Corium International, Inc.

In June 2017, Agile resubmitted its NDA with the results of an additional Phase 3 clinical trial that had been recommended by the FDA in 2013. On December 22, 2017, Agile disclosed that the FDA had issued a Complete Response Letter, or CRL, in response to the resubmission of its NDA, which stated that the FDA could not approve Agile’s NDA in its current form.  Agile further disclosed that it met with the FDA in April 2018 to discuss the deficiencies in the Twirla NDA and the regulatory path for approval of Twirla, and that the FDA informed Agile that it continued to have significant concerns regarding the adhesion properties of Twirla in Agile’s clinical trials, and that Agile needed to address the Twirla in vivo adhesion properties by reformulating the transdermal system and conducting a formal adhesion study with the new formulation. In June 2018, Agile submitted a formal dispute resolution request to the FDA.  The dispute pertains to the determination from the FDA’s reviewing Division of Bone, Reproductive and Urologic Products, or DBRUP, that concerns surrounding the in vivo adhesion properties of Twirla prevent its approval and cannot be addressed through Agile’s proposed patient compliance programs.  In July 2018, Agile reported that the Office Director of the FDA’s Office of Drug Evaluation III, or ODEIII, has affirmed the position of DBRUP and denied their appeal of the CRL.  In addition, Agile disclosed that it intends to appeal the ODEIII decision to the Office of New Drugs. We continue to work with Agile as it pursues the dispute resolution process for Twirla. 

On December 22, 2017, Agile disclosed that the FDA had issued a Complete Response Letter in response to the resubmission of its NDA, which stated that the FDA could not approve Agile’s NDA in its current form. Agile reported that the CRL identified deficiencies relating to quality adhesion test methods, the need for Agile to address whether the in vivo adhesion properties of Twirla may have contributed to the SECURE Phase 3 clinical trial results, and also stated that observations noted during an inspection of our facility must be resolved. Agile further reported that the CRL also recommended that Agile address the implications of clinical trial subject patch compliance, and withdrawal and dropout rates. Agile has disclosed that it has met with the FDA in April 2018 in a Type A meeting to discuss the deficiencies in the Twirla NDA and the regulatory path for approval of Twirla, and the FDA informed Agile that it continued to have significant concerns regarding the adhesion properties of Twirla in Agile’s clinical trials, and that Agile needed to address the Twirla in vivo adhesion properties by reformulating the transdermal system and conducting a formal adhesion study with the new formulation. In June 2018, Agile submitted a formal dispute resolution request to the FDA. The dispute pertains to the determination from the FDA’s reviewing Division of Bone, Reproductive and Urologic Products, or DBRUP, that concerns surrounding the in vivo adhesion properties of Twirla prevent its approval and cannot be addressed through Agile’s proposed patient compliance programs. In July 2018, Agile reported that the Office Director of the FDA’s Office of Drug Evaluation III, or ODEIII, has affirmed the position of DBRUP and denied their appeal of the CRL. In addition, Agile disclosed that it intends to appeal the ODEIII decision to the Office of New Drugs. We cannot assure you that Agile will be able to ultimately obtain regulatory approval for the Twirla product candidate, or that we will receive FDA approval to manufacture the product. If we or Agile fail to achieve any of these critical activities, or experience significant delays in doing so, our near-term growth prospects would be limited, and it would create uncertainty around the value and usefulness of the Twirla manufacturing facility and equipment.

We are exposed to the risk that our employees, partners, independent contractors, principal investigators, consultants, vendors and CROs may engage in fraudulent or other illegal activity. Misconduct by these parties could include intentional, reckless and/or negligent conduct or unauthorized activity that violates: (1) FDA regulations, including those laws requiring the reporting of true, complete and accurate information to the FDA; (2) manufacturing standards; (3) federal and state healthcare fraud and abuse laws and regulations; or (4) laws that require the true, complete and accurate reporting of financial information or data. Activities subject to these laws also involve the improper use of information obtained in the course of clinical trials, or illegal misappropriation of drug product, which could result in regulatory sanctions and serious harm to our reputation. We have dismissed employees in the past for improper handling and theft of our product components, and although we reported their actions to all relevant authorities, any similar incidents or any other conduct that leads to an employee receiving an FDA debarment could result in a loss of business from our partners and severe reputational harm. We have adopted a code of business conduct and ethics, but it is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of civil, criminal and administrative penalties, damages, monetary fines, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, and curtailment of our operations, any of which could adversely affect our ability to operate our business and our results of operations.

On December 22, 2017, Agile announced that the FDA had issued a Complete Response Letter in response to the resubmission of their NDA, which stated that the FDA could not approve Agile’s NDA in its current form. Agile disclosed that the CRL identified deficiencies relating to quality adhesion test methods, the need for Agile to address whether the in vivo adhesion properties of Twirla may have contributed to the SECURE Phase 3 clinical trial results, and also stated that the observations noted during the inspection of our facility must be resolved. Agile further reported that the CRL also recommended that Agile address the implications of clinical trial subject patch compliance and withdrawal and dropout rates. Agile disclosed that it has met with the FDA in April 2018 in a Type A meeting to discuss the deficiencies in the Twirla NDA and the regulatory path for approval of Twirla, and the FDA informed Agile that it continued to have significant concerns regarding the adhesion properties of Twirla in Agile’s clinical trials, and that Agile needed to address the Twirla in vivo adhesion properties by reformulating the transdermal system and conducting a formal adhesion study with the new formulation. In June 2018, Agile submitted a formal dispute resolution request to the FDA. The dispute pertains to the determination from the FDA’s reviewing Division of Bone, Reproductive and Urologic Products, or DBRUP, that concerns surrounding the in vivo adhesion properties of Twirla prevent its approval and cannot be addressed through Agile’s proposed patient compliance programs. In July 2018, Agile reported that the Office Director of the FDA’s Office of Drug Evaluation III, or ODEIII, has affirmed the position of DBRUP and denied their appeal of the CRL.  In addition, Agile disclosed that it intends to appeal the ODEIII decision to the Office of New Drugs. Even if Twirla is eventually approved by the FDA, Mylan has successfully marketed a generic version of the Ortho Evra contraceptive patch since April 2014, so the Twirla product may face established competition in the contraceptive patch market. In addition, the FDA conducted a pre-approval inspection of our manufacturing facility for the Twirla NDA in the fall of 2017 and we have not yet received approval for commercial manufacture of the Twirla product. We cannot assure you that Agile will be able to obtain regulatory approval for the Twirla product, or successfully launch and commercialize the product, or that we will receive approval to manufacture the product, any of which would limit our near-term growth prospects, and would create uncertainty around the value and usefulness of our Twirla manufacturing facility and equipment. We have one partnered product candidate that is the subject of a pending ANDA submitted by our partner to the FDA, and other product candidates in clinical development. The research, testing, manufacturing, labeling, approval, sale, marketing and distribution of drug products are subject to extensive regulation by the FDA and other regulatory authorities in the United States and in foreign countries. Obtaining approval of an NDA or ANDA (or foreign equivalents) is a lengthy, expensive and uncertain process. The FDA and other regulatory authorities in foreign countries also have substantial discretion in the drug approval process, including the ability to delay, limit or deny approval of a product candidate for many reasons.

Likewise, the annual Medicare Physician Fee Schedule update, which, until recently, was based on a target-setting formula system called the Sustainable Growth Rate, or SGR, was adjusted to reflect the comparison of actual expenditures to target expenditures. Because one of the factors for calculating the SGR was linked to the growth in the U.S. gross domestic product, or GDP, the SGR formula often resulted in a negative payment update when growth in Medicare beneficiaries’ use of services exceeded GDP growth. Congress repeatedly intervened to delay the implementation of negative SGR payment updates. For example, on April 1, 2014, with the enactment of the Protecting Access to Medicare Act of 2014, Congress prevented the 24% cut that was to occur by continuing the previously implemented 0.5% payment increase through December 31, 2014 and maintaining a 0% payment update from January 1, 2015 through March 31, 2015. However, on April 14, 2015, Congress passed the Medicare Access and CHIP Reauthorization Act of 2015, which was signed into law by President Obama on April 16, 2015. This law repeals the SGR methodology from the physician payment formula, institutes a 0% update to the Medicare Physician Fee Schedule for the January 1 to July 1, 2015 period, a 0.5% payment update for July 2015 through the end of 2019, and a 0% payment update for 2020 through 2025. For 2026 and subsequent years, the payment update will be either 0.75% or 0.25%, depending on which Alternate Payment Model the physician participates. The Bipartisan Budget Act of 2018 reduces the payment update for 2019 from 0.5% to 0.25%. In addition, there is increasing legislative attention to opioid abuse in the United States, including passage of the 2016 Comprehensive Addiction and Recovery Act and the 21st Century Cures Act, or the Cures Act, which, among other things, strengthens state prescription drug monitoring programs and expands educational efforts for certain populations. The Cures Act, which was signed into law on

December 13, 2016 also, among other things, requires the manufacturer of an investigational drug for a serious disease or condition to make available, such as by posting on its website, its policy on evaluating and responding to requests for individual patient access to such investigational drug. This requirement applies on the later of 60 calendar days after the date of enactment of the Cures Act or the first initiation of a Phase 2 or Phase 3 trial of the investigational drug.