Table of Contents
UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x
|
|
Quarterly report pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934.
|
For the quarterly period ended September 30,
2009.
o
|
|
Transition report pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934.
|
For the
transition period from
to
.
Commission
File Number 000-29815
Allos
Therapeutics, Inc.
(Exact name of
Registrant as specified in its charter)
Delaware
|
|
54-1655029
|
(State or other
jurisdiction of
|
|
(I.R.S. Employer
|
incorporation or
organization)
|
|
Identification No.)
|
11080
CirclePoint Road, Suite 200
Westminster,
Colorado 80020
(303)
426-6262
(Address,
including zip code, and telephone number,
including area code, of principal executive offices)
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 period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes
x
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 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
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. (Check one):
Large
accelerated filer
o
|
|
Accelerated
filer
x
|
|
|
|
Non-accelerated
filer
o
|
|
Smaller
reporting company
o
|
(Do not check if a
smaller reporting company)
|
|
|
Indicate by check mark
whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes
o
No
x
As of October 30,
2009, there were 103,941,015 shares of the registrants Common Stock, par value
$0.001 per share, outstanding.
Table of Contents
ALLOS
THERAPEUTICS, INC.
FORM 10-Q
TABLE OF CONTENTS
NOTE:
Allos
Therapeutics, Inc., the Allos Therapeutics, Inc. logo, FOLOTYN, the FOLOTYN logo and all other Allos
names are trademarks of Allos Therapeutics, Inc. in the United States and
in other selected countries. All other brand names or trademarks appearing in
this report are the property of their respective holders. Unless the context
requires otherwise, references in this report to Allos, the Company, we, us,
and our refer to Allos Therapeutics, Inc.
2
Table
of Contents
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ALLOS THERAPEUTICS, INC.
(A Development Stage
Enterprise)
BALANCE SHEETS
(unaudited)
|
|
September 30,
|
|
December 31,
|
|
|
|
2009
|
|
2008
|
|
ASSETS
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
62,377,663
|
|
$
|
30,458,424
|
|
Restricted cash
|
|
237,632
|
|
237,632
|
|
Investments in
marketable securities
|
|
21,392,678
|
|
53,468,942
|
|
Prepaid research
and development expenses
|
|
854,491
|
|
919,384
|
|
Prepaid expenses
and other assets
|
|
3,259,917
|
|
2,772,235
|
|
Total current
assets
|
|
88,122,381
|
|
87,856,617
|
|
Property and
equipment, net
|
|
1,990,365
|
|
1,307,084
|
|
Investments in
marketable securities
|
|
344,443
|
|
38,480
|
|
Intangible
asset, net
|
|
5,792,561
|
|
|
|
Other assets
|
|
99,242
|
|
137,423
|
|
Total assets
|
|
$
|
96,348,992
|
|
$
|
89,339,604
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
Trade accounts
payable
|
|
$
|
3,019,048
|
|
$
|
280,526
|
|
Accrued
liabilities
|
|
7,924,617
|
|
9,594,712
|
|
Total current
liabilities
|
|
10,943,665
|
|
9,875,238
|
|
Commitments and
contingencies (See Note 9)
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders
equity:
|
|
|
|
|
|
Preferred stock,
$0.001 par value; 10,000,000 shares authorized at September 30, 2009 and
December 31, 2008; no shares issued or outstanding
|
|
|
|
|
|
Series A
Junior Participating Preferred Stock, $0.001 par value; 1,500,000 and
1,000,000 shares designated from authorized preferred stock at
September 30, 2009 and December 31, 2008, respectively; no shares
issued or outstanding
|
|
|
|
|
|
Common stock,
$0.001 par value; 150,000,000 shares authorized at September 30, 2009
and December 31, 2008; 89,901,688 and 81,238,812 shares issued and
outstanding at September 30, 2009 and December 31, 2008,
respectively
|
|
89,902
|
|
81,239
|
|
Additional
paid-in capital
|
|
435,601,429
|
|
379,042,015
|
|
Deficit
accumulated during the development stage
|
|
(350,286,004
|
)
|
(299,658,888
|
)
|
Total
stockholders equity
|
|
85,405,327
|
|
79,464,366
|
|
Total
liabilities and stockholders equity
|
|
$
|
96,348,992
|
|
$
|
89,339,604
|
|
The accompanying notes are an integral part of these
financial statements.
3
Table of Contents
ALLOS THERAPEUTICS, INC.
(A Development Stage
Enterprise)
STATEMENTS OF OPERATIONS
(unaudited)
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
Cumulative
Period from
September 1, 1992
(date of inception)
through
September 30,
|
|
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development
|
|
$
|
6,025,486
|
|
$
|
6,360,950
|
|
$
|
18,900,803
|
|
$
|
17,738,486
|
|
$
|
168,048,727
|
|
Clinical
manufacturing
|
|
1,512,341
|
|
1,727,630
|
|
5,773,776
|
|
4,799,240
|
|
47,133,028
|
|
Marketing,
general and administrative
|
|
11,327,073
|
|
5,326,357
|
|
26,326,317
|
|
15,776,485
|
|
152,200,286
|
|
Amortization
of intangible asset
|
|
7,439
|
|
|
|
7,439
|
|
|
|
7,439
|
|
Restructuring
and separation costs
|
|
|
|
|
|
|
|
|
|
1,663,821
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
operating expenses
|
|
18,872,339
|
|
13,414,937
|
|
51,008,335
|
|
38,314,211
|
|
369,053,301
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
(18,872,339
|
)
|
(13,414,937
|
)
|
(51,008,335
|
)
|
(38,314,211
|
)
|
(369,053,301
|
)
|
Gain
on settlement claims
|
|
|
|
|
|
|
|
|
|
5,110,083
|
|
Interest
and other income, net
|
|
125,752
|
|
254,416
|
|
304,402
|
|
1,323,376
|
|
23,816,861
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
before income taxes
|
|
(18,746,587
|
)
|
(13,160,521
|
)
|
(50,703,933
|
)
|
(36,990,835
|
)
|
(340,126,357
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
tax benefit
|
|
76,817
|
|
|
|
76,817
|
|
|
|
76,817
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
(18,669,770
|
)
|
(13,160,521
|
)
|
(50,627,116
|
)
|
(36,990,835
|
)
|
(340,049,540
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend
related to beneficial conversion feature of preferred stock
|
|
|
|
|
|
|
|
|
|
(10,236,464
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss attributable to common stockholders
|
|
$
|
(18,669,770
|
)
|
$
|
(13,160,521
|
)
|
$
|
(50,627,116
|
)
|
$
|
(36,990,835
|
)
|
$
|
(350,286,004
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss per share: basic and diluted
|
|
$
|
(0.21
|
)
|
$
|
(0.16
|
)
|
$
|
(0.58
|
)
|
$
|
(0.50
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding: basic and diluted
|
|
89,543,949
|
|
80,752,024
|
|
86,581,372
|
|
73,554,904
|
|
|
|
The accompanying notes are an integral part of these
financial statements.
4
Table
of Contents
ALLOS THERAPEUTICS, INC.
(A Development Stage
Enterprise)
STATEMENTS
OF CASH FLOWS
(unaudited)
|
|
Nine Months Ended
September 30,
|
|
Cumulative
Period From
September 1, 1992
(date of inception)
through
|
|
|
|
2009
|
|
2008
|
|
September 30,
2009
|
|
Cash
Flows From Operating Activities:
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(50,627,116
|
)
|
$
|
(36,990,835
|
)
|
$
|
(340,049,540
|
)
|
Adjustments
to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
314,290
|
|
304,322
|
|
4,155,335
|
|
Stock-based
compensation expense
|
|
6,602,733
|
|
5,936,499
|
|
46,904,901
|
|
Amortization
of intangible asset
|
|
7,439
|
|
|
|
7,439
|
|
Write-off
of long-term investment
|
|
|
|
|
|
1,000,000
|
|
Realized
loss on sale of marketable securities
|
|
157,141
|
|
551,698
|
|
708,839
|
|
Other
|
|
149,040
|
|
|
|
266,849
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
Prepaid
expenses and other assets
|
|
(384,606
|
)
|
(987,188
|
)
|
(4,203,648
|
)
|
Interest
receivable on investments
|
|
686,062
|
|
(539,283
|
)
|
(147,098
|
)
|
Trade
accounts payable
|
|
2,738,522
|
|
961,838
|
|
3,019,048
|
|
Accrued
liabilities
|
|
(1,670,095
|
)
|
55,884
|
|
7,924,617
|
|
Net
cash used in operating activities
|
|
(42,026,590
|
)
|
(30,707,065
|
)
|
(280,413,258
|
)
|
Cash
Flows From Investing Activities:
|
|
|
|
|
|
|
|
Acquisition
of property and equipment
|
|
(1,146,612
|
)
|
(530,067
|
)
|
(6,059,423
|
)
|
Pledge
of restricted cash
|
|
|
|
(237,632
|
)
|
(237,632
|
)
|
Cash
paid for license
|
|
(5,800,000
|
)
|
|
|
(5,800,000
|
)
|
Purchases
of marketable securities
|
|
(18,216,703
|
)
|
(94,048,013
|
)
|
(627,812,960
|
)
|
Proceeds
from maturities of marketable securities
|
|
45,250,000
|
|
54,140,827
|
|
594,872,797
|
|
Proceeds
from sales of marketable securities
|
|
3,893,800
|
|
6,747,500
|
|
10,641,300
|
|
Purchase
of long-term investment
|
|
|
|
|
|
(1,000,000
|
)
|
Payments
received on notes receivable
|
|
|
|
|
|
49,687
|
|
Net
cash provided by (used in) investing activities
|
|
23,980,485
|
|
(33,927,385
|
)
|
(35,346,231
|
)
|
Cash
Flows From Financing Activities:
|
|
|
|
|
|
|
|
Principal
payments under capital leases
|
|
|
|
|
|
(422,088
|
)
|
Proceeds
from sales leaseback
|
|
|
|
|
|
120,492
|
|
Proceeds
from issuance of convertible preferred stock, net of issuance costs
|
|
|
|
|
|
89,125,640
|
|
Proceeds
from issuance of common stock associated with stock options, stock warrants
and employee stock purchase plan
|
|
3,008,555
|
|
4,905,755
|
|
18,019,372
|
|
Proceeds
from issuance of common stock, net of issuance costs
|
|
46,956,789
|
|
65,185,128
|
|
271,293,736
|
|
Net
cash provided by financing activities
|
|
49,965,344
|
|
70,090,883
|
|
378,137,152
|
|
Net
increase in cash and cash equivalents
|
|
31,919,239
|
|
5,456,433
|
|
62,377,663
|
|
Cash
and cash equivalents, beginning of period
|
|
30,458,424
|
|
15,919,664
|
|
|
|
Cash
and cash equivalents, end of period
|
|
$
|
62,377,663
|
|
$
|
21,376,097
|
|
$
|
62,377,663
|
|
Supplemental
Schedule of Cash and Non-cash Operating and Financing Activities:
|
|
|
|
|
|
|
|
Cash
paid for interest
|
|
$
|
|
|
$
|
|
|
$
|
1,033,375
|
|
Issuance
of stock in exchange for license agreement
|
|
|
|
|
|
40,000
|
|
Capital
lease obligations incurred for acquisition of property and equipment
|
|
|
|
|
|
422,088
|
|
Issuance
of stock in exchange for notes receivable
|
|
|
|
|
|
139,687
|
|
Conversion
of preferred stock to common stock
|
|
|
|
|
|
89,125,640
|
|
The accompanying
notes are an integral part of these financial statements.
5
Table of Contents
ALLOS THERAPEUTICS, INC.
(A Development
Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
(unaudited)
1.
Basis of Presentation
The unaudited financial
statements of Allos Therapeutics, Inc. (referred to herein as the Company,
we, us or our) included herein reflect all adjustments, consisting only
of normal recurring adjustments, which in the opinion of management are
necessary to fairly state our financial position, results of operations and
cash flows for the periods presented.
Certain information and footnote disclosures normally included in
audited financial information prepared in accordance with accounting principles
generally accepted in the United States of America, or U.S. GAAP, have been
condensed or omitted pursuant to the rules and regulations of the
Securities and Exchange Commission, or SEC.
Operating results for the three and nine months ended September 30,
2009 are not necessarily indicative of the results that may be expected for the
year ending December 31, 2009.
These financial statements should be read in conjunction with the
audited financial statements and notes thereto which are included in our Annual
Report on Form 10-K for the year ended December 31, 2008, as amended,
for a broader discussion of our business and the opportunities and risks
inherent in such business.
Since our inception in 1992, we have not generated any
revenue from product sales and have experienced significant net losses and
negative cash flows from operations. Our
activities have consisted primarily of developing product candidates, raising
capital and recruiting personnel. We are
currently focused on the development and commercialization of FOLOTYN
TM
(pralatrexate
injection), a selective antifolate designed to accumulate preferentially in
cancer cells. On September 24, 2009, the U.S. Food and Drug
Administration, or FDA, granted accelerated approval of FOLOTYN for use as a
single agent for the treatment of patients with relapsed or refractory
peripheral T-cell lymphoma, or PTCL. FOLOTYN represents our first drug approved
for marketing in the United States. FOLOTYN is the first and only drug approved
by the FDA for its indication and represents a new treatment option for
patients with relapsed or refractory PTCL. We began making FOLOTYN available
for commercial sale in the United States on October 5, 2009, with an
anticipated commercial launch in January 2010. Accordingly, while we are considered to be in
the development stage as of September 30, 2009, we have since commenced
our planned principal operations and will no longer be considered to be in the
development stage as of October 2009.
Liquidity
We are a biopharmaceutical company committed to the
development and commercialization of innovative anti-cancer therapeutics. Our
goal is to build a profitable company by generating income from products we
develop and commercialize, either alone or with one or more potential strategic
partners. Our ability to generate
revenue and achieve profitability is dependent on our ability, alone or with
partners, to successfully commercialize FOLOTYN for the treatment of patients
with relapsed or refractory PTCL. We may
continue incurring net losses for the foreseeable future. We may never generate
significant revenue from product sales or become profitable. We expect to
continue to spend substantial amounts on research and development, including
amounts spent on conducting clinical trials and seeking additional regulatory
approvals for FOLOTYN, and commercializing FOLOTYN for the treatment of
patients with relapsed or refractory PTCL.
Clinical development timelines, likelihood of success and total costs
vary widely and are impacted by a variety of risks and uncertainties.
As of September 30, 2009, we had $84.1 million in
cash, cash equivalents and investments in marketable securities. Based upon the current status of our product
development and commercialization plans, we believe that our cash, cash
equivalents, and investments in marketable securities as of September 30,
2009, together with the net proceeds of approximately $93.0 million from the October 2009
Financing discussed in Note 11, Subsequent Events, should be adequate to
support our operations through at least the next 12 months, although there can
be no assurance that this can, in fact, be accomplished. Our forecast of the period of time through
which our financial resources will be adequate to support our operations
involves risks and uncertainties, and actual results could vary materially.
6
Table of Contents
We anticipate continuing
our current development programs and beginning other long-term development
projects involving FOLOTYN, including the post-approval clinical studies
required for FOLOTYN. These projects may require many years and substantial
expenditures to complete and may ultimately be unsuccessful. In addition,
we expect to incur significant costs relating to the commercialization of
FOLOTYN, including costs related to our sales and marketing, medical affairs
and manufacturing operations. Therefore, we may need to raise additional
capital to support our future operations. Our actual capital requirements
will depend on many factors, including:
·
the timing and amount of revenues
generated from the sale of FOLOTYN;
·
the timing and costs associated with
developing our sales and marketing, medical affairs and manufacturing
operations for the commercialization of FOLOTYN;
·
the timing and costs associated with
manufacturing clinical and commercial supplies of FOLOTYN;
·
the timing and costs associated with
conducting preclinical and clinical development of FOLOTYN, as well as our
evaluation of, and decisions with respect to, additional therapeutic
indications for which we may develop FOLOTYN;
·
the timing and costs associated with
completing the post-approval clinical studies required by the FDA;
·
the timing, costs and potential revenue
associated with any co-promotion or other partnering arrangements entered into
to commercialize FOLOTYN; and
·
our evaluation of, and decisions with
respect to, potential in-licensing or product acquisition opportunities or
other strategic alternatives
.
We may seek to obtain this additional capital through
equity or debt financings, arrangements with corporate partners, or from other
sources. Such financings or arrangements, if successfully consummated, may be
dilutive to our existing stockholders. However, there is no assurance that
additional financing will be available when needed, or that, if available, we
will obtain such financing on terms that are favorable to our stockholders or
us. In the event that additional funds are obtained through arrangements with
collaborative partners or other sources, such arrangements may require us to
relinquish rights to some of our technologies, product candidates or products
under development, which we might otherwise seek to develop or commercialize
ourselves, on terms that are less favorable than might otherwise be available.
If we are unable to generate meaningful amounts of revenue from future product
sales or cannot otherwise raise sufficient additional funds to support our
operations, we may be required to delay, reduce the scope of or eliminate one
or more of our development programs and our business and future prospects for
revenue and profitability may be harmed.
2.
Fair Value of Financial
Instruments
Cash, Cash Equivalents and Investments in Marketable
Securities
All
highly liquid investments with original maturities of three months or less are
considered to be cash equivalents. The carrying values of our cash equivalents
and investments in marketable securities approximate their market values based
on quoted market prices. Investments in marketable securities are classified as
held to maturity and are carried at cost plus accrued interest. Our cash and
cash equivalents are maintained in a financial institution in amounts that, at
times, may exceed federally insured limits. We realized a loss of approximately
$0 and $157,000 on the sale of certain of our investments in marketable
securities during the three and nine months ended September 30, 2009,
respectively. We realized a loss of
approximately $552,000 on the sale of certain of our investments in marketable
securities during the three and nine months ended September 30, 2008. In response to the instability in the global
financial markets during these periods, we reviewed our investments in
marketable securities and sold certain investments prior to their maturity in
order to preserve our principal, as the issuers of those securities experienced
significant deteriorations in their creditworthiness as evidenced by investment
rating downgrades. We have the ability
and intent to hold our remaining investments in marketable securities as of September 30,
2009 to their scheduled maturity, although we monitor our investment portfolio
with the primary objectives of preserving principal and maintaining proper
liquidity to meet our operating needs. The weighted average duration of the
remaining time to maturity for our portfolio of investments in marketable
securities as of September 30, 2009 was approximately five months. As of September 30, 2009, our
investments in marketable securities were held in a variety of
7
Table of Contents
interest-bearing
instruments, consisting mainly of U.S. Treasury bills, certificates of deposit
and high-grade corporate notes. We did not hold any derivative instruments,
foreign exchange contracts, asset backed securities, mortgage backed
securities, auction rate securities, or securities of issuers in bankruptcy in
our investment portfolio as of September 30, 2009.
Fair Value of Financial Instruments
Fair value is defined as the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. The following
fair value hierarchy prioritizes the inputs into valuation techniques used to
measure fair value. Accordingly, we use valuation techniques that maximize the
use of observable inputs and minimize the use of unobservable inputs when
determining fair value. The three levels of the hierarchy are as follows:
Level 1: Inputs that
reflect unadjusted quoted prices in active markets that are accessible to us
for identical assets or liabilities;
Level 2: Inputs include
quoted prices for similar assets and liabilities in active and inactive markets
or that are observable for the asset or liability either directly or
indirectly; and
Level 3: Unobservable
inputs that are supported by little or no market activity.
We
have no assets or liabilities that were measured using quoted prices for
similar assets and liabilities or significant unobservable inputs (Level 2 and
Level 3 assets and liabilities, respectively) as of September 30,
2009. Our financial instruments include
cash and cash equivalents, investments in marketable securities, prepaid
expenses, accounts payable and accrued liabilities. The carrying amounts of
financial instruments approximate their fair value due to their short
maturities. The carrying value of our cash held in money market funds totaling
$52.6 million as of September 30, 2009 is included in cash and cash
equivalents on our Balance Sheet and approximates market values based on quoted
market prices, or Level 1 inputs.
3.
Prepaid Expenses and Other Assets
Prepaid expenses and other assets are comprised of the
following:
|
|
September 30,
2009
|
|
December 31,
2008
|
|
Prepaid
sales, marketing and medical affairs expenses
|
|
$
|
1,988,788
|
|
$
|
174,800
|
|
Prepaid
expenses and other assets
|
|
1,271,129
|
|
597,435
|
|
Receivable
and cash in escrow related to litigation settlement (see Note 9)
|
|
|
|
2,000,000
|
|
|
|
$
|
3,259,917
|
|
$
|
2,772,235
|
|
4.
Intangible asset, net
Costs incurred for
products or product candidates not yet approved by the FDA and for which no
alternative future use exists are recorded as expense. In the event a product
or product candidate has been approved by the FDA or an alternative future use
exists for a product or product candidate, patent and license costs are
capitalized and amortized over the shorter of the expected patent life and the
expected life cycle of the related product or product candidate.
As a result of the FDAs
approval to market FOLOTYN
on September 24, 2009, we met a milestone under
our license agreement with Memorial Sloan-Kettering Cancer Center, SRI
International and Southern Research Institute, discussed in Note 9, which
required us to make a milestone payment of $5.8 million. We capitalized
the $5.8 million payment as an intangible asset and began amortizing the asset
immediately following the FDA approval to market FOLOTYN. Amortization expense will
be recorded on a straight line basis over the remaining expected life of the
patent for FOLOTYN, which we expect to last until July 16, 2022. This
includes the anticipated Hatch-Waxman extension that provides patent protection
for drug compounds for a period of up to five years to compensate for time
spent in development. This term is our best estimate of the life of the patent.
If, however, the Hatch-Waxman extension is not granted, the intangible asset
will be amortized over a shorter period. The amortization expense for the three
and nine months ended September 30, 2009 totaling $7,439 is recorded as
amortization of intangible assets in the statement of operations. The estimated annual amortization expense for
the intangible asset is approximately $121,000 in 2009, $454,000 per
year during 2010 through 2021 and $234,000 in 2022.
8
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The carrying values of
intangible assets are periodically reviewed to determine if the facts and
circumstances suggest that a potential impairment may have occurred. No
impairment occurred for the three and nine months ended September 30, 2009
on the intangible asset, net of $5,792,561.
5.
Accrued Liabilities
Accrued liabilities are
comprised of the following:
|
|
September 30,
2009
|
|
December 31,
2008
|
|
Accrued
personnel costs
|
|
$
|
3,488,483
|
|
$
|
2,816,404
|
|
Accrued
sales and marketing expenses
|
|
1,403,790
|
|
695,255
|
|
Accrued
research and development expenses
|
|
1,365,022
|
|
2,272,219
|
|
Accrued
clinical manufacturing expenses
|
|
726,902
|
|
1,153,028
|
|
Accrued
litigation settlement costs (see Note 9)
|
|
|
|
2,000,000
|
|
Accrued
expensesother
|
|
940,420
|
|
657,806
|
|
|
|
$
|
7,924,617
|
|
$
|
9,594,712
|
|
6.
Stockholders Equity
On April 3, 2009, we
completed an underwritten public offering of 7,750,000 shares of our common
stock at the public offering price of $6.30 per share. We received net proceeds
from the offering of $47.0 million, after deducting $1.4 million of
underwriting discounts and commissions and approximately $473,000 of offering
expenses.
At our Annual Meeting of
Stockholders held on June 23, 2009, our stockholders approved an amendment
to the Allos Therapeutics, Inc. 2008 Equity Incentive Plan, or the Plan,
to increase the aggregate number of shares of common stock authorized for
issuance under the Plan by 5,750,000 shares. Our board of directors had
previously approved the amendment and recommended its approval to our
stockholders.
On
July 17, 2009, we filed with the Delaware Secretary of State a Certificate
of Amendment to our
Certificate
of Designation of Series A Junior Participating Preferred Stock
to increase the
number of shares designated as Series A Junior Participating Preferred
Stock thereunder from 1,000,000 shares to 1,500,000 shares. In accordance with
the terms of our Amended and Restated Certificate of Incorporation, as amended,
our board of directors has the authority to increase the number of shares of
any series of preferred stock. The
Certificate of Amendment was approved by our board of directors on July 16,
2009.
On July 20, 2009, we filed a Shelf Registration
Statement on Form S-3 with the SEC providing for the registration for sale
by us of an aggregate of up to $150 million of shares of our common stock and
preferred stock, depositary shares, various series of debt securities and
warrants to purchase any of such securities, either individually or in units,
and also providing for the registration for resale by Warburg Pincus Private
Equity VIII, L.P., or Warburg, of up to 26,124,430 shares of our common
stock. We will not receive any proceeds
from sales of common stock by Warburg, if any.
The SEC declared the registration statement effective on August 28,
2009. In October 2009, we completed
an underwritten public offering of 14,000,000 shares of our common stock, which
resulted in net proceeds to us of approximately $93.0 million as discussed in
Note 11, Subsequent Events.
7.
Stock-Based Compensation
Stock-based compensation expense for the three and
nine months ended September 30, 2009 and 2008 has been recognized in the
accompanying Statements of Operations as follows:
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
Research
and development
|
|
$
|
(68,784
|
)
|
$
|
609,767
|
|
$
|
1,642,659
|
|
$
|
1,947,384
|
|
Clinical
manufacturing
|
|
113,207
|
|
98,744
|
|
321,533
|
|
305,756
|
|
Marketing,
general and administrative
|
|
1,710,574
|
|
1,124,329
|
|
4,638,541
|
|
3,683,359
|
|
Total
stock-based compensation expense
|
|
$
|
1,754,997
|
|
$
|
1,832,840
|
|
$
|
6,602,733
|
|
$
|
5,936,499
|
|
9
Table of Contents
Effective September 30, 2009, Pablo J. Cagnoni,
M.D., our Senior Vice President and Chief Medical Officer (CMO), resigned. As a result of his resignation, we adjusted
the forfeiture rate applied to his equity compensation, which resulted in a
one-time $906,000 reversal of research and development stock-based compensation
expense during the three and nine months ended September 30, 2009, of
which $699,000 related to stock option awards, $166,000 related to restricted
stock awards and $41,000 related to restricted stock unit awards.
We did not recognize a related tax benefit during the
three or nine months ended September 30, 2009 and 2008 as we maintain net
operating loss carryforwards and we have established a valuation allowance
against the entire tax benefit as of September 30, 2009. No stock-based compensation expense was
capitalized on our Balance Sheets as of September 30, 2009 and December 31,
2008.
The following table summarizes activity and related
information for our stock option awards:
|
|
Options Outstanding
|
|
Options Exercisable
|
|
|
|
Number of
Shares
|
|
Weighted
Average
Exercise Price
|
|
Number of
Shares
|
|
Weighted
Average
Exercise Price
|
|
Outstanding at December 31, 2008
|
|
7,236,512
|
|
$
|
5.14
|
|
3,122,681
|
|
$
|
4.15
|
|
Granted
|
|
2,570,812
|
|
6.80
|
|
|
|
|
|
Exercised
|
|
(935,899
|
)
|
3.13
|
|
|
|
|
|
Forfeited
|
|
(401,615
|
)
|
6.27
|
|
|
|
|
|
Outstanding at September 30, 2009
|
|
8,469,810
|
|
$
|
5.81
|
|
3,694,435
|
|
$
|
5.04
|
|
During the nine months ended September 30, 2009,
we granted 2,570,812 stock options with a weighted-average grant-date fair value of $4.21 per share. During the three months ended September 30,
2009 and 2008, we recorded stock-based compensation related to our stock option
plans of $1,754,077 and $1,732,134, respectively. During
the nine months ended September 30, 2009 and 2008, we recorded stock-based
compensation related to our stock option plans of $6,251,721 and $5,569,655,
respectively. The stock-based compensation expense amounts for the three and
nine months ended September 30, 2009 include the $699,000 one-time
reversal related to the resignation of our former CMO discussed above. As of September 30,
2009, the unrecorded stock-based compensation balance related to stock option
awards was $9,314,161 and will be recognized over an estimated weighted-average
amortization period of 1.4 years.
The following table summarizes information about
outstanding stock options that are fully vested and currently exercisable, and
outstanding stock options that are expected to vest in the future:
|
|
Number
Outstanding
|
|
Weighted Average
Remaining
Contractual Term
|
|
Weighted
Average
Exercise Price
|
|
Aggregate
Intrinsic Value
|
|
As of September 30, 2009:
|
|
|
|
|
|
|
|
|
|
Options
fully vested and exercisable
|
|
3,694,435
|
|
5.9
|
|
$
|
5.04
|
|
$
|
8,438,284
|
|
Options
expected to vest, including effects of expected forfeitures
|
|
4,029,799
|
|
8.9
|
|
$
|
6.39
|
|
3,998,120
|
|
Options
fully vested and expected to vest
|
|
7,724,234
|
|
7.4
|
|
$
|
5.74
|
|
$
|
12,436,404
|
|
The aggregate intrinsic value in the table above
represents the total pretax intrinsic value, based on our closing stock price
of $7.25 as of September 30, 2009, which would have been received by the
option holders had all option holders with in-the-money options exercised their
options as of that date. The total
number of in-the-money options exercisable as of September 30, 2009 was
3,083,118.
The total intrinsic value of options exercised during
the three months ended September 30, 2009 and 2008 was $2,775,020 and
$1,522,485, respectively, determined as of the date of option exercise. The total intrinsic value of options
exercised during the nine months ended September 30, 2009 and 2008 was
$4,369,503 and $2,966,342, respectively, determined as of the date of option
exercise. We settle employee stock option exercises with newly issued common
shares. No tax benefits were realized by
us in connection with these exercises during the three or nine months ended September 30,
2009 and 2008 as we maintain net operating loss carryforwards and we have
established a valuation allowance against the entire tax benefit.
10
Table of Contents
The following table summarizes activity and related
information for restricted stock, or RS, awards:
|
|
Number of
Shares
|
|
Weighted
Average
Grant-Date
Fair Value
|
|
Nonvested RS at December 31, 2008
|
|
293,750
|
|
$
|
4.07
|
|
Granted
|
|
|
|
|
|
Vested
|
|
(131,250
|
)
|
3.81
|
|
Forfeited
|
|
(37,500
|
)
|
6.17
|
|
Nonvested RS at September 30, 2009
|
|
125,000
|
|
$
|
3.72
|
|
The shares of restricted
stock vest in four equal annual installments from the date of grant. D
uring the three months ended September 30,
2009 and 2008, we recorded stock-based compensation related to restricted stock
awards of $(118,862) and $85,691, respectively.
During the nine months
ended September 30, 2009 and 2008, we recorded stock-based compensation
related to restricted stock awards of $21,212 and $326,670, respectively. The stock-based compensation expense amounts
for the three and nine months ended September 30, 2009 include the
$166,000 one-time reversal related to the resignation of our former CMO
discussed above. As of September 30,
2009, the unrecorded stock-based compensation balance related to restricted
stock awards was $83,259 and will be recognized over an estimated
weighted-average amortization period of 1.2 years.
The following table summarizes activity and related
information for restricted stock unit, or RSU, awards:
|
|
Number of
Shares
|
|
Weighted
Average
Grant-Date
Fair Value
|
|
Nonvested RSU at December 31, 2008
|
|
|
|
$
|
|
|
Granted
|
|
173,981
|
|
6.51
|
|
Vested
|
|
|
|
|
|
Forfeited
|
|
(23,873
|
)
|
6.40
|
|
Nonvested RSU at September 30, 2009
|
|
150,108
|
|
$
|
6.52
|
|
The shares of restricted
stock unit awards vest in four equal annual installments from the date of
grant. Upon vesting of the restricted
stock unit awards, we issue unrestricted shares of our common stock. D
uring the three months ended September 30,
2009 and 2008, we recorded stock-based compensation related to restricted stock
unit awards of $87,054 and $0, respectively.
During the nine months
ended September 30, 2009 and 2008, we recorded stock-based compensation
related to restricted stock unit awards of $254,644 and $0, respectively. The stock-based compensation expense amounts
for the three and nine months ended September 30, 2009 include the $41,000
one-time reversal related to the resignation of our former CMO discussed
above. As of September 30, 2009,
the unrecorded stock-based compensation balance related to restricted stock
unit awards was $621,672 and will be recognized over an estimated
weighted-average amortization period of 1.7 years.
8.
Net Loss Per Share
Basic net loss per share is computed by dividing the
net loss attributable to common stockholders for the period by the weighted
average number of common shares outstanding during the period. Diluted earnings per share is computed by
giving effect to all dilutive potential common stock outstanding during the
period, including stock options, restricted stock, restricted stock unit awards
and shares to be issued under our employee stock purchase plan.
11
Table of Contents
Diluted net loss per share is the same as basic net
loss per share for all periods presented because any potential dilutive common
shares were anti-dilutive due to our net loss (as including such shares would
decrease our basic net loss per share). Such potentially dilutive shares are
excluded when the effect would be to reduce net loss per share. Because we
reported a net loss for the three and nine months ended September 30, 2009
and 2008, all potentially dilutive common shares have been excluded from the
computation of the dilutive net loss per share for all periods presented. Such potentially
dilutive common shares consist of the following:
|
|
September 30,
|
|
|
|
2009
|
|
2008
|
|
Common
stock options
|
|
8,469,810
|
|
7,003,180
|
|
Unvested
restricted stock
|
|
125,000
|
|
293,750
|
|
Unvested
restricted stock units
|
|
150,108
|
|
|
|
|
|
8,744,918
|
|
7,296,930
|
|
9.
Commitments and Contingencies
Royalty and License Fee Commitments for FOLOTYN
In December 2002, we entered into a license
agreement with Memorial Sloan-Kettering Cancer Center, SRI International and
Southern Research Institute, as amended, under which we obtained exclusive
worldwide rights to a portfolio of patents and patent applications related to
FOLOTYN and its uses. Under the terms of the agreement, we paid an up-front
license fee of $2.0 million upon execution of the agreement. To date, we have
made aggregate milestone payments of $2.5 million based on the passage of time.
Additionally, in May and September 2009, we made milestone payments
of $1.5 million based on the FDA accepting our New Drug Application for review
and $5.8 million based on the FDA approval to market FOLOTYN,
respectively. We are also required to
make an additional milestone payment of $3.5 million upon regulatory approval
to market FOLOTYN in Europe. The up-front license fee and all milestone
payments under the agreement prior to FDA approval to market FOLOTYN were
recorded to research and development expense as incurred. All milestone
payments under the agreement subsequent to FDA approval to market FOLOTYN were
or will be capitalized and amortized over the expected useful life. Under the
terms of the agreement, we are required to fund all development programs and
will have sole responsibility for all commercialization activities. In
addition, we will pay the licensors a royalty based on a percentage of net
sales of the product, which may be different than our net product revenue
recognized in accordance with U.S. GAAP, or sublicense revenues arising from
sublicensing the product, if and when such sales or sublicenses occur.
Contingencies
We were named as a defendant in a purported securities
class action lawsuit filed in May 2004 seeking unspecified damages
relating to the issuance of allegedly false and misleading statements regarding
EFAPROXYN during the period from May 29, 2003 to April 29, 2004 and
subsequent declines in our stock price. In an opinion dated October 20,
2005, the U.S. District Court for the District of Colorado concluded that the
plaintiffs complaint failed to meet the legal requirements applicable to its
alleged claims and dismissed the lawsuit. On November 20, 2005, the
plaintiffs appealed the District Courts decision to the U.S. Court of Appeals
for the Tenth Circuit. On February 6, 2008, the parties signed a
stipulation of settlement, settling the case for $2,000,000. The settlement was
subject to various conditions, including, without limitation, approval of the
District Court. On January 29,
2009, the District Court issued its Order and Final Judgment approving the
settlement, including the releases of the defendants for which the settlement
provided. Neither we nor our former
officer, who was also named as a defendant, admitted any liability in
connection with the settlement. The
amount of the settlement in excess of our deductible was covered by our
insurance carrier. The period to appeal
the District Courts approval of the settlement lapsed during the three months
ended March 31, 2009 without any further appeals being filed and the
settlement is final. We have no further obligations related to this lawsuit and
have no accrual remaining related to the settlement.
10.
Recent Accounting Pronouncements
On January 1, 2009,
we adopted new accounting guidance for business combinations issued by the
Financial Accounting Standards Board, or the FASB, that generally requires an
acquirer (1) to recognize the assets acquired, the liabilities assumed,
including those arising from contractual contingencies, any contingent
consideration, and any noncontrolling interest in the acquiree at the
acquisition date, measured at their fair values as of that date, with limited
exceptions, (2) in a business combination achieved in stages (sometimes
referred to as a step acquisition) to recognize the identifiable assets and
liabilities, as well as the noncontrolling interest in the acquiree, at the
full amounts of their fair values, (3) to measure the noncontrolling
12
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interest in the acquiree
at fair value will result in recognizing the goodwill attributable to the
noncontrolling interest in addition to that attributable to the acquirer, (4) to
recognize changes in the amount of its deferred tax benefits that are
recognizable because of a business combination either in income from continuing
operations in the period of the combination or directly in contributed capital,
depending on the circumstances. We have not entered into any business
combinations and will apply this new guidance to any business combinations in
the future.
On January 1, 2009,
we adopted new accounting guidance for noncontrolling interests in a subsidiary
issued by the FASB. This guidance
establishes accounting and reporting standards for the noncontrolling interest
in a subsidiary and for the deconsolidation of a subsidiary. It also clarifies
that a noncontrolling interest in a subsidiary is an ownership interest in the
consolidated entity that should be reported as equity in the consolidated
financial statements and changes the way the consolidated income statement is
presented by requiring consolidated net income to be reported at amounts that
include the amounts attributable to both the parent and the noncontrolling
interest. It also requires disclosure, on the face of the consolidated
statement of income, of the amounts of consolidated net income attributable to
the parent and to the noncontrolling interest. The guidance also requires that
a parent recognize a gain or loss in net income when a subsidiary is
deconsolidated and requires expanded disclosures in the consolidated financial
statements that clearly identify and distinguish between the interests of the
parent owners and the interests of the noncontrolling owners of a
subsidiary. We currently do not have any
subsidiaries.
On January 1, 2009,
we adopted new accounting guidance issued by the FASB to improve financial
reporting about derivative instruments and hedging activities by requiring
companies to enhance disclosure about how these instruments and activities
affect their financial position, performance and cash flows.
We
currently do not have any derivative
instruments.
On January 1, 2009,
we adopted new accounting guidance issued by the FASB to address whether
instruments granted in share-based payment transactions are participating
securities prior to their vesting and therefore need to be included in the
earnings per share calculation under the two-class method. This guidance
requires companies to treat unvested share-based payment awards that have
non-forfeitable rights to dividends or dividend equivalents as participating
securities and thus, include them in calculations of basic earnings per share.
There was no impact to our financial statements.
In
April 2009, the FASB issued new accounting guidance that requires
disclosures about fair value of financial instruments for interim reporting
periods of publicly traded companies as well as in annual financial statements.
This guidance also requires those disclosures in summarized financial
information at interim reporting periods. We adopted this guidance on April 1,
2009. The required disclosures are included in Note 2, Fair Value of
Financial Instruments.
In
April 2009, the FASB issued new accounting guidance that amends the
existing other-than-temporary impairment guidance for debt securities to make
it more operational and to improve the presentation and disclosure of such
impairments on debt and equity securities in the financial statements. It does
not amend existing recognition and measurement guidance related to
other-than-temporary impairments of equity securities. We adopted this guidance
on April 1, 2009 and it did not materially impact our financial
statements.
In May 2009, the
FASB issued new accounting guidance that establishes general standards of
accounting for and disclosures of events that occur after the balance sheet
date but before financial statements are issued or are available to be issued.
In particular, this statement sets forth (1) the period after the balance
sheet date during which management of a reporting entity should evaluate events
or transactions that may occur for potential recognition or disclosure in the
financial statements; (2) the circumstances under which an entity should
recognize events or transactions occurring after the balance sheet date in its
financial statements; and (3) the disclosures that an entity should make
about events or transactions that occurred after the balance sheet
date.
We adopted this guidance on April 1, 2009, and
the required disclosures are included in Note 11, Subsequent Events
.
In June 2009, the
FASB issued accounting guidance that eliminates the exemption from
consolidation for qualifying special-purpose entities, effective for financial
asset transfers occurring after the beginning of an entitys first fiscal year
that begins after November 15, 2009. We are currently evaluating the
potential impact of this guidance.
In June 2009, the
FASB issued accounting guidance that assists
in determining whether an enterprise has a controlling financial
interest in a variable interest entity. This guidance is effective as of the
beginning of the first fiscal year that begins after November 15, 2009. We
are currently evaluating the potential impact of this guidance on our financial
statements.
13
Table of Contents
In June 2009, the FASB approved its Accounting
Standards Codification, or Codification, as the single source of authoritative
U.S. accounting and reporting standards applicable for all non-governmental
entities. Rules and interpretive releases of the SEC under authority of
federal securities laws are also sources of authoritative U.S. GAAP for SEC
registrants. We adopted this Codification during the third quarter of
2009. As the Codification does not
change or alter existing U.S. GAAP, it did not have any impact on our financial
position or results of operations.
In October 2009, the
FASB issued new accounting guidance related to revenue arrangements with
multiple deliverables that provides principles for allocation of consideration
among an arrangements multiple-elements, allowing more flexibility in
identifying and accounting for separate deliverables. The guidance introduces
an estimated selling price method 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 on a prospective basis for revenue
arrangements entered into or materially modified in fiscal years beginning on
or after June 15, 2010. Alternatively, adoption may be on a retrospective
basis, and early application is permitted. We are currently evaluating the
impact of adopting this guidance on our financial statements.
11.
Subsequent Events
We
have evaluated all
subsequent events through November 3, 2009,
the date which these financial statements were issued.
On October 13, 2009,
we completed an underwritten public offering of 14,000,000 shares of our common
stock at the public offering price of $7.10 per share (the October 2009
Financing). We received net proceeds from the offering of approximately $93.0
million, after deducting underwriting discounts and commissions and estimated
offering expenses. We have also granted the underwriters an option through November 6,
2009 to purchase up to an aggregate of 2,100,000 additional shares of common
stock to cover over-allotments, if any.
We currently anticipate using the net proceeds of the offering primarily
for activities relating to the commercialization of FOLOTYN, preclinical
research and clinical development of FOLOTYN, and for general corporate
purposes.
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ITEM 2. MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Managements Discussion and Analysis of Financial Condition
and Results of Operations, as well as information contained elsewhere in this
report,
contains 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. These forward-looking
statements include, but are not limited to, statements regarding our
commercialization of FOLOTYN for patients with relapsed or refractory
peripheral T-cell lymphoma; our projected timeline to present top line results
from our Phase 2b trial comparing FOLOTYN and Tarceva (erlotinib) in patients
with advanced non-small cell lung cancer; our projected net cash use in
operating activities for fiscal year 2009; other statements regarding our
future product development and regulatory strategies, including our intent to
develop or seek regulatory approval for FOLOTYN in specific indications; the
ability of our third-party manufacturers to support our requirements for drug
supply; any statements regarding our future financial performance, results of
operations or sufficiency of capital resources to fund our operating
requirements; and any other statements that are other than statements of
historical fact. In some cases, these statements may be identified by
terminology such as may, will, should, expects, plans, anticipates,
believes, estimates, predicts, potential or continue, or the negative
of such terms and other comparable terminology. Although we believe that the
expectations reflected in the forward-looking statements contained herein are
reasonable, we cannot guarantee future results, levels of activity, performance
or achievements. These statements involve known and unknown risks and
uncertainties that may cause our, or our industrys results, levels of
activity, performance or achievements to be materially different from those
expressed or implied by the forward-looking statements. Factors that may cause
or contribute to such differences include, among other things, those discussed
in Part II, Item 1A of this report under the caption Risk Factors. All
forward-looking statements included in this report are based on information
available to us as of the date hereof and we undertake no obligation to revise
any forward-looking statements in order to reflect any subsequent events or
circumstances. Forward-looking statements not specifically described above also
may be found in these and other sections of this report.
Overview
We are a biopharmaceutical company committed to the
development and commercialization of innovative anti-cancer therapeutics. Our
goal is to build a profitable company by generating income from products we
develop and commercialize, either alone or with one or more potential strategic
partners. We strive to develop proprietary products that have the potential to
improve the standard of care in cancer therapy. Our focus is on product
opportunities for oncology that leverage our internal clinical development and
regulatory expertise and address important markets with unmet medical needs. We
may also seek to grow our product portfolio through product acquisition and
in-licensing efforts.
We are currently focused on the development and
commercialization of FOLOTYN
TM
(pralatrexate injection), a selective
antifolate designed to accumulate preferentially in cancer cells. On September 24,
2009, the U.S. Food and Drug Administration, or FDA, granted accelerated
approval of FOLOTYN for use as a single agent for the treatment of patients
with relapsed or refractory peripheral T-cell lymphoma, or PTCL. This
indication is based on overall response rate. Clinical benefit such as
improvement in progression free survival, or PFS, or overall survival has not
been demonstrated. FOLOTYN represents our first drug approved for marketing in
the United States. FOLOTYN is the first and only drug approved by the FDA for
this indication and represents a new treatment option for patients with
relapsed or refractory PTCL. In connection with the approval, we are required
to conduct several post-approval studies. We began making FOLOTYN available for
commercial sale in the United States on October 5, 2009, with an
anticipated commercial launch in January 2010. We are also developing
FOLOTYN for use as a single agent and in combination therapy regimens in a
range of hematologic malignancies and solid tumors.
FOLOTYN
TM
(pralatrexate injection)
FOLOTYN is a selective antifolate designed to
accumulate preferentially in cancer cells. Acting on the folate pathway,
FOLOTYN interferes with DNA synthesis and triggers cancer cell death. FOLOTYN can be delivered as a single agent,
for which we currently have approval, and has the potential to be used in
combination therapy regimens. We believe that FOLOTYNs unique mechanism of
action offers us the ability to target the drug for development in a variety of
solid tumors and hematological malignancies. We currently retain exclusive
worldwide commercial rights to FOLOTYN for all indications. We have received
accelerated approval from the FDA for the use of FOLOTYN for
15
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the treatment of patients with relapsed or refractory
PTCL on September 24, 2009. We began making FOLOTYN available for
commercial sale in the United States on October 5, 2009, with an
anticipated commercial launch in January 2010.
We are currently evaluating FOLOTYN in a Phase 2b
trial for non-small cell lung cancer, or NSCLC, and in a Phase 2 trial for
advanced or metastatic relapsed transitional cell carcinoma, or TCC, of the
urinary bladder, as well as in several clinical trials for hematologic
malignancies. Our Phase 2b trial in NSCLC is fully enrolled and we anticipate
reporting data from this trial in the first half of 2010.
FOLOTYN approved for the treatment of relapsed or refractory peripheral
T-cell lymphoma
T-cell lymphoma comprises a biologically diverse group
of blood cancers that account for approximately 10 to 15 percent of all cases
of non-Hodgkins lymphoma, or NHL, in the United States. According to the
American Cancer Society, an estimated 66,000 new cases of NHL were expected to
be diagnosed in the United States in 2008. We estimate the incidence of newly
diagnosed PTCL in the United States to be approximately 5,600 patients. In
addition, we estimate the overall prevalence of PTCL in the United States to be
approximately 19,900 patients, including approximately 9,850 patients with
relapsed or refractory PTCL. There are currently no pharmaceutical agents
approved for use in the treatment of first-line PTCL and, prior to the recent
approval of FOLOTYN, there were no pharmaceutical agents approved for use in
the treatment of patients with relapsed or refractory PTCL. In addition to
those PTCL patients who do not respond to first-line treatment, a significant
number of first-line multi-agent chemotherapy responders relapse or become
refractory after treatment. According to the clinical literature, patients with
PTCL have an overall five-year survival rate of approximately 25% to 40%
depending on sub-type, and a median overall survival of 1 to 3 years.
We intend to commercialize FOLOTYN through an
oncology-focused U.S. sales and marketing organization. We have been actively
preparing for the commercial launch of FOLOTYN in the United States, including
the ongoing development of our sales and marketing, medical affairs and
manufacturing operations. We believe
that the market for relapsed or refractory PTCL is addressable with a targeted
U.S. sales and marketing organization.
We plan to market and sell FOLOTYN in the United States through our
commercial organization, which includes 25 sales specialists that we currently
expect will increase
16
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to approximately 50 specialists in advance of our
planned commercial launch of FOLOTYN in January 2010. We have initially established the wholesale
acquisition cost for FOLOTYN at $3,125 per 20 mg vial and $6,250 per 40 mg
vial. We have no experience selling FOLOTYN at these prices and we cannot
assure you that we will not be required to offer discounts or allowances to
wholesalers or otherwise change our prices to effectively commercialize
FOLOTYN. As a result, our net revenue may not be directly associated with our
proposed wholesale acquisition cost.
In February 2009, we
completed two market research studies designed to evaluate the U.S. market for
PTCL and the potential trial, use and adoption of FOLOTYN as a commercially
available product. Both studies were conducted by an independent market
research firm and the physician respondents were blinded to the name of our
company and the product being evaluated.
In the quantitative market research survey of 143
community and institution-based hematologists and oncologists who treat
patients with PTCL, physicians were asked questions regarding their current
PTCL treatment patterns, perception of a product, which we refer to as Product
X, described having a product profile similar to that of FOLOTYN as established
in the PROPEL trial described below, and potential change in treatment patterns
following the commercial availability of Product X. In general, physicians
rated their satisfaction with current therapies for treating patients with
relapsed or refractory PTCL as low. When
asked to rate the value of various combination therapy regimens and single
agents typically prescribed as off-label treatments for patients with relapsed
or refractory PTCL, physicians rated autologous/allogeneic stem cell transplant
the highest, with an average value rating of 6.7 on a scale of 1 (not valuable
at all) to 10 (very valuable). The combination therapy regimens averaged a
rating of 5.7 out of 10, while the single agents averaged a rating of 5.2 out
of 10. When asked to assess the value of the Product X product profile,
physicians rated Product X more favorably than current PTCL treatments with an
average value rating of 7.7 out of 10. Participating physicians were also asked
to identify the key product attributes they consider when selecting a treatment
for patients with relapsed or refractory PTCL. Overall survival was rated as
the most important product attribute, followed by overall response rate,
disease control rate, PFS, complete response rate and duration of response.
Separately, in the qualitative market research survey
of 45 community and institution-based hematologists and oncologists who treat
patients with PTCL, physicians were asked questions regarding their current
PTCL treatment approaches and impressions of the Product X product profile
demonstrated in the PROPEL trial. Among the key findings, 98% of respondents
indicated that they believed Product X would be an improvement over existing
therapies, and 93% indicated that they would use Product X in the second-line
setting for patients with relapsed or refractory PTCL who were not candidates
for bone marrow transplant. Based on the results of our market research, we
believe the FOLOTYN package insert aligns with physicians treatment priorities
and is likely to support the trial, use and adoption of FOLOTYN for the
treatment of patients with relapsed or refractory PTCL.
FOLOTYN clinical development in T-cell lymphoma
The
FOLOTYN approval was based on the results from PROPEL, an open-label,
single-arm, multi-center, international clinical trial that enrolled 115
patients with relapsed or refractory PTCL, 109 of whom were considered
evaluable for efficacy according to the trial protocol. Patients were
considered evaluable if they received at least one dose of FOLOTYN, their
diagnosis of PTCL was confirmed by independent pathology review, and they had
relapsed or refractory disease after at least one prior treatment. Patients
were treated with FOLOTYN at 30 mg/m
2
once weekly by intravenous push over 3-5
minutes for 6 weeks in 7-week cycles until disease progression or unacceptable
toxicity. In addition, patients received
1 mg of vitamin B
12
intramuscularly every
8-10 weeks and 1.0-1.25 mg of folic acid orally on a daily basis. We believe PROPEL was the largest
prospectively designed single agent trial ever conducted in patients with
relapsed or refractory PTCL.
The primary efficacy endpoint of the trial was
overall response rate (complete response, complete response unconfirmed and
partial response) as assessed by International Workshop Criteria, or IWC. The
key secondary efficacy endpoint was duration of response. Response assessments were scheduled at the
end of cycle 1 and then every other cycle (every 14 weeks). Duration of response was measured from the
first day of documented response to disease progression or death. Response and disease progression were
evaluated by independent central review using the IWC. The results of the trial demonstrated that 29
of 109 evaluable patients, or 27%, responded to FOLOTYN. The median duration of
response was 287 days, or 9.4 months (range 1-503 days). Thirteen of 109
evaluable patients had a duration of response greater-than or equal to 14 weeks
17
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(range 98-503 days). The most common grade 3/4
adverse events were thrombocytopenia, which was observed in 33% of patients;
mucositis in 21% of patients; neutropenia in 20% of patients; and anemia in 17%
of patients.
FOLOTYN was approved for the treatment of patients
with relapsed or refractory PTCL under the FDAs accelerated approval program,
which allows the FDA to approve products for cancer or other life-threatening
diseases based on initial positive clinical data. As a condition of
approval, we are required to conduct the following post-approval studies that
are intended to verify and describe FOLOTYNs clinical benefit in patients with
T-cell lymphoma and assess whether FOLOTYN poses a serious risk of altered drug
levels resulting from organ impairment:
·
a Phase 3, multi-center, randomized clinical study of
sequential FOLOTYN versus observation in patients with newly diagnosed
aggressive PTCL who have responded following initial treatment with
chemotherapy based on CHOP (cyclophosphamide, doxorubicin, vincristine and
prednisone). The primary endpoint will be PFS. Patients will be
enrolled prior to initiation of the CHOP-based regimen. Patients responding (either a complete
response or a partial response) after CHOP-based treatment will be randomized
2:1 to FOLOTYN versus observation. We
plan to initiate this study in 2010 and have agreed to submit the results of
this study to the FDA by June 30, 2017.
·
a Phase 3, multi-center, randomized clinical study
comparing FOLOTYN in combination with systemic Targretin (bexarotene) versus
systemic bexarotene alone in patients with cutaneous T-cell lymphoma who are
refractory to at least one prior systemic therapy. The primary endpoint
will be PFS and response rate will be a secondary endpoint. Prior to
initiation of the Phase 3 study, we will conduct a Phase 1 study to determine
the maximum tolerated dose of the combination. We plan to initiate the
Phase 1 study in 2010 and have agreed to complete the Phase 1 study by August 31,
2011. We have also agreed to submit the
results of the Phase 3 study to the FDA by September 30, 2015.
·
a Phase 1 clinical study to evaluate the
pharmacokinetics of FOLOTYN in relapsed or refractory lymphoma patients
(B-cell, T-cell and Hodgkins lymphoma) with mild to severe renal
impairment. The trial will have three cohorts of six patients for a total
of 18 patients. Cohorts will be based on the severity of renal
impairment: severely impaired, moderately impaired and mildly impaired.
The FOLOTYN dose for the first two cohorts will be determined based on the
pharmacokinetics experience from the PROPEL study and the third cohort will be
dosed at the recommended dose (30 mg/m
2
). We have agreed to submit the
results of this study to the FDA by January 31, 2013.
·
completion of an ongoing Phase 1 mass balance clinical
study to evaluate the excretion and metabolic profile of FOLOTYN. We have
agreed to submit the results of this study to the FDA by December 31,
2010.
Failure
to complete the studies or adhere to the timelines set by the FDA could result
in penalties, including fines or withdrawal of FOLOTYN from the market, unless
we are a
ble to demonstrate good cause for not
completing the studies or adhering to the
timelines. The FDA may also initiate proceedings to withdraw approval if
our Phase 3 post-approval studies fail to verify
the
clinical benefit of FOLOTYN.
Further, the FDA may require
us to strengthen the warnings and precautions section of the FOLOTYN package
insert based on the results of the Phase 1 studies.
The
FDA has awarded orphan drug status to FOLOTYN for the treatment of patients
with T-cell lymphoma. Under the U.S. Orphan Drug Act, the first company to
receive FDA approval for pralatrexate for the designated orphan drug indication
obtains seven years of marketing exclusivity during which the FDA may not
approve another companys application for pralatrexate for the same orphan
indication. Because the FDA approved
FOLOTYN for the treatment of patients with relapsed or refractory PTCL, a
subset of T-cell lymphoma, we expect to receive seven years of marketing
exclusivity for that indication. Orphan
drug exclusivity would not prevent FDA approval of a different drug for the
orphan indication or the same drug for a different indication.
The European Medicines
Agency, or EMEA, has granted Orphan Medicinal Product Designation to FOLOTYN
for the treatment of PTCL. The EMEA Orphan Medicinal Product Designation is
intended to promote the development of drugs that may provide significant
benefit to patients suffering from rare diseases identified as life-threatening
or very serious. Under EMEA guidelines, Orphan Medicinal Product Designation
provides ten years of potential market exclusivity once the product candidate
is approved for marketing for the designated indication in the European Union.
Based
on the results of the PROPEL trial, we intend to seek regulatory approval to
market FOLOTYN in Europe and other countries for the treatment of patients with
relapsed or refractory PTCL. Our current
intention is to submit a Marketing Authorization Application in Europe in 2010. We intend to enter into co-promotion or out-licensing
arrangements with other
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pharmaceutical
or biotechnology partners where necessary to reach foreign market segments that
are not reachable by a U.S.-based sales force or when deemed strategically and
economically advisable.
FOLOTYN clinical development beyond PTCL
Beyond
PTCL, we are committed to developing FOLOTYN both as a single agent and in
combination therapy regimens in a variety of hematologic malignancies and solid
tumor indications. The following
clinical trials involving FOLOTYN are currently ongoing:
·
a Phase 2b, randomized, international, multi-center trial comparing
FOLOTYN and Tarceva (erlotinib) in patients with Stage IIIB/IV NSCLC who are,
or have been, cigarette smokers who have failed treatment with at least one
prior platinum-based chemotherapy regimen. We initiated patient
enrollment in this trial in January 2008 and completed patient enrollment
with 201 patients in July 2009. We currently expect to report top
line results of the trial in the first half of 2010, although the actual timing
may vary based upon a number of factors.
·
a
Phase 2, open-label, single-arm, multi-center trial of FOLOTYN in patients with
advanced or metastatic relapsed TCC of the urinary bladder. We initiated
patient enrollment in this trial in July 2008. The trial will seek
to enroll up to 41 patients in up to 20 investigative sites worldwide.
·
a
Phase 1/2a, open-label, multi-center trial of FOLOTYN and Gemzar (gemcitabine)
in patients with relapsed or refractory NHL and Hodgkins disease. We
initiated patient enrollment in this trial in May 2007. In July 2009,
we completed patient enrollment in the Phase 1 portion of this trial and
initiated enrollment in the Phase 2a portion of the trial to assess the
efficacy and safety of two different schedules of this combination in patients
with NHL, both B-cell and T-cell, as well as in patients with Hodgkins lymphoma.
·
a
Phase 1, open-label, multi-center trial of FOLOTYN in patients with relapsed or
refractory cutaneous T-cell lymphoma. We initiated patient enrollment in
this trial in August 2007. We plan to enroll up to 56 evaluable
patients in the trial with the objective of determining the optimal dose and
safety profile, including at least 20 patients at what we believe to be the
optimal dose and schedule.
·
a Phase 2, single-arm, open-label, multi-center trial of FOLOTYN in
patients with aggressive relapsed or refractory B-cell non-Hodgkins
lymphoma. This trial will seek to enroll
approximately 27 evaluable patients in up to 10 investigative sites
worldwide. The primary endpoint of the
study is objective response rate (complete and partial response) per IWC. Secondary endpoints include duration of
response, PFS, overall survival, and the safety and tolerability of FOLOTYN.
In addition to the treatment of T-cell lymphoma, the
FDA has awarded orphan drug status to FOLOTYN for the treatment of patients
with follicular lymphoma and diffuse large B-cell lymphoma. In addition to the treatment of PTCL, the
EMEA has granted Orphan Medicinal Product Designation to FOLOTYN for the
treatment of non-papillary TCC of the urinary bladder.
In December 2002, we entered into a license
agreement with Memorial Sloan-Kettering Cancer Center, SRI International and
Southern Research Institute. Under the agreement, as amended, we obtained
exclusive worldwide rights to a portfolio of patents and patent applications
related to FOLOTYN and its uses. The portfolio currently consists of two issued
patents in the United States, two issued patents in Europe, an issued patent in
Singapore, an allowed patent application in New Zealand, and pending patent
applications in the United States, Canada, Europe, Australia, Japan, China,
Brazil, Indonesia, South Korea, Mexico, Norway, New Zealand, the Philippines,
and South Africa.
RH1
RH1 is
a small molecule chemotherapeutic agent that we believe is bioactivated by the
enzyme DT-diaphorase, also known as NAD(P)H quinone oxidoreductase. In June 2009,
we discontinued the RH1 development program. In August 2009, we
provided notice of termination of our license agreement for RH1 to the
licensors, which termination was effective September 6, 2009.
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Results
of Operations
Since our inception in
1992, we have not generated any revenue from product sales and have experienced
significant net losses and negative cash flows from operations. We have
incurred these losses principally from costs incurred in our research and
development programs, clinical manufacturing and from our marketing, general
and administrative expenses. On September 24, 2009, we obtained
accelerated approval from the FDA for FOLOTYN for use as a single agent for the
treatment of patients with relapsed or refractory PTCL. We began making FOLOTYN available for
commercial sale in the United States on October 5, 2009, with an
anticipated commercial launch in January 2010. Our ability to generate revenue and achieve
profitability is dependent on our ability, alone or with partners, to
successfully commercialize FOLOTYN for the treatment of patients with relapsed
or refractory PTCL. We are also
developing FOLOTYN for use as a single agent and in combination therapy
regimens in a range of hematologic malignancies and solid tumor indications,
which may or may not lead to obtaining the necessary regulatory approvals to
market FOLOTYN for additional indications. Clinical development timelines,
likelihood of success and total costs vary widely and are impacted by a variety
of risks and uncertainties, including those discussed in the Risk Factors
section of Part II, Item 1A below.
We may continue incurring net losses for the foreseeable future. We may
never generate significant revenue from product sales or become profitable. We
expect to continue to spend substantial amounts on research and development,
including amounts spent on conducting clinical trials and seeking additional
regulatory approvals for FOLOTYN, and commercializing FOLOTYN for the treatment
of patients with relapsed or refractory PTCL.
We anticipate continuing
our current development programs and/or beginning other long-term development
projects involving FOLOTYN. These projects may require many years and
substantial expenditures to complete and may ultimately be unsuccessful. In addition, we expect to incur significant
costs relating to commercialization of FOLOTYN for the treatment of patients
with relapsed or refractory PTCL, including costs related to our sales and
marketing, medical affairs and manufacturing operations. Therefore, we may need to raise additional
capital to support our future operations.
Our actual capital requirements will depend on many factors, including
those discussed under the Liquidity and Capital Resources section below.
Comparison
of three and nine months ended September 30, 2009 and 2008
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
Research
and development
|
|
$
|
6,025,486
|
|
$
|
6,360,950
|
|
$
|
18,900,803
|
|
$
|
17,738,486
|
|
Clinical
manufacturing
|
|
1,512,341
|
|
1,727,630
|
|
5,773,776
|
|
4,799,240
|
|
Marketing,
general and administrative
|
|
11,327,073
|
|
5,326,357
|
|
26,326,317
|
|
15,776,485
|
|
Amortization
of intangible asset
|
|
7,439
|
|
|
|
7,439
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
operating expenses
|
|
$
|
18,872,339
|
|
$
|
13,414,937
|
|
$
|
51,008,335
|
|
$
|
38,314,211
|
|
Research
and Development.
Research
and development expenses include the costs of certain personnel, basic
research, preclinical studies, clinical trials, regulatory affairs,
biostatistical data analysis and licensing fees for our product candidates
incurred prior to receiving regulatory approval.
Research and development
expenses for the three months ended September 30, 2009 and 2008 were $6.0
million and $6.4 million, respectively.
The $335,000 decrease in research and development expenses in the three
months ended September 30, 2009 as compared to the same period in 2008 was
primarily due to the following:
·
a $512,000 decrease in clinical trial costs involving
FOLOTYN, including decreased costs for PROPEL, which completed patient
enrollment in April 2008; and
·
a $679,000 decrease in stock-based compensation,
primarily related to the resignation of our former Chief Medical Officer (CMO),
as discussed in more detail in the
Stock-based Compensation
Expense
section below.
This
decrease was partially offset by:
·
a $585,000 increase in consulting and professional
fees, primarily related to regulatory affairs and preparations for
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the FDAs Oncologic Drugs Advisory Committee, or ODAC,
meeting for FOLOTYN in September 2009; and
·
a $351,000 increase related to key personnel changes
and related travel costs, mainly attributable to additional headcount and increases
in compensation costs year over year.
Research and development
expenses for the nine months ended September 30, 2009 and 2008 were $18.9
million and $17.7 million, respectively.
The $1.2 million increase in research and development expenses in the
nine months ended September 30, 2009 as compared to the same period in
2008 was primarily due to the following:
·
a $1.5 million increase in licensing costs for
pralatrexate, as $1.5 million of milestone payments under the license agreement
for FOLOTYN became due upon FDA acceptance of our New Drug Application, or NDA,
for review in May 2009, with no corresponding amount in the same period in
2008;
·
a $1.5 million increase related to key personnel
changes and related travel costs, mainly attributable to additional headcount
and increases in compensation costs year over year; and
·
a $1.5 million increase in consulting, professional fees and grants,
primarily related to regulatory affairs, including preparations related to
filing of our NDA for FOLOTYN and the ODAC meeting.
This
increase was partially offset by:
·
a $2.3 million decrease in clinical trial costs
involving FOLOTYN, including decreased costs for PROPEL, which completed
patient enrollment in April 2008;
·
a $600,000 decrease in preclinical studies, primarily
related to FOLOTYN; and
·
a $305,000 decrease in stock-based compensation,
primarily related to the resignation of our former CMO, as discussed in more
detail in the
Stock-based Compensation Expense
section below.
For the fourth quarter of
2009, we expect our research and development expenses to increase compared to
the quarterly average for the nine months ended September 30, 2009 due to
the following:
·
an increase in clinical trial costs
involving FOLOTYN, including study start-up costs for the post-approval
clinical studies required by the FDA; and
·
an increase in personnel and related
travel costs primarily resulting from additional headcount; offset by
·
a decrease in licensing costs for
FOLOTYN, as upon FDA approval to market FOLOTYN, any additional milestone
payments would be capitalized as an intangible asset. No additional milestone
payments are expected to become due under the license agreement for FOLOTYN
during the fourth quarter.
Clinical
Manufacturing.
Clinical
manufacturing expenses include the costs of certain personnel, third-party
manufacturing costs for development of drug materials for use in clinical
trials and preclinical studies, and costs associated with pre-commercial
scale-up of manufacturing to support anticipated regulatory and potential
commercial requirements. Prior to the September 24, 2009 regulatory
approval of FOLOTYN, costs
associated with manufacturing process development and the manufacture of drug
product were recorded as clinical manufacturing expenses. Subsequent to
approval, costs associated with the manufacture of FOLOTYN to be sold in the United States will be capitalized into
inventory.
Clinical manufacturing
expenses for the three months ended September 30, 2009 and 2008 were $1.5
million and $1.7 million, respectively.
The $215,000 decrease in clinical manufacturing expenses in the three
months ended September 30, 2009 as compared to the same period in 2008 was
primarily due to a decrease in consulting expenses, primarily related to the
use of consultants in connection with the preparation and filing of our NDA for
FOLOTYN that was completed in March 2009.
Clinical manufacturing
expenses for the nine months ended September 30, 2009 and 2008 were $5.8
million and $4.8 million, respectively.
The $1.0 million increase in clinical manufacturing expenses in the nine
months ended September 30, 2009 as compared to the same period in 2008 was
primarily due to an increase in third-party manufacturing costs for clinical
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trial material and
pre-commercial scale-up activities for FOLOTYN.
For the fourth quarter of
2009, we expect our clinical manufacturing expenses to increase relative to the
quarterly average for the nine months ended September 30, 2009 due to the
following:
·
an increase in third-party manufacturing
costs for FOLOTYN to support ongoing and planned clinical trials and the
addition of secondary third-party manufacturing suppliers;
·
an
increase in personnel and related travel costs primarily resulting from
additional headcount; and
·
an
increase in non-cash stock-based compensation expense related to grants for new
employees.
Marketing,
General and Administrative.
Marketing, general and
administrative expenses include costs for pre-marketing activities, corporate
development, executive administration, corporate offices and related
infrastructure.
Marketing, general and
administrative expenses for the three months ended September 30, 2009 and
2008 were $11.3 million and $5.3 million, respectively. The $6.0 million increase in marketing,
general and administrative expenses in the three months ended September 30,
2009 as compared to the same period in 2008 was primarily due to the following:
·
a $3.3 million
increase related to key personnel changes and related travel and facilities
costs, mainly attributable to additional headcount, including approximately 25
sales specialists, and increases in compensation costs year over year;
·
a $2.2 million
increase related to pre-commercial planning activities for FOLOTYN; and
·
a $586,000
increase in non-cash stock-based compensation expense, as discussed in more
detail in the
Stock-based Compensation Expense
section below.
Marketing, general and
administrative expenses for the nine months ended September 30, 2009 and
2008 were $26.3 million and $15.8 million, respectively. The $10.5 million increase in marketing,
general and administrative expenses in the nine months ended September 30,
2009 as compared to the same period in 2008 was primarily due to the following:
·
a $5.4 million
increase related to key personnel changes and related travel and facilities
costs, mainly attributable to additional headcount, including approximately 25
sales specialists, and increases in compensation costs year over year;
·
a $4.2 million
increase related to pre-commercial planning activities for FOLOTYN; and
·
a $955,000
increase in non-cash stock-based compensation expense, as discussed in more
detail in the
Stock-based Compensation Expense
section below.
For the fourth quarter of
2009, we expect our marketing, general and administrative expenses to increase
relative to the quarterly average for the nine months ended September 30,
2009 due to the following:
·
an increase in sales and marketing
costs associated with executing our post-approval FOLOTYN marketing and
promotional programs for the anticipated commercial launch FOLOTYN in January 2010;
·
an increase in
general and administrative expenses associated with building and maintaining
our administrative infrastructure to support the commercialization of FOLOTYN;
·
an increase in
personnel costs, primarily resulting from additional headcount, including a full
quarter of costs for the 25 sales specialists hired in the third quarter and
additional sales specialists hired in the fourth quarter to bring the total up
to approximately 50 sales specialists in preparation for the anticipated
commercial launch of FOLOTYN in January 2010; and
·
an increase in non-cash stock-based
compensation expense related to grants for new employees.
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Amortization
of intangible asset.
Amortization of intangible asset
includes amortization of capitalized license costs over the expected patent
life of the related product.
Amortization of
intangible asset expenses for the three and nine months ended September 30,
2009 and 2008 were $7,000 and $0, respectively.
The $7,000 increase in amortization of intangible asset expenses in the
three months ended September 30, 2009 as compared to the same period in
2008 was due to the amortization of the $5.8 million intangible asset resulting
from the milestone payment in September 2009, with no corresponding amount
in the same period in 2008. Amortization
expense will be recorded on a straight line basis over the estimated remaining
life of the patent for FOLOTYN, which we expect to last until July 16,
2022. This includes the anticipated Hatch-Waxman extension that provides patent
protection for drug compounds for a period of up to five years to compensate
for time spent in development. This term is our best estimate of the life of
the patent. If, however, the
Hatch-Waxman extension is not granted, the intangible asset will be amortized
over a shorter period.
Stock-based
Compensation Expense.
Stock-based
compensation expense for the three and nine months ended September 30,
2009 and 2008 has been recognized in our Statements of Operations as follows:
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
Research
and development
|
|
$
|
(68,784
|
)
|
$
|
609,767
|
|
$
|
1,642,659
|
|
$
|
1,947,384
|
|
Clinical
manufacturing
|
|
113,207
|
|
98,744
|
|
321,533
|
|
305,756
|
|
Marketing,
general and administrative
|
|
1,710,574
|
|
1,124,329
|
|
4,638,541
|
|
3,683,359
|
|
Total
stock-based compensation expense
|
|
$
|
1,754,997
|
|
$
|
1,832,840
|
|
$
|
6,602,733
|
|
$
|
5,936,499
|
|
Effective September 30,
2009, Pablo J. Cagnoni, M.D., our Senior Vice President and Chief Medical
Officer (CMO), resigned. As a result of
his resignation, we adjusted the forfeiture rate applied to his equity
compensation, which resulted in a one-time $906,000 reversal of research and
development stock-based compensation expense during the three and nine months
ended September 30, 2009, of which $699,000 related to stock option
awards, $166,000 related to restricted stock awards and $41,000 related to restricted
stock unit awards.
The $1.8 million of
stock-based compensation recognized in the three months ended September 30,
2009 and 2008 was primarily related to our stock option plans. The $78,000
decrease in stock-based compensation expense in the three months ended September 30,
2009 as compared to the same period in 2008 was primarily due to the reversal
related to the resignation of our former CMO discussed above, offset by an
increase in the number of options granted to new employees and to existing
employees pursuant to our annual grants that occurred in February 2009.
Of the $6.6 million of
stock-based compensation recognized in the nine months ended September 30,
2009, $6.3 million was related to our stock option plans, $275,000 related
to restricted stock and restricted stock units and $75,000 was related to our
employee stock purchase plan. Of the
$5.9 million of stock-based compensation recognized in the nine months ended September 30,
2008, $5.6 million was related to our stock option plans, $327,000 related
to restricted stock and $40,000 was related to our employee stock purchase
plan. The $666,000 increase in stock-based compensation expense in the nine
months ended September 30, 2009 as compared to the same period in 2008 was
primarily due to an increase in the number of options granted to new employees
and to existing employees pursuant to our annual grants that occurred in February 2009,
offset by the reversal related to the resignation of our former CMO discussed
above.
As of September 30,
2009, the unrecorded stock-based compensation balance related to stock option
awards was $9.3 million and will be recognized over an estimated
weighted-average amortization period of 1.4 years. As of September 30,
2009, the unrecorded stock-based compensation balance related to restricted
stock unit awards was $622,000 and will be recognized over an estimated
weighted-average amortization period of 1.7 years. As of September 30,
2009, the unrecorded stock-based compensation balance related to restricted
stock awards was $83,000 and will be recognized over an estimated
weighted-average amortization period of 1.2 years.
Interest
and Other Income, Net
. Interest and other income, net
for the three months ended September 30, 2009 and 2008, was $126,000 and $254,000,
respectively. The $129,000 decrease in
interest and other income, net in the three months ended September 30,
2009 as compared to the same period in 2008, was primarily due to lower yields
on our cash, cash equivalents and investments in marketable securities; offset
by a realized loss of approximately $552,000 on the sale of certain of our
investments in marketable securities during the three months ended September 30,
2008, with no corresponding amount for the same period of 2009. Interest and other
income, net for the nine months ended September 30, 2009 and 2008, was
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$304,000 and $1.3
million, respectively. The $1.0 million
decrease in interest and other income, net in the nine months ended September 30,
2009 as compared to the same period in 2008, was primarily due to lower yields
on our cash, cash equivalents and investments in marketable securities and a
$149,000 loss on the disposal of certain software that was no longer in use
during the three months ended June 30, 2009, offset by a $395,000 decrease
in realized losses on the sale of certain of our investments in marketable
securities.
Income
Tax Benefit
. Income tax benefit for the three and nine
months ended September 30, 2009 and 2008 was $77,000 and $0,
respectively. The $77,000 increase in
income tax benefit in the three and nine months ended September 30, 2009
as compared to the same period in 2008 was related to a research and
experimentation income tax credit received during the three and nine months
ended September 30, 2009, with no corresponding amount in the same period
for 2008. We do not expect an income tax
benefit during the fourth quarter of 2009.
We performed an evaluation of tax periods which remain subject to
examination by major tax jurisdictions as of September 30, 2009 and we
have concluded that there are no significant uncertain tax positions requiring
recognition in our financial statements.
A full valuation allowance has been established for the entire tax
benefit as we believe that it is more likely than not that such assets will not
be realized.
Liquidity
and Capital Resources
As of September 30,
2009, we had $84.1 million in cash, cash equivalents, and investments in
marketable securities. Of this amount,
$52.6 million was held in money market funds and $31.5 million was held in U.S.
Treasury bills, certificates of deposit and high-grade corporate notes with a
weighted average duration of the remaining time to maturity of approximately
five months. Until required for use in our business, we invest our cash
reserves in bank deposits, money market funds, certificates of deposit,
high-grade corporate notes and U.S. government instruments in accordance with
our investment policy.
On October 13, 2009,
we completed an underwritten public offering of 14,000,000 shares of our common
stock at the public offering price of $7.10 per share (the October 2009
Financing). We received net proceeds from the offering of approximately $93.0
million, after deducting underwriting discounts and commissions and estimated
offering expenses. We also granted the underwriters an option through November 6,
2009 to purchase up to an aggregate of 2,100,000 additional shares of common
stock to cover over-allotments, if any.
We currently anticipate using the net proceeds of the offering primarily
for activities relating to the commercialization of FOLOTYN, preclinical
research and clinical development of FOLOTYN, and for general corporate
purposes.
Since our inception, we
have financed our operations primarily through public and private sales of our
equity securities, which have resulted in net proceeds to us of
$378.4 million through September 30, 2009. We have also generated approximately
$23.8 million of net interest income since our inception from investing
the net proceeds of these public and private sales of our equity securities.
We have used $280.4
million of cash for operating activities from our inception through September 30,
2009. Net cash used in operating
activities for the nine months ended September 30, 2009 and 2008 was $42.0
million and $30.7 million, respectively.
For fiscal year 2009, we currently anticipate that net cash use in
operating activities, together with the $5.8 million milestone payment under
our license agreement for FOLOTYN as discussed in the net cash provided from
investing activities section below, will approximate $65 million to $70
million. Our 2009 financial guidance
includes the phase-in of key investments associated with our commercial,
medical affairs and manufacturing operations in preparation for the anticipated
commercial launch of FOLOTYN in January 2010, and the $1.5 million and
$5.8 million milestone payments under our license agreement for FOLOTYN paid
upon FDA acceptance and approval of our NDA, respectively, during the nine
months ended September 30, 2009.
Net cash provided from
investing activities for the nine months ended September 30, 2009 was
$24.0 million and consisted of the net proceeds from maturities, sales and
purchases of investments in marketable securities, partially offset by $5.8
million of cash paid for license related to the milestone payment made under
our license agreement upon FDA approval of our NDA in September 2009 and
$1.1 million for the acquisition of property and equipment. Net cash used in investing activities for the
nine months ended September 30, 2008 was $33.9 million and consisted
primarily of the purchase of investments in marketable securities of $94.0
million, $530,000 for the acquisition of property and equipment and $238,000
related to the pledging of collateral for a letter of credit related to a
facility lease, partially offset by the proceeds from maturities and sales of
investments in marketable securities.
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Net cash provided by
financing activities for the nine months ended September 30, 2009 was
$50.0 million and consisted of the $47.0 million of net proceeds from the sale
of 7,750,000 shares of common stock at the public offering price of $6.30 in April 2009
and $3.0 million of proceeds from the issuance of common stock associated with
stock options exercised by our employees and sales of stock under our employee
stock purchase plan. Net cash provided
by financing activities for the nine months ended September 30, 2008 was
$70.1 million and consisted of the $65.2 million of net proceeds from the sale
of 12,420,000 shares of common stock at the public offering price of $5.64 per
share in May 2008 and $4.9 million of proceeds from the issuance of common
stock associated with stock options exercised by our employees and sales of
stock under our employee stock purchase plan.
Based upon the current
status of our product development and commercialization plans, we believe that
our cash, cash equivalents, and investments in marketable securities as of September 30,
2009, together with the net proceeds of approximately $93.0 million from the October 2009
Financing, should be adequate to support our operations through at least the
next 12 months, although there can be no assurance that this can, in fact, be
accomplished. Our forecast of the period of time through which our financial
resources will be adequate to support our operations is a forward-looking
statement that involves risks and uncertainties, and actual results could vary
materially.
We
anticipate continuing our current development programs and beginning other
long-term development projects involving FOLOTYN, including the post-approval
clinical studies required for FOLOTYN. These projects may require many years
and substantial expenditures to complete and may ultimately be
unsuccessful. In addition, we expect to incur significant costs relating
to the commercialization of FOLOTYN, including costs related to our sales and
marketing, medical affairs and manufacturing operations. Therefore, we
may need to raise additional capital to support our future operations.
Our actual capital requirements will depend on many factors, including:
·
the timing and amount of revenues generated from the
sale of FOLOTYN;
·
the timing and costs associated with developing our
sales and marketing, medical affairs and manufacturing operations for the
commercialization of FOLOTYN;
·
the timing and costs associated with manufacturing
clinical and commercial supplies of FOLOTYN;
·
the timing and costs associated with conducting
preclinical and clinical development of FOLOTYN, as well as our evaluation of,
and decisions with respect to, additional therapeutic indications for which we
may develop FOLOTYN;
·
the timing and costs associated with completing the
post-approval clinical studies required by the FDA;
·
the timing, costs and potential revenue associated
with any co-promotion or other partnering arrangements entered into to
commercialize FOLOTYN; and
·
our evaluation of, and decisions with respect to,
potential in-licensing or product acquisition opportunities or other strategic
alternatives
.
We may seek to obtain
this additional capital through equity or debt financings, arrangements with
corporate partners, or from other sources. Such financings or arrangements, if
successfully consummated, may be dilutive to our existing stockholders.
However, there is no assurance that additional financing will be available when
needed, or that, if available, we will obtain such financing on terms that are
favorable to our stockholders or us. In the event that additional funds are
obtained through arrangements with collaborative partners or other sources,
such arrangements may require us to relinquish rights to some of our
technologies, product candidates or products under development, which we might
otherwise seek to develop or commercialize ourselves, on terms that are less
favorable than might otherwise be available. If we are unable to generate
meaningful amounts of revenue from future product sales or cannot otherwise
raise sufficient additional funds to support our operations, we may be required
to delay, reduce the scope of or eliminate one or more of our development
programs and our business and future prospects for revenue and profitability
may be harmed.
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Obligations
and Commitments
Royalty and
License Fee Commitments for FOLOTYN
In December 2002, we
entered into a license agreement with Memorial Sloan-Kettering Cancer Center,
SRI International and Southern Research Institute, as amended, under which we
obtained exclusive worldwide rights to a portfolio of patents and patent
applications related to FOLOTYN and its uses. Under the terms of the agreement,
we paid an up-front license fee of $2.0 million upon execution of the
agreement. To date, we have made aggregate milestone payments of $2.5 million
based on the passage of time. Additionally, in May and September 2009,
we made milestone payments of $1.5 million based on the FDA accepting our NDA
for review and $5.8 million based on the FDA approval to market FOLOTYN,
respectively. We are also required to
make an additional milestone payment of $3.5 million upon regulatory approval
to market FOLOTYN in Europe. The up-front license fee and all milestone
payments under the agreement prior to FDA approval to market FOLOTYN were
recorded to research and development expense as incurred. All milestone
payments under the agreement subsequent to FDA approval to market FOLOTYN, were
or will be capitalized and amortized over the expected useful life. Under the
terms of the agreement, we are required to fund all development programs and
will have sole responsibility for all commercialization activities. In
addition, we will pay the licensors a royalty based on a percentage of net
sales of the product, which may be different than our net product revenue
recognized in accordance with U.S. GAAP, or sublicense revenues arising from
sublicensing the product, if and when such sales or sublicenses occur.
Critical
Accounting Policies
Our discussion and
analysis of our financial condition and results of operations are based upon
our financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States. The preparation of these financial statements
requires us to make estimates and judgments that affect the reported amounts of
assets, liabilities, and expenses. We
base our estimates on historical experience, available information and
assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these
estimates under different assumptions or conditions. For a description of our critical accounting
policies, please see our Annual Report on Form 10-K for the fiscal year
ended December 31, 2008, as amended.
Recent
Accounting Pronouncements
For a description of
recent accounting pronouncements, please see Note 10 of the unaudited September 30,
2009 financial statements included herein.
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our financial instruments
as of September 30, 2009 consisted of cash, cash equivalents, investments
in marketable securities, prepaid expenses, accounts payable and accrued
liabilities. All highly liquid
investments with original maturities of three months or less are considered to
be cash equivalents. We invest in
marketable securities in accordance with our investment policy. The primary objectives of our investment
policy are to preserve principal and maintain proper liquidity to meet
operating needs. Our investment policy
specifies credit quality standards for our investments and limits the amount of
credit exposure to any single issue, issuer or type of investment. The weighted average duration of the
remaining time to maturity for our portfolio of investments in marketable
securities as of September 30, 2009 was approximately five months. As of September 30, 2009, our
investments in marketable securities of $21.7 million were all classified
as held-to-maturity and were held in a variety of interest-bearing instruments,
consisting mainly of U.S. Treasury bills, certificates of deposit and
high-grade corporate notes. We did not hold any derivative instruments, foreign
exchange contracts, asset backed securities, mortgage backed securities,
auction rate securities, or securities of issuers in bankruptcy in our
investment portfolio as of September 30, 2009. The value of our investments in marketable
securities may be adversely affected by rating downgrades or bankruptcies
affecting the issuers of such securities, whether caused by instability in the
global financial markets, lack of liquidity in the credit and capital markets,
or other factors. In response to the
recent instability in the global financial markets, we reviewed our investments
in marketable securities and sold certain investments that we deemed to have
increased risk during the three months ended March 31, 2009. We have the ability and intent to hold our
remaining investments in marketable securities as of September 30, 2009 to
their scheduled maturity, although we monitor our investment portfolio with the
primary objectives of preserving principal and maintaining proper liquidity to
meet our operating needs.
Investments in fixed-rate
interest-earning instruments carry varying degrees of interest rate risk. The fair market value of our fixed-rate
securities may be adversely impacted due to a rise in interest rates. In general, securities with longer maturities
are subject to greater interest-rate risk than those with shorter maturities. Due in part to this factor, our interest
income may fall short of expectations or we may suffer losses in principal if
securities are sold that have declined in market value due to changes in
interest rates. Due to the short
duration of our investment portfolio, we believe an immediate 10% change in
interest rates would not be material to our financial condition or results of
operations.
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ITEM 4. CONTROLS
AND PROCEDURES
Disclosure
Controls and Procedures
As of the end of the
period covered by this report, an evaluation was carried out under the
supervision and with the participation of our management, including our
principal executive officer and principal financial officer, of the
effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) of
the Securities Exchange Act of 1934, as amended, or the Exchange Act. Based on that evaluation, our management,
including our principal executive officer and principal financial officer,
concluded that our disclosure controls and procedures were effective as of September 30,
2009 to ensure that information required to be disclosed by us in reports that
we file or submit under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in Securities and Exchange
Commissions 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.
No
Changes in Internal Control over Financial Reporting
There were no changes in
our internal controls over financial reporting during the three months ended September 30,
2009 that have materially affected, or are reasonably likely to materially
affect, our internal controls over financial reporting.
27
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As
reported in our Quarterly Report on Form 10-Q for the period ended March 31,
2009, the period to appeal the approval by the U.S. District Court for the
District of Colorado of the settlement of the securities class action lawsuit
to which we were a party lapsed during the three months ended March 31,
2009 without any further appeals being filed and the settlement is final.
ITEM 1A. RISK
FACTORS
Our
business faces significant risks. These risks include those described below and
may include additional risks of which we are not currently aware or which we
currently do not believe are material. If any of the events or circumstances
described in the following risk factors actually occurs, they may materially
harm our business, financial condition, operating results and cash flow. As a
result, the market price of our common stock could decline. Additional risks
and uncertainties that are not yet identified or that we think are immaterial
may also materially harm our business, operating results and financial
condition.
Stockholders and
potential investors in shares of our common stock should carefully consider the
following risk factors, which hereby update those risks contained in the Risk
Factors section of our Annual Report on Form 10-K for the year ended December 31,
2008, as amended, in addition to other information and risk factors in this
report. We are identifying these risk
factors as important factors that could cause our actual results to differ
materially from those contained in any written or oral forward-looking
statements made by or on behalf of the Company.
We are relying upon the safe harbor for all forward-looking statements
in this report, and any such statements made by or on behalf of the Company are
qualified by reference to the following cautionary statements, as well as to
those set forth elsewhere in this report. We consistently update and include
our risk factors in our Quarterly Reports on Form 10-Q. Risk factors that
have been substantively changed from those set forth in our Annual Report on Form 10-K
for the period ended December 31, 2008, as amended, have been marked with
an asterisk immediately following the heading of such risk factor.
We have a history
of net losses and an accumulated deficit, and we may never generate revenue or
achieve or maintain profitability in the future. *
Since our inception in
1992, we have not generated any revenue from product sales and have experienced
significant net losses and negative cash flows from operations. To date, we
have financed our operations primarily through the public and private sale of
securities. For the nine months ended September 30,
2009, we had a net loss of $50.6 million.
As of September 30, 2009, we had accumulated a deficit during our
development stage of $350.3 million.
We have incurred these losses principally from costs incurred in our
research and development programs, clinical manufacturing and from our marketing,
general and administrative expenses. On September 24, 2009, we obtained
accelerated approval from the FDA for FOLOTYN for use as a single agent for the
treatment of patients with relapsed or refractory PTCL. We began making FOLOTYN
available for commercial sale in the United States on October 5, 2009,
with an anticipated commercial launch in January 2010. Our ability to generate revenue and achieve
profitability is dependent on our ability, alone or with partners, to
successfully commercialize FOLOTYN for the treatment of patients with relapsed
or refractory PTCL. We are also
developing FOLOTYN for use as a single agent and in combination therapy
regimens in a range of hematologic malignancies and solid tumor indications,
which may or may not lead to obtaining the necessary regulatory approvals to
market FOLOTYN for additional indications. We may never generate significant
revenue from product sales or become profitable. We expect to continue to spend
substantial amounts on research and development, including amounts spent on
conducting clinical trials and seeking additional regulatory approvals for
FOLOTYN, and commercializing FOLOTYN for the treatment of patients with
relapsed or refractory PTCL.
Our near-term prospects are dependent
on FOLOTYN. If we are unable to successfully commercialize FOLOTYN for
the treatment of patients with relapsed or refractory PTCL, our ability to
generate significant revenue or achieve profitability will be adversely
affected
.
*
On September 24,
2009, the FDA granted accelerated approval of FOLOTYN for use as a single agent
for the treatment of patients with relapsed or refractory PTCL. This indication is based on overall response
rate. Clinical benefit such as
improvement in PFS or overall survival has not been demonstrated. As a condition of approval, the FDA is
requiring us to conduct several post-approval clinical studies. FOLOTYN is our
only product approved for marketing by the FDA and our ability to generate
revenue in the near term is entirely dependent upon sales of FOLOTYN, which we
made available for commercial sale in the United States commencing in October 2009.
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We may not be able to successfully commercialize
FOLOTYN for a number of reasons, including:
·
we may not be able to establish or demonstrate in the medical community
the safety and efficacy of FOLOTYN and its potential advantages over existing
and newly developed therapeutic products;
·
doctors may be hesitant to prescribe FOLOTYN until results from our
post-approval studies are available or other long term data regarding efficacy
and safety exists;
·
results from our Phase 3
post-approval studies may fail to verify the clinical benefit of FOLOTYN for
the treatment of T-cell lymphoma
;
·
our limited experience in marketing, selling and distributing products;
·
reimbursement and coverage policies of government and private payers
such as Medicare, Medicaid, insurance companies, health maintenance
organizations and other plan administrators;
·
the relative price of FOLOTYN as compared to alternative treatment
options;
·
we may not have adequate financial or other resources to successfully
commercialize FOLOTYN;
·
we may not be able to manufacture FOLOTYN in
commercial quantities or at acceptable costs; and
·
the receipt of timely regulatory approval, if at all,
for additional indications that we are studying.
If
we are unable to develop adequate sales, marketing or distribution capabilities
or enter into agreements with third parties to perform some of these functions,
we will not be able to commercialize FOLOTYN effectively
. *
The
approval of FOLOTYN for the treatment of patients with relapsed or refractory
PTCL is our first U.S. indication.
Accordingly, we have limited experience in sales, marketing and
distribution of pharmaceutical products.
Although we are currently in the process of developing our sales,
marketing and distribution capabilities, we may not be able to establish these
capabilities on our own or enter into necessary or desirable arrangements with
third parties in a timely manner or on acceptable terms. Additionally,
building sales, marketing and distribution capabilities may be more expensive
than we anticipate, requiring us to divert capital from other intended purposes
or preventing us from building our sales, marketing and distribution
capabilities to the desired levels. To be successful we must:
·
recruit and retain adequate
numbers of effective sales personnel;
·
effectively train our sales
personnel in the benefits of FOLOTYN;
·
establish and maintain
successful sales and marketing and education programs that encourage physicians
to recommend FOLOTYN to their patients; and
·
manage geographically
dispersed sales and marketing operations.
We intend to enter into
co-promotion or out-licensing arrangements with other pharmaceutical or
biotechnology partners where necessary to reach foreign market segments that
are not reachable by a U.S.-based direct sales organization or when deemed
strategically and economically advisable. To the extent that we enter into
co-promotion or other licensing arrangements, our product revenues are likely
to be lower than if we directly marketed and sold FOLOTYN, and some or all of
the revenues we receive will depend upon the efforts of third parties, which
may not be successful. If we are unable to develop and maintain adequate sales,
marketing and distribution capabilities, independently or with others, we may
not be able to generate significant product revenue or become profitable.
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Even
though we have obtained accelerated approval to market FOLOTYN for the
treatment of patients with relapsed or refractory PTCL, we are subject to
ongoing regulatory obligations and review, including post-approval requirements
.
*
FOLOTYN was approved for the treatment of patients
with relapsed or refractory PTCL under the FDAs accelerated approval program,
which allows the FDA to approve products for cancer or other life threatening
diseases based on initial positive clinical data. Under these provisions, we are subject to
certain post-approval requirements pursuant to which we have agreed to conduct
two randomized Phase 3 trials to verify and describe FOLOTYNs clinical benefit
in patients with T-cell lymphoma. The
FDA has also required that we conduct two Phase 1 trials to assess whether
FOLOTYN poses a serious risk of altered drug levels resulting from organ
impairment. Failure to complete the
studies or adhere to the timelines established by the FDA could result in
penalties, including fines or withdrawal of FOLOTYN from the market. The FDA may also initiate proceedings to
withdraw approval if our Phase 3 studies fail to verify clinical benefit. Further, the FDA may require us to strengthen
the warnings and precautions section of the FOLOTYN package insert based on the
results of the Phase 1 studies. We are
also
subject to
additional, continuing post-approval regulatory obligations, including the
possibility of additional clinical studies required by the FDA, safety
reporting requirements and regulatory oversight of the promotion and marketing
of FOLOTYN.
In addition, we or our
third-party manufacturers are required to adhere to regulations setting forth
the FDAs current Good Manufacturing Practices, or cGMP. These regulations
cover all aspects of the manufacturing, storage, testing, quality control and
record keeping relating to FOLOTYN. Furthermore, we or our third-party
manufacturers are subject to periodic inspection by the FDA and foreign
regulatory authorities to ensure strict compliance with cGMP or other
applicable government regulations and corresponding foreign standards. We do
not have control over a third-party manufacturers compliance with these
regulations and standards. If we or our
third-party manufacturers fail to comply with applicable regulatory
requirements, we may be subject to fines, suspension, modification or
withdrawal of regulatory approvals, product recalls, seizure of products,
operating restrictions and criminal prosecution.
The status of coverage and reimbursement from third-party
payers for newly approved health care drugs is uncertain and failure to obtain
adequate coverage and reimbursement could limit our ability to generate
revenue. *
Our ability to
successfully commercialize FOLOTYN for the treatment of patients with relapsed
or refractory PTCL or for other future indications will depend, in part, on the
extent to which coverage and reimbursement for FOLOTYN is available from
government and health administration authorities, private health insurers, managed
care programs and other third-party payers. Significant uncertainty
exists as to the coverage and reimbursement of newly approved health care
products.
Healthcare providers and
third-party payers use coding systems to identify diagnoses, procedures,
services, drugs, pharmaceutical devices, equipment and other health-related
items and services. Proper coding is an
integral component to receiving appropriate reimbursement for the
administration of FOLOTYN and related services. The majority of payers use
nationally recognized code sets to report medical conditions, services and
drugs. Although we are in the process of applying for permanent reimbursement
codes for FOLOTYN, healthcare providers prescribing FOLOTYN will initially be
required to submit claims for reimbursement using temporary miscellaneous
codes, which may result in payment delays or incorrect payment levels. We
are also in the process of applying for transitional pass-through status which
would enable FOLOTYN to be reimbursed under the hospital outpatient prospective
payment system. We cannot predict at this time whether our customers will
receive adequate reimbursement for FOLOTYN, nor can we predict whether FOLOTYN
will receive permanent reimbursement codes or transitional pass-through status
in the future.
Third-party payers,
including Medicare, are challenging the prices charged for medical products and
services. Government and other third-party payers increasingly are attempting
to contain health care costs by limiting both coverage and the level of
reimbursement for new drugs and by refusing, in some cases, to provide coverage
for uses of approved products for disease conditions for which the FDA has not
granted labeling approval. Third-party insurance coverage may not be available
to patients for FOLOTYN. If government and other third-party payers do not
provide adequate coverage and reimbursement levels for FOLOTYN, FOLOTYNs
market acceptance may be adversely affected.
We have limited
market research upon which to evaluate the potential commercial acceptance of
FOLOTYN.
*
Based on the results of our market research, we
believe the FOLOTYN package insert aligns with physicians treatment priorities
and is likely to support the trial, use and adoption of FOLOTYN for the
treatment of patients with relapsed or refractory PCTL. The market research we
have performed is limited in scope and represents
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physicians impressions of a product profile similar
to that of FOLOTYN. However, physicians responding to the survey were not aware
that the product in question was FOLOTYN. We cannot assure you that the results
of this market research are indicative of the response we might receive from a
broader selection of physicians, or that these same physicians, when provided
with the name of the actual product, would respond in a similar manner.
Moreover, these results are based on physicians impressions formed from a
description of the product, and not actual results from prescription of the
product, which could result in different responses from those same or other
physicians.
If we fail to comply with healthcare fraud and abuse laws, we
could face substantial penalties and our business, operations and financial
condition could be adversely affected
.
As a
biopharmaceutical company, even though we do not and will not control referrals
of health care services or bill directly to Medicare, Medicaid or other
third-party payers, certain federal and state healthcare laws and regulations
pertaining to fraud and abuse will be applicable to our business. These laws
and regulations, include, among others:
·
the federal Anti-Kickback statute, which prohibits,
among other things, persons from soliciting, receiving or providing
remuneration, directly or indirectly, to induce either the referral of an
individual for an item or service or the purchasing or ordering of a good or
service, for which payment may be made under federal health care programs such
as the Medicare and Medicaid programs;
·
federal false claims laws that prohibit, among other
things, individuals or entities from knowingly presenting, or causing to be
presented, claims for payment from Medicare, Medicaid, or other third-party
payers that are false or fraudulent;
·
the federal Health Insurance Portability and
Accountability Act of 1996, or HIPAA, which prohibits executing a scheme to
defraud any healthcare benefit program or making false statements relating to
healthcare matters and which also imposes certain requirements relating to the
privacy, security and transmission of individually identifiable health
information;
·
federal self-referral laws, such as STARK, which
prohibit a physician from making a referral to a provider of certain health
services with which the physician or the physicians family member has a
financial interest; and
·
state law equivalents of each of the above federal laws,
such as anti-kickback and false claims laws that may apply to items or services
reimbursed by any third-party payor, including commercial insurers, and state
laws governing the privacy of health information in certain circumstances, many
of which differ from each other in significant ways and often are not preempted
by HIPAA.
Although
there are a number of statutory exemptions and regulatory safe harbors
protecting certain common activities from prosecution under the federal
Anti-Kickback statute, the exemptions and safe harbors are drawn narrowly, and
practices that involve remuneration intended to induce prescriptions, purchases
or recommendations may be subject to scrutiny if they do not qualify for an
exemption or safe harbor. Our practices may not in all cases meet all of the
criteria for safe harbor protection from anti-kickback liability.
If our
operations are found to be in violation of any of the healthcare fraud and
abuse laws described above or any other governmental regulations that apply to
us, we may be subject to penalties, including civil and criminal penalties,
damages, fines and the curtailment or restructuring of our operations. Any
penalties, damages, fines, curtailment or restructuring of our operations could
adversely affect our ability to operate our business and our financial results.
Although compliance programs can mitigate the risk of investigation and
prosecution for violations of these laws, the risks cannot be entirely
eliminated. Any action against us for violation of these laws, even if we
successfully defend against it, could cause us to incur significant legal
expenses and divert our managements attention from the operation of our
business. Moreover, achieving and sustaining compliance with all applicable
federal and state fraud and abuse laws may be costly.
If our competitors develop and market products that are more
effective than FOLOTYN, our commercial opportunity will be reduced or
eliminated. *
Even
though we have obtained approval to market FOLOTYN for the treatment of
patients with relapsed or refractory PTCL, our commercial opportunity will be
reduced or eliminated if our competitors develop and market products that are
more effective, have fewer side effects or are less expensive than FOLOTYN for
this or any other potential indication. Our
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potential
competitors include large, fully-integrated pharmaceutical companies and more
established biotechnology companies, both of which have significant resources
and expertise in research and development, manufacturing, testing, obtaining
regulatory approvals and marketing. Academic institutions, government agencies,
and other public and private research organizations conduct research, seek
patent protection and establish collaborative arrangements for research,
development, manufacturing and marketing. It is possible that competitors will
succeed in developing technologies that are more effective than those being
developed by us or that would render our technology obsolete or noncompetitive.
We cannot predict when or if we will obtain regulatory
approval to market FOLOTYN in the United States for any additional indications
or in any other countries. *
We are subject to stringent regulations with respect
to product safety and efficacy by various international, federal, state and
local authorities. FOLOTYN has not been approved for marketing in the United
States for any indication other than the treatment of patients with relapsed or
refractory PTCL. In addition, FOLOTYN has not been approved for marketing for
this or any other indication in any other country. A pharmaceutical product
cannot be marketed in the United States or most other countries until it has
completed a rigorous and extensive regulatory review and approval process.
Satisfaction of regulatory requirements typically takes many years, is
dependent upon the type, complexity and novelty of the product and requires the
expenditure of substantial resources. Of particular significance are the
requirements covering research and development, preclinical and clinical
testing, manufacturing, quality control, labeling and promotion of drugs for
human use. We may not obtain the necessary regulatory approvals to market
FOLOTYN in the United States for any additional indications or in any other
countries. If we fail to obtain or maintain regulatory approvals to market
FOLOTYN in the United States for any additional indications or in any other
countries, our ability to generate significant revenue or achieve profitability
may be adversely affected.
Reports of adverse events or safety concerns involving
FOLOTYN or in related technology fields or other companies clinical trials of
similar small molecule chemotherapeutic agents could delay or prevent us from
obtaining or maintaining regulatory approval or negatively impact public
perception of FOLOTYN. *
FOLOTYN
may produce serious adverse events. These adverse events could interrupt, delay
or halt clinical trials of FOLOTYN, including the FDA-required post-approval
studies, and could result in the FDA or other regulatory authorities denying or
withdrawing approval of FOLOTYN for any or all indications, including for the
treatment of patients with relapsed or refractory PTCL. An independent data
safety monitoring board, the FDA, other regulatory authorities or we may
suspend or terminate clinical trials at any time. We cannot assure you that
FOLOTYN will be safe for human use.
At
present, there are a number of clinical trials being conducted by other
pharmaceutical companies involving small molecule chemotherapeutic agents. If
other pharmaceutical companies announce that they observed frequent adverse
events or unknown safety issues in their trials involving compounds similar to,
or competitive with, FOLOTYN, we could encounter delays in the timing of our
clinical trials or difficulties in obtaining or maintaining the necessary
regulatory approvals for FOLOTYN. In addition, the public perception of FOLOTYN
might be adversely affected, which could harm our business and results of
operations and cause the market price of our common stock to decline, even if
the concern relates to another companys product or product candidate.
If FOLOTYN fails to meet safety or efficacy endpoints in
clinical trials for additional indications, it will not receive regulatory
approval and we will be unable to market FOLOTYN for those indications studied.
*
We
have ongoing clinical trials involving FOLOTYN and plan to initiate additional
trials to evaluate FOLOTYNs potential clinical utility in other hematologic
malignancies and solid tumor indications.
FOLOTYN may not prove to be safe and efficacious in clinical trials for
other indications and may not meet all of the applicable regulatory
requirements needed to receive regulatory approval for those indications. The
clinical development and regulatory approval process is expensive and takes
many years. Failure can occur at any stage of development, and the timing of
any regulatory approval cannot be accurately predicted. In addition, failure to
comply with the FDA and other applicable U.S. and foreign regulatory
requirements applicable to clinical trials may subject us to administrative or
judicially imposed sanctions.
As
part of the regulatory approval process, we must conduct clinical trials for
FOLOTYN and any other product candidate to demonstrate safety and efficacy to
the satisfaction of the FDA and other regulatory authorities abroad. The number
and design of clinical trials that will be required varies depending on the
product candidate, the condition being evaluated, the trial results and
regulations applicable to any particular product candidate. The designs of our
clinical trials for FOLOTYN are based on many assumptions about the expected
effect of FOLOTYN, and if those assumptions prove incorrect, the
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clinical
trials may not demonstrate the safety or efficacy of FOLOTYN. Preliminary
results may not be confirmed upon full analysis of the detailed results of a
trial, and prior clinical trial program designs and results may not be
predictive of future clinical trial designs or results. Product candidates in
later stage clinical trials may fail to show the desired safety and efficacy
despite having progressed through initial clinical trials with acceptable
endpoints. For example, we terminated the development of EFAPROXYN, one of our
former product candidates, when it failed to demonstrate statistically
significant improvement in overall survival in the targeted patients in a
Phase 3 clinical trial. If FOLOTYN fails to show clinically significant
benefits in any clinical trial or for any particular indication, it may not be
approved for marketing for such indication. Additionally, if FOLOTYN is
demonstrated to be unsafe in clinical trials for other indications, such
demonstration could negatively impact FOLOTYNs existing approval for the
treatment of patients with relapsed or refractory PTCL.
Even
if we achieve positive interim results in clinical trials, these results do not
necessarily predict final results, and acceptable results in early trials may
not be repeated in later trials. Data obtained from preclinical and clinical
activities are susceptible to varying interpretations that could delay, limit
or prevent regulatory clearances, and the FDA can request that we conduct
additional clinical trials. A number of
companies in the pharmaceutical industry have suffered significant setbacks in
advanced clinical trials, even after promising results in earlier trials. In
addition, negative or inconclusive results or adverse safety events during a
clinical trial could cause a clinical trial to be repeated or terminated. Also,
failure to construct clinical trial protocols to screen patients for risk
profile factors relevant to the trial for purposes of segregating patients into
the patient populations treated with the drug being tested and the control
group could result in either group experiencing a disproportionate number of
adverse events and could cause a clinical trial to be repeated or terminated.
If we have to conduct additional clinical trials for FOLOTYN for any particular
indication, it will significantly increase our expenses and may delay marketing
of FOLOTYN for such indication.
Even if FOLOTYN meets safety and efficacy endpoints in
clinical trials for additional indications, regulatory authorities may not
approve FOLOTYN, or we may face post-approval problems that require withdrawal
of FOLOTYN from the market. *
We will not be able to market FOLOTYN in the United
States for any additional indications or in any other countries for any
indications until we have obtained the necessary regulatory approvals. Our
receipt of approval of FOLOTYN in the United States for the treatment of
patients with relapsed or refractory PTCL does not guarantee that we will
obtain regulatory approval to market FOLOTYN in the United States for any
additional indications or in any other countries. We have limited experience in
filing and pursuing applications necessary to gain regulatory approvals, which
may place us at risk of delays, overspending and human resources inefficiencies
.
FOLOTYN
may not be approved for any additional indications even if it achieves its
endpoints in clinical trials. Regulatory agencies, including the FDA, or their
advisors, may disagree with our interpretations of data from preclinical
studies and clinical trials. The FDA has substantial discretion in the approval
process, and when or whether regulatory approval will be obtained for any drug
we develop. Regulatory agencies also may
approve a product candidate for fewer conditions than requested or may grant
approval subject to the performance of post-approval studies or risk evaluation
and mitigation strategies for a product candidate. In addition, regulatory
agencies may not approve the labeling claims that are necessary or desirable
for the successful commercialization of FOLOTYN.
Following
regulatory approval for any additional indication, FOLOTYN may later produce
adverse events that limit or prevent its widespread use or that force us to
withdraw FOLOTYN from the market for that indication or other indications. In
addition, a marketed product continues to be subject to strict regulation after
approval and may be required to undergo post-approval studies. For example,
we are required
to conduct two randomized Phase 3 trials to verify and describe FOLOTYNs
clinical benefit in patients with T-cell lymphoma as well as two Phase 1 trials
to assess whether FOLOTYN poses a serious risk of altered drug levels resulting
from organ impairment.
Any unforeseen problems with an approved
product, any failure to meet the post-approval study requirements or any
violation of regulations could result in restrictions on the product, including
its withdrawal from the market. Any delay in or failure to obtain or maintain
regulatory approvals for FOLOTYN in the United States for any additional
indication or in any other countries could harm our business and prevent us
from ever generating significant revenues or achieving profitability.
We may experience delays in our clinical trials that could
adversely affect our financial position and our commercial prospects. *
We do
not know when our current clinical trials will be completed, if at all. We also
cannot accurately predict when other planned clinical trials will begin or be
completed. Many factors affect patient enrollment, including the size of the
patient
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population,
the proximity of patients to clinical sites, the eligibility criteria for the
trial, competing clinical trials and new drugs approved for the conditions we
are investigating. Other companies are conducting clinical trials and have
announced plans for future trials that are seeking or likely to seek patients
with the same diseases as those we are studying. Competition for patients in
some cancer trials is particularly intense because of the limited number of
leading specialist physicians and the geographic concentration of major
clinical centers.
As a
result of the numerous factors that can affect the pace of progress of clinical
trials, our trials may take longer to enroll patients than we anticipate, if
they can be completed at all. Delays in patient enrollment in the trials may
increase our costs and slow our product development and approval process. Our
product development costs will also increase if we need to perform more or
larger clinical trials than planned. If other companies product candidates
show favorable results, we may be required to conduct additional clinical
trials to address changes in treatment regimens or for our products to be
commercially competitive. Any delays in completing our clinical trials will
delay our ability to obtain regulatory approval to market FOLOTYN in the United
States for any additional indications or in any other countries, which may
adversely affect our ability to generate significant revenues or achieve
profitability.
We may be required to suspend, repeat or terminate our
clinical trials if they are not conducted in accordance with regulatory
requirements, the results are negative or inconclusive or the trials are not
well designed. *
Clinical
trials must be conducted in accordance with the FDAs current Good Clinical
Practices or other applicable foreign government guidelines and are subject to
oversight by the FDA, other foreign governmental agencies and Institutional
Review Boards at the medical institutions where the clinical trials are
conducted. In addition, clinical trials must be conducted with product
candidates produced under cGMP and may require large numbers of test subjects.
Clinical trials may be suspended by the FDA, other foreign governmental
agencies, or us for various reasons, including:
·
deficiencies in the conduct of the clinical trials,
including failure to conduct the clinical trial in accordance with regulatory
requirements or clinical protocols;
·
deficiencies in the clinical trial operations or trial
sites;
·
the product candidate may have unforeseen adverse side
effects;
·
the time required to determine whether the product
candidate is effective may be longer than expected;
·
fatalities or other adverse events arising during a
clinical trial due to medical problems that may not be related to clinical
trial treatments;
·
the product candidate may not appear to be more
effective than current therapies;
·
the quality or stability of the product candidate may
fall below acceptable standards; or
·
insufficient quantities of the product candidate to
complete the trials.
In
addition, changes in regulatory requirements and guidance may occur and we may
need to amend clinical trial protocols to reflect these changes. Amendments may
require us to resubmit our clinical trial protocols to Institutional Review
Boards for reexamination, which may impact the costs, timing or successful
completion of a clinical trial. Due to these and other factors, FOLOTYN could
take a significantly longer time to gain regulatory approval for any additional
indications than we expect or we may never gain approval for additional
indications, which could reduce our revenue by delaying or terminating the
commercialization of FOLOTYN for additional indications.
Due to our reliance on contract research organizations and
other third parties to conduct our clinical trials, we are unable to directly
control the timing, conduct and expense of our clinical trials.
We
rely primarily on third parties to conduct our clinical trials. As a result, we
have had and will continue to have less control over the conduct of our
clinical trials, the timing and completion of the trials, the required
reporting of adverse events and the management of data developed through the
trial than would be the case if we were relying entirely upon our own staff.
Communicating with outside parties can also be challenging, potentially leading
to mistakes as well as difficulties in coordinating activities. Outside parties
may have staffing difficulties, may undergo changes in priorities or may become
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financially
distressed, any of which may adversely affect their willingness or ability to
conduct our trials. We may experience unexpected cost increases that are beyond
our control. Problems with the timeliness or quality of the work of a contract
research organization may lead us to seek to terminate the relationship and use
an alternative service provider. However, making this change may be costly and
may delay our trials, and contractual restrictions may make such a change
difficult or impossible. Additionally, it may be impossible to find a
replacement organization that can conduct our trials in an acceptable manner
and at an acceptable cost.
We may need to raise additional capital to support our future
operations. If we fail to obtain the capital necessary to fund our
operations, we will be unable to successfully develop or commercialize FOLOTYN.
*
Based
upon the current status of our product development and commercialization plans,
we believe that our cash, cash equivalents, and investments in marketable
securities as of September 30, 2009, t
ogether with the net
proceeds of approximately $93.0 million from the October 2009 Financing,
should be adequate to support our
operations through at least the next 12 months, although there can be no
assurance that this can, in fact, be accomplished. We anticipate
continuing our current development programs and beginning other long-term
development projects involving FOLOTYN, including the post-approval clinical
studies required for FOLOTYN. These projects may require many years and
substantial expenditures to complete and may ultimately be unsuccessful.
In addition, we expect to incur significant costs relating to the
commercialization of FOLOTYN, including costs related to our sales and
marketing, medical affairs and manufacturing operations. Therefore, we
may need to raise additional capital to support our future operations.
Our actual capital requirements will depend on many factors, including:
·
the timing and amount of revenues generated from the
sale of FOLOTYN;
·
the timing and costs associated with developing our
sales and marketing, medical affairs and manufacturing operations for the
commercialization of FOLOTYN;
·
the timing and costs associated with manufacturing
clinical and commercial supplies of FOLOTYN;
·
the timing and costs associated with conducting
preclinical and clinical development of FOLOTYN, as well as our evaluation of,
and decisions with respect to, additional therapeutic indications for which we
may develop FOLOTYN;
·
the timing and costs associated with completing the
post-approval clinical studies required by the FDA;
·
the timing, costs and potential revenue associated
with any co-promotion or other partnering arrangements entered into to
commercialize FOLOTYN; and
·
our evaluation of, and decisions with respect to,
potential in-licensing or product acquisition opportunities or other strategic
alternatives.
We may
seek to obtain this additional capital through equity or debt financings,
arrangements with corporate partners, or from other sources. Such financings or
arrangements, if successfully consummated, may be dilutive to our existing
stockholders. However, there is no assurance that additional financing will be
available when needed, or that, if available, we will obtain such financing on
terms that are favorable to our stockholders or us. In the event that
additional funds are obtained through arrangements with collaborative partners
or other sources, such arrangements may require us to relinquish rights to some
of our technologies, product candidates or products under development, which we
might otherwise seek to develop or commercialize ourselves, on terms that are
less favorable than might otherwise be available. If we are unable to
generate meaningful amounts of revenue from future product sales or cannot
otherwise raise sufficient additional funds to support our operations, we may
be required to delay, reduce the scope of or eliminate one or more of our
development programs and our business and future prospects for revenue and
profitability may be harmed.
Budget constraints may force us to delay our efforts to
develop FOLOTYN for additional indications while we complete the post-approval
clinical studies required by the FDA, which may prevent us from commercializing
FOLOTYN for all desired
indications as quickly
as possible. *
Because
we have limited resources, and because research and development is an expensive
process, we must regularly assess the most efficient allocation of our research
and development budget. In particular,
our approval of FOLOTYN in patients
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with
relapsed or refractory PTCL is conditioned upon us undertaking two additional
Phase 3 studies and two additional Phase 1 studies which will result in
significant additional expense. As a
result of our limited resources, we may have to prioritize the development of
FOLOTYN for additional indications and may not be able to fully realize the
value of FOLOTYN for other indications in a timely manner, if at all.
We do not have manufacturing facilities or capabilities and
are dependent on third parties to fulfill our manufacturing needs, which could
result in the delay of clinical trials, regulatory approvals, product
introductions and commercial sales. *
We are
dependent on third parties for the manufacture and storage of FOLOTYN for
clinical trials and for commercial sale. If we are unable to contract for a
sufficient supply of FOLOTYN on acceptable terms, or if we encounter delays or
difficulties in the manufacturing process or our relationships with our
manufacturers, we may not have sufficient product to conduct or complete our
clinical trials or support commercial requirements for FOLOTYN.
FOLOTYN
is cytotoxic, which requires the manufacturers of FOLOTYN to have specialized
equipment and safety systems to handle such a substance. In addition, the
starting materials for FOLOTYN require custom preparations, which require us to
manage an additional set of suppliers to obtain the needed supplies of FOLOTYN.
We
have entered into arrangements with one third-party manufacturer to produce
FOLOTYN bulk drug substance and two third-party manufacturers to produce
FOLOTYN formulated drug product. We believe these third-party manufacturers
have the capability to meet our clinical trial and commercial requirements with
respect to FOLOTYNs current approval for marketing in the United States.
However, these contract manufacturers have not supplied us with commercial
quantities in the past and we cannot assure you that they will be able to meet
our commercial requirements in the future. In addition, we are in the
process of establishing additional supply agreements for the commercial
production of FOLOTYN bulk drug substance and formulated drug product.
However, given our current lack of formal supply agreements and the fact that
in many cases our components are supplied by a single source, our third party
manufacturers may not be able to fulfill our potential commercial needs or meet
our deadlines, or the components they supply to us may not meet our
specifications and quality policies and procedures. If we need to find an
alternative supplier of FOLOTYN or its components, we may not be able to
contract for those components on acceptable terms, if at all. Any such failure
to supply or delay caused by such suppliers would have an adverse effect on our
ability to continue clinical development of FOLOTYN or commercialize FOLOTYN.
Our
current or future manufacturers may be unable to accurately and reliably
manufacture commercial quantities of FOLOTYN at reasonable costs, on a timely
basis and in compliance with the FDAs cGMP. If our current or future contract
manufacturers fail in any of these respects, our ability to timely complete our
clinical trials, obtain or maintain required regulatory approvals and
successfully commercialize FOLOTYN may be materially and adversely affected.
This risk may be heightened with respect to FOLOTYN as there are a limited
number of manufacturers with the ability to handle cytotoxic products such as FOLOTYN.
Our reliance on contract manufacturers exposes us to additional risks,
including:
·
our current and future manufacturers are subject to ongoing, periodic,
unannounced inspections by the FDA and corresponding state and international
regulatory authorities for compliance with strictly enforced cGMP regulations
and similar state and foreign standards, and we do not have control over our
contract manufacturers compliance with these regulations and standards;
·
our manufacturers may not be able to comply with applicable regulatory
requirements, which would prohibit them from manufacturing products for us;
·
our manufacturers may have staffing difficulties, may undergo changes
in control or may become financially distressed, adversely affecting their
willingness or ability to manufacture products for us;
·
our manufacturers might not be able to fulfill our commercial needs,
which would require us to seek new manufacturing arrangements and may result in
substantial delays in meeting market demands;
·
if we need to change to other commercial manufacturing contractors, the
FDA and comparable foreign regulators must approve our use of any new
manufacturer, which would require additional testing, regulatory filings and
compliance inspections, and the new manufacturers would have to be educated in,
or themselves develop substantially equivalent processes necessary for, the
production of our products; and
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·
we may not have intellectual property rights, or may have to share
intellectual property rights, to any improvements in the manufacturing
processes or new manufacturing processes for our products.
Any of
these factors could result in the delay of clinical trials, regulatory
submissions, required approvals or commercialization of FOLOTYN. They could
also entail higher costs and result in our being unable to effectively
commercialize FOLOTYN.
If we are unable to effectively protect our intellectual
property, we will be unable to prevent third parties from using our technology,
which would impair our competitiveness and ability to commercialize FOLOTYN. In
addition, enforcing our proprietary rights may be expensive and result in
increased losses.
Our
success will depend in part on our ability to obtain and maintain meaningful
patent protection for FOLOTYN, both in the United States and in other
countries. We rely on patents to protect a large part of our intellectual
property and our competitive position. Any patents issued to or licensed by us
could be challenged, invalidated, infringed, circumvented or held
unenforceable, based on, among other things, obviousness, inequitable conduct,
anticipation or enablement. In addition, it is possible that no patents will
issue on any of our licensed patent applications. It is possible that the
claims in patents that have been issued or licensed to us or that may be issued
or licensed to us in the future will not be sufficiently broad to protect our
intellectual property or that the patents will not provide protection against
competitive products or otherwise be commercially valuable. Failure to obtain
and maintain adequate patent protection for our intellectual property would
impair our ability to be commercially competitive.
Our
commercial success will also depend in part on our ability to commercialize
FOLOTYN without infringing patents or other proprietary rights of others or
breaching the licenses granted to us. We may not be able to obtain a license to
third-party technology that we may require to conduct our business or, if
obtainable, we may not be able to license such technology at a reasonable cost.
If we fail to obtain a license to any technology that we may require to
commercialize FOLOTYN, or fail to obtain a license at a reasonable cost, we
will be unable to commercialize FOLOTYN or to commercialize it at a price that
will allow us to become profitable.
In
addition to patent protection, we also rely upon trade secrets, proprietary
know-how and technological advances that we seek to protect through
confidentiality agreements with our collaborators, employees, advisors and
consultants. Our employees and consultants are required to enter into
confidentiality agreements with us. We also enter into non-disclosure
agreements with our collaborators and vendors, which agreements are intended to
protect our confidential information delivered to third parties for research
and other purposes. However, these agreements could be breached and we may not
have adequate remedies for any breach, or our trade secrets and proprietary
know-how could otherwise become known or be independently discovered by others.
Furthermore,
as with any pharmaceutical company, our patent and other proprietary rights are
subject to uncertainty. Our patent rights related to FOLOTYN might conflict
with current or future patents and other proprietary rights of others. For the
same reasons, the products of others could infringe our patents or other
proprietary rights. Litigation or patent interference proceedings, either of
which could result in substantial costs to us, may be necessary to enforce any
of our patents or other proprietary rights, or to determine the scope and
validity or enforceability of other parties proprietary rights. We may be
dependent on third parties, including our licensors, for cooperation and
information that may be required in connection with the defense and prosecution
of our patents and other proprietary rights. The defense and prosecution of
patent and intellectual property infringement claims are both costly and time
consuming, even if the outcome is favorable to us. Any adverse outcome could
subject us to significant liabilities to third parties, require disputed rights
to be licensed from third parties, or require us to cease selling our future
products. We are not currently a party to any patent or other intellectual
property infringement claims.
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We may explore strategic partnerships
that may never materialize or may fail.
We may, in the future, periodically explore a variety
of possible strategic partnerships in an effort to gain access to additional
product candidates or resources. At the current time, we cannot predict what
form such a strategic partnership might take. We are likely to face significant
competition in seeking appropriate strategic partners, and these strategic
partnerships can be complicated and time consuming to negotiate and document.
We may not be able to negotiate strategic partnerships on acceptable terms, or
at all. We are unable to predict when, if ever, we will enter into any additional
strategic partnerships because of the numerous risks and uncertainties
associated with establishing strategic partnerships.
If we enter into one or more
strategic partnerships, we may be required to relinquish important rights to
and control over the development of FOLOTYN or otherwise be subject to
unfavorable terms.
Any future strategic partnerships we enter into could
subject us to a number of risks, including:
·
we may be required to undertake the expenditure of
substantial operational, financial and management resources in integrating new
businesses, technologies and products;
·
we may be required to issue equity securities that
would dilute our existing stockholders percentage ownership;
·
we may be required to assume substantial actual or
contingent liabilities;
·
we may not be able to control the amount and timing of
resources that our strategic partners devote to the development or
commercialization of FOLOTYN;
·
strategic partners may delay clinical trials, provide
insufficient funding, terminate a clinical trial or abandon a product
candidate, repeat or conduct new clinical trials or require a new version of a
product candidate for clinical testing;
·
strategic partners may not pursue further development
and commercialization of products resulting from the strategic partnering
arrangement or may elect to discontinue research and development programs;
·
strategic partners may not commit adequate resources
to the marketing and distribution of FOLOTYN or any other products, limiting
our potential revenues from these products;
·
disputes may arise between us and our strategic
partners that result in the delay or termination of the research, development
or commercialization of FOLOTYN or any other product candidate or that result
in costly litigation or arbitration that diverts managements attention and
consumes resources;
·
strategic partners may experience financial
difficulties;
·
strategic partners may not properly maintain or defend
our intellectual property rights or may use our proprietary information in a
manner that could jeopardize or invalidate our proprietary information or
expose us to potential litigation;
·
business combinations or significant changes in a
strategic partners business strategy may also adversely affect a strategic
partners willingness or ability to complete its obligations under any
arrangement;
·
strategic partners could independently move forward
with a competing product candidate developed either independently or in
collaboration with others, including our competitors; and
·
strategic partners could terminate the arrangement or
allow it to expire, which would delay the development and may increase the cost
of developing FOLOTYN or any other product candidate.
Health care reform measures could adversely affect our
business. *
The
business and financial condition of pharmaceutical and biotechnology companies
are affected by the efforts of governmental and third-party payers to contain
or reduce the costs of health care. In the United States and in foreign
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jurisdictions
there have been, and we expect that there will continue to be, a number of
legislative and regulatory proposals aimed at changing the health care system.
For example, in some countries other than the United States, pricing of
prescription drugs is subject to government control, and we expect proposals to
implement similar controls in the United States to continue. Further, broad
health care reform proposals are currently being considered by the U.S.
Congress. We are unable to predict what additional legislation or regulation,
if any, relating to the health care industry or third-party coverage and
reimbursement may be enacted in the future or what effect such legislation or
regulation would have on our business. The pendency or approval of such
proposals or reforms could result in a decrease in our stock price or limit our
ability to raise capital or to obtain strategic partnerships or licenses.
We may not obtain orphan drug exclusivity or we may not
receive the full benefit of orphan drug exclusivity even if we obtain such
exclusivity. *
The
FDA has awarded orphan drug status to FOLOTYN for the treatment of patients
with T-cell lymphoma, follicular lymphoma and diffuse large B-cell lymphoma.
Under the Orphan Drug Act, the first company to receive FDA approval for
pralatrexate for the designated orphan drug indication will obtain seven years of
marketing exclusivity during which the FDA may not approve another companys
application for pralatrexate for the same orphan indication. Because the FDA approved FOLOTYN for the
treatment of patients with relapsed or refractory PTCL, we expect to receive
seven years of marketing exclusivity for that indication. Orphan drug exclusivity would not prevent FDA
approval of a different drug for the orphan indication or the same drug for a
different indication. In addition, the
FDA may void orphan drug exclusivity under certain circumstances.
If product liability lawsuits are successfully brought
against us, we may incur substantial liabilities and may be required to limit
commercialization of FOLOTYN. *
The
testing and marketing of pharmaceutical products entail an inherent risk of
product liability. Product liability claims might be brought against us by
consumers or health care providers or by pharmaceutical companies or others
selling FOLOTYN or any future products. If we cannot successfully defend ourselves
against such claims, we may incur substantial liabilities or be required to
limit the commercialization of FOLOTYN. We have obtained limited product
liability insurance coverage for our human clinical trials and commercial sales
of FOLOTYN. However, product liability insurance coverage is becoming
increasingly expensive, and we may be unable to maintain such insurance
coverage at a reasonable cost or in sufficient amounts to protect us against
losses due to product liability. A successful product liability claim in excess
of our insurance coverage could have a material adverse effect on our business,
financial condition and results of operations.
Our success depends on the retention of our President and
Chief Executive
Officer and other key personnel. *
We are
highly dependent on our President and Chief Executive Officer, Paul L. Berns,
and other members of our management team. We are named as the beneficiary on a
term life insurance policy covering Mr. Berns in the amount of
$10.0 million. We also depend on key employees and academic collaborators
for each of our research and development programs. The loss of any of our key
employees or academic collaborators could delay the development and
commercialization of FOLOTYN or result in the termination of our FOLOTYN
development program in its entirety. Mr. Berns and others on our executive
management team have employment agreements with us, but the agreements provide
for at-will employment with no specified term. Our future success also will
depend in large part on our continued ability to attract and retain other
highly qualified scientific, technical and management personnel, as well as
personnel with expertise in clinical testing, governmental regulation and
commercialization of pharmaceutical products. We face competition for personnel
from other companies, universities, public and private research institutions,
government entities and other organizations. If we are unsuccessful in our
recruitment and retention efforts, our business will be harmed.
We
also rely on consultants, collaborators and advisors to assist us in
formulating and conducting our research and development programs. All of our
consultants, collaborators and advisors are employed by other employers or are
self-employed and may have commitments to or consulting contracts with other
entities that may limit their ability to contribute to our company.
We cannot guarantee that we will be in compliance with all
potentially applicable regulations.
The
development, manufacturing, pricing, marketing, sale and reimbursement of
FOLOTYN, together with our general operations, are subject to extensive
regulation by federal, state and other authorities within the United States and
numerous
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entities
outside of the United States. We have fewer employees than many other companies
that have one or more product candidates that are approved for marketing and we
rely heavily on third parties to conduct many important functions.
As a
publicly-traded company, we are subject to significant regulations including
the Sarbanes Oxley Act of 2002. We cannot assure you that we are or will be in
compliance with all potentially applicable regulations. If we fail to comply
with the Sarbanes Oxley Act of 2002 or any other regulations, we could be
subject to a range of consequences, including restrictions on our ability to
sell equity securities or otherwise raise capital funds, the de-listing of our
common stock from The NASDAQ Global Market, suspension or termination of our
clinical trials, failure to obtain approval to market FOLOTYN, restrictions on
future products or our manufacturing processes, significant fines, or other sanctions
or litigation.
If our internal controls over financial reporting are not
considered effective, our business and stock price could be adversely affected.
Section 404
of the Sarbanes-Oxley Act of 2002 requires us to evaluate the effectiveness of
our internal controls over financial reporting as of the end of each fiscal
year, and to include a management report assessing the effectiveness of our
internal controls over financial reporting in our annual report on Form 10-K
for that fiscal year. Section 404 also requires our independent registered
public accounting firm to attest to, and report on, managements assessment of
our internal controls over financial reporting.
Our
management, including our chief executive officer and principal financial officer,
does not expect that our internal controls over financial reporting will
prevent all error and all fraud. A control system, no matter how well designed
and operated, can provide only reasonable, not absolute, assurance that the
control systems objectives will be met. Further, the design of a control
system must reflect the fact that there are resource constraints, and the
benefits of controls must be considered relative to their costs. Because of the
inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud
involving a company have been, or will be, detected. The design of any system
of controls is based in part on certain assumptions about the likelihood of future
events, and we cannot assure you that any design will succeed in achieving its
stated goals under all potential future conditions. Over time, controls may
become ineffective because of changes in conditions or deterioration in the
degree of compliance with policies or procedures. Because of the inherent
limitations in a cost-effective control system, misstatements due to error or
fraud may occur and not be detected. We cannot assure you that we or our
independent registered public accounting firm will not identify a material
weakness in our internal controls in the future. A material weakness in our
internal controls over financial reporting would require management and our
independent registered public accounting firm to consider our internal controls
as ineffective. If our internal controls over financial reporting are not
considered effective, we may experience a loss of public confidence, which
could have an adverse effect on our business and on the market price of our
common stock.
If we do not progress in our programs as anticipated, our
stock price could decrease.
For
planning purposes, we estimate the timing of a variety of clinical, regulatory
and other milestones, such as when a certain product candidate will enter
clinical development, when a clinical trial will be initiated or completed, or
when an application for regulatory approval will be filed. Some of our
estimates are included in this report. Our estimates are based on information
available to us as of the date of this report and a variety of assumptions.
Many of the underlying assumptions are outside of our control. If milestones
are not achieved when we estimated that they would be, investors could be
disappointed and our stock price may decrease.
Warburg Pincus Private Equity VIII, L.P. controls a
substantial percentage of the voting power of our outstanding common stock. *
On March 2,
2005, we entered into a Securities Purchase Agreement with Warburg Pincus
Private Equity VIII, L.P., or Warburg, and certain other investors pursuant to
which we issued and sold shares of our Series A Exchangeable Preferred
Stock, or the Exchangeable Preferred, for gross proceeds of approximately $52.0
million, which were then exchanged for common stock in the second quarter of
2005. In connection with this financing, Warburg and certain of its affiliates
entered into a standstill agreement pursuant to which they agreed not to
pursue, for so long as they continue to own a specified number of shares of our
common stock, certain activities the purpose or effect of which may be to
change or influence the control of our company.
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As of October 30,
2009, we had
103,941,015
shares of common stock outstanding, of which Warburg
owned 26,124,430 shares, or approximately 25% of the voting power of our
outstanding common stock. Although Warburg has entered into a standstill
agreement with us, Warburg is, and will continue to be, able to exercise
substantial influence over any actions requiring stockholder approval.
Anti-takeover provisions in our charter documents and under
Delaware law could discourage, delay or prevent an acquisition of us, even if
an acquisition would be beneficial to our stockholders, and may prevent
attempts by our stockholders to replace or remove our current management. *
Provisions
of our amended and restated certificate of incorporation and bylaws, as well as
provisions of Delaware law, could make it more difficult for a third party to
acquire us, even if doing so would benefit our stockholders. In addition, these
provisions may make it more difficult for stockholders to replace members of
our board of directors. Because our board of directors is responsible for
appointing the members of our management team, these provisions could in turn
affect any attempt by our stockholders to replace current members of our
management team. These provisions include:
·
authorizing the issuance of blank check preferred
stock that could be issued by our board of directors to increase the number of
outstanding shares or change the balance of voting control and thwart a
takeover attempt;
·
prohibiting cumulative voting in the election of
directors, which would otherwise allow for less than a majority of stockholders
to elect director candidates;
·
prohibiting stockholder action by written consent,
thereby requiring all stockholder actions to be taken at a meeting of our
stockholders;
·
eliminating the ability of stockholders to call a
special meeting of stockholders; and
·
establishing advance notice requirements for
nominations for election to the board of directors or for proposing matters
that can be acted upon at stockholder meetings.
In
addition, we are subject to Section 203 of the Delaware General
Corporation Law, which generally prohibits a Delaware corporation from engaging
in any of a broad range of business combinations with an interested stockholder
for a period of three years following the date on which the stockholder became
an interested stockholder. This provision could have the effect of delaying or
preventing a change of control, whether or not it is desired by or beneficial
to our stockholders. Notwithstanding the foregoing, the three-year moratorium
imposed on business combinations by Section 203 will not apply to Warburg
because, prior to the date on which Warburg became an interested stockholder,
our board of directors approved the transactions that resulted in Warburg
becoming an interested stockholder. However, in connection with its purchase of
Exchangeable Preferred in March 2005, Warburg and certain of its
affiliates entered into a standstill agreement pursuant to which they agreed
not to pursue, for so long as they continue to own a specified number of shares
of our common stock, certain activities the purpose or effect of which may be
to change or influence the control of our company.
We have adopted a stockholder rights plan that may discourage,
delay or prevent a merger or acquisition that is beneficial to our
stockholders. *
In May 2003,
our board of directors adopted a stockholder rights plan that may have the
effect of discouraging, delaying or preventing a merger or acquisition of us
that our stockholders may consider beneficial by diluting the ability of a
potential acquirer to acquire us. Pursuant to the terms of the stockholder
rights plan, when a person or group, except under certain circumstances,
acquires 15% or more of our outstanding common stock or 10 business days after
announcement of a tender or exchange offer for 15% or more of our outstanding
common stock, the rights (except those rights held by the person or group who
has acquired or announced an offer to acquire 15% or more of our outstanding
common stock) would generally become exercisable for shares of our common stock
at a discount. Because the potential acquirers rights would not become
exercisable for our shares of common stock at a discount, the potential
acquirer would suffer substantial dilution and may lose its ability to acquire
us. In addition, the existence of the plan itself may deter a potential
acquirer from acquiring or making an offer to acquire us. As a result,
either by operation of the plan or by its potential deterrent effect, mergers
and acquisitions of our company that our stockholders may consider in their
best interests may not occur.
Because
Warburg owns a substantial percentage of our outstanding common stock, we
amended the stockholder rights plan in connection with Warburgs purchase of
Exchangeable Preferred in March 2005 to provide that Warburg and its
affiliates
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will
be exempt from the stockholder rights plan, unless Warburg and its affiliates
become, without the prior consent of our board of directors, the beneficial
owner of more than 44% of our common stock. Likewise, in connection with our
completion of an underwritten offering of 9,000,000 shares of common stock in February 2007,
we amended the stockholder rights plan to provide that Baker Brothers Life
Sciences, L.P. and certain other affiliated funds, which are collectively
referred to herein as Baker, will be exempt from the stockholder rights plan,
unless Baker becomes, without the prior consent of our board of directors, the
beneficial owner of more than 20% of our common stock. According to
filings with the Securities and Exchange Commission, or SEC, Baker owned less
than 10% of our outstanding common stock as of February 2009. Under the
stockholder rights plan, our board of directors has express authority to amend
the rights plan without stockholder approval.
Unstable market conditions may have serious adverse
consequences on our business.
The
recent economic downturn and market instability has made the business climate
more volatile and more costly. Our general business strategy may be adversely
affected by unpredictable and unstable market conditions. If the current equity
and credit markets deteriorate further, or do not improve, it may make any
necessary equity or debt financing more difficult, more costly, and more
dilutive. While we believe we have adequate capital resources to meet our
expected working capital and capital expenditure requirements for at least the
next 12 months, a radical economic downturn or increase in our expenses could
require additional financing on less than attractive rates or on terms that are
excessively dilutive to existing stockholders. Failure to secure any necessary
financing in a timely manner and on favorable terms could have a material
adverse effect on our growth strategy, financial performance and stock price
and could require us to delay or abandon clinical development plans. There is a
risk that one or more of our current service providers, manufacturers or other
partners may encounter difficulties during challenging economic times, which
could have an adverse effect on our business, results of operations and
financial condition.
Our liquidity, capital resources and results of operations
may be adversely affected by declines in the value of our investments in
marketable securities. *
As of September 30,
2009, we had $84.1 million in cash, cash equivalents, and investments in
marketable securities. Until required for use in our business, we invest
our cash reserves in bank deposits, money market funds, high-grade corporate
notes and U.S. government instruments in accordance with our investment policy.
Our investments in marketable securities as of September 30, 2009,
totaling $21.7 million,
were held in a variety of interest-bearing
instruments, consisting mainly of high-grade corporate notes, U.S. Treasury
bills and certificates of deposit
. The weighted average duration of the remaining
time to maturity for our portfolio of investments in marketable securities as
of September 30, 2009 was approximately five months. We did not hold
any derivative instruments, foreign exchange contracts, asset backed
securities, mortgage backed securities, auction rate securities, or securities
of issuers in bankruptcy in our investment portfolio as of September 30,
2009.
Based upon the current status of our product
development and commercialization plans, we believe that our cash, cash
equivalents, and investments in marketable securities as of September 30,
2009
, together with the net proceeds of approximately $93.0 million from
the October 2009 Financing,
should be adequate to support our operations through
at least the next 12 months, although there can be no assurance that this can,
in fact, be accomplished. In particular, our liquidity, capital resources
and results of operations may be adversely affected by declines in the value of
our investments in marketable securities. The value of our investments in
marketable securities may be adversely affected by rating downgrades or
bankruptcies affecting the issuers of such securities, whether caused by
instability in the global financial markets, lack of liquidity in the credit
and capital markets, or other factors. For example, during the three
months ended March 31, 2009, we realized a loss of approximately $157,000
on the sale of certain of our investments in marketable securities, which were
sold in order to preserve our principal as the issuers of those securities
experienced significant deteriorations in their creditworthiness as evidenced
by investment rating downgrades. We have the ability and intent to hold
our remaining investments in marketable securities as of September 30,
2009 to their scheduled maturity, although we monitor our investment portfolio
with the primary objectives of preserving principal and maintaining proper
liquidity to meet our operating needs.
The market price for our common stock has been and may
continue to be highly volatile, and an active trading market for our common
stock may never exist. *
We
cannot assure you that an active trading market for our common stock will exist
at any time. Holders of our common stock may not be able to sell shares quickly
or at the market price if trading in our common stock is not active. The
trading
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price
of our common stock has been and is likely to continue to be highly volatile
and could be subject to wide fluctuations in price in response to various
factors, many of which are beyond our control, including:
·
the timing and amount of
revenues generated from the sale of FOLOTYN;
·
actual or anticipated variations in quarterly
operating results;
·
actual or anticipated regulatory approvals or
non-approvals of FOLOTYN or of competing product candidates;
·
the loss of regulatory
approval for FOLOTYN in patients with relapsed or refractory PTCL;
·
actual or anticipated results of our clinical trials
involving FOLOTYN;
·
changes in laws or regulations applicable to FOLOTYN;
·
changes in the expected or actual timing of our
development programs;
·
announcements of technological innovations by us or
our competitors;
·
changes in financial estimates or recommendations by
securities analysts;
·
conditions or trends in the biotechnology and
pharmaceutical industries;
·
changes in the market valuations of similar companies;
·
announcements by us of significant acquisitions,
strategic partnerships, joint ventures or capital commitments;
·
additions or departures of key personnel;
·
disputes or other developments relating to proprietary
rights, including patents, litigation matters and our ability to obtain patent
protection for our technologies;
·
developments concerning any of our research and
development, manufacturing and marketing collaborations;
·
sales of large blocks of our common stock;
·
sales of our common stock by our executive officers,
directors and five percent stockholders; and
·
economic and other external factors, including
disasters or crises.
Public
companies in general and companies included on The NASDAQ Global Market in
particular have experienced extreme price and volume fluctuations that have
often been unrelated or disproportionate to the operating performance of those
companies. There has been particular volatility in the market prices of
securities of biotechnology and other life sciences companies, and the market
prices of these companies have often fluctuated because of problems or
successes in a given market segment or because investor interest has shifted to
other segments. These broad market and industry factors may cause the market
price of our common stock to decline, regardless of our operating performance.
We have no control over this volatility and can only focus our efforts on our
own operations, and even these may be affected due to the state of the capital
markets. In the past, following large price declines in the public market price
of a companys securities, securities class action litigation has often been
initiated against that company, including in 2004 against us. Litigation of
this type could result in substantial costs and diversion of managements
attention and resources, which would hurt our business. Any adverse
determination in litigation could also subject us to significant liabilities.
Substantial sales of shares may
impact the market price of our common stock. *
If our stockholders sell
substantial amounts of our common stock, the market price of our common stock
may decline. These sales also might make it more difficult for us to sell
equity or equity-related securities in the future at a time and price that we
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consider appropriate. We
are unable to predict the effect that sales may have on the then prevailing
market price of our common stock. We have entered into a Registration
Rights Agreement with Warburg pursuant to which Warburg is entitled to certain
registration rights with respect to shares of our common stock. On July 20,
2009, we filed a Registration Statement on Form S-3 with the SEC providing
for the registration for resale by Warburg of up to 26,124,430 shares of our
common stock, which registration statement was declared effective on August 28,
2009.
ITEM 2.
|
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE
OF PROCEEDS
|
|
None
|
|
|
|
|
|
ITEM 3.
|
|
DEFAULTS UPON SENIOR SECURITIES
|
|
None
|
|
|
|
|
|
ITEM 4.
|
|
SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
|
|
None
|
|
|
|
|
|
ITEM 5.
|
|
OTHER INFORMATION
|
|
None
|
|
|
|
|
|
ITEM 6.
|
|
EXHIBITS
|
|
|
|
|
|
|
Incorporated by Reference
|
|
|
Exhibit
No.
|
|
Description
|
|
Form
|
|
Filing
Date
|
|
Number
|
|
Filed
Herewith
|
3.1
|
|
Amended and Restated
Certificate of Incorporation.
|
|
8-K
|
|
7/20/2009
|
|
3.1
|
|
|
3.2
|
|
Certificate of
Designation of Series A Junior Participating Preferred Stock.
|
|
8-K
|
|
7/20/2009
|
|
3.2
|
|
|
3.3
|
|
Certificate of
Amendment to Restated Certificate of Incorporation.
|
|
8-K
|
|
7/20/2009
|
|
3.3
|
|
|
3.4
|
|
Certificate of
Amendment to the Certificate of Designations of Series A Junior
Participating Preferred Stock.
|
|
8-K
|
|
7/20/2009
|
|
3.4
|
|
|
4.1
|
|
Amendment to Rights
Agreement, dated as of July 17, 2009, between the Company and Mellon
Investor Services LLC.
|
|
8-K
|
|
7/20/2009
|
|
4.1
|
|
|
31.1
|
|
Certification of
principal executive officer required by Rule 13a-14(a) / 15d-14(a).
|
|
|
|
|
|
|
|
X
|
31.2
|
|
Certification of principal
financial officer required by Rule 13a-14(a) / 15d-14(a).
|
|
|
|
|
|
|
|
X
|
32.1#
|
|
Section 1350
Certification.
|
|
|
|
|
|
|
|
X
|
#
The
certifications attached as Exhibit 32.1 that accompany this Quarterly
Report on Form 10-Q are not deemed filed with the Securities and Exchange
Commission and are not to be incorporated by reference into any filing of Allos
Therapeutics, Inc. under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, whether made before or after the
date of this Form 10-Q, irrespective of any general incorporation language
contained in such filing.
44
Table
of Contents
SIGNATURES
Pursuant to the
requirements 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: November 3,
2009
|
ALLOS THERAPEUTICS, INC.
|
|
|
|
/s/ Paul L. Berns
|
|
Paul L. Berns
|
|
President and Chief
Executive Officer
|
|
(Principal Executive
Officer)
|
|
|
|
|
|
/s/ David C. Clark
|
|
David C. Clark
|
|
Vice President, Finance
and Treasurer
|
|
(Principal Financial
and Accounting Officer)
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45
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