February
6, 2009
Mr. Jim
B. Rosenberg
Senior
Assistant Chief Accountant
Division
of Corporation Finance
U.S.
Securities and Exchange Commission
Washington,
DC 20549
Mail
Stop: 6010
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Re:
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Acura
Pharmaceuticals, Inc.
Form
10-K for Fiscal Year Ended December 31, 2007
Filed
March 5, 2008
File
No. 001-10113
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Dear Mr.
Rosenberg:
On behalf
of Acura Pharmaceuticals, Inc. (the “Company”), I am responding to your letter
to Andrew D. Reddick dated January 28, 2009 (the “Comment Letter”) relating to
the Company’s Annual Report Form 10-K for the year ended December 31, 2007 (the
“Form 10-K”) filed by the Company on March 5, 2008. We have
reproduced below the sole comment contained in the Comment Letter and have
provided our response:
Consolidated
Financial Statements, page F-1
Notes to
Consolidated Financial Statements, page F-8
Note B –
License, Development and Commercialization Agreement, page F-14
1. Refer
to your response to our Comment number four. On page 40, under
Revenue Recognition and Deferred Program Fee Revenue, you state that you “have
assigned a portion of the program fee revenue to each of the product candidates
included under the Agreement and recognize the program fee revenue ratably over
our estimate of the development period for each of the products under the
Agreement with King.” You disclose that this development period ends
in November 2009. In your Response Letter you state that “With King’s
oversight, we will conduct all Acurox Tablet development activities through
approval of a 505(b)(2) New Drug Application
(“NDA”)…” Please disclose what specific factors you applied in
arriving at the November 2009 end of the development period for each product
candidate. Include how you are able to determine that the NDA will be
approved by that time. Describe the nature and extent of your
obligations under the agreement after the NDA is approved.
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Response
to Comment
Please
disclose what specific factors you applied in arriving at the November 2009 end
of the development period for each product candidate.
Our
Agreement with King includes four distinct products identified as Product A,
Product B, Product C and Product D. The Agreement requires that we
develop at least three of the four products. Products were assigned a
revenue amortization period as follows:
Product
A: Pursuant to the Agreement, we are responsible for
conducting all development for Product A through regulatory approval by the Food
and Drug Administration ("FDA") of a NDA for Product A. Upon
execution of the Agreement, we assigned $10 million of the upfront $30 million
payment to our development efforts for Product A. We had a plan to
complete the required testing for Product A and submit an NDA to the FDA by
December 2008. Assuming a December 2008 NDA submission and a 10 month
FDA review of the NDA pursuant to the Prescription Drug User Fee Act ("PDUFA")
we would obtain regulatory approval of the Product A NDA in November 2009 and
our development obligations for Product A would end. We submitted our
NDA for Product A to the FDA as planned in December 2008 and we continue to
assume a standard FDA review and maintain the amortization period to end in
November 2009.
Product
B: Pursuant to the Agreement, we are responsible for
conducting all development for Product B up to an Investigational New Drug (IND)
application becoming effective for Product B pursuant to 21 C.F.R.
§312.40(b). At execution of the Agreement, we assigned $10 million of
the upfront $30 million payment to our development efforts for Product
B. We had a plan to complete the necessary testing and to submit an
IND for Product B by May 2008. Pursuant to FDA regulation, an IND
automatically becomes effective 30 days following submission unless otherwise
notified by the FDA. As such, we estimated our amortization of the
Product B revenue to end in June 2008. We submitted our IND for
Product B to the FDA as planned in May 2008 and it became effective in June
2008. Thus, we completed the amortization of revenue for Product B in
June 2008 and pursuant to the Agreement, all future development for Product B
will be conducted by King Pharmaceuticals.
Products
C and/or D: Pursuant to the Agreement, we are responsible for
conducting all development to successfully complete a “Proof of Concept” for
Product C and/or
Product D. Thus, we assigned the remaining $10 million of the upfront
$30 million payment to Product D because our development obligation was to
complete a Proof of Concept for either Product C or Product
D. Product D was selected because it was less complex and more
advanced in development than Product C and therefore, had a higher probability
of success. We had a plan to complete the necessary testing to
achieve Proof of Concept for Product D by March 2008. As such, we
estimated our amortization of the Product D revenue to end in March
2008. We completed Proof of Concept for Product D in March 2008 and
submitted the information to King. King subsequently exercised their
option to license Product D in May 2008. As such, we completed our
amortization of the revenue on Product D in March 2008 and pursuant to the
Agreement all future development for Product D will be conducted by King
Pharmaceuticals.
Page 2 of
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Include
how you are able to determine that the NDA [for Product A] will be approved by
that time.
Under
PDUFA, the FDA has a standard statutory review period of 10 months from the
submission of an NDA. The FDA has a 90% success rate of completing
its NDA review within the statutory timeframes. We have no definitive
method of determining the outcome of FDA’s review of our Product A NDA
submission. However, NDA submissions for products similar to Product
A often obtain FDA approval within 10 months after NDA submission.
Describe
the nature and extent of your obligations under the agreement after the NDA is
approved.
After our
development obligations for each Product are completed, King Pharmaceuticals is
responsible for conducting all further product development activities and for
manufacturing (or having manufactured), distributing, selling, marketing,
invoicing and collections relating to licensed products. We and King
conduct joint steering committee meetings to review development budgets and
commercial progress of the products. King has final decision making authority
with respect to all development and commercialization activities for all
products licensed under the Agreement. In light of the requirements
of Emerging Issues Task Force, Issue No. 00-21, “Revenue Arrangements with
Multiple Deliverables” (“EITF 00-21”), we have concluded that our participation
on the King-Acura Joint Steering Committee has no standalone value and,
therefore, it does not meet the criteria to be considered a separate unit of
accounting.
On behalf
of the Company we acknowledge that:
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the
Company is responsible for the adequacy and accuracy of the disclosure in
the filings;
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staff
comments or changes to disclosure in response to staff comments do not
foreclose the Commission from taking any action with respect to the
filings; and
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the
Company may not assert staff comments as a defense in any proceeding
initiated by the Commission or any person under the federal securities
laws of the United States.
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Page 3 of
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We trust
the supplemental response provided above adequately addresses the Staff’s
inquiry. Please contact me with any clarifications you may
require.
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Sincerely,
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/s/
John P. Reilly
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John
P. Reilly
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JPR/rr
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cc:
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James
Peklenk
Joel
Parker
Laura
Crotty
Suzanne
Hayes
Andrew
Reddick, CEO
Robert
Jones, COO
Peter
Clemens, CFO
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