Market Overview

In 2010, more than 50,000 organ transplants were conducted in the United States, Japan, the United Kingdom, France, Germany, Italy and Spain.

The immunosuppression market comprises several different classes of compounds. The main class of immunosuppressants are the calcineurin inhibitors (CNIs), which includes tacrolimus (Prograf and Advagraf® (Astellas Pharma Inc.) and generics of Prograf) and cyclosporine (Neoral® and Sandimmune® (Novartis AG) and generics). The worldwide sales of non-generic Prograf and Advagraf were reported by Astellas Pharma Inc. to be JPY 154 billion (approximately USD 1.95 billion) for 2011 (Astellas Pharma Inc. Annual Report FY 2011). Sales of non-generic cyclosporine (Neoral and Sandimmune), for which generic versions have been available since 2000, were reported as being USD 903 million for 2011 (Novartis AG Annual Report FY 2011).

The CNIs are the principle class of agents that will compete with LCP-Tacro for sales, together with Nulojix® (belatacept) which was launched by Bristol-Myers Squibb Company ("BMS") in 2011 and achieved sales of USD 3 million (BMS Annual Report 2011).

In addition to these agents, patients will get additional drugs in addition to their CNIs. These include the anti-metabolites that include CellCept® and generic versions of mycophenolate mofetil, as well as myfortic (mycophenolate sodium), and the TOR inhibitors Rapamune® (sirolimus; Wyeth LLC) and Certican® (everolimus). CellCept (Hoffmann-LaRoche AG) achieved sales of USD 1.4 billion for 2010, while Novartis AG reported sales of USD 518 million for myfortic for 2011 (Novartis AG Annual Report FY 2011). Pfizer Inc. reported sales of USD 372 million for Rapamune for 2011 (Pfizer Inc. Annual Report FY 2011) while Novartis AG reported sales of USD 46 million for Certican (Novartis AG Annual Report FY 2011).

The transplant marketplace in the United States is ideally suited for a small and well-focused selling effort and the clinical practice of transplant medicine leads to a unique commercialisation opportunity. Transplants are generally performed at a small number of highly specialised centres, of which there are approximately 250 in the entire United States.

Patents waiting for a transplant will often travel considerable distances for transplant at one of these few centres. As such, a limited number of sales representatives can cover the majority of the centres. During a sales visit, a representative can effectively call upon all professionals involved in the transplant process including surgeons, nephrologists, infectious diseases specialists and pharmacists. On a targeted basis, community nephrologists with large numbers of transplant patients would also be included for field force coverage.

Over the past 20 years, a number of new immunosuppression medications have been approved, increasing the number of options available and facilitating a noticeable evolution in therapeutic protocols. While CNIs continue to be used for maintenance immunosuppression in most patients, there has been a change in the preference of CNI used, from cyclosporine to Astellas Pharma Inc.'s tacrolimus (Prograf).

Immunosuppression can be achieved with many different drugs, including steroids, targeted antibodies and CNIs like tacrolimus. Of these immunosuppressants, tacrolimus is one of the most potent in terms of suppression of the immune system. Tacrolimus for systemic use is currently available worldwide as a twice-daily dosage formulation, Prograf (Astellas Pharma Inc.), and in Europe, since June 2007, it has also been available as a once-daily dosage formulation, Advagraf (Astellas Pharma Inc.). Advagraf attained EUR 144 million in sales in 2011 in the European Union (Astellas Pharma Inc. FY2011 Financial Results). Astellas Pharma Inc. received, with respect to Advagraf, approvable letters from the FDA in January 2007 for the prevention of organ rejection in kidney and liver transplants, in March 2008 (for the prevention of organ rejection in kidney transplants) and May 2008 (for the prevention of organ rejection in liver transplants). However, as at the date of this Offering Circular, Advagraf has not been approved for marketing in the United States.

A new infusional biologic agent, Nulojix (belatacept, BMS) achieved U.S. and EU approval in June 2011. However, the initial sales were modest with BMS reporting 2011 sales for Nulojix of USD 3 million (BMS FY2011 Financial Results). The 2012 sales continue to be modest, with BMS reporting first half sales of only USD 4 million (BMS 2Q 2012 Financial Results).

The current market consists of Astellas Pharma Inc.'s Prograf (twice-daily) and generic equivalent tacrolimus products, as well as Astellas Pharma Inc.'s Advagraf (once-daily), which is currently marketed outside the United States and would likely be a key competitive product to LCP-Tacro in, specifically, countries within the European Union. In particular, major pharmaceutical companies such as Sandoz (a Novartis AG company), Accord Healthcare Ltd., Watson Pharmaceuticals, Inc., Dr. Reddy's Laboratories Ltd. and Mylan Laboratories, Inc. are active generic market participants in the immunosuppression market.

At present, there is no once-daily version of tacrolimus available in the United States. In September 2012, Astellas Pharma Inc. announced that they had submitted an application to the FDA seeking approval in the United States for tacrolimus extended release capsules (Advagraf) for the prophylaxis of organ rejection in adult kidney transplant recipients and adult male liver transplant recipients. Generic versions of Prograf became available in the United States in 2009 and in the European Union in 2010. Generics have attained a 64% share of the tacrolimus market in the United States as at 12 April 2012 (source: Astellas Pharma Inc. FY2011 Financial Results). LCP-Tacro will not be an AB-rated generic equivalent of tacrolimus, and therefore generics of tacrolimus cannot automatically substitute for LCP-Tacro.