Form 10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2010
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File No. 001-32157
ADVENTRX Pharmaceuticals, Inc.
(Exact name of registrant as specified in its charter)
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| Delaware
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84-1318182 |
| (State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.) |
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| 12390 El Camino Real, Ste 150, San Diego, CA
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92130 |
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(Zip Code) |
(858) 552-0866
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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| Title of each class:
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Name of each exchange on which registered: |
| Common Stock, par value $0.001 per share
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NYSE Amex LLC |
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule
405 of the Securities Act. Yes o No þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the Act. Yes o No þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter periods that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files).
Yes o No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K
(§229.405 of this chapter) is not contained herein, and will not be contained, to the best of
registrant’s knowledge, in definitive proxy or information statement incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated
filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
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Accelerated filer o
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Non-accelerated filer o
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Smaller reporting company þ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes o No þ
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the
registrant as of June 30, 2010 was approximately $24.0 million based upon the closing price of the
registrant’s common stock on the NYSE Amex reported for such date. Shares of the registrant’s
common stock held by each officer and director of the registrant and by each person or entity who
is known by the registrant to own beneficially 5% or more of the registrant’s outstanding common
stock have been excluded for purposes of the foregoing calculation on the basis that such persons
and entities may be deemed to be affiliates of the registrant. This determination of affiliate
status is not necessarily a conclusive determination for other purposes.
As of March 1, 2011, the registrant had 23,664,858 shares of its common stock issued and
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive proxy statement to be filed subsequent to the date hereof
with the Securities and Exchange Commission pursuant to Regulation 14A in connection with the
registrant’s 2011 annual meeting of stockholders are incorporated by reference into Part III of
this report. Such definitive proxy statement will be filed with the Commission not later than 120
days after the end of the registrant’s fiscal year ended December 31, 2010.
Forward-Looking Statements
This Annual Report on Form 10-K, particularly in Item 1 “Business,” and Item 7 “Management’s
Discussion and Analysis of Financial Condition and Results of Operations,” and the information
incorporated herein by reference, include forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of
1934, as amended. All statements, other than statements of historical fact, are statements that
could be deemed forward-looking statements, including, but not limited to, statements regarding our
business strategy, expectations and plans, our objectives for future operations and our future
financial position. When used in this report, the words “believe,” “may,” “could,” “will,”
“estimate,” “continue,” “anticipate,” “intend,” “expect,” “indicate,” “seek,” “should” or “would”
and similar expressions are intended to identify forward-looking statements. Among the factors
that could cause or contribute to material differences between our actual results and those
indicated from the forward-looking statements are risks and uncertainties inherent in our business,
including, but are not limited to: the extent to which we acquire new technologies, product
candidates, products or businesses and our ability to integrate them successfully into our
operations; our ability, or that of a future partner, to obtain regulatory approval for our product
candidates and, if approved, to successfully commercialize them in the U.S. and/or elsewhere; our
ability to obtain stockholder approval of the issuance of milestone-related shares in connection
with our acquisition of SynthRx, Inc. on a timely basis, or at all; our ability to obtain
stockholder approval to complete any other product pipeline expansion transaction, if necessary, on
a timely basis, or at all; the potential that we may enter into a merger or other business
combination whereby the stockholders who own the majority of our voting securities prior to the
transaction own less than a majority after the transaction; our ability to obtain additional
funding on a timely basis or on acceptable terms, or at all; the potential that we may enter into
one or more commercial partnerships or other strategic transactions relating to Exelbine and/or
ANX-514, and the terms of any such transactions; the extent to which we rebuild our workforce and
our ability to attract and retain qualified personnel and manage growth; our ability to develop
sales, marketing and distribution capabilities to launch Exelbine, should we obtain regulatory
approval to market it, and any other current or future product candidate, should we obtain
regulatory approval to market any of them and determine to commercialize any of them without a
partner; delays in the commencement or completion of nonclinical testing, bioequivalence or
clinical trials of or manufacturing, regulatory or launch activities related to our product
candidates; the success of future bioequivalence or clinical trials; whether any of our product
candidates for which we receive regulatory approval, if any, achieve broad market acceptance;
competition in the marketplace for our products, if any are approved; our ability to maintain our
relationships with the single source manufacturers and suppliers for certain of our product
candidates and their component materials and the ability of such manufacturers and suppliers to
successfully and consistently manufacture and supply, as applicable, our products and their
component materials on a commercial scale, if we receive regulatory approval to commercialize our
product candidates; the satisfactory performance of third parties on whom we rely significantly to
conduct our nonclinical testing and bioequivalence and clinical studies and other aspects of our
development programs; undesirable side effects that our product candidates may cause; our ability
to protect our intellectual property rights with respect to our product candidates and proprietary
technology; claims against us for infringing the proprietary rights of third parties; healthcare
reform measures and reimbursement policies that, if not favorable to our products, could hinder or
prevent our products’ commercial success; potential product liability exposure and, if successful
claims are brought against us, liability for a product or product candidate; our ability to
maintain compliance with NYSE Amex continued listing standards and maintain the listing of our
common stock on the NYSE Amex or another national securities exchange; and and other risks and
uncertainties described in Part I, Item 1A “Risk Factors” of this report.
We have based the forward-looking statements we make on our current expectations and
projections about future events and trends that we believe may affect our financial condition,
results of operations, business strategy, short-term and long-term business operations and
objectives, and financial needs. In light of these risks and uncertainties and our assumptions,
the forward-looking events and circumstances discussed in this report and in the information
incorporated herein by reference may not occur. We cannot guarantee future results, events, levels
of activity, performance or achievement. Accordingly, you are cautioned not to place undue
reliance on forward-looking statements. Except as required by law, we do not intend to update the
forward-looking statements discussed in this report publicly or to update the reasons actual
results could differ materially from those anticipated in these forward-looking statements, even if
new information becomes available in the future.
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PART I
Overview
We are a specialty pharmaceutical company focused on acquiring, developing and commercializing
proprietary product candidates. We have not yet marketed or sold any products or generated any
significant revenue.
Our lead product candidates, Exelbine™ (vinorelbine injectable emulsion), or ANX-530, and
ANX-514 (docetaxel emulsion for injection), are novel emulsion formulations of currently marketed
chemotherapy drugs. We believe Exelbine and ANX-514 may improve the safety of the currently
marketed reference products, Navelbine® (vinorelbine tartrate) Injection and Taxotere® (docetaxel)
Injection Concentrate, respectively.
In November 2010, we submitted a new drug application, or NDA, for Exelbine to the U.S. Food
and Drug Administration, or FDA, and in January 2011, we announced that the FDA accepted the
Exelbine NDA for filing and established a Prescription Drug User Fee Act, or PDUFA, goal date of
September 1, 2011 to finish its review of the Exelbine NDA.
In February 2011, we met with the FDA to discuss ANX-514 and the data package we presented to
FDA to support approval of ANX-514 based on data from our bioequivalence study of ANX-514. The FDA
indicated that a randomized safety study comparing ANX-514 and Taxotere would be required to
support approval of ANX-514. The study would be primarily descriptive but with a sample size
sufficient to demonstrate a comparable safety profile. The FDA recommended that the study also
collect data on response rate and duration of response. We are developing a study protocol for
submission to the FDA and intend to continue discussions with the FDA regarding the phase 3
clinical study and other requirements for approval of ANX-514.
In 2010, we additionally began to focus on expanding our product pipeline through one or more
in-license, asset acquisition or merger transactions. In August 2010, we announced that we engaged
the investment banking firm Canaccord Genuity Inc. to advise us in connection with expanding our
product pipeline and that our board of directors formed a special committee to assist the board in
evaluating potential opportunities in this regard. The special committee, the members of which are
Drs. Michael Goldberg, Odysseas Kostas (chair) and Eric Rowinsky, met regularly during the year
with management and Canaccord Genuity to identify and evaluate opportunities and determine whether
to recommend them to the full board of directors.
Pending Acquisition of SynthRx, Inc.
In February 2011, we entered into an agreement and plan of merger to acquire SynthRx, Inc., a
privately-held company developing a purified form of a rheologic and antithrombotic agent,
poloxamer 188, or 188, in exchange for shares of our common stock. We expect to consummate the
acquisition of SynthRx in the first half of 2011. 188 is a nonionic block copolymer surfactant that
adheres to hydrophobic surfaces that develop when cells are damaged. It has been shown to restore
hydration lattices and minimize the cascade of adhesive, inflammatory and coagulation responses
that cause adhesion of cells, impaired blood flow and tissue ischemia. Improving blood flow in the
microvasculature may benefit patients with sickle cell disease in acute crisis, which is associated
with microvascular occlusion. As discussed in more detail below, we initially intend to develop
purified 188 for the treatment of sickle cell crisis in a pediatric population and, if our
acquisition of SynthRx closes and we are able to reach agreement with the FDA on a study protocol
on a timely basis, we may initiate a phase 3 clinical trial of purified 188 for that indication in
2012.
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Business Strategy
Our goal is to be a successful specialty pharmaceutical company focused on acquiring,
developing and commercializing proprietary product candidates. Currently, we are focused primarily
on oncology and, assuming our acquisition of SynthRx closes, disorders and conditions resulting
from microvascular-flow abnormalities. However, we may pursue other therapeutic areas. Our
near-term goals include consummating our acquisition of SynthRx, preparing for the commercial
launch of Exelbine and reaching agreement with the FDA regarding phase 3 clinical study protocols
for ANX-514 and purified 188, should the SynthRx acquisition close, and initiating the phase 3
studies. Specifically, with respect to our business strategy, we intend to:
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Acquire SynthRx and pursue development of purified 188. We expect to consummate our
acquisition of SynthRx in the first half of 2011. We initially intend to develop
SynthRx’s lead product candidate, purified 188, for the treatment of sickle cell crisis
in a pediatric population. If we consummate our acquisition of SynthRx and we are able
to reach agreement with the FDA on a study protocol on a timely basis, we may initiate
a phase 3 clinical trial of purified 188 for that indication in 2012. |
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Seek regulatory approval for Exelbine in the U.S. In November 2010, we submitted an
NDA for Exelbine to the FDA, and in January 2011, we announced that the FDA accepted
the Exelbine NDA for filing and established a PDUFA goal date of September 1, 2011 to
finish its review of the Exelbine NDA. We plan to work with the FDA to the extent
possible to move Exelbine toward approval. |
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Reach agreement with FDA regarding a phase 3 safety study for ANX-514. Based on our
February 2011 meeting with the FDA to discuss ANX-514, we believe a single, additional,
randomized, phase 3 safety study could support FDA approval of ANX-514. We are
developing a study protocol for submission to the FDA and intend to continue
discussions with the FDA regarding requirements for regulatory approval of ANX-514. |
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Establish sales and marketing capabilities in the U.S. The oncology marketplace in
general, and the anticipated target audience for Exelbine in particular, is
concentrated. We believe a meaningful portion of the potential U.S. market for Exelbine
can be accessed through an experienced sales force that targets key constituents of the
treatment/product-selection decision-making process. In addition, we will evaluate
opportunities to leverage an existing sales force by adding complementary products with
a similar target audience. We have undertaken and expect to continue to undertake
activities to prepare for the commercial launch of Exelbine, including developing
and/or acquiring certain internal sales, distribution and marketing and associated
regulatory compliance capabilities and contracting with third parties to supplement and
enhance our internal capabilities. However, we remain receptive to partnering Exelbine
in the U.S. if presented with terms that we believe would increase its value for our
stockholders. |
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Acquire, develop and commercialize additional product candidates, products and/or
capabilities. We continue to evaluate opportunities to expand our product pipeline and
believe that, due to a challenging capital raising environment, many drug development
programs with substantial potential are available at attractive valuations. We may also
seek to acquire currently-marketed products that could complement our portfolio and
provide a sales and marketing platform for our existing or future product candidates. |
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Pursue additional indications and commercial opportunities for our product
candidates independently and through collaborations. We may increase the value of our
product candidates by seeking approval for label changes and pursuing other commercial
opportunities. For example, beyond sickle cell disease, we believe purified 188 may
have clinical benefits in other acute events related to microvascular-flow
abnormalities, such as heart attack, stroke and hemorrhagic shock. |
Opportunities in Cancer Therapy
Despite recent advances in the treatment of certain tumor types, cancer remains a serious
disease. The Centers for Disease Control and Prevention consistently ranks cancer as the second
most common cause of death in the U.S. The American Cancer Society estimates that, in the U.S. in
2009, almost 1.5 million people were diagnosed with and over 550,000 people died from cancer.
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Exelbine and ANX-514 are designed to improve treatments for cancer patients. Treatment
selection for cancer patients depends on the histology, stage and progression of the disease, along
with the number and types of prior therapies, if any. Treatment options include surgery, radiation,
chemotherapy, hormone therapy and immunotherapy, both alone and in combination with each other.
Treatment of cancer with chemicals is referred to as chemotherapy.
Cancer treatments, including chemotherapy, typically are associated with side effects, some of
which can be severe and, in rare cases, fatal. Not all side effects are the result of an active
ingredient. Many side effects are associated with the manner in which a particular drug’s active
ingredient is formulated — that is, side effects can be associated with the non-active components
required to administer a drug. We believe formulating drugs with less toxic components can reduce
undesirable side effects and provide other advantages. Without compromising the efficacy of a
particular drug’s active ingredient, novel formulations may provide patients with superior
treatment options.
Our Novel Emulsion Formulations
Background and Opportunity
Reformulating existing pharmaceutical products is an increasingly common product
lifecycle-management strategy. Finding new markets for and ways to modify and enhance existing
products is often an essential element of pharmaceutical companies’ efforts to innovate and improve
treatment outcomes in the context of patent expirations and competitive pressures.
Navelbine and Taxotere are intravenously-injected chemotherapy drugs commonly used to treat
solid tumors. We believe the current formulations of these drugs have limitations, such as
phlebitis, erythema, hypersensitivity reactions and fluid retention, that present opportunities for
improvement. We are developing novel ways to formulate the active ingredient underlying each of
these drugs that we believe may improve their safety profiles without adversely affecting efficacy.
In addition, we believe our formulations may provide benefits to patients and practitioners that do
not manifest themselves in traditional measures of safety or efficacy, such as handling and
administration advantages for healthcare practitioners and patients.
Commercialization
Currently, we intend to build a commercial capability in the U.S. focused on Exelbine, as well
as other products that we may develop or acquire. We believe we can achieve our strategic goals
through a targeted approach that combines contracting with oncology group purchasing organizations,
or GPOs, to help create awareness of our products and deploying a specialized, experienced sales
force to call on physicians and nurses at community oncology practices and other organizations with
defined characteristics, such as high vinorelbine use.
In preparing for the potential commercial launch of Exelbine, we expect to develop or acquire
certain internal marketing, distribution and sales capabilities and associated regulatory
compliance capabilities, as well as contract with third parties to supplement and enhance our
internal capabilities.
HCPCS Product Codes and Reimbursement
In the U.S. and elsewhere, healthcare providers, including hospitals, nursing homes and
physician offices, typically purchase and administer to patients the drugs that patients are
restricted from self-administering. Healthcare providers then seek reimbursement, primarily from
third-party payors such as Medicare, Medicaid and private insurance companies. As a result, sales
of physician-administered prescription pharmaceuticals are dependent in large part on the
availability and rate of reimbursement to healthcare providers from third-party payors.
The Healthcare Common Procedure Coding System, or HCPCS, was established to identify and
provide unique codes for healthcare goods and procedures, including codes for injectable oncology
drugs such as Exelbine and ANX-514, should they be approved. Ultimately, the Centers for Medicare
and Medicaid Services, or CMS, is responsible for reviewing and approving applications for new
HCPCS codes for healthcare goods. Generic equivalents of drugs are assigned the same HCPCS product
code as the original drug. Virtually all U.S. payors, including Medicare and private insurance
plans, use the HCPCS, including the product codes assigned by CMS.
In determining a specific reimbursement rate for a drug, CMS publishes an average sales price
for the drug based on manufacturer-reported sales data for all drugs within the same HCPCS product
code, including applicable discounts and rebates, as well as a reimbursement rate, expressed as a
percentage of the average sales price. Because generic equivalents of drugs are assigned the same
HCPCS product code as the original drug, generic competition can be expected to decrease the level
of reimbursement for all drugs with the same HCPCS product code (both the original drug and its
generic equivalents) until price equilibrium is reached. Most private payors use similar methods
for determining reimbursement rates, sometimes based on average wholesale prices or CMS’
published average sales price.
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A key component to our commercial strategy in the U.S. for Exelbine is to obtain a unique
HCPCS product code that is distinct from the HCPCS product code for Navelbine and its generic
equivalents. If our products are provided unique HCPCS product codes, they will be reimbursed based
on their own sales prices, without including sales prices of the applicable reference product or
its generic competition. We believe this will allow for appropriate pricing for our products
relative to competitive products.
Exelbine (vinorelbine injectable emulsion)
Background; Limitations of Current Vinorelbine Formulations
Exelbine is a novel emulsion formulation of the chemotherapy drug, vinorelbine. Navelbine, a
branded formulation of vinorelbine, is approved in the U.S. to treat advanced non-small cell lung
cancer as a single agent or in combination with cisplatin, and approved in the European Union, or
EU, to treat non-small cell lung cancer and advanced or metastatic breast cancer. Generic
equivalents of Navelbine have been available in the U.S. since February 2003.
Navelbine and its generic equivalents are vesicants and often associated with injection site
reactions, including phlebitis, erythema and pain at the site of injection. As reported in the
Navelbine label, injection site reactions occurred in approximately one-third of 365 patients
treated in three clinical studies with Navelbine as a single agent, with 5% of these reactions
categorized as severe.
Exelbine was designed to be a bioequivalent formulation of Navelbine that may reduce the
incidence and severity of injection site reactions to Navelbine. Our formulation emulsifies
vinorelbine into a homogeneous suspension of nanoparticles that is designed to reduce the
interaction between vinorelbine and the venous endothelium during administration into a peripheral
vein, thereby reducing irritation associated with administration of the drug.
Exelbine New Drug Application
We submitted our Exelbine NDA under Section 505(b)(2) of U.S. Federal Food, Drug and Cosmetic
Act, or FDCA, which pathway is discussed below under “Government Regulations — Section 505(b)(2)
New Drug Applications.” As such, in seeking approval of Exelbine, we are relying in part on the
FDA’s findings of safety and effectiveness with respect to Navelbine. We are seeking approval of
Exelbine for the same indications as Navelbine. Our November 2010 Exelbine NDA included data from
one clinical bioequivalence study designed to assess the pharmacokinetic equivalence of Exelbine
and Navelbine, the reference drug for Exelbine, as well as 12 months of site-specific stability
data from our intended commercial manufacturer to support expiration dating, which fulfilled a
request communicated to us by the FDA following our prior submission of the Exelbine NDA in
December 2009. In its refusal-to-file letter relating to our December 2009 Exelbine NDA submission,
the FDA identified only this one chemistry, manufacturing and controls, or CMC, reason for the
refusal to file.
Our decision to continue to develop Exelbine was based in part on positive results from the
bioequivalence study we conducted, which was an open-label, single-dose, cross-over comparison of
Exelbine and Navelbine. The FDA had indicated to us that data from such a study of approximately 28
patients that demonstrated the bioequivalence of Exelbine to Navelbine would be sufficient to
support an NDA. Pharmacokinetic equivalence, the primary endpoint of our bioequivalence study, was
observed between Exelbine and Navelbine. Based on federal regulations and FDA guidance regarding
bioequivalence studies, pharmacokinetic equivalence was demonstrated by a statistical comparison of
both the areas under the curve (AUC) and maximum plasma concentrations (Cmax). In addition, in post
hoc analyses, relative to Navelbine, Exelbine demonstrated a statistically significant reduction in
injection site reactions. Notably, in our study, the incidence of injection site reactions
attributed to Navelbine was consistent with its product label.
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If approved, the drug prescribing information, or “label,” for Exelbine generally will be the
same as for Navelbine, but may reflect differences between Exelbine and Navelbine or data generated
during our bioequivalence trial, including comparative adverse event information. Ultimately,
because the label for Exelbine, if approved, will be based on discussions with the FDA, we cannot
predict with accuracy its final label. After we obtain marketing
approval, we may conduct clinical studies while marketing Exelbine to expand its label in ways
that might increase its use. If any clinical study we conduct, in addition to our bioequivalence
study, is essential to the FDA’s approval of an application to use Exelbine to treat a new
indication, or to support a label change in product use, Exelbine may be eligible for three years
of marketing exclusivity for that indication or use. Marketing exclusivity means that the FDA will
not approve an abbreviated NDA, or ANDA (an ANDA is for a generic drug product), or an NDA
submitted under Section 505(b)(2) of the FDCA during the exclusivity period based on the conditions
of approval of our product.
Market and Opportunity
Based on data from IMS Health, total vinorelbine sold in the U.S. in 2009 was approximately
9.4 million milligrams. We estimate that the current average sales price for generic, or
multi-source, vinorelbine in the U.S. is between $1.40 and $1.50 per milligram. The dollar value
of the U.S. vinorelbine market has varied since 2003, when generic equivalents first became
available in the U.S., in part due to competition among manufacturers of Navelbine and its generic
equivalents. For instance, in September 2009, a new manufacturer of generic Navelbine entered the
U.S. market. According to industry data, the price for this new entrant’s product was lower than
alternatives, which induced a lower average sales price for all products sharing the same HCPCS
product code. To remain price-competitive and, because practitioners are reimbursed by CMS based on
a percentage of average sales price, to prevent practitioners from being reimbursed at a level that
is less than the acquisition cost of their product, other manufacturers may further reduce the
prices for their products. As a result, each new entrant’s pricing strategy may erode the total
dollar value of the entire U.S. vinorelbine market.
As more fully described above under “HCPCS Product Codes and Reimbursement,” if Exelbine is
granted a HCPCS product code that is distinct from the HCPCS product code for Navelbine and its
generic equivalents, Exelbine would not be impacted directly by pricing competition in the way that
products sharing the same HCPCS product code may be impacted. This should provide us the
flexibility to establish an appropriate price for Exelbine and one that is different than the
prices of multi-source vinorelbine. While we have not determined a price for Exelbine if it were
approved by the FDA, we expect decision makers to value its unique formulation as compared to
Navelbine and its generic equivalents, and we anticipate pricing Exelbine in the U.S. between $5
and $10 per milligram. If Exelbine is approved, granted a unique HCPCS product code and priced at a
premium to multi-source vinorelbine, the potential dollar value of the U.S. Exelbine market likely
will be greater than the dollar value of the existing U.S. vinorelbine market, assuming the same
volume of vinorelbine demand.
Our market research, conducted among practicing oncologists and oncology nurses, suggests that
healthcare practitioners prefer and would use a formulation of vinorelbine that reduced or
eliminated injection site reactions while providing comparable efficacy, provided the financial
impact to the practitioner of using such a formulation, relative to alternative formulations, is
neutral or positive. Furthermore, for a variety of reasons, including anticipated frequent
intravenous drug delivery and to avoid injection site reactions and loss of venous access,
Navelbine often is administered through a central line, a more invasive procedure in which a
catheter is inserted into and left for a period of time in a large vein in the neck, chest or
groin. We believe Exelbine ultimately may provide an alternative to placing a central line for
those patients for whom central lines are used primarily to avoid injection site reactions.
FDA Acceptance of Brand Name Exelbine™
In March 2010, we announced that the FDA accepted our proposed proprietary name, “Exelbine,”
for our novel emulsion formulation of the chemotherapy drug vinorelbine. The FDA’s acceptance of
our Exelbine brand name is conditioned upon its review of our Exelbine NDA and its confirmation of
the information in the NDA regarding the safety of interchanging Exelbine with other vinorelbine
injectable products.
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ANX-514 (docetaxel emulsion for injection)
Background; Limitations of Taxotere
ANX-514 is a novel emulsion formulation of the chemotherapy drug, docetaxel. Taxotere, a
branded formulation of docetaxel, is approved to treat breast, non-small cell lung, prostate,
gastric and head and neck cancers. Based on data from IMS Health, sales of Taxotere in 2010 were
$1.2 billion in the U.S. and $2.9 billion
worldwide, making it one of the top-selling anti-cancer agents in the world. However, in the
U.S., patents covering docetaxel expired in 2010 and generic equivalents of Taxotere are expected
to enter the market in 2011.
Despite its demonstrated efficacy and commercial success, the Taxotere formulation has
limitations; principally, toxicity associated with its excipient, polysorbate 80. Docetaxel, the
active ingredient in Taxotere, is lipophilic and practically insoluble in water. Successful
development of the molecule for intravenous administration involved formulating the active
ingredient with polysorbate 80 (1:26 docetaxel:polysorbate 80), a nonionic surfactant used in
parenteral drug formulations as a solvent or solubilizing agent for drugs with poor aqueous
solubility, and further dilution with ethanol.
Taxotere is associated with acute hypersensitivity reactions, ranging widely in incidence and
severity. Taxotere also is associated with fluid retention. Many patients suffer severe (in rare
cases, fatal) hypersensitivity reactions immediately following Taxotere administration. The
occurrence of hypersensitivity reactions has been attributed, in part, to the intrinsic toxic
effects of polysorbate 80; more specifically, to its oxidation products, which are known to cause
histamine release. Even following premedication, which is required for Taxotere therapy as
discussed below, hypersensitivity reactions have been observed, including, in rare cases, fatal
anaphylaxis. Notably, Taxotere is contraindicated for patients with a history of hypersensitivity
reactions to drugs formulated with polysorbate 80. The occurrence of fluid retention may be
explained, in part, by the fact that polysorbate 80 has been shown to increase membrane
permeability.
Taxotere therapy requires premedication with corticosteroids to reduce the severity of
hypersensitivity reactions and the incidence and severity of fluid retention due to the presence of
polysorbate 80 in the Taxotere formulation. The recommended premedication regimen for most cancer
patients consists of oral corticosteroids, such as dexamethasone at 16 mg per day (e.g., 8 mg twice
a day) for three days starting one day prior to Taxotere administration. Glucocorticoids, such as
dexamethasone, affect blood-glucose levels, which can be problematic for diabetic patients, and may
increase the risk of diabetes, osteoporosis and infection.
In addition, we believe that ANX-514 may also have handling and administration advantages for
healthcare practitioners and patients. For example, Taxotere’s label indicates foaming may occur
when mixing Taxotere and the accompanying diluents due to the presence of polysorbate 80. Our
market research suggests foaming is frequent, which can cause delays in administering the drug or
disruption during administration if too much foam is present during administration. Polysorbate 80
also is incompatible with plasticized polyvinyl chloride, or PVC, which is used in making the IV
bags and tubing commonly used to infuse chemotherapy drugs. Polysorbate 80 can leach diethylhexyl
phthalate, a potentially hepatotoxic and carcinogenic acid, from plasticized PVC bags and tubing,
resulting in the addition of diethylhexyl phthalate into the infusion solution. Taxotere’s label
warns against contact between Taxotere and plasticized PVC equipment. As a result, healthcare
providers must have available and remember to use more costly non-PVC supplies to prepare and
administer Taxotere, the costs of which generally are not separately reimbursed.
Potential Benefits of ANX-514
ANX-514 is a novel formulation of docetaxel that has the potential to improve outcomes for
cancer patients. ANX-514 was designed to have clinically comparable release of docetaxel relative
to Taxotere while eliminating the presence of polysorbate 80 and ethanol, both of which are used to
solubilize docetaxel in the Taxotere formulation. The ANX-514 formulation solubilizes docetaxel
using oil droplets comprised of a combination of non-toxic excipients. Docetaxel is contained
within these oil droplets and can be administered intravenously without using detergents as
pharmaceutical vehicles. Once in central circulation, the emulsion is metabolized rapidly, leaving
chemically-identical active ingredient to exert its cytotoxic effect. The rate and extent of
absorption of docetaxel from ANX-514 was designed to be comparable to that of Taxotere, resulting
in similar clinical outcomes attributable to the active ingredient. However, the absence of
polysorbate 80 and ethanol in the ANX-514 formulation has the potential to improve the safety
profile of ANX-514 relative to Taxotere and other formulations of docetaxel that use detergents as
solubilizing agents or that contain alcohol.
A detergent-free docetaxel formulation may provide benefits to cancer patients. ANX-514 may
reduce the incidence and severity of hypersensitivity reactions and delay the onset of fluid
retention. ANX-514 also may minimize other adverse reactions to polysorbate 80, such as
neurotoxicity.
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In addition, high-dose dexamethasone premedication intended to address polysorbate 80-mediated
hypersensitivity reactions and fluid retention may be unnecessary with detergent-free ANX-514.
Avoiding high-dose premedication could benefit diabetics and pre-diabetics (those with impaired
fasting glucose). Dexamethasone and other glucocorticoids are associated with development of
hyperglycemia. A study published in 2009 in the Journal of the National Cancer Institute examined
the effect of dexamethasone on blood glucose levels in 39 women being treated for adjuvant breast
cancer. All patients received 8 mg of oral dexamethasone per cycle for antiemsis, while those in a
docetaxel arm received the recommended 24 mg cumulative dose. Before chemotherapy, none of the
women had blood glucose in either the impaired glucose range or the diabetic range. However, among
women who received the higher dose of dexamethasone, there was a statistically significant increase
in blood glucose levels in later cycles (cycle 5: p<0.001; cycle 6: p=0.002). Following the
fifth cycle, six women had blood glucose levels in the impaired range and eight women had levels
within the diabetic range.
Nonclinical Efficacy and Safety
In nonclinical testing, we demonstrated that ANX-514 reduced hypersensitivity reactions
without impacting pharmacokinetics or antitumor activity when compared to Taxotere. In an animal
model, we observed anaphylactic reactions following Taxotere administration, including decreased
respiration, swelling and tremors. Furthermore, decreases in blood pressure and increases in
histamine levels were observed within 10 to 20 minutes of Taxotere administration. In contrast, we
did not observe treatment-related changes in blood pressure or increases in histamine levels
following administration of ANX-514. On re-challenge at three weeks, increases in histamine levels
were observed only in the Taxotere-treated animals.
In addition, in two separate studies in different animal species, ANX-514 showed equivalent
pharmacokinetics to Taxotere. In animal models, ANX-514 demonstrated dose-dependent inhibition of
tumor growth with equivalent antitumor activity when compared to Taxotere at equal dose levels.
Planned Phase 3 Clinical Study
As with Exelbine, we expect to seek approval of ANX-514 under Section 505(b)(2) of the FDCA.
Initially, we intended to demonstrate the bioequivalence of ANX-514 to Taxotere in a single
bioequivalence study, which we refer to as Study 514-01, and which we completed in 2009. In May
2009, we announced that pharmacokinetic equivalence, the primary endpoint of Study 514-01, was not
demonstrated based on the FDA’s benchmark standards. The study data revealed higher average
blood-levels of total (bound and unbound) docetaxel during and immediately following infusion of
the study drug (i.e., during the first hour of treatment) in patients receiving ANX-514 relative to
those receiving Taxotere, but, at 10 minutes after the completion of infusion, average total
docetaxel blood-levels were comparable and remained so through the end of the observation period.
Interestingly, the data also revealed lower average blood-levels of unbound, or free, docetaxel in
patients receiving ANX-514 relative to those receiving Taxotere.
Following extensive analysis and modeling of the data from Study 514-01 and published results
from other trials using Taxotere, we believe that comparable clinical outcomes can be expected
following treatment with ANX-514 or Taxotere, despite Study 514-01 not demonstrating
pharmacokinetic equivalence using FDA’s benchmark standards.
In February 2011, we met with the FDA to discuss ANX-514 and the data package we presented to
FDA to support approval of ANX-514. Because the Cmax for total docetaxel was higher following
administration with ANX-514 in Study 514-01, the FDA indicated that a randomized safety study
comparing ANX-514 and Taxotere would be required in an appropriate patient population to support
approval of ANX-514. The study would be primarily descriptive but with a sample size sufficient to
demonstrate a comparable safety profile. The FDA recommended that the study also collect data on
response rate and duration of response. We are developing a study protocol for submission to the
FDA and intend to continue discussions with the FDA regarding the phase 3 clinical study and other
requirements for approval of ANX-514.
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Development Outside the U.S.
In March 2009, we announced that we and our wholly-owned subsidiary, SD Pharmaceuticals, Inc.,
had entered into a license agreement with respect to ANX-514 with Shin Poong Pharmaceutical Co.,
Ltd., a company organized under the laws of the Republic of Korea, pursuant to which we granted to
Shin Poong an exclusive
license, including the right to sublicense, to research, develop, make, have made, use, offer
for sale, sell and import licensed products, in each case solely for the treatment of cancer by
intravenous administration of formulations of docetaxel as emulsified products and solely in South
Korea. Under the terms of the agreement, we received an upfront licensing fee and are entitled to
receive a regulatory milestone payment upon receipt of regulatory approval for marketing a licensed
product in South Korea (the amount depends on whether the Korea Food and Drug Administration
requires Shin Poong to conduct a bioequivalence or clinical study in human subjects prior to
receipt of regulatory approval), one-time commercial milestone payments tied to annual net sales of
licensed products and royalty payments on net sales of licensed products. Shin Poong is responsible
for all development and commercial activities related to ANX-514 in South Korea.
Potential New Opportunity — Purified Poloxamer 188
Background
Poloxamer 188, or 188, is a nonionic block copolymer surfactant that has been used in foods,
drugs and cosmetics since the 1950s. In the 1980s, extensive research on the mechanisms and
potential clinical applications of 188 was conducted. Research has demonstrated that 188 adheres
to hydrophobic surfaces that develop when cells are damaged and restores normal hydrated surfaces,
while having little or no activity in normal, healthy tissues. Research also has demonstrated that
188 prevents adhesion and aggregation of soluble fibrin and formed elements in the blood, maintains
the deformability of red blood cells, non-adhesiveness of unactiviated platelets and granulocytes
and the normal viscosity of blood. In addition, it is believed that 188 is not metabolized, but is
excreted unchanged in the urine with a half-life of approximately two hours. Likewise, it is
believed that 188 is not absorbed following oral administration, but is recovered unchanged in the
stool.
We believe that 188 has numerous potential applications as a cytoprotective, rheologic,
antithrombotic and anti-inflammatory agent. 188 has been evaluated in the clinic to treat acute
myocardial infarction, sickle cell disease and malaria, including a 2,950-patient, randomized,
controlled study in acute myocardial infarction. The effectiveness of 188 also has been observed in
studies investigating its application in stroke, hemorrhagic shock, bypass surgery, adult
respiratory distress syndrome, neurologic protection in deep hypothermic circulatory arrest,
vasospasm, spinal cord injury, angioplasty, frostbite, amniotic fluid embolism, acute ischemic
bowel disease and burns.
Purified 188 is designed to eliminate impurities present in, and associated renal toxicity
that was observed in certain prior clinical investigations of, (non-purified) 188. Purified 188 has
been evaluated in multiple clinical studies, including a 255-patient, phase 3 study, in which
elevated levels of renal toxicity were not observed.
Sickle Cell: Clinical History; Planned Phase 3 Clinical Study
The safety and efficacy of 188 and purified 188 in sickle cell disease have been evaluated in
multiple clinical studies, including a 255-patient, randomized, double-blind, placebo-controlled
phase 3 study in patients with sickle cell disease in acute vaso-occlusive crisis.
In the phase 3 study, signs of efficacy were observed in the primary endpoint, duration of
crisis. However, features of the study’s design and the study not enrolling the originally-planned
number of patients may have diluted the treatment effect or its significance. Notably, in a planned
subgroup analysis in children (n=73), in which the effect of confounding factors may have been
mitigated (such as chronic pain syndrome, which is less prevalent in children), a statistically
significant and greater treatment effect was observed. In terms of safety, there were no
differences between the two treatment groups in the overall incidence of adverse events, for
adverse events defined as serious, or for adverse events involving any body system for the groups
as a whole. It was determined that renal function was not influenced by treatment with purified
188. However, the purified 188 arm did exhibit a modest but statistically significant increase in
levels of alanine aminotransferase and direct bilirubin, each of which returned to its respective
baseline level by the day-35 follow-up visit.
We believe that a properly designed and executed clinical study will demonstrate that purified
188 is an effective treatment for sickle cell crisis. Assuming our acquisition of SynthRx closes,
we intend to develop purified 188 for the treatment of sickle cell crisis in a pediatric population
and plan to meet with the FDA to reach agreement on a phase 3 clinical trial protocol.
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Sickle Cell: Market and Opportunity
Vaso-occlusive crisis, caused by sickle-shaped red blood cells that obstruct capillaries and
restrict blood flow to an organ, causes pain that is often very severe and results in ischemia
(restriction of blood supply), necrosis, and often organ damage. The frequency, severity and
duration of these crises can vary considerably. Once vaso-occlusive crisis occurs, treatment
consists of maintenance of hydration, oxygenation and analgesia, usually using narcotics.
Preventative measures for pulmonary complications, such as incentive spirometry, and blood
transfusion also may be used. We are not aware of any currently available agents with demonstrated
efficacy in shortening the duration of vaso-occlusive crisis. Patients with sickle cell disease
experience an average life expectancy of approximately 40 years.
More than $1.0 billion is spent annually in the U.S. to treat patients with sickle cell
disease. We estimate that, in the U.S., sickle cell disease results in over 95,000 hospitalizations
and approximately 69,000 emergency department treat-and-release encounters each year. When a
patient with sickle cell disease makes an institutional visit, vaso-occlusive crisis is the primary
diagnosis in approximately 77% of hospital admissions and 64% of emergency room treat-and-release
encounters. In addition, although the number of untreated crisis events is difficult to measure,
we estimate that it is substantial and in the hundreds of thousands in the U.S. each year. We
believe that, if purified 188 is approved, as people with sickle cell disease are made aware of the
new therapy, more people who suffer from vaso-occlusive crisis will seek treatment.
Competition
If regulatory authorities approve the marketing and selling of any of our product candidates,
our product candidates will face significant and long-term competition from pharmaceutical
companies, pharmaceutical divisions of companies and biotechnology, biopharmaceutical and specialty
pharmaceutical companies, among others. This competition likely will become more intense if any of
our products or competitor products achieves significant commercial success. Most of our
competitors, particularly large pharmaceutical companies, have greater clinical, regulatory,
manufacturing, marketing, distribution, compliance and financial resources and experience than we
do. Many of these companies have commercial arrangements with other companies to supplement their
internal capabilities.
Over the longer term, our ability, independently or with a strategic or other partner, to
successfully manufacture, market, distribute and sell any of our or their approved products, expand
their usage and bring new products to the marketplace will depend on many factors, including, but
not limited to, the effectiveness and safety of those products, FDA and foreign regulatory
agencies’ approvals of new products and indications, the degree of patent protection afforded to
particular products and the rates at which those products are reimbursed.
Exelbine and ANX-514
Exelbine and ANX-514, if approved, may compete against Navelbine and Taxotere, respectively,
as well as their generic equivalents and other formulations of vinorelbine and docetaxel that may
be approved by the FDA. In addition to Navelbine, in the U.S., currently there are seven
commercially available generic versions of vinorelbine. With respect to docetaxel, in the U.S., we
believe non-Taxotere formulations of docetaxel will be commercially available in 2011 and that
generic equivalents of Taxotere will be commercially available in the near-term, possibly in 2011.
However, we are not aware of any docetaxel formulation with near-market potential that is
polysorbate 80-free.
Because we have submitted our Exelbine NDA with only bioequivalence data, the ability to
differentiate it from competing products will be limited. Even if we believe Exelbine demonstrates
clinical, pharmacoeconomic or other benefits relative to competing products, we may be unable to
market or promote it based on these benefits. If our products do not receive unique HCPCS product
codes, we may be required to price our products at levels that do not cover our costs to
manufacture, market and distribute the products or provide any profit, or to price our products at
levels at which they are not competitive.
In addition, numerous companies are focused on reformulating currently marketed drugs. In
particular, the taxanes, the class of drugs of which Taxotere is a member, have experienced
substantial commercial success, in part as a result of their effectiveness in treating a wide
variety of cancers. This commercial success has generated significant interest in reformulating
Taxotere and other taxanes. For instance, in 2010, the FDA approved Jevtana®
for treatment of patients with hormone-refractory metastatic prostate cancer previously
treated with a docetaxel-containing treatment regimen. The active ingredient of Jevtana is
cabazitaxel, an antineoplastic agent belonging to the taxane class.
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In addition to our approach of emulsifying docetaxel, other companies may be pursuing
alternative delivery vehicles, including the use of albumin nanoparticles, prodrugs,
polyglutamates, analogs, co-solvents, liposomes and microspheres. Many of these or similar
approaches might also be applied to vinorelbine. Relative to our formulations, formulations based
on one or more of these other methods may result in greater efficacy or safety, provide better drug
delivery to tumor sites or otherwise improve benefits to patients and healthcare providers. For
instance, there is an oral formulation of vinorelbine approved for use in the EU against which
Exelbine would compete if it were approved for use in the EU.
Purified 188 for Sickle Cell Crisis
Currently, most treatment options for sickle cell crisis are focused on symptomatic relief or
treatment to address complications, such as morphine or other analgesics for pain. However, there
is substantial interest in developing agents for the treatment of sickle cell crisis. In addition
to for-profit commercial enterprises, numerous foundations and interest groups also are committed
to treating sickle cell disease and preventing and mitigating acute crisis associated with sickle
cell disease. We are aware of numerous companies with product candidates in varying stages of
development for the treatment of sickle cell crisis, including mechanisms that target the sPLA2
enzyme or P2Y12 ADP receptor, increase oxygen binding of hemoglobin or stimulate production of
fetal hemoglobin. Advances in the understanding of the signaling pathways associated with sickle
cell disease may lead to further interest and development of treatment options.
More broadly, purified 188 would compete against agents designed to treat sickle cell disease,
of which sickle cell crisis is a condition. Hydroxyurea, a form of chemotherapy used for
myeloproliferative disease, has been shown to decrease the severity of sickle cell disease by
reducing the frequency of crisis, but hydroxyurea does not treat the crisis itself. Blood
transfusions, which carry risk of allergic reactions and iron overload, also are used to treat
sickle cell disease. Bone marrow and stem cell transplantation have been shown to be effective to
treat and, in some cases, cure sickle cell disease, but current methods are expensive, require a
well-matched donor and come with risk of serious complications including bleeding, pneumonia, and
severe infection.
In addition, there is increasing interest in developing drugs for “rare diseases,” which may
have the effect of increasing the development of agents to treat sickle cell disease generally or
sickle cell crisis in particular. GlaxoSmithKline and Pfizer each recently formed a unit focused on
rare diseases. Legislative action, such as the potential to expand the priority review voucher
system to rare pediatric diseases, may further generate interest.
Manufacturing
We do not have our own manufacturing facilities. We meet our nonclinical and clinical trial
manufacturing requirements (including manufacturing active pharmaceutical ingredient, or API,
formulating and assembling final drug product, labeling, testing and release, packaging, storing
API and finished drug product and similar activities) by establishing relationships with
third-party manufacturers and other service providers to perform these services for us.
In the past, with respect to Exelbine and ANX-514, we relied on individual proposals and
purchase orders to meet our needs and typically relied on terms and conditions proposed by the
third party or us to govern our rights and obligations under each order (including provisions with
respect to intellectual property, if any). In 2008, we entered into a master services agreement
with a new contract manufacturer, as well as individual work orders that are governed by the master
services agreement, under which the manufacturer provided process development and scale-up
activities for Exelbine. We do not have any long-term agreements or commitments for these services.
Likewise, we do not have any long-term agreements or commitments with vendors to supply the
underlying component materials of Exelbine, some of which are available from only a single
supplier. We are in the process of entering into supply arrangements with third parties in
connection with the potential commercialization of Exelbine. We also are in the process of
evaluating vendors with respect to manufacturing ANX-514.
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Purified 188 is manufactured by applying a proprietary, super-critical fluid extraction (SCFE)
process to commercial grade 188, which is available from several manufacturers. We believe multiple
vendors have the
capability to manufacture both purified 188 drug substance pursuant to this SCFE process and
the final, finished drug product. However, prior to manufacturing additional purified 188,
including for clinical use, we expect to evaluate critical operating parameters and ranges and,
ultimately, to re-validate the SCFE process with the anticipated manufacturers.
As noted above with respect to Exelbine, should any of our product candidates obtain marketing
approval, relationships with third-party manufacturers and other service providers in connection
with the commercial production of our products would need to be established. There is some
flexibility in securing other manufacturers to produce our product candidates; however, our
alternatives may be limited due to proprietary technologies or methods used in the manufacture of
some of our product candidates. In addition, if we seek to make certain changes to an approved
product, such as changing vendors who supply the underlying component materials of our product
candidates, we will need FDA review and approval before the change can be implemented. For example,
if we change the manufacturer of a product or of the API component of a product, the FDA may
require stability or other data from the new manufacturer, which data will take time and is costly
to generate, and the delay associated with generating this data may cause interruptions in our
ability to meet commercial demand, if any.
Intellectual Property
Exelbine (vinorelbine injectable emulsion)
We own world-wide rights (excluding China, Hong Kong, Macau and Taiwan) to patent applications
covering the composition and use of our vinorelbine injectable emulsion product candidate, subject
to the exclusive license we granted to Latitude Pharmaceuticals (described below under “Licensing
Agreement”). In January 2011, the United States Patent and Trademark Office, or USPTO, issued
patent claims directed to formulations of vinorelbine bitartrate that provide protection for
Exelbine. U.S. Patent No. 7,871,632, entitled “Compositions for Delivering Highly Water Soluble
Drugs,” will provide coverage for Exelbine until November 2027. In addition, in December 2010, we
filed a continuation application of U.S. Patent No. 7,871,632 in the USPTO claiming a priority date
of July 12, 2004 drawn to methods of treatment. With respect to patent protection outside the U.S.,
patents entitled “Compositions for Delivering Highly Water Soluble Drugs” have issued in Japan and
Russia and will provide coverage for Exelbine until July 2025. In addition, patent applications
entitled “Compositions for Delivering Highly Water Soluble Drugs” currently are pending in Canada,
India, South Korea and the European Patent Office. These applications have a priority date of July
12, 2004, and any patents granted thereon will have an expected expiration date of July 2025.
ANX-514 (docetaxel emulsion for injection)
We own world-wide rights (excluding China, Hong Kong, Macau and Taiwan) to patent applications
covering the composition and use of our docetaxel injectable emulsion product candidate, subject to
the exclusive licenses we have granted to Latitude Pharmaceuticals (described below under
“Licensing Agreements”) and Shin Poong Pharmaceutical Co., Ltd. (described above under “ANX-514 —
Development Outside the U.S.”). Patent applications, entitled “Low Oil Emulsion Compositions for
Delivering Taxoids and Other Insoluble Drugs,” currently are pending in the U.S., Canada, India,
Japan, South Korea, Mexico and the European Patent Office. These applications have a priority date
of September 28, 2004, and any patents granted thereon will have an expected expiration date of
September 2024 in the U.S. and September 2025 in the other countries.
Patent applications, entitled “Vitamin E Succinate Stabilized Pharmaceutical Compositions,
Methods for the Preparation and Use Thereof,” currently are pending in the U.S., Canada, Australia,
India, Japan, South Korea, Mexico, New Zealand, the European Patent Office and the Eurasian Patent
Office. These applications have a priority date of February 1, 2006, and any patents granted
thereon will have an expected expiration date of February 2027 in the U.S. and in the other
countries.
Purified 188 for Sickle Cell Crisis
Assuming our acquisition of SynthRx closes, pursuant to an agreement with CytRx Corporation
(described below under “Licensing Agreements”), we will acquire exclusive rights to a variety of
issued patents related to poloxamers and their uses. The issued patents cover, among other things,
188, purified 188, methods of treating sickle cell anemia using 188 and methods of preparing
purified 188. However, we expect many of the patents
covering purified 188 for the treatment of sickle cell crisis will expire prior to regulatory
approval of purified 188 for that indication.
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We believe the primary method of exclusivity for purified 188 for the treatment of sickle cell
crisis will be the orphan drug designation that the FDA has granted for 188. Accordingly, as
described below under “Government Regulations,” if our product candidate receives the first FDA
approval for sickle cell crisis, the FDA may not approve any other application to market 188 for
sickle cell crisis for a period of seven years, except in limited circumstances, such as another
product showing clinical superiority to 188. However, orphan drug designation does not convey any
advantage in, or shorten the duration of, the regulatory review and approval process. In addition,
competitors may receive approval of different drugs or biologics for sickle cell crisis or sickle
cell disease generally. In addition, if we and the FDA reach agreement that the planned phase 3
study in a pediatric population will satisfy the requirements for pediatric exclusivity, upon FDA
approval, we may be granted an additional six months of marketing exclusivity.
Assuming our acquisition of SynthRx closes, we also will acquire ownership of certain patent
applications related to 188 for the treatment and diagnosis of chronic inflammation due to chronic
microvascular diseases and use in increasing the safety and efficacy of blood transfusions and
improving oxygenation of jeopardized tissue.
We are aware of a substantial number of patents issued and patent applications filed in our
technical areas or fields. There is a risk that third parties may allege that they have patent
rights encompassing our product candidates or methods and no assurance can be given that patents do
not exist, have not been filed, or could not be filed or issued, that contain claims covering our
product candidates or methods.
We cannot provide assurance that our pending patent applications will issue as patents, that
any issued patents will provide us with significant competitive advantages, or that the validity or
enforceability of any of our patents will not be challenged or, if instituted, that these
challenges will not be successful. The cost of litigation to uphold the validity and prevent
infringement of our patents could be substantial. Furthermore, we cannot provide assurance that
others will not independently develop similar technologies or duplicate our technologies or design
around the patented aspects of our technologies. We can provide no assurance that our proposed
technologies will not infringe patents or rights owned by others, licenses to which might not be
available to us.
In addition, the approval process for patent applications in different countries may differ
significantly. The patent authorities in each country administer that country’s laws and
regulations relating to patents independently of the laws and regulations of any other country and
the patents must be sought and obtained separately, which can add substantial cost and expense. In
addition, a favorable outcome or approval in one country does not necessarily indicate that a
favorable outcome or approval can be obtained in other countries.
Trademarks
We have applied for trademark registration for EXELBINE™ in the U.S. We are developing
commercial names for our other product candidates. All other trademarks, service marks or trade
names appearing in this report, including but not limited to Navelbine® and Taxotere®, are the
property of their respective owners. Use or display by us of other parties’ trademarks, service
marks, trade names, trade dress or products is not intended to and does not imply a relationship
with, or endorsements or sponsorship of, us by the trademark, service mark, trade name, trade dress
or product owners.
Research and Development
Our research and development expenses were $3.7 million in 2010 and $6.5 million in 2009. Our
research and development expenses consist primarily of costs associated with nonclinical
activities, such as research-related manufacturing, nonclinical research studies, quality assurance
and regulatory activities, salaries and related employee benefits, and costs associated with
bioequivalence and clinical trials managed by contract research organizations, or CROs. In 2010,
our most significant costs were for consulting services related to the November 2010 Exelbine NDA,
stability testing for Exelbine and consulting services related to evaluation of the data from Study
514-01 and research-related manufacturing for ANX-514. In 2009, our most significant costs were for
manufacturing, analytical and stability testing for Exelbine and consulting services related to the
December 2009 Exelbine NDA. Our research-related manufacturing expenses include purchasing API,
manufacturing materials for bioequivalence and clinical trials and stability testing to support
regulatory filings, related labeling, testing and
release, packaging and storing and related consulting fees. Our bioequivalence and clinical
trial expenses include payments to vendors such as CROs, investigators, clinical suppliers and
related consulting fees.
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Licensing Agreements
SD Pharmaceuticals
In April 2006, we acquired SD Pharmaceuticals, Inc. in exchange for shares of our common
stock. Under a prior license agreement between SD Pharmaceuticals, Latitude Pharmaceuticals, Inc.
and Andrew X. Chen, the sole owner of Latitude Pharmaceuticals, Dr. Chen had assigned to SD
Pharmaceuticals all rights and interests of Dr. Chen and Latitude Pharmaceuticals to certain
patents throughout the world other than in China, Hong Kong, Macau and Taiwan. Under this
agreement, SD Pharmaceuticals granted back to Latitude Pharmaceuticals a worldwide, exclusive,
royalty-free and irrevocable license to use the assigned patents in all fields of use other than
certain excluded fields as specified in the agreement. Our rights in Exelbine and ANX-514 arise
through our interest in SD Pharmaceuticals. Accordingly, we have no rights in these product
candidates in China, Hong Kong, Macau and Taiwan, and our rights under the assigned patents in the
rest of the world are limited to the following fields:
| |
• |
|
For Exelbine, vinca alkaloid intravenous emulsion formulation for cancer
treatment and any other disease indication. |
| |
• |
|
For ANX-514, docetaxel intravenous emulsion formulation for cancer treatment
and any other disease indication. |
CytRx Corporation
Assuming our acquisition of SynthRx closes, we will acquire a 2004 license agreement between
CytRx Corporation and SynthRx. Under the agreement, as amended, CytRx granted to SynthRx an
exclusive license, with the right to grant sublicenses, under specified patents to use, offer and
sell licensed products in all of the countries in the world and in all fields, except those fields
that, at the time of the agreement, were or will be licensed pursuant to certain identified
agreements. We believe that the field limitation does not prevent us from developing or
commercializing purified 188 for the treatment of sickle cell crisis.
In partial consideration of the license grant, SynthRx agreed to pay CytRx certain
non-refundable and non-creditable milestone payments based on the approval of each product in a
major market, which includes the U.S. The amount of each milestone is in the low single-digit
millions, half of which is due on the first commercial sale of the approved product and half of
which is due as a royalty on net sales. In addition, SynthRx would pay a single-digit royalty on
net sales of licensed products. However, in the event of a sublicense under the specified patents,
in lieu of the foregoing milestone and royalty payments, SynthRx, in its sole discretion, may elect
to pay CytRx an amount equal to 20% of any sublicensing income received by SynthRx within 30 days
of receipt thereof. Sublicense income includes, without limitation, license fees, royalties,
milestone payments, license maintenance fees and strategic alliance payments, whether in cash,
equity or other property, with the payment to be in the same form as the payment received by
SynthRx.
Material Terms of the Pending Acquisition of SynthRx
Under the terms of our merger agreement with SynthRx, in connection with consummation of the
merger we would issue 2,938,773 shares of our common stock to SynthRx’s stakeholders, of which
200,000 shares would be placed in escrow for 12 months following the closing of the merger to
indemnify us against breaches of SynthRx’s representations and warranties, and 1,938,773 shares
would be subject to repurchase rights by us pending achievement of the first development milestone
described below. We would issue up to an aggregate of 13,478,050 additional shares of our common
stock to SynthRx’s stakeholders if the development of purified 188 achieves certain milestones, as
described below, and our stockholders approve the issuance of such milestone-related shares, as
required by NYSE Amex rules. If our stockholders do not approve the issuance of the
milestone-related shares, under the terms of the merger agreement, we would be required to pay
SynthRx’s stakeholders in cash the value of the milestone-related shares we would have otherwise
issued, with all such cash payments made in quarterly installments and, with respect to the cash
value associated with 12,478,050 of the milestone-related shares, payable based on net sales of
purified 188. We cannot determine with any degree of certainty the amount of our potential cash
payments to SynthRx’s stakeholders because the amount of such payments, if applicable, will depend
on the
10-day volume weighted average of the closing price of our common stock at the time a
milestone is achieved and the market price of our common stock historically has been, and likely
will continue to be, highly volatile. Of the shares issuable in connection with achievement of
milestones, up to 1,000,000 shares would be issuable upon the dosing of the first patient in a
phase 3 clinical study that the FDA has indicated may be sufficient to support approval of a new
drug application covering the use of purified 188 for the treatment of sickle cell crisis in
children, or the 188 NDA, which we refer to as the First Milestone; 3,839,400 shares would be
issuable upon acceptance for review of the 188 NDA by the FDA, which we refer to as the Second
Milestone; and 8,638,650 shares would be issuable upon approval by the FDA of the 188 NDA, which we
refer to as the Third Milestone.
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Under the terms of the merger agreement, we have agreed to use commercially reasonable efforts
(a) to request a meeting with the FDA to occur within nine months of the closing of the merger for
the purpose of discussing clinical development and regulatory approval of an intravenous injection
product in which a purified form of 188 is an active ingredient and (b) during the one-year period
following the closing of the merger, to conduct certain activities related to the development of
purified 188; provided that the aggregate cost of such activities does not exceed $1.5 million. We
have also agreed to use commercially reasonable efforts to develop an intravenous injection product
in which a purified form of 188 is an active ingredient until the earlier of achievement of the
Third Milestone or the date that is four years after February 12, 2011. In addition, we have
agreed not to consummate a change of control with a third party that involves all or substantially
all of SynthRx’s assets until the earlier of the achievement of the Third Milestone and the date
that is four years following February 12, 2011, except (x) in connection with an Exempt Transaction
(as described below) or (y) with the written consent of SynthRx, which consent shall not be
unreasonably withheld, conditioned or delayed. Under the merger agreement, an Exempt Transaction
is a change of control that closes prior to achievement of the Third Milestone in which the
acquiror agrees in writing to submit the 188 NDA to the FDA for FDA approval (or, if there are
unexpected safety or regulatory issues, to conduct activities to address or resolve such issues)
until the earlier of (i) the date that, beginning at the effective time of the merger and
thereafter, the aggregate expenditure related to the program involving the product candidate on
which the 188 NDA is to be based is at least $15,000,000 and (ii) the fourth anniversary of the
effective time of the merger; provided, however, such acquiror shall be relieved of such
obligations under certain specified conditions.
In connection with our execution of the merger agreement, each of SynthRx’s stockholders
entered into a voting and transfer restriction agreement with us, the term of which will commence
at the effective time of the merger. Under the voting and transfer restriction agreement, each
SynthRx stockholder has agreed to vote all shares of our common stock beneficially owned by that
stockholder with respect to every action or approval by written consent of our stockholders in such
manner as directed by us. Notwithstanding the foregoing, until the earlier of: (a) achievement of
the Third Milestone and (b) the four year anniversary of the closing of the merger, each SynthRx
stockholder will be permitted to vote any shares of our common stock beneficially owned by that
stockholder in such stockholder’s sole discretion solely with respect to a change of control that
involves the transfer of SynthRx’s assets to a third party and in which at least 80% of the
consideration received by our company (or our stockholders) is non-contingent and paid in cash. In
addition, pursuant to the voting and transfer restriction agreement, SynthRx stockholders may not
transfer any shares of our common stock that are subject to vesting or that are held in escrow. We
refer to shares of our common stock issued to SynthRx stockholders that have vested and/or been
released from escrow as Transferable Shares. Transferable Shares may be transferred by their
holder to an affiliate of such holder in accordance with applicable securities laws, provided that
any such transferee becomes a party to the voting and transfer restriction agreement. The voting
and transfer restriction agreement also provides that SynthRx’s stockholders, as a group, will have
the right to transfer Transferable Shares to non-affiliates pursuant to an effective resale
registration statement, which we agreed to file within 120 days of the effective time of the
merger, or in compliance with Rule 144 of the Securities Act of 1933, (a) on each trading day, such
aggregate number of Transferable Shares as is equal to or less than 10% of the average daily
trading volume of our common stock, and (b) not more than once in any 12-month period, such
aggregate amount of Transferable Shares as is equal to five times the average daily trading volume
of our common stock.
Prior Cost-Containment and Fundraising Activities
In the past, we spent significant resources on the development of ANX-510, or CoFactor®,
including a 300-patient phase 2b clinical trial and a discontinued phase 3 clinical trial.
Following our October 2007 announcement that CoFactor did not meet the primary endpoint in the
phase 2b clinical trial, in October 2008, we discontinued active work on our CoFactor program. In
June 2010, we granted an exclusive worldwide license for
CoFactor to Theragence, Inc., which includes the right to grant sublicenses under certain
circumstances, to conduct research on and to develop, make, have made, use, offer for sale, sell,
have sold and import licensed products in any field or use.
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Beginning in October 2008 and through June 2009, we implemented numerous restructuring,
cost-cutting and re-prioritization initiatives to reduce operating costs and to focus on those of
our options that we believed maximized the overall value of our company. For instance, in October
2008, in addition to the discontinuation of our CoFactor program, we discontinued active work on
all compounds to which we have or had rights and on which we may have previously spent resources
developing, other than Exelbine and ANX-514. In addition, during that period, we suspended
substantially all fundamental business operations and effected three reductions in our full-time
employee workforce while we explored options for capital-raising and/or strategic transactions as
well as liquidating our assets and winding-up our operations.
Since June 2009, we have completed seven registered direct financing transactions, raising an
aggregate of approximately $56.7 million in net proceeds, after deducting our aggregate dividend
and related payment obligations, the fees and expenses of our placement agent and financial advisor
in those financings and our other estimated offering expenses. In addition, in December 2009 and
January 2010, we raised an aggregate of approximately $3.3 million in net proceeds in connection
with the exercise of warrants issued in connection with certain of these financings.
Government Regulations
Governmental authorities in the U.S. and other countries extensively regulate the testing,
manufacturing, labeling, storage, recordkeeping, advertising, promotion, export, marketing and
distribution, among other things, of pharmaceutical products. In the U.S., the FDA, under the FDCA
and other federal statutes and regulations, subjects pharmaceutical products to rigorous review. If
we do not comply with applicable requirements, we may be fined, the government may refuse to
approve our marketing applications or allow us to manufacture or market our products, and we may be
criminally prosecuted.
We and our third-party manufacturers, distributors and CROs may also be subject to regulations
under other federal, state, and local laws, including the Occupational Safety and Health Act, the
Environmental Protection Act, the Clean Air Act, the Health Insurance Portability and
Accountability Act, privacy laws and import, export and customs regulations, as well as the laws
and regulations of other countries.
FDA Approval Process
To obtain approval of a new product from the FDA, we must, among other requirements, submit
data supporting safety and efficacy, as well as detailed information on the manufacture and
composition of the product and proposed labeling. The testing and collection of data and the
preparation of necessary applications are expensive and time-consuming. The FDA may not act quickly
or favorably in reviewing these applications, and we may encounter significant difficulties or
costs in our efforts to obtain FDA approvals that could delay or preclude us from marketing our
products.
The process required by the FDA before a new drug may be marketed in the U.S. generally
involves the following: (i) completion of nonclinical laboratory and animal testing in compliance
with FDA regulations; (ii) submission of an investigational new drug application, or IND, which
must become effective before human clinical trials may begin; (iii) performance of adequate and
well-controlled human clinical trials to establish the safety and efficacy of the proposed drug for
its intended use; and (iv) submission and approval of an NDA by the FDA. The sponsor typically
conducts human clinical trials in three sequential phases, but the phases may overlap. In phase 1
clinical trials, the product is tested in a small number of patients or healthy volunteers,
primarily for safety at one or more doses. In phase 2, in addition to safety, the sponsor evaluates
the efficacy of the product on targeted indications, and identifies possible adverse effects and
safety risks, in a patient population somewhat larger than in phase 1 clinical trials. Phase 3
clinical trials typically involve additional testing for safety and clinical efficacy in an
expanded population at geographically-dispersed test sites. A clinical trial may combine the
elements of more than one phase and, typically, two or more phase 3 studies are required. A
company’s designation of a clinical trial as being of a particular phase is not necessarily
indicative that the trial will be sufficient to satisfy the FDA requirements of that phase because
this determination cannot be made until the protocol and data have been
submitted to and reviewed by the FDA. In addition, a clinical trial may contain elements of
more than one phase notwithstanding the designation of the trial as being of a particular phase.
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As a product candidate moves through the clinical phases, manufacturing processes are further
defined, refined, controlled and validated. The level of control and validation required by the FDA
increases as clinical studies progress.
Clinical trials must be conducted in accordance with the FDA’s good clinical practices
requirements. The FDA may order the temporary or permanent discontinuation of a clinical trial at
any time or impose other sanctions if it believes that the clinical trial is not being conducted in
accordance with FDA requirements or presents an unacceptable risk to the clinical trial patients.
An institutional review board, or IRB, generally must approve the clinical trial design and patient
informed consent at each clinical site and may also require the clinical trial at that site to be
halted, either temporarily or permanently, for failure to comply with the IRB’s requirements, or
may impose other conditions. It is not possible to estimate with any certainty the time required to
complete phase 1, 2 and 3 studies with respect to a given product candidate.
The applicant must submit to the FDA the results of the nonclinical studies and clinical
trials, together with, among other things, detailed information on the manufacture and composition
of the product and proposed labeling, in the form of an NDA, including payment of a user fee,
unless waived. The FDA reviews all NDAs submitted before it accepts them for filing and may request
additional information rather than accepting an NDA for filing. Once the submission is accepted for
filing, the FDA begins an in-depth review of the NDA. Under PDUFA, the FDA ordinarily has 10 months
in which to complete its initial review of the NDA and respond to the applicant. However, the PDUFA
goal dates are not legal mandates and the FDA response often occurs several months beyond the
original PDUFA goal date. Further, the review process and the target response date under PDUFA may
be extended if the FDA requests or the NDA sponsor otherwise provides additional information or
clarification regarding information already provided in the NDA submission. The NDA review process
can, accordingly, be very lengthy. During its review of an NDA, the FDA may refer the application
to an advisory committee for review, evaluation and recommendation as to whether the application
should be approved. Data from clinical trials are not always conclusive and the FDA and/or any
advisory committee it appoints may interpret data differently than we or any future partner of ours
interprets data.
Following completion of the FDA’s initial review of the NDA and the clinical and manufacturing
procedures and facilities, the FDA will issue a complete response letter, which will either include
an approval authorizing commercial marketing of the drug for certain indications or contain the
conditions that must be met in order to secure final approval of the NDA. If the FDA’s evaluation
of the NDA submission and the clinical and manufacturing procedures and facilities is not
favorable, the FDA may refuse to approve the NDA.
Section 505(b)(2) New Drug Applications
As an alternate path to FDA approval for new formulations of previously approved products, a
company may file an NDA under Section 505(b)(2) of the FDCA. Section 505(b)(2) was enacted as part
of the Drug Price Competition and Patent Term Restoration Act of 1984, otherwise known as the
Hatch-Waxman Act. Section 505(b)(2) permits the submission of an NDA where at least some of the
information required for approval comes from studies not conducted by or for the applicant and for
which the applicant has not obtained a right of reference. The Hatch-Waxman Act permits the
applicant to rely upon certain published nonclinical or clinical studies conducted for an approved
product or the FDA’s conclusions from prior review of such studies. The FDA may also require
companies to perform additional studies or measurements to support any changes from the approved
product. The FDA may then approve the new product for all or some of the label indications for
which the referenced product has been approved, as well as for any new indication sought by the
Section 505(b)(2) applicant. While references to nonclinical and clinical data not generated by the
applicant or for which the applicant does not have a right of reference are allowed, all
development, process, stability, qualification and validation data related to the manufacturing and
quality of the new product must be included in an NDA submitted under Section 505(b)(2). We
submitted our Exelbine NDA under Section 505(b)(2), and we expect to submit an NDA under Section
505(b)(2) for ANX-514.
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To the extent that the Section 505(b)(2) applicant is relying on the FDA’s conclusions
regarding studies conducted for an already approved product, the applicant is required to certify
to the FDA concerning any patents listed for the approved product in the FDA’s Orange Book
publication. Specifically, the applicant must certify that:
(i) the required patent information has not been filed; (ii) the listed patent has expired;
(iii) the listed patent has not expired, but will expire on a particular date and approval is
sought after patent expiration; or (iv) the listed patent is invalid or will not be infringed by
the new product. A certification that the new product will not infringe the already approved
product’s listed patents or that such patents are invalid is called a paragraph IV certification.
If the applicant does not challenge the listed patents, the Section 505(b)(2) application will not
be approved until all the listed patents claiming the referenced product have expired. The Section
505(b)(2) application also will not be approved until any non-patent exclusivity, such as
exclusivity for obtaining approval of a new chemical entity, listed in the Orange Book for the
referenced product has expired.
If the applicant has provided a paragraph IV certification to the FDA, the applicant must also
send notice of the paragraph IV certification to the NDA and patent holders for the referenced
product once the applicant’s NDA has been accepted for filing by the FDA. The NDA and patent
holders may then initiate a legal challenge to the paragraph IV certification. The filing of a
patent infringement lawsuit within 45 days of their receipt of a paragraph IV certification
automatically prevents the FDA from approving the Section 505(b)(2) application until the earlier
of 30 months, expiration of the patent, settlement of the lawsuit or a decision in the infringement
case that is favorable to the Section 505(b)(2) applicant. Thus, the Section 505(b)(2) applicant
may invest a significant amount of time and expense in the development of its products only to be
subject to significant delay and patent litigation before its products may be commercialized.
Alternatively, if the listed patent holder does not file a patent infringement lawsuit within the
required 45-day period, the applicant’s Section 505(b)(2) application will not be subject to the
30-month stay.
Orphan Drug Designation
The Orphan Drug Act, or ODA, provides for granting special status, referred to as orphan drug
designation, to a drug or biologic intended to treat, diagnose or prevent a rare disease or
condition that affects fewer than 200,000 people in the U.S. at the time of application for orphan
designation. Orphan designation qualifies the sponsor of the product for the tax credit and
marketing incentives of the ODA. Orphan drug designation must be requested by the sponsor before
submitting its marketing application for that drug or biologic for an orphan indication. After the
FDA grants orphan drug designation, the generic identity of the orphan drug or biologic and its
potential use are disclosed publicly by the FDA. The first sponsor to receive FDA marketing
approval for an orphan drug or biologic is entitled to a seven year exclusive marketing period in
the U.S. for that product for that indication and, typically, a waiver of the prescription drug
user fee for its marketing application. However, a drug or biologic that the FDA considers to be
clinically superior to, or different from, another approved orphan drug or biologic, even though
for the same indication, may also obtain approval in the U.S. during the seven year exclusive
marketing period. Orphan drug exclusive marketing rights may also be lost if the FDA later
determines that the request for designation was materially defective or if the manufacturer is
unable to assure sufficient quantity of the drug. The approval of an orphan designation request
does not alter the standard regulatory requirements and process for obtaining marketing approval.
Safety and efficacy of a compound must be established through adequate and well-controlled studies.
Legislation similar to the Orphan Drug Act has been enacted in countries other than the U.S.,
including the European Union. The orphan legislation in the European Union is available for
therapies addressing conditions that affect five or fewer out of 10,000 persons. The marketing
exclusivity period is for ten years, although that period can be reduced to six years if, at the
end of the fifth year, available evidence establishes that the product is sufficiently profitable
not to justify maintenance of market exclusivity.
Fast Track Designation
Pursuant to the Food and Drug Administration Modernization Act of 1997, or the FDAMA, the FDA
is required to facilitate the development and expedite review of drugs and biologics intended to
treat a serious or life-threatening conditions and that demonstrate the potential to address unmet
medical needs. Under the fast track program, the sponsor of the product candidate may request that
the FDA designate the candidate for a specific indication as a fast track drug concurrent with or
after the filing of the IND for the product candidate. FDAMA requires the FDA to determine within
60 days of receipt of the request whether the conditions for fast track designation have been met.
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Fast track designation typically results in greater access to FDA personnel for consultation
throughout the development process and adds to existing FDA programs the possibility of a “rolling
submission” for a marketing application, which means the FDA may initiate review of sections of a
fast track drug’s NDA before the application
is complete. This rolling review is available if the applicant provides and the FDA approves a
schedule for the submission of the remaining information and the applicant pays applicable user
fees. However, the FDA’s time period goal for reviewing an application as specified under PDUFA
does not begin until the sponsor submits the complete application. Additionally, the fast track
designation may be withdrawn by the FDA if the FDA believes that the designation is no longer
supported by data emerging in the clinical trial process.
Priority Review
Under the FDA policies, a product candidate is eligible for priority review, or review within
a six-month time frame from the time a complete NDA is accepted for filing, if the product
candidate provides a significant improvement compared to marketed drugs in the treatment, diagnosis
or prevention of a disease. A fast track designated drug or biologic candidate would ordinarily
meet the FDA’s criteria for priority review.
Pediatric Exclusivity
The Best Pharmaceuticals for Children Act, which was signed into law January 4, 2002 and
reauthorized under the Food and Drug Administration Amendments Act of 2007, or the FDAAA, provides
in some cases an additional six months of exclusivity for new or marketed drugs for specific
pediatric studies conducted at the written request of the FDA. A sponsor may attempt to prompt a
written request from the FDA by submitting a proposed pediatric study request describing the
pediatric study or studies the sponsor proposes to conduct in return for pediatric exclusivity. The
FDA may issue a written request in response to a proposed pediatric study request if it finds that
the proposed study will provide information that may result in health benefits to children. The
written request sent by FDA will outline the nature of the pediatric studies the drug sponsor must
conduct to qualify for pediatric exclusivity and a time frame for completion of those studies.
The Pediatric Research Equity Act of 2003, or PREA, which was also reauthorized under the
FDAAA, authorizes the FDA to require pediatric studies for drugs to ensure the drugs’ safety and
efficacy in children. PREA requires that certain NDAs or supplements to NDAs contain data assessing
the safety and effectiveness for the claimed indication in all relevant pediatric subpopulations.
Dosing and administration must be supported for each pediatric subpopulation for which the drug is
safe and effective. The FDA may also require this data for approved drugs that are used in
pediatric patients for the labeled indication, or where there may be therapeutic benefits over
existing products. The FDA may grant deferrals for submission of data, or full or partial waivers
from PREA. For example, unless otherwise required by regulation, PREA does not apply to any drug
for an indication for which orphan drug designation has been granted.
Other Regulatory Requirements
Even if the FDA approves one or more of our product candidates, we will continue to be subject
to a number of post-approval regulatory requirements. If we seek to make certain changes to an
approved product, such as the addition of a new labeled indication or certain manufacturing changes
or product enhancements, we will need FDA review and approval before the change can be implemented.
For example, if we change the manufacturer of a product or of the API component of a product, FDA
may require stability or other data from the new manufacturer, which data will take time and is
costly to generate, and the delay associated with generating this data may cause interruptions in
our ability to meet commercial demand, if any. While physicians may use products for indications
that have not been approved by the FDA, we may not label or promote the product for an indication
that has not been approved. Securing FDA approval for new indications or product enhancements and,
in some cases, for labeling claims or changes in manufacturing, is generally a time-consuming and
expensive process that may require us to conduct clinical studies under the FDA’s investigational
new drug regulations. Even if such studies are conducted, the FDA may not approve any change in a
timely fashion, or at all. In addition, adverse experiences associated with use of the products
must be reported to the FDA, and FDA rules govern how we can label, advertise or otherwise
commercialize our products. The FDA also may, in its discretion, require post-marketing testing and
surveillance to monitor the effects of approved products or place conditions on any approvals that
could restrict the commercial applications of these products.
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In addition to FDA restrictions on marketing of pharmaceutical products, several other types
of state and federal laws have been applied to restrict certain marketing practices in the
pharmaceutical industry in recent years. These laws include anti-kickback statutes and false claims
statutes. The federal healthcare program anti-kickback statute prohibits, among other things,
knowingly and willfully offering, paying, soliciting or receiving remuneration
to induce or in return for purchasing, leasing, ordering or arranging for the purchase, lease
or order of any healthcare item or service reimbursable under Medicare, Medicaid or other federally
financed healthcare programs. This statute has been interpreted to apply to arrangements between
pharmaceutical manufacturers on the one hand and prescribers, purchasers and formulary managers on
the other. Violations of the anti-kickback statute are punishable by imprisonment, criminal fines,
civil monetary penalties and exclusion from participation in federal healthcare programs. Although
there are a number of statutory exemptions and regulatory safe harbors protecting certain common
activities from prosecution or other regulatory sanctions, the exemptions and safe harbors are
drawn narrowly, and practices that involve remuneration intended to induce prescribing, purchases
or recommendations may be subject to scrutiny if they do not qualify for an exemption or safe
harbor.
Federal false claims laws prohibit any person from knowingly presenting, or causing to be
presented, a false claim for payment to the federal government, or knowingly making, or causing to
be made, a false statement to have a false claim paid. Recently, several pharmaceutical and other
healthcare companies have been prosecuted under these laws for allegedly promoting their products
for uses for which they were not approved and causing the submission of claims for payment for such
use under federal healthcare programs. The majority of states also have statutes or regulations
similar to the federal anti-kickback law and false claims laws, which apply to items and services
reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the
payor.
In addition, we and the third-party manufacturers on which we rely for the manufacture of our
products or their respective underlying components (including API) are subject to requirements that
drugs be manufactured, packaged and labeled in conformity with current good manufacturing practices
promulgated by the FDA, or cGMP. To comply with cGMP requirements, manufacturers must continue to
spend time, money and effort to meet requirements relating to personnel, facilities, equipment,
production and process, labeling and packaging, quality control, recordkeeping and other
requirements. The FDA periodically inspects drug manufacturing facilities to evaluate compliance
with cGMP requirements.
Also, as part of the sales and marketing process, pharmaceutical companies frequently provide
samples of approved drugs to physicians. This practice is regulated by the FDA and other
governmental authorities, including, in particular, requirements concerning recordkeeping and
control procedures.
Outside of the U.S., the ability to market our products will also depend on receiving
marketing authorizations from the appropriate regulatory authorities. The foreign regulatory
approval process includes all of the risks associated with the FDA approval described above. In
addition, the requirements governing the conduct of clinical trials and marketing authorization
vary widely from country to country, and the time may be longer or shorter than that required for
FDA approval. In addition, regulatory approval of prices is required in most countries other than
the U.S. We face the risk that the resulting prices would be insufficient to generate an acceptable
return to us or any collaborator of ours.
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Employees
As of March 1, 2011, we have four employees, three of whom are full-time. Our employees are
not unionized and we believe that our relationship with our employees is good.
Following the cost-cutting and re-prioritization initiatives we began in October 2008, we have
maintained a small, efficient organizational infrastructure, outsourcing substantially all of our
product development and commercialization activities, including research-related manufacturing and
regulatory affairs, and our general and administrative activities, such as finance, accounting,
human resources, facilities, internal systems support, sales and marketing and investor relations.
Our outsourcing strategy has included engaging individual consultants that commit and spend
considerable amounts of time in our office to manage key functional areas, including regulatory,
CMC and commercial. In connection with preparing for the commercial launch of Exelbine, should it
be approved by the FDA, and initiating clinical activities with respect to ANX-514, should we reach
agreement with the FDA regarding a phase 3 clinical study, and purified 188, should we consummate
our acquisition of SynthRx, we plan to increase our internal capabilities in the near-term.
Formation
Our company was incorporated in Delaware in December 1995. In October 2000, we merged our
wholly-owned subsidiary, Biokeys Acquisition Corp., with and into Biokeys, Inc. and changed our
name to Biokeys Pharmaceuticals, Inc. In May 2003, we merged Biokeys, Inc., our wholly-owned
subsidiary, with and into us and changed our name to ADVENTRX Pharmaceuticals, Inc.
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Our financial position, results of operations and cash flows are subject to various risks,
many of which are not exclusively within our control, that may cause actual performance to differ
materially from historical or projected future performance. We urge investors to carefully
consider the risk factors described below in evaluating the information contained in this report.
RISKS RELATED TO OUR BUSINESS
Risks Related to Our Capital Requirements, Finances and Operations
We have incurred losses since our inception, we expect our operating expenses to continue to exceed
our revenues for the foreseeable future and we may never generate revenues sufficient to achieve
profitability.
We are a development stage company and have not generated sustainable revenues from operations
or been profitable since inception, and it is possible we will never achieve profitability. We have
devoted our resources to acquiring and developing a new generation of therapeutic products, but
such products cannot be marketed until the regulatory process is completed and governmental
approvals have been obtained. Accordingly, there is no current source of revenues from operations,
much less profits, to sustain our present activities, and no revenues from operations will likely
be available until, and unless, our product candidates are approved by the FDA or other regulatory
agencies and successfully marketed, either by us or a partner, an outcome which we may not achieve.
The success of our business currently is dependent primarily on the success of Exelbine and ANX-514
and these product candidates may not receive regulatory approval or be successfully commercialized.
We currently have no products for sale and only two product candidates, Exelbine and ANX-514,
for which we are pursuing regulatory approval. Although we have entered into an agreement to
acquire SynthRx, Inc. and currently anticipate pursuing the development of purified 188 for the
treatment of sickle cell crisis as another of our lead programs after the transaction closes, the
transaction may not close. Accordingly, the success of our business currently depends primarily on
our ability, ourselves or with a future partner of ours, to obtain regulatory approval for and
successfully market and sell Exelbine and ANX-514, and our efforts in this regard may prove
unsuccessful. In November 2010, we submitted an NDA to the FDA for Exelbine and, in January 2011,
we announced that the FDA had accepted our NDA for filing and established a PDUFA goal date of
September 1, 2011 to finish its review. Because the NDA has been accepted for filing, the FDA is
conducting an in-depth review of the submission to determine whether to approve Exelbine for
commercial marketing in the U.S. for the same indications as Navelbine. If the FDA is not satisfied
with the information we have provided, the agency may refuse to approve our NDA or may require us
to perform additional studies or provide other information in order to secure approval. The FDA may
delay, limit or refuse to approve our NDA for many reasons, including those identified under the
section titled “Risks Related to Drug Development and Commercialization.” The FDA may formally
extend its review process by three months or longer if it determines it requires additional time to
review additional information that it requests or that we elect to provide during the review
process. If we are unable to timely respond to the FDA’s requests for additional information, the
approval of the Exelbine NDA may be delayed further. In addition, the FDA may fail to meet its
review goals. Regulatory approval for Exelbine may not be obtained, and any failure or significant
delay in obtaining the required approval could have a material adverse effect on our business and
financial condition.
In addition, with respect to ANX-514, following our meeting with the FDA in February 2011, we
announced that the FDA determined ANX-514 could not be approved based on the findings from our
bioequivalence study of ANX-514, which we refer to as Study 514-01, because the Cmax for total
docetaxel was higher in patients who received ANX-514 relative to those who received Taxotere in
Study 514-01. The FDA indicated that a randomized safety study comparing ANX-514 and Taxotere
would be required in an appropriate patient population to support approval of ANX-514. The FDA
recommended that the study also collect data on response rate and duration of response. We are
developing a study protocol for submission to the FDA and intend to continue discussions with the
FDA regarding the phase 3 clinical study and other requirements for approval of ANX-514. The
results of these discussions will determine in large part the timeline for and estimated cost of
continued development of ANX-514. Currently, we plan to continue development of ANX-514, but the
FDA’s requirements for additional clinical and/or nonclinical activities to support approval of
ANX-514 may increase estimated development time and expense to the point where we determine to
discontinue work on ANX-514 based
on our assessment of its commercial value. Even if we continue development of ANX-514
following further discussions with the FDA, the FDA’s requirements may negatively impact our
ability to raise additional capital to develop and/or partner ANX-514.
-21-
If any of our current or future product candidates, including purified 188 if our acquisition
of SynthRx closes, is approved by the FDA or any foreign regulatory agency, our ability to generate
revenues from these products will depend in substantial part on the extent to which they are
accepted by the medical community and reimbursed by third-party payors and our ability to ensure
that our third-party manufacturer or manufacturers produce sufficient quantities of the products to
meet commercial demand, if any.
Our financial resources are limited, we will need to obtain additional funding to pursue our
current business strategy and we may not be able to obtain such funding on a timely basis or on
commercially reasonable terms, if at all.
We have experienced significant losses in acquiring and funding the development of our product
candidates, accumulating net losses totaling approximately $158.4 million as of December 31, 2010,
and we expect to continue to incur substantial operating losses for the foreseeable future, even if
we or a future partner of ours is successful in advancing our product candidates to market. We do
not expect to generate cash flows from sales of our products unless and until our products are
approved for marketing, the timing of which we cannot predict accurately.
Our future expenditures on our programs are subject to many uncertainties, including whether
our product candidates will be developed or commercialized with a partner or independently. Our
future capital requirements will depend on, and could increase significantly as a result of, many
factors, including:
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the costs of seeking regulatory approval for our product candidates, including
any nonclinical testing or bioequivalence or clinical studies, process development,
scale-up and other manufacturing and stability activities, or other work required
to achieve such approval, as well as the timing of such activities and approval; |
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the extent to which we invest in or acquire new technologies, product
candidates, products or businesses and the development requirements with respect to
any acquired programs; |
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the scope, prioritization and number of development and/or commercialization
programs we pursue and the rate of progress and costs with respect to such
programs; |
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the costs related to developing, acquiring and/or contracting for sales,
marketing and distribution capabilities and regulatory compliance capabilities,
most immediately with respect to Exelbine, if we commercialize any of our product
candidates for which we obtain regulatory approval without a partner; |
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the timing and terms of any collaborative, licensing and other strategic
arrangements that we may establish; |
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the extent to which we will need to rebuild our workforce, which currently
consists of four employees, and the costs involved in recruiting, training and
incentivizing new employees; |
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the effect of competing technological and market developments; and |
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the cost involved in establishing, enforcing or defending patent claims and
other intellectual property rights. |
We anticipate that our cash as of December 31, 2010, which was approximately $28.0 million,
together with the net proceeds from the equity financing we completed in January 2011, will be
sufficient to fund our operations at their current levels for at least the next 12 months. However,
we may determine to grow our organization and/or pursue development and/or commercialization
activities for our current or future product candidates, including purified 188 should we
consummate our acquisition of SynthRx, at levels or on timelines, or we may incur unexpected
expenses, that shorten the period through which our current operating funds will sustain us. We may
also acquire new technologies, product candidates and/or products and the cost to acquire, develop
and/or commercialize such new technologies, product candidates and/or products may shorten the
period through which our current operating funds will sustain us. We may seek additional funding
through public or private sales of our equity securities, debt financings, collaborations,
licensing arrangements or other strategic or partnering transactions. However, we may not be able
to obtain sufficient additional funding on satisfactory terms, if at all. We believe global
economic conditions, including the heightened volatility of U.S. and international equity markets
and the recent credit crisis, may adversely impact our ability to raise additional capital.
-22-
We may incur substantial costs in connection with evaluating and negotiating future strategic
or partnering and/or capital-raising transactions, the effect of which may be to shorten the period
through which our current operating funds will sustain us. Even if we incur costs in pursuing,
evaluating and negotiating particular strategic or partnering and/or capital-raising transactions,
our efforts may not prove successful.
If we consummate the SynthRx acquisition and if our stockholders fail to approve the issuance of
the shares of our common stock issuable upon the achievement of milestones related to development
and regulatory approval of purified 188, our future liquidity and cash position could be materially
impaired, which could have an immediate negative effect on our stock price and require us to raise
additional capital.
Under the terms of the merger agreement we entered into with SynthRx, if we consummate the
acquisition of SynthRx, we would be required to issue up to an aggregate of 13,478,050 additional
shares of our common stock upon the achievement of milestones related to the development and
regulatory approval of purified 188 for the treatment of sickle cell crisis in children. Under
NYSE Amex rules, our stockholders are required to approve the issuance of shares of common stock
issuable by us as consideration in an acquisition if the potential number of such shares could
result in an increase in our outstanding shares of 20% or more, which is the case with respect to
the milestone-related shares issuable to SynthRx’s stakeholders under our merger agreement. We
expect to submit a proposal to our stockholders to approve the issuance of the milestone-related
shares at our 2011 annual meeting of stockholders. If our stockholders do not approve the issuance
of the milestone-related shares at the annual meeting or any special meeting we may call prior to
December 31, 2011, under the terms of the merger agreement, we will be required to pay in cash the
value of the milestone-related shares we would have otherwise issued. We cannot determine with any
degree of certainty the amounts of these potential cash payments because the amounts of such
payments, if any, will be based on the 10-day volume weighted average of the closing price of our
common stock at the time a milestone is achieved and the market price of our common stock
historically has been, and likely will continue to be, highly volatile.
Any obligation to satisfy the milestone-related merger consideration in cash rather than with
shares of our common stock, or even the perception of such future obligations, likely would have a
material and adverse effect on our cash position, ability to raise capital and stock price. Though
recently we have experienced success raising capital, our financial resources are limited and large
cash payments could materially impair or entirely deplete our future cash position, as well as any
cash equivalents and short-term securities. In addition, cash used to satisfy milestone-related
obligations would reduce our available resources to pursue our core business strategy, including
our future development and commercialization activities.
Further, the potential for us to satisfy these obligations in cash may cause us to raise
additional capital. It can be difficult to raise capital to finance payment or other debt
obligations, or where the use of proceeds is for other than fundamental business activities, which
may limit our future capital-raising ability, whether or not the intended purpose of the
transaction is to satisfy these potential cash payment obligations. In addition, the expectation
that we may or will be required to raise additional capital, including to satisfy these potential
cash payment obligations, may have the effect of depressing the market price of our common stock
for a substantial period of time, including as a result of anticipated dilution, resulting in
further dilution than might otherwise be the case in the event we in fact are able to raise
additional capital. Furthermore, if we have or are perceived to have insufficient capital to
satisfy a cash payment obligation at the time a particular milestone is achieved, the expectation
of imminent financing activity may depress our stock price at a time when the purified 188 program
is demonstrating success through achievement of the milestone.
If our stockholders do not approve the issuance of the milestone-related shares and we are
successful in raising additional capital in anticipation of satisfying these cash payment
obligations before particular milestones are achieved, we may raise more capital than ultimately is
necessary, subjecting our stockholders to otherwise unnecessary dilution. Alternatively, we may
raise insufficient capital to meet a payment obligation. If we wait to
raise capital until particular milestones are achieved, investors may impose more onerous
terms based on an actual or perceived need to raise capital immediately, if capital is available at
all.
-23-
Our ability to raise capital may be limited by applicable laws and regulations.
Historically, we have raised capital through the sale and issuance of our equity securities.
Our ability to raise additional capital through the sale and issuance of our equity securities may
be limited by, among other things, current U.S. Securities and Exchange Commission, or SEC, and
NYSE Amex rules and regulations. Since June 2009, we completed six equity financings under “shelf”
registration statements on Form S-3. Use of a “shelf” registration statement for primary offerings
typically enables an issuer to raise additional capital on a more timely and cost effective basis
than through other means, such as registration of a securities offering under a Form S-1
registration statement. Under current SEC rules and regulations, to be eligible to use a Form S-3
registration statement for primary offerings without restriction as to the amount of securities to
be sold and issued, an issuer must, among other requirements, have outstanding common equity with a
market value of at least $75.0 million held by non-affiliates. If we file a “shelf” Form S-3
registration statement at a time when the aggregate market value of our common stock held by
non-affiliates, or public float, is less than $75.0 million (calculated as set forth in Form S-3
and SEC rules and regulations), the amount we could raise through primary offerings of our
securities in any 12-month period using the Form S-3 registration statement may be limited to an
aggregate of one-third of our public float. Moreover, the market value of all securities sold by us
under a Form S-3 registration statement during the prior 12 months may be subtracted from that
amount to determine the amount we can then raise under the Form S-3 registration statement. Even if
we file a “shelf” Form S-3 registration statement at a time when our public float is $75.0 million
or more (calculated as set forth in Form S-3 and SEC rules and regulations), we may become subject
to the one-third of public float limitation described above in the future. The SEC’s rules and
regulations require that we periodically re-evaluate the value of our public float. If, at a
re-evaluation date, our public float is less than $75.0 million (calculated as set forth in Form
S-3 and SEC rules and regulations), the amount we could raise through primary offerings of our
securities in any 12-month period using a Form S-3 registration statement would be subject to the
one-third of public float limitation described above.
In addition, under current SEC rules and regulations, if our public float is less than $75.0
million or if we seek to register a resale offering (i.e., an offering of securities of ours by
persons other than us), we must, among other requirements, maintain our listing with the NYSE Amex
or have our common stock listed and registered on another national securities exchange in order to
be eligible to use a Form S-3 registration statement for any primary or resale offering.
Alternative means of raising capital through sales of our securities, including through the use of
a Form S-1 registration statement, may be more costly and time-consuming.
Currently, our common stock is listed on the NYSE Amex equities market. The NYSE Amex will
review the appropriateness of continued listing of any issuer that falls below the exchange’s
continued listing standards. Previously, including during part of 2010, we were not in compliance
with certain NYSE Amex continued listing standards and were at risk of being delisted from the NYSE
Amex equities market. For additional information regarding this risk, see the risk factor below
titled “If we are unable to maintain compliance with NYSE Amex continued listing standards, we may
be delisted from the NYSE Amex equities market, which would likely cause the liquidity and market
price of our common stock to decline.” If our common stock were delisted from the NYSE Amex, our
ability to raise capital on terms and conditions we deem acceptable, if at all, may be materially
impaired.
Our ability to timely raise sufficient additional capital also may be limited by the NYSE
Amex’s requirements relating to stockholder approval for transactions involving the issuance of our
common stock or securities convertible into our common stock. For instance, the NYSE Amex requires
that we obtain stockholder approval of any transaction involving the sale, issuance or potential
issuance by us of our common stock (or securities convertible into our common stock) at a price
less than the greater of book or market value, which (together with sales by our officers,
directors and principal stockholders) equals 20% or more of our presently outstanding common stock,
unless the transaction is considered a “public offering” by the NYSE Amex staff. Based on our
outstanding common stock as of March 1, 2011 and a closing price of $2.07, which was the closing
price of our common stock on March 1, 2011, we could not raise more than approximately $9.8 million
without stockholder approval, unless the transaction is deemed a public offering or does not
involve the sale, issuance or potential issuance by us of our common stock (or securities
convertible into our common stock) at a price less than the greater of book or market value.
However, certain prior sales by us may be aggregated with any offering we may propose in the
near-term, further limiting the amount we could raise in any future offering that is not considered
a public
offering by the NYSE Amex staff and would involve the sale, issuance or potential issuance by
us of our common stock (or securities convertible into our common stock) at a price less than the
greater of book or market value. The NYSE Amex will also require stockholder approval if the
issuance or potential issuance of additional shares will be considered by the exchange staff to
result in a change of control of us.
-24-
Obtaining stockholder approval is a costly and time-consuming process. If we are required to
obtain stockholder approval, we would expect to spend substantial additional money and resources.
In addition, seeking stockholder approval would delay our receipt of otherwise available capital,
which may materially and adversely affect our ability to execute our current business strategy, and
there is no guarantee our stockholders ultimately would approve a proposed transaction. A public
offering under the NYSE Amex rules typically involves broadly announcing the proposed transaction,
which often times has the effect of depressing the issuer’s stock price. Accordingly, the price at
which we could sell our securities in a public offering may be less and the dilution existing
stockholders experience may in turn be greater than if we were able to raise capital through other
means.
Our ability to raise capital may be limited by contractual restrictions.
In the past, in connection with raising capital through the sale and issuance of our equity
securities, we have agreed to certain restrictions on our ability to raise additional capital
through additional equity financing transactions. For example, in connection with an equity
financing we completed in July 2005, we entered into a rights agreement with certain of the
purchasers of our securities, including entities affiliated with Carl C. Icahn. Pursuant to the
Rights Agreement, dated July 27, 2005, as amended, or the Rights Agreement, we agreed to, among
other things, grant the investors that were party to the Rights Agreement, or the Rights Investors,
the right to participate in sales of our securities for up to seven years (with certain enumerated
exceptions as set forth in the Rights Agreement). Pursuant to the Rights Agreement, we must notify
the Rights Investors of certain proposed transactions on the timeline specified in the Rights
Agreement. In many of our prior financing transactions, we have requested and received waivers from
the Rights Investors with respect to their participation rights, but if we are unable to obtain
such waivers in a timely manner, or at all, with respect to future financing transactions, we may
be unable to consummate a financing that otherwise may be available to us and in the best interest
of our company and stockholders.
Raising additional capital may cause dilution to our existing stockholders, require us to
relinquish proprietary rights or restrict our operations.
We may raise additional capital at any time and may do so through one or more financing
alternatives, including public or private sales of our equity securities, debt financings,
collaborations, licensing arrangements or other strategic transactions. Each of these financing
alternatives carries certain risks. Raising capital through the issuance of common stock may
depress the market price of our stock and may substantially dilute our existing stockholders. If we
instead seek to raise capital through strategic transactions, such as licensing arrangements or
sales of one or more of our technologies or product candidates, we may be required to relinquish
valuable rights and dilute the current and future value of our assets. For example, any licensing
arrangement would likely require us to share a significant portion of any revenues generated by our
licensed technologies with our licensees. Additionally, our control over the development of any
products or product candidates licensed or sold to third parties may be reduced and thus we may not
realize the full value of any such products or product candidates. Debt financings could involve
covenants that restrict our operations. These restrictive covenants may include limitations on
additional borrowing and specific restrictions on the use of our assets, as well as prohibitions on
our ability to create liens or make investments and may, among other things, preclude us from
making distributions to stockholders (either by paying dividends or redeeming stock) and taking
other actions beneficial to our stockholders. In addition, investors could impose more one-sided
investment terms and conditions on companies that have or are perceived to have limited remaining
funds or limited ability to raise additional funds. The lower our cash balance, the more difficult
it is likely to be for us to raise additional capital on commercially reasonable terms, or at all.
We currently expect to increase the size of our organization, and may experience difficulties in
attracting and retaining qualified personnel and managing growth.
Currently, we have four employees and we rely on third parties to perform many essential
services for us. In connection with preparing for the commercial launch of Exelbine, should our
November 2010 Exelbine NDA be approved, and initiating clinical activities with respect to ANX-514,
should we reach agreement with the FDA regarding a phase 3 clinical study, and purified 188, should
we consummate our acquisition of SynthRx, we plan to
increase our internal sales and marketing, finance and accounting, research and development,
regulatory, manufacturing, quality, compliance, and other resources in order to manage our expanded
operations. We do not expect that our current management, personnel, systems and, potentially,
facilities will be adequate to support those activities. We expect to continue to rely on third
parties to perform certain essential services as we develop and/or acquire additional internal
capabilities.
-25-
The success of our business will depend, in part, on our ability to attract and retain highly
qualified personnel, and on our ability to develop and maintain important relationships with
respected service providers and industry-leading consultants and advisors. Competition for these
types of personnel and relationships is intense from numerous pharmaceutical and biotechnology
companies, universities and other research organizations, particularly in the San Diego, California
area. In connection with the cost-cutting measures we implemented in 2008 and 2009, we eliminated,
among others, our scientific staff and our manufacturing and regulatory personnel, who had a deep
background in our product candidates and our research and development programs. Recruiting and
retaining employees, including senior-level personnel, with relevant product development and
commercialization experience may be costly and time-consuming. Our ability to provide competitive
compensation to our management and other employees may also be adversely affected by our capital
resources. If we cannot attract and retain additional skilled personnel, we may not achieve our
development and other goals.
We may not be able to manage our business effectively if we are unable to retain key personnel.
We are highly dependent on the expertise and deep background in our product candidates of our
chief executive officer and our president and chief operating officer, who currently are the only
members of our management team. If we lose one or both of these key employees, our ability to
successfully implement our current business strategy could be seriously harmed. Replacing these key
employees may be difficult and take an extended period of time, particularly due to the fact that
we currently do not have other executive officers or personnel to assume all of the
responsibilities of these key employees and the intense competition for qualified personnel among
biotechnology, pharmaceutical and other businesses, particularly in the San Diego, California area.
Our chief executive officer and our president and chief operating officer may terminate their
employment with us at any time with or without notice.
If we are unable to raise sufficient additional capital as needed, we may be forced to reduce our
current and/or planned development and commercialization activities, partner our product candidates
or products at inopportune times or pursue less expensive but higher-risk development paths, which
we have done in the past.
Although we anticipate that our cash as of December 31, 2010, together with the net proceeds
from the equity financing we completed in January 2011, will be sufficient to fund our operations
at their current levels for at least the next 12 months, we expect to need to raise additional
capital in order to execute our current business plan. If we are not able to raise sufficient
additional capital, we may be required to reduce our development and commercialization activities
or attempt to continue them by entering into arrangements with partners or others that may not be
available on favorable terms, or at all, and may require us to relinquish some or all of our rights
to our product candidates or products or the financial benefits thereof. For example, in late 2008,
due to an immediate need for additional capital, we discontinued all of our development programs
other than with respect to Exelbine and ANX-514 and limited our activities with respect to Exelbine
and ANX-514 to those we believed necessary to preparing and submitting NDAs for Exelbine and
ANX-514. Going forward, if we do not have sufficient capital, we may determine, for example, not to
conduct the randomized safety study comparing ANX-514 and Taxotere, which the FDA has indicated
would be required to support approval of ANX-514 or any additional clinical and/or nonclinical
studies that may be required by the FDA to support approval of ANX-514, any post-approval clinical
studies to support uses of Exelbine in new indications or other label changes intended to expand
the scale and scope of its market potential, or, should we consummate our acquisition of SynthRx,
any clinical and/or nonclinical studies that may be required by the FDA to support approval of
purified 188.
-26-
Our failure to successfully acquire, develop and commercialize additional technologies, product
candidates and/or products may impair our ability to grow.
Our current business strategy involves expanding our pipeline of product candidates through
one or more in-license, asset acquisition or merger transactions, including our pending acquisition
of SynthRx. Because we neither have, nor currently intend to establish, internal research
capabilities, we are dependent upon pharmaceutical and biotechnology companies, universities and
other research organizations to sell or license technologies, product
candidates, products or businesses to us. The process of identifying, evaluating, negotiating
and implementing the purchase or license of new assets is lengthy and complex and may disrupt other
development programs and distract our personnel. We have limited experience and resources with
respect to identifying, evaluating, negotiating and implementing the acquisition of new assets or
rights thereto and integrating them into our current infrastructure. Supplementing our current
resources to complete one or more transactions may be costly. In addition, given our recent market
capitalization and our desire to preserve our cash for development activities, any merger or other
business combination transaction pursuant to which we acquire additional technologies, product
candidates and/or products primarily will involve the issuance of shares of our common stock, or
securities convertible into our common stock. For example, if we consummate our acquisition of
SynthRx, in connection with the consummation of the transaction we would issue 2,938,773 shares of
our common stock to SynthRx’s stakeholders. In addition, we could issue up to an aggregate of
13,478,050 additional shares of our common stock to SythRx’s stakeholders upon achievement of
milestones related to the development and regulatory approval of purified 188 for the treatment of
sickle cell crisis in children, if our stockholders approve the issuance of such milestone-related
shares, as required by NYSE Amex rules. If all milestones are achieved without reduction, the
number of shares we issue in connection with the SynthRx acquisition would, in the aggregate,
represent an approximately 40% ownership stake in our company (based on currently outstanding
shares plus shares issued in connection with the acquisition). The issuance of shares in
connection with other future strategic transactions, if any, may result in the stockholders who own
the majority of our voting securities prior to one or more of such transactions owning less than a
majority after such transactions.
Our success in acquiring or acquiring rights to new technologies, product candidates and/or
products may also be adversely affected by competition for the same assets by other companies,
including some with substantially greater development and commercialization resources and with a
proven record of successfully developing and/or commercializing product candidates. In addition, we
may not be able to identify, acquire or acquire the rights to additional technologies, product
candidates and/or products on terms that we find acceptable, or at all.
Any technology and/or product candidate that we acquire or to which we acquire rights likely
will require additional development efforts prior to commercial sale, including extensive clinical
testing and approval by the FDA and applicable foreign regulatory authorities. All product
candidates are subject to risks of failure typical of pharmaceutical product development, including
the possibility that a product candidate will not be shown to be sufficiently safe or effective for
approval by regulatory authorities and other risks described under the section titled “Risks
Related to Drug Development and Commercialization.”
If we acquire or acquire rights to new technologies, product candidates and/or products and fail to
integrate them successfully into our operations, we may incur unexpected costs and disruptions to
our business.
In addition to our pending acquisition of SynthRx, which we expect to consummate in the first
half of 2011, we currently continue to spend significant time and attention identifying and
evaluating, and potentially negotiating to acquire or acquire rights to, other technologies,
product candidates and/or products that we believe have a strategic fit with our current or future
business strategy. However, any strategic transaction, including in-license, asset acquisition and
merger transactions, including our acquisition of SynthRx, if it closes, may entail numerous
operational and financial risks, including:
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exposure to unknown liabilities; |
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disruption of our business and diversion of our management’s time and attention
to develop and/or commercialize acquired technologies, products candidates and/or
products; |
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incurrence of substantial debt or dilutive issuances of securities to pay for
acquisitions; |
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higher than expected acquisition and integration costs; |
-27-
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increased amortization expenses; |
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difficulty and cost in combining the operations and personnel of any acquired
businesses with our operations and personnel; |
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impairment of relationships with key suppliers and/or customers of any acquired
businesses due to changes in management and ownership; and |
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inability to retain key employees of any acquired businesses. |
We may devote resources to potential product candidate acquisition or in-licensing opportunities
that are never completed, or we may fail to realize the anticipated benefits of such efforts.
The use of our net operating loss carry forwards and research and development tax credits has been
and may be limited further by changes in ownership within the meaning of IRC Section 382.
Our net operating loss carry forwards and research and development tax credits may expire and
not be used. As of December 31, 2010, we had generated federal and state net operating loss carry
forwards of approximately $31.5 million and $34.4 million, respectively, and federal and state
research and development tax credit carry forwards of approximately $145,000 and $87,000,
respectively. Federal net operating loss carry forwards and research and development tax credits
have a 20-year carry forward period and California net operating losses have a carry forward period
that varies depending on the year such net operating losses are generated. California research and
development tax credits carry forward indefinitely. Our federal net operating loss carry forwards
will begin to expire in 2016 and our California net operating loss carry forwards will begin to
expire in 2013 if we have not used them prior to that time. Our federal research and development
tax credits will begin to expire in 2029.
Pursuant to Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, or IRC, our
ability to use any net operating loss carry forwards and research and development credits to offset
taxable income in the future is limited if we experience a cumulative change in ownership of more
than 50% within a three-year period. During 2010, we completed an analysis to determine whether any
such change in ownership had occurred during the period from January 1, 2008 through January 7,
2010, and identified several changes in ownership within the meaning of IRC Section 382. Upon
application of limitations prescribed by IRC Section 382, we determined that our net operating loss
carry forwards and research and development credits were significantly adversely affected by the
identified changes in control, and we have adjusted our deferred tax assets accordingly. We have
not completed an analysis to determine whether any change in ownership within the meaning of IRC
Section 382 has occurred since January 7, 2010, but we believe a change in ownership may have
occurred as a result of our equity securities financings in May 2010 and January 2011. If any such
change in ownership has occurred since January 7, 2010 or were to occur in the future, the amount
of our net operating loss carry forwards and research and development tax credits we could utilize
annually in the future to offset taxable income could be further significantly restricted or
eliminated. Inability to fully utilize our net operating loss carry forwards and research and
development tax credits could have an adverse impact on our financial position and results of
operations.
If we fail to maintain an effective system of internal control over financial reporting and
disclosure controls and procedures, we may not be able to accurately report our financial results.
As a result, current and potential investors could lose confidence in our financial reporting,
which could harm our business and have an adverse effect on our stock price.
Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, we are required to annually furnish
a report by our management on our internal control over financial reporting. Such report must
contain, among other matters, an assessment by our principal executive officer and our principal
financial officer on the effectiveness of our internal control over financial reporting, including
a statement as to whether or not our internal control over financial reporting is effective as of
the end of our fiscal year. This assessment must include disclosure of any material weakness in our
internal control over financial reporting identified by management. Performing the system and
process documentation and evaluation needed to comply with Section 404 is both costly and
challenging. In addition, under current SEC rules, if our public float is $75 million or more as of
the last business day of our most recently completed second fiscal quarter, we will be required to
obtain an attestation report from our independent registered public accounting firm as to our
assessment of the effectiveness of our internal control over financial reporting for our annual
report on Form 10-K for that fiscal year, which likely would consume significant additional
financial and managerial resources.
-28-
We have in the past discovered, and may in the future discover, areas of internal controls
that need improvement. For example, during the fourth quarter of 2008, we discovered that we did
not correctly apply
generally accepted accounting principles relating to accounting for warrant liability because
our accounting staff did not have adequate training or expertise, and determined that we had a
material weakness in our internal control over financial reporting as of December 31, 2007. A
material weakness is a deficiency, or a combination of deficiencies, in internal control over
financial reporting, such that there is a reasonable possibility that a material misstatement of
our annual or interim financial statements will not be prevented or detected on a timely basis. For
a detailed description of this material weakness and our remediation of this material weakness, see
“Part II — Item 9A(T) — Controls and Procedures” of our annual report on Form 10-K for the year
ended December 31, 2008. If we identify a material weakness in our internal control over financial
reporting in the future, we may not be able to conclude that our internal control over financial
reporting is effective, and we may need to implement expensive and time-consuming remedial
measures. As a result of reductions in our workforce and other personnel departures that occurred
in 2008 and 2009, we have experienced substantial turnover in our personnel responsible for
performing activities related to our internal control over financial reporting. Since July 2009,
our president and chief operating officer, who has no formal education in finance or accounting,
has served as our principal financial and principal accounting officer. We have used third-party
contractors in an effort to maintain effective internal control over financial reporting during and
since that turn-over period. However, we cannot be certain that a material weakness will not be
identified in the future and, if we fail to maintain effective internal control over financial
reporting, we could lose investor confidence in the accuracy and completeness of our financial
reports, which could have a material adverse effect on our stock price.
Internal control over financial reporting cannot provide absolute assurance of achieving
financial reporting objectives because of its inherent limitations, including the possibility of
human error and circumvention by collusion or overriding of controls. Accordingly, even an
effective internal control system may not prevent or detect material misstatements on a timely
basis. Also, projections of any evaluation of effectiveness to future periods are subject to the
risk that controls may become inadequate because of changes in conditions or that the degree of
compliance with the policies or procedures may deteriorate.
Our operations might be interrupted by the occurrence of a natural disaster or other catastrophic
event.
Our corporate headquarters are located in a single commercial facility in San Diego,
California. Important documents and records, including copies of our regulatory documents and other
records for our product candidates, are located at our facilities and we depend on our facilities
for the continued operation of our business. Natural disasters and other catastrophic events, such
as wildfires and other fires, earthquakes and extended power interruptions, which have impacted San
Diego businesses in the past, and terrorist attacks or severe weather conditions, could
significantly disrupt our operations and result in additional, unplanned expense. As a small
company, we have limited capability to establish and maintain a comprehensive disaster recovery
program and, accordingly, we do not have a formal business continuity or disaster recovery plan,
and any natural disaster or catastrophic event could delay our development and potential
commercialization efforts. Even though we believe we carry commercially reasonable insurance, we
might suffer losses that exceed the coverage available under these insurance policies. In addition,
we are not insured against terrorist attacks or earthquakes.
Risks Related to Drug Development and Commercialization
Further testing and/or validation of our product candidates and related manufacturing processes may
be required and regulatory approval may be delayed or denied, which would limit or prevent us from
marketing our product candidates and significantly impair our ability to generate revenues.
Human pharmaceutical products generally are subject to rigorous nonclinical testing and
clinical trials and other approval procedures mandated by the FDA and foreign regulatory
authorities. Various federal and foreign statutes and regulations also govern or influence the
manufacturing, safety, labeling, storage, record keeping and marketing of pharmaceutical products.
The process of obtaining these approvals and the subsequent compliance with appropriate U.S. and
foreign statutes and regulations is time-consuming and requires the expenditure of substantial
resources. In addition, these requirements and processes vary widely from country to country.
-29-
To varying degrees based on the regulatory plan for each of our product candidates, the effect
of government regulation and the need for FDA and other regulatory agency approval will delay
commercialization of our product candidates, impose costly procedures upon our activities, and put
us at a disadvantage relative to larger companies with which we compete. There can be no assurance
that FDA or other regulatory approval for any product candidates developed by us, alone or with a
future partner, will be granted on a timely basis, or at all. For
example, despite our including in our December 2009 Exelbine NDA data that we believe met the
filing requirements for a new drug promulgated by the International Conference on Harmonization, or
ICH, as well as site-specific stability data from lots manufactured at the intended commercial
manufacturing site, we received a refusal-to-file letter from the FDA indicating that the data
included in the December 2009 submission was insufficient to support a commercially-viable
expiration dating period. Likewise, even though the FDA has confirmed the appropriateness of a
Section 505(b)(2) regulatory path for Exelbine and ANX-514, the FDA’s views may change or the FDA
may require additional nonclinical testing or clinical studies to demonstrate their safety. For
example, with respect to ANX-514, because the Cmax for total docetaxel was higher in patients who
received ANX-514 relative to those who received Taxotere in Study 514-01, the FDA indicated that a
randomized safety study comparing ANX-514 and Taxotere would be required in an appropriate patient
population to support approval of ANX-514. The FDA recommended that the study also collect data on
response rate and duration of response. We are developing a study protocol for submission to the
FDA and intend to continue discussions with the FDA regarding the phase 3 clinical study and other
requirements for approval of ANX-514. The results of these discussions will determine in large
part the timeline for and estimated cost of continued development of ANX-514. Currently, we plan
to continue development of ANX-514, but the FDA’s requirements for additional development
activities to support approval of ANX-514 may increase estimated development time and expense to
the point where we determine to discontinue work on ANX-514 based on our assessment of its
commercial value. Likewise, if, during its review of our Exelbine NDA, the FDA determines that
additional nonclinical testing or clinical studies are necessary for regulatory approval of
Exelbine, we may determine that the associated time and cost is not financially justifiable and, as
a result, discontinue that program. If we discontinue the development of one or both of these
product candidates, our business and stock price may suffer.
In connection with any NDA that we file under Section 505(b)(2) of the FDCA we may be required
to notify third parties that we have certified to the FDA that any patents listed for the reference
product in the FDA’s Orange Book publication are invalid or will not be infringed by the
manufacture, use or sale of our product. If the third party files a patent infringement lawsuit
against us within 45 days of its receipt of notice of our certification, the FDA is automatically
prevented from approving our NDA until, subject to certain adjustments, the earliest of 30 months,
expiration of the patent, settlement of the lawsuit or a decision in the infringement case that is
favorable to us. Accordingly, we may invest significant time and expense in the development of our
product candidates, including ANX-514, only to be subject to significant delay and patent
litigation before our products may be commercialized.
We may not achieve our projected development, commercialization and other goals in the time frames
we announce. Delays in the commencement or completion of nonclinical testing, bioequivalence or
clinical trials or manufacturing, regulatory or other activities could result in increased costs to
us and delay or limit our ability to generate revenues.
We set goals for and make public statements regarding our estimates of the timing of the
accomplishment of objectives material to successful development, approval and future
commercialization of our product candidates. The actual timing of these events can vary
dramatically due to any number of factors, including delays or failures in our nonclinical testing,
bioequivalence and clinical trials and manufacturing, regulatory and commercial launch activities
and the uncertainties inherent in the regulatory approval process. While our regulatory strategy
for Exelbine and ANX-514 has been to demonstrate the bioequivalence of each to the currently
approved reference product in small, bioequivalence trials in humans, in February 2011, we
announced that the FDA determined ANX-514 could not be approved based on the findings from Study
514-01 and indicated that a randomized safety study comparing ANX-514 and Taxotere would be
required in an appropriate patient population to support approval of ANX-514. The FDA recommended
that the study also collect data on response rate and duration of response. We are developing a
study protocol for submission to the FDA and intend to continue discussions with the FDA regarding
the phase 3 clinical study and other requirements for approval of ANX-514. However, the FDA’s
requirements for development activities beyond Study 514-01 will significantly increase the time
and cost associated with seeking regulatory approval of ANX-514 relative to our previously planned
regulatory approval pathway for ANX-514. In addition, we may determine to conduct clinical studies
with respect to Exelbine and ANX-514 to support uses in new indications or other label changes or
for other reasons. If we consummate our acquisition of SynthRx, we intend to develop purified 188
for the treatment of sickle cell crisis in a pediatric population and plan to meet with the FDA to
reach agreement on a phase 3 clinical trial protocol. Although the safety and efficacy of 188 and
purified 188 in sickle cell disease have been evaluated in multiple clinical studies and we believe
that a properly designed and executed phase 3 clinical trial will demonstrate that purified 188 is
an effective treatment for
sickle cell crisis, the FDA may require additional nonclinical testing and/or clinical studies
for regulatory approval of purified 188 for the treatment for sickle cell crisis in a pediatric
population.
-30-
We conduct nonclinical activities in the course of our development programs, including in
connection with the manufacture of our product candidates, and in response to requests by
regulatory authorities, as well as for other reasons. Delays in our nonclinical activities could
occur for a number of reasons, including:
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delays in reaching agreement on acceptable terms with prospective contract
research organizations, or CROs, and contract manufacturing organizations, or CMOs,
the terms of which can be subject to extensive negotiation and may vary
significantly among different CROs and CMOs; |
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failures on the part of our CROs and CMOs in developing procedures and protocols
or otherwise conducting activities on timeframes requested by us; |
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delays in identifying and hiring or engaging, as applicable, additional
employees or consultants to assist us in managing CRO and/or CMO activities; |
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changes in regulatory requirements or other standards or guidance relating to
nonclinical testing, including testing of pharmaceutical products in animals; |
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a lack of availability of capacity at our CMOs, or of the component materials,
including the active pharmaceutical ingredient, or API, or related materials,
including vials and stoppers, necessary to manufacture our product candidates or
products; and |
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unforeseen results of nonclinical testing that require us to amend study or test
designs or delay future testing or bioequivalence or clinical trials and related
regulatory filings. |
In addition, we do not know whether planned bioequivalence or clinical trials will commence on
time or be completed on schedule, if at all. The commencement and completion of trials can be
delayed for a variety of reasons, including delays related to:
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obtaining regulatory approval to commence a trial; |
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identifying appropriate trial sites and reaching agreement on acceptable terms
with prospective CROs, trial sites and investigators, the terms of which can be
subject to extensive negotiation and may vary significantly among different CROs,
trial sites and investigators; |
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identifying and hiring or engaging, as applicable, additional employees or
consultants to assist us in managing a trial and analyzing the data resulting from
a trial; |
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manufacturing sufficient quantities of a product candidate; |
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obtaining institutional review board, or IRB, approval to conduct a trial at a
prospective site; |
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recruiting and enrolling patients to participate in trials for a variety of
reasons, including competition from other clinical trials for the same indication
as our product candidates and the perception that the design of a trial or the
proposed treatment regimen is less beneficial to patients than available
alternatives; and |
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retaining patients who have initiated a trial but may be prone to withdraw due
to side effects from the therapy, lack of efficacy, improvement in condition before
treatment has been completed or personal issues, or who are lost to further
follow-up. |
Even if we complete a planned bioequivalence or clinical trial, we may not achieve our
projected development, approval, commercialization or other goals in the time frames we initially
anticipate or announce. For example, with respect to ANX-514, in February 2011, we announced that
because the Cmax for total docetaxel was higher in patients who received ANX-514 relative to those
who received Taxotere in Study 514-01, the FDA
indicated that a randomized safety study comparing ANX-514 and Taxotere would be required in
an appropriate patient population to support approval of ANX-514. As a result of the FDA’s
additional requirements with respect to the regulatory approval pathway for ANX-514, there is
substantial uncertainty as to the cost and timeline to obtaining FDA approval for ANX-514.
-31-
In addition to the potential for delays in commencing and completing a bioequivalence or
clinical trial described above, a trial may be suspended or terminated by us, an IRB, the FDA or
other regulatory authorities due to a number of factors, including:
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failure to conduct the trial in accordance with regulatory requirements or the
trial’s protocol; |
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inspection of trial operations or trial sites by the FDA or other regulatory
authorities resulting in the imposition of a clinical hold; |
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unforeseen safety issues; or |
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lack of adequate funding to continue the trial. |
Additionally, changes in regulatory requirements and guidance relating to bioequivalence or
clinical trials may occur and we may need to amend trial protocols to reflect these changes.
Amendments may require us to resubmit protocols to IRBs for reexamination or renegotiate terms with
CROs, trial sites and trial investigators, all of which may impact the costs, timing or successful
completion of a trial. Changes may also occur in regulatory requirements or policy during the
period of product development and/or regulatory review of a submitted NDA relating to the data
required to be included in marketing applications. For example, despite our including in our
December 2009 Exelbine NDA data that we believe met the filing requirements for a new drug
promulgated by the ICH, as well as site-specific stability data from lots manufactured at the
intended commercial manufacturing site, we received a refusal-to-file letter from the FDA
indicating that the data included in that submission was insufficient to support a
commercially-viable expiration dating period. Consequently, we had to wait for 12 months of
site-specific stability data from the intended commercial manufacturing site to be generated before
resubmitting an NDA for Exelbine, which we did in November 2010. A change in regulatory policy,
which may not have been formalized or publicly disseminated, may have been a factor underlying the
FDA’s refusal to file our December 2009 Exelbine NDA.
There can be no assurance that our nonclinical testing and bioequivalence and/or clinical
trials will commence or be completed, that we will make regulatory submissions or receive
regulatory approvals as planned or that we will be able to adhere to anticipated schedules for the
development or approval of any of our product candidates. The length of time necessary to complete
bioequivalence or clinical trials and manufacturing development work and to submit an application
for marketing approval for a final decision by a regulatory authority varies significantly and is
difficult to predict accurately. If we experience delays in the completion of, or if we terminate,
our bioequivalence or clinical trials or nonclinical testing or if we are otherwise unable to
adhere to our current schedule for the development of our product candidates, the commercial
prospects for our product candidates may be harmed and our ability to generate product revenues
will be delayed. In addition, many of the factors that cause, or lead to, a delay in the
commencement or completion of bioequivalence or clinical trials or nonclinical testing may also
ultimately lead to the denial of regulatory approval of a product candidate. Even if we are able to
ultimately commercialize our product candidates, other therapies for the same indications may have
been introduced to the market in the interim and established a competitive advantage.
-32-
Positive results in nonclinical testing, bioequivalence trials and/or clinical trials do not ensure
that future bioequivalence or clinical trials will be successful or that our product candidates
will receive the regulatory approvals necessary for their commercialization.
Before obtaining regulatory approvals for the commercial sale of any of our product
candidates, we must demonstrate through nonclinical testing and bioequivalence or clinical trials
that each product is safe and effective for use in each target indication. Success in nonclinical
testing and/or bioequivalence trials does not ensure that subsequent or large-scale trials will be
successful. Additionally, throughout development, we must provide adequate assurance to the FDA and
other regulatory authorities that we can consistently produce our product candidates in conformance
with current good manufacturing practices, or cGMP, and other regulatory standards. Bioequivalence
and clinical trial results are frequently susceptible to varying interpretations and regulatory
authorities may disagree
on what are appropriate methods for analyzing data, which may delay, limit or prevent
regulatory approvals. For instance, with respect to our bioequivalence trial of Exelbine, the FDA
may perform its bioequivalence analysis based on a patient population or data-set other than the
population or data-set on which we based our analysis, which may result in the FDA determining that
Exelbine and Navelbine are not bioequivalent, requiring that we evaluate additional patients,
re-perform the study, conduct clinical testing or take other remedial action. In addition, because
we are using a different third-party manufacturer for the commercial manufacture of Exelbine than
we used for the manufacture of the Exelbine used in our bioequivalence trial and certain changes
were required in transferring the manufacturing process, the FDA may require us to perform
additional nonclinical or clinical studies before accepting our Exelbine NDA or approving Exelbine
for marketing and sale in the U.S. Further, the Exelbine bioequivalence trial was open-label,
meaning physician-investigators, as well as patients, may have been aware of which drug was being
administered. There is a risk of investigator bias in reporting adverse events as a result of the
study’s open-label nature, including bias that may have increased the reporting of adverse events
associated with Navelbine and/or decreased the reporting of adverse events associated with
Exelbine.
With respect to ANX-514, despite positive nonclinical testing that indicated bioequivalence
between ANX-514 and the reference product, Taxotere, Study 514-01 did not demonstrate
pharmacokinetic equivalence between ANX-514 and Taxotere, the primary endpoint of Study 514-01,
based on the FDA’s benchmark regulatory standards. In February 2011, we announced that the FDA
determined ANX-514 could not be approved based on the findings from Study 514-01 and indicated that
a randomized safety study comparing ANX-514 and Taxotere would be required in an appropriate
patient population to support approval of ANX-514. We are developing a study protocol for
submission to the FDA and intend to continue discussions with the FDA regarding the phase 3
clinical study and other requirements for approval of ANX-514. However, the FDA’s requirements for
development activities beyond Study 514-01 will significantly increase the time and cost associated
with regulatory approval of ANX-514 relative to our previously planned regulatory approval pathway
for ANX-514. In addition, the FDA may inquire regarding the manufacturing source, in-process and
product release specifications and overall uniformity of reference product used in Study 514-01,
particularly since it was conducted at sites in multiple countries, and we may be unable to provide
documentation satisfactory to the FDA with respect to such reference product, which may result in
the FDA requiring that we evaluate additional patients, re-perform the bioequivalence study,
conduct clinical studies or take other remedial measures. Further, the form of API used in the
manufacture of ANX-514 for purposes of Study 514-01 will not be the same form of API used in the
manufacture of ANX-514 for purposes of the planned phase 3 study of ANX-514 or for process
validation batches or commercial supply. To ensure the comparability of the ANX-514 used in Study
514-01 and the ANX-514 intended for use in the planned phase 3 study and commercial sale, the FDA
may require that we evaluate each form of ANX-514 in additional patients, conduct other clinical
studies or take other remedial actions. We may have insufficient quantities of each form of
ANX-514 and could incur substantial cost and delay in acquiring such quantities, in addition to the
time and expense associated with conducting the evaluation, conducting other clinical studies or
taking other remedial measures. Furthermore, we have licensed to a third party certain rights to
ANX-514 in South Korea and have limited control over any nonclinical testing or clinical studies
such third party, or a future third-party licensee, may conduct. If data from investigations of
ANX-514 sponsored by a third-party licensee identify a safety or efficacy concern with respect to
ANX-514, or the lack of comparable pharmacokinetics between ANX-514 and Taxotere, such data could
have an adverse effect on the U.S. regulatory process.
There is a significant risk that any of our product candidates, including purified 188 should
our acquisition of SynthRx close, could fail to show anticipated results in human trials, as was
the case in our bioequivalence study of ANX-514, or manufacturing development, and, as a result, we
may not continue their development. A failure to obtain requisite regulatory approvals or to obtain
approvals of the scope requested will delay or preclude us from marketing our products or limit the
commercial use of the products, and would have a material adverse effect on our business, financial
condition and results of operations.
-33-
We currently have no sales or marketing capability and our failure to acquire or develop these and
related capabilities internally or contract with third parties to perform these activities
successfully could delay and/or limit our ability to generate revenues in the event one or more of
our product candidates obtains regulatory approval.
We currently do not have sales, marketing or other commercialization personnel. To
commercialize our products, including Exelbine, we will have to acquire or develop marketing,
distribution and sales capabilities and associated regulatory compliance capabilities, or rely on
marketing partners or other arrangements with third parties
for the marketing, distribution and sale of our products. There is no guarantee that we will
be able to establish marketing, distribution or sales capabilities or make arrangements with third
parties to perform those activities on terms satisfactory to us, or at all, or that any internal
capabilities or third-party arrangements will be cost-effective. The acquisition or development of
commercialization and associated regulatory compliance capabilities likely will require substantial
financial and other resources and divert the attention of our management and key personnel, and, if
not completed on time, could delay the launch of a product candidate, including Exelbine, if
approved, and otherwise negatively impact our product development and commercialization efforts.
To the extent we establish marketing, distribution or sales arrangements with any third
parties, those third parties may hold significant control over important aspects of the
commercialization of our products, including market identification, marketing methods, pricing,
composition of sales force and promotional activities. Even if we are successful in establishing
and maintaining these arrangements, there can be no assurance that we will be able to control the
amount and timing of resources that any third party may devote to our products or prevent any third
party from pursuing alternative technologies or products that could result in the development of
products that compete with, or the withdrawal of support for, our products. If we retain
third-party service providers to perform functions related to the marketing, distribution and sale
of our products, key aspects of those functions that may be out of our direct control could include
warehousing and inventory management, distribution, contract administration and chargeback
processing, accounts receivable management and call center management. In this event, we would
place substantial reliance on third-party providers to perform services for us, including
entrusting our inventories of products to their care and handling. If these third-party service
providers fail to comply with applicable laws and regulations, fail to meet expected deadlines, or
otherwise do not carry out their contractual duties to us, or encounter natural or other disasters
at their facilities, our ability to deliver product to meet commercial demand could be
significantly impaired. In addition, we may use third parties to perform various other services for
us relating to sample accountability and regulatory monitoring, including adverse event reporting,
safety database management and other product maintenance services. If the quality or accuracy of
the data maintained by these service providers is insufficient, our ability to continue to market
our products could be jeopardized or we could be subject to regulatory sanctions.
If any of our product candidates for which we receive regulatory approval do not achieve broad
market acceptance (including as a result of our inability to differentiate our products from
competitor products or promote any such differences or as a result of failing to obtain
reimbursement rates for our products that make our products competitive from the healthcare
provider’s perspective), the revenues we generate from their sales will be limited and our business
may not be profitable.
Our success will depend in substantial part on the extent to which our products for which we
obtain marketing approval from the FDA and comparable foreign regulatory authorities are accepted
by the medical community and reimbursed by third-party payors, including government payors. The
degree of market acceptance with respect to each of our products, if approved, will depend upon a
number of factors, including, among other things:
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our product’s perceived advantages over existing treatment methods (including
relative convenience and ease of administration and prevalence and severity of any
adverse side effects); |
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claims or other information (including limitations or warnings) in our product’s
approved labeling; |
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the resources we devote to marketing our product and restrictions on promotional
claims we can make with respect to the product; |
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reimbursement and coverage policies of government and other third-party payors; |
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pricing and cost-effectiveness; |
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in the U.S., the ability of group purchasing organizations (including
distributors and other network providers) to sell our product to their
constituencies; |
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the establishment and demonstration in the medical community of the safety and
efficacy of our product and our ability to provide acceptable evidence of safety
and efficacy; |
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availability of alternative treatments; and |
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the prevalence of off-label substitution of chemically equivalent products or
alternative treatments. |
-34-
We cannot predict whether physicians, patients, healthcare insurers or maintenance
organizations, or the medical community in general, will accept or utilize any of our products. If
our products are approved but do not achieve an adequate level of acceptance by these parties, we
may not generate sufficient revenues from these products to become or remain profitable. In
addition, our efforts to educate the medical community and third-party payors regarding the
benefits, if any, of our products may require significant resources and may never be successful.
In addition, FDA approval of Exelbine based on bioequivalence to Navelbine may limit our
ability to differentiate Exelbine from Navelbine, its generic equivalents and other formulations of
vinorelbine that may be approved by the FDA unless the FDA allows us to include certain data in the
Exelbine label. Likewise, unless we investigate the potential clinical benefits of the absence of
polysorbate 80 in our planned phase 3 clinical trial of ANX-514, our ability to differentiate
ANX-514 from Taxotere, its generic equivalents and other formulations of docetaxel that may be
approved by the FDA may be limited.
If we fail to obtain a unique Healthcare Common Procedure Coding System, or HCPCS, product
code for Exelbine or ANX-514, we may be unable to sell those products at a price that exceeds their
respective manufacturing, marketing and distribution costs. Even if we obtain unique HCPCS product
codes for Exelbine and ANX-514, if they are perceived to provide little or no advantage relative to
competing products or for other reasons, we may be required to price those products at levels that
do not cover our costs to manufacture, market and distribute the products or provide any profit, or
to price those products at levels at which they are not competitive.
Based on our determinations regarding the commercial potential of Exelbine and ANX-514,
including as a result of the above factors, we may determine that the time and cost necessary to
continue to develop and/or seek regulatory approval for one or both of these product candidates is
not financially justified, particularly with respect to Exelbine, if the FDA requires additional
nonclinical testing or bioequivalence or clinical studies beyond the bioequivalence study that we
have conducted for that product candidate and, with respect to ANX-514, depending on the outcome of
future discussions with the FDA regarding a phase 3 clinical trial study protocol and other
requirements for approval of ANX-514. While we evaluate these factors, we may reduce our
expenditures on the development and/or the process of seeking regulatory approval of these product
candidates. There can be no assurance that, in the future, we will continue to develop or seek
regulatory approval for either of these product candidates as quickly as possible, or at all. In
the future, we may devote our resources to identifying, acquiring and developing new product
candidates, including purified 188 if we consummate our acquisition of SynthRx. In such event, we
will have significant flexibility in determining which new product candidates to pursue.
Stockholders will be required to rely on the judgment of our management and our board of directors
in this regard and may have limited or no opportunity to evaluate potential new product candidates,
including the terms of their acquisition, the costs of their future development and their
commercial potential.
We do not have manufacturing capabilities and are dependent on single source manufacturers and
suppliers for certain of our product candidates and their component materials, and the loss of any
of these manufacturers or suppliers, or their failure to provide us with an adequate supply of
products or component materials on commercially acceptable terms, or at all, could harm our
business.
We do not have any manufacturing capability. We rely on third-party manufacturers and
component materials suppliers for the manufacture of our product candidates for bioequivalence or
clinical trial purposes and we anticipate establishing relationships with third-party manufacturers
and component materials suppliers for the commercial production of our products. Currently, we do
not have any long-term commercial supply agreements or commitments with our third-party
manufacturers or component suppliers, and we may not be able to establish these relationships with
these parties in a timely manner or on commercially acceptable terms, or at all. If we fail to
establish and maintain such relationships, we expect it would have a material and adverse effect on
our operations. Even if we successfully establish these relationships with third-party
manufacturers and component suppliers on commercially acceptable terms, our manufacturers and
suppliers may not perform as agreed or may terminate their agreements with us. Because many of our
single source suppliers provide manufacturing services to a number of other pharmaceutical
companies, our suppliers may experience capacity constraints or choose to prioritize one or more of
their other customers over us. Any significant problem that our single source manufacturers or
suppliers
experience could delay or interrupt the supply to us of bioequivalence or clinical trial
materials or commercial products until the manufacturer or supplier cures the problem or until we
locate, negotiate for and validate an alternative source of supply, if an alternative source is
available, and any such delay or interruption could be protracted and could materially and
adversely affect our development and commercial activities and operations.
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For instance, Exelbine is an emulsified cytotoxic product that must be aseptically-filled.
There are a limited number of CMOs capable and willing to manufacture this type of product at the
commercial scale at which we anticipate requiring for Exelbine, which will make identifying and
establishing short- or long-term relationships with willing manufacturers more difficult and
provide them with substantial leverage over us in any negotiations. Furthermore, certain of the
component materials of Exelbine are available only from a particular supplier, and currently we do
not have any short- or long-term agreements for the supply of those materials.
Even if we successfully establish a long-term relationship with our current CMO for Exelbine
on commercially acceptable terms, that CMO may be unable to successfully and consistently
manufacture Exelbine at commercial scale. Both us and our current CMO have limited experience
manufacturing Exelbine. Because data from a single bioequivalence trial of Exelbine may be
sufficient to support approval of the Exelbine NDA, our and our current CMO’s ability to gain
experience manufacturing Exelbine, in particular at various scales, has been limited. If our
current CMO is unable to manufacture Exelbine successfully and consistently at commercial scale and
within established parameters, we may be unable to validate our manufacturing process, even if the
FDA otherwise would approve our NDA, and we would therefore be unable to sell Exelbine.
All manufacturers of our products and product candidates must comply with cGMP requirements
enforced by the FDA through its facilities inspection program, as well as applicable requirements
of foreign regulatory authorities. These requirements include quality control, quality assurance
and the maintenance of records and documentation. Manufacturers of our products and product
candidates may be unable to comply with these cGMP requirements and with other FDA, state and
foreign regulatory requirements. While we or our representatives generally monitor and audit our
manufacturers’ systems, we have little control over our manufacturers’ ongoing compliance with
these regulations and standards. A failure to comply with these requirements may result in fines
and civil penalties, suspension of production, suspension or delay in product approval, product
seizure or recall, or withdrawal of product approval.
Furthermore, the manufacture of pharmaceutical products requires significant expertise and
capital investment, including the development of advanced manufacturing techniques and process
controls. Manufacturers of pharmaceutical products often encounter difficulties in production,
particularly in scaling-up initial production. These problems include difficulties with production
costs and yields, quality control, including stability of the product candidate and quality
assurance testing, and shortages of qualified personnel.
If our manufacturers were to encounter any of these difficulties or otherwise fail to comply
with their contractual obligations, our ability to provide sufficient quantities of our product
candidates for any future bioequivalence or clinical trials or to meet commercial demand may be
jeopardized. In addition, any delay or interruption in the supply of supplies necessary or useful
to manufacture our product candidates could delay the completion of any future bioequivalence or
clinical trials, increase the costs associated with maintaining our development programs and,
depending upon the period of delay, require us to commence new trials at significant additional
expense or terminate the trials completely. We cannot ensure that manufacturing or quality control
problems will not arise in connection with the manufacture of our products or product candidates,
or that third-party manufacturers will be able to maintain the necessary governmental licenses and
approvals to continue manufacturing such products or product candidates. Any of the above factors
could cause us to delay or suspend anticipated or on-going trials, regulatory submissions, required
approvals or commercialization of our product candidates, entail higher costs or result in our
being unable to effectively commercialize our products. Our dependence upon third parties for the
manufacture of our products and product candidates may adversely affect our future costs and our
ability to develop and commercialize our products and product candidates on a timely and
competitive basis.
If any of our product candidates should be approved, any problems or delays experienced in
their manufacturing processes may impair our ability to provide commercial quantities of the
products, which would limit our ability to sell the products and adversely affect our business. It
could take significant time to redesign our manufacturing processes or identify alternative
suppliers in response to problems we may encounter as we
manufacture our products, if such alternative processes and suppliers are available at all.
Even if we are able to identify alternative suppliers, they may be unwilling to manufacture our
products on commercially reasonable terms. Neither Exelbine nor ANX-514 have been manufactured at
the scales we believe will be necessary to maximize their commercial value and, accordingly, we or
a future partner of ours may encounter difficulties in production while scaling-up initial
production and may not succeed in scaling-up initial production.
-36-
Any new supplier of products or component materials, including API, would be required to
qualify under applicable regulatory requirements and would need to have sufficient rights under
applicable intellectual property laws to the method of manufacturing such products or ingredients.
The FDA may require us to conduct additional bioequivalence or clinical trials, collect stability
data and provide additional information concerning any new supplier, or change in a validated
manufacturing process, before we could distribute products from that supplier or revised process.
For example, if FDA requires substantial stability or other data from the new manufacturer, which
data will take time and is costly to generate, it could cause interruptions in our ability to meet
commercial demand, if any.
In addition, obtaining the necessary FDA approvals or other qualifications under applicable
regulatory requirements and ensuring non-infringement of third-party intellectual property rights
could result in a significant interruption of supply and require the new supplier to bear
significant additional costs, which may be passed on to us.
We rely significantly on third parties to conduct our nonclinical testing and bioequivalence and
clinical studies and other aspects of our development programs and if those third parties do not
satisfactorily perform their contractual obligations or meet anticipated deadlines, the development
of our product candidates could be adversely affected.
We do not employ personnel or possess the facilities necessary to conduct many of the
activities associated with our programs, particularly since we implemented severe cost-cutting
measures in late 2008 and early 2009. Although we plan to expand our internal capabilities in the
near-term, currently, we engage consultants, advisors, CROs, CMOs and others to design, conduct,
analyze and interpret the results of nonclinical tests and bioequivalence and clinical studies in
connection with the research and development of our product candidates, and we expect to continue
to outsource a significant amount of such activities while we develop or acquire internal
capabilities. As a result, many important aspects of our product candidates’ development are and
will continue to be outside our direct control. There can be no assurance that such third parties
will perform all of their obligations under arrangements with us or will perform those obligations
satisfactorily.
The CROs with which we contract for execution of our bioequivalence and clinical studies play
a significant role in the conduct of the studies and subsequent collection and analysis of data,
and we likely will depend on these and other CROs and clinical investigators to conduct any future
bioequivalence or clinical studies or assist with our analysis of completed studies and to develop
corresponding regulatory strategies. Individuals working at the CROs with which we contract, as
well as investigators at the sites at which our studies are conducted, are not our employees, and
we cannot control the amount or timing of resources that they devote to our programs. If these CROs
fail to devote sufficient time and resources to our studies, or if their performance is
substandard, it will delay the approval of our applications to regulatory agencies and the
introduction of our products. Failure of these CROs to meet their obligations could adversely
affect development of our product candidates. Moreover, these CROs may have relationships with
other commercial entities, some of which may compete with us. If they assist our competitors at our
expense, it could harm our competitive position.
For instance, we lacked the internal capabilities to fully analyze the data from our
bioequivalence study of ANX-514 and relied on multiple third-party consultants to help us interpret
and understand the data. Because of the impact different analyses of the data may have on our
business, an employee may have approached the data and analysis in a substantially more rigorous,
thoughtful and creative manner than a consultant or contractor.
-37-
If we receive regulatory approval for one or more of our product candidates, we may face
competition from generic products, which could exert downward pressure on the pricing and market
share of our products and limit our ability to generate revenues.
Many of the currently marketed and anticipated products against which our product candidates
may compete are, or we anticipate will be, available as generics. For instance, Exelbine would
compete against
Navelbine, for which generic equivalents have been available in the U.S. since 2003. ANX-514
would compete against Taxotere. We anticipate that ANX-514 would also compete against other
formulations of docetaxel and we expect that generic equivalents of Taxotere will have entered the
market prior to regulatory approval, if any, to market ANX-514. Even if we obtain unique HCPCS
product codes for Exelbine and ANX-514, the existence of generic products could make it more
difficult for our branded products to gain or maintain market share and could cause prices for our
products to drop, potentially below our cost of goods, which could adversely affect our business.
If we receive regulatory approval for one or more of our product candidates, we may face
competition for our products from lower priced products from foreign countries that have placed
price controls on pharmaceutical products.
Proposed federal legislative changes may expand consumers’ ability to import lower priced
versions of our and competing products from Canada. Further, several states and local governments
have implemented importation schemes for their citizens, and, in the absence of federal action to
curtail such activities, we expect other states and local governments to launch importation
efforts. The importation of foreign products that compete with our own products could negatively
impact our business and prospects.
Even if we receive regulatory approval for one or more of our product candidates, they may still
face future development and regulatory difficulties that could materially and adversely affect our
business, financial condition and results of operations and cause our stock price to decline.
Even if initial regulatory approval is obtained, the FDA or a foreign regulatory agency may
still impose significant restrictions on a product’s indicated uses or marketing or impose ongoing
requirements for potentially costly post-approval studies or marketing surveillance programs. Our
product candidates will also be subject to ongoing FDA requirements related to the labeling,
packaging, storage, distribution, advertising, promotion, record-keeping and submission of safety
and other post-market information regarding the product. For instance, the FDA may require changes
to approved drug labels, require post-approval clinical trials and impose distribution and use
restrictions on certain drug products. In addition, approved products, manufacturers and
manufacturers’ facilities are subject to continuing regulatory review and periodic inspections. If
previously unknown problems with a product are discovered, such as adverse events of unanticipated
severity or frequency, or problems with the facility where the product is manufactured, the FDA may
impose restrictions on that product or us, including requiring withdrawal of the product from the
market. If we or a CMO of ours fail to comply with applicable regulatory requirements, a regulatory
agency may:
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issue warning letters or untitled letters; |
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impose civil or criminal penalties; |
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suspend or withdraw regulatory approval; |
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suspend or terminate any ongoing bioequivalence or clinical trials; |
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refuse to approve pending applications or supplements to approved applications; |
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exclude our product from reimbursement under government healthcare programs,
including Medicaid or Medicare; |
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impose restrictions or affirmative obligations on our or our CMO’s operations,
including costly new manufacturing requirements; |
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close the facilities of a CMO; or |
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seize or detain products or require a product recall. |
-38-
Even if one or more of our product candidates receive regulatory approval in the U.S., we may never
receive approval or commercialize our products outside of the U.S., which would limit our ability
to realize the full commercial potential of our product candidates.
In order to market any products outside of the U.S., we must establish and comply with
numerous and varying regulatory requirements of other countries regarding safety and efficacy.
Approval procedures vary among countries and can involve additional product testing and validation
and additional administrative review periods. The time required to obtain approval in other
countries might differ from that required to obtain FDA approval. In particular, other countries
may not have a comparable regulatory procedure as is available under Section 505(b)(2) of FDCA.
Even if a country did have a comparable procedure, that country may require a more robust data
package than the bioequivalence data package for Exelbine that we submitted in November 2010 and
was accepted for review by the FDA. The regulatory approval process in other countries may include
all of the risks detailed above regarding FDA approval in the U.S., as well as other risks.
Regulatory approval in one country does not ensure regulatory approval in another, but a failure or
delay in obtaining regulatory approval in one country may have a negative effect on the regulatory
process in others. Failure to obtain regulatory approval in other countries or any delay or setback
in obtaining such approval could have the same adverse effects detailed above regarding FDA
approval in the U.S. As described above, such effects include the risks that our product candidates
may not be approved for all indications requested, which could limit the uses of our product
candidates and have an adverse effect on product sales, and that such approval may be subject to
limitations on the indicated uses for which the product may be marketed or require costly,
post-marketing follow-up studies.
Our product candidates may cause undesirable side effects or have other properties that could delay
or prevent their regulatory approval or commercialization.
Undesirable side effects caused by our product candidates could interrupt, delay or halt
bioequivalence or clinical trials and could result in the denial of regulatory approval by the FDA
or other regulatory authorities for any or all indications, and in turn prevent us from
commercializing our product candidates and generating revenues from their sale. For example, in a
prior phase 3 study of purified 188, a modest but statistically significant increase in levels of
alanine aminotrasferase and direct bilirubin was observed. If in our planned phase 3 clinical trial
of purified 188, should we consummate our acquisition of SynthRx, we observe more pronounced
increases in these or other levels, or we observe other previously unidentified adverse events,
whether or not statistically significant, we may be required to conduct additional clinical trials
of purified 188 or purified 188 may not receive regulatory approval.
In addition, if any of our product candidates receive marketing approval and we or others
later identify undesirable side effects caused by the product or the reference product:
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regulatory authorities may require the addition of labeling statements, such as
a “black box” warning or a contraindication; |
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regulatory authorities may withdraw their approval of the product; |
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we may be required to change the way the product is administered, conduct
additional clinical trials or change the labeling of the product; and |
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our reputation may suffer. |
Any of these events could prevent us from achieving or maintaining market acceptance of the
affected product or could substantially increase the costs and expenses of commercializing the
product, which in turn could delay or prevent us from generating significant revenues from its
sale.
Risks Related to Our Intellectual Property
Our success will depend on patents and other protection we obtain on our product candidates and
proprietary technology.
Our success will depend in part on our ability to:
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obtain and maintain patent and other exclusivity with respect to our products; |
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prevent third parties from infringing upon our proprietary rights; |
-39-
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maintain trade secrets; |
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operate without infringing upon the patents and proprietary rights of others;
and |
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obtain appropriate licenses to patents or proprietary rights held by third
parties if infringement would otherwise occur, both in the U.S. and in foreign
countries. |
The patent and intellectual property positions of specialty pharmaceutical companies,
including ours, are uncertain and involve complex legal and factual questions. There is no
guarantee that we have or will develop or obtain the rights to products or processes that are
patentable, that patents will issue from any pending applications or that claims allowed will be
sufficient to protect the technology we develop or have developed or that is used by us, our CMOs
or our other service providers. In addition, we cannot be certain that patents issued to us will
not be challenged, invalidated, infringed or circumvented, including by our competitors, or that
the rights granted thereunder will provide competitive advantages to us.
Furthermore, patent applications in the U.S. are confidential for a period of time until they
are published, and publication of discoveries in scientific or patent literature typically lags
actual discoveries by several months. As a result, we cannot be certain that the inventors listed
in any patent or patent application owned by us were the first to conceive of the inventions
covered by such patents and patent applications or that such inventors were the first to file
patent applications for such inventions.
We also may rely on unpatented trade secrets and know-how and continuing technological
innovation to develop and maintain our competitive position, which we seek to protect, in part, by
confidentiality agreements with employees, consultants, collaborators and others. We also have
invention or patent assignment agreements with our employees and certain consultants. There can be
no assurance, however, that binding agreements will not be breached, that we will have adequate
remedies for any breach, or that trade secrets will not otherwise become known or be independently
discovered by competitors. In addition, there can be no assurance that inventions relevant to us
will not be developed by a person not bound by an invention assignment agreement with us.
With respect to purified 188 for the treatment of sickle cell crisis, should our acquisition
of SynthRx close, we will acquire exclusive rights to a variety of issued patents that cover, among
other things, 188, purified 188, methods of treating sickle cell anemia using 188 and methods of
preparing purified 188. However, we expect many of the patents covering purified 188 for the
treatment of sickle cell crisis will expire prior to regulatory approval of purified 188 for that
indication. For exclusivity, we expect to rely primarily on the orphan drug designation that the
FDA has granted for 188 for the treatment of sickle cell crisis. However, the orphan drug
designation does not convey any advantage in, or shorten the duration of, the regulatory review or
approval process. Our product candidate would not receive the seven-year orphan drug marketing
exclusivity if it is not the first to obtain FDA marketing approval. In addition, orphan drug
exclusive marketing rights may be lost if the FDA later determines that the request for designation
was materially defective or if the manufacturer is unable to assure sufficient quantity of the
drug. Furthermore, if the FDA later determines another drug or biologic for the treatment of sickle
cell crisis to be clinically superior to or different from our product, the FDA may approve such
other product candidate for marketing during the seven year exclusive marketing period of our
product.
Patent protection for our emulsion-formulation product candidates may be difficult to obtain and
any issued claims may be limited because of the nature of patent protection available for these
candidates.
Our formulations consist of common excipients that emulsify the underlying chemical entity. We
believe the specific combinations of excipients in our formulations are not obvious and that many
of the properties that the resulting formulations exhibit are surprising. However, there is
substantial prior art involving the emulsification of drugs and a patent examiner may combine
numerous disparate references in order to reject our formulations for obviousness. A patent
examiner could also determine that, even without combining references, the prior art taught the
specific combination of excipients in our formulations or that, for other reasons, such combination
was obvious. If our formulations are deemed obvious, the invention would not be patentable.
-40-
In addition, while the patent applications and the issued patent covering our
emulsion-formulation product candidates, including Exelbine and ANX-514, include product claims,
they cover only specific formulations of the
API, and not the API itself. Such product claims are not as strong as claims covering APIs,
which are widely viewed as the strongest form of intellectual property protection for
pharmaceutical products, as they apply without regard to how the API is formulated or the method in
which the API is used. A competitor may modify our formulations and obtain regulatory approval for
products with the same API as our products. Such competitive products may not infringe any patents
we may hold in the future covering our specific formulation of the API.
If we are sued for infringing the proprietary rights of third parties, it will be costly and time
consuming, and an unfavorable outcome would have an adverse effect on our business.
Our commercial success depends on our ability and the ability of our CMOs and component
suppliers to develop, manufacture, market and sell our products and product candidates and use our
proprietary technologies without infringing the proprietary rights of third parties. Numerous U.S.
and foreign issued patents and pending patent applications, which are owned by third parties, exist
in the fields in which we are or may be developing products. As the biotechnology and
pharmaceutical industry expands and more patents are issued, the risk increases that we will be
subject to claims that our products or product candidates, or their use, infringe the rights of
others. Because patent applications can take many years to publish and issue, there currently may
be pending applications, unknown to us, that may later result in issued patents that our products,
product candidates or technologies infringe, or that the process of manufacturing our products or
any of their respective component materials, or the component materials themselves, infringe, or
that the use of our products, product candidates or technologies infringe.
We or our CMOs or component material suppliers may be exposed to, or threatened with, future
litigation by third parties having patent or other intellectual property rights alleging that our
products, product candidates and/or technologies infringe their intellectual property rights or
that the process of manufacturing our products or any of their respective component materials, or
the component materials themselves, or the use of our products, product candidates or technologies,
infringe their intellectual property rights. If one of these patents was found to cover our
products, product candidates, technologies or their uses, or any of the underlying manufacturing
processes or components, we could be required to pay damages and could be unable to commercialize
our products or use our technologies or methods unless we are able to obtain a license to the
patent or intellectual property right. A license may not be available to us in a timely manner or
on acceptable terms, if at all. In addition, during litigation, a patent holder could obtain a
preliminary injunction or other equitable remedy that could prohibit us from making, using or
selling our products, technologies or methods.
There is a substantial amount of litigation involving patent and other intellectual property
rights in the biotechnology and pharmaceutical industries generally. If a third party claims that
we or our CMOs or component material suppliers infringe its intellectual property rights, we may
face a number of issues, including, but not limited to:
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infringement and other intellectual property claims which, with or without
merit, may be expensive and time consuming to litigate and may divert our
management’s attention from our core business; |
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substantial damages for infringement, including the potential for treble damages
and attorneys’ fees, which we may have to pay if a court decides that the product
at issue infringes or violates the third party’s rights; |
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a court prohibiting us from selling or licensing the product unless the third
party licenses its product rights to us, which it may not be required to do; |
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if a license is available from the third party, we may have to pay substantial
royalties, fees and/or grant cross-licenses to our products; and |
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redesigning our products or processes so they do not infringe, which may not be
possible or may require substantial expense and time. |
No assurance can be given that patents do not exist, have not been filed, or could not be
filed or issued, which contain claims covering our products, product candidates or technology or
those of our CMOs or component material suppliers or the use of our products, product candidates or
technologies. Because of the number of patents issued and patent applications filed in the
pharmaceutical industry, we believe there is a risk that third parties may
allege they have patent rights encompassing our products, product candidates or technologies,
or those of our CMOs or component material suppliers, or uses of our products, product candidates
or technologies.
-41-
In addition, it may be necessary for us to enforce patents under which we have rights, or to
determine the scope, validity and unenforceability of other parties’ proprietary rights, which may
affect our rights. There can be no assurance that our patents would be held valid by a court or
administrative body or that an alleged infringer would be found to be infringing. The uncertainty
resulting from the mere institution and continuation of any patent related litigation or
interference proceeding could have a material and adverse effect on us.
RISKS RELATED TO OUR INDUSTRY
We expect intense competition in the marketplace for each of our products, if any of our product
candidates are approved.
The industry in which we operate is highly competitive and rapidly changing. If successfully
developed and approved, our products will likely compete with existing and new products and
therapies and our competitors may succeed in commercializing products more rapidly or effectively
than us, which would have a material and adverse effect on our ability to generate revenues from
product sales. In addition, there are numerous companies with a focus in oncology and/or that are
pursuing the development of pharmaceuticals that target the same diseases as are targeted by the
products that we currently are, or in the future may be, developing or that focus on reformulating
currently approved drugs. We anticipate that we will face intense and increasing competition in the
future as new products enter the market and new technologies become available. Existing products or
new products developed by competitors may be more effective, or more effectively marketed and sold,
than those we may market and sell. Competitive products may render our products and product
candidates obsolete or noncompetitive.
Exelbine and ANX-514, if approved, may compete against Navelbine and Taxotere, respectively,
as well as their generic equivalents and other formulations of vinorelbine and docetaxel that may
be approved by the FDA. In addition to Navelbine, in the U.S., currently there are seven
commercially available generic versions of vinorelbine. In addition, there is an oral formulation
of vinorelbine approved for use in the EU against which Exelbine would compete if Exelbine were
approved for use in the EU. With respect to docetaxel, in the U.S., we believe non-Taxotere
formulations of docetaxel will be commercially available in 2011 and that generic equivalents of
Taxotere will be commercially available in the near-term, possibly in 2011.
With respect to Exelbine, because we submitted the Exelbine NDA with only bioequivalence data,
our ability to differentiate Exelbine from competing products will be limited. Even if we believe
Exelbine demonstrates clinical, pharmacoeconomic or other benefits relative to competing products,
we may be unable to market or promote it based on these benefits. If our products do not receive
unique HCPCS product codes, we may be required to price our products at levels that do not cover
our costs to manufacture, market and distribute the products or provide any profit, or to price our
products at levels at which they are not competitive.
In addition, numerous companies are focused on reformulating currently approved
chemotherapeutic agents. In particular, the taxanes, the class of drugs of which Taxotere is a
member, have experienced substantial commercial success, in part as a result of their effectiveness
in treating a wide variety of cancers, which has generated significant interest in reformulating
Taxotere and other taxanes. For instance, in 2010, the FDA approved Jevtana® for treatment of
patients with hormone-refractory metastatic prostate cancer previously treated with a
docetaxel-containing treatment regimen. The active ingredient of Jevtana is cabazitaxel, an
antineoplastic agent belonging to the taxane class. In addition to our approach of emulsifying
docetaxel, other companies may be pursuing alternative delivery vehicles, including the use of
albumin nanoparticles, prodrugs, polyglutamates, analogs, co-solvents, liposomes and microspheres.
Many of these or similar approaches could be applied to vinorelbine. Relative to our formulations,
formulations based on one or more of these other methods may result in greater efficacy or safety,
provide better drug delivery to tumor sites or otherwise increase benefits to patients and
healthcare providers.
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With respect to competition for purified 188 for the treatment of sickle cell crisis, we are
aware of numerous companies with product candidates in varying stages of development for the
treatment of sickle cell crisis. In addition, we expect advances in the understanding of the
signaling pathways associated with sickle cell disease to lead to further interest and development
of treatment options. More broadly, should we consummate our acquisition of SynthRx and receive
regulatory approval to market a product based on purified 188 for the treatment of sickle cell
disease in children, purified 188 would compete against agents designed to treat sickle cell
disease, of which sickle cell crisis is a condition. Hydroxyurea, a form of chemotherapy used for
myeloproliferative disease, has been shown to decrease the severity of sickle cell disease by
reducing the frequency of crisis. Blood transfusions also are used to treat sickle cell disease.
Bone marrow and stem cell transplantation have also been shown to be effective to treat and, in
some cases, cure sickle cell disease. In addition, there is increasing interest in developing
drugs for “rare diseases,” which may have the effect of increasing the development of agents to
treat sickle cell disease generally or sickle cell crisis in particular. GlaxoSmithKline and
Pfizer each have a unit focused on rare diseases. Legislative action, such as the potential to
expand the priority review voucher system to rare pediatric diseases, may further generate
interest. If an effective treatment or cure for sickle cell disease or sickle cell crisis receives
regulatory approval, the commercial success of any product of ours based on purified 188, should we
consummate our acquisition of SynthRx and receive regulatory approval to market it, could be
severely jeopardized.
Companies likely to have products that will compete with our product candidates have
significantly greater financial, technical and human resources than we do, and are better equipped
to develop, manufacture, market and distribute products. Many of these companies have extensive
experience in nonclinical testing and clinical trials, obtaining FDA and other regulatory approvals
and manufacturing and marketing products, have products that have been approved or are in
late-stage development, and operate large, well-funded research, development and commercialization
programs.
Smaller companies may also prove to be significant competitors, particularly through
collaborative arrangements with large pharmaceutical and biotechnology companies. Furthermore,
academic institutions, government agencies and other public and private research organizations are
becoming increasingly aware of the commercial value of their inventions and are actively seeking to
commercialize the technologies they have developed.
We are subject to uncertainty relating to healthcare reform measures and reimbursement policies
that, if not favorable to our products, could hinder or prevent our products’ commercial success,
if any of our product candidates are approved.
Our ability to commercialize our products successfully will depend in part on the extent to
which reimbursement for the costs of such products and related treatments will be available from
government health administration authorities, private health insurers and other third-party payors.
Significant uncertainty exists as to the reimbursement status of newly approved medical products.
The continuing efforts of the government, insurance companies, managed care organizations and other
payors of healthcare services to contain or reduce costs of healthcare may adversely affect:
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our ability to set a price we believe is fair for our products; |
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our ability to generate revenues or achieve or maintain profitability; |
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the future revenues and profitability of our potential customers, suppliers and
collaborators; and |
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the availability to us of capital. |
If we are successful in obtaining FDA approval for Exelbine, it will compete with Navelbine,
its generic equivalents and other formulations of vinorelbine that may be approved by the FDA. Our
ability to commercialize Exelbine will depend in part on the extent to which governmental
authorities, private health insurers and other organizations establish what we believe are
appropriate coverage and reimbursement levels for the cost of our product. These payors are
increasingly attempting to contain healthcare costs by limiting both coverage and the level of
reimbursement, particularly for new therapeutic products or if there is a perception that the
target indication of the new product is well-served by existing drugs or other treatments.
Accordingly, even if coverage and reimbursement are provided, market acceptance of our products
would be adversely affected if the amount of coverage and/or reimbursement rates for the use of our
products proved to be unprofitable for healthcare providers or less profitable than alternative
treatments.
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There have been federal and state proposals to subject the pricing of healthcare goods and
services to government control and to make other changes to the U.S. healthcare system. While we
cannot predict the outcome of current or future legislation, we anticipate, particularly given the
passage in 2010 of the Patient Protection and
Affordable Care Act, that Congress and state legislatures will introduce initiatives directed
at lowering the total cost of healthcare. In addition, in certain foreign markets, the pricing of
drug products is subject to government control and reimbursement may in some cases be unavailable
or insufficient. It is uncertain if future legislative proposals, whether domestic or abroad, will
be adopted that might affect our products or product candidates or what actions federal, state, or
private payors for healthcare treatment and services may take in response to any such healthcare
reform proposals or legislation. Any such healthcare reforms could have a material and adverse
effect on the marketability of any products for which we ultimately receive FDA or other regulatory
agency approval.
We face potential product liability exposure and, if successful claims are brought against us, we
may incur substantial liability for a product or product candidate and may have to limit its
commercialization. In the future, we anticipate that we will need to obtain additional or increased
product liability insurance coverage and it is uncertain that such increased or additional
insurance coverage can be obtained on commercially reasonable terms, if at all.
Our business (in particular, the use of our product candidates in clinical trials and the sale
of any products for which we obtain marketing approval) will expose us to product liability risks.
Product liability claims might be brought against us by patients, healthcare providers,
pharmaceutical companies or others selling our products. If we cannot successfully defend ourselves
against any such claims, we will incur substantial liabilities. Regardless of merit or eventual
outcome, liability claims may result in:
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decreased demand for our products; |
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impairment of our business reputation; |
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withdrawal of bioequivalence or clinical trial participants; |
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costs of related litigation; |
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substantial monetary awards to patients or other claimants; |
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the inability to commercialize our products and product candidates. |
We maintain limited product liability insurance for our bioequivalence and clinical trials,
but our insurance coverage may not reimburse us or may not be sufficient to reimburse us for all
expenses or losses we may suffer. Moreover, insurance coverage is becoming increasingly expensive
and, in the future, we may not be able to maintain insurance coverage at a reasonable cost or in
sufficient amounts to protect us against losses.
We expect that we would expand our insurance coverage to include the sale of commercial
products if we obtain marketing approval of any of our product candidates, but we may be unable to
obtain product liability insurance on commercially acceptable terms or may not be able to maintain
such insurance at a reasonable cost or in sufficient amounts to protect us against potential
losses. Large judgments have been awarded in class action lawsuits based on drug products that had
unanticipated side effects. A successful product liability claim or series of claims brought
against us could cause our stock price to fall and, if judgments exceed our insurance coverage,
could decrease our cash and adversely affect our business.
RISKS RELATED TO OUR COMMON STOCK
If we are unable to maintain compliance with NYSE Amex continued listing standards, we may be
delisted from the NYSE Amex equities market, which would likely cause the liquidity and market
price of our common stock to decline.
Our common stock currently is listed on the NYSE Amex equities market. The NYSE Amex normally
will consider suspending dealings in, or removing from the list, securities of an issuer that has
stockholders’ equity of less than $6.0 million if such issuer has sustained losses from continuing
operations and/or net losses in its five most recent fiscal years. In addition, the NYSE Amex will
normally consider suspending dealings in, or removing from the list, securities selling for a
substantial period of time at a low price per share if the issuer fails to effect a reverse
split of such stock within a reasonable time after being notified that the NYSE Amex deems
such action to be appropriate under the circumstances.
-44-
Previously, we were not in compliance with certain NYSE Amex stockholders’ equity continued
listing standards. Specifically, we were not in compliance with (1) Section 1003(a)(ii) of the NYSE
Amex Company Guide, or the Company Guide, because we reported stockholders’ equity of less than
$4,000,000 and losses from continuing operations and net losses in three of our four most recent
fiscal years, or (2) Section 1003(a)(iii) of the Company Guide, because we reported stockholders’
equity of less than $6,000,000 and losses from continuing operations and net losses in our five
most recent fiscal years. In addition, we were notified, in accordance with Section 1003(f)(v) of
the Company Guide, that the NYSE Amex determined it was appropriate for us to effect a reverse
stock split of our common stock to address our low selling price per share.
In April 2010, we announced that we had resolved the stockholders’ equity continued listing
deficiencies and we implemented a 1-for-25 reverse split of our common stock, in part to address
the NYSE Amex’s requirement that we address our low stock price. Even though, currently, we are in
compliance with NYSE Amex continued listing standards, there is no assurance that we will continue
to maintain compliance with such standards. For example, we may determine to grow our organization
or product pipeline or pursue development or other activities at levels or on timelines that
reduces our stockholders’ equity below the level required to maintain compliance with NYSE Amex
continued listing standards. In addition, the market price for our common stock historically has
been highly volatile, as more fully described below under the risk titled “The market price of our
common stock historically has been and likely will continue to be highly volatile.” The NYSE Amex
may again determine that the selling price per share of our common stock is low and require that we
effect a reverse stock split of our common stock, which would require stockholder approval that we
may be unable to obtain. Our failure to maintain compliance with NYSE Amex continued listing
standards could result in the delisting of our common stock from the NYSE Amex.
The delisting of our common stock from the NYSE Amex likely would reduce the trading volume
and liquidity in our common stock and may lead to decreases in the trading price of our common
stock. The delisting of our common stock may also materially impair our stockholders’ ability to
buy and sell shares of our common stock. In addition, the delisting of our common stock could
significantly impair our ability to raise capital, which is critical to the execution of our
current business strategy.
If our common stock were delisted and determined to be a “penny stock,” a broker-dealer may find it
more difficult to trade our common stock and an investor may find it more difficult to acquire or
dispose of our common stock in the secondary market.
If our common stock were removed from listing with the NYSE Amex, it may be subject to the
so-called “penny stock” rules. The SEC has adopted regulations that define a “penny stock” to be
any equity security that has a market price per share of less than $5.00, subject to certain
exceptions, such as any securities listed on a national securities exchange. For any transaction
involving a “penny stock,” unless exempt, the rules impose additional sales practice requirements
on broker-dealers, subject to certain exceptions. If our common stock were delisted and determined
to be a “penny stock,” a broker-dealer may find it more difficult to trade our common stock and an
investor may find it more difficult to acquire or dispose of our common stock on the secondary
market.
The market price of our common stock historically has been and likely will continue to be highly
volatile.
The market price for our common stock historically has been highly volatile, and the market
for our common stock has from time to time experienced significant price and volume fluctuations
that are unrelated to our operating performance. For instance, on October 1, 2007, the market price
for our common stock dropped almost 80% following our announcement of the results of our phase 2b
clinical trial of CoFactor for the first-line treatment of metastatic colorectal cancer.
Conversely, the market price for our common stock more than doubled over two trading days in late
December 2009. The market price of our common stock may fluctuate significantly in response to a
number of factors, including:
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the level of our financial resources; |
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announcements of entry into or consummation of a financing or strategic
transaction;
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changes in the regulatory status of our product candidates, including results of
any bioequivalence and clinical trials and other research and development programs; |
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• |
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FDA or international regulatory actions and regulatory developments in the U.S.
and foreign countries; |
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• |
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announcements of new products or technologies, commercial relationships or other
events (including bioequivalence and clinical trial results and regulatory events
and actions) by us or our competitors; |
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• |
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market conditions in the pharmaceutical, biopharmaceutical, specialty
pharmaceutical and biotechnology sectors; |
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• |
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developments concerning intellectual property rights generally or those of us or
our competitors; |
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• |
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changes in securities analysts’ estimates of our financial performance or
deviations in our business and the trading price of our common stock from the
estimates of securities analysts; |
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events affecting any future collaborations, commercial agreements and grants; |
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fluctuations in stock market prices and trading volumes of similar companies; |
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sales of large blocks of our common stock, including sales by our executive
officers, directors and significant stockholders or pursuant to shelf or resale
registration statements that register shares of our common stock that may be sold
by us or certain of our current or future stockholders; |
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discussion of us or our stock price by the financial and scientific press and in
online investor communities; |
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commencement of delisting proceedings by the NYSE Amex; |
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additions or departures of key personnel; and |
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changes in third-party payor reimbursement policies. |
As evidenced by the October 1, 2007 decline, the realization of any of the foregoing could
have a dramatic and adverse impact on the market price of our common stock. In addition, class
action litigation has often been instituted against companies whose securities have experienced
substantial decline in market price. Moreover, regulatory entities often undertake investigations
of investor transactions in securities that experience volatility following an announcement of a
significant event or condition. Any such litigation brought against us or any such investigation
involving our investors could result in substantial costs and a diversion of management’s attention
and resources, which could hurt our business, operating results and financial condition.
Sales of substantial amounts of our common stock or the perception that such sales may occur could
cause the market price of our common stock to drop significantly, even if our business is
performing well.
The market price of our common stock could decline as a result of sales by, or the perceived
possibility of sales by, us or our existing stockholders of shares of our common stock. These sales
by our existing stockholders might also make it more difficult for us to sell equity securities at
a time and price that we deem appropriate. Currently, we have an effective primary registration
statement on Form S-3 under which we may sell and issue more than $85 million of securities. In
addition, we have effective resale registration statements on Form S-3 and an effective
registration statement on Form S-1 that register a significant number of shares of our common stock
and securities convertible into our common stock that may be sold by us or certain of our
stockholders. Collectively, these registration statements may increase the likelihood of sales by,
or the perception of an increased likelihood of sales by, us or our existing stockholders of shares
of our common stock.
-46-
If our acquisition of SynthRx closes, we may obtain voting control over a significant amount of our
outstanding common stock and we may determine to cause those shares to be voted in such a manner
that does not necessarily coincide with the interests of individual stockholders or particular
groups of stockholders.
Pursuant to the voting and transfer restriction agreement between us and each of the other
parties thereto, each other party has agreed to vote all shares of our common stock beneficially
owned by that party with respect to every action or approval by written consent of our stockholders
in such manner as directed by us, except in limited circumstances, and has executed an irrevocable
proxy appointing and authorizing us to vote such shares in such manner. If our acquisition of
SynthRx closes we will issue 2,938,773 shares of our common stock to SynthRx’s stakeholders,
representing, in the aggregate, approximately 11% of our company (based on our currently
outstanding shares plus shares issued in connection with the closing). If our acquisition of
SynthRx closes, our stockholders approve the issuance of the milestone-related shares and
development of purified 188 achieves all related milestones without reduction, we will issue an
additional 13,478,050 shares of our common stock, representing, in the aggregate (and including the
shares issued in connection with the closing) an approximately 40% ownership stake in our company
(based on our currently outstanding shares plus shares issued in connection with the acquisition).
As a result of such issuances and the voting and transfer restriction agreement, we may, at and
following the closing of the acquisition, have significant control over substantially all matters
requiring approval by our stockholders, including the election of directors and the approval of
certain mergers and other business combination transactions. Even if less than all potential
milestone-related shares are issued, our ability to control a potentially significant block of
stockholder votes pursuant to the voting and transfer restriction agreement may enable us to
substantially affect the outcome of proposals brought before our stockholders. Although our board
of directors acts in a manner it believes is in the best interest of our stockholders as a whole, the
interests of our stockholders as a whole may not always coincide with the interests of individual
stockholders or particular groups of stockholders.
Anti-takeover provisions in our charter documents and under Delaware law may make an acquisition of
us, which may be beneficial to our stockholders, more difficult, which could depress our stock
price. Alternatively, prohibitions on anti-takeover provisions in our charter documents may
restrict us from acting in the best interests of our stockholders.
We are incorporated in Delaware. Certain anti-takeover provisions of Delaware law and our
charter documents as currently in effect may make a change in control of our company more
difficult, even if a change in control would be beneficial to our stockholders. Our bylaws limit
who may call a special meeting of stockholders and establish advance notice requirements for
nomination of individuals for election to our board of directors or for proposing matters that can
be acted upon at stockholders’ meetings. Delaware law also prohibits corporations from engaging in
a business combination with any holders of 15% or more of their capital stock until the holder has
held the stock for three years unless, among other possibilities, the board of directors approves
the transaction. Our board of directors may use these provisions to prevent changes in the
management and control of our company. Also, under applicable Delaware law, our board of directors
may adopt additional anti-takeover measures in the future. In addition, provisions of certain
compensatory contracts with our management, such as equity award agreements, may have an
anti-takeover effect by resulting in accelerated vesting of outstanding equity securities held by
our executive officers. In particular, in the event of a change in control, the vesting of options
we granted since July 2009 to our current executives will accelerate with respect to fifty percent
of the then unvested shares on the day prior to the date of the change in control and, subject to
the respective executive’s continuous service, with respect to the remaining fifty percent of the
then unvested shares on the one year anniversary of the date of the change in control. As a result,
if an acquirer desired to retain the services of one or both of our current executives following an
acquisition, it may be required to provide additional incentive to them, which could increase the
cost of the acquisition to the acquirer and may deter or affect the terms of the potential
acquisition.
In connection with a July 2005 private placement, we agreed with the investors in that
transaction that we would not implement certain additional measures that would have an
anti-takeover effect. As a result, under our amended and restated certificate of incorporation, we
are prohibited from dividing our board of directors into classes and adopting or approving any
“rights plan,” “poison pill” or other similar plan or device. A classified board of directors could
serve to protect our stockholders against unfair treatment in takeover situations, by making it
more difficult and time-consuming for a potential acquirer to take control of our board of
directors. A company may also adopt a classified board of directors to ensure stability in the
board of directors and thereby improve long-term planning, which may benefit stockholders. A
“poison pill” or similar plan or device may encourage potential acquirers to discuss their
intentions with the board of directors of a company and avoid the time, expense and
distraction of a hostile take-over. Any benefit to us and our stockholders from instituting a
classified board or adopting or approving a “poison pill” or similar plan or device in these and
other circumstances is unavailable.
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Because we do not expect to pay dividends with respect to our common stock in the foreseeable
future, you must rely on stock appreciation for any return on your investment.
We have paid no cash dividends on any of our common stock to date, and we currently intend to
retain our future earnings, if any, to fund the development and growth of our business. As a
result, with respect to our common stock, we do not expect to pay any cash dividends in the
foreseeable future, and payment of cash dividends, if any, will also depend on our financial
condition, results of operations, capital requirements and other factors and will be at the
discretion of our board of directors. Furthermore, we are subject to various laws and regulations
that may restrict our ability to pay dividends and we may in the future become subject to
contractual restrictions on, or prohibitions against, the payment of dividends. Due to our intent
to retain any future earnings rather than pay cash dividends on our common stock and applicable
laws, regulations and contractual obligations that may restrict our ability to pay dividends on our
common stock, the success of your investment in our common stock will likely depend entirely upon
any future appreciation and there is no guarantee that our common stock will appreciate in value.
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| Item 1B. |
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Unresolved Staff Comments. |
We do not have any unresolved comments issued by the SEC staff.
We lease approximately 6,500 square feet of office space for our headquarters in San Diego,
California subject to a lease arrangement that will expire in January 2012, unless we exercise our
option to extend the lease for an additional 12 months. The average base rent for this space is
approximately $15,600 per month. We believe that the facilities we lease are adequate to meet our
current requirements and our requirements for the remaining term of the lease. We have no
laboratory, research or manufacturing facilities.
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| Item 3. |
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Legal Proceedings. |
In the normal course of business, we may become subject to lawsuits and other claims and
proceedings. Such matters are subject to uncertainty and outcomes are often not predictable with
assurance. We are not currently a party to any material pending litigation or other material legal
proceeding.
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| Item 4. |
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(Removed and Reserved). |
-48-
PART II
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| Item 5. |
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Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities. |
Market Information
Our common stock trades under the symbol “ANX” on NYSE Amex Equities. The following table
sets forth the high and low closing sale prices for our common stock in each full quarterly period
within the two most recent fiscal years as reported in the consolidated transaction reporting
system for NYSE Amex Equities. The prices in the table below have been adjusted to reflect
retrospective application of the 1-for-25 reverse split of our common stock effected on April 23,
2010.
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Closing Sale Price |
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2010 |
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2009 |
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High |
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Low |
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High |
|
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Low |
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First Quarter |
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$ |
11.67 |
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$ |
5.00 |
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$ |
4.50 |
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$ |
2.25 |
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Second Quarter |
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$ |
6.80 |
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$ |
1.61 |
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$ |
5.50 |
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$ |
2.76 |
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Third Quarter |
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$ |
2.11 |
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$ |
1.53 |
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$ |
5.00 |
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$ |
3.00 |
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Fourth Quarter |
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$ |
2.99 |
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$ |
1.93 |
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$ |
10.75 |
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$ |
2.25 |
|
As of March 1, 2011, we had approximately 143 record holders of our common stock. We believe
that the number of beneficial owners is substantially greater than the number of record holders
because a large portion of our common stock is held of record through brokerage firms in “street
name.”
Dividend Policy
We have never declared or paid any cash dividends on our common stock and do not anticipate
declaring or paying any cash dividends on our common stock in the foreseeable future. In addition,
in connection with previous preferred stock financings, we have agreed to charter restrictions on
our ability to pay cash dividends or distributions on our common stock for so long as any shares of
such preferred stock are outstanding, unless we obtain prior written consent from the holders of
such preferred stock. Although currently there are no such restrictions on our ability to pay
dividends on our common stock, we may agree to similar restrictions in the future.
We expect to retain all available funds and any future earnings to support operations and fund
the development and growth of our business. Our board of directors will determine whether we pay
and the amount of future dividends (including cash dividends), if any.
Recent Sales of Unregistered Securities
As partial consideration for its services as placement agent in connection with registered
direct offerings of our equity securities, we have issued the following common stock purchase
warrants to Rodman & Renshaw, LLC, or its designee, on the dates indicated:
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on June 12, 2009, warrants to purchase an aggregate of up to 36,071 shares of
our common stock at an exercise price of $3.75 per share, which warrants became
exercisable on December 13, 2009 and may be exercised any time on or before June
12, 2014; |
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• |
|
on July 6, 2009, warrants to purchase an aggregate of up to 19,007 shares of our
common stock at an exercise price of $4.475 per share, which warrants became
exercisable on January 7, 2010 and may be exercised any time on or before July 6,
2014; |
-49-
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on August 10, 2009, warrants to purchase an aggregate of up to 14,183 shares of
our common stock at an exercise price of $4.0625 per share, which warrants became
exercisable on February 10, 2010 and may be exercised any time beginning on or
before August 10, 2014; |
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• |
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on October 9, 2009, warrants to purchase an aggregate of up to 144,000 shares of
our common stock at an exercise price of $5.875 per share, which warrants became
exercisable on April 7, 2010 and may be exercised any time on or before October 6,
2014; |
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on January 7, 2010, warrants to purchase an aggregate of up to 99,696 shares of
our common stock at an exercise price of $11.9125 per share, which warrants became
exercisable on July 7, 2010 and may be exercised any time on or before June 3,
2014; and |
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on January 11, 2011, warrants to purchase an aggregate of up to 409,228 shares
of our common stock at an exercise price of $3.44 per share, which warrants were
exercisable upon issuance and may be exercised any time on or before April 1, 2015. |
The warrants described above were offered and sold by us in reliance upon exemptions from the
registration statement requirements by Section 4(2) of the Securities Act of 1933, as amended, as
transactions by an issuer not involving a public offering. The number of underlying shares and
exercise prices of the warrants described above that were issued prior to April 23, 2010 have been
adjusted to reflect retrospective application of the 1-for-25 reverse split of our common stock
effected on April 23, 2010.
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| Item 6. |
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Selected Financial Data. |
Under SEC rules and regulations, as a smaller reporting company we are not required to provide
the information required by this item.
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| Item 7. |
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Management’s Discussion and Analysis of Financial Condition and Results of
Operations. |
The following discussion and analysis of our financial condition and results of operations
should be read in conjunction with the consolidated financial statements and related notes
appearing elsewhere in this report. In addition to historical information, this discussion and
analysis contains forward-looking statements that involve risks, uncertainties, and assumptions.
Our actual results may differ materially from those anticipated in these forward-looking statements
as a result of certain factors, including but not limited to those identified under Item 1A “Risk
Factors” in this report.
Overview
We are a specialty pharmaceutical company focused on acquiring, developing and commercializing
proprietary product candidates. Our lead product candidates, Exelbine™ (vinorelbine injectable
emulsion), or ANX-530, and ANX-514 (docetaxel emulsion for injection), are novel emulsion
formulations of currently marketed chemotherapy drugs.
We have devoted substantially all of our resources to research and development, or R&D, or to
acquisition of our product candidates. We have not yet marketed or sold any products or generated
any significant revenue and we have incurred significant losses since inception. We had a loss
from operations of $8.5 million for the year ended December 31, 2010 and cash of approximately
$28.0 million at December 31, 2010.
In November 2010, we submitted a new drug application, or NDA, for Exelbine to the U.S. Food
and Drug Administration, or FDA, and in January 2011, we announced that the FDA accepted the
Exelbine NDA for filing and established a Prescription Drug User Fee Act, or PDUFA, goal date of
September 1, 2011 to finish its review of the Exelbine NDA.
In February 2011, we met with the FDA to discuss ANX-514 and the data package we presented to
FDA to support approval of ANX-514 based on data from our bioequivalence study of ANX-514. The FDA
indicated that a randomized safety study comparing ANX-514 and Taxotere would be required to
support approval of ANX-514. The study would be primarily descriptive but with a sample size sufficient to demonstrate a
comparable safety profile. The FDA recommended that the study also collect data on response rate
and duration of response. We are developing a study protocol for submission to the FDA and intend
to continue discussions with the FDA regarding the phase 3 clinical study and requirements for
ANX-514’s approval.
-50-
In 2010, we additionally began to focus on expanding our product pipeline through one or more
in-license, asset acquisition or merger transactions. In February 2011, we entered into an
agreement and plan of merger to acquire SynthRx, Inc., a privately-held Delaware corporation
developing a purified form of a rheologic and antithrombotic agent, poloxamer 188, or 188, in
exchange for shares of our common stock. We expect to consummate the acquisition of SynthRx in the
first half of 2011. As discussed in more detail under Part I, Item 1 “Business” in this report, we
initially intend to develop purified 188 for the treatment of sickle cell crisis in a pediatric
population and, if our acquisition of SynthRx closes and we are able to reach agreement with the
FDA on a study protocol on a timely basis, we may initiate a phase 3 clinical trial of purified 188
for that indication in 2012. In connection with the consummation of this acquisition, we would
issue 2,938,773 shares of our common stock to SynthRx’s stakeholders, 1,938,773 of which would be
subject to repurchase by us in the event development of purified 188 does not achieve the first
milestone described below. We could issue up to an aggregate of 13,478,050 additional shares of
our common stock to SynthRx’s stakeholders if the development of purified 188 achieves certain
milestones, as described below, and our stockholders approve the issuance of such milestone-related
shares, as required by NYSE Amex rules. If our stockholders do not approve the issuance of the
milestone-related shares, under the terms of the merger agreement, we would be required to pay
SynthRx’s stakeholders in cash the value of the milestone-related shares we would have otherwise
issued, with all such cash payments made in quarterly installments and, with respect to the cash
value associated with 12,478,050 of the milestone-related shares, payable based on net sales of
purified 188. We cannot determine the amount of our potential cash payments to SynthRx’s
stakeholders because the amount of such payments, if any, will depend on the 10-day volume weighted
average of the closing price of our common stock at the time a milestone is achieved and the market
price of our common stock historically has been, and likely will continue to be, highly volatile.
Of the shares issuable in connection with achievement of milestones, up to 1,000,000 shares would
be issuable upon the dosing of the first patient in a phase 3 clinical study that the FDA has
indicated may be sufficient to support approval of a new drug application covering the use of
purified 188 for the treatment of sickle cell crisis in children, or the 188 NDA, which we refer to
as the First Milestone; 3,839,400 shares would be issuable upon acceptance for review of the 188
NDA by the FDA, which we refer to as the Second Milestone; and 8,638,650 shares would be issuable
upon approval by the FDA of the 188 NDA, which we refer to as the Third Milestone.
We anticipate that our cash as of December 31, 2010, together with net proceeds from the
equity financing we completed in January 2011, will be sufficient to fund our currently planned
level of operations for at least the next 12 months. However, we may pursue development and/or
commercialization activities for our current or future product candidates, including purified 188
should we consummate the acquisition of SynthRx, at levels or on timelines, or we may incur
unexpected expenses, that shorten the period through which our operating funds will sustain us. We
may also acquire new technologies, product candidates and/or products and the cost to acquire,
develop and/or commercialize such new technologies, product candidates and/or products may shorten
the period through which our operating funds will sustain us. In addition, we may seek to raise
substantial additional capital to support activities that we believe will enhance the value of our
programs and increase stockholder value. We may not be able to obtain additional financing on a
timely basis or on acceptable terms, if at all.
Recent Financings
In 2010, we raised an aggregate of $27.4 million in adjusted net proceeds through the issuance
and sale of units consisting of convertible preferred stock and warrants to purchase shares of our
common stock, and, in January 2011, we raised an additional $21.0 million in net proceeds through
the issuance and sale of units consisting of common stock and warrants to purchase common stock as
follows:
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In January 2010, we completed a registered direct equity financing involving the
issuance of units consisting of shares of our 3.73344597664961% Series E
Convertible Preferred Stock, or Series E Stock, which were convertible into an
aggregate of 1,993,965 shares of our common stock, and 30-month warrants to
purchase up to an aggregate of 498,488 shares of our common stock. The gross
proceeds of this financing were $19.0 million, and we received $14.0 million in net
proceeds after deducting amounts deposited into escrow accounts to fund our
dividend and related payment
obligations in respect of the Series E Stock, the fees and expenses of our placement
agent, and our other offering expenses. All of the shares of our Series E Stock
have been converted into common stock and are no longer outstanding. We may receive
up to $4.4 million of additional proceeds from the exercise of the warrants issued
in this financing. Those warrants have an exercise price of $8.75 per share and are
exercisable any time on or before July 6, 2012, subject to certain beneficial
ownership limitations. |
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In May 2010, we completed a registered direct equity financing involving the
issuance of units consisting of shares of our 2.19446320054018% Series F
Convertible Preferred Stock, or Series F Stock, which were convertible into an
aggregate of 5,190,312 shares of our common stock, 5-year warrants to purchase up
to an aggregate of 1,816,608 shares of our common stock and 1-year warrants to
purchase up to an aggregate of 778,548 shares of our common stock. The gross
proceeds of this financing were $19.2 million, and we received $13.3 million in net
proceeds after deducting amounts deposited into escrow accounts to fund our
dividend and related payment obligations in respect of the Series F Stock, the fees
and expenses of our placement agent and financial advisor, and our other offering
expenses. All of the shares of our Series F Stock have been converted into common
stock and are no longer outstanding. We may receive up to $9.5 million of
additional proceeds from the exercise of the warrants issued in this financing.
Those warrants have an exercise price of $3.65 per share. The 5-year warrants are
exercisable any time on or before May 6, 2015 and the 1-year warrants are
exercisable any time on or before May 20, 2011, subject to certain beneficial
ownership limitations. |
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In January 2011, we completed a registered direct equity financing involving the
issuance of units consisting of 8,184,556 shares of our common stock, 5-year
warrants to purchase up to an aggregate of 2,046,139 shares of our common stock and
1-year warrants to purchase up to an aggregate of 2,046,139 shares of our common
stock. The gross proceeds of this financing were $22.5 million, and we received
$21.0 million in net proceeds after deducting the fees and expenses of our
placement agent and our other offering expenses. We may receive up to $11.3
million of additional proceeds from the exercise of the warrants issued in this
financing. Those warrants have an exercise price of $2.75 per share. The 5-year
warrants are exercisable any time on or before January 11, 2016 and the 1-year
warrants are exercisable any time on or before January 19, 2012, subject to certain
beneficial ownership limitations. |
Reverse Stock Split
On April 23, 2010, we effected a 1-for-25 reverse split of our common stock, which was
authorized by our stockholders at a special meeting held in August 2009. The reverse stock split
reduced the number of our issued and outstanding shares of common stock as of April 23, 2010 from
approximately 257.3 million shares to approximately 10.3 million shares. All common stock share
and per share information included in this report have been restated to reflect retrospective
application of the reverse stock split for periods ending or as of a date prior to April 23, 2010,
except for par value per share and the number of authorized shares, which were not affected by the
reverse stock split.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations is based upon
consolidated financial statements that we have prepared in accordance with accounting principles
generally accepted in the U.S. The preparation of these financial statements requires management
to make a number of assumptions and estimates that affect the reported amounts of assets,
liabilities, revenues and expenses in these consolidated financial statements and accompanying
notes. On an on-going basis, we evaluate these estimates and assumptions, including those related
to recognition of expenses in service contracts, license agreements and share-based compensation.
Management bases its estimates on historical information and assumptions believed to be reasonable
under the circumstances, the results of which form the basis for making judgments about the
carrying values of assets and liabilities not readily apparent from other sources. Actual results
may differ from these estimates under different assumptions or conditions.
-52-
Revenue Recognition. We may enter into revenue arrangements that contain multiple
deliverables. In these cases, revenue is recognized when all of the following criteria are met:
(1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been
rendered; (3) the seller’s price to the buyer is fixed and determinable; and (4) collectability is
reasonably assured.
Revenue from licensing agreements is recognized based on the performance requirements of the
agreement. Revenue is deferred for fees received before earned. Nonrefundable upfront fees that
are not contingent on any future performance by us are recognized as revenue when the license term
commences and the revenue recognition criteria are met. Nonrefundable upfront fees, where we have
ongoing involvement or performance obligations, are recorded as deferred revenue and recognized as
revenue over the life of the contract, the period of the performance obligation or the development
period, whichever is appropriate in light of the circumstances.
Payments related to substantive, performance-based milestones in an agreement are recognized
as revenue upon the achievement of the milestones as specified in the underlying agreement when
they represent the culmination of the earnings process. Royalty revenue from licensed products
will be recognized when earned in accordance with the terms of the applicable license agreements.
We recognize revenues from federal government research grants during the period in which we
receive the grant funds, or their collection is reasonably assured, and we incur the qualified
expenditures.
R&D Expenses. R&D expenses consist of expenses incurred in performing R&D activities,
including salaries and benefits, facilities and other overhead expenses, bioequivalence and
clinical trials, research-related manufacturing services, contract services and other outside
expenses. R&D expenses are charged to operations as the underlying work is performed. Advance
payments, including nonrefundable amounts, for goods or services that will be used or rendered for
future R&D activities are deferred and capitalized. Such amounts will be recognized as an expense
as the related goods are delivered or the related services are performed. If the goods will not be
delivered, or services will not be rendered, then the capitalized advance payment is charged to
expense.
Milestone payments that we make in connection with in-licensed technology or product
candidates are expensed as incurred when there is uncertainty in receiving future economic benefits
from the licensed technology or product candidates. We consider the future economic benefits from
the licensed technology or product candidates to be uncertain until such licensed technology is
incorporated into products that, or such product candidates, are approved for marketing by the FDA
or when other significant risk factors are abated. For accounting purposes, management has viewed
future economic benefits for all of our licensed technology or product candidates to be uncertain.
Payments in connection with our bioequivalence and clinical trials are often made under
contracts with multiple contract research organizations that conduct and manage these trials on our
behalf. The financial terms of these agreements are subject to negotiation and vary from contract
to contract and may result in uneven payment flows. Generally, these agreements set forth the
scope of work to be performed at a fixed fee or unit price or on a time-and-material basis.
Payments under these contracts depend on factors such as the successful enrollment or treatment of
patients or the completion of other milestones. Expenses related to bioequivalence and clinical
trials are accrued based on our estimates and/or representations from service providers regarding
work performed, including actual level of patient enrollment, completion of patient studies, and
trial progress. Other incidental costs related to patient enrollment or treatment are accrued when
reasonably certain. If the contracted amounts are modified (for instance, as a result of changes
in the bioequivalence or clinical trial protocol or scope of work to be performed), we modify our
accruals accordingly on a prospective basis. Revisions in scope of contract are charged to expense
in the period in which the facts that give rise to the revision become reasonably certain. Because
of the uncertainty of possible future changes to the scope of work in bioequivalence and clinical
trials contracts, we are unable to quantify an estimate of the reasonably likely effect of any such
changes on our consolidated results of operations or financial position. Historically, we have had
no material changes in our bioequivalence and clinical trial expense accruals that would have had a
material impact on our consolidated results of operations or financial position.
Purchased In-Process Research and Development. We adopted the Financial Accounting Standards
Board’s, or FASB’s, changes to Accounting Standards Codification, or ASC, 805, “Business
Combinations,”
effective January 1, 2009. The adoption of the changes to ASC 805 did not have a material
effect on our consolidated results of operations or financial position.
-53-
In accordance with previous accounting guidance effective through December 31, 2008, we
accounted for the costs associated with any purchased in-process research and development, or
IPR&D, as an expense on the statement of operations upon acquisition. These amounts represented an
estimate of the fair value of purchased IPR&D for projects that, as of the acquisition date, had
not yet reached technological feasibility, had no alternative future use, and had uncertainty in
generating future economic benefits. We determined the future economic benefits from the purchased
IPR&D to be uncertain until such technology is incorporated into products approved for marketing by
the FDA or when other significant risk factors are abated.
Share-based Compensation Expenses. We account for share-based compensation awards granted to
employees, including non-employee members of our board of directors, in accordance with ASC 718,
“Compensation — Stock Compensation.” Share-based compensation expense is measured at the grant
date, based on the estimated fair value of the award, and is recognized as expense over the
employee’s requisite service period. As share-based compensation expense is based on awards
ultimately expected to vest, it has been reduced for estimated forfeitures. ASC 718 requires
forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods
if actual forfeitures differ from those estimates. Forfeitures are estimated based on historical
experience. Although estimates of share-based compensation expenses are significant to our
consolidated financial statements, they are not related to the payment of any cash by us.
We estimate the fair value of stock option awards on the date of grant using the Black-Scholes
option-pricing model, or Black-Scholes model. The determination of the fair value of share-based
payment awards on the date of grant using an option-pricing model is affected by the price of our
common stock as well as assumptions regarding a number of complex and subjective variables. These
variables include, but are not limited to, our expected share price volatility over the term of the
awards, actual and projected employee stock option exercise behaviors, a risk-free interest rate
and expected dividends. We may elect to use different assumptions under the Black-Scholes model in
the future, which could materially affect our net income or loss and net income or loss per share.
We account for share-based compensation awards granted to non-employees by determining the
fair value of the share-based compensation awards granted as either the fair value of the
consideration received or the fair value of the equity instruments issued, whichever is more
reliably measurable. If the fair value of the equity instruments issued is used, it is measured
using the share price and other measurement assumptions as of the earlier of (1) the date at which
a commitment for performance by the counterparty to earn the equity instruments is reached or (2)
the date at which the counterparty’s performance is complete.
Income Taxes. We account for income taxes and the related accounts under the liability method
in accordance with ASC 740, “Income Taxes.” Deferred tax assets and liabilities are determined
based on the differences between the financial statement carrying amounts and the income tax bases
of assets and liabilities. A valuation allowance is applied against any net deferred tax asset if,
based on available evidence, it is more likely than not that some or all of the deferred tax assets
will not be realized.
The tax effects from an uncertain tax position can be recognized in our consolidated financial
statements only if the position is more likely than not of being sustained upon an examination by
tax authorities. An uncertain income tax position will not be recognized if it has less than a 50%
likelihood of being sustained.
Costs Associated with Exit or Disposal Activities. As part of our efforts to reduce operating
costs, we completed one workforce reduction in the fourth quarter of 2008 and two workforce
reductions in the first six months of 2009, each of which was accounted for in accordance with ASC
420, “Exit or Disposal Cost Obligations.” We recorded severance-related charges, including salary,
payroll taxes and healthcare benefits, of $757,000 in the aggregate over three consecutive quarters
beginning in the fourth quarter of 2008. We recorded severance-related charges of $350,000 in the
first quarter of 2009, of which $237,000 was recorded in research and development and the balance
was recorded in selling, general and administrative, and $163,000 in the second quarter of 2009, of
which $121,000 was recorded in research and development and the balance was recorded in selling,
general and
administrative. As of June 30, 2009, all severance-related costs associated with these
workforce reductions had been recorded and paid.
-54-
Convertible Instruments. At issuance, we value separately embedded beneficial conversion
features present in convertible securities. Embedded beneficial conversion features are recognized
by allocating to additional paid-in capital and accumulated deficit that portion of the net
proceeds from the sale of the convertible security equal to the intrinsic value of the beneficial
conversion feature. Intrinsic value is calculated as the difference, as of the commitment date,
between the conversion price of the convertible security and the fair value of the common stock
underlying the convertible security, which for us is the closing price of a share of our common
stock on the NYSE Amex multiplied by the number of shares of our common stock into which the
convertible security is convertible. If the intrinsic value of the beneficial conversion feature
is greater than the net proceeds allocated to the convertible security, the amount of the discount
assigned to the beneficial conversion feature is limited to the amount of the net proceeds. In our
registered direct equity financings that closed in June, July, August and October 2009 and January
and May 2010, we issued convertible preferred stock securities with non-detachable conversion
features that were in-the-money as of the commitment date, which we recognized as beneficial
conversion features. All of the shares of the convertible preferred stock we issued in these
financings have been converted into common stock at fixed conversion rates. The embedded
beneficial conversion features were valued separately and recognized by allocating to additional
paid-in capital and accumulated deficit a portion of the net proceeds equal to the intrinsic value
of the beneficial conversion features.
The foregoing is not intended to be a comprehensive list of all of our accounting policies.
In most cases, the accounting treatment of a particular transaction is specifically dictated by
accounting principles generally accepted in the U.S.
Results of Operations
A general understanding of the drug development process is critical to understanding our
results of operations. Drug development in the U.S. and most countries throughout the world is a
process that includes several steps defined by the FDA and similar regulatory authorities in
foreign countries. The FDA approval processes relating to new drug products differ depending on
the nature of the particular product candidate for which approval is sought. With respect to any
product candidate with active ingredients not previously approved by the FDA, a prospective drug
product manufacturer is required to submit an NDA that includes complete reports of pre-clinical,
clinical and laboratory studies and extensive manufacturing information to demonstrate such
product’s safety and effectiveness. The NDA process generally requires, before the submission of
the NDA, filing of an investigational new drug application, or IND, pursuant to which permission is
sought to begin clinical testing of the new product candidate. An NDA based on published safety
and effectiveness studies conducted by others, or previous findings of safety and effectiveness by
the FDA, may be submitted under Section 505(b)(2) of the Federal Food, Drug and Cosmetic Act, or
the FDCA.
Generally, with respect to any product candidate with active ingredients not previously
approved by the FDA, an NDA must be supported by data from at least phase 1, phase 2 and phase 3
clinical trials. Phase 1 clinical trials can be expected to last from 6 to 18 months, phase 2
clinical trials can be expected to last from 12 to 24 months and phase 3 clinical trials can be
expected to last from 18 to 36 months. However, clinical development timelines vary widely, as do
the total costs of clinical trials and the likelihood of success. We anticipate that we will make
determinations as to which of our R&D programs to pursue and how much funding to direct to each R&D
program on an ongoing basis in response to the scientific, nonclinical and clinical success of the
underlying product candidate, our ongoing assessment of its market potential and our available
resources.
Future expenditures on R&D programs are subject to many uncertainties, including whether we
will further develop our product candidates with a partner or independently. At this time, due to
such uncertainties and the risks inherent in drug product development and the associated regulatory
process, we cannot estimate with reasonable certainty the duration of or costs to complete our R&D
programs or whether or when or to what extent revenues will be generated from the commercialization
and sale of any of our product candidates. The duration and costs of our R&D programs, in
particular those associated with clinical and bioequivalence trials and research-related
manufacturing, can vary significantly among programs as a result of a variety of factors,
including:
| |
• |
|
the number of trials necessary to demonstrate the safety and efficacy of a product
candidate; |
| |
• |
|
the number of patients who participate in the trials; |
-55-
| |
• |
|
the number and location of sites included in trials and the rate of site approval
for the trial; |
| |
• |
|
the rates of patient recruitment and enrollment; |
| |
• |
|
the ratio of randomized to evaluable patients; |
| |
• |
|
the time and cost of process development activities related to our product
candidates; |
| |
• |
|
the costs of manufacturing our product candidates; |
| |
• |
|
with respect to bioequivalence or comparative trials, the availability and cost of
reference or control product in the jurisdiction of each site; |
| |
• |
|
the duration of patient treatment and follow-up; |
| |
• |
|
the time and cost of stability studies, including the need to identify critical
parameters, methods to evaluate and test these parameters and validation of such
methods and tests; and |
| |
• |
|
the costs, requirements, timing of and the ability to secure regulatory approvals. |
The difficult process of seeking regulatory approvals for our product candidates, in
particular any containing new chemical entities, and compliance with applicable regulations
requires the expenditure of substantial resources. Any failure by us to obtain, or any delay in
obtaining, regulatory approvals could cause our R&D expenditures to increase and, in turn, have a
material and unfavorable effect on our results of operations. We cannot be certain when, if ever,
we will generate revenues from sales of any of our product candidates.
While many of our R&D expenses are transacted in U.S. dollars, certain significant expenses
are required to be paid in foreign currencies and expose us to transaction gains and losses that
could result from changes in foreign currency exchange rates. In particular, our current contract
manufacturer, which is also our intended commercial manufacturer, for both Exelbine and ANX-514 is
located outside the U.S. and generally we pay for its services in Euros. As a result, our exposure
to currency risk likely will increase as we move our products towards commercialization and
increase the services we request from our current contract manufacturer. We include realized gains
and losses from foreign currency transactions in operations as incurred.
We operate our business and evaluate our company on the basis of a single reportable segment,
which is the business of acquiring, developing and commercializing proprietary product candidates
principally for the treatment of cancer. As a development-stage company, we have not generated any
revenue from product sales to date, and we do not expect to generate revenue from product sales
until such time that we have obtained approval from a regulatory agency to sell one or more of our
product candidates, which we cannot predict will occur.
In 2010 and 2009, our R&D expenses consisted primarily of costs associated with nonclinical
activities related to Exelbine and ANX-514, including regulatory-related consulting services,
research-related manufacturing services and stability testing and a toxicology study of Exelbine.
Our most significant R&D expenses were those relating to the submission and resubmission of our
Exelbine NDA to the FDA. Our selling, general and administrative, or SG&A, expenses for the same
periods consisted primarily of consultants’ fees for performing finance, accounting, human
resources, facilities, internal systems support, business development, commercialization and
investor relations functions activities, salaries, benefits and related personnel costs for
employees, including our executive officers, and share-based compensation expense. The following
table illustrates the types of operating expenses we incurred in 2010 and 2009 and their respective
percent of our total operating costs for those periods:
| |
|
|
|
|
|
|
|
|
| |
|
Operating Expenses |
|
| |
|
Years Ended |
|
| |
|
December 31, |
|
| |
|
2010 |
|
|
2009 |
|
Research and development |
|
|
41 |
% |
|
|
56 |
% |
Selling, general and administrative |
|
|
59 |
% |
|
|
43 |
% |
Depreciation and amortization |
|
|
0 |
% |
|
|
1 |
% |
|
|
|
|
|
|
|
Total operating expenses |
|
|
100 |
% |
|
|
100 |
% |
|
|
|
|
|
|
|
-56-
Comparison of 2010 and 2009
Revenue. We recognized revenue of $0.5 million for the year ended December 31, 2010 and $0.3
million for the year ended December 31, 2009. Revenue in 2010 consists of two grants awarded under
the qualifying therapeutic discovery project established under Section 48D of the Internal Revenue
Code as a result of the Patient Protection and Affordable Care Act of 2010 and paid in November
2010. Revenue in 2009 consists of a nonrefundable license fee under our March 2009 license
agreement with respect to ANX-514 with Shin Poong Pharmaceutical Co., Ltd.
R&D Expenses. We maintain and evaluate our R&D expenses by the type of cost incurred rather
than by project. We maintain and evaluate R&D expenses by type primarily because we outsource a
substantial portion of our work and our R&D personnel and consultants work across multiple programs
rather than dedicating their time to one particular program. We began maintaining such expenses by
type on January 1, 2005. The following table summarizes our consolidated R&D expenses by type for
each of the periods listed:
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
January 1, 2005 |
|
| |
|
|
|
|
|
|
|
|
|
through |
|
| |
|
Years Ended December 31, |
|
|
December 31, |
|
| |
|
2010 |
|
|
2009 |
|
|
2010 |
|
External bioequivalence and clinical trial fees and expenses |
|
$ |
215,486 |
|
|
$ |
603,097 |
|
|
$ |
24,018,062 |
|
External nonclinical study fees and expenses (1) |
|
|
3,225,723 |
|
|
|
5,083,474 |
|
|
|
27,254,671 |
|
Personnel costs |
|
|
253,298 |
|
|
|
779,510 |
|
|
|
10,543,996 |
|
Share-based compensation expense |
|
|
(5,745 |
) |
|
|
41,569 |
|
|
|
2,919,985 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
3,688,762 |
|
|
$ |
6,507,650 |
|
|
$ |
64,736,714 |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
| (1) |
|
External nonclinical study fees and expenses include preclinical, research-related
manufacturing, quality assurance and regulatory expenses. |
R&D expenses decreased by $2.8 million, or 43%, to $3.7 million for the year ended December
31, 2010, compared to $6.5 million for the year ended December 31, 2009. The decrease in R&D
expenses in 2010 compared to 2009 was due primarily to a $1.9 million decrease in external
nonclinical study fees and expenses. This decrease resulted largely from a $2.6 million decrease
in costs of research-related manufacturing activities for Exelbine and a $0.1 million decrease in
fees for regulatory-related consulting services related to Exelbine, partially offset by a $0.5
million increase in fees for regulatory-related consulting services related to ANX-514 and a $0.3
million increase in toxicology study expenses related to Exelbine. The decrease in personnel costs
was attributable primarily to lower headcount in 2010 compared to 2009 and completion in 2009 of
severance payments associated with our 2009 and 2008 workforce reductions. The decrease in
external bioequivalence and clinical trial fees and expenses in 2010 compared to 2009 was due
primarily to the release of residual accruals for expenses related to ANX-510 clinical trials that
were completed in the fourth quarter of 2008 and the first quarter of 2009. The decrease in
share-based compensation expense resulted primarily from the forfeiture of stock option awards in
connection with employee terminations in 2009 and 2008.
We expect R&D expenses to be a significantly larger component of our total operating expenses
in 2011 compared to 2010. We expect R&D expenses to increase in 2011 relative to 2010 to support
continued development of ANX-514, to pursue development of purified 188, should our acquisition of
SynthRx close, and to pursue development of any other technologies and/or product candidates we may
acquire, including potentially adding new clinical, regulatory and manufacturing personnel.
Selling, General and Administrative Expenses. SG&A expenses were relatively flat year to
year, with an increase of $0.3 million, or approximately 6%, to $5.3 million for the year ended
December 31, 2010, compared to $5.0 million for the year ended December 31, 2009. In 2010 compared
to 2009, fees for third-party services related to commercial-readiness activities related to
Exelbine and identifying and evaluating strategic opportunities for our product candidates and
pipeline expansion increased by $0.3 million, consulting fees related to our finance, accounting,
human resources, facilities and internal systems support increased by $0.2 million, our Delaware
corporate franchise tax increased by $0.2 million and share-based compensation expense increased by
$0.2 million. These increases were partially offset by a $0.5 million decrease in personnel costs,
primarily as a result of lower
headcount and the absence of severance costs in 2010, and a $0.1 million decrease in
professional fees for legal, audit and tax services.
-57-
We expect SG&A expenses to increase in 2011 relative to 2010 as we prepare for the commercial
launch of Exelbine and, should it be approved, as we launch Exelbine, and any other products we may
acquire, including potentially adding sales and marketing personnel, and to support continued
development of ANX-514, pursue development of purified 188, should our acquisition of SynthRx
close, and pursue development of any other technologies, product candidates and/or we may acquire.
Interest and Other Income/(Expense). Interest income amounted to $93,000 for 2010, compared
to $7,000 in 2009. The increase in interest income of $86,000 for 2010 was primarily attributable
to overall higher invested balances, though offset partially by lower interest rates earned. Even
though we raised a substantial amount of additional capital through our January and May 2010 and
January 2011 registered direct equity financings, we expect that interest income will continue to
be low due to negligible interest rates. Other expense was $2,000 in 2010, compared to $47,000 in
2009. Both years’ expense was attributable to losses on the sale of various business assets.
Net Loss. Net loss applicable to common stock was $14.1 million, or $1.07 per share, for
the year ended December 31, 2010, compared to a net loss applicable to common stock of $16.2
million, or $3.47 per share, for the year ended December 31, 2009. Included in the net loss
applicable to common stock for 2010 and 2009 were non-cash deemed dividend expenses of
approximately $5.6 million and $4.9 million, respectively, related to our January and May 2010 and
June, July, August and October 2009 registered direct equity financings. Included in both net loss
and net loss applicable to common stock for 2009 were charges associated with our 2009 and 2008
workforce reductions.
Liquidity and Capital Resources
We have a history of annual losses from operations and we have funded our operations primarily
through sales of our equity securities. We had a net loss of $8.5 million for the year ended
December 31, 2010 and cash of approximately $28.0 million as of December 31, 2010.
In January and May 2010, we completed registered direct equity financings involving the
issuance, respectively, of units consisting of shares of our Series E Stock and our Series F Stock
and common stock purchase warrants. These financings resulted in an aggregate of $38.2 million in
gross proceeds, and we received an aggregate of $27.4 million in net proceeds after deducting
amounts deposited into escrow accounts to fund our dividend and related payment obligations in
respect of the Series E Stock and Series F Stock, the fees and expenses of our placement agent and
financial advisor in the financings, and our other offering expenses. As of December 31, 2010, all
of the shares of our Series E Stock and Series F Stock had been converted into common stock and are
no longer outstanding.
In January 2010, we received an aggregate of $0.3 million of net proceeds and issued an
aggregate of 84,651 shares of our common stock in connection with the exercise of warrants issued
in our June 2009 registered direct equity financing.
In November 2010, the Internal Revenue Service notified us that an aggregate amount of
$488,959 in grants had been awarded to us under the qualifying therapeutic discovery project, or
QTDP, program established under Section 48D of the Internal Revenue Code as a result of the Patient
Protection and Affordable Care Act of 2010. We submitted applications in July 2010 for qualified
investments we made, or expected to make, in 2009 and 2010 in our Exelbine and ANX-514 programs,
and a grant in the amount of $244,479 was approved for each of those programs. These grants are
not taxable for federal income tax purposes. We received full payment of the grants in November
2010.
In January 2011, we completed a registered direct equity financing involving the issuance of
shares of our common stock and common stock purchase warrants. This financing resulted in $22.5
million in gross proceeds, and we received $21.0 million in net proceeds after deducting the fees
and expenses of our placement agent and our other offering expenses.
-58-
We may receive up to $0.8 million, $4.4 million, $9.5 million and $11.3 million of additional
net proceeds from the exercise of warrants issued in the registered direct equity financings we
completed in October 2009, January and May 2010 and January 2011, respectively; however, the
exercise of these warrants is subject to certain beneficial ownership limitations. In addition, we
may receive up to $3.7 million of additional net proceeds from the exercise of warrants issued to
our placement agent as additional consideration for services in connection with certain of our
registered direct equity financings.
For a more detailed discussion of our 2009 and 2010 equity financings, see Note 6, “Capital
Stock and Warrants,” of the Notes to Consolidated Financial Statements in this report.
For a discussion of our liquidity and capital resources outlook, see “Management Outlook”
below.
Analysis of our 2010 versus 2009 cash flow from operating, investing and financing activities
is provided below.
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
December 31, |
|
|
Increase |
|
|
December 31, |
|
| |
|
2010 |
|
|
During 2010 |
|
|
2009 |
|
Cash |
|
$ |
27,978,823 |
|
|
$ |
19,311,419 |
|
|
$ |
8,667,404 |
|
Net working capital |
|
$ |
26,607,603 |
|
|
$ |
19,988,796 |
|
|
$ |
6,618,807 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Year Ended |
|
|
Change |
|
|
Year Ended |
|
| |
|
December 31, |
|
|
Between |
|
|
December 31, |
|
| |
|
2010 |
|
|
Periods |
|
|
2009 |
|
Net cash used in operating activities |
|
$ |
(8,341,237 |
) |
|
$ |
4,275,179 |
|
|
$ |
(12,616,416 |
) |
Net cash provided by (used in) investing activities |
|
|
(24,134 |
) |
|
|
(40,134 |
) |
|
|
16,000 |
|
Net cash provided by financing activities |
|
|
27,676,790 |
|
|
|
16,258,874 |
|
|
|
11,417,916 |
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash |
|
$ |
19,311,419 |
|
|
$ |
20,493,919 |
|
|
$ |
(1,182,500 |
) |
|
|
|
|
|
|
|
|
|
|
Operating activities. Net cash used in operating activities was $8.3 million in 2010,
compared to $12.6 million in 2009. The decrease in cash used in operating activities in 2010 was
due primarily to realization of financial benefit from the restructuring, cost-cutting and
re-prioritization initiatives we implemented beginning in October 2008 through June 2009;
specifically, our workforce reductions and our discontinuation of active work on all compounds,
other than Exelbine and ANX-514, to which we have or had rights during that period.
Investing activities. Net cash used in investing activities was $24,134 in 2010, compared to
$16,000 provided by investing activities in 2009. The cash used in investing activities in 2010
was primarily for purchases of property and equipment offset by $4,379 of proceeds from sale of
property and equipment. The $16,000 provided by investing activities in 2009 was from proceeds
from sale of property and equipment.
Financing activities. Net cash provided by financing activities was $27.7 million in 2010,
compared to $11.4 million in 2009. The cash provided by financing activities in 2010 and 2009
primarily consisted of proceeds from the issuance of our equity securities in the financing
transactions we completed during those periods.
Management Outlook
We anticipate that our cash as of December 31, 2010, together with the net proceeds from the
equity financing we completed in January 2011, will be sufficient to fund our currently planned
level of operations for at least the next 12 months. However, our future capital uses and
requirements will be affected by numerous forward-
looking factors that, depending on their actual outcome, could shorten or extend the period
through which our operating funds will sustain us. These factors include, but are not limited to:
the extent to which we acquire new technologies, product candidates, products or businesses; the
scope, prioritization and number of development and/or commercialization programs we pursue; the
rate of progress and costs of development and regulatory approval activities associated with our
product candidates, including conducting manufacturing process development activities and
manufacturing clinical trial material; the rate of progress and costs to comply with post-approval
requirements imposed on our products candidates, should any be approved; the extent to which we
partner or collaborate with third parties to develop, seek regulatory approval of and commercialize
our product candidates or products, or sell or license our product candidates or products to
others; the costs and timing of acquiring or developing sales, marketing and distribution
capabilities and the regulatory compliance and administrative capabilities to commercialize
Exelbine in the U.S., regardless of whether Exelbine is ultimately approved by the FDA; the costs
and timing of acquiring or developing similar commercialization capabilities for other of our
product candidates, including ANX-514, and product candidates or products we may acquire in the
future, including purified 188 should our acquisition of SynthRx close; and whether any of our
product candidates for which we receive regulatory approval, if any, achieve broad market
acceptance. In addition, currently, we have only three full-time employees and one part-time
employee and rely on third parties to perform many essential services for us. Increasing the size
of our workforce will also impact the period through which our operating funds will sustain us, but
the timing and extent to which we do so is difficult to predict as it will be influenced by the
rate of progress of development and regulatory approval of our product candidates and whether we
partner them, as well as the extent to which we acquire and develop new technologies, product
candidates, products or businesses.
-59-
We continue to undertake commercial-readiness activities with respect to Exelbine to prepare
for its launch in the U.S., should the FDA approve our Exelbine NDA. In preparing for the
potential commercial launch of Exelbine, we expect to develop or acquire internal marketing,
distribution and sales capabilities and associated regulatory compliance capabilities, as well as
contract with third parties to supplement and enhance our internal capabilities. Such activities
may result in a substantial increase in our workforce in 2011. We continue to evaluate the
relative benefits of developing or acquiring these capabilities, as well as the use of third
parties. Currently, we cannot forecast with any degree of certainty the costs associated with our
Exelbine commercial-readiness activities during 2011.
We also continue to develop ANX-514 following our February 2011 meeting with the FDA. We are
in the process of developing a protocol for a phase 3 clinical trial of ANX-514 for submission to
the FDA. In 2011, we expect to use capital to develop the phase 3 trial protocol, conduct
manufacturing process development activities and manufacture clinical trial material that would
enable us to initiate a clinical trial of ANX-514 should we reach agreement with the FDA as to the
trial protocol. In parallel, we also expect to continue to pursue partnering and other strategic
opportunities for ANX-514, including its sale or exclusive license to a third party. However,
partnering and other strategic options may not be available on acceptable terms, if at all. As our
discussions with the FDA progress, if we determine the anticipated capital requirements associated
with continued development of ANX-514 are not financially justifiable, we may determine to
discontinue this program. Currently, we cannot forecast with any degree of certainty the costs
associated with our continued development of ANX-514 during 2011.
In February 2011, we entered into an agreement and plan of merger to acquire SynthRx, Inc. in
exchange for shares of our common stock. We expect to consummate our acquisition of SynthRx in the
first half of 2011. As discussed in more detail under Item 1 “Business” above, we initially intend
to develop purified 188 for the treatment of sickle cell crisis in a pediatric population. If our
acquisition of SynthRx closes, we intend to meet with the FDA to reach agreement on a protocol for
a phase 3 clinical trial of purified 188 for this indication. In parallel, we expect to prepare to
initiate the clinical trial, including conducting manufacturing process development activities and
manufacturing clinical material, which could enable us to initiate it in 2012. We also expect to
increase our workforce in connection with our acquisition of SynthRx. Until we reach agreement
with the FDA on a phase 3 trial protocol, we cannot forecast with any degree of certainty the costs
that would be associated with our development of purified 188 for the treatment of sickle cell
crisis in a pediatric population. However, our preliminary estimate of third party costs related
to this development program through submission of an NDA is approximately $15 million to $25
million.
In addition, in connection with the consummation of the SynthRx acquisition, we would issue
2,938,773 shares of our common stock to SynthRx’s stakeholders, 1,938,773 of which would be subject
to repurchase by us in
the event purified 188 does not achieve the First Milestone. We could issue up to an
aggregate of 13,478,050 additional shares of our common stock to SynthRx’s stakeholders if the
development of purified 188 achieves the First, Second and Third Milestones and our stockholders
approve the issuance of such milestone-related shares, as required by NYSE Amex rules. If our
stockholders do not approve the issuance of the milestone-related shares, under the terms of the
merger agreement, we would be required to pay SynthRx’s stakeholders in cash the value of the
milestone-related shares we would have otherwise issued, with all such cash payments made in
quarterly installments and, with respect to the cash value associated with the Second and Third
Milestone shares (an aggregate of 12,478,050 shares), payable based on net sales of purified 188.
We cannot determine the amount of our potential cash payments to SynthRx’s stakeholders because the
amount of such payments, if any, will depend on the 10-day volume weighted average of the closing
price of our common stock at the time a milestone is achieved and the market price of our common
stock historically has been, and likely will continue to be, highly volatile.
-60-
We continue to spend significant time and attention identifying and evaluating additional
opportunities to expand our product pipeline and may do so through one or more in-license, asset
acquisition or merger transactions. We continue to believe that, due to a challenging capital
raising environment, many drug development programs with substantial potential currently are
available at attractive valuations. If we seek to expand our product pipeline through a merger or
other business combination with one of these companies, given our recent market capitalization and
our desire to preserve our cash for development activities, such a transaction may result in our
stockholders owning less than a majority of the voting securities of the surviving entity. The
process of identifying and evaluating various opportunities may be lengthy and complex and divert
management’s attention from our current development programs, and we may not be able to acquire or
acquire rights to additional technologies, product candidates and/or products on acceptable terms,
or at all. We have limited resources to identify, evaluate and negotiate the acquisition of new
technologies, product candidates and/or products or rights thereto and to integrate them into our
current infrastructure. Supplementing our current resources to complete one or more transactions
may be costly. We anticipate that our capital requirements will increase in future periods if we
are successful in expanding our product pipeline.
We may also seek or need to raise additional capital through public or private sales of our
equity securities or debt financings. However, we may not be able to obtain additional financing
on a timely basis or on acceptable terms, if at all.
Recent Accounting Pronouncements
See Note 2, “Summary of Significant Accounting Policies — Recent Accounting Pronouncements,”
of the Notes to Consolidated Financial Statements in this report for a discussion of recent
accounting pronouncements and their effect, if any, on us.
|
|
|
| Item 7A. |
|
Quantitative and Qualitative Disclosures About Market Risk. |
Under SEC rules and regulations, as a smaller reporting company we are not required to provide
the information required by this item.
|
|
|
| Item 8. |
|
Financial Statements and Supplementary Data. |
The consolidated financial statements and supplementary financial information required by this
item are filed with this report as described under Item 15.
|
|
|
| Item 9. |
|
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure. |
None.
|
|
|
| Item 9A. |
|
Controls and Procedures. |
Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information
required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the SEC’s rules and forms,
and that such information is accumulated and communicated to our management, including our
principal executive officer and principal financial officer, as appropriate to allow timely
decisions regarding required disclosure. In designing and evaluating the disclosure controls and
procedures, management recognized that any controls and procedures, no matter how well designed and
operated, can only provide reasonable assurance of achieving the desired control objectives, and in
reaching a reasonable level of assurance, management necessarily was required to apply its judgment
in evaluating the cost-benefit relationship of possible controls and procedures.
-61-
Under the supervision and with the participation of our management, including our principal
executive officer and principal financial officer, we have evaluated the effectiveness of our
disclosure controls and procedures (as defined under Exchange Act Rule 13a-15(e)) as of December
31, 2010. Based on that evaluation, our principal executive officer and principal financial
officer have concluded that these disclosure controls and procedures were effective as of December
31, 2010.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting identified in connection
with the evaluation required by Exchange Act Rules 13a-15(d) and 15d-15(d) that occurred during the
fiscal quarter ended December 31, 2010 that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over
financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision
and with the participation of our management, including our principal executive officer and
principal financial officer, we conducted an evaluation of the effectiveness of our internal
control over financial reporting based on the framework in Internal Control — Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our
evaluation under the framework in Internal Control — Integrated Framework, our management
concluded that our internal control over financial reporting was effective as of December 31, 2010.
This annual report does not include an attestation report of our independent registered public
accounting firm regarding our internal control over financial reporting. Management’s report on
internal control over financial reporting was not subject to attestation by our independent
registered public accounting firm pursuant to the rules of the SEC because we are neither an
accelerated filer nor a larger accelerated filer.
|
|
|
| Item 9B. |
|
Other Information. |
Not applicable.
-62-
PART III
Certain information required by Part III is omitted from this report pursuant to General
Instruction G(3) of Form 10-K because we will file a definitive proxy statement (the “Proxy
Statement”) within 120 days after the end of our fiscal year pursuant to Regulation 14A for our
2011 annual meeting of stockholders, and such information included in the Proxy Statement is
incorporated herein by reference.
|
|
|
| Item 10. |
|
Directors, Executive Officers and Corporate Governance. |
Code of Ethics
We have adopted a code of ethics that applies to our principal executive officer, principal
financial officer, principal accounting officer or persons performing similar functions, as well as
all of our other officers, directors and employees. This code of ethics is a part of our code of
business conduct and ethics, and is available on our corporate website at www.adventrx.com. We
intend to disclose future amendments to, or waivers of, certain provisions of our code of ethics
that apply to our principal executive officer, principal financial officer, principal accounting
officer or persons performing similar functions on the above website within four business days
following such amendment or waiver.
The other information required by this item will be set forth in the Proxy Statement and is
incorporated into this report by reference.
|
|
|
| Item 11. |
|
Executive Compensation. |
The information required by this item will be set forth in the Proxy Statement and is
incorporated into this report by reference.
|
|
|
| Item 12. |
|
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters. |
The information required by this item will be set forth in the Proxy Statement and is
incorporated into this report by reference.
|
|
|
| Item 13. |
|
Certain Relationships and Related Transactions, and Director Independence. |
The information required by this item will be set forth in the Proxy Statement and is
incorporated into this report by reference.
|
|
|
| Item 14. |
|
Principal Accounting Fees and Services. |
The information required by this item will be set forth in the Proxy Statement and is
incorporated into this report by reference.
PART IV
|
|
|
| Item 15. |
|
Exhibits, Financial Statement Schedules. |
| (a) |
|
Documents Filed. The following documents are filed as part of this report: |
| |
(1) |
|
Financial Statements. The following report of J.H. Cohn LLP and
financial statements: |
| |
• |
|
Report of J.H. Cohn LLP, Independent Registered Public Accounting Firm |
| |
• |
|
Consolidated Balance Sheets as of December 31, 2010 and 2009 |
| |
• |
|
Consolidated Statements of Operations for the years ended December 31, 2010
and 2009 and from inception through December 31, 2010 |
-63-
| |
• |
|
Consolidated Statements of Stockholders’ Equity (Deficit) and Comprehensive
Loss from inception through December 31, 2010 |
| |
• |
|
Consolidated Statements of Cash Flows for the years ended December 31, 2010
and 2009 and from inception through December 31, 2010 |
| |
• |
|
Notes to Consolidated Financial Statements |
| |
(2) |
|
Financial Statement Schedules. See subsection (c) below. |
| |
(3) |
|
Exhibits. See subsection (b) below. |
| |
|
|
|
|
| Exhibit |
|
Description |
| |
|
|
|
|
| |
2.1 |
(1) |
|
Agreement and Plan of Merger, dated April 7, 2006, among the registrant, Speed
Acquisition, Inc., SD Pharmaceuticals, Inc. and certain individuals named
therein (including exhibits thereto) |
| |
|
|
|
|
| |
3.1 |
(2) |
|
Amended and Restated Certificate of Incorporation of the registrant |
| |
|
|
|
|
| |
3.2 |
(3) |
|
Certificate of Amendment to the Amended and Restated Certificate of
Incorporation of the registrant dated October 5, 2009 |
| |
|
|
|
|
| |
3.3 |
(4) |
|
Certificate of Amendment to the Amended and Restated Certificate of
Incorporation of the registrant, dated April 23, 2010 |
| |
|
|
|
|
| |
3.4 |
(5) |
|
Certificate of Designation of Preferences, Rights and Limitations of 0% Series A
Convertible Preferred Stock |
| |
|
|
|
|
| |
3.5 |
(6) |
|
Certificate of Designation of Preferences, Rights and Limitations of 5% Series B
Convertible Preferred Stock |
| |
|
|
|
|
| |
3.6 |
(7) |
|
Certificate of Designation of Preferences, Rights and Limitations of 5% Series C
Convertible Preferred Stock |
| |
|
|
|
|
| |
3.7 |
(8) |
|
Certificate of Designation of Preferences, Rights and Limitations of 4.25660%
Series D Convertible Preferred Stock |
| |
|
|
|
|
| |
3.8 |
(9) |
|
Certificate of Designation of Preferences, Rights and Limitations of
3.73344597664961% Series E Convertible Preferred Stock |
| |
|
|
|
|
| |
3.9 |
(10) |
|
Certificate of Designation of Preferences, Rights and Limitations of
2.19446320054018% Series F Convertible Preferred Stock |
| |
|
|
|
|
| |
3.10 |
(11) |
|
Amended and Restated Bylaws of the registrant (formerly known as Biokeys
Pharmaceuticals, Inc.) |
| |
|
|
|
|
| |
10.1 |
(12) |
|
Securities Purchase Agreement, dated July 21, 2005, among the registrant and the
Purchasers (as defined therein) |
| |
|
|
|
|
| |
10.2 |
(12) |
|
Rights Agreement, dated July 27, 2005, among the registrant, the Icahn
Purchasers and Viking (each as defined therein) |
| |
|
|
|
|
| |
10.3 |
(13) |
|
First Amendment to Rights Agreement, dated September 22, 2006, among the
registrant and the Icahn Purchasers (as defined therein) |
| |
|
|
|
|
| |
10.4 |
(14) |
|
Second Amendment to Rights Agreement, dated February 25, 2008, among the
registrant and the Icahn Purchasers (as defined therein) |
| |
|
|
|
|
| |
10.5 |
(15) |
|
Third Amendment to Rights Agreement, dated August 26, 2009, among the registrant
and Icahn Purchasers (as defined therein) |
| |
|
|
|
|
| |
10.6 |
(12) |
|
Form of $2.26 Common Stock Warrant issued on July 27, 2005 to Icahn Partners LP,
Icahn Partners Master Fund LP, High River Limited Partnership, Viking Global
Equities LP and VGE III Portfolio Ltd. |
-64-
| |
|
|
|
|
| Exhibit |
|
Description |
| |
|
|
|
|
| |
10.7 |
(12) |
|
Form of $2.26 Common Stock Warrant issued on July 27, 2005 to North Sound Legacy
Institutional Fund LLC and North Sound Legacy International Ltd. |
| |
|
|
|
|
| |
10.8 |
(5) |
|
Engagement Letter Agreement, dated June 7, 2009, by and between the registrant
and Rodman & Renshaw, LLC |
| |
|
|
|
|
| |
10.9 |
(5) |
|
Securities Purchase Agreement, date June 8, 2009, governing the issuance and
sale of the registrant’s 0% Series A Convertible Preferred Stock and 5-year
common stock purchase warrants |
| |
|
|
|
|
| |
10.10 |
(5) |
|
Form of Common Stock Purchase Warrant issued on June 12, 2009 by the registrant
to the purchasers of the registrant’s 0% Series A Convertible Preferred Stock
and to Rodman & Renshaw, LLC |
| |
|
|
|
|
| |
10.11 |
(6) |
|
Engagement Letter Agreement, dated June 26, 2009, by and between the registrant
and Rodman & Renshaw, LLC |
| |
|
|
|
|
| |
10.12 |
(6) |
|
Securities Purchase Agreement, dated June 29, 2009, governing the issuance and
sale of the registrant’s 5% Series B Convertible Preferred Stock |
| |
|
|
|
|
| |
10.13 |
(6) |
|
Form of Common Stock Purchase Warrant issued on July 6, 2009 by the registrant
to Rodman & Renshaw, LLC |
| |
|
|
|
|
| |
10.14 |
(7) |
|
Engagement Letter Agreement, dated August 4, 2009, by and between the registrant
and Rodman & Renshaw, LLC |
| |
|
|
|
|
| |
10.15 |
(7) |
|
Securities Purchase Agreement, dated August 5, 2009, governing the issuance and
sale of the registrant’s 5% Series C Convertible Preferred Stock |
| |
|
|
|
|
| |
10.16 |
(7) |
|
Form of Common Stock Purchase Warrant issued on August 10, 2009 by the
registrant to Rodman & Renshaw, LLC |
| |
|
|
|
|
| |
10.17 |
(16) |
|
Engagement Letter Agreement, dated September 24, 2009, by and between the
registrant and Rodman & Renshaw, LLC |
| |
|
|
|
|
| |
10.18 |
(8) |
|
Engagement Letter Agreement, dated September 29, 2009, by and between the
registrant and Rodman & Renshaw, LLC |
| |
|
|
|
|
| |
10.19 |
(8) |
|
Form of Securities Purchase Agreement, dated October 6, 2009, governing the
issuance and sale of the registrant’s 4.25660% Series D Convertible Preferred
Stock and 5-year common stock purchase warrants |
| |
|
|
|
|
| |
10.20 |
(8) |
|
Form of Common Stock Purchase Warrant issued on October 9, 2009 by the
registrant to the purchasers of the registrant’s 4.25660% Series D Convertible
Preferred Stock and to Rodman & Renshaw, LLC |
| |
|
|
|
|
| |
10.21 |
(9) |
|
Engagement Letter Agreement, dated January 3, 2010, by and between the
registrant and Rodman & Renshaw, LLC |
| |
|
|
|
|
| |
10.22 |
(9) |
|
Securities Purchase Agreement, dated as of January 4, 2010, governing the
issuance and sale of the registrant’s 3.73344597664961% Series E Convertible
Preferred Stock and 30-month common stock purchase warrants |
| |
|
|
|
|
| |
10.23 |
(9) |
|
Form of Common Stock Purchase Warrant issued on January 7, 2010 by the
registrant to the purchasers of the registrant’s 3.73344597664961% Series E
Convertible Preferred Stock and to Rodman & Renshaw, LLC |
| |
|
|
|
|
| |
10.24 |
(10) |
|
Engagement Letter Agreement, dated April 29, 2010, by and between the registrant
and Rodman & Renshaw, LLC |
-65-
| |
|
|
|
|
| Exhibit |
|
Description |
| |
|
|
|
|
| |
10.25 |
(10) |
|
Form of Securities Purchase Agreement, dated May 2, 2010 governing the issuance
and sale of the registrant’s 2.19446320054018% Series F Convertible Preferred
Stock and 5-year and 1-year common stock purchase warrants |
| |
|
|
|
|
| |
10.26 |
(10) |
|
Form of Series A and B Common Stock Purchase Warrants issued on May 6, 2010 by
the registrant to the purchasers of the registrant’s 2.19446320054018% Series F
Convertible Preferred Stock |
| |
|
|
|
|
| |
10.27 |
(17) |
|
Engagement Letter Agreement, dated January 5, 2011, by and between the
registrant and Rodman & Renshaw, LLC |
| |
|
|
|
|
| |
10.28 |
(17) |
|
Form of Securities Purchase Agreement, dated January 6, 2011 governing the
issuance and sale of the registrant’s common stock and 5-year and 1-year common
stock purchase warrants |
| |
|
|
|
|
| |
10.29 |
(17) |
|
Form of [Series A/B] Common Stock Purchase Warrant issued on January 11, 2011 by
the registrant to the purchasers of the registrant’s common stock and to Rodman
& Renshaw, LLC |
| |
|
|
|
|
| |
10.30 |
#(18) |
|
2005 Equity Incentive Plan |
| |
|
|
|
|
| |
10.31 |
#(19) |
|
Form of Stock Option Agreement under the 2005 Equity Incentive Plan |
| |
|
|
|
|
| |
10.32 |
#(20) |
|
Form of Stock Option Agreement under the 2005 Equity Incentive Plan (for
director option grants beginning in 2008) |
| |
|
|
|
|
| |
10.33 |
#(21) |
|
Form of Stock Option Agreement under the 2005 Equity Incentive Plan (for option
grants to employees approved in March 2008) |
| |
|
|
|
|
| |
10.34 |
#(2) |
|
Form of Restricted Share Award Agreement under the 2005 Equity Incentive Plan |
| |
|
|
|
|
| |
10.35 |
#(22) |
|
2008 Omnibus Incentive Plan |
| |
|
|
|
|
| |
10.36 |
#(23) |
|
Form of Notice of Grant of Restricted Stock Units under the 2008 Omnibus
Incentive Plan (for grants to employees in January 2009) |
| |
|
|
|
|
| |
10.37 |
#(23) |
|
Form of Restricted Stock Units Agreement under the 2008 Omnibus Incentive Plan |
| |
|
|
|
|
| |
10.38 |
#(24) |
|
Form of Non-Statutory Stock Option Grant Agreement (for directors) under the
2008 Omnibus Incentive Plan |
| |
|
|
|
|
| |
10.39 |
#(24) |
|
Form of Non-Statutory/Incentive Stock Option Grant Agreement (for
consultants/employees) under the 2008 Omnibus Incentive Plan |
| |
|
|
|
|
| |
10.40 |
#(25) |
|
Form of Incentive Stock Option Grant Agreement under the 2008 Omnibus Incentive
Plan (for grant to Brian M. Culley in July 2009) |
| |
|
|
|
|
| |
10.41 |
#(25) |
|
Form of Incentive Stock Option Grant Agreement under the 2008 Omnibus Incentive
Plan (for grant to Patrick L. Keran in July 2009) |
| |
|
|
|
|
| |
10.42 |
#(26) |
|
Form of letter, dated January 20, 2010, modifying options granted to Brian M.
Culley and Patrick L. Keran in July 2009 |
| |
|
|
|
|
| |
10.43 |
#(26) |
|
Form of Incentive Stock Option Grant Agreement under the 2008 Omnibus Incentive
Plan (for grant to Brian M. Culley in January 2010) |
| |
|
|
|
|
| |
10.44 |
#(26) |
|
Form of Incentive Stock Option Grant Agreement under the 2008 Omnibus Incentive
Plan (for grant to Patrick L. Keran in January 2010) |
| |
|
|
|
|
| |
10.45 |
(20) |
|
License Agreement, dated December 10, 2005, among SD Pharmaceuticals, Latitude
Pharmaceuticals and Andrew Chen, including a certain letter, dated November 20,
2007, clarifying the scope of rights thereunder |
| |
|
|
|
|
| |
10.46 |
† (27) |
|
License Agreement, dated March 25, 2009, among the registrant, SD
Pharmaceuticals, Inc. and Shin Poong Pharmaceutical Co., Ltd. |
| |
|
|
|
|
| |
10.47 |
(28) |
|
Standard Multi-Tenant Office Lease — Gross, dated June 3, 2004, between the
registrant and George V. Casey & Ellen M. Casey, Trustees of the Casey Family
Trust dated June 22, 1998 |
-66-
| |
|
|
|
|
| Exhibit |
|
Description |
| |
|
|
|
|
| |
10.48 |
(2) |
|
First Amendment to the Standard Multi-Tenant Office Lease — Gross, dated June
3, 2004 between the registrant and George V. & Ellen M. Casey, Trustees of the
Casey Family Trust dated June 22, 1998 |
| |
|
|
|
|
| |
10.49 |
(29) |
|
Second Amendment to Standard Mutli-Tenant Office Lease — Gross, dated July 22,
2009, by and among Westcore Mesa View, LLC, DD Mesa View LLC and the registrant |
| |
|
|
|
|
| |
10.50 |
(30) |
|
Third Amendment to Standard Multi-Tenant Office Lease — Gross, dated December
10, 2009, by and among Westcore Mesa View, LLC, DD Mesa View, LLC and the
registrant |
| |
|
|
|
|
| |
10.51 |
(31) |
|
Fourth Amendment to Standard Multi-Tenant Office Lease — Gross, dated February
4, 2010, by and among Westcore Mesa View, LLC, DD Mesa View, LLC and the
registrant |
| |
|
|
|
|
| |
10.52 |
#(32) |
|
Offer letter, dated November 15, 2004, to Brian M. Culley |
| |
|
|
|
|
| |
10.53 |
#(23) |
|
Retention and Incentive Agreement, dated January 28, 2009 between the registrant
and Brian M. Culley |
| |
|
|
|
|
| |
10.54 |
#(27) |
|
Retention and Incentive Agreement, dated January 28, 2009, between the
registrant and Patrick L. Keran |
| |
|
|
|
|
| |
10.55 |
#(31) |
|
Consulting Agreement, effective as of July 15, 2009, and Amendment to Consulting
Agreement, effective as of December 31, 2009, between the registrant and Michele
L. Yelmene |
| |
|
|
|
|
| |
10.56 |
#(25) |
|
2009 Mid-Year Incentive Plan for Brian M. Culley and Patrick L. Keran |
| |
|
|
|
|
| |
10.57 |
#(25) |
|
Retention and Severance Plan (as of July 21, 2009) for Brian M. Culley and
Patrick L. Keran |
| |
|
|
|
|
| |
10.58 |
#(26) |
|
2010 Incentive Plan for Brian M. Culley and Patrick L. Keran |
| |
|
|
|
|
| |
10.59 |
#(31) |
|
Consulting Agreement, effective as of November 23, 2009, between the registrant
and Eric K. Rowinsky |
| |
|
|
|
|
| |
10.60 |
#(33) |
|
Director Compensation Policy, adopted June 21, 2006 |
| |
|
|
|
|
| |
10.61 |
#(31) |
|
Director Compensation Policy, adopted January 25, 2010 |
| |
|
|
|
|
| |
10.62 |
(34) |
|
Form of Director and Officer Indemnification Agreement |
| |
|
|
|
|
| |
21.1 |
|
|
List of Subsidiaries |
| |
|
|
|
|
| |
23.1 |
|
|
Consent of J.H. Cohn LLP, Independent Registered Public Accounting Firm |
| |
|
|
|
|
| |
31.1 |
|
|
Certification of principal executive officer pursuant to Rule 13a-14(a)/15d-14(a) |
| |
|
|
|
|
| |
31.2 |
|
|
Certification of principal financial officer pursuant to Rule 13a-14(a)/15d-14(a) |
| |
|
|
|
|
| |
32.1 |
± |
|
Certification of principal executive officer and principal financial officer
pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 |
| |
|
|
| † |
|
Indicates that confidential treatment has been requested or granted to
certain portions, which portions have been omitted and filed
separately with the SEC |
| |
| # |
|
Indicates management contract or compensatory plan |
| |
| ± |
|
These certifications are being furnished solely to accompany this
report pursuant to 18 U.S.C. 1350, and are not being filed for
purposes of Section 18 of the Securities Exchange Act of 1934 and are
not to be incorporated by reference into any filing of the registrant,
whether made before or after the date hereof, regardless of any
general incorporation by reference language in such filing. |
| |
| (1) |
|
Filed with the registrant’s Amendment No. 1 to Current Report on Form 8-K/A on May 1, 2006
(SEC file number 001-32157-06796248) |
-67-
| |
|
|
| (2) |
|
Filed with the registrant’s Annual Report on Form 10-K on March 16, 2006 (SEC file number
001-32157-06693266) |
| |
| (3) |
|
Filed with the registrant’s Current Report on Form 8-K on October 13, 2009 (SEC file number
001-32157-091115090) |
| |
| (4) |
|
Filed with the registrant’s Current Report on Form 8-K on April 26, 2010 (SEC file number
001-32157-10769058) |
| |
| (5) |
|
Filed with the registrant’s Current Report on Form 8-K on June 8, 2009 (SEC file number
001-32157-09878961) |
| |
| (6) |
|
Filed with the registrant’s Current Report on Form 8-K on June 30, 2009 (SEC file number
001-32157-09917820) |
| |
| (7) |
|
Filed with the registrant’s Current Report on Form 8-K on August 5, 2009 (SEC file number
001-32157-09989205) |
| |
| (8) |
|
Filed with the registrant’s Amendment No. 3 to the Registration Statement on Form S-1 on
October 5, 2009 (SEC file number 333-160778-091107945) |
| |
| (9) |
|
Filed with the registrant’s Current Report on Form 8-K on January 4, 2010 (SEC file number
001-32157- 10500379) |
| |
| (10) |
|
Filed with the registrant’s Current Report on Form 8-K on May 3, 2010 (SEC file number
001-32157-10790486) |
| |
| (11) |
|
Filed with the registrant’s Current Report on Form 8-K on December 15, 2008 (SEC file number
001-32157-081249921) |
| |
| (12) |
|
Filed with the registrant’s Quarterly Report on Form 10-Q on August 12, 2005 (SEC file number
001-32157-051022046) |
| |
| (13) |
|
Filed with the registrant’s Current Report on Form 8-K on September 22, 2006 (SEC file number
001-32157-061103268) |
| |
| (14) |
|
Filed with the registrant’s Current Report on Form 8-K on February 25, 2008 (SEC file number
001-32157 08638638) |
| |
| (15) |
|
Filed with the registrant’s Current Report on Form 8-K on September 1, 2009 (SEC file number
001-32157-091049161) |
| |
| (16) |
|
Filed with the registrant’s Amendment No. 2 to the Registration Statement on Form S-1 on
September 25, 2009 (SEC file number 333-160778-091087750) |
| |
| (17) |
|
Filed with the registrant’s Current Report on Form 8-K on January 7, 2011 (SEC file number
001-32157-11515655) |
| |
| (18) |
|
Filed with the registrant’s Annual Report on Form 10-K on March 15, 2007 (SEC file number
001-32157-07697283) |
| |
| (19) |
|
Filed with the registrant’s Registration Statement on Form S-8 on July 13, 2005 (SEC file
number 333-126551-05951362) |
| |
| (20) |
|
Filed with registrant’s Annual Report on Form 10-K on March 17, 2008 (SEC file number
001-32157-08690952) |
| |
| (21) |
|
Filed with the registrant’s Quarterly Report on Form 10-Q on May 12, 2008 (SEC file number
001-32157-08820541) |
| |
| (22) |
|
Filed with the registrant’s Current Report on Form 8-K on June 2, 2008 (SEC file number
001-32157-08874724) |
| |
| (23) |
|
Filed with the registrant’s Current Report on Form 8-K on February 2, 2009 (SEC file number
001-32157- 09561715) |
| |
| (24) |
|
Filed with the registrant’s Quarterly Report on Form 10-Q on August 11, 2008 (SEC file number
001-32157-081005744) |
-68-
| |
|
|
| (25) |
|
Filed with the registrant’s Current Report on Form 8-K on July 22, 2009 (SEC file number
001-32157-09957353) |
| |
| (26) |
|
Filed with the registrant’s Current Report on Form 8-K on January 26, 2010 (SEC file number
001-32157- 10547818) |
| |
| (27) |
|
Filed with the registrant’s Quarterly Report on Form 10-Q on May 15, 2009 (SEC file number
001-32157-09878961) |
| |
| (28) |
|
Filed with the registrant’s Quarterly Report on Form 10-QSB on August 10, 2004 (SEC file
number 001-32157-04963741) |
| |
| (29) |
|
Filed with the registrant’s Current Report on Form 8-K on August 20, 2009 (SEC file number
001-32157-091025631) |
| |
| (30) |
|
Filed with the registrant’s Current Report on Form 8-K on December 24, 2009 (SEC file number
001-32157-091260100) |
| |
| (31) |
|
Filed with the registrant’s Annual Report on Form 10-K on March 18, 2010 (SEC file number
001-32157-10692317) |
| |
| (32) |
|
Filed with the registrant’s Annual Report on Form 10-KSB on March 31, 2005 (SEC file number
001-32157-05719975) |
| |
| (33) |
|
Filed with the registrant’s Current Report on Form 8-K on June 23, 2006 (SEC file number
001-32157-06922676) |
| |
| (34) |
|
Filed with the registrant’s Current Report on Form 8-K on October 23, 2006 (SEC file number
001-32157-061156993) |
| |
| (c) |
|
Financial Statement Schedules. All schedules are omitted because they are not
applicable, the amounts involved are not significant or the required information is shown in
the financial statements or notes thereto. |
-69-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
| |
|
|
|
|
| Date: March 10, 2011 |
ADVENTRX Pharmaceuticals, Inc.
|
|
| |
By: |
/s/ Brian M. Culley
|
|
| |
|
Brian M. Culley |
|
| |
|
Chief Executive Officer |
|
| |
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes
and appoints Brian M. Culley and Patrick L. Keran, and each of them acting individually, as his
true and lawful attorneys-in-fact and agents, each with full power to act alone, with full powers
of substitution and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments to this annual report on Form 10-K, and to file the
same, with all exhibits thereto and other documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority
to do and perform each and every act and thing requisite and necessary to be done in connection
therewith, as fully for all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of them or their
substitute or resubstitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed by the following persons on behalf of the registrant and in the capacities and on the dates
indicated.
| |
|
|
|
|
| Signature |
|
Title |
|
Date |
|
|
|
|
|
/s/ Brian M. Culley
Brian M. Culley
|
|
Chief Executive Officer
(Principal Executive Officer)
|
|
March 10, 2011 |
|
|
|
|
|
/s/ Patrick L. Keran
Patrick L. Keran
|
|
President and Chief Operating Officer
(Principal Financial and Accounting Officer)
|
|
March 10, 2011 |
|
|
|
|
|
|
|
Chair of the Board
|
|
March 10, 2011 |
|
|
|
|
|
/s/ Michael M. Goldberg
Michael M. Goldberg
|
|
Director
|
|
March 10, 2011 |
|
|
|
|
|
/s/ Odysseas D. Kostas
Odysseas D. Kostas
|
|
Director
|
|
March 10, 2011 |
|
|
|
|
|
/s/ Mark J. Pykett
Mark J. Pykett
|
|
Director
|
|
March 10, 2011 |
|
|
|
|
|
/s/ Eric K. Rowinsky
Eric K. Rowinsky
|
|
Director
|
|
March 10, 2011 |
-70-
Index to Consolidated Financial Statements
| |
|
|
|
|
| |
|
Page |
|
|
|
|
|
|
|
|
|
F-2 |
|
|
|
|
|
|
Financial Statements: |
|
|
|
|
|
|
|
|
|
|
|
|
F-3 |
|
|
|
|
|
|
|
|
|
F-4 |
|
|
|
|
|
|
|
|
|
F-5 - F-8 |
|
|
|
|
|
|
|
|
|
F-9 - F-10 |
|
|
|
|
|
|
|
|
|
F-11 - F-31 |
|
|
|
|
|
|
Financial Statement Schedules: |
|
|
|
|
|
|
|
|
|
Financial statement schedules have been omitted for the reason that the
required information is presented in financial statements or notes thereto, the
amounts involved are not significant or the schedules are not applicable. |
|
|
|
|
F-1
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders
ADVENTRX Pharmaceuticals, Inc.
We have audited the accompanying consolidated balance sheets of ADVENTRX Pharmaceuticals, Inc. and
Subsidiaries (a development stage enterprise) as of December 31, 2010 and 2009, and the related
consolidated statements of operations, stockholders’ equity (deficit) and comprehensive loss and
cash flows for the years then ended and for the period from January 1, 2002 through December 31,
2010. These consolidated financial statements are the responsibility of the Company’s management.
Our responsibility is to express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects,
the financial position of ADVENTRX Pharmaceuticals, Inc. and Subsidiaries (a development stage
enterprise) as of December 31, 2010 and 2009, and their results of operations and cash flows for
years then ended and for the period from January 1, 2002 through December 31, 2010, in conformity
with accounting principles generally accepted in the United States of America.
/s/ J. H. COHN LLP
San Diego, California
March 10, 2011
F-2
ADVENTRX Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Consolidated Balance Sheets
| |
|
|
|
|
|
|
|
|
| |
|
December 31, |
|
| |
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash |
|
$ |
27,978,823 |
|
|
$ |
8,667,404 |
|
Interest and other receivables |
|
|
1,980 |
|
|
|
14,841 |
|
Prepaid expenses |
|
|
428,276 |
|
|
|
290,249 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
28,409,079 |
|
|
|
8,972,494 |
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
|
44,254 |
|
|
|
44,210 |
|
Other assets |
|
|
33,484 |
|
|
|
10,513 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
28,486,817 |
|
|
$ |
9,027,217 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
479,780 |
|
|
$ |
385,358 |
|
Accrued liabilities |
|
|
864,857 |
|
|
|
1,379,010 |
|
Accrued compensation and payroll taxes |
|
|
456,839 |
|
|
|
589,319 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
1,801,476 |
|
|
|
2,353,687 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity: |
|
|
|
|
|
|
|
|
Convertible Preferred Stock, Series A through F, $0.001 par
value; 53,776.13 and 15,559 shares authorized as of December 31,
2010 and 2009, respectively; 0 shares issued and outstanding at
December 31, 2010 and 2009 |
|
|
— |
|
|
|
— |
|
Common stock, $0.001 par value; 500,000,000
shares authorized; 15,480,302 and 8,211,410
shares issued and outstanding at December 31,
2010 and 2009, respectively |
|
|
15,480 |
|
|
|
8,211 |
|
Additional paid-in capital |
|
|
182,798,982 |
|
|
|
148,703,722 |
|
Deficit accumulated during the development stage |
|
|
(156,129,121 |
) |
|
|
(142,038,403 |
) |
|
|
|
|
|
|
|
Total stockholders’ equity |
|
|
26,685,341 |
|
|
|
6,673,530 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ equity |
|
$ |
28,486,817 |
|
|
$ |
9,027,217 |
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
F-3
ADVENTRX Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Consolidated Statements of Operations
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Inception |
|
| |
|
|
|
|
|
|
|
|
|
(June 12, 1996) |
|
| |
|
|
|
|
|
|
|
|
|
Through |
|
| |
|
Years Ended December 31, |
|
|
December 31, |
|
| |
|
2010 |
|
|
2009 |
|
|
2010 |
|
| |
Licensing revenue |
|
$ |
— |
|
|
$ |
300,000 |
|
|
$ |
1,300,000 |
|
Net sales |
|
|
— |
|
|
|
— |
|
|
|
174,830 |
|
Grant revenue |
|
|
488,959 |
|
|
|
— |
|
|
|
618,692 |
|
|
|
|
|
|
|
|
|
|
|
Total net revenue |
|
|
488,959 |
|
|
|
300,000 |
|
|
|
2,093,522 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
— |
|
|
|
— |
|
|
|
51,094 |
|
|
|
|
|
|
|
|
|
|
|
Gross margin |
|
|
488,959 |
|
|
|
300,000 |
|
|
|
2,042,428 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
3,688,762 |
|
|
|
6,507,650 |
|
|
|
72,210,967 |
|
Selling, general and administrative |
|
|
5,320,073 |
|
|
|
4,998,307 |
|
|
|
53,287,583 |
|
Depreciation and amortization |
|
|
19,821 |
|
|
|
79,728 |
|
|
|
10,897,618 |
|
In-process research and development |
|
|
— |
|
|
|
— |
|
|
|
10,422,130 |
|
Impairment loss — write-off of goodwill |
|
|
— |
|
|
|
— |
|
|
|
5,702,130 |
|
Equity in loss of investee |
|
|
— |
|
|
|
— |
|
|
|
178,936 |
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
9,028,656 |
|
|
|
11,585,685 |
|
|
|
152,699,364 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations |
|
|
(8,539,697 |
) |
|
|
(11,285,685 |
) |
|
|
(150,656,936 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on fair value of warrants |
|
|
— |
|
|
|
— |
|
|
|
(12,239,688 |
) |
Interest income |
|
|
92,873 |
|
|
|
7,162 |
|
|
|
4,682,061 |
|
Interest expense |
|
|
(1,629 |
) |
|
|
— |
|
|
|
(180,719 |
) |
Other income (expense) |
|
|
(2,469 |
) |
|
|
(46,535 |
) |
|
|
63,375 |
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes |
|
|
(8,450,922 |
) |
|
|
(11,325,058 |
) |
|
|
(158,331,907 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
Loss before cumulative effect of change in
accounting principle |
|
|
(8,450,922 |
) |
|
|
(11,325,058 |
) |
|
|
(158,331,907 |
) |
Cumulative effect of change in accounting
principle |
|
|
— |
|
|
|
— |
|
|
|
(25,821 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
(8,450,922 |
) |
|
|
(11,325,058 |
) |
|
|
(158,357,728 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock dividends |
|
|
— |
|
|
|
— |
|
|
|
(621,240 |
) |
Deemed dividends on preferred stock |
|
|
(5,639,796 |
) |
|
|
(4,866,887 |
) |
|
|
(10,506,683 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss applicable to common stock |
|
$ |
(14,090,718 |
) |
|
$ |
(16,191,945 |
) |
|
$ |
(169,485,651 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per common share — basic and diluted |
|
$ |
(1.07 |
) |
|
$ |
(3.47 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding —
basic and diluted |
|
|
13,180,583 |
|
|
|
4,667,160 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
F-4
ADVENTRX Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Consolidated Statements of Stockholders’ Equity (Deficit) and Comprehensive Loss
Inception (June 12, 1996) Through December 31, 2010
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Cumulative convertible |
|
|
Convertible |
|
|
Cumulative convertible |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
accumulated |
|
|
|
|
|
|
Total |
|
|
|
|
| |
|
preferred stock, |
|
|
preferred stock, |
|
|
preferred stock, |
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
other |
|
|
during the |
|
|
Treasury |
|
|
stockholders’ |
|
|
|
|
| |
|
series A through C |
|
|
series A (2009) |
|
|
series B through F (2009 - 2010) |
|
|
Common stock |
|
|
paid-in |
|
|
comprehensive |
|
|
development |
|
|
stock, |
|
|
equity |
|
|
Comprehensive |
|
| |
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
capital |
|
|
income (loss) |
|
|
stage |
|
|
at cost |
|
|
(deficit) |
|
|
loss |
|
| |
Balances at June 12, 1996 (date of incorporation) |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
Sale of common stock without par value |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
20 |
|
|
|
— |
|
|
|
10 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
10 |
|
|
|
|
|
Issuance of common stock and net liabilities assumed in acquisition |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
68,645 |
|
|
|
69 |
|
|
|
4,871 |
|
|
|
— |
|
|
|
(18,094 |
) |
|
|
— |
|
|
|
(13,154 |
) |
|
|
|
|
Issuance of common stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
80,405 |
|
|
|
80 |
|
|
|
2,386 |
|
|
|
— |
|
|
|
(2,466 |
) |
|
|
— |
|
|
|
— |
|
|
|
|
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(259,476 |
) |
|
|
— |
|
|
|
(259,476 |
) |
|
$ |
(259,476 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 1996 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
149,070 |
|
|
|
149 |
|
|
|
7,267 |
|
|
|
— |
|
|
|
(280,036 |
) |
|
|
— |
|
|
|
(272,620 |
) |
|
$ |
(259,476 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of common stock, net of offering costs of $9,976 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
40,182 |
|
|
|
40 |
|
|
|
1,790,939 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,790,979 |
|
|
|
|
|
Issuance of common stock in acquisition |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
15,036 |
|
|
|
15 |
|
|
|
888,235 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
888,250 |
|
|
|
|
|
Minority interest deficiency at acquisition charged to the Company |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(45,003 |
) |
|
|
— |
|
|
|
(45,003 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,979,400 |
) |
|
|
— |
|
|
|
(1,979,400 |
) |
|
$ |
(1,979,400 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 1997 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
204,288 |
|
|
|
204 |
|
|
|
2,686,441 |
|
|
|
— |
|
|
|
(2,304,439 |
) |
|
|
— |
|
|
|
382,206 |
|
|
$ |
(1,979,400 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rescission of acquisition |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(15,036 |
) |
|
|
(15 |
) |
|
|
(888,235 |
) |
|
|
— |
|
|
|
561,166 |
|
|
|
— |
|
|
|
(327,084 |
) |
|
|
|
|
Issuance of common stock at conversion of notes payable |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
18,011 |
|
|
|
18 |
|
|
|
363,982 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
364,000 |
|
|
|
|
|
Expense related to stock warrants issued |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
260,000 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
260,000 |
|
|
|
|
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,204,380 |
) |
|
|
— |
|
|
|
(1,204,380 |
) |
|
$ |
(1,204,380 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 1998 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
207,263 |
|
|
|
207 |
|
|
|
2,422,188 |
|
|
|
— |
|
|
|
(2,947,653 |
) |
|
|
— |
|
|
|
(525,258 |
) |
|
$ |
(1,204,380 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of common stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
27,136 |
|
|
|
27 |
|
|
|
134,973 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
135,000 |
|
|
|
|
|
Expense related to stock warrants issued |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
212,000 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
212,000 |
|
|
|
|
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,055,485 |
) |
|
|
— |
|
|
|
(1,055,485 |
) |
|
$ |
(1,055,485 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 1999 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
234,399 |
|
|
|
234 |
|
|
|
2,769,161 |
|
|
|
— |
|
|
|
(4,003,138 |
) |
|
|
— |
|
|
|
(1,233,743 |
) |
|
$ |
(1,055,485 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of preferred stock, net of offering costs of $76,500 |
|
|
3,200 |
|
|
|
32 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,123,468 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,123,500 |
|
|
|
|
|
Issuance of common stock at conversion of notes and interest payable |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
16,499 |
|
|
|
16 |
|
|
|
492,481 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
492,497 |
|
|
|
|
|
Issuance of common stock at conversion of notes payable |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,814 |
|
|
|
3 |
|
|
|
83,997 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
84,000 |
|
|
|
|
|
Issuance of common stock to settle obligations |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
19,804 |
|
|
|
20 |
|
|
|
1,202,140 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,202,160 |
|
|
|
|
|
Issuance of common stock for
acquisition |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
280,000 |
|
|
|
280 |
|
|
|
9,332,489 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
9,332,769 |
|
|
|
|
|
Issuance of warrants for acquisition |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
4,767,664 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
4,767,664 |
|
|
|
|
|
Stock issued for acquisition costs |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
6,000 |
|
|
|
6 |
|
|
|
487,494 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
487,500 |
|
|
|
|
|
Expense related to stock warrants
issued |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
140,000 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
140,000 |
|
|
|
|
|
Dividends payable on preferred stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(85,000 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(85,000 |
) |
|
|
|
|
Cashless exercise of warrants |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
23,963 |
|
|
|
24 |
|
|
|
(24 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(3,701,084 |
) |
|
|
— |
|
|
|
(3,701,084 |
) |
|
$ |
(3,701,084 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 2000 |
|
|
3,200 |
|
|
|
32 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
583,479 |
|
|
|
583 |
|
|
|
22,313,870 |
|
|
|
— |
|
|
|
(7,704,222 |
) |
|
|
— |
|
|
|
14,610,263 |
|
|
$ |
(3,701,084 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
F-5
ADVENTRX Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Consolidated Statements of Stockholders’ Equity (Deficit) and Comprehensive Loss
Inception (June 12, 1996) Through December 31, 2010
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Cumulative convertible |
|
|
Convertible |
|
|
Cumulative convertible |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
accumulated |
|
|
|
|
|
|
Total |
|
|
|
|
| |
|
preferred stock, |
|
|
preferred stock, |
|
|
preferred stock, |
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
other |
|
|
during the |
|
|
Treasury |
|
|
stockholders’ |
|
|
|
|
| |
|
series A through C |
|
|
series A (2009) |
|
|
series B through F (2009 - 2010) |
|
|
Common stock |
|
|
paid-in |
|
|
comprehensive |
|
|
development |
|
|
stock, |
|
|
equity |
|
|
Comprehensive |
|
| |
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
capital |
|
|
income (loss) |
|
|
stage |
|
|
at cost |
|
|
(deficit) |
|
|
loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends payable on preferred stock |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
(256,000 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(256,000 |
) |
|
|
|
|
Repurchase of warrants |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(55,279 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(55,279 |
) |
|
|
|
|
Sale of warrants |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
47,741 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
47,741 |
|
|
|
|
|
Cashless exercise of warrants |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
8,740 |
|
|
|
9 |
|
|
|
(9 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
Issuance of common stock to pay preferred
dividends |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,737 |
|
|
|
4 |
|
|
|
212,996 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
213,000 |
|
|
|
|
|
Detachable warrants issued with notes payable |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
450,000 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
450,000 |
|
|
|
|
|
Issuance of warrants to pay operating expenses |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
167,138 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
167,138 |
|
|
|
|
|
Issuance of common stock to pay operating
expenses |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
4,252 |
|
|
|
4 |
|
|
|
387,267 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
387,271 |
|
|
|
|
|
Issuance of preferred stock to pay operating
expenses |
|
|
137 |
|
|
|
1 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
136,499 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
136,500 |
|
|
|
|
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(16,339,120 |
) |
|
|
— |
|
|
|
(16,339,120 |
) |
|
$ |
(16,339,120 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 2001 |
|
|
3,337 |
|
|
|
33 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
600,208 |
|
|
|
600 |
|
|
|
23,404,223 |
|
|
|
— |
|
|
|
(24,043,342 |
) |
|
|
— |
|
|
|
(638,486 |
) |
|
$ |
(16,339,120 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends payable on preferred stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(242,400 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(242,400 |
) |
|
|
|
|
Repurchase of warrants |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
Sale of warrants |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
9,600 |
|
|
|
10 |
|
|
|
117,843 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
117,853 |
|
|
|
|
|
Cashless exercise of warrants |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
4,008 |
|
|
|
4 |
|
|
|
(4 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
Exercise of warrants |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
13,783 |
|
|
|
14 |
|
|
|
168,808 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
168,822 |
|
|
|
|
|
Sale of preferred stock at $1.50 per share |
|
|
200,000 |
|
|
|
2,000 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
298,000 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
300,000 |
|
|
|
|
|
Sale of preferred stock at $10.00 per share |
|
|
70,109 |
|
|
|
701 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
700,392 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
701,093 |
|
|
|
|
|
Conversion of preferred stock into common stock |
|
|
(3,000 |
) |
|
|
(30 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
72,000 |
|
|
|
72 |
|
|
|
(42 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
Preferred stock dividends forgiven |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
335,440 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
335,440 |
|
|
|
|
|
Issuance of warrants to pay operating expenses |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
163,109 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
163,109 |
|
|
|
|
|
Issuance of common stock to pay operating
expenses |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
251 |
|
|
|
— |
|
|
|
12,269 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
12,269 |
|
|
|
|
|
Issuance of preferred stock to pay operating
expenses |
|
|
136 |
|
|
|
1 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
6,000 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
6,001 |
|
|
|
|
|
Issuance of stock options to employees |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
329,296 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
329,296 |
|
|
|
|
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(2,105,727 |
) |
|
|
— |
|
|
|
(2,105,727 |
) |
|
$ |
(2,105,727 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 2002 |
|
|
270,582 |
|
|
|
2,705 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
699,850 |
|
|
|
700 |
|
|
|
25,292,934 |
|
|
|
— |
|
|
|
(26,149,069 |
) |
|
|
— |
|
|
|
(852,730 |
) |
|
$ |
(2,105,727 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends payable on preferred stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(37,840 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(37,840 |
) |
|
|
|
|
Conversion of Series C preferred stock into common stock |
|
|
(70,109 |
) |
|
|
(701 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
560,874 |
|
|
|
561 |
|
|
|
140 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
Issuance of common stock to pay interest on Bridge Notes |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
6,633 |
|
|
|
7 |
|
|
|
53,484 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
53,491 |
|
|
|
|
|
Sale of common stock at $0.40 per share, net of issuance costs |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
265,630 |
|
|
|
266 |
|
|
|
2,597,066 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,597,332 |
|
|
|
|
|
Sale of common stock at $1.00 per share, net of issuance costs |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
148,069 |
|
|
|
148 |
|
|
|
3,992,701 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,992,849 |
|
|
|
|
|
Exchange of warrants |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
9,412 |
|
|
|
9 |
|
|
|
49,712 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
49,721 |
|
|
|
|
|
Issuance of common stock to pay operating
expenses |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
9,200 |
|
|
|
9 |
|
|
|
206,790 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
206,799 |
|
|
|
|
|
Issuance of warrants to pay operating expenses |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
156,735 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
156,735 |
|
|
|
|
|
Issuance of stock options to employees |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
286,033 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
286,033 |
|
|
|
|
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(2,332,077 |
) |
|
|
— |
|
|
|
(2,332,077 |
) |
|
$ |
(2,332,077 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 2003 |
|
|
200,473 |
|
|
|
2,004 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,699,668 |
|
|
|
1,700 |
|
|
|
32,597,755 |
|
|
|
— |
|
|
|
(28,481,146 |
) |
|
|
— |
|
|
|
4,120,313 |
|
|
$ |
(2,332,077 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
F-6
ADVENTRX Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Consolidated Statements of Stockholders’ Equity (Deficit) and Comprehensive Loss
Inception (June 12, 1996) Through December 31, 2010
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Cumulative convertible |
|
|
Convertible |
|
|
Cumulative convertible |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
accumulated |
|
|
|
|
|
|
Total |
|
|
|
|
| |
|
preferred stock, |
|
|
preferred stock, |
|
|
preferred stock, |
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
other |
|
|
during the |
|
|
Treasury |
|
|
stockholders’ |
|
|
|
|
| |
|
series A through C |
|
|
series A (2009) |
|
|
series B through F (2009 - 2010) |
|
|
Common stock |
|
|
paid-in |
|
|
comprehensive |
|
|
development |
|
|
stock, |
|
|
equity |
|
|
Comprehensive |
|
| |
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
capital |
|
|
income (loss) |
|
|
stage |
|
|
at cost |
|
|
(deficit) |
|
|
loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Extinguishment of dividends payable on preferred stock |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
72,800 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
72,800 |
|
|
|
|
|
Conversion of Series A cumulative preferred
stock |
|
|
(473 |
) |
|
|
(4 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
9,460 |
|
|
|
9 |
|
|
|
(5 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
Conversion of Series B preferred stock |
|
|
(200,000 |
) |
|
|
(2,000 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
8,000 |
|
|
|
8 |
|
|
|
1,992 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
Cashless exercise of warrants |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
18,583 |
|
|
|
18 |
|
|
|
(18 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
Exercise of warrants |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
953 |
|
|
|
1 |
|
|
|
27,352 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
27,353 |
|
|
|
|
|
Issuance of warrants in settlement of a claim |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
86,375 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
86,375 |
|
|
|
|
|
Sale of common stock at $1.50 per share |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
416,705 |
|
|
|
417 |
|
|
|
15,626,033 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
15,626,450 |
|
|
|
|
|
Payment of financing and offering costs |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,366,774 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,366,774 |
) |
|
|
|
|
Issuance of stock options to employees |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
524,922 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
524,922 |
|
|
|
|
|
Acquisition of treasury stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
34,747 |
|
|
|
— |
|
|
|
— |
|
|
|
(34,747 |
) |
|
|
— |
|
|
|
|
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(6,701,048 |
) |
|
|
— |
|
|
|
(6,701,048 |
) |
|
$ |
(6,701,048 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 2004 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,153,369 |
|
|
|
2,153 |
|
|
|
47,605,179 |
|
|
|
— |
|
|
|
(35,182,194 |
) |
|
|
(34,747 |
) |
|
|
12,390,391 |
|
|
$ |
(6,701,048 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(24,782,646 |
) |
|
|
— |
|
|
|
(24,782,646 |
) |
|
$ |
(24,782,646 |
) |
Effect of change in fair value of available-for-sale securities |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,722 |
) |
|
|
— |
|
|
|
— |
|
|
|
(1,722 |
) |
|
|
(1,722 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Par value of shares issued in conjunction with mezzanine financing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
432,432 |
|
|
|
433 |
|
|
|
(433 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
Cashless exercise of warrants |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
5,985 |
|
|
|
6 |
|
|
|
(6 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
Exercise of warrants |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
90,348 |
|
|
|
90 |
|
|
|
3,073,348 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,073,438 |
|
|
|
|
|
Exercise of stock options |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
7,400 |
|
|
|
7 |
|
|
|
144,993 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
145,000 |
|
|
|
|
|
Issuance of stock options to employees |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
994,874 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
994,874 |
|
|
|
|
|
Issuance of stock options to non-employee |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
93,549 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
93,549 |
|
|
|
|
|
Issuance of common stock to vendor |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
5,000 |
|
|
|
5 |
|
|
|
258,495 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
258,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 2005, as restated |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,694,534 |
|
|
|
2,694 |
|
|
|
52,169,999 |
|
|
|
(1,722 |
) |
|
|
(59,964,840 |
) |
|
|
(34,747 |
) |
|
|
(7,828,616 |
) |
|
$ |
(24,784,368 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(29,331,773 |
) |
|
|
— |
|
|
|
(29,331,773 |
) |
|
$ |
(29,331,773 |
) |
Effect of change in fair value of available-for-sale securities |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(368 |
) |
|
|
— |
|
|
|
— |
|
|
|
(368 |
) |
|
|
(368 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cashless exercise of warrants |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
16,807 |
|
|
|
17 |
|
|
|
(17 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
Exercise of warrants, net of financing costs |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
204,150 |
|
|
|
204 |
|
|
|
7,691,386 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
7,691,590 |
|
|
|
|
|
Acquisition of SD Pharmaceuticals. Inc. |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
84,000 |
|
|
|
84 |
|
|
|
10,163,868 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
10,163,952 |
|
|
|
|
|
Sale of common stock at $2.75 per share, net of offering costs |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
581,800 |
|
|
|
582 |
|
|
|
37,069,629 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
37,070,211 |
|
|
|
|
|
Issuance of stock for severance agreement |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,406 |
|
|
|
2 |
|
|
|
196,672 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
196,674 |
|
|
|
|
|
Exercise of stock options |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,700 |
|
|
|
4 |
|
|
|
125,747 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
125,751 |
|
|
|
|
|
Issuance of restricted stock to non-employees |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
600 |
|
|
|
1 |
|
|
|
68,649 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
68,650 |
|
|
|
|
|
Issuance of stock options to employees |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,697,452 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,697,452 |
|
|
|
|
|
Issuance of stock options to non-employee |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
104,225 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
104,225 |
|
|
|
|
|
Cancellation of treasury stock shares |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(927 |
) |
|
|
(1 |
) |
|
|
(34,746 |
) |
|
|
— |
|
|
|
— |
|
|
|
34,747 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 2006, as restated |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,587,070 |
|
|
|
3,587 |
|
|
|
109,252,864 |
|
|
|
(2,090 |
) |
|
|
(89,296,613 |
) |
|
|
— |
|
|
|
19,957,748 |
|
|
$ |
(29,332,141 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative effect of change in accounting
principle |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
18,116,751 |
|
|
|
— |
|
|
|
12,239,688 |
|
|
|
— |
|
|
|
30,356,439 |
|
|
|
|
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(22,142,040 |
) |
|
|
— |
|
|
|
(22,142,040 |
) |
|
$ |
(22,142,040 |
) |
Effect of change in fair value of available-for-sale securities |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
4,792 |
|
|
|
— |
|
|
|
— |
|
|
|
4,792 |
|
|
|
4,792 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of stock options |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
23,033 |
|
|
|
23 |
|
|
|
441,593 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
441,616 |
|
|
|
|
|
Issuance of stock options to employees |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,414,077 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,414,077 |
|
|
|
|
|
Issuance of stock options to non-employee |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,908 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,908 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 2007 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,610,103 |
|
|
|
3,610 |
|
|
|
130,227,193 |
|
|
|
2,702 |
|
|
|
(99,198,965 |
) |
|
|
— |
|
|
|
31,034,540 |
|
|
$ |
(22,137,248 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
F-7
ADVENTRX Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Consolidated Statements of Stockholders’ Equity (Deficit) and Comprehensive Loss
Inception (June 12, 1996) Through December 31, 2010
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Cumulative convertible |
|
|
Convertible |
|
|
Cumulative convertible |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
accumulated |
|
|
|
|
|
|
Total |
|
|
|
|
| |
|
preferred stock, |
|
|
preferred stock, |
|
|
preferred stock, |
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
other |
|
|
during the |
|
|
Treasury |
|
|
stockholders’ |
|
|
|
|
| |
|
series A through C |
|
|
series A (2009) |
|
|
series B through F (2009 - 2010) |
|
|
Common stock |
|
|
paid-in |
|
|
comprehensive |
|
|
development |
|
|
stock, |
|
|
equity |
|
|
Comprehensive |
|
| |
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
capital |
|
|
income (loss) |
|
|
stage |
|
|
at cost |
|
|
(deficit) |
|
|
loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(26,647,493 |
) |
|
$ |
— |
|
|
$ |
(26,647,493 |
) |
|
$ |
(26,647,493 |
) |
Effect of change in fair value of available-for-sale securities |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(2,702 |
) |
|
|
— |
|
|
|
— |
|
|
|
(2,702 |
) |
|
|
(2,702 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of stock options |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
Issuance of stock options to employees |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,605,908 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,605,908 |
|
|
|
|
|
Issuance of stock options to non-employee |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
4,982 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
4,982 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 2008 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,610,103 |
|
|
|
3,610 |
|
|
|
131,838,083 |
|
|
|
— |
|
|
|
(125,846,458 |
) |
|
|
— |
|
|
|
5,995,235 |
|
|
$ |
(26,650,195 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(11,325,058 |
) |
|
|
— |
|
|
|
(11,325,058 |
) |
|
$ |
(11,325,058 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of series A preferred stock, net of offering costs of $389,125 |
|
|
— |
|
|
|
— |
|
|
|
1,993 |
|
|
|
2 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,735,627 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,735,629 |
|
|
|
|
|
Conversion of series A preferred stock into common stock |
|
|
— |
|
|
|
— |
|
|
|
(1,993 |
) |
|
|
(2 |
) |
|
|
— |
|
|
|
— |
|
|
|
721,448 |
|
|
|
721 |
|
|
|
(719 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
Sale of series B preferred stock, net of offering costs of $247,643 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,361 |
|
|
|
1 |
|
|
|
— |
|
|
|
— |
|
|
|
833,030 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
833,031 |
|
|
|
|
|
Conversion of series B preferred stock into common stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,361 |
) |
|
|
(1 |
) |
|
|
380,168 |
|
|
|
380 |
|
|
|
(379 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
Sale of series C preferred stock, net of offering costs of $143,885 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
922 |
|
|
|
1 |
|
|
|
— |
|
|
|
— |
|
|
|
711,198 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
711,199 |
|
|
|
|
|
Conversion of series C preferred stock into common stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(922 |
) |
|
|
(1 |
) |
|
|
283,692 |
|
|
|
284 |
|
|
|
(283 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
Sale of series D preferred stock, net of offering costs of $1,327,664 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
11,283 |
|
|
|
11 |
|
|
|
— |
|
|
|
— |
|
|
|
5,124,125 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
5,124,136 |
|
|
|
|
|
Conversion of series D preferred stock into common stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(11,283 |
) |
|
|
(11 |
) |
|
|
2,400,000 |
|
|
|
2,400 |
|
|
|
(2,389 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
Deemed dividend on series A preferred stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,207,536 |
|
|
|
— |
|
|
|
(1,207,536 |
) |
|
|
— |
|
|
|
— |
|
|
|
|
|
Deemed dividend on series B preferred stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
214,795 |
|
|
|
— |
|
|
|
(214,795 |
) |
|
|
— |
|
|
|
— |
|
|
|
|
|
Deemed dividend on series C preferred stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
186,173 |
|
|
|
— |
|
|
|
(186,173 |
) |
|
|
— |
|
|
|
— |
|
|
|
|
|
Deemed dividend on series D preferred stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,258,383 |
|
|
|
— |
|
|
|
(3,258,383 |
) |
|
|
— |
|
|
|
— |
|
|
|
|
|
Issuance of stock options to employees |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
585,438 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
585,438 |
|
|
|
|
|
Series A warrants exercised |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
240,000 |
|
|
|
240 |
|
|
|
899,760 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
900,000 |
|
|
|
|
|
Series D warrants exercised |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
576,000 |
|
|
|
576 |
|
|
|
2,113,344 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,113,920 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 2009 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
8,211,411 |
|
|
|
8,211 |
|
|
|
148,703,722 |
|
|
|
— |
|
|
|
(142,038,403 |
) |
|
|
— |
|
|
|
6,673,530 |
|
|
$ |
(11,325,058 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(8,450,922 |
) |
|
|
— |
|
|
|
(8,450,922 |
) |
|
$ |
(8,450,922 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reduction of shares and cash paid in lieu for fractional shares
following the reverse split |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(31 |
) |
|
|
— |
|
|
|
(146 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(146 |
) |
|
|
|
|
Sale of series E preferred stock, net of offering costs of $2,162,787 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
19,000 |
|
|
|
19 |
|
|
|
— |
|
|
|
— |
|
|
|
14,014,705 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
14,014,724 |
|
|
|
|
|
Conversion of series E preferred stock into common stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(19,000 |
) |
|
|
(19 |
) |
|
|
1,993,965 |
|
|
|
1,994 |
|
|
|
(1,975 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
Sale of series F preferred stock, net of offering costs of $1,655,234 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
19,217 |
|
|
|
19 |
|
|
|
— |
|
|
|
— |
|
|
|
13,344,749 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
13,344,768 |
|
|
|
|
|
Conversion of series F preferred stock into common stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(19,217 |
) |
|
|
(19 |
) |
|
|
5,190,306 |
|
|
|
5,190 |
|
|
|
(5,171 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
Deemed dividend on series E preferred stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,514,920 |
|
|
|
— |
|
|
|
(2,514,920 |
) |
|
|
— |
|
|
|
— |
|
|
|
|
|
Deemed dividend on series F preferred stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,124,876 |
|
|
|
— |
|
|
|
(3,124,876 |
) |
|
|
— |
|
|
|
— |
|
|
|
|
|
Issuance of stock options to employees |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
785,943 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
785,943 |
|
|
|
|
|
Series A warrants exercised |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
84,651 |
|
|
|
85 |
|
|
|
317,359 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
317,444 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 2010 |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
|
|
15,480,302 |
|
|
$ |
15,480 |
|
|
$ |
182,798,982 |
|
|
$ |
— |
|
|
$ |
(156,129,121 |
) |
|
$ |
— |
|
|
$ |
26,685,341 |
|
|
$ |
(8,450,922 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
F-8
ADVENTRX Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Consolidated Statements of Cash Flows
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Inception |
|
| |
|
|
|
|
|
|
|
|
|
(June 12, 1996) |
|
| |
|
|
|
|
|
|
|
|
|
Through |
|
| |
|
Years Ended December 31, |
|
|
December 31, |
|
| |
|
2010 |
|
|
2009 |
|
|
2010 |
|
| |
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(8,450,922 |
) |
|
$ |
(11,325,058 |
) |
|
$ |
(158,357,728 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net loss to net cash used in
operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
19,821 |
|
|
|
79,728 |
|
|
|
10,447,620 |
|
Loss on disposal of fixed assets |
|
|
4,269 |
|
|
|
59,114 |
|
|
|
59,785 |
|
Loss on fair value of warrants |
|
|
— |
|
|
|
— |
|
|
|
12,239,688 |
|
Amortization of debt discount |
|
|
— |
|
|
|
— |
|
|
|
450,000 |
|
Forgiveness of employee receivable |
|
|
— |
|
|
|
— |
|
|
|
30,036 |
|
Impairment loss — write-off of goodwill |
|
|
— |
|
|
|
— |
|
|
|
5,702,130 |
|
Expenses related to employee stock options and
restricted stock issued |
|
|
785,943 |
|
|
|
585,437 |
|
|
|
9,223,942 |
|
Expenses related to options issued to non-employees |
|
|
— |
|
|
|
— |
|
|
|
204,664 |
|
Expenses paid by issuance of common stock |
|
|
— |
|
|
|
— |
|
|
|
1,341,372 |
|
Expenses paid by issuance of warrants |
|
|
— |
|
|
|
— |
|
|
|
573,357 |
|
Expenses paid by issuance of preferred stock |
|
|
— |
|
|
|
— |
|
|
|
142,501 |
|
Expenses related to stock warrants issued |
|
|
— |
|
|
|
— |
|
|
|
612,000 |
|
Equity in loss of investee |
|
|
— |
|
|
|
— |
|
|
|
178,936 |
|
In-process research and development |
|
|
— |
|
|
|
— |
|
|
|
10,422,130 |
|
Write-off of license agreement |
|
|
— |
|
|
|
— |
|
|
|
152,866 |
|
Write-off assets available-for-sale |
|
|
— |
|
|
|
— |
|
|
|
108,000 |
|
Cumulative effect of change in accounting principle |
|
|
— |
|
|
|
— |
|
|
|
25,821 |
|
Accretion of discount on investments in securities |
|
|
— |
|
|
|
— |
|
|
|
(1,604,494 |
) |
Changes in assets and liabilities, net of effect
of acquisitions: |
|
|
|
|
|
|
|
|
|
|
|
|
(Increase) decrease in prepaid and other assets |
|
|
(148,137 |
) |
|
|
344,699 |
|
|
|
(711,110 |
) |
Increase (decrease) in accounts payable and
accrued liabilities |
|
|
(552,211 |
) |
|
|
(2,360,336 |
) |
|
|
1,978,184 |
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities |
|
|
(8,341,237 |
) |
|
|
(12,616,416 |
) |
|
|
(106,780,300 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sales and maturities of short-term
investments |
|
|
— |
|
|
|
— |
|
|
|
112,788,378 |
|
Purchases of short-term investments |
|
|
— |
|
|
|
— |
|
|
|
(111,183,884 |
) |
Purchases of property and equipment |
|
|
(28,513 |
) |
|
|
— |
|
|
|
(1,058,867 |
) |
Proceeds from sale of property and equipment |
|
|
4,379 |
|
|
|
16,000 |
|
|
|
54,285 |
|
Purchase of certificate of deposit |
|
|
— |
|
|
|
— |
|
|
|
(1,016,330 |
) |
F-9
ADVENTRX Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Consolidated Statements of Cash Flows
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Inception |
|
| |
|
|
|
|
|
|
|
|
|
(June 12, 1996) |
|
| |
|
|
|
|
|
|
|
|
|
Through |
|
| |
|
Years Ended December 31, |
|
|
December 31, |
|
| |
|
2010 |
|
|
2009 |
|
|
2010 |
|
| |
Maturity of certificate of deposit |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
1,016,330 |
|
Cash paid for acquisitions, net of cash
acquired |
|
|
— |
|
|
|
— |
|
|
|
32,395 |
|
Payment on obligation under license
agreement |
|
|
— |
|
|
|
— |
|
|
|
(106,250 |
) |
Issuance of note receivable — related party |
|
|
— |
|
|
|
— |
|
|
|
(35,000 |
) |
Payments on note receivable |
|
|
— |
|
|
|
— |
|
|
|
405,993 |
|
Advance to investee |
|
|
— |
|
|
|
— |
|
|
|
(90,475 |
) |
Cash transferred in rescission of acquisition |
|
|
— |
|
|
|
— |
|
|
|
(19,475 |
) |
Cash received in rescission of acquisition |
|
|
— |
|
|
|
— |
|
|
|
230,000 |
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing
activities |
|
|
(24,134 |
) |
|
|
16,000 |
|
|
|
1,017,100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sale of common stock |
|
|
— |
|
|
|
— |
|
|
|
84,151,342 |
|
Proceeds from exercise of stock options |
|
|
— |
|
|
|
— |
|
|
|
712,367 |
|
Proceeds from sale or exercise of warrants |
|
|
317,444 |
|
|
|
3,013,920 |
|
|
|
14,714,258 |
|
Proceeds from sale of preferred stock |
|
|
30,453,227 |
|
|
|
9,820,500 |
|
|
|
44,474,720 |
|
Repurchase of warrants |
|
|
— |
|
|
|
— |
|
|
|
(55,279 |
) |
Payments for financing and offering costs |
|
|
(3,093,735 |
) |
|
|
(1,416,504 |
) |
|
|
(10,994,048 |
) |
Payments on notes payable and long-term debt |
|
|
— |
|
|
|
— |
|
|
|
(605,909 |
) |
Proceeds from issuance of notes payable and
detachable warrants |
|
|
— |
|
|
|
— |
|
|
|
1,344,718 |
|
Cash paid in lieu of fractional shares for
reverse stock split |
|
|
(146 |
) |
|
|
— |
|
|
|
(146 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
|
27,676,790 |
|
|
|
11,417,916 |
|
|
|
133,742,023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash |
|
|
19,311,419 |
|
|
|
(1,182,500 |
) |
|
|
27,978,823 |
|
Cash at beginning of period |
|
|
8,667,404 |
|
|
|
9,849,904 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
Cash at end of period |
|
$ |
27,978,823 |
|
|
$ |
8,667,404 |
|
|
$ |
27,978,823 |
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
F-10
ADVENTRX Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
December 31, 2010
| (1) |
|
Description of Business |
| |
|
ADVENTRX Pharmaceuticals, Inc., a Delaware corporation (“ADVENTRX,” “we” or the “Company”),
is a specialty pharmaceutical company focused on acquiring, developing and commercializing
proprietary product candidates. We have devoted substantially all of our resources to
research and development (“R&D”), or to acquisition of our product candidates. We have not
yet marketed or sold any products or generated any significant revenue. Through our
acquisition of SD Pharmaceuticals, Inc. (“SDP”) in 2006, we have rights to product candidates
in varying stages of development, including our lead product candidates, Exelbine
(vinorelbine injectable emulsion) and ANX-514 (docetaxel emulsion for injection), which are
novel emulsion formulations of currently marketed chemotherapy drugs. In February 2011, we
entered into an agreement and plan of merger to acquire SynthRx, Inc., a privately-held
Delaware corporation in exchange for shares of our common stock. See Note 17, “Subsequent
Events,” below for additional information regarding this pending acquisition. |
| |
|
In October 2000, we merged our wholly-owned subsidiary, Biokeys Acquisition Corp., with and
into Biokeys, Inc. and changed our name to Biokeys Pharmaceuticals, Inc. In May 2003, we
merged Biokeys Inc., our wholly-owned subsidiary, with and into us and changed our name to
ADVENTRX Pharmaceuticals, Inc. The merger had no effect on our financial statements. In
July 2004, we formed a wholly-owned subsidiary, ADVENTRX (Europe) Ltd., in the United Kingdom
primarily to facilitate conducting clinical trials in the European Union, but we dissolved
this subsidiary in December 2009. In April 2006, we acquired all of the outstanding capital
stock of SDP through a merger with our newly created wholly-owned subsidiary, Speed
Acquisition, Inc. (the “Merger Sub”) and changed the name of the Merger Sub to SD
Pharmaceuticals, Inc. |
| (2) |
|
Summary of Significant Accounting Policies |
| |
|
The consolidated financial statements include the accounts of the Company and its
wholly-owned subsidiaries, SDP and ADVENTRX (Europe) Ltd. up until its dissolution in
December 2009. All intercompany accounts and transactions have been eliminated in
consolidation. |
| |
|
On April 23, 2010, the Company effected a 1-for-25 reverse split of its common stock, which
was authorized by its stockholders at a special meeting held in August 2009. All common
stock share and per share information in the consolidated financial statements and notes
thereto included in this report have been restated to reflect retrospective application of
the reverse stock split for all periods presented ending or as of a date prior to April 23,
2010, except for par value per share and the number of authorized shares, which were not
affected by the reverse stock split. |
| |
|
The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America (“U.S.”) requires management to make estimates and
assumptions that affect the amounts reported in the consolidated financial statements and
accompanying notes. Actual results could differ from those estimates. |
| |
|
Cash equivalents consist of highly liquid investments with original maturities of three
months or less at the date of purchase. The carrying amounts approximate fair value due to
the short maturities of these instruments. At December 31, 2010 and 2009, we did not have
any cash equivalents. |
F-11
ADVENTRX Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
December 31, 2010
| |
|
Financial instruments that potentially subject us to concentrations of credit risk consist
principally of cash and cash equivalents and investment securities. We maintain our cash and
cash equivalents in high-credit quality financial institutions. At times, such balances
exceed federally insured limits. At December 31, 2010 and 2009, our cash was in excess of
the Federal Deposit Insurance Corporation limit and we did not have any cash equivalents or
investment securities. |
| |
|
During 2010, approximately 13% or $1.4 million of our total vendor payments were made to a
manufacturer that provided process development and scale-up manufacturing services that
assisted us in completing a New Drug Application (“NDA”) for our lead product candidate,
ANX-530, which we filed with the United States Food and Drug Administration (“FDA”) in
November 2010. If we were to lose this vendor, our progress toward commercializing Exelbine
would be severely impeded. This vendor also provides process development and scale-up
manufacturing services for our other lead product candidate, ANX-514; however, we are
evaluating alternate vendors with respect to ANX-514. During 2009, approximately 28% or $3.5
million of our total vendor payments were made to the same manufacturer. |
| |
|
Property and equipment are stated at cost. Depreciation and amortization are calculated
using the straight-line method over the estimated useful lives of the assets. The costs of
improvements that extend the lives of the assets are capitalized. Repairs and maintenance
are expensed as incurred. |
| |
|
Impairment of Long-Lived Assets |
| |
|
Long-lived assets with finite lives are evaluated for impairment whenever events or changes
in circumstances indicate that their carrying value may not be recoverable. If the
evaluation indicates that intangibles or long-lived assets are not recoverable (i.e.,
carrying amount is less than the future projected undiscounted cash flows), their carrying
amount would be reduced to fair value. Since inception through December 31, 2010, we
recognized an impairment loss of the value of goodwill in the amount of $5.7 million, which
was recorded in the year ended December 31, 2001. |
| |
|
We may enter into revenue arrangements that contain multiple deliverables. In these cases,
revenue is recognized when all of the following criteria are met: (1) persuasive evidence of
an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the
seller’s price to the buyer is fixed and determinable; and (4) collectability is reasonably
assured. |
| |
|
Revenue from licensing agreements is recognized based on the performance requirements of the
agreement. Revenue is deferred for fees received before earned. Nonrefundable upfront fees
that are not contingent on any future performance by us are recognized as revenue when the
revenue recognition criteria are met and the license term commences. Nonrefundable upfront
fees, where we have ongoing involvement or performance obligations, are recorded as deferred
revenue and recognized as revenue over the life of the contract, the period of the
performance obligation or the development period, whichever is appropriate in light of the
circumstances. |
| |
|
Payments related to substantive, performance-based milestones in an agreement are recognized
as revenue upon the achievement of the milestones as specified in the underlying agreement
when they represent the culmination of the earnings process. Royalty revenue from licensed
products will be recognized when earned in accordance with the terms of the applicable
license agreements. |
F-12
ADVENTRX Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
December 31, 2010
| |
|
We recognize revenues from federal government research grants during the period in which we
receive the grant funds, or their collection is reasonably assured, and we incur the
qualified expenditures. |
| |
|
Research and Development Expenses |
| |
|
Research and development (“R&D”) expenses consist of expenses incurred in performing R&D
activities, including salaries and benefits, facilities and other overhead expenses,
bioequivalence and clinical trials, research-related manufacturing services, contract
services and other outside expenses. R&D expenses are charged to operations as they are
incurred. Advance payments, including nonrefundable amounts, for goods or services that will
be used or rendered for future R&D activities are deferred and capitalized. Such amounts
will be recognized as an expense as the related goods are delivered or the related services
are performed. If the goods will not be delivered, or services will not be rendered, then
the capitalized advance payment is charged to expense. |
| |
|
Milestone payments that we make in connection with in-licensed technology or product
candidates are expensed as incurred when there is uncertainty in receiving future economic
benefits from the licensed technology or product candidates. We consider the future economic
benefits from the licensed technology or product candidates to be uncertain until such
licensed technology is incorporated into products that, or such product candidates, are
approved for marketing by the FDA or when other significant risk factors are abated. For
expense accounting purposes, management has viewed future economic benefits for all of our
licensed technology or product candidates to be uncertain. |
| |
|
Payments in connection with our bioequivalence and clinical trials are often made under
contracts with multiple clinical research organizations (“CROs”) that conduct and manage
these trials on our behalf. The financial terms of these agreements are subject to
negotiation and vary from contract to contract and may result in uneven payment flows.
Generally, these agreements set forth the scope of work to be performed at a fixed fee or
unit price or on a time-and-material basis. Payments under these contracts depend on factors
such as the successful enrollment or treatment of patients or the completion of other
milestones. Expenses related to bioequivalence and clinical trials are accrued based on our
estimates and/or representations from service providers regarding work performed, including
actual level of patient enrollment, completion of patient studies, and trials progress.
Other incidental costs related to patient enrollment and treatment are accrued when
reasonably certain. If the contracted amounts are modified (for instance, as a result of
changes in the bioequivalence or clinical trial protocol or scope of work to be performed),
we modify our accruals accordingly on a prospective basis. Revisions in scope of contract
are charged to expense in the period in which the facts that give rise to the revision become
reasonably certain. Because of the uncertainty of possible future changes to the scope of
work in bioequivalence and clinical trials contracts, we are unable to quantify an estimate
of the reasonably likely effect of any such changes on our consolidated results of operations
or financial position. Historically, we have had no material changes in our bioequivalence
or clinical trial expense accruals that would have had a material impact on our consolidated
results of operations or financial position. |
| |
|
Purchased In-Process Research and Development |
| |
|
In accordance with previous accounting guidance effective through December 31, 2008, we
immediately charged the costs associated with in-process research and development (“IPR&D”)
purchased prior to December 31, 2008 to the statement of operations upon acquisition. These
amounts represented an estimate of the fair value of purchased IPR&D for projects that, as of
the acquisition date, had not yet reached technological feasibility, had no alternative
future use, and had uncertainty in receiving future economic benefits from the purchased
IPR&D. We determined the future economic benefits from the purchased
IPR&D to be uncertain until such technology is incorporated into products approved by the FDA
or when other significant risk factors are abated. In the year ended December 31, 2006, we
recorded approximately $10.4 million of IPR&D expense related to our acquisition of SD
Pharmaceuticals, Inc. in April 2006. |
F-13
ADVENTRX Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
December 31, 2010
| |
|
We will account for future purchased IPR&D in accordance with the Financial Accounting
Standards Board’s (“FASB”) updated guidance for business combinations, which became effective
January 1, 2009. |
| |
|
Share-based compensation cost is measured at the grant date, based on the estimated fair
value of the award and is recognized as expense over the employee’s requisite service period
on a straight-line basis. Share-based compensation expense recognized in the consolidated
statements of operations for the years ended December 31, 2010 and 2009 is based on awards
ultimately expected to vest and has been reduced for estimated forfeitures. This estimate
will be revised in subsequent periods if actual forfeitures differ from those estimates. We
have no awards with market or performance conditions. |
| |
|
Legal costs in connection with approved patents and patent applications are expensed as
incurred and classified as selling, general and administrative expense in our consolidated
statement of operations. |
| |
|
We account for income taxes and the related accounts under the liability method. Deferred
tax assets and liabilities are determined based on the differences between the financial
statement carrying amounts and the income tax basis of assets and liabilities. A valuation
allowance is applied against any net deferred tax asset if, based on available evidence, it
is more likely than not that some or all of the deferred tax assets will not be realized. |
| |
|
The tax effects from an uncertain tax position can be recognized in our consolidated
financial statements only if the position is more likely than not of being sustained upon an
examination by tax authorities. An uncertain income tax position will not be recognized if
it has less than a 50% likelihood of being sustained. |
| |
|
We account for interest and penalties related to income tax matters in income tax expense. |
| |
|
Comprehensive income or loss is defined as the change in equity of a business enterprise
during a period from transactions and other events and circumstances from non-owner sources,
including foreign currency translation adjustments and unrealized gains and losses on
marketable securities. We present comprehensive loss in our consolidated statements of
stockholders’ equity (deficit) and comprehensive loss. |
| |
|
Net Loss per Common Share |
| |
|
Basic and diluted net loss per common share was calculated by dividing the net loss
applicable to common stock for the period by the weighted-average number of common shares
outstanding during the period, without consideration for our outstanding common stock
equivalents because their effect would have been anti-dilutive. Common stock equivalents are
included in the calculation of diluted earnings per common share only if their effect is
dilutive. As of December 31, 2010 and 2009, our outstanding common stock equivalents
consisted of options and warrants as follows: |
| |
|
|
|
|
|
|
|
|
| |
|
2010 |
|
|
2009 |
|
Warrants |
|
|
4,055,030 |
|
|
|
946,344 |
|
Options |
|
|
403,737 |
|
|
|
234,356 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,458,767 |
|
|
|
1,180,700 |
|
|
|
|
|
|
|
|
F-14
ADVENTRX Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
December 31, 2010
| |
|
Supplemental Cash Flow Information |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Inception |
|
| |
|
|
|
|
|
|
|
|
|
(June 12, 1996) |
|
| |
|
|
|
|
|
|
|
|
|
Through |
|
| |
|
Years Ended December 31, |
|
|
December 31, |
|
| |
|
2010 |
|
|
2009 |
|
|
2010 |
|
Supplemental disclosures of cash flow information: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid |
|
$ |
1,629 |
|
|
$ |
— |
|
|
$ |
180,719 |
|
Income taxes paid |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Supplemental disclosures of non-cash investing and
financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of warrants, common stock and preferred stock
for: |
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of notes payable and accrued interest |
|
|
— |
|
|
|
— |
|
|
|
1,213,988 |
|
Prepaid services to consultants |
|
|
— |
|
|
|
— |
|
|
|
1,482,781 |
|
Conversion of preferred stock |
|
|
7,184 |
|
|
|
3,785 |
|
|
|
13,674 |
|
Acquisitions |
|
|
— |
|
|
|
— |
|
|
|
24,781,555 |
|
Payment of dividends |
|
|
— |
|
|
|
— |
|
|
|
213,000 |
|
Financial advisor services in conjunction with private
placements |
|
|
724,286 |
|
|
|
691,812 |
|
|
|
2,553,554 |
|
Acquisition of treasury stock in settlement of a claim |
|
|
— |
|
|
|
— |
|
|
|
34,737 |
|
Cancellation of treasury stock |
|
|
— |
|
|
|
— |
|
|
|
(34,737 |
) |
Assumptions of liabilities in acquisitions |
|
|
— |
|
|
|
— |
|
|
|
1,235,907 |
|
Acquisition of license agreement for long-term debt |
|
|
— |
|
|
|
— |
|
|
|
161,180 |
|
Cashless exercise of warrants |
|
|
— |
|
|
|
— |
|
|
|
4,312 |
|
Dividends accrued |
|
|
— |
|
|
|
— |
|
|
|
621,040 |
|
Trade asset converted to available for sale asset |
|
|
— |
|
|
|
— |
|
|
|
108,000 |
|
Dividends extinguished |
|
|
— |
|
|
|
— |
|
|
|
408,240 |
|
Trade payable converted to note payable |
|
|
— |
|
|
|
— |
|
|
|
83,948 |
|
Issuance of warrants for return of common stock |
|
|
— |
|
|
|
— |
|
|
|
50,852 |
|
Detachable warrants issued with notes payable |
|
|
— |
|
|
|
— |
|
|
|
450,000 |
|
Cumulative preferred stock dividends |
|
|
7,763,903 |
|
|
|
5,738,500 |
|
|
|
13,502,403 |
|
| |
|
Recent Accounting Pronouncements |
| |
|
In October 2009, the FASB issued Accounting Standard Update (“ASU”) No. 2009-13, Revenue
Recognition (ASC 605) — Multiple-Deliverable Revenue Arrangements, a consensus of the FASB
Emerging Issues Task Force. The guidance modifies the fair value requirements of Accounting
Standards Codification (“ASC”) subtopic 605-25 Revenue Recognition — Multiple Element
Arrangements by providing principles for allocation of consideration among its multiple
elements, allowing more flexibility in identifying and accounting for separate deliverables
under an arrangement. An estimated selling price method is introduced for valuing the
elements of a bundled arrangement if vendor-specific objective evidence or third-party
evidence of selling price is not available, and significantly expands related disclosure
requirements. This guidance is effective prospectively for revenue arrangements entered
into or materially modified in fiscal years beginning on or after June 15, 2010. Currently,
we have no multiple-deliverable revenue arrangements that would be affected by this
guidance. |
| |
|
In March 2010, the FASB ratified the milestone method of revenue recognition. Under this
standard, an entity can recognize contingent consideration earned from the achievement of a
substantive milestone in its
entirety in the period in which the milestone is achieved. A milestone is defined as an
event (i) that can only be achieved based in whole or in part on either the entity’s
performance or on the occurrence of a specific outcome resulting from the entity’s
performance (ii) for which there is substantive uncertainty at the date the arrangement is
entered into that the event will be achieved and (iii) that would result in additional
payments being due to the entity. This guidance is effective for years beginning after June
15, 2010. We are evaluating the effect, if any, that this guidance will have on our
financial position or results of operations. |
F-15
ADVENTRX Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
December 31, 2010
| (3) |
|
Fair Value Measurements |
| |
|
The guidance for the fair value option for financial assets and financial liabilities
provides companies the irrevocable option to measure many financial assets and liabilities
at fair value with changes in fair value recognized in earnings. We have not elected to
measure any financial assets or liabilities at fair value that were not previously required
to be measured at fair value. |
| |
|
Fair value is defined as the exit price, or the amount that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market participants
as of the measurement date. The guidance also establishes fair value hierarchy for inputs
used in measuring fair value that maximizes the use of observable inputs and minimizes the
use of unobservable inputs by requiring that the most observable inputs be used when
available. Observable inputs are inputs market participants would use in valuing the asset
or liability and are developed based on market data obtained from sources independent of the
Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the
factors market participants would use in valuing the asset or liability. The guidance
establishes three levels of inputs that may be used to measure fair value as follows: |
| |
|
|
|
Level 1 —
|
|
Quoted prices in active markets for identical assets or liabilities. |
|
|
|
Level 2 —
|
|
Inputs other than Level 1 that are observable, either directly or
indirectly, such as quoted prices for similar assets or liabilities; quoted prices in
markets that are not active; or other inputs that are observable or can be corroborated
by observable market data for substantially the full term of the assets or liabilities. |
|
|
|
Level 3 —
|
|
Unobservable inputs that are supported by little or no market activity
and that are significant to the fair value of the assets or liabilities. |
| |
|
At December 31, 2010 and 2009, we had no financial assets or liabilities required to be
measured at fair value. |
| (4) |
|
Property and Equipment |
| |
|
Property and equipment at December 31, 2010 and 2009 were as follows: |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Useful Lives |
|
|
2010 |
|
|
2009 |
|
| |
Office furniture, computer and lab equipment |
|
3 - 5 years |
|
$ |
216,698 |
|
|
$ |
293,480 |
|
Computer software |
|
3 years |
|
|
60,841 |
|
|
|
89,422 |
|
Leasehold improvements |
|
1 year |
|
|
21,733 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
299,272 |
|
|
|
382,902 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less accumulated depreciation and amortization |
|
|
|
|
|
|
(255,018 |
) |
|
|
(338,692 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
|
|
|
|
$ |
44,254 |
|
|
$ |
44,210 |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
At December 31, 2010, there was $14,165 of lab equipment held for sale with an equipment
reseller on a consignment basis. |
| |
|
Depreciation and amortization expense was $19,821 and $79,728 for the years ended December
31, 2010 and 2009, respectively. |
F-16
ADVENTRX Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
December 31, 2010
| |
|
Accrued liabilities at December 31, 2010 and 2009 were as follows: |
| |
|
|
|
|
|
|
|
|
| |
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
Accrued contracts and study expenses |
|
$ |
381,309 |
|
|
$ |
1,144,279 |
|
Other accrued liabilities |
|
|
483,548 |
|
|
|
234,731 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued liabilities |
|
$ |
864,857 |
|
|
$ |
1,379,010 |
|
|
|
|
|
|
|
|
| (6) |
|
Capital Stock and Warrants |
| |
|
At a special meeting of our stockholders held on August 25, 2009, our stockholders approved
a proposal to authorize our board of directors, in its discretion, to effect a reverse split
of our outstanding common stock without further action by our stockholders. In April 2010,
our board of directors approved a 1-for-25 reverse split of our common stock and on April
23, 2010 at 4:01 p.m. Eastern time, the reverse stock split became effective. As a result
of the reverse stock split, each 25 shares of our issued and outstanding common stock were
automatically reclassified as and changed into one share of our common stock. The reverse
stock split reduced the number of our issued and outstanding shares of common stock as of
April 23, 2010 from approximately 257.3 million shares to approximately 10.3 million shares.
No fractional shares were issued in connection with the reverse stock split. Stockholders
who were entitled to fractional shares instead became entitled to receive a cash payment in
lieu of receiving fractional shares (after taking into account and aggregating all shares of
our common stock then held by such stockholder) equal to the fractional share interest
multiplied by $4.6275 (the per share closing price of our common stock (on a post-split
basis) as determined by the NYSE Amex on April 23, 2010). The reverse stock split affected
all of the holders of our common stock uniformly. Shares of our common stock underlying
outstanding options and warrants were proportionately reduced and the exercise prices of
outstanding options and warrants were proportionately increased in accordance with the terms
of the agreements governing such securities. All common stock share and per share
information in the consolidated financial statements and notes thereto included in this
report have been restated to reflect retrospective application of the reverse stock split
for all periods presented ending or as of a date on or prior to April 23, 2010, except for
par value per share and the number of authorized shares, which were not affected by the
reverse stock split. |
| |
|
0% Series A Convertible Preferred Stock |
| |
|
In June 2009, we completed a registered direct equity financing raising gross proceeds of
approximately $2.0 million involving the issuance of units consisting of 1,993 shares of our
0% Series A Convertible Preferred Stock with a stated value of $1,000 per share (“Series A
Stock”) and 5-year warrants to purchase up to 324,651 shares of our common stock at an
exercise price of $3.75 per share. In the aggregate, the shares of Series A Stock we issued
were convertible into 721,448 shares of our common stock. All of the shares of the Series A
Stock have been converted into common stock and are no longer outstanding. We received
approximately $1.7 million in net proceeds from the financing, after deducting the placement
agent’s fees and expenses and other offering expenses. In December 2009, in connection with
the exercise of warrants issued in the June 2009 financing, we issued 240,000 shares of our
common stock and received net proceeds of $0.9 million. In January 2010, in connection with
the exercise of the remaining warrants issued in the June 2009 financing, we issued an
additional 84,651 shares of our common stock and received an additional $0.3 million of net
proceeds. All of the warrants we issued in the June 2009 financing have been exercised and
are no longer outstanding. |
F-17
ADVENTRX Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
December 31, 2010
| |
|
The convertible feature of our Series A Stock and the terms of the warrants issued in
connection with our Series A Stock provided for a rate of conversion or exercise that was
below the market value of our common stock at issuance. The convertible feature of our
Series A Stock is characterized as a beneficial conversion feature (“BCF”). The estimated
relative fair values of the shares of our Series A Stock and the warrants issued in
connection with such stock were calculated as approximately $1.2 million and $531,000,
respectively. The value of the BCF was determined using the intrinsic value method and
calculated as approximately $1.2 million. Because our Series A Stock did not have a stated
redemption date, the value of the BCF was fully realized at the time our Series A Stock was
issued. The fair value of the warrants was determined using the Black-Scholes
option-pricing model as of the date of issuance assuming a five-year term, stock volatility
of 197.01%, and a risk-free interest rate of 2.81%. The value of the BCF was treated as a
deemed dividend to the holders of our Series A Stock and, due to the potential immediate
convertibility of our Series A Stock at issuance, was recorded as an increase to additional
paid-in capital and accumulated deficit at the time of issuance. |
| |
|
We also issued warrants to purchase up to 36,071 shares of our common stock at an exercise
price of $3.75 per share to the placement agent in the June 2009 financing as additional
consideration for its services in connection with the financing. These warrants had a fair
value of approximately $132,000 using the Black-Scholes option-pricing model as of the date
of issuance assuming a five-year term, stock volatility of 196.5%, and a risk-free interest
rate of 2.85%. The warrants became exercisable on December 13, 2009 and are exercisable at
any time on or before June 12, 2014. |
| |
|
5% Series B Convertible Preferred Stock |
| |
|
In July 2009, we completed a registered direct equity financing raising gross proceeds of
approximately $1.4 million involving the issuance of 1,361 shares of our 5% Series B
Convertible Preferred Stock with a stated value of $1,000 per share (“Series B Stock”). In
the aggregate, the shares of Series B Stock we issued were convertible into 380,168 shares
of our common stock. All of the shares of our Series B Stock have been converted into
common stock and are no longer outstanding. Our Series B Stock would have accrued a
cumulative annual dividend of 5% per share until July 6, 2014, and no dividend thereafter.
In accordance with the terms of the Series B Stock, because the Series B Stock was converted
prior to July 6, 2014, we paid the holders an amount equal to the total dividend that would
have accrued in respect of the shares converted from the issuance date through July 6, 2014,
or $250 per $1,000 of stated value of the shares converted. We received approximately $0.8
million in net proceeds from the financing after deducting the $340,250 we placed into
escrow accounts to pay the aggregate dividend payment in respect of our Series B Stock,
placement agent’s fees and expenses and other offering expenses. |
| |
|
The convertible feature of our Series B Stock and the value of the dividend in respect
thereof provided for a rate of conversion that was below the market value of our common
stock at issuance. The convertible feature of our Series B Stock is characterized as a BCF.
The estimated relative fair value of the shares of our Series B Stock was calculated as
approximately $1.0 million. The value of the BCF was determined using the intrinsic value
method and calculated as approximately $215,000. Because our Series B Stock did not have a
stated redemption date, the value of the BCF was fully realized at the time our Series B
Stock was issued. The value of the BCF was treated as a deemed dividend to the holders of
our Series B Stock and, due to the potential immediate convertibility of our Series B Stock
at issuance, was recorded as an increase to additional paid-in capital and accumulated
deficit at the time of issuance. |
| |
|
We also issued warrants to purchase up to 19,007 shares of our common stock at an exercise
price of $4.48 per share to the placement agent in the July 2009 financing as additional
consideration for its services in connection with the financing. These warrants had a fair
value of approximately $60,000 using the Black-Scholes option-pricing model as of the date
of issuance assuming a five-year term, stock volatility of 197.37%, and a risk-free interest
rate of 2.4%. The warrants became exercisable on January 7, 2010 and are exercisable at any
time on or before July 6, 2014. |
F-18
ADVENTRX Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
December 31, 2010
| |
|
5% Series C Convertible Preferred Stock |
| |
|
In August 2009, we completed a registered direct equity financing raising gross proceeds of
approximately $0.9 million involving the issuance of 922 shares of our 5% Series C
Convertible Preferred Stock with a stated value of $1,000 per share (“Series C Stock”). In
the aggregate, the shares of Series C Stock we issued were convertible into 283,692 shares
of our common stock. All of the shares of our Series C Stock have been converted into
common stock and are no longer outstanding. Our Series C Stock would have accrued a
cumulative annual dividend of 5% per share until February 10, 2012, and no dividend
thereafter. In accordance with the terms of the Series C Stock, because the Series C Stock
was converted prior to February 10, 2012, we paid the holders an amount equal to the total
dividend that would have accrued in respect of the shares converted from the issuance date
through February 10, 2012, or $125 per $1,000 of stated value of the shares converted. We
received approximately $0.7 million in net proceeds from the financing after deducting the
$115,250 we placed into escrow accounts to pay the aggregate dividend payment in respect of
our Series C Stock, placement agent’s fees and expenses and other offering expenses. |
| |
|
The convertible feature of our Series C Stock and the value of the dividend in respect
thereof provided for a rate of conversion that was below the market value of our common
stock at issuance. The convertible feature of our Series C Stock is characterized as a BCF.
The estimated relative fair value of the shares of our Series C Stock was calculated as
approximately $807,000. The value of the BCF was determined using the intrinsic value
method and calculated as approximately $186,000. Because our Series C Stock did not have a
stated redemption date, the value of the BCF was fully realized at the time our Series C
Stock was issued. The value of the BCF was treated as a deemed dividend to the holders of
our Series C Stock and, due to the potential immediate convertibility of our Series C Stock
at issuance, was recorded as an increase to additional paid-in capital and accumulated
deficit at the time of issuance. |
| |
|
We also issued warrants to purchase up to 14,183 shares of our common stock at an exercise
price of $4.06 per share to the placement agent in the August 2009 financing as additional
consideration for its services in connection with the financing. These warrants had a fair
value of approximately $48,000 using the Black-Scholes option-pricing model as of the date
of issuance assuming a five-year term, stock volatility of 198.94%, and a risk-free interest
rate of 2.75%. The warrants became exercisable on February 10, 2010 and are exercisable at
any time on or before August 10, 2014. |
| |
|
4.25660% Series D Convertible Preferred Stock |
| |
|
In October 2009, we completed a registered direct equity financing raising gross proceeds of
approximately $11.3 million involving the issuance of units consisting of 11,283 shares of
our 4.25660% Series D Convertible Preferred Stock with a stated value of $1,000 per share
(“Series D Stock”) and 5-year warrants to purchase up to an aggregate of 792,000 shares of
our common stock. In the aggregate, the shares of Series D Stock we issued were convertible
into 2,400,000 shares of our common stock. All of the shares of our Series D Stock have
been converted into common stock and are no longer outstanding. Our Series D Stock would
have accrued a cumulative annual dividend of 4.25660% per share until October 9, 2020, and
no dividend thereafter. In accordance with the terms of the Series D Stock, because the
Series D Stock was converted prior to October 9, 2020, we paid the holders an amount equal
to the total dividend that would have accrued in respect of the shares converted from the
issuance date through October 9, 2020, or $468.23 per $1,000 of stated value of the shares
converted. We received approximately $5.1 million in net proceeds from the financing after
deducting the approximately $5.3 million we placed into escrow accounts to pay the aggregate
dividend payment in respect of our Series D Stock, placement agent’s fees and expenses and
other offering expenses. In December 2009, in connection with the exercise of warrants
issued in the October 2009 financing, we issued 576,000 shares of our common stock and
received net proceeds of $2.1 million. We may receive an additional $0.8 million of net
proceeds from the exercise of the remaining warrants issued in the October 2009 financing.
Those warrants, which have an exercise price of $3.67 per share, are exercisable any time on
or before October 9, 2014, subject to certain beneficial ownership limitations. |
F-19
ADVENTRX Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
December 31, 2010
| |
|
The convertible feature of our Series D Stock and the terms of the warrants issued in
connection with our Series D Stock provide for a rate of conversion or exercise that was
below the market value of our common stock at issuance. The convertible feature of our
Series D Stock is characterized as BCF. The estimated relative fair values of the shares of
our Series D Stock and the warrants issued in connection with such stock were calculated as
approximately $3.9 million and $1.3 million, respectively. The value of the BCF was
determined using the intrinsic value method and calculated as approximately $3.3 million.
Because our Series D Stock did not have a stated redemption date, the value of the BCF was
fully realized at the time our Series D Stock was issued. The fair value of the warrants
was determined using the Black-Scholes option-pricing model as of the date of issuance
assuming a five-year term, stock volatility of 197.63%, and a risk-free interest rate of
2.36%. The value of the BCF was treated as a deemed dividend to the holders of our Series D
Stock and, due to the potential immediate convertibility of our Series D Stock at issuance,
was recorded as an increase to additional paid-in capital and accumulated deficit at the
time of issuance. |
| |
|
We also issued warrants to purchase up to 144,000 shares of our common stock at an exercise
price of $5.88 per share to the placement agent in the October 2009 financing as additional
consideration for its services in connection with the financing. These warrants had a fair
value of approximately $452,000 using the Black-Scholes option-pricing model as of the date
of issuance assuming a five-year term, stock volatility of 197.63%, and a risk-free interest
rate of 2.36%. The warrants became exercisable on April 7, 2010 and are exercisable at any
time on or before October 6, 2014. |
| |
|
3.73344597664961% Series E Convertible Preferred Stock |
| |
|
In January 2010, we completed a registered direct equity financing raising gross proceeds of
$19.0 million involving the issuance of units consisting of 19,000 shares of our
3.73344597664961% Series E Convertible Preferred Stock with a stated value of $1,000 per
share (“Series E Stock”) and 30-month warrants to purchase up to an aggregate of 498,488
shares of our common stock. In the aggregate, the shares of Series E Stock we issued were
convertible into 1,993,965 shares of our common stock. All of the shares of our Series E
Stock have been converted into common stock and are no longer outstanding. Our Series E
Stock would have accrued a cumulative annual dividend of 3.73344597664961% per share until
January 7, 2015, and no dividend thereafter. In accordance with the terms of the Series E
Stock, because the Series E Stock was converted prior to January 7, 2015, we paid the
holders an amount equal to the total dividend that would have accrued in respect of the
shares converted from the issuance date through January 7, 2015, or $186.67 per $1,000 of
stated value of the shares converted. We received approximately $14.0 million in net
proceeds from the financing after deducting the approximately $3.5 million we placed into
escrow accounts to pay the aggregate dividend payment in respect of our Series E Stock,
placement agent’s fees and expenses and other offering expenses. We may receive up to
approximately $4.4 million of additional proceeds from the exercise of the warrants issued
in the January 2010 financing. Those warrants, which have an exercise price of $8.75 per
share, are exercisable any time on or before July 6, 2012, subject to certain beneficial
ownership limitations. |
| |
|
The convertible feature of our Series E Stock and the terms of the warrants issued in
connection with our Series E Stock provide for a rate of conversion or exercise that was
below the market value of our common stock at issuance. The convertible feature of our
Series E Stock is characterized as BCF. The estimated relative fair values of the shares of
our Series E Stock and the warrants issued in connection with such stock were calculated as
approximately $12.4 million and $3.0 million, respectively. The value of the BCF was
determined using the intrinsic value method and calculated as approximately $2.5 million.
Because our Series E Stock did not have a stated redemption date, the value of the BCF was
fully realized at the time our Series E Stock was issued. The fair value of the warrants
was determined using the Black-Scholes option-pricing model as of the date of issuance
assuming a 30-month term, stock volatility of 275.79%, and a risk-free interest rate of
1.325%. The value of the BCF was treated as a deemed dividend to the holders of our Series
E Stock and, due to the potential immediate convertibility of our Series E Stock at
issuance, was recorded as an increase to additional paid-in capital and accumulated deficit
at the time of issuance. |
F-20
ADVENTRX Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
December 31, 2010
| |
|
We also issued warrants to purchase up to 99,696 shares of our common stock at an exercise
price of $11.91 per share to the placement agent in the January 2010 financing as additional
consideration for its services in connection with the financing. These warrants had a fair
value of approximately $724,000 using the Black-Scholes option-pricing model as of the date
of issuance assuming a 4.5-year term, stock volatility of 209.46%, and a risk-free interest
rate of 2.37%. The warrants became exercisable on July 7, 2010 and are exercisable at any
time on or before June 3, 2014. |
| |
|
2.19446320054018% Series F Convertible Preferred Stock |
| |
|
In May 2010, we completed a registered direct equity financing raising gross proceeds of
$19.2 million involving the issuance of units consisting of 19,217.13 shares of our
2.19446320054018% Series F Convertible Preferred Stock with a stated value of $1,000 per
share (“Series F Stock”), 5-year warrants to purchase up to an aggregate of 1,816,608 shares
of our common stock and 1-year warrants to purchase up to an aggregate of 778,548 shares of
our common stock. In the aggregate, the shares of Series F Stock we issued were convertible
into 5,190,312 shares of our common stock. All of the shares of our Series F Stock have
been converted into common stock and are no longer outstanding. Series F Stock would have
accrued a cumulative annual dividend of 2.19446320054018% per share until May 6, 2020, and
no dividend thereafter. In accordance with the terms of the Series F Stock, because the
Series F Stock was converted prior to May 6, 2020, upon conversion of the shares, we paid
the holders an amount equal to the total dividend that would have accrued in respect of the
shares converted from the issuance date through May 6, 2020, or $219.45 per $1,000 of stated
value of the shares converted, less the amount of any dividend paid on such shares before
their conversion. Dividend payments were due on January 1, April 1, July 1 and October 1.
Because 2,884.57 shares of our Series F Stock were outstanding at the time of the July 1,
2010 and October 1, 2010 dividend payment dates, we paid aggregate dividends of
approximately $25,300 to the holders of those outstanding shares and such previously paid
amounts were subtracted from the payments due in respect of those shares at the time of
their conversion. We received approximately $13.3 million in net proceeds from the
financing after deducting the approximately $4.2 million we placed into escrow accounts to
pay the aggregate dividend payment in respect of our Series F Stock, placement agent and
financial advisor fees and other offering expenses. We may receive up to approximately $9.5
million of additional proceeds from the exercise of the warrants issued in the May 2010
financing. The exercise price of the warrants is $3.65 per share. Subject to certain
beneficial ownership limitations, the 5-year warrants are exercisable any time on or before
May 6, 2015 and the 1-year warrants are exercisable any time on or before May 20, 2011. |
| |
|
The convertible feature of our Series F Stock and the terms of the warrants issued in
connection with our Series F Stock provide for a rate of conversion or exercise that was
below the market value of our common stock at issuance. The convertible feature of our
Series F Stock is characterized as BCF. The estimated relative fair values of the shares of
our Series F Stock and the warrants issued in connection with such stock were calculated as
approximately $10.1 million and $4.9 million, respectively. The value of the BCF was
determined using the intrinsic value method and calculated as approximately $3.1 million.
Because our Series F Stock did not have a stated redemption date, the value of the BCF was
fully realized at the time our Series F Stock was issued. The fair value of the 5-year
warrants was determined using the Black-Scholes option-pricing model as of the date of
issuance assuming a 5-year term, stock volatility of 202%, and a risk-free interest rate of
2%. The fair value of the 1-year warrants was determined using the Black-Scholes
option-pricing model as of the date of issuance assuming a 1-year term, stock volatility of
361%, and a risk-free interest rate of 0.4%. The value of the BCF was treated as a deemed
dividend to the holders of our Series F Stock and, due to the potential immediate
convertibility of our Series F Stock at issuance, was recorded as an increase to additional
paid-in capital and accumulated deficit at the time of issuance. |
| |
|
Common Stock Issued for Warrants Exercised |
| |
|
As described above, in December 2009, we issued 240,000 shares of our common stock and
received net proceeds of $0.9 million, in connection with the exercise of warrants issued in
the June 2009 financing at an exercise price of $3.75. |
F-21
ADVENTRX Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
December 31, 2010
| |
|
As described above, in December 2009, we issued 576,000 shares of our common stock and
received net proceeds of $2.1 million in connection with the exercise of warrants issued in
the October 2009 financing at an exercise price of $3.67. |
| |
|
As described above, in January 2010, we issued 84,651 shares of our common stock and
received net proceeds of $0.3 million in connection with the exercise of the remaining
warrants issued in the June 2009 financing at an exercise price of $3.75 per share. |
| |
|
During 2009, warrants were issued to investors in conjunction with the Series A Stock and
Series D Stock financings in June and October 2009, respectively. The Series A warrants to
investors have been fully exercised as described above. In addition, warrants were issued
to the placement agent in each of the Series A Stock, Series B Stock, Series C Stock and
Series D Stock financings in June 2009, July 2009, August 2009 and October 2009,
respectively. See details of the equity financings above. |
| |
|
During 2010, warrants were issued to investors in conjunction with the Series E Stock and
Series F Stock financings in January 2010 and May 2010, respectively. In addition, warrants
were issued to the placement agent of the Series E Stock financing in January 2010. See
details of the equity financings above. |
| |
|
At December 31, 2010, outstanding warrants to purchase shares of common stock are as
follows: |
| |
|
|
|
|
|
|
|
|
| Warrants |
|
Exercise Price |
|
|
Expiration Date |
|
| |
| 432,429 |
|
$ |
56.5000 |
|
|
July 2012 |
| 36,071 |
|
$ |
3.7500 |
|
|
June 2014 |
19,007 |
|
$ |
4.4750 |
|
|
July 2014 |
| 14,183 |
|
$ |
4.0625 |
|
|
August 2014 |
| 216,000 |
|
$ |
3.6700 |
|
|
October 2014 |
| 144,000 |
|
$ |
5.8750 |
|
|
October 2014 |
| 498,488 |
|
$ |
8.7475 |
|
|
July 2012 |
| 99,696 |
|
$ |
11.9125 |
|
|
June 2014 |
| 1,816,608 |
|
$ |
3.6500 |
|
|
May 2015 |
| 778,548 |
|
$ |
3.6500 |
|
|
May 2011 |
| |
|
|
|
|
|
|
| 4,055,030 |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
| (7) |
|
Equity Incentive Plans |
| |
|
At December 31, 2010, we had the 2005 Equity Incentive Plan (the “2005 Plan”), the 2005
Employee Stock Purchase Plan (the “Purchase Plan”), and the 2008 Omnibus Incentive Plan (the
“2008 Plan”) which are described below. The share-based compensation expense from all stock
options granted that has been charged to our consolidated statements of operations in the
years ended December 31, 2010 and 2009 was comprised of the following: |
| |
|
|
|
|
|
|
|
|
| |
|
Years Ended December 31, |
|
| |
|
2010 |
|
|
2009 |
|
| |
Selling, general and administrative expense |
|
$ |
791,688 |
|
|
$ |
543,868 |
|
Research and development expense |
|
|
(5,745 |
) |
|
|
41,569 |
|
|
|
|
|
|
|
|
Share-based compensation expense before taxes |
|
|
785,943 |
|
|
|
585,437 |
|
Related income tax benefits |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
Share-based compensation expense |
|
$ |
785,943 |
|
|
$ |
585,437 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net share-based compensation expense per common
share — basic and diluted |
|
$ |
0.06 |
|
|
$ |
0.13 |
|
|
|
|
|
|
|
|
F-22
ADVENTRX Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
December 31, 2010
| |
|
Since we have net operating loss carry forwards as of December 31, 2010, no excess tax
benefits for the tax deductions related to share-based awards were recognized in the
consolidated statement of operations. Additionally, no incremental tax benefits were
recognized, as there were no stock options exercised in the years ended December 31, 2010
and 2009 that would have resulted in a reclassification to reduce net cash provided by
operating activities with an offsetting increase in net cash provided by financing
activities. |
| |
2005 |
|
Equity Incentive Plan and 2008 Omnibus Incentive Plan |
| |
|
The 2005 and the 2008 Plans, which are stockholder-approved, are intended to encourage
ownership of shares of common stock by our directors, officers, employees, consultants and
advisors and to provide additional incentive for them to promote the success of our business
through the grant of share-based awards. Both plans provide for the grant of incentive and
non-statutory stock options as well as share appreciation rights, restricted shares,
restricted share units, performance units, shares and other share-based awards. Since the
2008 Plan was approved by the Company’s stockholders in May 2008, no awards have been or
will be granted under the 2005 Plan. Share-based awards are subject to terms and conditions
established by our board of directors or the compensation committee of our board of
directors. |
| |
|
As of December 31, 2010, the maximum aggregate number of shares of common stock that may be
issued pursuant to or subject to the foregoing types of awards granted under the 2008 Plan
is 755,348 shares. Any shares of common stock that are subject to options or stock
appreciation rights granted under the 2008 Plan shall be counted against this limit as one
share of common stock for every one share of common stock granted. Any shares of common
stock that are subject to awards other than options or stock appreciation rights granted
under the 2008 Plan shall be counted against this limit as 1.2 shares of common stock for
every one share of common stock granted. If any shares of common stock subject to an award
under the 2008 Plan or the 2005 Plan are forfeited, expire or are settled for cash pursuant
to the terms of an award, the shares subject to the award may be used again for awards under
the 2008 Plan to the extent of the forfeiture, expiration or settlement. The shares of
common stock will be added back as one share for every share of common stock if the shares
were subject to options or stock appreciation rights granted under the 2008 Plan or under
the 2005 Plan, and as 1.2 shares for every share of common stock if the shares were subject
to awards other than options or stock appreciation rights granted under the 2008 Plan or the
2005 Plan. The following shares of common stock will not be added to the shares issuable
under the 2008 Plan: (i) shares tendered by the participant or withheld by the Company in
payment of the purchase price of an option, (ii) shares tendered by the participant or
withheld by the Company to satisfy tax withholding with respect to an award, and (iii)
shares subject to a stock appreciation right that are not issued in connection with the
stock settlement of the stock appreciation right on exercise. Shares of common stock under
awards made in substitution or exchange for awards granted by a company acquired by the
Company, or with which the Company combines, do not reduce the maximum number of shares that
may be issued under the 2008 Plan. In addition, if a company acquired by the Company, or
with which the Company combines, has shares remaining available under a plan approved by its
stockholders, the available shares (adjusted to reflect the exchange or valuation ratio in
the acquisition or combination) may be used for awards under the 2008 Plan and will not
reduce the maximum number of shares of common stock that may be issued under the 2008 Plan;
provided, however that awards using such available shares shall not be made after the date
awards or grants could have been made under the pre-existing plan, absent the acquisition or
combination, and shall only be made to individuals who were not our employees or directors
prior to the acquisition or combination. |
| |
|
Under the 2008 Plan, the purchase price of shares of common stock covered by a stock option
cannot be less than 100% of the fair market value of the common stock on the date the option
is granted. Fair market value of the common stock is generally equal to the closing price
for the common stock on the principal securities exchange on which the common stock is
traded on the date the option is granted (or if there was no closing price on that date, on
the last preceding date on which a closing price is reported). Option awards generally have
ten-year contractual terms and vest over four years based on continuous service; however,
the 2005 Plan and the 2008 Plan allow for other vesting periods and we have granted
employees
options where the requisite service period is three years and we have granted our
non-employee directors options where the requisite service period is three years, one year
and, in one case, four months. |
F-23
ADVENTRX Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
December 31, 2010
| |
|
We canceled options exercisable for 34,000 and 76,229 shares of common stock in the years
ended December 31, 2010 and 2009, respectively, held by employees and directors whose
service to our company terminated during those respective periods. The shares underlying
such options were returned to and are available for re-issuance under the 2008 Plan pursuant
to the terms described above. |
| |
|
During the year ended December 31, 2010, all awards granted under the 2008 Plan were stock
options. During the year ended December 31, 2009, the awards granted under the 2008 Plan
were stock options and restricted stock units. All the restricted stock units granted in
the first quarter of 2009 were subsequently canceled in the first, second and third quarters
of 2009. A summary of all of our option activity as of December 31, 2010 and 2009 and of
changes in options outstanding under the plans during the year ended December 31, 2010 are
as follows: |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Weighted- |
|
|
|
|
| |
|
|
|
|
|
Weighted- |
|
|
Average |
|
|
|
|
| |
|
|
|
|
|
Average |
|
|
Remaining |
|
|
Aggregate |
|
| |
|
|
|
|
|
Exercise |
|
|
Contractual |
|
|
Intrinsic |
|
| |
|
Shares |
|
|
Price |
|
|
Years |
|
|
Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2009 |
|
|
234,356 |
|
|
$ |
19.98 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted |
|
|
203,381 |
|
|
$ |
7.20 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
Cancelled/forfeited/expired |
|
|
(34,000 |
) |
|
$ |
33.62 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2010 |
|
|
403,737 |
|
|
$ |
12.39 |
|
|
|
8.46 |
|
|
$ |
19,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at December 31, 2010 |
|
|
121,464 |
|
|
$ |
26.88 |
|
|
|
7.56 |
|
|
$ |
9,800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and expected to vest at December
31, 2010 |
|
|
370,416 |
|
|
$ |
12.91 |
|
|
|
8.42 |
|
|
$ |
19,438 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
The weighted-average grant-date fair value of options granted during the years ended
December 31, 2010 and 2009 was $6.91 and $3.18, respectively. As of December 31, 2010,
there was approximately $1.1 million of unamortized compensation cost related to unvested
stock option awards, which is expected to be recognized over a weighted-average period of
approximately 2.5 years. |
| |
|
There were no options exercised during the years ended December 31, 2010 and 2009. |
| |
|
Our determination of fair value is affected by our stock price as well as a number of
assumptions that require judgment. The fair value of each option award is estimated on the
date of grant using the Black-Scholes option-valuation model. The assumptions used in the
Black-Scholes option-valuation model for option grants to employees and non-employee
directors during the years ended December 31, 2010 and 2009 are as follows: |
| |
|
|
|
|
|
|
|
|
| |
|
Years Ended December 31, |
|
| |
|
2010 |
|
|
2009 |
|
Risk-free interest rate |
|
|
1.8 – 2.7 |
% |
|
|
2.7 |
% |
Dividend yield |
|
|
0.0 |
% |
|
|
0.0 |
% |
Expected volatility |
|
|
188 – 202 |
% |
|
|
183 |
% |
Expected term (in years) |
|
5 – 6 years |
|
|
6 years |
|
F-24
ADVENTRX Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
December 31, 2010
| |
|
The risk-free interest rate assumption is based on the U.S. Treasury yield for a period
consistent with the expected term of the option in effect at the time of the grant. We have
not paid any dividends on common stock since our inception and do not anticipate paying
dividends on our common stock in the foreseeable future. The expected option term is
computed using the “simplified” method as permitted under the provisions of Staff Accounting
Bulletin (“SAB 107”). SAB 107’s guidance was extended indefinitely by SAB 110. The
expected volatility is based on the historical volatility of our common stock based on the
daily close prices. |
| |
|
No options were granted to consultants in 2010 and 2009. We recognized $0 in share-based
compensation expense associated with non-employee options in the years ended December 31,
2010 and 2009. In accordance with ASC 718, “Compensation — Stock Compensation,”
share-based compensation expense associated with the non-employee director options is
included with employee share-based compensation expense. |
| |
|
The following table summarizes information concerning our outstanding and exercisable stock
options as of December 31, 2010: |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Options Outstanding |
|
|
Options Exercisable |
|
| |
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Average |
|
|
Weighted- |
|
|
|
|
|
|
Weighted- |
|
| |
|
|
|
|
|
Remaining |
|
|
Average |
|
|
|
|
|
Average |
|
| |
|
Number |
|
|
Contractual |
|
|
Exercise |
|
|
Number |
|
|
Exercise |
|
| Range of Exercise Price |
|
Outstanding |
|
|
Life |
|
|
Price |
|
|
Exercisable |
|
|
Price |
|
$1.63 to $3.25 |
|
|
155,998 |
|
|
|
8.67 |
|
|
$ |
3.04 |
|
|
|
44,000 |
|
|
$ |
2.88 |
|
$5.91 to $8.00 |
|
|
183,381 |
|
|
|
9.10 |
|
|
$ |
7.79 |
|
|
|
22,888 |
|
|
$ |
8.00 |
|
$9.25 to $13.50 |
|
|
28,000 |
|
|
|
6.92 |
|
|
$ |
11.88 |
|
|
|
18,400 |
|
|
$ |
11.03 |
|
$57.50 to $118.75 |
|
|
36,358 |
|
|
|
5.53 |
|
|
$ |
76.04 |
|
|
|
36,176 |
|
|
$ |
76.08 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
403,737 |
|
|
|
8.46 |
|
|
$ |
12.39 |
|
|
|
121,464 |
|
|
$ |
26.88 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Employee Stock Purchase Plan |
| |
|
The Purchase Plan was approved by our stockholders in 2005; however, we have not implemented
the Purchase Plan. The Purchase Plan allows all eligible employees to purchase shares of
common stock at 85% of the lower of the fair market value on the first or the last day of
each offering period. Employees may authorize us to withhold up to 15% of their
compensation during any offering period, subject to certain limitations. The maximum
aggregate number of shares of common stock that may be issued under the Purchase Plan is
186,945 as of December 31, 2010. This maximum number is subject to an annual automatic
increase on January 1 of each year equal to the lesser of (i) 1% of the number of
outstanding shares of common stock on such day, (ii) 30,000 or (iii) such other amount as
our board of directors may specify. At December 31, 2010, no shares of common stock have
been issued under the Purchase Plan. On January 1, 2011, the number of shares of common
stock available for issuance under the Purchase Plan increased by 30,000 in accordance with
the provisions for annual increases under the Purchase Plan. |
| |
|
We are obligated under operating leases for office space and equipment. In July 2004, we
entered into a lease for office space in a facility in San Diego, California that served as
our headquarters. In June 2005, we leased additional space in the same facility. During
May 2009, the lease was extended for only a portion of the office space. The lease was set
to expire in August 2009 and we vacated an additional portion of the facility at that time.
During December 2009, we amended the lease to extend its term for an additional eight months
through January 31, 2011. During February 2010, we further amended the lease to lease
adjacent office space through January 31, 2011, and to terminate our obligations with
respect to the office space we were then occupying, effective March 1, 2010. During the
year ended December 31, 2009,
our average monthly office lease payment was $14,700 per month. During the year ended
December 31, 2010, our average monthly office lease payment was $6,400 per month. We lease
copiers and an automobile, which leases expire in 2015 and 2011, respectively. |
F-25
ADVENTRX Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
December 31, 2010
| |
|
In December 2010, we entered into a new lease for office space at a different facility in
San Diego, California to serve as our headquarters, effective January 1, 2011. The term of
the new lease will expire January 31, 2012, unless we exercise our option to extend the
lease an additional 12 months. The average base rent for this space is approximately
$15,600 per month. |
| |
|
Rent expense was approximately $99,000 and $203,000 during the years ended December 31, 2010
and 2009, respectively. |
| |
|
Future rental commitments under all operating leases are as follows: |
| |
|
|
|
|
| Year Ending December 31, |
|
|
|
|
| |
2011 |
|
$ |
205,562 |
|
2012 |
|
|
25,260 |
|
2013 |
|
|
8,326 |
|
2014 |
|
|
8,326 |
|
2015 |
|
|
694 |
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
248,168 |
|
|
|
|
|
| |
|
In June 2010, we announced that we had entered into a license agreement with respect to our
know-how to develop, make, use and sell ANX-510, or CoFactor®
(5,10-methylenetetrahydrofolate), with Theragence, Inc., a California corporation
(“Theragence”). Pursuant to the agreement, we granted to Theragence an exclusive worldwide
license, including the right to grant sublicenses under certain circumstances, to conduct
research on and to develop, make, have made, use, offer for sale, sell, have sold and import
licensed products in any field or use. We are entitled to receive royalties on net sales of
licensed products and commercial milestone payments of up to approximately $30 million based
on aggregate gross sales of licensed products in the United States, European Union and
Japan. Theragence agreed to use commercially reasonable efforts to research, develop and
commercialize at least one licensed product. We discontinued active work on our CoFactor
program in October 2008. |
| |
|
In March 2009, we announced that we and our wholly-owned subsidiary, SD Pharmaceuticals,
Inc., had entered into a license agreement with respect to our product candidate ANX-514
(docetaxel emulsion for injection) with Shin Poong Pharmaceutical Co., Ltd., a company
organized under the laws of the Republic of Korea (“Shin Poong”), pursuant to which we
granted to Shin Poong an exclusive license, including the right to sublicense, to research,
develop, make, have made, use, offer for sale, sell and import licensed products, in each
case solely for the treatment of cancer by intravenous administration of formulations of
docetaxel as emulsified products and solely in South Korea. Under the terms of the
agreement, we received an upfront licensing fee of $0.3 million, and are entitled to receive
a regulatory milestone payment of either $0.2 million or $0.4 million upon receipt of
regulatory approval for marketing a licensed product in South Korea (the amount depends on
whether the Korea Food and Drug Administration requires Shin Poong to conduct a
bioequivalence or clinical study in human subjects prior to receipt of regulatory approval),
one-time commercial milestone payments tied to annual net sales of licensed products in an
aggregate amount of up to $1.5 million and royalty payments on net sales of licensed
products. Shin Poong is responsible for all development and commercial activities related
to ANX-514 in South Korea. We agreed to pay Shin Poong $0.1 million if the Korea Food and
Drug Administration required Shin Poong to conduct a bioequivalence or clinical trial in
human subjects prior to receipt of regulatory approval and we elect not to supply product to
conduct such trial, which supply obligation is subject to limitations. |
F-26
ADVENTRX Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
December 31, 2010
| |
|
We received the $0.3 million upfront licensing fee in April 2009. We recognized $0.3
million in licensing revenue in the three-month period ended March 31, 2009 because the
criteria under our revenue recognition policy were met in that period. |
| |
|
In September 2010, pursuant to the terms of the license agreement, we elected to make the
$0.1 million cash payment to Shin Poong in lieu of supplying product for the ANX-514 trial
in human subjects required by the Korea Food and Drug Administration. |
| |
|
In November 2010, the Internal Revenue Service notified us that an aggregate amount of
$488,959 in grants had been awarded to us under the qualifying therapeutic discovery project
(“QTDP”) program established under Section 48D of the Internal Revenue Code as a result of
the Patient Protection and Affordable Care Act of 2010. We submitted applications in July
2010 for qualified investments we made, or expected to make, in 2009 and 2010 in our
ANX-530, or Exelbine™, and ANX-514 programs, and a grant in the amount of $244,479 was
approved for each of those programs. These grants are not taxable for federal income tax
purposes. We received full payment of the grants in November 2010, all of which we
recognized as revenue in the three month period ended December 31, 2010 because the criteria
under our revenue recognition policy were met in that period. |
| |
|
Due to our historical net loss position, and as we have recorded a full valuation allowance
against net deferred tax assets, there is no provision or benefit for income taxes recorded
for the years ended December 31, 2010 and 2009. |
| |
|
The income tax provision/(benefit) is different from that which would be obtained by
applying the statutory Federal income tax rate of 34% to income before income tax expense.
The items causing this difference for the years ended December 31, 2010 and 2009 are as
follows: |
| |
|
|
|
|
|
|
|
|
| |
|
December 31, |
|
| |
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
Income tax benefit at federal statutory rate |
|
$ |
(2,873,000 |
) |
|
$ |
(3,851,000 |
) |
R & D credit |
|
|
1,625,000 |
|
|
|
(150,000 |
) |
Stock options |
|
|
164,000 |
|
|
|
770,000 |
|
Net operating true-ups |
|
|
26,574,000 |
|
|
|
(20,000 |
) |
Other |
|
|
(163,000 |
) |
|
|
62,000 |
|
Change in federal valuation allowance |
|
|
(25,327,000 |
) |
|
|
3,189,000 |
|
|
|
|
|
|
|
|
Total |
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
F-27
ADVENTRX Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
December 31, 2010
| |
|
Deferred income taxes reflect the net tax effect of temporary differences between the
carrying amount of assets and liabilities for financial reporting purposes and the amounts
used for income tax purposes. Significant components of deferred tax assets and liabilities
at December 31, 2010 and 2009 are as follows: |
| |
|
|
|
|
|
|
|
|
| |
|
December 31, |
|
| |
|
2010 |
|
|
2009 |
|
Deferred tax assets: |
|
|
|
|
|
|
|
|
Accrued expenses |
|
$ |
57,252 |
|
|
$ |
85,538 |
|
Stock options expense under ASC 718 |
|
|
1,129,227 |
|
|
|
1,008,517 |
|
Net operating loss carry forwards |
|
|
12,732,504 |
|
|
|
37,484,836 |
|
Income tax credit carry forwards |
|
|
202,215 |
|
|
|
2,478,625 |
|
Property and equipment |
|
|
6,820 |
|
|
|
12,094 |
|
Intangibles |
|
|
2,246,349 |
|
|
|
2,360,396 |
|
Other |
|
|
6,108 |
|
|
|
6,553 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets |
|
|
16,380,475 |
|
|
|
43,436,559 |
|
Less: valuation allowance |
|
|
(16,380,475 |
) |
|
|
(43,436,559 |
) |
|
|
|
|
|
|
|
Total deferred tax assets, net of valuation allowance |
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
| |
|
We have established a full valuation allowance against our net deferred tax assets due to
the uncertainty surrounding the realization of such assets. Management has determined it is
more likely than not that the deferred tax assets are not realizable due to our historical
loss position. |
| |
|
The deferred tax asset for net operating losses and the related valuation allowance includes
approximately $47,000 related to stock option deductions, the benefit of which may
eventually be credited to equity. We recognize windfall tax benefits associated with the
exercise of stock options directly to stockholders’ equity only when realized. Accordingly,
as we are in a cumulative loss position, deferred tax assets have not been recognized for
net operating loss carry forwards resulting from windfall tax benefits generated through
stock option deductions. |
| |
|
At December 31, 2010, we had federal and California tax loss carry forwards of approximately
$31.5 million and $34.4 million, respectively. The federal and California net operating loss
carry forwards begin to expire in 2016 and 2013, respectively, if unused. At December 31,
2010, we had federal and California R&D tax credit carry forwards of approximately $145,000
and $87,000, respectively. The federal R&D tax credits will begin to expire in 2029. The
California R&D tax credits do not expire. |
| |
|
Pursuant to the Internal Revenue Code of 1986, as amended, (“IRC”) §382 and IRC §383, our
ability to use net operating loss and R&D tax credit carry forwards to offset future taxable
income is limited if we experience a cumulative change in ownership of more than 50% within
a three-year period. During 2010, we completed a formal study for the period January 1,
2008 through January 7, 2010. This study and a previous study identified several ownership
changes within the meaning of IRC §382. Upon application of limitations prescribed by IRC
§382, we identified certain tax attributes that would expire before utilization and have
adjusted our deferred tax assets for net operating loss and R&D tax credit carry forwards
accordingly. We will need to update the IRC §382 analysis since January 7, 2010 for the
subsequent registered direct equity financing completed during the year ended December 31,
2010. If an ownership change occurred after January 7, 2010, including as a result of the
equity financings we completed in May 2010 and January 2011, the amount of net operating loss
and R&D tax credit carry forwards available for utilization would be subject to further
limitation. |
| |
|
In accordance with authoritative guidance, the impact of an uncertain income tax position on
the income tax return must be recognized at the largest amount that is more-likely-than-not
to be sustained upon audit by the relevant taxing authority. An uncertain income tax
position will not be recognized if it has less than a 50% likelihood of being sustained. As
of December 31, 2010, we continue to have no unrecognized tax benefits. There are no
unrecognized tax benefits included on the balance sheet that would, if recognized, impact
the effective tax rate. We do not anticipate there will be a significant change in
unrecognized tax benefits within the next 12 months. |
| |
|
Our policy is to recognize interest and/or penalties related to income tax matters in income
tax expense. Because we have generated net operating losses since inception, no tax
liability, penalties or interest has
been recognized for balance sheet or income statement purposes as of and for the years ended
December 31, 2010 and 2009. |
F-28
ADVENTRX Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
December 31, 2010
| |
|
We are subject to taxation in the U.S. and the state of California. All of our tax years are
subject to examination by the tax authorities due to the carry forward of unutilized net
operating losses and R&D tax credits. |
| |
|
In the normal course of business, we may become subject to lawsuits and other claims and
proceedings. Such matters are subject to uncertainty and outcomes are often not predictable
with assurance. We are not currently a party to any material pending litigation or other
material legal proceeding. |
| |
|
We have a defined contribution savings plan pursuant to Section 401(k) of the IRC. The plan
is for the benefit of all qualifying employees and permits voluntary contributions by
employees up to 100% of eligible compensation, subject to the Internal Revenue Service
(“IRS”)-imposed maximum limits. From January 1, 2008 until May 16, 2009, the terms of the
plan required us to make matching contributions equal to 100% of employee contributions up
to 6% of eligible compensation, limited by the IRS-imposed maximum. In April 2009, we
amended the plan such that we were not required to make matching contributions on any
employee contributions made by a “highly-compensated employee” from May 16, 2009 through
December 31, 2009. In November 2009, we amended the plan to reinstate the 6% matching
contribution effective for the plan year beginning January 1, 2010. We incurred total
expenses of $47,250 and $29,661 in employer matching contributions in 2010 and 2009,
respectively. |
| |
|
We operate our business on the basis of a single reportable segment, which, fundamentally,
is the business of acquiring, developing and commercializing proprietary product candidates.
We evaluate our Company as a single operating segment. The majority of our operating
activities and work performed by our employees are currently conducted from a single
location in the U.S. We recognized revenues of $0.5 million and $0.3 million in 2010 and
2009, respectively, which revenues were derived from U.S. government grants in 2010 and
license fees under a license agreement with Shin Poong Pharmaceutical Co., Ltd. in 2009. |
| (15) |
|
Summary of Quarterly Financial Data (unaudited) |
| |
|
The following is a summary of the unaudited quarterly results of operations for the years
ended December 31, 2010 and 2009: |
Quarterly statements of operations data
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Quarters Ended |
|
| for 2010 (unaudited): |
|
March 31 |
|
|
June 30 |
|
|
September 30 |
|
|
December 31 |
|
Grant revenue |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
488,959 |
|
Gross margin |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
488,959 |
|
Loss from operations |
|
|
(2,419,885 |
) |
|
|
(1,942,750 |
) |
|
|
(1,868,138 |
) |
|
|
(2,308,924 |
) |
Net loss |
|
|
(2,403,074 |
) |
|
|
(1,919,442 |
) |
|
|
(1,843,899 |
) |
|
|
(2,284,507 |
) |
Net loss applicable to common stock |
|
|
(4,917,994 |
) |
|
|
(5,044,318 |
) |
|
|
(1,843,899 |
) |
|
|
(2,284,507 |
) |
Basic and diluted net loss per share |
|
$ |
(0.48 |
) |
|
$ |
(0.39 |
) |
|
$ |
(0.13 |
) |
|
$ |
(0.15 |
) |
Basic and diluted weighted average
number of shares of common stock
outstanding |
|
|
10,143,789 |
|
|
|
12,886,826 |
|
|
|
14,701,216 |
|
|
|
14,921,292 |
|
F-29
ADVENTRX Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
December 31, 2010
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Quarters Ended |
|
| for 2009 (unaudited): |
|
March 31 |
|
|
June 30 |
|
|
September 30 |
|
|
December 31 |
|
Licensing revenue |
|
$ |
300,000 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Gross margin |
|
|
300,000 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Loss from operations |
|
|
(3,158,786 |
) |
|
|
(2,552,485 |
) |
|
|
(2,349,865 |
) |
|
|
(3,224,549 |
) |
Net loss |
|
|
(3,157,010 |
) |
|
|
(2,595,541 |
) |
|
|
(2,352,586 |
) |
|
|
(3,219,921 |
) |
Net loss applicable to common stock |
|
|
(3,157,010 |
) |
|
|
(3,827,956 |
) |
|
|
(2,728,675 |
) |
|
|
(6,478,304 |
) |
Basic and diluted net loss per share |
|
$ |
(0.87 |
) |
|
$ |
(1.02 |
) |
|
$ |
(0.57 |
) |
|
$ |
(1.00 |
) |
Basic and diluted weighted average
number of shares of common stock
outstanding |
|
|
3,610,102 |
|
|
|
3,735,572 |
|
|
|
4,779,228 |
|
|
|
6,509,266 |
|
| (16) |
|
Severance Related Expenses |
| |
|
As part of restructuring to reduce operating costs, we completed workforce reductions of
nine employees in the three months ended December 31, 2008 and fifteen employees in the six
months ended June 30, 2009. As a result, we recorded severance-related charges of $350,000
in the first quarter of 2009, of which $237,000 was recorded in research and development and
the balance was recorded in selling, general and administrative, and $163,000 in the second
quarter of 2009, of which $121,000 was recorded in research and development and the balance
was recorded in selling, general and administrative. As of June 30, 2009, all
severance-related costs associated with these workforce reductions had been recorded and
paid. No severance-related costs were recorded or paid during the year ended December 31,
2010. |
| |
|
On January 11, 2011, we completed a registered direct equity financing involving the
issuance of units consisting of 8,184,556 shares of our common stock, 5-year warrants to
purchase up to an aggregate of 2,046,139 shares of our common stock and 1-year warrants to
purchase up to an aggregate of 2,046,139 shares of our common stock. The gross proceeds of
this financing were $22.5 million, and we received $21.0 million in net proceeds after
deducting the fees and expenses of our placement agent and our other offering expenses. We
may receive up to $11.3 million of additional proceeds from the exercise of the warrants
issued in this financing. Those warrants have an exercise price of $2.75 per share. The
5-year warrants are exercisable any time on or before January 11, 2016 and the 1-year
warrants are exercisable any time on or before January 19, 2012, subject to certain
beneficial ownership limitations. |
| |
|
In November 2010, we submitted a new drug application (“NDA”), for Exelbine to the U.S. Food
and Drug Administration (“FDA”), and in January 2011, we announced that the FDA accepted the
Exelbine NDA for filing and established a Prescription Drug User Fee Act, or PDUFA, goal
date of September 1, 2011 to finish its review of the Exelbine NDA. |
F-30
ADVENTRX Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
December 31, 2010
| |
|
In February 2011, we entered into an agreement and plan of merger to acquire SynthRx, Inc.
(“SynthRx”), a privately-held Delaware corporation developing a purified form of a rheologic
and antithrombotic agent, poloxamer 188 (“188”), in exchange for shares of our common stock.
As discussed in more detail under Part I, Item 1 “Business” in this report, we initially
intend to develop purified 188 for the treatment of sickle cell crisis in a pediatric
population and, if our acquisition of SynthRx closes and we are able to reach agreement with
the FDA on a study protocol on a timely basis, we may initiate a phase 3 clinical trial of
purified 188 for that indication in 2012. In connection with the consummation of this
acquisition, we would issue 2,938,773 shares of our common stock to SynthRx’s stakeholders,
1,938,773 of which would be subject to repurchase by us in the event development of purified
188 does not achieve the first milestone described below. We could issue up to an aggregate
of 13,478,050 additional shares of our common stock to SynthRx’s stakeholders if the
development of purified 188 achieves certain milestones, as described below, and our
stockholders approve the issuance of such milestone-related shares, as required by NYSE Amex
rules. If our stockholders do not approve the issuance of the milestone-related shares,
under the terms of the merger agreement, we would be required to pay SynthRx’s stakeholders
in cash the value of
the milestone-related shares we would have otherwise issued, with all such cash payments
made in quarterly installments and, with respect to the cash value associated with
12,478,050 of the milestone-related shares, payable based on net sales of purified 188. Of
the shares issuable in connection with achievement of milestones, up to 1,000,000 shares
would be issuable upon the dosing of the first patient in a phase 3 clinical study that the
FDA has indicated may be sufficient to support approval of a new drug application covering
the use of purified 188 for the treatment of sickle cell crisis in children (the “188 NDA”),
which we refer to as the first milestone; 3,839,400 shares would be issuable upon acceptance
for review of the 188 NDA by the FDA, which we refer to as the second milestone; and
8,638,650 shares would be issuable upon approval by the FDA of the 188 NDA, which we refer
to as the third milestone. |
F-31
Exhibit Index
| |
|
|
|
|
| Exhibit |
|
Description |
| |
|
|
|
|
| |
2.1 |
(1) |
|
Agreement and Plan of Merger, dated April 7, 2006, among the registrant, Speed
Acquisition, Inc., SD Pharmaceuticals, Inc. and certain individuals named
therein (including exhibits thereto) |
| |
|
|
|
|
| |
3.1 |
(2) |
|
Amended and Restated Certificate of Incorporation of the registrant |
| |
|
|
|
|
| |
3.2 |
(3) |
|
Certificate of Amendment to the Amended and Restated Certificate of
Incorporation of the registrant dated October 5, 2009 |
| |
|
|
|
|
| |
3.3 |
(4) |
|
Certificate of Amendment to the Amended and Restated Certificate of
Incorporation of the registrant, dated April 23, 2010 |
| |
|
|
|
|
| |
3.4 |
(5) |
|
Certificate of Designation of Preferences, Rights and Limitations of 0% Series A
Convertible Preferred Stock |
| |
|
|
|
|
| |
3.5 |
(6) |
|
Certificate of Designation of Preferences, Rights and Limitations of 5% Series B
Convertible Preferred Stock |
| |
|
|
|
|
| |
3.6 |
(7) |
|
Certificate of Designation of Preferences, Rights and Limitations of 5% Series C
Convertible Preferred Stock |
| |
|
|
|
|
| |
3.7 |
(8) |
|
Certificate of Designation of Preferences, Rights and Limitations of 4.25660%
Series D Convertible Preferred Stock |
| |
|
|
|
|
| |
3.8 |
(9) |
|
Certificate of Designation of Preferences, Rights and Limitations of
3.73344597664961% Series E Convertible Preferred Stock |
| |
|
|
|
|
| |
3.9 |
(10) |
|
Certificate of Designation of Preferences, Rights and Limitations of
2.19446320054018% Series F Convertible Preferred Stock |
| |
|
|
|
|
| |
3.10 |
(11) |
|
Amended and Restated Bylaws of the registrant (formerly known as Biokeys
Pharmaceuticals, Inc.) |
| |
|
|
|
|
| |
10.1 |
(12) |
|
Securities Purchase Agreement, dated July 21, 2005, among the registrant and the
Purchasers (as defined therein) |
| |
|
|
|
|
| |
10.2 |
(12) |
|
Rights Agreement, dated July 27, 2005, among the registrant, the Icahn
Purchasers and Viking (each as defined therein) |
| |
|
|
|
|
| |
10.3 |
(13) |
|
First Amendment to Rights Agreement, dated September 22, 2006, among the
registrant and the Icahn Purchasers (as defined therein) |
| |
|
|
|
|
| |
10.4 |
(14) |
|
Second Amendment to Rights Agreement, dated February 25, 2008, among the
registrant and the Icahn Purchasers (as defined therein) |
| |
|
|
|
|
| |
10.5 |
(15) |
|
Third Amendment to Rights Agreement, dated August 26, 2009, among the registrant
and Icahn Purchasers (as defined therein) |
| |
|
|
|
|
| |
10.6 |
(12) |
|
Form of $2.26 Common Stock Warrant issued on July 27, 2005 to Icahn Partners LP,
Icahn Partners Master Fund LP, High River Limited Partnership, Viking Global
Equities LP and VGE III Portfolio Ltd. |
| |
|
|
|
|
| |
10.7 |
(12) |
|
Form of $2.26 Common Stock Warrant issued on July 27, 2005 to North Sound Legacy
Institutional Fund LLC and North Sound Legacy International Ltd. |
| |
|
|
|
|
| |
10.8 |
(5) |
|
Engagement Letter Agreement, dated June 7, 2009, by and between the registrant
and Rodman & Renshaw, LLC |
| |
|
|
|
|
| |
10.9 |
(5) |
|
Securities Purchase Agreement, date June 8, 2009, governing the issuance and
sale of the registrant’s 0% Series A Convertible Preferred Stock and 5-year
common stock purchase warrants |
| |
|
|
|
|
| Exhibit |
|
Description |
| |
|
|
|
|
| |
10.10 |
(5) |
|
Form of Common Stock Purchase Warrant issued on June 12, 2009 by the registrant
to the purchasers of the registrant’s 0% Series A Convertible Preferred Stock
and to Rodman & Renshaw, LLC |
| |
|
|
|
|
| |
10.11 |
(6) |
|
Engagement Letter Agreement, dated June 26, 2009, by and between the registrant
and Rodman & Renshaw, LLC |
| |
|
|
|
|
| |
10.12 |
(6) |
|
Securities Purchase Agreement, dated June 29, 2009, governing the issuance and
sale of the registrant’s 5% Series B Convertible Preferred Stock |
| |
|
|
|
|
| |
10.13 |
(6) |
|
Form of Common Stock Purchase Warrant issued on July 6, 2009 by the registrant
to Rodman & Renshaw, LLC |
| |
|
|
|
|
| |
10.14 |
(7) |
|
Engagement Letter Agreement, dated August 4, 2009, by and between the registrant
and Rodman & Renshaw, LLC |
| |
|
|
|
|
| |
10.15 |
(7) |
|
Securities Purchase Agreement, dated August 5, 2009, governing the issuance and
sale of the registrant’s 5% Series C Convertible Preferred Stock |
| |
|
|
|
|
| |
10.16 |
(7) |
|
Form of Common Stock Purchase Warrant issued on August 10, 2009 by the
registrant to Rodman & Renshaw, LLC |
| |
|
|
|
|
| |
10.17 |
(16) |
|
Engagement Letter Agreement, dated September 24, 2009, by and between the
registrant and Rodman & Renshaw, LLC |
| |
|
|
|
|
| |
10.18 |
(8) |
|
Engagement Letter Agreement, dated September 29, 2009, by and between the
registrant and Rodman & Renshaw, LLC |
| |
|
|
|
|
| |
10.19 |
(8) |
|
Form of Securities Purchase Agreement, dated October 6, 2009, governing the
issuance and sale of the registrant’s 4.25660% Series D Convertible Preferred
Stock and 5-year common stock purchase warrants |
| |
|
|
|
|
| |
10.20 |
(8) |
|
Form of Common Stock Purchase Warrant issued on October 9, 2009 by the
registrant to the purchasers of the registrant’s 4.25660% Series D Convertible
Preferred Stock and to Rodman & Renshaw, LLC |
| |
|
|
|
|
| |
10.21 |
(9) |
|
Engagement Letter Agreement, dated January 3, 2010, by and between the
registrant and Rodman & Renshaw, LLC |
| |
|
|
|
|
| |
10.22 |
(9) |
|
Securities Purchase Agreement, dated as of January 4, 2010, governing the
issuance and sale of the registrant’s 3.73344597664961% Series E Convertible
Preferred Stock and 30-month common stock purchase warrants |
| |
|
|
|
|
| |
10.23 |
(9) |
|
Form of Common Stock Purchase Warrant issued on January 7, 2010 by the
registrant to the purchasers of the registrant’s 3.73344597664961% Series E
Convertible Preferred Stock and to Rodman & Renshaw, LLC |
| |
|
|
|
|
| |
10.24 |
(10) |
|
Engagement Letter Agreement, dated April 29, 2010, by and between the registrant
and Rodman & Renshaw, LLC |
| |
|
|
|
|
| |
10.25 |
(10) |
|
Form of Securities Purchase Agreement, dated May 2, 2010 governing the issuance
and sale of the registrant’s 2.19446320054018% Series F Convertible Preferred
Stock and 5-year and 1-year common stock purchase warrants |
| |
|
|
|
|
| |
10.26 |
(10) |
|
Form of Series A and B Common Stock Purchase Warrants issued on May 6, 2010 by
the registrant to the purchasers of the registrant’s 2.19446320054018% Series F
Convertible Preferred Stock |
| |
|
|
|
|
| |
10.27 |
(17) |
|
Engagement Letter Agreement, dated January 5, 2011, by and between the
registrant and Rodman & Renshaw, LLC |
| |
|
|
|
|
| Exhibit |
|
Description |
| |
|
|
|
|
| |
10.28 |
(17) |
|
Form of Securities Purchase Agreement, dated January 6, 2011 governing the
issuance and sale of the registrant’s common stock and 5-year and 1-year common
stock purchase warrants |
| |
|
|
|
|
| |
10.29 |
(17) |
|
Form of [Series A/B] Common Stock Purchase Warrant issued on January 11, 2011 by
the registrant to the purchasers of the registrant’s common stock and to Rodman
& Renshaw, LLC |
| |
|
|
|
|
| |
10.30 |
#(18) |
|
2005 Equity Incentive Plan |
| |
|
|
|
|
| |
10.31 |
#(19) |
|
Form of Stock Option Agreement under the 2005 Equity Incentive Plan |
| |
|
|
|
|
| |
10.32 |
#(20) |
|
Form of Stock Option Agreement under the 2005 Equity Incentive Plan (for
director option grants beginning in 2008) |
| |
|
|
|
|
| |
10.33 |
#(21) |
|
Form of Stock Option Agreement under the 2005 Equity Incentive Plan (for option
grants to employees approved in March 2008) |
| |
|
|
|
|
| |
10.34 |
#(2) |
|
Form of Restricted Share Award Agreement under the 2005 Equity Incentive Plan |
| |
|
|
|
|
| |
10.35 |
#(22) |
|
2008 Omnibus Incentive Plan |
| |
|
|
|
|
| |
10.36 |
#(23) |
|
Form of Notice of Grant of Restricted Stock Units under the 2008 Omnibus
Incentive Plan (for grants to employees in January 2009) |
| |
|
|
|
|
| |
10.37 |
#(23) |
|
Form of Restricted Stock Units Agreement under the 2008 Omnibus Incentive Plan |
| |
|
|
|
|
| |
10.38 |
#(24) |
|
Form of Non-Statutory Stock Option Grant Agreement (for directors) under the
2008 Omnibus Incentive Plan |
| |
|
|
|
|
| |
10.39 |
#(24) |
|
Form of Non-Statutory/Incentive Stock Option Grant Agreement (for
consultants/employees) under the 2008 Omnibus Incentive Plan |
| |
|
|
|
|
| |
10.40 |
#(25) |
|
Form of Incentive Stock Option Grant Agreement under the 2008 Omnibus Incentive
Plan (for grant to Brian M. Culley in July 2009) |
| |
|
|
|
|
| |
10.41 |
#(25) |
|
Form of Incentive Stock Option Grant Agreement under the 2008 Omnibus Incentive
Plan (for grant to Patrick L. Keran in July 2009) |
| |
|
|
|
|
| |
10.42 |
#(26) |
|
Form of letter, dated January 20, 2010, modifying options granted to Brian M.
Culley and Patrick L. Keran in July 2009 |
| |
|
|
|
|
| |
10.43 |
#(26) |
|
Form of Incentive Stock Option Grant Agreement under the 2008 Omnibus Incentive
Plan (for grant to Brian M. Culley in January 2010) |
| |
|
|
|
|
| |
10.44 |
#(26) |
|
Form of Incentive Stock Option Grant Agreement under the 2008 Omnibus Incentive
Plan (for grant to Patrick L. Keran in January 2010) |
| |
|
|
|
|
| |
10.45 |
(20) |
|
License Agreement, dated December 10, 2005, among SD Pharmaceuticals, Latitude
Pharmaceuticals and Andrew Chen, including a certain letter, dated November 20,
2007, clarifying the scope of rights thereunder |
| |
|
|
|
|
| |
10.46 |
†(27) |
|
License Agreement, dated March 25, 2009, among the registrant, SD
Pharmaceuticals, Inc. and Shin Poong Pharmaceutical Co., Ltd. |
| |
|
|
|
|
| |
10.47 |
(28) |
|
Standard Multi-Tenant Office Lease — Gross, dated June 3, 2004, between the
registrant and George V. Casey & Ellen M. Casey, Trustees of the Casey Family
Trust dated June 22, 1998 |
| |
|
|
|
|
| |
10.48 |
(2) |
|
First Amendment to the Standard Multi-Tenant Office Lease — Gross, dated June
3, 2004 between the registrant and George V. & Ellen M. Casey, Trustees of the
Casey Family Trust dated June 22, 1998 |
| |
|
|
|
|
| |
10.49 |
(29) |
|
Second Amendment to Standard Mutli-Tenant Office Lease — Gross, dated July 22,
2009, by and among Westcore Mesa View, LLC, DD Mesa View LLC and the registrant |
| |
|
|
|
|
| |
|
|
|
|
| Exhibit |
|
Description |
| |
| |
10.50 |
(30) |
|
Third Amendment to Standard Multi-Tenant Office Lease — Gross, dated December
10, 2009, by and among Westcore Mesa View, LLC, DD Mesa View, LLC and the
registrant |
| |
|
|
|
|
| |
10.51 |
(31) |
|
Fourth Amendment to Standard Multi-Tenant Office Lease — Gross, dated February
4, 2010, by and among Westcore Mesa View, LLC, DD Mesa View, LLC and the
registrant |
| |
|
|
|
|
| |
10.52 |
#(32) |
|
Offer letter, dated November 15, 2004, to Brian M. Culley |
| |
|
|
|
|
| |
10.53 |
#(23) |
|
Retention and Incentive Agreement, dated January 28, 2009 between the registrant
and Brian M. Culley |
| |
|
|
|
|
| |
10.54 |
#(27) |
|
Retention and Incentive Agreement, dated January 28, 2009, between the
registrant and Patrick L. Keran |
| |
|
|
|
|
| |
10.55 |
#(31) |
|
Consulting Agreement, effective as of July 15, 2009, and Amendment to Consulting
Agreement, effective as of December 31, 2009, between the registrant and Michele
L. Yelmene |
| |
|
|
|
|
| |
10.56 |
#(25) |
|
2009 Mid-Year Incentive Plan for Brian M. Culley and Patrick L. Keran |
| |
|
|
|
|
| |
10.57 |
#(25) |
|
Retention and Severance Plan (as of July 21, 2009) for Brian M. Culley and
Patrick L. Keran |
| |
|
|
|
|
| |
10.58 |
#(26) |
|
2010 Incentive Plan for Brian M. Culley and Patrick L. Keran |
| |
|
|
|
|
| |
10.59 |
#(31) |
|
Consulting Agreement, effective as of November 23, 2009, between the registrant
and Eric K. Rowinsky |
| |
|
|
|
|
| |
10.60 |
#(33) |
|
Director Compensation Policy, adopted June 21, 2006 |
| |
|
|
|
|
| |
10.61 |
#(31) |
|
Director Compensation Policy, adopted January 25, 2010 |
| |
|
|
|
|
| |
10.62 |
(34) |
|
Form of Director and Officer Indemnification Agreement |
| |
|
|
|
|
| |
21.1 |
|
|
List of Subsidiaries |
| |
|
|
|
|
| |
23.1 |
|
|
Consent of J.H. Cohn LLP, Independent Registered Public Accounting Firm |
| |
|
|
|
|
| |
31.1 |
|
|
Certification of principal executive officer pursuant to Rule 13a-14(a)/15d-14(a) |
| |
|
|
|
|
| |
31.2 |
|
|
Certification of principal financial officer pursuant to Rule 13a-14(a)/15d-14(a) |
| |
|
|
|
|
| |
32.1 |
± |
|
Certification of principal executive officer and principal financial officer
pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 |
| |
|
|
| † |
|
Indicates that confidential treatment has been requested or granted to
certain portions, which portions have been omitted and filed
separately with the SEC |
| |
| # |
|
Indicates management contract or compensatory plan |
| |
| ± |
|
These certifications are being furnished solely to accompany this
report pursuant to 18 U.S.C. 1350, and are not being filed for
purposes of Section 18 of the Securities Exchange Act of 1934 and are
not to be incorporated by reference into any filing of the registrant,
whether made before or after the date hereof, regardless of any
general incorporation by reference language in such filing. |
| |
| (1) |
|
Filed with the registrant’s Amendment No. 1 to Current Report on Form 8-K/A on May 1, 2006
(SEC file number 001-32157-06796248) |
| |
| (2) |
|
Filed with the registrant’s Annual Report on Form 10-K on March 16, 2006 (SEC file number
001-32157-06693266) |
| |
| (3) |
|
Filed with the registrant’s Current Report on Form 8-K on October 13, 2009 (SEC file number
001-32157-091115090) |
| |
|
|
| (4) |
|
Filed with the registrant’s Current Report on Form 8-K on April 26, 2010 (SEC file number
001-32157-10769058) |
| |
| (5) |
|
Filed with the registrant’s Current Report on Form 8-K on June 8, 2009 (SEC file number
001-32157-09878961) |
| |
| (6) |
|
Filed with the registrant’s Current Report on Form 8-K on June 30, 2009 (SEC file number
001-32157-09917820) |
| |
| (7) |
|
Filed with the registrant’s Current Report on Form 8-K on August 5, 2009 (SEC file number
001-32157-09989205) |
| |
| (8) |
|
Filed with the registrant’s Amendment No. 3 to the Registration Statement on Form S-1 on
October 5, 2009 (SEC file number 333-160778-091107945) |
| |
| (9) |
|
Filed with the registrant’s Current Report on Form 8-K on January 4, 2010 (SEC file number
001-32157- 10500379) |
| |
| (10) |
|
Filed with the registrant’s Current Report on Form 8-K on May 3, 2010 (SEC file number
001-32157-10790486) |
| |
| (11) |
|
Filed with the registrant’s Current Report on Form 8-K on December 15, 2008 (SEC file number
001-32157-081249921) |
| |
| (12) |
|
Filed with the registrant’s Quarterly Report on Form 10-Q on August 12, 2005 (SEC file number
001-32157-051022046) |
| |
| (13) |
|
Filed with the registrant’s Current Report on Form 8-K on September 22, 2006 (SEC file number
001-32157-061103268) |
| |
| (14) |
|
Filed with the registrant’s Current Report on Form 8-K on February 25, 2008 (SEC file number
001-32157 08638638) |
| |
| (15) |
|
Filed with the registrant’s Current Report on Form 8-K on September 1, 2009 (SEC file number
001-32157-091049161) |
| |
| (16) |
|
Filed with the registrant’s Amendment No. 2 to the Registration Statement on Form S-1 on
September 25, 2009 (SEC file number 333-160778-091087750) |
| |
| (17) |
|
Filed with the registrant’s Current Report on Form 8-K on January 7, 2011 (SEC file number
001-32157-11515655) |
| |
| (18) |
|
Filed with the registrant’s Annual Report on Form 10-K on March 15, 2007 (SEC file number
001-32157-07697283) |
| |
| (19) |
|
Filed with the registrant’s Registration Statement on Form S-8 on July 13, 2005 (SEC file
number 333-126551-05951362) |
| |
| (20) |
|
Filed with registrant’s Annual Report on Form 10-K on March 17, 2008 (SEC file number
001-32157-08690952) |
| |
| (21) |
|
Filed with the registrant’s Quarterly Report on Form 10-Q on May 12, 2008 (SEC file number
001-32157-08820541) |
| |
| (22) |
|
Filed with the registrant’s Current Report on Form 8-K on June 2, 2008 (SEC file number
001-32157-08874724) |
| |
| (23) |
|
Filed with the registrant’s Current Report on Form 8-K on February 2, 2009 (SEC file number
001-32157- 09561715) |
| |
| (24) |
|
Filed with the registrant’s Quarterly Report on Form 10-Q on August 11, 2008 (SEC file number
001-32157-081005744) |
| |
| (25) |
|
Filed with the registrant’s Current Report on Form 8-K on July 22, 2009 (SEC file number
001-32157-09957353) |
| |
| (26) |
|
Filed with the registrant’s Current Report on Form 8-K on January 26, 2010 (SEC file number
001-32157- 10547818) |
| |
|
|
| (27) |
|
Filed with the registrant’s Quarterly Report on Form 10-Q on May 15, 2009 (SEC file number
001-32157-09878961) |
| |
| (28) |
|
Filed with the registrant’s Quarterly Report on Form 10-QSB on August 10, 2004 (SEC file
number 001-32157-04963741) |
| |
| (29) |
|
Filed with the registrant’s Current Report on Form 8-K on August 20, 2009 (SEC file number
001-32157-091025631) |
| |
| (30) |
|
Filed with the registrant’s Current Report on Form 8-K on December 24, 2009 (SEC file number
001-32157-091260100) |
| |
| (31) |
|
Filed with the registrant’s Annual Report on Form 10-K on March 18, 2010 (SEC file number
001-32157-10692317) |
| |
| (32) |
|
Filed with the registrant’s Annual Report on Form 10-KSB on March 31, 2005 (SEC file number
001-32157-05719975) |
| |
| (33) |
|
Filed with the registrant’s Current Report on Form 8-K on June 23, 2006 (SEC file number
001-32157-06922676) |
| |
| (34) |
|
Filed with the registrant’s Current Report on Form 8-K on October 23, 2006 (SEC file number
001-32157-061156993) |