ is approved in the United States for the management of breakthrough cancer pain in opioid-tolerant patients. It was approved by the FDA in November 1998 and was launched in the United States in March 1999. Following our acquisition of Anesta Corp. in October 2000, we relaunched ACTIQ in February 2001. In October 2002, we reacquired rights to ACTIQ in 12 countries, principally in Europe, from Elan Pharma International Limited.
ACTIQ uses an oral transmucosal delivery system ("OTS®") to deliver fentanyl citrate, a powerful, Schedule II opioid analgesic. The OTS delivery system consists of a drug matrix that is mounted on a handle. It is designed to achieve rapid absorption of fentanyl through the oral mucosa and into the bloodstream, with pain relief that may begin within 15 minutes. ACTIQ is available in six dosage strengths to allow individualization of dosing. Side effects of ACTIQ are typical of opioid products and include somnolence, nausea, vomiting and dizziness. The greatest risk from improper use of ACTIQ, as with all opioid-based products, is the potential for respiratory depression, which can be life-threatening. We market ACTIQ under a comprehensive risk management program of educational and safe use messages that inform health care professionals, patients and their families of proper use, storage, handling and disposal of the product. The FDA has notified us that we must implement a REMS Program for ACTIQ and generic OTFC. We submitted our REMS Program for ACTIQ and generic OTFC in early April 2009. Subject to the timing and nature of further discussions with the FDA, we expect to receive a response from the FDA by the middle of 2010.
To secure FTC clearance of our acquisition of CIMA LABS, we agreed to license to Barr our U.S. rights to intellectual property necessary to manufacture and market a generic OTFC. The rights we granted to Barr became effective in September 2006 and Barr entered the United States market with generic OTFC on September 27, 2006. On this same date, we also entered the market with a generic OTFC, utilizing Watson as our sales agent in this effort. In September 2009, our obligation to supply Barr with generic OTFC ended pursuant to the terms of a license and supply agreement we entered into with Barr in July 2004. In October 2009, we understand that the FDA approved ANDAs by Barr and by Covidien to market and sell generic OTFC. With respect to ACTIQ, its sales have been meaningfully eroded by the launch of FENTORA and by generic OTFC products sold since June 2006 by Barr Laboratories, Inc. and by us through our sales agent, Watson Pharmaceuticals, Inc. We expect this erosion will continue.
Intellectual Property Position
AMRIX: Upon FDA approval, AMRIX was granted a three-year period of marketing exclusivity that extends until February 2010. In June 2008, the U.S. Patent and Trademark Office issued a pharmaceutical formulation patent for AMRIX, which expires in February 2025. An additional patent covering a method of relieving muscle spasm using AMRIX was issued in June 2009 and expires in 2023. We have an exclusive North American license to these patents from Eurand. Other patent applications claiming further formulations and uses are pending. We also hold rights to the AMRIX trademark.
FENTORA: We own patents and/or patent applications covering formulation, methods of treatment using certain formulations and manufacturing processes for FENTORA expiring between 2019 and 2024. We also hold rights to the FENTORA trademark.
ACTIQ: The U.S. patents covering the currently approved compressed powder pharmaceutical composition and the method for administering fentanyl via this composition expired in September 2006. As described above, we have licensed to Barr our U.S. rights to intellectual property necessary to manufacture and market a generic OTFC. Corresponding patents covering the current formulation of ACTIQ in foreign countries generally expire between 2009 and 2010. Our patent protection with respect to the ACTIQ formulation we sold in the United States prior to June 2003 expired in May 2005. We hold the rights to the ACTIQ trademark.
Regarding our ongoing AMRIX and FENTORA patent lawsuits, please see Note 16 to our Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K, which is incorporated herein by reference. While we intend to vigorously defend the AMRIX and FENTORA intellectual property rights, these efforts will be both expensive and time consuming and, ultimately, due to the nature of litigation, there can be no assurance that these efforts will be successful.
Manufacturing and Product Supply
AMRIX: We have third party agreements with one company to supply us with AMRIX capsules and another company to package the AMRIX capsules for commercial sale. We seek to maintain inventories of finished products to protect against supply disruptions. Any future change in manufacturers or manufacturing processes requires regulatory approval.
FENTORA /ACTIQ/Generic OTFC: At our facility in Salt Lake City, Utah, we manufacture FENTORA, ACTIQ and generic OTFC for our sale in the United States and international markets and EFFENTORA for our sale in certain countries in Europe.
Fentanyl, the active ingredient in FENTORA, EFFENTORA, ACTIQ and generic OTFC, is a Schedule II controlled substance under the Controlled Substances Act. Our purchases of fentanyl for use in the production of FENTORA, EFFENTORA, ACTIQ and generic OTFC are subject to quota that is approved by the U.S. Drug Enforcement Administration ("DEA"). Supply disruption could result from delays in obtaining DEA approvals or the receipt of approvals for quantities of fentanyl that are insufficient to meet current or projected product demand. The quota system also limits our ability to build inventories as a method of insuring against possible supply disruptions. While we currently have available fentanyl quota to produce our fentanyl-based products, in the future we could face shortages of quota that could negatively impact our ability to produce our fentanyl-based products.
AMRIX: Cyclobenzaprine hydrochloride, the active ingredient in AMRIX, is a widely prescribed muscle relaxant in the United States, representing 43% of the 48 million prescriptions for muscle relaxants written in 2008, according to IMS Health Incorporated. AMRIX competes with short-acting, non-extended release versions of cyclobenzaprine hydrochloride, such as SKELAXIN®, FLEXERIL® and other inexpensive generic forms of muscle relaxants. AMRIX is a once-a-day, extended-release version of cyclobenzaprine hydrochloride.
FENTORA/ACTIQ/Generic OTFC: Both long-acting and short-acting formulations are prescribed to treat cancer pain. Persistent pain is typically treated by around-the-clock administration of long- or short-acting opioids. Breakthrough cancer pain is usually treated with a short-acting product, such as FENTORA, ACTIQ or generic OTFC, that is used in conjunction with an around-the-clock formulation.
Long-acting products, which have a slower onset and longer duration of action relative to FENTORA, ACTIQ and generic OTFC, are commonly prescribed to treat persistent pain. Three long-acting opioid analgesics and their generic equivalents currently marketed for chronic pain dominate this market: Johnson & Johnson's DURAGESIC® and Purdue Pharmaceuticals' OXYCONTIN® and MS-CONTIN®. Persistent cancer pain also is treated with short-acting opioid tablets, capsules and elixirs, as well as quick-acting invasive opioid delivery systems (i.e., intravenous, intramuscular and subcutaneous), many of which have been available for many years and are available in inexpensive generic form.
The overwhelming majority of prescriptions written to treat breakthrough cancer pain are for short-acting opioids other than FENTORA, ACTIQ or generic OTFC, such as morphine and combination products (with acetaminophen and oxycodone or hydrocodone), as well as quick-acting opioids delivered via invasive delivery systems. In some cases, physicians also may attempt to manage breakthrough pain by increasing the dose of a long-acting opioid.
We are aware of numerous companies developing other technologies for rapid delivery of opioids to treat breakthrough pain, including transmucosal, transdermal, nasal spray, and inhaled delivery systems, among others. If these technologies are successfully developed and approved over the next few years, they could represent significant competition for FENTORA, ACTIQ and generic OTFC.
The existence of generic OTFC has and will likely continue to impact sales of ACTIQ and could negatively impact the growth of FENTORA. Since the launch of generic OTFC in September 2006, ACTIQ sales have been meaningfully eroded. In addition, sales of our own generic OTFC could be significantly impacted by the entrance into the market of additional generic OTFC products, which could occur at any time. For example, we expect Covidien to enter the U.S. market with its generic OTFC in the first quarter of 2010.
Our U.S. oncology portfolio includes two marketed products to treat patients with hematologic cancers: TREANDA, a bi-functional hybrid cytotoxic; and TRISENOX®, an intravenous arsenic-based targeted therapy currently marketed in the U.S., as well as in Europe. In Europe, we have two commercialized oncology products in our portfolio: MYOCET® (liposomal doxorubicin), a cardio-protective chemotherapy agent used to treat metastatic breast cancer and TARGRETIN® (bexarotene), a treatment for cutaneous T-cell lymphoma. In addition, we market and sell ABELCET® (amphotericin B lipid complex), an anti-fungal product used by cancer patients.
We obtained U.S. and Canadian rights to TREANDA in June 2005. TREANDA is a novel hybrid cytotoxic alkylating agent that differs from conventional compounds in its apparent multi-functional mechanism of action. In addition to killing cells by damaging their DNA and triggering apoptosis—which is typical of alkylating agents—researchers demonstrated that TREANDA also causes the disruption of cell division. Bendamustine hydrochloride, the active ingredient in TREANDA, is currently marketed in Germany by a third party for the treatment of NHL, CLL, multiple myeloma, metastatic breast cancer and other solid tumors.
In March 2008, the FDA approved TREANDA for the treatment of patients with CLL. The FDA granted an orphan drug designation to TREANDA for this indication. CLL is a slowly progressing blood and bone marrow disease with an estimated 15,000 new cases diagnosed every year in the United States, according to the National Cancer Institute (the "NCI").
In October 2008, the FDA approved TREANDA for the treatment of patients with indolent B-cell NHL who have progressed during or within six months of treatment with rituximab or a rituximab-containing regimen. NHL occurs when lymphatic cells divide too much and too fast. Growth control is lost, and the lymphatic cells may overcrowd, invade and destroy lymphoid tissues and spread to other organs. There are two broad subtypes of NHL—indolent, also referred to as slow growing or low-grade, and aggressive or high-grade. Indolent disease may "transform" into a more aggressive condition. According to the NCI, an estimated 30,000 people in the United States were diagnosed in 2008 with indolent NHL, which is difficult to treat because patients are prone to relapse after treatment.
Over the past few years, we have incurred significant expenditures related to conducting clinical studies to develop new pharmaceutical products and to explore the utility of our existing products in treating disorders beyond those currently approved in their respective labels. In 2010, we expect to continue to incur significant levels of research and development expenditures. We also expect to continue or begin a number of significant clinical programs including: studies of TREANDA in combination with RITUXAN as a front-line treatment for NHL and a Phase I/II clinical study for the treatment of multiple myeloma in combination with Velcade®. While not a currently approved indication by the FDA, TREANDA in combination with RITUXAN was recently listed in the 2010 NCCN clinical practice guidelines as a front-line treatment for NHL. We believe the guidelines listing was the result of an independent Phase III clinical study conducted by the German Study Group for Indolent Lymphomas ("StiL Group") in Giessen, Germany. The StiL Group's study results announced in December 2009 indicated better tolerability and more than a 20-month improvement in median progression free survival in patients treated with TREANDA in combination with rituximab versus CHOP in combination with rituximab for the first-line treatment of patients with advanced follicular, indolent, and mantle cell lymphomas, each of which is not currently an FDA-approved indication.
Intellectual Property Position
We received a five year New Chemical Entity exclusivity which prevents the FDA from accepting an ANDA for this product for a period of five years from the date of approval (four years if the ANDA contains a Paragraph IV certification). In August 2007, the FDA granted orphan drug status for TREANDA for the treatment of CLL. The orphan drug designation provides a seven-year period of marketing exclusivity for the treatment of CLL with TREANDA until March 2015. We are also prosecuting method of treatment, polymorph, manufacturing and formulation patent applications relating to bendamustine. We also hold rights to the TREANDA trademark.
Manufacturing and Product Supply
We have one third-party supplier of the active drug substance bendamustine hydrochloride and one third-party supplier of finished supplies of TREANDA. In addition, we will seek to qualify additional manufacturers as may be necessary to meet commercial demands and to protect against supply disruptions. We also seek to maintain inventories of active drug substance and finished products to protect against supply disruptions.
TREANDA competes with traditional methods of treating indolent NHL, including treatments involving chemotherapy with a combination of drugs such as cyclophosphamide, vincristine and prednisolone and with drugs currently marketed (such as BEXXAR® (131-I tositumomab) by GlaxoSmithKline) or being developed to treat indolent NHL refractory to rituximab. With respect to CLL, TREANDA competes with Leukeran® (chlorambucil) by GlaxoSmithKline, Campath® (alemtuzumab) by Bayer Healthcare Pharmaceuticals and, although not currently approved for the treatment of CLL but used for the treatment of CLL, the combination therapy of fludarabine, cyclophospharmide and rituximab.
In July 2005, we acquired substantially all of the assets related to the TRISENOX injection business from Cell Therapeutics, Inc. TRISENOX was approved for marketing in the United States and Europe in 2000 and 2002, respectively, for the treatment of patients with relapsed or refractory acute promyelocytic leukemia ("APL"), a life threatening hematologic cancer. APL is one of eight subtypes of acute myeloid or myelogenous leukemia ("AML"). According to the American Cancer Society, approximately 13,000 patients are diagnosed with AML in the United States every year, 10 to 15% of whom will have the APL subtype. Research indicates that approximately 10 to 30% of patients with APL will not respond to, or will relapse from, first-line therapy.
TRISENOX is a highly purified salt of arsenic, a natural element. TRISENOX appears to have multiple targets and mechanisms of antileukemic activity; it degrades a protein that causes abnormal levels of immature white blood cells while simultaneously forcing immature cancer cells to self-destruct through a process called programmed cell death or apoptosis. Apoptosis is a normal part of a cell's life cycle. Because cancer is often associated with a malfunction of the normal process of apoptosis, drugs that can induce apoptosis offer the hope of affecting cancer cells more selectively without the typical toxic side effects of conventional treatments. Direct induction of apoptosis represents a relatively new method of killing tumor cells that is different than the majority of conventional cancer drugs. As a result, in addition to its use as a single-agent therapy, TRISENOX may work well when administered in combination with other cancer therapies to produce more durable response rates.
In January 2007, the National Cancer Institute (the "NCI") and one of its Cooperative Clinical Trial Groups announced positive results from a clinical trial using TRISENOX in newly diagnosed patients with APL. According to the NCI, the results of the trial showed that adult patients with previously untreated APL who had standard chemotherapy to induce remission of their disease, and who then received TRISENOX to maintain remission, had significantly better event-free survival and better overall survival than those who received only standard chemotherapy.
Intellectual Property Position
We have a license to patents and patent applications covering methods of treating APL with the active ingredient arsenic trioxide that expire in 2018. We also hold rights to the TRISENOX trademark.
Manufacturing and Product Supply
We have one third-party manufacturer that produces the active drug substance arsenic trioxide for us and one third-party manufacturer that provides finished commercial supplies of TRISENOX to us in the United States and Europe. We seek to maintain inventories of active drug substance and finished products to protect against supply disruptions.
The pharmaceutical market for the treatment of patients with relapsed or refractory APL is served by a number of available therapeutics, such as VESANOID® by Roche Laboratories Inc. in combination with chemotherapy.
In November 2008, we entered into an option agreement (the "ImmuPharma Option Agreement") with ImmuPharma plc providing us with an option to obtain an exclusive, worldwide license to the investigational medication LUPUZOR™ for the treatment of systemic lupus erythematosus ("Lupus"). In January 2009, we exercised the option and entered into a Development and Commercialization Agreement (the "ImmuPharma License Agreement") with ImmuPharma based on a review of interim results of a Phase IIb study for LUPUZOR. Under the terms of the ImmuPharma Option Agreement, we paid ImmuPharma a $15.0 million upfront option payment upon execution and paid a one-time $30.0 million license fee in February 2009. Under the ImmuPharma License Agreement, ImmuPharma may receive (i) up to approximately $500 million in milestone payments (including the option and license fees) upon the achievement of regulatory and sales milestones and (ii) royalties on the net sales of LUPUZOR. We will assume all expenses for the additional Phase II and Phase III clinical studies, regulatory filings and, assuming regulatory approval, subsequent commercialization of the product.
Lupus is an autoimmune disease causing various effects throughout different parts of the body. Its severity can range from very mild to extremely serious depending on which body organs are afflicted. The Lupus Foundation of America estimates that 1.5 million Americans have a form of Lupus. Approximately 90 percent of those diagnosed with the disease are women. Lupus is two to three times more prevalent among people of color, including African-Americans, Hispanics/Latinos, Asians, and Native Americans. LUPUZOR has shown that it modulates, through a unique mechanism, a specific subset of CD4 T cells which may play a critical role in the physiopathology of Lupus. Patents for LUPUZOR have been approved in Europe, Japan and Australia, and have been applied for in the United States.
In November 2009, ImmuPharma issued a press release announcing the final results for its Phase IIb clinical study for LUPUZOR for the treatment of Lupus. In its press release, ImmuPharma stated that in an intention to treat ("ITT") analysis, LUPUZOR administered at 200 mcg once a month for 3 months plus standard of care achieved a clinically significant improvement (p = 0.048) in patient response rate compared to placebo plus standard of care as measured by a combined score, which is defined by: (1) a reduction from baseline of at least 4 points on the 2K-SLEDAI disease activity scale (which reduction indicates a clinically important reduction in Lupus disease activity); (2) no worsening of disease as measured by the Physician's Global Assessment (worsening defined as an increase of 0.30 points or more from baseline); and (3) no new BILAG A organ domain score (which indicates a severe flare of Lupus disease activity) and no more than one new BILAG B organ domain score (which indicates a moderate flare of Lupus disease activity). ImmuPharma also stated that the greatest improvement was seen in patients with moderate to severe Lupus. In this subgroup, which was 90% of the ITT population, LUPUZOR administered at 200 mcg once a month achieved a statistically significant improvement in patient response rate compared to placebo (p=0.016). Consistent with previous studies, LUPUZOR was generally well tolerated, with no significant drug related adverse events reported.
We expect to commence a large Phase IIb study for LUPUZOR in the second quarter of 2010.
CEP-37247 is a new generation tumor necrosis factor (TNF) alpha blocker in development to treat patients with sciatica. CEP-37247 is based on a new type of therapeutic protein called a domain antibody. CEP-37247 is the first product incorporating domain antibodies (dAb) to be used in human trials. Domain antibodies exhibit the binding properties to a target characteristic of a full-sized antibody, but are considerably smaller. This smaller size has several possible advantages including improved manufacturing yield, lower immunogenicity and improved tissue penetration. We acquired CEP-37247 as part of our acquisition of Arana in August 2009.
Effective November 2009, we signed an agreement with BioAssets Development Corporation ("BDC") that sets forth our option to acquire BDC. Under the terms of the option agreement, we paid BDC an upfront payment of $30.0 million. If we exercise the option, we have agreed to pay a total of $12.5 million plus the value of BDC's net working capital less the amount of any outstanding debt. BDC stockholders could also receive additional future payments related to regulatory and sales milestones. BDC is currently conducting a Phase II placebo-controlled proof of concept study with the tumor necrosis factor (TNF) inhibitor, etanercept, epidurally administered to a minimum of 40 patients with sciatica. Sciatica is a neuropathic inflammatory pain condition that occurs when the sciatic nerve is compressed, injured or irritated. BDC has secured an intellectual property estate around use of TNF inhibitors for sciatic pain in patients with intervertebral disk herniation, as well as other spinal disorders. We may exercise our option at any time from the closing date of the option agreement until the date that is 60 days after receipt of one-month patient response data from BDC's Phase II study. Data are anticipated to be available in the second half of 2010.
If we acquire BDC, we expect to utilize the BDC intellectual property and expertise to evaluate CEP-37247 for the treatment of sciatica. Most often the result of a herniated spinal disc or spinal stenosis, sciatica is a set of symptoms typically defined by a sharp or burning pain radiating down the leg. Sciatica is the major form of radiculopathy, which occurs when a nerve root that connects to the sciatic nerve is compressed, injured or irritated. TNF is thought to be a major mediator of pain in radiculopathy.
In September 2009, a Phase II study for the treatment of psoriasis was completed, with repeat doses of CEP-37247 being generally well-tolerated and exhibiting an efficacy safety profile consistent with anti-TNF activity. We are also examining CEP-37247 as a possible treatment for rheumatoid arthritis.
CINQUIL (reslizumab) is an investigational humanized monoclonal antibody (mAb) against interleukin-5 (IL-5). IL-5 has been shown to play a crucial role in the maturation, growth and chemotaxis (movement) of eosinophils, inflammatory white blood cells implicated in a number of allergic diseases. We hold an option to acquire Ception Therapeutics, Inc. ("Ception"), the developer of CINQUIL. For more information regarding the Ception option, please see Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations—Recent Acquisitions and Transactions", which is incorporated herein by reference.
A Phase II study of CINQUIL in eosinophilic asthma is ongoing, with top-line results expected in the first quarter of 2010. The parties have agreed to extend Cephalon's option exercise period until a specified period of time after delivery of the top-line results for the Phase II eosinophilic asthma study. Eosinophilic airway inflammation is a common feature in patients with asthma and is generally responsive to inhaled corticosteroids treatment. Certain patients with severe asthma suffer persistent eosinophilic airway inflammation that is resistant to inhaled corticosteroids treatment. These patients suffer from airway remodeling, impaired lung function, more frequent asthma exacerbations and near-fatal asthma attacks and require additional anti-inflammatory therapies to address persistent symptoms and associated poor prognosis.
In November 2009, we, together with Ception, announced results from a Phase IIb/III clinical trial for CINQUIL as a treatment for pediatric eosinophilic esophagitis ("EE"). The study was designed to evaluate improvement in the co-primary endpoints of changes in esophageal eosinophil levels and clinical symptoms. The four-month, double-blind, placebo-controlled clinical trial evaluated the efficacy and safety of CINQUIL in 226 pediatric patients between five and 18 years of age with poorly controlled EE. Study participants were randomized to receive one of three dose levels of CINQUIL (1 mg/kg, 2 mg/kg, and 3 mg/kg) or placebo. The reduction of esophageal eosinophils was marked in all active groups, with statistically significant reductions of peak esophageal eosinophils (p<0.0001) at all dose levels compared to placebo. All active groups also experienced improvement in the physician global assessment of their symptoms. However, the placebo cohort also demonstrated improvement in their physician global assessment; therefore, there were no statistically significant differences between the active groups and the placebo group for this endpoint.
We market and sell directly or through partnerships 30 different branded products in over 50 countries in Europe, the Middle East and Africa and have a strong presence in the five key European pharmaceutical markets: France, Germany, Italy, Spain and the United Kingdom, and affiliates in Benelux and Poland. For the year ended December 31, 2009, aggregate net sales outside the United States accounted for 18% of our total consolidated net sales. In 2009, our largest products in terms of net product sales outside the United States are shown in the table below. Together, these products accounted for 81% of our total European segment net sales and 14% of our total consolidated net sales for the year ended December 31, 2009.
As of December 31, 2009, we had a total of 3,026 full-time employees, of which 2,107 were employed in the United States, 851 were located at our facilities in Europe and 68 were located at our facilities in Australia and Asia. We believe that we have been successful in attracting skilled and experienced personnel; however, competition for such personnel is intense.