e424b3
Filed Pursuant to Rule 424(b)(3)
Registration
No. 333-170099
(To Prospectus dated November 3, 2010)
20,380,549 Shares of
Common Stock
This prospectus supplement, together with our prospectus dated
November 3, 2010 (together, the prospectus),
relates to the sale of an aggregate of 20,380,549 shares of
our common stock, $0.001 par value per share, by the
selling stockholders identified in this prospectus, including
their transferees, pledgees, donees or successors. This
prospectus supplement should only be read and delivered together
with our prospectus dated November 3, 2010. This prospectus
supplement may add, update or change information contained in
this prospectus.
The common stock covered by this prospectus consists of
(i) 10,500,000 shares of common stock and
(ii) 4,200,000 shares of common stock issuable upon
exercise of outstanding warrants (the Warrants)
issued in a private placement transaction that closed on
September 24, 2010, and (iii) 5,517,349 shares of
common stock and 163,200 shares of common stock issuable
upon outstanding warrants held by existing stockholders.
The selling stockholders may sell their shares of common stock
from time to time at market prices prevailing at the time of
sale, at prices related to the prevailing market price, or at
negotiated prices. We will not receive any proceeds from the
sale of common stock by the selling stockholders, other than as
a result of the exercise of warrants held by the selling
stockholders for cash.
No underwriter or other person has been engaged to facilitate
the sale of shares of our common stock in this offering. We are
paying the cost of registering the shares of common stock
covered by this prospectus as well as various related expenses.
The selling stockholders are responsible for all selling
commissions, transfer taxes and other costs related to the offer
and sale of their shares of common stock.
Our common stock is traded on the NASDAQ Global Market under the
symbol ANTH. On November 16, 2010, the closing
sale price of our common stock on the NASDAQ Global Market was
$5.67 per share.
This investment involves risks. See Risk Factors
beginning on page 11.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
The date of this prospectus is November 17, 2010.
TABLE OF
CONTENTS
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F-1
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You should rely only on the information contained in this
prospectus, any applicable prospectus supplement and the
information incorporated by reference in this prospectus. We
have not authorized anyone to provide you with additional or
different information. This document may only be used where it
is legal to sell these securities. The information in this
prospectus is accurate only as of the date of this prospectus,
regardless of the time of delivery of this prospectus or any
sale of shares of our common stock.
PROSPECTUS
SUMMARY
This summary highlights certain information contained elsewhere
in this prospectus. Because this is only a summary, it does not
contain all of the information you should consider before
investing in our common stock. You should read this entire
prospectus carefully, especially the information set forth under
the headings Risk Factors and
Managements Discussion and Analysis of Financial
Condition and Results of Operations and our financial
statements and the related notes appearing at the end of this
prospectus, before making an investment decision.
Our
Company
We are a biopharmaceutical company focused on developing and
commercializing products to treat serious diseases associated
with inflammation, including cardiovascular and autoimmune
diseases. We currently have one Phase 3 clinical program,
varespladib, and two Phase 2 clinical programs,
A-623 and
A-001.
Varespladib and
A-001
inhibit a novel enzyme target known as secretory phospholipase
A2,
or
sPLA2.
Elevated levels of
sPLA2
have been implicated in a variety of acute inflammatory
conditions, including acute coronary syndrome and acute chest
syndrome, as well as chronic diseases such as stable coronary
artery disease, or CAD. Our Phase 2 product candidate,
A-623,
targets elevated levels of
B-lymphocyte
stimulator, or BLyS, also known as B-cell Activating Factor, or
BAFF, which has been associated with a variety of B-cell
mediated autoimmune diseases, including systemic lupus
erythematosus, or lupus. We have worldwide rights to our product
candidates, with the exception of Japan, where
Shionogi & Co., Ltd. retains commercial rights to our
sPLA2
product candidates.
Product
Development Programs
We have focused our product development programs on
anti-inflammatory therapeutics for cardiovascular diseases,
lupus and other serious diseases for which we believe current
treatments are either inadequate or non-existent. Our current
product development programs are listed in the figure below.
Varespladib
for the Treatment of Acute Coronary Syndrome
We have commenced a pivotal Phase 3 clinical study named
VISTA-16 (Vascular Inflammation Suppression to Treat Acute
coronary syndrome 16 Weeks) for our lead product
candidate, varespladib, an oral
sPLA2
inhibitor, in combination with Lipitor (atorvastatin), a HMG-CoA
reductase inhibitor, for short-term (16-week) treatment of
patients experiencing an acute coronary syndrome. The American
Heart Association defines acute coronary syndrome as any group
of clinical signs and
1
symptoms related to acute myocardial ischemia, or heart muscle
damage. Patients experiencing an acute coronary syndrome suffer
from significant inflammation and abnormal lipid profiles, which
may lead to further vascular damage and a second cardiovascular
event.
sPLA2
enzymes act to directly amplify inflammation, and adversely
modify lipids. Varespladib, when combined with lipid-lowering
therapies, is one of only a few therapeutics in development with
the potential to offer a unique and synergistic approach
targeting inflammation, elevated lipid levels and
atherosclerosis.
Clinical results from FRANCIS (Fewer Recurrent Acute coronary
events with Near-term Cardiovascular Inflammation Suppression),
our Phase 2b clinical study enrolling 625 acute coronary
syndrome patients, and two Phase 2 clinical studies enrolling
534 stable CAD patients demonstrated statistically significant
reductions in low-density lipoprotein cholesterol, or LDL-C, a
known predictor of cardiovascular risk. Reductions in LDL-C were
greater when used in combination with commonly prescribed statin
therapies. In addition, rapid and sustained anti-inflammatory
activity was also evident as
sPLA2
concentrations were statistically significantly reduced from
baseline levels throughout dosing in all clinical studies. In
our Phase 2b clinical study, C-reactive protein, or CRP, and
interleukin-6, or IL-6, both independent predictors of
cardiovascular risk, were lower at all time points among
varespladib treated patients as compared to placebo. The percent
decrease in CRP at week two in our Phase 2b clinical study was
nearly two-fold greater among varespladib treated patients than
those treated with placebo (p = 0.183) and by week 16, the
difference between the two groups achieved statistical
significance (p = 0.0067). A p-value is a probability with a
value ranging from 0 to 1, which indicates the likelihood that a
clinical study is different between treatment and control
groups. P-values below 0.05 are typically referred to as
statistically significant.
The VISTA-16 acute coronary syndrome study is a multinational,
randomized, double-blind, placebo-controlled Phase 3 clinical
study designed to evaluate short-term (16-week) therapy with
varespladib in combination with Lipitor (atorvastatin) for the
prevention of secondary major adverse coronary events in
patients who have recently experienced an acute coronary
syndrome. As part of our Special Protocol Assessment, or SPA,
agreement with the U.S. Food and Drug Administration, or
FDA, the VISTA-16 study is estimated to enroll up to
6,500 patients with similar characteristics to patients in
FRANCIS. Patients are randomized within 96 hours of an
acute coronary syndrome and will receive 16 weeks of either
once-daily varespladib or placebo in addition to a dose of
Lipitor (atorvastatin). VISTA-16 will continue enrollment until
a minimum of 385 primary endpoint events have occurred. The
primary endpoint of the VISTA-16 study will assess the time to
the first occurrence of the combined endpoint of cardiovascular
death, non-fatal myocardial infarction, non-fatal stroke or
documented unstable angina with objective evidence of ischemia,
which is lack of blood to tissues due to a blockage of a vessel,
requiring hospitalization. Survival status will be obtained for
all patients six months after the completion of dosing. Based
upon our statistical calculations, this number of primary
endpoint events will allow us to detect a treatment effect on
the composite endpoint as low as 18.1% with a p-value of less
than 0.05. As in the FRANCIS study, changes in
sPLA2,
CRP and LDL-C will be measured at baseline, 24 hours, and
at weeks one, two, four, eight and 16. An independent committee
comprised of individuals who are not involved with the VISTA-16
clinical study will conduct a data review of these biomarkers
after at least 1,000 patients have been enrolled in the
clinical study. This biomarker futility analysis is designed to
confirm that relevant biomarkers have met pre-specified
statistical reductions versus placebo at various time-points.
Elevations of each of these biomarkers,
sPLA2,
CRP, LDL-C, and IL-6 are known to be independently correlated
with adverse cardiovascular outcomes. At the same time, our
independent Data Safety Monitoring Board, or DSMB, will review
all available clinical data from VISTA-16 to assess overall
safety.
2
Our
Special Protocol Assessment Agreement with the FDA
We have reached agreement with the FDA on an SPA, for the
VISTA-16 acute coronary syndrome study protocol, including
patient inclusion/exclusion criteria, study size, statistical
considerations, efficacy endpoints, study duration,
randomization and lipid management strategies.
A-623
Our BAFF Antagonism Program for the Treatment of Lupus
BAFF has been associated with a wide range of B-cell mediated
autoimmune diseases, including systemic lupus erythematosus, or
lupus. The beneficial role of BAFF inhibition to improve
clinical outcomes in patients with lupus has been evaluated in
multiple phase 3 studies with another BAFF antagonist. We intend
to advance the development of
A-623, a
BAFF inhibitor, in a number of autoimmune diseases including
lupus and rheumatoid arthritis. Our peptibody is a novel fusion
protein that is distinct from an antibody, binds to both soluble
and membrane-bound BAFF and is manufactured using bacterial
fermentation. Recent clinical and non-clinical studies have
reported that membrane-bound BAFF is a more potent stimuli for
B-cell maturation and survival than the soluble form of BAFF. In
fact, lupus disease severity can be correlated with higher
levels of membrane-bound BAFF. We are actively evaluating a
partnership opportunity with major pharmaceutical companies to
develop and commercialize
A-623. We
licensed
A-623 from
Amgen Inc. in December 2007 and have worldwide product rights in
all indications.
Two randomized, dose-ranging, placebo-controlled Phase 1
clinical studies evaluating
A-623 in
104 patients have been completed. Results from these
studies demonstrated antagonism of BAFF by
A-623 led to
statistically significant reductions in B-cells of approximately
50-70% (p
< 0.001) among lupus patients across multiple subcutaneous
and intravenous formulations. We believe
A-623 could
offer
3
a number of advantages over other BAFF (or BLyS) antagonists as
well as other novel B-cell directed therapies including:
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convenient, at-home, patient-administered subcutaneous dosing;
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a range of dosing frequencies including monthly and weekly;
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binding to both membrane-bound and soluble forms of BAFF;
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low cost of goods based on a bacterial fermentation
manufacturing process; and
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multiple binding domains achieve highest reported affinity for
inhibition of BAFF.
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Based on results from 104 patients in our Phase 1a and 1b
clinical studies, we have commenced patient dosing in our Phase
2b clinical study with
A-623 in
lupus patients. PEARL-SC (A Randomized, Double-Blind Phase 2b
Study to Evaluate the Efficacy, Safety, and Tolerability of
A-623
AdministRation in Subjects with Systemic Lupus Erythematosus) is
a randomized, placebo-controlled, phase 2b clinical study that
allows enrollment of up to 600 patients in 60 centers
worldwide. Subjects will be randomized into three active
subcutaneous treatment arms and one subcutaneous placebo
treatment arm for a minimum of 24 weeks and a maximum of
one year. The primary endpoint of the PEARL-SC study will be
clinical improvement at 24 weeks in responder rates of a
systemic lupus erythematosus responder index, or SRI, in the
pooled treatment arms versus placebo. The primary endpoint is
based upon changes in SELENA and SLEDAI disease activity scale,
Physicians Global Assessment scores and British Isles
Lupus Assessment Group scores, which are clinical standards for
the measurement of disease severity in lupus patients. Secondary
endpoints will include safety, improvement in other clinical
assessment scores, clinical response in patients with various
baseline disease severities, resolution of fatigue, steroid
utilization and time to flare. A blinded interim biomarker
analysis to establish the appropriate drug effect on B-cells is
included early in the study.
On November 16, 2010, we placed a voluntary hold on the
PEARL-SC study due to problems found with product vials. Patient
enrollment in the study has been temporarily suspended and
patients currently enrolled in the study will discontinue dosing
while we conduct a complete analysis of the problem. There have
been no reports of patient-related side effects or problems with
drug administration that could be attributed to this problem.
4
The following table represents our current PEARL-SC study as
well as the option to extend the study to collect long-term
safety data.
A-001
for the Prevention of Acute Chest Syndrome Associated with
Sickle Cell Disease
Our next product candidate, varespladib sodium,
A-001, is an
intravenously administered inhibitor of
sPLA2,
which is in a Phase 2 clinical study for the prevention of acute
chest syndrome associated with sickle cell disease. Acute chest
syndrome is a form of inflammation-induced lung failure and is
the most common cause of death in patients with sickle cell
disease.
sPLA2
levels increase substantially in the 24 to 48 hours before
the onset of acute chest syndrome. According to the Sickle Cell
Information Center, sickle cell disease is a genetic disorder
afflicting more than 70,000 people in the United States
alone. Given the small patient population and lack of approved
drugs for the prevention of acute chest syndrome, we have
received orphan drug designation and fast track status from the
FDA for
A-001.
A pre-specified interim review of our Phase 2 clinical study
results by a DSMB indicate
A-001, at a
certain dose, reduced
sPLA2
activity by more than 80% from baseline within 48 hours.
Furthermore, the incidence of acute chest syndrome appeared to
be related to the level of
sPLA2
activity.
Other
sPLA2
Inhibitors
We also have an additional novel
sPLA2
inhibitor,
A-003, in
preclinical development for existing target indications as well
as other therapeutic areas.
A-003 has
shown increased potency against
sPLA2
and favorable characteristics in preclinical studies. We plan to
file an investigational new drug application for
A-003 in the
future.
5
Our
Strategy
Our objective is to develop and commercialize our product
candidates to treat serious diseases associated with
inflammation, including cardiovascular and autoimmune diseases.
To achieve these objectives, we intend to initially focus on:
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advancing the development of varespladib through the Phase 3
VISTA-16 clinical study;
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advancing the development of
A-623
through the Phase 2b PEARL-SC clinical study;
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leveraging our
sPLA2
expertise to develop products for additional disease
indications; and
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developing commercial strategies designed to maximize our
product candidates market potential, including securing
corporate partners whose capabilities complement ours.
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Risks
Related to Our Business
The risks set forth under the section entitled Risk
Factors beginning on page 11 of this prospectus
reflect risks and uncertainties that could significantly and
adversely affect our business and our ability to execute our
business strategy. For example:
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We are a development-stage company with no revenue and no
products approved for marketing. We will need substantial
additional capital to fund our operations and develop our
product candidates.
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For the nine months ended September 30, 2010, we had net
losses of approximately $27.4 million, and as of
September 30, 2010, we had an accumulated deficit of
approximately $92.6 million. We expect to incur continued
significant losses for the foreseeable future.
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We are largely dependent on the success of our development-stage
product candidates, particularly our primary product candidates,
varespladib,
A-623 and
A-001, and
our clinical studies may fail to adequately demonstrate their
safety and efficacy. If a clinical study fails, or if additional
clinical studies are required, our development costs may
increase and we may be unable to continue operations without
raising additional funding.
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The regulatory approval process is expensive, time-consuming and
uncertain, and our product candidates have not been, and may not
be, approved for sale by regulatory authorities or be
successfully commercialized. Even if approved for sale by the
appropriate regulatory authorities, our products may not achieve
market acceptance and we may never achieve profitability.
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Our preclinical development programs may not produce any other
viable or marketable product candidates.
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Our and our licensors patent positions may not adequately
protect our present or future product candidates or permit us to
gain or keep a competitive advantage.
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Commercialization
Strategy
We have worldwide rights to develop and commercialize our
products in all indications and markets, with the exception of
Japan, where Shionogi & Co., Ltd. retains commercial
rights to our
sPLA2
product candidates. Our current development plans are focused on
acute treatment and orphan
6
indications that may provide an accelerated and cost-efficient
path to regulatory approval and commercialization. We believe
that certain of these markets can be commercialized through a
limited specialty sales force. In addition, we believe that our
product candidates can also address market opportunities in
chronic indications and we may seek development and
commercialization partners to address these non-specialty and
international markets.
Company
Information
We were incorporated in Delaware on September 9, 2004 as
Anthera Pharmaceuticals, Inc. Our corporate headquarters are
located at 25801 Industrial Boulevard, Suite B, Hayward,
California 94545 and our telephone number is
(510) 856-5600.
Our website address is www.anthera.com. The information
contained on our website or that can be accessed through our
website is not incorporated by reference into this prospectus
and is not part of this prospectus.
We use various trademarks, service marks and trade names in our
business, including without limitation Anthera
Pharmaceuticals and Anthera. This prospectus
also contains trademarks, services marks and trade names of
other businesses that are the property of their respective
holders.
Unless the context otherwise requires, we use the terms
Anthera Pharmaceuticals, Anthera,
we, us, the Company and
our in this prospectus to refer to Anthera
Pharmaceuticals, Inc. and its sole subsidiary.
7
THE
OFFERING
This prospectus relates to the resale by the selling
stockholders identified in this prospectus of up to
20,380,549 shares of common stock, of which
16,017,349 shares are issued and outstanding as of the date
of this prospectus, and 4,363,200 shares of which are
issuable upon the exercise of certain warrants.
10,500,000 shares of common stock issued and outstanding as
of the date of this prospectus and Warrants exercisable for
4,200,000 shares of common stock were issued in a private
placement transaction that closed on September 24, 2010.
5,517,349 shares of common stock and 163,200 shares of
common stock issuable upon outstanding warrants are held by
existing stockholders. All of the shares, when sold, will be
sold by the selling stockholders. The selling stockholders may
sell their shares from time to time at market prices prevailing
at the time of sale, at prices related to the prevailing market
price, or at negotiated prices. We will not receive any proceeds
from the sale of shares by the selling stockholders, other than
as a result of the exercise of warrants held by the selling
stockholders for cash.
8
SUMMARY
FINANCIAL DATA
The following summary financial data should be read together
with our financial statements and the related notes and
Managements Discussion and Analysis of Financial
Condition and Results of Operations appearing elsewhere in
this prospectus. The summary financial data in this section is
not intended to replace our financial statements and the related
notes. Our historical results are not necessarily indicative of
the results to be expected for any future period.
We were incorporated on September 9, 2004. The following
statement of operations data, including share data, for the
years ended December 31, 2007, 2008 and 2009 have been
derived from our audited financial statements and related notes
appearing elsewhere in this prospectus. The statement of
operations data, including share data, for the nine months ended
September 30, 2009 and 2010 and the balance sheet data as
of September 30, 2010 have been derived from our unaudited
interim financial statements appearing elsewhere in this
prospectus. The unaudited interim financial statements have been
prepared on the same basis as the audited financial statements
and reflect all adjustments necessary to fairly state our
financial position as of September 30, 2010 and results of
operations for the nine months ended September 30, 2009 and
2010. The operating results for any period are not necessarily
indicative of financial results that may be expected for any
future period.
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Fiscal Year Ended
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Nine Months Ended
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December 31,
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September 30,
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2007
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2008
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2009
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2010
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2009
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Statement of Operations Data:
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Operating expenses
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Research and development
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$
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23,921,932
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$
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10,882,322
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$
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8,415,414
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$
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18,565,088
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$
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7,727,129
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General and administrative
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2,468,607
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2,980,170
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3,425,690
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4,244,000
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2,730,482
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Total operating expenses
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(26,390,539
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)
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(13,862,492
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)
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(11,841,104
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)
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|
(22,809,088
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)
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(10,457,611
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)
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Other income (expense)
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Interest and other income
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696,962
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178,129
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23,534
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76,562
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21,559
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Interest and other expense
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(296,303
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)
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(385,922
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)
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(4,641,169
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)
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(289,776
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)
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Beneficial conversion feature
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(4,118,544
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)
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Total other income (expense)
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696,962
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(4,236,718
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)
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(362,388
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)
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|
(4,564,607
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)
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|
(268,217
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)
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Net loss
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$
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(25,693,577
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)
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$
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(18,099,210
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)
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$
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(12,203,492
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)
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$
|
(27,373,695
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)
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|
$
|
(10,725,828
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)
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Net loss per share-basic and
diluted(1)
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$
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(28.15
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)
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$
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(13.47
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)
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|
$
|
(8.06
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)
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|
$
|
(1.40
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)
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|
$
|
(7.16
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)
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Weighted-average number of shares used in share
calculation-basic and
diluted(2)
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912,668
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|
|
|
1,343,420
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|
|
|
1,513,598
|
|
|
|
19,567,058
|
|
|
|
1,498,108
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|
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(1)
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Diluted earnings per share, or EPS, is identical to basic EPS
since common equivalent and shares are excluded from the
calculation, as their effect is anti-dilutive.
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(2)
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For accounting purposes only, the number of issued and
outstanding shares for the years ended December 31, 2007,
2008 and 2009 and the nine months ended September 30, 2009
and 2010 do not include weighted-average shares of unvested
stock of 261,649, 230,028, 110,079, 121,542 and 52,612,
respectively. These shares are subject to a risk of repurchase
by us until such shares are vested. See Note 2 to our
financial statements for more information.
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9
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As of
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September 30,
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2010
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Balance Sheet Data:
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Cash and cash equivalents
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$
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51,208,720
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Short-term investments
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21,878,890
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Working capital
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70,063,385
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Total assets
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74,923,205
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Indebtedness
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4,837,707
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Deficit accumulated during the development stage
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(92,603,647
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)
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Total stockholders (deficit) equity
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70,085,498
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The September 30, 2010 balance sheet data reflects the sale
of 10,500,000 units, at an offering price of $3.00 per
unit, with each unit consisting of one share of common stock and
a Warrant to purchase 0.40 shares of common stock, to the
selling stockholders pursuant to the private placement
transaction that closed on September 24, 2010. The above
table does not reflect any exercise by the selling stockholders
of the Warrants.
10
RISK
FACTORS
Before you decide to invest in our common stock, you should
carefully consider the risks described below, together with the
other information contained in this prospectus, including the
financial statements and the related notes that appear at the
end of this prospectus. We believe the risks described below are
the risks that are material to us as of the date of this
prospectus. If any of the following risks occur, our business,
financial condition, results of operations and future growth
prospects would likely be materially and adversely affected. In
these circumstances, the market price of our common stock could
decline, and you may lose all or part of your investment.
Risks
Related to Our Financial Condition and Capital
Requirements
We have incurred significant losses since our inception
and anticipate that we will incur continued significant losses
for the foreseeable future.
We are a development stage company with only six years of
operating history. We have focused primarily on developing our
three product candidates, varespladib,
A-623 and
varespladib sodium
(A-001). We
have financed our operations exclusively through equity
offerings and private placements of convertible debt and we have
incurred losses in each year since our inception in September
2004. Our net losses were approximately $15,000 in 2004,
$540,000 in 2005, $8.7 million in 2006, $25.7 million
in 2007, $18.1 million in 2008, $12.2 million in 2009
and $27.4 million for the nine months ended
September 30, 2010. As of September 30, 2010, we had
an accumulated deficit of approximately $92.6 million.
Substantially all of our losses resulted from costs incurred in
connection with our product development programs and from
general and administrative costs associated with our operations.
We expect to incur additional losses over the next several
years, and these losses may increase if we cannot generate
revenues. These losses, combined with expected future losses,
have had and will continue to have an adverse effect on our
stockholders equity and working capital. We expect our
development expenses, as well as our clinical product
manufacturing expenses, to increase in connection with our
pivotal Phase 3 clinical study named VISTA-16 for varespladib,
our Phase 2b clinical study named PEARL-SC for
A-623, and
other clinical studies related to the development of
A-623. In
addition, we will incur additional costs of operating as a
public company and, if we obtain regulatory approval for any of
our product candidates, we may incur significant sales,
marketing, in-licensing and outsourced manufacturing expenses as
well as continued product development expenses. As a result, we
expect to continue to incur significant and increasing losses
for the foreseeable future.
We have never generated any revenue and may never be
profitable.
Our ability to generate revenue and achieve profitability
depends on our ability, alone or with collaborators, to
successfully complete the development of our product candidates,
conduct preclinical tests in animals and clinical studies in
human beings, obtain the necessary regulatory approvals for our
product candidates and commercialize any approved products. We
have not generated any revenue from our development-stage
product candidates, and we do not know when, or if, we will
generate any revenue. The commercial success of our
development-stage product candidates will depend on a number of
factors, including, but not limited to, our ability to:
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obtain favorable results for and advance the development of our
lead product candidate, varespladib, for the treatment of acute
coronary syndrome, including successfully launching and
completing the VISTA-16 study;
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obtain favorable results for and advance the development of our
product candidate
A-623, for
the treatment of B-cell mediated autoimmune diseases, including
successfully launching
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and completing a Phase 2b clinical study in patients with
systemic lupus erythematosus, or lupus, or other indications
related to the development of
A-623;
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obtain favorable results for and advance the development of our
product candidate
A-001, for
the prevention of acute chest syndrome associated with sickle
cell disease, including completing a multi-center Phase 2
clinical study;
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successfully execute our planned preclinical studies in animals
and clinical studies in human beings for our other product
candidates;
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obtain regulatory approval for varespladib,
A-623,
A-001 and
our other product candidates;
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if regulatory approvals are obtained, begin the commercial
manufacturing of our product candidates with our third-party
manufacturers;
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launch commercial sales and effectively market our product
candidates, either independently or in strategic collaborations
with third parties; and
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achieve broad market acceptance of our product candidates in the
medical community and with third-party payors.
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All of our product candidates are subject to the risks of
failure inherent in the development of therapeutics based on new
technologies. Currently, we have three product candidates in
clinical development: varespladib,
A-623 and
A-001. These
product candidates could fail in clinical studies if we are
unable to demonstrate that they are effective or if they cause
unacceptable adverse effects in the patients we treat. Failure
of our product candidates in clinical studies would have a
material adverse effect on our ability to generate revenue or
become profitable. If we are not successful in achieving
regulatory approval for our product candidates or are
significantly delayed in doing so, our business will be
materially harmed.
Additionally, all of our other product candidates are in
preclinical development. Our drug discovery efforts may not
produce any other viable or marketable product candidates. We do
not expect any of our potential product candidates to be
commercially available until at least 2013.
Even if our product candidates are approved for commercial sale,
the approved product candidate may not gain market acceptance or
achieve commercial success. Physicians, patients, payors or the
medical community in general may be unwilling to accept, utilize
or recommend any of our products. We would anticipate incurring
significant costs associated with commercializing any approved
product. Even if we are able to generate product sales, which we
cannot guarantee, we may not achieve profitability soon
thereafter, if ever. If we are unable to generate product
revenues, we will not become profitable and may be unable to
continue operations without additional funding.
Because we will need substantial additional capital in the
future to fund our operations, our independent registered public
accounting firm included a paragraph regarding concerns about
our ability to continue as a going concern in their report on
our financial statements. If additional capital is not
available, we will have to delay, reduce or cease
operations.
We will need to raise substantial additional capital to fund our
operations and to develop our product candidates. Our future
capital requirements could be substantial and will depend on
many factors including:
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the rate of progress of our Phase 3 clinical study named
VISTA-16 study for varespladib and our Phase 2b clinical study
named
PEARL-SC for
A-623;
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12
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the scope, size, rate of progress, results and costs of our
preclinical studies, clinical studies and other development
activities for one or more of our other product candidates;
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manufacturing campaign of
A-623
clinical matters, including formulation development and
enhancement;
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non-clinical activities that we may pursue parallel to clinical
trials for each clinical compound;
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the cost, timing and outcomes of regulatory proceedings;
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payments received under any strategic collaborations;
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the filing, prosecution and enforcement of patent claims;
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the costs associated with commercializing our product candidates
if they receive regulatory approval, including the cost and
timing of developing sales and marketing capabilities, or
entering into strategic collaboration with others relating to
the commercialization of our product candidates; and
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revenues received from approved products, if any, in the future.
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As of the date of this prospectus, we anticipate that our
existing cash, cash equivalents and short-term investments, will
enable us to maintain our currently planned operations through
at least the next 12 months. Changing circumstances may
cause us to consume capital significantly faster than we
currently anticipate. Additional financing may not be available
when we need it or may not be available on terms that are
favorable to us. If adequate funds are not available to us on a
timely basis, or at all, we may be required to:
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terminate, reduce or delay preclinical studies, clinical studies
or other development activities for one or more of our product
candidates; or
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terminate, reduce or delay our (i) establishment of sales
and marketing capabilities, (ii) pursuit of strategic
collaborations with others relating to the sales, marketing and
commercialization of our product candidates or (iii) other
activities that may be necessary to commercialize our product
candidates, if approved for sale.
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The timing of the milestone and royalty payments we are
required to make to each of Eli Lilly and Company,
Shionogi & Co., Ltd. and Amgen Inc. is uncertain and
could adversely affect our cash flows and results of
operations.
In July 2006, we entered into a license agreement with Eli Lilly
and Company, or Eli Lilly, and Shionogi & Co., Ltd. to
develop and commercialize certain secretory phospholipase
A2,
or
sPLA2,
inhibitors for the treatment of cardiovascular disease and other
diseases. Pursuant to our license agreement with them, we have
an obligation to pay to each of Eli Lilly and
Shionogi & Co., Ltd. significant milestone and royalty
payments based upon how we develop and commercialize certain
sPLA2
inhibitors, including varespladib and
A-001, and
our achievement of certain significant corporate, clinical and
financial events. For varespladib, we are required to pay up to
$32.0 million upon achievement of certain approval and
post-approval sales milestones. For
A-001, we
are required to pay up to $3.0 million upon achievement of
certain clinical development milestones and up to
$25.0 million upon achievement of certain approval and
post-approval sales milestones. For other product formulations
that we are not currently developing, we would be required to
pay up to $2.0 million upon achievement of certain clinical
development milestones and up to $35.5 million upon
achievement of certain approval and post-approval sales
milestones. In addition, in December 2007, we entered into a
license agreement with Amgen Inc., or Amgen, pursuant to which
we obtained an exclusive worldwide license to certain technology
and compounds relating to
A-623.
13
Pursuant to our license agreement with Amgen, we are required to
make various milestone payments upon our achievement of certain
development, regulatory and commercial objectives for any
A-623
formulation. We are required to pay up to $10.0 million
upon achievement of certain pre-approval clinical development
milestones and up to $23.0 million upon achievement of
certain post-approval milestones. We are also required to make
tiered quarterly royalty payments on net sales, which increase
as a percentage from the high single digits to the low double
digits as net sales increase. The timing of our achievement of
these events and corresponding milestone payments becoming due
to Eli Lilly, Shionogi & Co., Ltd. and Amgen is
subject to factors relating to the clinical and regulatory
development and commercialization of certain
sPLA2
inhibitors or
A-623, as
applicable, many of which are beyond our control. We may become
obligated to make a milestone payment during a period in which
we do not have the cash on hand to make such payment, which
could require us to delay our clinical studies, curtail our
operations, scale back our commercialization and marketing
efforts or seek funds to meet these obligations at terms
unfavorable to us.
Our limited operating history makes it difficult to
evaluate our business and prospects.
We were incorporated in September 2004. Our operations to date
have been limited to organizing and staffing our company,
acquiring product and technology rights, conducting product
development activities for our primary product candidates,
varespladib,
A-623 and
A-001, and
performing research and development. We have not yet
demonstrated an ability to obtain regulatory approval for or
commercialize a product candidate. Consequently, any predictions
about our future performance may not be as accurate as they
could be if we had a history of successfully developing and
commercializing pharmaceutical products.
Risks
Associated with Development and Commercialization of Our Product
Candidates
We depend substantially on the success of our three
primary product candidates, varespladib,
A-623 and
A-001, which
are still under clinical development. We cannot assure you that
these product candidates or any of our other product candidates
will receive regulatory approval or be successfully
commercialized.
To date, we have not marketed, distributed or sold any product
candidates. The success of our business depends primarily upon
our ability to develop and commercialize our three primary
product candidates successfully. Our lead product candidate is
varespladib, which has completed its Phase 2 clinical studies
and for which we have received (i) an agreement from the
U.S. Food and Drug Administration, or FDA, on a Special
Protocol Assessment, or SPA, for the VISTA-16 Phase 3 study
protocol, and (ii) scientific advice from the European
Medicines Agency on our European development strategy for
varespladib. We initiated the VISTA-16 study for varespladib in
June 2010.
Our next product candidate is
A-623, which
has completed several Phase 1 clinical studies and recently
began enrollment for our Phase 2b clinical study. In July 2010,
we received clearance from the FDA to begin recruitment of lupus
patients into the PEARL-SC Phase 2b clinical study. On
November 16, 2010, we placed a voluntary hold on the
PEARL-SC study due to problems found with product vials. Patient
enrollment in the study has been temporarily suspended and
patients currently enrolled in the study will discontinue dosing
while we conduct a complete analysis of the problem. There have
been no reports of patient-related side effects or problems with
drug administration that could be attributed to this problem.
Our third product candidate, varespladib sodium
(A-001), is
an intravenously administered inhibitor of
sPLA2.
We have completed a Phase 2 clinical study for the
prevention of acute chest syndrome associated with sickle cell
disease. A pre-specified interim review of our Phase 2
clinical study results by a Data Safety Monitoring Board, or
DSMB, indicated
A-001, at a
certain dose, reduced
sPLA2
activity by more than 80% from baseline within 48 hours.
Furthermore, the incidence of acute chest syndrome appeared to
be related to the level of
sPLA2
activity.
14
Our product candidates are prone to the risks of failure
inherent in drug development. Before obtaining regulatory
approvals for the commercial sale of any product candidate for a
target indication, we must demonstrate with substantial evidence
gathered in preclinical and well-controlled clinical studies,
and, with respect to approval in the United States, to the
satisfaction of the FDA and, with respect to approval in other
countries, similar regulatory authorities in those countries,
that the product candidate is safe and effective for use for
that target indication and that the manufacturing facilities,
processes and controls are adequate. Despite our efforts, our
product candidates may not:
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offer therapeutic or other improvement over existing, comparable
therapeutics;
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be proven safe and effective in clinical studies;
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meet applicable regulatory standards;
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be capable of being produced in sufficient quantities at
acceptable costs;
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be successfully commercialized; or
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obtain favorable reimbursement.
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We are not permitted to market our varespladib and
A-001
product candidates in the United States until we receive
approval of a new drug application, or NDA, or with respect to
our A-623
product candidate, approval of a biologics license application,
or BLA, from the FDA, or in any foreign countries until we
receive the requisite approval from such countries. We have not
submitted an NDA or BLA or received marketing approval for any
of our product candidates.
Preclinical testing and clinical studies are long, expensive and
uncertain processes. We may spend several years completing our
testing for any particular product candidate, and failure can
occur at any stage. Negative or inconclusive results or adverse
medical events during a clinical study could also cause the FDA
or us to terminate a clinical study or require that we repeat it
or conduct additional clinical studies. Additionally, data
obtained from a clinical study are susceptible to varying
interpretations and the FDA or other regulatory authorities may
interpret the results of our clinical studies less favorably
than we do. The FDA and equivalent foreign regulatory agencies
have substantial discretion in the approval process and may
decide that our data are insufficient to support a marketing
application and require additional preclinical, clinical or
other studies.
Any termination or suspension of, or delays in the
commencement or completion of, clinical testing of our product
candidates could result in increased costs to us, delay or limit
our ability to generate revenue and adversely affect our
commercial prospects.
Delays in the commencement or completion of clinical testing
could significantly affect our product development costs. We do
not know whether planned clinical studies will begin on time or
be completed on schedule, if at all. The commencement and
completion of clinical studies can be delayed for a number of
reasons, including delays related to:
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obtaining regulatory approval to commence a clinical study or
complying with conditions imposed by a regulatory authority
regarding the scope or design of a clinical study;
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reaching agreement on acceptable terms with prospective clinical
research organizations, or CROs, and study sites, the terms of
which can be subject to extensive negotiation and may vary
significantly among different CROs and study sites;
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manufacturing, including manufacturing sufficient quantities of
a product candidate or other materials for use in clinical
studies;
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15
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obtaining institutional review board, or IRB, approval or the
approval of other reviewing entities to conduct a clinical study
at a prospective site;
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recruiting and enrolling patients to participate in clinical
studies for a variety of reasons, including size of patient
population, nature of clinical study protocol, the availability
of approved effective treatments for the relevant disease and
competition from other clinical study programs for similar
indications;
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severe or unexpected drug-related adverse effects experienced by
patients in a clinical study; and
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retaining patients who have initiated a clinical study, but may
withdraw due to treatment protocol, adverse effects from the
therapy, lack of efficacy from the treatment, personal issues or
who are lost to further
follow-up.
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Clinical studies may also be delayed, suspended or terminated as
a result of ambiguous or negative interim results, or results
that are inconsistent with earlier results. For example, the
independent committee that is conducting the data review may
recommend that we stop our VISTA-16 study for varespladib if
certain biomarkers of inflammation and lipid profiles fail to
meet pre-specified reductions from a subset of the first 1,000
or more patients. In addition, a clinical study may be suspended
or terminated by us, the FDA, the IRB or other reviewing entity
overseeing the clinical study at issue, any of our clinical
study sites with respect to that site, or other regulatory
authorities due to a number of factors, including:
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failure to conduct the clinical study in accordance with
regulatory requirements or our clinical protocols;
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inspection of the clinical study operations or study sites by
the FDA or other regulatory authorities resulting in the
imposition of a clinical hold;
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unforeseen safety issues or any determination that a clinical
study presents unacceptable health risks; and
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lack of adequate funding to continue the clinical study,
including the incurrence of unforeseen costs due to enrollment
delays, requirements to conduct additional clinical studies and
increased expenses associated with the services of our CROs and
other third parties.
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Product development costs to us and our collaborators will
increase if we have delays in testing or approval of our product
candidates or if we need to perform more or larger clinical
studies than planned. For example, we may need to increase our
sample size for our VISTA-16 study for varespladib if the
overall major adverse cardiovascular event, or MACE, rate is
lower than expected. We typically rely on third-party clinical
investigators at medical institutions and health care facilities
to conduct our clinical studies and, as a result, we may face
additional delaying factors outside our control.
Additionally, changes in regulatory requirements and policies
may occur and we may need to amend clinical study protocols to
reflect these changes. Amendments may require us to resubmit our
clinical study protocols to IRBs for reexamination, which may
impact the costs, timing or successful completion of a clinical
study. If we experience delays in completion of, or if we, the
FDA or other regulatory authorities, the IRB or other reviewing
entities, or any of our clinical study sites suspend or
terminate any of our clinical studies, the commercial prospects
for our product candidates may be harmed and our ability to
generate product revenues will be delayed. In addition, many of
the factors that cause, or
16
lead to, termination or suspension of, or a delay in the
commencement or completion of, clinical studies may also
ultimately lead to the denial of regulatory approval of a
product candidate. Also, if one or more clinical studies are
delayed, our competitors may be able to bring products to market
before we do, and the commercial viability of our product
candidates could be significantly reduced.
The results of biomarker assays in earlier clinical
studies in varespladib are not necessarily predictive of future
results, and therefore the results of biomarker assays in the
VISTA-16 study may not be similar to those observed
previously.
Success in our Phase 2 clinical studies in lowering low-density
lipoprotein cholesterol, or LDL-C, C-reactive protein, or CRP,
sPLA2
and interleukin-6, or IL-6, during treatment with varespladib
does not ensure that later clinical studies, such as our
VISTA-16 study, will demonstrate similar reductions in these
biomarkers. Each of these biomarkers has been associated with an
increased risk for secondary MACE following an acute coronary
syndrome. Our inability to demonstrate similar biomarker effects
in our VISTA-16 study may reduce our ability to achieve our
primary endpoint to reduce MACE and to achieve regulatory
approval of varespladib.
Because the results of preclinical testing or earlier
clinical studies are not necessarily predictive of future
results, varespladib,
A-623,
A-001 or any
other product candidate we advance into clinical studies may not
have favorable results in later clinical studies or receive
regulatory approval.
Success in preclinical testing and early clinical studies does
not ensure that later clinical studies will generate adequate
data to demonstrate the efficacy and safety of an
investigational drug or biologic. A number of companies in the
pharmaceutical and biotechnology industries, including those
with greater resources and experience, have suffered significant
setbacks in Phase 3 clinical studies, even after seeing
promising results in earlier clinical studies. Despite the
results reported in earlier clinical studies for our product
candidates, including varespladib,
A-623 and
A-001, we do
not know whether any Phase 3 or other clinical studies we may
conduct will demonstrate adequate efficacy and safety to result
in regulatory approval to market any of our product candidates.
If later stage clinical studies do not produce favorable
results, our ability to achieve regulatory approval for any of
our product candidates may be adversely impacted.
If we breach the license agreements for our primary
product candidates, we could lose the ability to continue the
development and commercialization of our primary product
candidates.
We are party to an agreement with Eli Lilly and
Shionogi & Co., Ltd. containing exclusive, worldwide
licenses, except for Japan, of the composition of matter,
methods of making and methods of use for certain
sPLA2
inhibitors. We are also party to an agreement with Amgen
containing exclusive, worldwide licenses of the composition of
matter and methods of use for
A-623. These
agreements require us to make timely milestone and royalty
payments, provide regular information, maintain the
confidentiality of and indemnify Eli Lilly, Shionogi &
Co., Ltd. and Amgen under the terms of the agreements.
If we fail to meet these obligations, our licensors may
terminate our exclusive licenses and may be able to re-obtain
licensed technology and aspects of any intellectual property
controlled by us that relate to the licensed technology that
originated from the licensors. Our licensors could effectively
take control of the development and commercialization of
varespladib,
A-623 and
A-001 after
an uncured, material breach of our license agreements by us or
if we voluntarily terminate the agreements. While we would
expect to exercise all rights and remedies available to us,
including seeking to cure any breach by us, and otherwise seek
to preserve our rights under the patents licensed to us, we may
not be able to do so in a timely manner, at an acceptable cost
or at all. Any uncured, material breach under the licenses
17
could result in our loss of exclusive rights and may lead to a
complete termination of our product development and any
commercialization efforts for varespladib,
A-623 or
A-001.
Our industry is subject to intense competition. If we are
unable to compete effectively, our product candidates may be
rendered non-competitive or obsolete.
The pharmaceutical industry is highly competitive and subject to
rapid and significant technological change. Our potential
competitors include large pharmaceutical and more established
biotechnology companies, specialty pharmaceutical and generic
drug companies, academic institutions, government agencies and
other public and private research organizations that conduct
research, seek patent protection and establish collaborative
arrangements for research, development, manufacturing and
commercialization. All of these competitors currently engage in,
have engaged in or may engage in the future in the development,
manufacturing, marketing and commercialization of
pharmaceuticals and biotechnologies, some of which may compete
with our present or future product candidates. It is possible
that any of these competitors could develop technologies or
products that would render our product candidates obsolete or
non-competitive, which could adversely affect our revenue
potential. Key competitive factors affecting the commercial
success of our product candidates are likely to be efficacy,
safety profile, reliability, convenience of dosing, price and
reimbursement.
The market for inflammatory disease therapeutics is especially
large and competitive. All of the
sPLA2
inhibitor compounds we are currently developing, if approved,
will face intense competition, either as monotherapies or in
combination therapies. We are aware of other companies with
products in development that are being tested for
anti-inflammatory benefits in patients with acute coronary
syndrome, such as Via Pharmaceuticals, Inc. and its
5-lipoxygenase, or 5-LO, inhibitor, which has been evaluated in
Phase 2 clinical studies; and GlaxoSmithKline plc and its
product candidate, darapladib, which is a lipoprotein associated
phospholipase
A2,
or
Lp-PLA2,
inhibitor currently being evaluated in Phase 3 clinical studies.
Although there are no
sPLA2
inhibitor compounds currently approved by the FDA for the
treatment of acute chest syndrome associated with sickle cell
disease, Droxia, or hydroxyurea, is approved for the prevention
of vaso-occlusive crisis, or VOC, in sickle cell disease and
thus could reduce the pool of patients with VOC at risk for
acute chest syndrome. Further, we are aware of companies with
other products in development that are being tested for
potential treatment of lupus, including Human Genome Sciences,
Inc. and GlaxoSmithKline plc, who have a BAFF antagonist
monoclonal antibody product candidate, Benlysta, which recently
reported favorable results from a Phase 3 clinical study in
lupus; ZymoGenetics, Inc. and Merck Serono S.A., whose dual
BAFF/APRIL antagonist fusion protein, Atacicept, is in a Phase 3
clinical study for lupus; and Immunomedics, Inc. and UCB S.A.,
who recently reported favorable results for their CD-22
antagonist humanized antibody, epratuzumab, which completed a
Phase 2b clinical study in lupus.
Many of our potential competitors have substantially greater
financial, technical and human resources than we do and
significantly greater experience in the discovery and
development of drug candidates, obtaining FDA and other
regulatory approvals of products and the commercialization of
those products. Accordingly, our competitors may be more
successful than we may be in obtaining FDA approval for drugs
and achieving widespread market acceptance. Our
competitors drugs may be more effective, have fewer
adverse effects, be less expensive to develop and manufacture or
be more effectively marketed and sold than any product candidate
we may commercialize and may render our product candidates
obsolete or non-competitive before we can recover the expenses
of developing and commercializing any of our product candidates.
We anticipate that we will face intense and increasing
competition as new drugs enter the market and advanced
technologies become available. These entities may also establish
collaborative or licensing relationships with our competitors.
Finally, the development of new treatment methods for the
diseases we are targeting could render our drugs non-competitive
or obsolete. All of these factors could adversely affect our
business.
18
Our product candidates may cause undesirable adverse
effects or have other properties that could delay or prevent
their regulatory approval or limit the commercial profile of any
approved label.
Undesirable adverse effects caused by our product candidates
could cause us, IRBs or other reviewing entities, clinical study
sites, or regulatory authorities to interrupt, delay or halt
clinical studies and could result in the denial of regulatory
approval by the FDA or other regulatory authorities. Phase 2
clinical studies conducted by us with our product candidates
have generated differences in adverse effects and serious
adverse events. The most common adverse effects seen with any of
our product candidates versus placebo include diarrhea,
headache, nausea and increases in alanine aminotransferase,
which is an enzyme that indicates liver cell injury. The most
common serious adverse events seen with any of our product
candidates include death, VOC and congestive heart failure.
While none of these serious adverse events were considered
related to the administration of our product candidates by the
clinical investigators, if serious adverse events that are
considered related to our product candidates are observed in any
Phase 3 clinical studies, our ability to obtain regulatory
approval for our product candidates may be adversely impacted.
Further, if any of our product candidates receives marketing
approval and we or others later discover, after approval and use
in an increasing number of patients, that our products could
have adverse effect profiles that limit their usefulness or
require their withdrawal (whether or not the therapies showed
the adverse effect profile in Phase 1 through Phase 3 clinical
studies), a number of potentially significant negative
consequences could result, including:
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regulatory authorities may withdraw their approval of the
product;
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regulatory authorities may require the addition of labeling
statements, such as warnings or contraindications;
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we may be required to change the way the product is
administered, conduct additional clinical studies or change the
labeling of the product;
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we could be sued and held liable for harm caused to
patients; and
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our reputation may suffer.
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Any of these events could prevent us from achieving or
maintaining market acceptance of the affected product candidate
and could substantially increase the costs of commercializing
our product candidates.
After the completion of our clinical studies, we cannot
predict whether or when we will obtain regulatory approval to
commercialize our product candidates and we cannot, therefore,
predict the timing of any future revenue from these product
candidates.
We cannot commercialize any of our product candidates until the
appropriate regulatory authorities have reviewed and approved
the applications for the product candidates. We cannot assure
you that the regulatory agencies will complete their review
processes in a timely manner or that we will obtain regulatory
approval for any product candidate we develop. 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. In addition,
we may experience delays or rejections based upon additional
government regulation from future legislation or administrative
action or changes in FDA policy during the period of product
development, clinical studies and FDA regulatory review.
19
Our agreement with the FDA on an SPA for our VISTA-16
study of varespladib for the potential treatment of acute
coronary syndrome does not guarantee any particular outcome from
regulatory review of the study or the product candidate.
The FDAs SPA process creates a written agreement between
the sponsoring company and the FDA regarding clinical study
design and other clinical study issues that can be used to
support approval of a product candidate. The SPA is intended to
provide assurance that if the agreed upon clinical study
protocols are followed and the clinical study endpoints are
achieved, the data may serve as the primary basis for an
efficacy claim in support of an NDA. However, the SPA agreement
is not a guarantee of an approval of a product or any
permissible claims about the product. In particular, the SPA is
not binding on the FDA if public health concerns unrecognized at
the time of the SPA agreement is entered into become evident,
other new scientific concerns regarding product safety or
efficacy arise or if the sponsor company fails to comply with
the agreed upon clinical study protocols. Although we have an
agreement with the FDA on an SPA for our VISTA-16 clinical study
of varespladib for the potential short-term (16-week) treatment
of acute coronary syndrome, we do not know how the FDA will
interpret the commitments under our agreed upon SPA, how it will
interpret the data and results or whether it will approve our
varespladib product candidate for the short-term (16-week)
treatment of acute coronary syndrome. Regardless of our SPA
agreement, we cannot guarantee any particular outcome from
regulatory review of our VISTA-16 study.
Even if our product candidates receive regulatory
approval, they may still face future development and regulatory
difficulties.
Even if U.S. regulatory approval is obtained, the FDA may
still impose significant restrictions on a products
indicated uses or marketing or impose ongoing requirements for
potentially costly post-approval studies or post-market
surveillance. For example, the label ultimately approved for
varespladib, if any, may include restrictions on use. Further,
the FDA has indicated that long-term safety data on varespladib
may need to be obtained as a post-market requirement. Our
product candidates will also be subject to ongoing FDA
requirements governing the labeling, packaging, storage,
distribution, safety surveillance, advertising, promotion,
recordkeeping and reporting of safety and other post-market
information. In addition, manufacturers of drug products and
their facilities are subject to continual review and periodic
inspections by the FDA and other regulatory authorities for
compliance with current good manufacturing practices, or cGMP,
regulations. If we or a regulatory agency discovers previously
unknown problems with a product, such as adverse events of
unanticipated severity or frequency, or problems with the
facility where the product is manufactured, a regulatory agency
may impose restrictions on that product, the manufacturing
facility or us, including requiring recall or withdrawal of the
product from the market or suspension of manufacturing. If we,
our product candidates or the manufacturing facilities for our
product candidates fail to comply with applicable regulatory
requirements, a regulatory agency may:
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issue warning letters or untitled letters;
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seek an injunction or impose civil or criminal penalties or
monetary fines;
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suspend or withdraw regulatory approval;
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suspend any ongoing clinical studies;
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refuse to approve pending applications or supplements to
applications filed by us;
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suspend or impose restrictions on operations, including costly
new manufacturing requirements; or
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seize or detain products, refuse to permit the import or export
of products, or require us to initiate a product recall.
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The occurrence of any event or penalty described above may
inhibit our ability to commercialize our products and generate
revenue.
New legal and regulatory requirements could make it more
difficult for us to obtain approvals for our product candidates
and could limit or make more burdensome our ability to
commercialize any approved products.
New federal legislation or regulatory requirements could affect
the requirements for obtaining regulatory approvals of our
product candidates or otherwise limit our ability to
commercialize any approved products or subject our products to
more rigorous post-approval requirements. For example, the FDA
Amendments Act of 2007, or FDAAA, granted the FDA new authority
to impose post-approval clinical study requirements, require
safety-related changes to product labeling and require the
adoption of risk management plans, referred to in the
legislation as risk evaluation and mitigation strategies, or
REMS. The REMS may include requirements for special labeling or
medication guides for patients, special communication plans to
health care professionals, and restrictions on distribution and
use. Pursuant to the FDAAA, if the FDA makes the requisite
findings, it might require that a new product be used only by
physicians with specified specialized training, only in
specified designated health care settings, or only in
conjunction with special patient testing and monitoring. The
legislation also included the following: requirements for
providing the public information on ongoing clinical studies
through a clinical study registry and for disclosing clinical
study results to the public through such registry; renewed
requirements for conducting clinical studies to generate
information on the use of products in pediatric patients; and
substantial new penalties, for example, for false or misleading
consumer advertisements. Other proposals have been made to
impose additional requirements on drug approvals, further expand
post-approval requirements, and restrict sales and promotional
activities. The new legislation, and the additional proposals if
enacted, may make it more difficult or burdensome for us to
obtain approval of our product candidates, any approvals we
receive may be more restrictive or be subject to onerous
post-approval requirements, our ability to successfully
commercialize approved products may be hindered and our business
may be harmed as a result.
If any of our product candidates for which we receive
regulatory approval does not achieve broad market acceptance,
the revenue that we generate from its sales, if any, will be
limited.
The commercial success of our product candidates for which we
obtain marketing approval from the FDA or other regulatory
authorities will depend upon the acceptance of these products by
the medical community, including physicians, patients and health
care payors. The degree of market acceptance of any of our
approved products will depend on a number of factors, including:
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demonstration of clinical safety and efficacy compared to other
products;
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the relative convenience, ease of administration and acceptance
by physicians and payors of varespladib in the treatment of
acute coronary syndrome,
A-623 in the
treatment of lupus and
A-001 in the
prevention of acute chest syndrome associated with sickle cell
disease;
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the prevalence and severity of any adverse effects;
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limitations or warnings contained in a products
FDA-approved labeling;
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availability of alternative treatments, including, in the case
of varespladib, a number of competitive products being studied
for anti-inflammatory benefits in patients with acute coronary
syndrome or expected to be commercially launched in the near
future;
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pricing and cost-effectiveness;
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the effectiveness of our or any future collaborators sales
and marketing strategies;
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our ability to obtain and maintain sufficient third-party
coverage or reimbursement from government health care programs,
including Medicare and Medicaid; and
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the willingness of patients to pay
out-of-pocket
in the absence of third-party coverage.
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If our product candidates are approved but do not achieve an
adequate level of acceptance by physicians, health care payors
and patients, we may not generate sufficient revenue from these
products, and we may not become or remain profitable. In
addition, our efforts to educate the medical community and
third-party payors on the benefits of our product candidates may
require significant resources and may never be successful.
Our future success depends on our ability to retain our
chief executive officer and other key executives and to attract,
retain and motivate qualified personnel.
We are highly dependent on Mr. Paul F. Truex, our President
and Chief Executive Officer, Dr. Colin Hislop, our Senior
Vice President and Chief Medical Officer and the other principal
members of our executive team listed under
Management on page 109. The loss of the
services of any of these persons might impede the achievement of
our research, development and commercialization objectives.
Recruiting and retaining qualified scientific personnel and
possibly sales and marketing personnel will also be critical to
our success. We may not be able to attract and retain these
personnel on acceptable terms given the competition among
numerous pharmaceutical and biotechnology companies for similar
personnel. We also experience competition for the hiring of
scientific personnel from universities and research
institutions. Failure to succeed in clinical studies may make it
more challenging to recruit and retain qualified scientific
personnel. In addition, we rely on consultants and advisors,
including scientific and clinical advisors, to assist us in
formulating our research and development and commercialization
strategy. Our consultants and advisors may be employed by
employers other than us and may have commitments under
consulting or advisory contracts with other entities that may
limit their availability to us.
Recently enacted and future legislation or regulatory
reform of the health care system in the United States and
foreign jurisdictions may affect our ability to sell our
products profitably.
Our ability to commercialize our future products successfully,
alone or with collaborators, will depend in part on the extent
to which reimbursement for the products will be available from
government and health administration authorities, private health
insurers and other third-party payors. The continuing efforts of
the U.S. and foreign governments, insurance companies,
managed care organizations and other payors of health care
services to contain or reduce health care costs may adversely
affect our ability to set prices for our products which we
believe are fair, and our ability to generate revenues and
achieve and maintain profitability.
Specifically, in both the United States and some foreign
jurisdictions, there have been a number of legislative and
regulatory proposals to change the health care system in ways
that could affect our ability to sell our products profitably.
In March 2010, President Obama signed into law the Patient
Protection and Affordable Care Act, as amended by the Health
Care and Education Reconciliation Act, or collectively, the
Health Care Reform Law, a sweeping law intended to broaden
access to health
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insurance, reduce or constrain the growth of healthcare
spending, enhance remedies against fraud and abuse, add new
transparency requirements for healthcare and health insurance
industries, impose new taxes and fees on the health industry and
impose additional health policy reforms.
We will not know the full effects of the Health Care Reform Law
until applicable federal and state agencies issue regulations or
guidance under the new law. Although it is too early to
determine the effect of the Health Care Reform Law, the new law
appears likely to continue the pressure on pharmaceutical
pricing, especially under the Medicare program, and also may
increase our regulatory burdens and operating costs. We expect
further federal and state proposals and health care reforms to
continue to be proposed by legislators, which could limit the
prices that can be charged for the products we develop and may
limit our commercial opportunity.
Also in the United States, the Medicare Prescription Drug,
Improvement, and Modernization Act of 2003, also called the
Medicare Modernization Act, or MMA, changed the way Medicare
covers and pays for pharmaceutical products. The legislation
expanded Medicare coverage for drug purchases by the elderly and
introduced a new reimbursement methodology based on average
sales prices for drugs. In addition, this legislation authorized
Medicare Part D prescription drug plans to use formularies
where they can limit the number of drugs that will be covered in
any therapeutic class. As a result of this legislation and the
expansion of federal coverage of drug products, we expect that
there will be additional pressure to contain and reduce costs.
These cost reduction initiatives and other provisions of this
legislation could decrease the coverage and price that we
receive for any approved products and could seriously harm our
business. While the MMA applies only to drug benefits for
Medicare beneficiaries, private payors often follow Medicare
coverage policy and payment limitations in setting their own
reimbursement rates, and any reduction in reimbursement that
results from the MMA may result in a similar reduction in
payments from private payors.
The continuing efforts of government and other third-party
payors to contain or reduce the costs of health care through
various means may limit our commercial opportunity. It will be
time-consuming and expensive for us to go through the process of
seeking reimbursement from Medicare and private payors. Our
products may not be considered cost-effective, and government
and third-party private health insurance coverage and
reimbursement may not be available to patients for any of our
future products or sufficient to allow us to sell our products
on a competitive and profitable basis. Our results of operations
could be adversely affected by the MMA, the Health Care Reform
Law, and additional prescription drug coverage legislation, by
the possible effect of this legislation on amounts that private
insurers will pay and by other health care reforms that may be
enacted or adopted in the future. In addition, increasing
emphasis on managed care in the United States will continue to
put pressure on the pricing of pharmaceutical products. Cost
control initiatives could decrease the price that we or any
potential collaborators could receive for any of our future
products and could adversely affect our profitability.
In some foreign countries, including major markets in the
European Union and Japan, the pricing of prescription
pharmaceuticals is subject to governmental control. In these
countries, pricing negotiations with governmental authorities
can take six to 12 months or longer after the receipt of
regulatory marketing approval for a product. To obtain
reimbursement or pricing approval in some countries, we may be
required to conduct a clinical study that compares the
cost-effectiveness of our product candidates to other available
therapies. Such pharmacoeconomic studies can be costly and the
results uncertain. Our business could be harmed if reimbursement
of our products is unavailable or limited in scope or amount or
if pricing is set at unsatisfactory levels.
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We face potential product liability exposure, and, if
successful claims are brought against us, we may incur
substantial liability.
The use of our product candidates in clinical studies and the
sale of any products for which we obtain marketing approval
expose us to the risk of product liability claims. Product
liability claims might be brought against us by consumers,
health care providers, pharmaceutical companies or others
selling or otherwise coming into contact with our products. If
we cannot successfully defend ourselves against product
liability claims, we could incur substantial liabilities. In
addition, regardless of merit or eventual outcome, product
liability claims may result in:
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impairment of our business reputation;
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withdrawal of clinical study participants;
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costs of related litigation;
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distraction of managements attention from our primary
business;
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substantial monetary awards to patients or other claimants;
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the inability to commercialize our product candidates; and
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decreased demand for our product candidates, if approved for
commercial sale.
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Our product liability insurance coverage for our clinical
studies may not be sufficient to reimburse us for all expenses
or losses we may suffer. Moreover, insurance coverage is
becoming increasingly expensive, and, in the future, we may not
be able to maintain insurance coverage at a reasonable cost or
in sufficient amounts to protect us against losses due to
liability. If and when we obtain marketing approval for any of
our product candidates, we intend to expand our insurance
coverage to include the sale of commercial products; however, we
may be unable to obtain this product liability insurance on
commercially reasonable terms. On occasion, large judgments have
been awarded in class action lawsuits based on drugs that had
unanticipated adverse effects. A successful product liability
claim or series of claims brought against us could cause our
stock price to decline and, if judgments exceed our insurance
coverage, could decrease our cash and adversely affect our
business.
If we use hazardous and biological materials in a manner
that causes injury or violates applicable law, we may be liable
for damages.
Our research and development activities involve the controlled
use of potentially hazardous substances, including toxic
chemical and biological materials. We could be held liable for
any contamination, injury or other damages resulting from these
hazardous substances. In addition, our operations produce
hazardous waste products. While third parties are responsible
for disposal of our hazardous waste, we could be liable under
environmental laws for any required cleanup of sites at which
our waste is disposed. Federal, state, foreign and local laws
and regulations govern the use, manufacture, storage, handling
and disposal of these hazardous materials. If we fail to comply
with these laws and regulations at any time, or if they change,
we may be subject to criminal sanctions and substantial civil
liabilities, which may harm our business. Even if we continue to
comply with all applicable laws and regulations regarding
hazardous materials, we cannot eliminate the risk of accidental
contamination or discharge and our resultant liability for any
injuries or other damages caused by these accidents.
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We rely on third parties to conduct, supervise and monitor
our clinical studies, and those third parties may perform in an
unsatisfactory manner, such as by failing to meet established
deadlines for the completion of these clinical studies, or may
harm our business if they suffer a catastrophic
event.
We rely on third parties such as CROs, medical institutions and
clinical investigators to enroll qualified patients and conduct,
supervise and monitor our clinical studies. Our reliance on
these third parties for clinical development activities reduces
our control over these activities. Our reliance on these third
parties, however, does not relieve us of our regulatory
responsibilities, including ensuring that our clinical studies
are conducted in accordance with good clinical practices, or
GCP, and the investigational plan and protocols contained in the
relevant regulatory application, such as the investigational new
drug application, or IND. In addition, the CROs with which we
contract may not complete activities on schedule, or may not
conduct our preclinical studies or clinical studies in
accordance with regulatory requirements or our clinical study
design. If these third parties do not successfully carry out
their contractual duties or meet expected deadlines, our efforts
to obtain regulatory approvals for, and to commercialize, our
product candidates may be delayed or prevented. In addition, if
a catastrophe such as an earthquake, fire, flood or power loss
should affect one of the third parties on which we rely, our
business prospects could be harmed. For example, if a central
laboratory holding all of our clinical study samples were to
suffer a catastrophic loss of their facility, we would lose all
of our samples and would have to repeat our studies.
Any failure by our third-party manufacturers on which we
rely to produce our preclinical and clinical drug supplies and
on which we intend to rely to produce commercial supplies of any
approved product candidates may delay or impair our ability to
commercialize our product candidates.
We have relied upon a small number of third-party manufacturers
and active pharmaceutical ingredient formulators for the
manufacture of our material for preclinical and clinical testing
purposes and intend to continue to do so in the future. We also
expect to rely upon third parties to produce materials required
for the commercial production of our product candidates if we
succeed in obtaining necessary regulatory approvals. If we are
unable to arrange for third-party manufacturing sources, or to
do so on commercially reasonable terms, we may not be able to
complete development of our product candidates or market them.
Reliance on third-party manufacturers entails risks to which we
would not be subject if we manufactured product candidates
ourselves, including reliance on the third party for regulatory
compliance and quality assurance, the possibility of breach of
the manufacturing agreement by the third party because of
factors beyond our control (including a failure to synthesize
and manufacture our product candidates in accordance with our
product specifications) and the possibility of termination or
nonrenewal of the agreement by the third party, based on its own
business priorities, at a time that is costly or damaging to us.
In addition, the FDA and other regulatory authorities require
that our product candidates be manufactured according to cGMP
and similar foreign standards. Any failure by our third-party
manufacturers to comply with cGMP or failure to scale up
manufacturing processes, including any failure to deliver
sufficient quantities of product candidates in a timely manner,
could lead to a delay in, or failure to obtain, regulatory
approval of any of our product candidates. In addition, such
failure could be the basis for action by the FDA to withdraw
approvals for product candidates previously granted to us and
for other regulatory action, including recall or seizure, total
or partial suspension of production or injunction.
We received a request from the FDA for additional information
regarding the characterization and qualification of the
manufactured vials of A-623 we intend to use in our PEARL-SC
clinical study. In addition, the FDA has asked for a proposal to
establish comparability of future manufactured A-623 to be
included in clinical studies. Any inability to use A-623 in our
inventory would require manufacture
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of additional A-623 for use in our clinical study and would
result in additional expense and potential delay of our clinical
development plans.
We rely on our manufacturers to purchase from third-party
suppliers the materials necessary to produce our product
candidates for our clinical studies. There are a small number of
suppliers for certain capital equipment and raw materials that
we use to manufacture our drugs. Such suppliers may not sell
these raw materials to our manufacturers at the times we need
them or on commercially reasonable terms. We do not have any
control over the process or timing of the acquisition of these
raw materials by our manufacturers. Moreover, we currently do
not have any agreements for the commercial production of these
raw materials. Although we generally do not begin a clinical
study unless we believe we have a sufficient supply of a product
candidate to complete the clinical study, any significant delay
in the supply of a product candidate or the raw material
components thereof for an ongoing clinical study due to the need
to replace a third-party manufacturer could considerably delay
completion of our clinical studies, product testing and
potential regulatory approval of our product candidates. If our
manufacturers or we are unable to purchase these raw materials
after regulatory approval has been obtained for our product
candidates, the commercial launch of our product candidates
would be delayed or there would be a shortage in supply, which
would impair our ability to generate revenues from the sale of
our product candidates.
Because of the complex nature of our compounds, our
manufacturers may not be able to manufacture our compounds at a
cost or in quantities or in a timely manner necessary to make
commercially successful products. If we successfully
commercialize any of our drugs, we may be required to establish
large-scale commercial manufacturing capabilities. In addition,
as our drug development pipeline increases and matures, we will
have a greater need for clinical study and commercial
manufacturing capacity. We have no experience manufacturing
pharmaceutical products on a commercial scale and some of these
suppliers will need to increase their scale of production to
meet our projected needs for commercial manufacturing, the
satisfaction of which on a timely basis may not be met.
If we are unable to establish sales and marketing
capabilities or enter into agreements with third parties to
market and sell our product candidates, we may be unable to
generate any revenue.
We do not currently have an organization for the sales,
marketing and distribution of pharmaceutical products and the
cost of establishing and maintaining such an organization may
exceed the cost-effectiveness of doing so. In order to market
any products that may be approved by the FDA, we must build our
sales, marketing, managerial and other non-technical
capabilities or make arrangements with third parties to perform
these services. If we are unable to establish adequate sales,
marketing and distribution capabilities, whether independently
or with third parties, we may not be able to generate product
revenue and may not become profitable. We will be competing with
many companies that currently have extensive and well-funded
marketing and sales operations. Without an internal team or the
support of a third party to perform marketing and sales
functions, we may be unable to compete successfully against
these more established companies.
Guidelines and recommendations published by various
organizations may adversely affect the use of any products for
which we may receive regulatory approval.
Government agencies issue regulations and guidelines directly
applicable to us and to our product candidates. In addition,
professional societies, practice management groups, private
health or science foundations and organizations involved in
various diseases from time to time publish guidelines or
recommendations to the medical and patient communities. These
various sorts of recommendations may relate to such matters as
product usage and use of related or competing therapies. For
example, organizations like the American Heart Association have
made recommendations about therapies in the cardiovascular
therapeutics market. Changes to these recommendations or other
guidelines advocating
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alternative therapies could result in decreased use of any
products for which we may receive regulatory approval, which may
adversely affect our results of operations.
Risks
Related to Our Intellectual Property
If our or our licensors patent positions do not
adequately protect our product candidates or any future
products, others could compete with us more directly, which
would harm our business.
As of the date of this prospectus and as described in the
section entitled Business Intellectual
Property on page 92, we hold a total of four pending
U.S. non-provisional patent applications, two pending
U.S. provisional patent applications and two pending Patent
Cooperation Treaty, or PCT, patent applications. Another PCT
application has entered the national phase in the European
Patent Office, the Eurasian Patent Organization and 17 other
countries. We have also entered into exclusive license
agreements for certain composition of matter, method of use and
method of making patents and patent applications for certain of
our development compounds. These license agreements encompass
(i) 13 U.S. patents, one pending
U.S. non-provisional patent application, five European, or
EP, patents, one pending EP patent application, 20 non-EP
foreign patents and four pending non-EP foreign patent
applications relating to varespladib and
A-001;
(ii) more than 30 U.S. patents, one pending
U.S. non-provisional patent application, six EP patents,
one pending EP patent application, 13 issued non-EP foreign
patents and two pending non-EP foreign patent applications
relating to other
sPLA2
inhibiting compounds including
A-003; and
(iii) two U.S. patents, one pending
U.S. non-provisional patent application, one EP patent, two
pending EP patent applications, ten non-EP foreign patents and
14 non-EP foreign patent applications relating to
A-623. Our
commercial success will depend in part on our and our
licensors ability to obtain additional patents and protect
our existing patent positions, particularly those patents for
which we have secured exclusive rights, as well as our ability
to maintain adequate protection of other intellectual property
for our technologies, product candidates and any future products
in the United States and other countries. If we or our licensors
do not adequately protect our intellectual property, competitors
may be able to use our technologies and erode or negate any
competitive advantage we may have, which could materially harm
our business, negatively affect our position in the marketplace,
limit our ability to commercialize our product candidates and
delay or render impossible our achievement of profitability. The
laws of some foreign countries do not protect our proprietary
rights to the same extent as the laws of the United States, and
we may encounter significant problems in protecting our
proprietary rights in these countries.
The patent positions of biotechnology and pharmaceutical
companies, including our patent position, involve complex legal
and factual questions, and, therefore, validity and
enforceability cannot be predicted with certainty. Patents may
be challenged, deemed unenforceable, invalidated or
circumvented. We and our licensors will be able to protect our
proprietary rights from unauthorized use by third parties only
to the extent that our proprietary technologies, product
candidates and any future products are covered by valid and
enforceable patents or are effectively maintained as trade
secrets.
The degree of future protection for our proprietary rights is
uncertain, and we cannot ensure that:
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we or our licensors were the first to make the inventions
covered by each of our pending patent applications;
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we or our licensors were the first to file patent applications
for these inventions;
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others will not independently develop similar or alternative
technologies or duplicate any of our technologies;
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any of our or our licensors pending patent applications
will result in issued patents;
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27
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any of our or our licensors patents will be valid or
enforceable;
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any patents issued to us or our licensors and collaborators will
provide a basis for commercially viable products, will provide
us with any competitive advantages or will not be challenged by
third parties;
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we will develop additional proprietary technologies or product
candidates that are patentable; or
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the patents of others will not have an adverse effect on our
business.
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We may be unable to adequately prevent disclosure of trade
secrets and other proprietary information.
We rely on trade secrets to protect our proprietary know-how and
technological advances, especially where we do not believe
patent protection is appropriate or obtainable. However, trade
secrets are difficult to protect. We rely in part on
confidentiality agreements with our employees, consultants,
outside scientific collaborators, sponsored researchers and
other advisors to protect our trade secrets and other
proprietary information. These agreements may not effectively
prevent disclosure of confidential information and may not
provide an adequate remedy in the event of unauthorized
disclosure of confidential information. In addition, others may
independently discover our trade secrets and proprietary
information. Costly and time-consuming litigation could be
necessary to enforce and determine the scope of our proprietary
rights. Failure to obtain or maintain trade secret protection
could enable competitors to use our proprietary information to
develop products that compete with our products or cause
additional, material adverse effects upon our competitive
business position.
We license patent rights from third-party owners. If we,
or such owners, do not properly maintain or enforce the patents
underlying such licenses, our competitive position and business
prospects will be harmed.
We have obtained exclusive, worldwide licenses, except for
Japan, of the composition of matter, methods of making and
methods of use for certain
sPLA2
compounds from Eli Lilly and Shionogi & Co., Ltd. In
addition, we are party to a license agreement with Amgen that
provides exclusive and worldwide rights to develop and
commercialize
A-623, a
novel BAFF inhibitor, as well as non-exclusive rights to certain
technology relating to peptibody compositions and formulations.
We may enter into additional licenses to third-party
intellectual property in the future.
We depend in part on our licensors to protect the proprietary
rights covering our in-licensed
sPLA2
compounds and
A-623,
respectively. Our licensors are responsible for maintaining
certain issued patents and prosecuting certain patent
applications. We have limited, if any, control over the amount
or timing of resources that our licensors devote on our behalf
or the priority they place on maintaining these patent rights
and prosecuting these patent applications to our advantage. Our
licensors may also be notified of alleged infringement and be
sued for infringement of third-party patents or other
proprietary rights. We may have limited, if any, control or
involvement over the defense of these claims, and our licensors
could be subject to injunctions and temporary or permanent
exclusionary orders in the United States or other countries. Our
licensors are not obligated to defend or assist in our defense
against third-party claims of infringement. We have limited, if
any, control over the amount or timing of resources, if any,
that our licensors devote on our behalf or the priority they
place on defense of such third-party claims of infringement.
Our success will depend in part on the ability of us or our
licensors to obtain, maintain and enforce patent protection for
their intellectual property, in particular, those patents to
which we have secured exclusive rights. We or our licensors may
not successfully prosecute the patent applications which we
28
have licensed. Even if patents issue in respect of these patent
applications, we or our licensors may fail to maintain these
patents, may determine not to pursue litigation against other
companies that are infringing these patents or may pursue such
litigation less aggressively than we would. Without protection
for the intellectual property we license, other companies might
be able to offer substantially identical products for sale,
which could adversely affect our competitive business position
and harm our business prospects.
If we do not obtain protection under the Hatch-Waxman Act
and similar foreign legislation to extend our licensed patent
terms and to obtain market exclusivity for our product
candidates, our business will be materially harmed.
The United States Drug Price Competition and Patent Term
Restoration Act of 1984, more commonly known as the
Hatch-Waxman Act, provides for an extension of
patent term for drug compounds for a period of up to five years
to compensate for time spent in the regulatory approval process.
Assuming we gain a five-year patent term extension for each of
our current product candidates in clinical development, and that
we continue to have rights under our license agreements with
respect to these product candidates, we would have exclusive
rights to varespladibs U.S. new chemical
entity patent (the primary patent covering the compound as
a new composition of matter) until 2019 and to
A-623s
U.S. new chemical entity patent until 2027. In Europe,
similar legislative enactments allow patent terms in the
European Union to be extended for up to five years through the
grant of a Supplementary Protection Certificate. Assuming we
gain such a five-year extension for each of our current product
candidates in clinical development, and that we continue to have
rights under our license agreements with respect to these
product candidates, we would have exclusive rights to
varespladibs European new chemical entity patents until
2020 and to
A-623s
European new chemical entity patents until 2027. In addition,
since varespladib has not been previously approved in the United
States, varespladib could be eligible for up to five years of
New Chemical Entity, or NCE, exclusivity from the FDA. NCE
exclusivity would prevent the FDA from approving any generic
competitor following NDA approval independent of the patent
status of varespladib. Further, since
A-623 has
not been previously approved,
A-623 could
be eligible for 12 years of data exclusivity from the FDA.
During the data exclusivity period, competitors are barred from
relying on the innovator biologics safety and efficacy
data to gain approval. Similarly, the European Union provides
that companies who receive regulatory approval for a new small
molecule compound or biologic will have a
10-year
period of data exclusivity for that compound or biologic (with
the possibility of a further one-year extension) in most EU
countries, beginning on the date of such European regulatory
approval, regardless of when the European new chemical entity
patent covering such compound expires. A generic version of the
approved drug may not be marketed or sold during such market
exclusivity period. However, there is no assurance that we will
receive the extensions of our patents or other exclusive rights
available under the Hatch-Waxman Act or similar foreign
legislation. If we fail to receive such Hatch-Waxman extensions
or marketing exclusivity rights or if we receive extensions that
are materially shorter than expected, our ability to prevent
competitors from manufacturing, marketing and selling generic
versions of our products will be materially harmed.
Our current patent positions and license portfolio may not
include all patent rights needed for the full development and
commercialization of our product candidates. We cannot be sure
that patent rights we may need in the future will be available
for license to us on commercially reasonable terms, or at
all.
We typically develop our product candidates using compounds for
which we have in-licensed and original composition of matter
patents and patents that claim the activities and methods for
such compounds production and use to the extent known at
that time. As we learn more about the mechanisms of action and
new methods of manufacture and use of these product candidates,
we may file additional patent applications for these new
inventions or we may need to ask our licensors to file
29
them. We may also need to license additional patent rights or
other rights on compounds, treatment methods or manufacturing
processes because we learn that we need such rights during the
continuing development of our product candidates.
Although our in-licensed and original patents may prevent others
from making, using or selling similar products, they do not
ensure that we will not infringe the patent rights of third
parties. We may not be aware of all patents or patent
applications that may impact our ability to make, use or sell
any of our product candidates or proposed product candidates.
For example, because we sometimes identify the mechanism of
action or molecular target of a given product candidate after
identifying its composition of matter and therapeutic use, we
may not be aware until the mechanism or target is further
elucidated that a third party has an issued or pending patent
claiming biological activities or targets that may cover our
product candidate. U.S. patent applications filed after
November 29, 2000 are confidential in the U.S. Patent
and Trademark Office for the first 18 months after such
applications earliest priority date, and patent offices in
non-U.S. countries
often publish patent applications for the first time six months
or more after filing. Furthermore, we may not be aware of
published or granted conflicting patent rights. Any conflicts
resulting from patent applications and patents of others could
significantly reduce the coverage of our patents and limit our
ability to obtain meaningful patent protection. If others obtain
patents with conflicting claims, we may need to obtain licenses
to these patents or to develop or obtain alternative technology.
We may not be able to obtain any licenses or other rights to
patents, technology or know-how from third parties necessary to
conduct our business as described in this prospectus and such
licenses, if available at all, may not be available on
commercially reasonable terms. Any failure to obtain such
licenses could delay or prevent us from developing or
commercializing our drug candidates or proposed product
candidates, which would harm our business. Litigation or patent
interference proceedings may be necessarily brought against
third parties, as discussed below, to enforce any of our patents
or other proprietary rights or to determine the scope and
validity or enforceability of the proprietary rights of such
third parties.
Litigation regarding patents, patent applications and
other proprietary rights may be expensive and time consuming. If
we are involved in such litigation, it could cause delays in
bringing product candidates to market and harm our ability to
operate.
Our commercial success will depend in part on our ability to
manufacture, use, sell and offer to sell our product candidates
and proposed product candidates without infringing patents or
other proprietary rights of third parties. Although we are not
currently aware of any litigation or other proceedings or
third-party claims of intellectual property infringement related
to our product candidates, the pharmaceutical industry is
characterized by extensive litigation regarding patents and
other intellectual property rights. Other parties may obtain
patents in the future and allege that the use of our
technologies infringes these patent claims or that we are
employing their proprietary technology without authorization.
Likewise, third parties may challenge or infringe upon our or
our licensors existing or future patents.
Proceedings involving our patents or patent applications or
those of others could result in adverse decisions regarding the
patentability of our inventions relating to our product
candidates or the enforceability, validity or scope of
protection offered by our patents relating to our product
candidates.
Even if we are successful in these proceedings, we may incur
substantial costs and divert management time and attention in
pursuing these proceedings. If we are unable to avoid infringing
the patent rights of others, we may be required to seek a
license, defend an infringement action or challenge the validity
of the patents in court. Patent litigation is costly and
time-consuming. We may not have sufficient resources to bring
these actions to a successful conclusion. In addition, if we do
not obtain a license,
30
develop or obtain non-infringing technology, fail to defend an
infringement action successfully or have infringed patents
declared invalid, we may incur substantial monetary damages;
encounter significant delays in bringing our product candidates
to market; or be precluded from participating in the
manufacture, use or sale of our product candidates or methods of
treatment requiring licenses.
Risks
Related to the Securities Markets and Investment in Our Common
Stock
Market volatility may affect our stock price and the value
of your investment.
The market price for our common stock has been, and is likely to
continue to be, volatile. In addition, the market price of our
common stock may fluctuate significantly in response to a number
of factors, most of which we cannot predict or control,
including:
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plans for, progress in and results from clinical studies for
varespladib,
A-623,
A-001 and
our other product candidates;
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announcements of new products, services or technologies,
commercial relationships, acquisitions or other events by us or
our competitors;
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developments concerning proprietary rights, including those
pertaining to patents held by Eli Lilly and Shionogi &
Co., Ltd. concerning our
sPLA2
inhibitors and Amgen concerning
A-623;
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failure of any of our product candidates, if approved, to
achieve commercial success;
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fluctuations in stock market prices and trading volumes of
securities of similar companies;
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general market conditions and overall fluctuations in
U.S. equity markets;
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variations in our operating results, or the operating results of
our competitors;
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changes in our financial guidance or securities analysts
estimates of our financial performance;
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changes in accounting principles;
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sales of large blocks of our common stock, including sales by
our executive officers, directors and significant stockholders;
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additions or departures of any of our key personnel;
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announcements related to litigation;
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changing legal or regulatory developments in the United States
and other countries; and
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discussion of us or our stock price by the financial press and
in online investor communities.
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In addition, the stock market in general, and The NASDAQ Global
Market in particular, have experienced substantial price and
volume volatility that is often seemingly unrelated to the
operating performance of particular companies. These broad
market fluctuations may cause the trading price of
31
our common stock to decline. In the past, securities class
action litigation has often been brought against a company after
a period of volatility in the market price of its common stock.
We may become involved in this type of litigation in the future.
Any securities litigation claims brought against us could result
in substantial expenses and the diversion of our
managements attention from our business.
Because a small number of our existing stockholders own a
majority of our voting stock, your ability to influence
corporate matters will be limited.
Our executive officers, directors and greater than 5%
stockholders, in the aggregate, own approximately 79% of our
outstanding common stock. As a result, such persons, acting
together, will have the ability to control our management and
affairs and substantially all matters submitted to our
stockholders for approval, including the election and removal of
directors and approval of any significant transaction. These
persons will also have the ability to control our management and
business affairs. This concentration of ownership may have the
effect of delaying, deferring or preventing a change in control,
impeding a merger, consolidation, takeover or other business
combination involving us, or discouraging a potential acquirer
from making a tender offer or otherwise attempting to obtain
control of our business, even if such a transaction would
benefit other stockholders.
Future sales of our common stock may cause our stock price
to decline.
As of September 30, 2010, there were 32,835,437 shares of
our common stock outstanding. Of these, 16,017,349 shares
of common stock and 4,363,200 shares of common stock
underlying certain warrants are being sold in this offering by
the selling stockholders and will be freely tradable immediately
after this offering (assuming exercise of the warrants and
except for shares purchased by affiliates) and 1,897,728 of the
32,835,437 shares may be sold upon expiration of
lock-up
agreements 30 days after the effective date of this
registration statement, of which this prospectus forms a part
(subject in some cases to volume limitations). In addition, as
of September 30, 2010, we had outstanding options to
purchase 1,307,066 shares of common stock that, if
exercised, will result in these additional shares becoming
available for sale. A large portion of these shares and options
are held by a small number of persons and investment funds.
Sales by these stockholders or optionholders of a substantial
number of shares after this offering could significantly reduce
the market price of our common stock. Moreover, certain holders
of shares of common stock will have rights, subject to some
conditions, to require us to file registration statements
covering the shares they currently hold, or to include these
shares in registration statements that we may file for ourselves
or other stockholders.
We have registered all common stock that we may issue under our
Amended and Restated 2010 Stock Option and Incentive Plan, or
the 2010 Plan, and our Employee Stock Purchase Plan, or the
ESPP. An aggregate of 433,644 shares of our common stock
has been reserved for future issuance under the 2010 Plan, plus
any shares reserved and unissued under our 2005 Equity Incentive
Plan, and an aggregate of 100,000 shares has been reserved
for future issuance under our ESPP. These shares can be freely
sold in the public market upon issuance, subject to the
lock-up
agreements referred to above. If a large number of these shares
are sold in the public market, the sales could reduce the
trading price of our common stock. See the section entitled
Shares Eligible for Future Sale on
page 156 for a more detailed description of sales that may
occur in the future.
We may need to raise additional capital to fund our
operations, which may cause dilution to our existing
stockholders, restrict our operations or require us to
relinquish rights.
We may seek additional capital through a combination of private
and public equity offerings, debt financings and collaboration,
strategic and licensing arrangements. To the extent that we
raise additional capital through the sale of equity or
convertible debt securities, your ownership interest will be
diluted, and the terms may include liquidation or other
preferences that adversely affect your rights as a
32
stockholder. Debt financing, if available, may involve
agreements that include covenants limiting or restricting our
ability to take specific actions such as incurring debt, making
capital expenditures or declaring dividends. If we raise
additional funds through collaboration, strategic alliance and
licensing arrangements with third parties, we may have to
relinquish valuable rights to our technologies or product
candidates or grant licenses on terms that are not favorable to
us.
Being a public company increases our expenses and
administrative burden.
As a public company, we incur significant legal, accounting and
other expenses that we did not incur as a private company. In
addition, our administrative staff will be required to perform
additional tasks. For example, the Sarbanes-Oxley Act of 2002,
or the Sarbanes-Oxley Act, as well as rules subsequently
implemented by the Securities and Exchange Commission, or SEC,
and The NASDAQ Global Market, impose various requirements on
public companies, including establishment and maintenance of
effective disclosure and financial controls and changes in
corporate governance practices. We must also bear all of the
internal and external costs of preparing and distributing
periodic public reports in compliance with our obligations under
the securities laws.
In particular, the Sarbanes-Oxley Act requires, among other
things, that we maintain effective internal control over
financial reporting and disclosure controls and procedures.
Commencing in 2011, we must perform system and process
evaluation and testing of our internal control over financial
reporting to allow management and our independent registered
public accounting firm to report on the effectiveness of our
internal control over financial reporting, as required by
Section 404 of the Sarbanes-Oxley Act. Our compliance with
Section 404 will require that we incur substantial
accounting expense and expend significant management time on
compliance-related issues. Moreover, if we are not able to
comply with the requirements of Section 404 in a timely
manner, our stock price could decline, and we could face
sanctions, delisting or investigations by The NASDAQ Global
Market, or other material adverse effects on our business,
reputation, results of operations, financial condition or
liquidity.
We do not intend to pay dividends on our common stock so
any returns will be limited to the value of our stock.
We have never declared or paid any cash dividend on our common
stock. We currently anticipate that we will retain future
earnings for the development, operation and expansion of our
business and do not anticipate declaring or paying any cash
dividends for the foreseeable future. Any return to stockholders
will therefore be limited to the value of their stock.
Anti-takeover provisions in our charter documents and
under Delaware law could make an acquisition of us, which may be
beneficial to our stockholders, more difficult and may prevent
attempts by our stockholders to replace or remove our current
management.
Provisions in our amended and restated certificate of
incorporation and amended and restated bylaws may delay or
prevent an acquisition of us or a change in our management.
These provisions include:
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a classified and staggered board of directors whose members can
only be dismissed for cause;
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the prohibition on actions by written consent of our
stockholders;
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the limitation on who may call a special meeting of stockholders;
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the establishment of advance notice requirements for nominations
for election to our board of directors or for proposing matters
that can be acted upon at stockholder meetings;
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33
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the ability of our board of directors to issue preferred stock
without stockholder approval, which would increase the number of
outstanding shares and could thwart a takeover attempt; and
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the requirement of at least 75% of the outstanding common stock
to amend any of the foregoing provisions.
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In addition, because we are incorporated in Delaware, we are
governed by the provisions of Section 203 of the Delaware
General Corporation Law, which limits the ability of
stockholders owning in excess of 15% of our outstanding voting
stock to merge or combine with us. Although we believe these
provisions collectively provide for an opportunity to obtain
greater value for stockholders by requiring potential acquirors
to negotiate with our board of directors, they would apply even
if an offer rejected by our board were considered beneficial by
some stockholders. In addition, these provisions may frustrate
or prevent any attempts by our stockholders to replace or remove
our current management by making it more difficult for
stockholders to replace members of our board of directors, which
is responsible for appointing the members of our management.
Our ability to use our net operating loss carryforwards
may be subject to limitation and may result in increased future
tax liability to us.
Generally, a change of more than 50% in the ownership of a
corporations stock, by value, over a three-year period
constitutes an ownership change for U.S. federal income tax
purposes. An ownership change may limit a companys ability
to use its net operating loss carryforwards attributable to the
period prior to such change. We have not performed a detailed
analysis to determine whether an ownership change under
Section 382 of the Internal Revenue Code has occurred after
each of our previous private placements of preferred stock and
convertible debt, or our previous issuances of common stock,
which if sufficient, taking into account prior or future shifts
in our ownership over a three-year period, could cause us to
undergo an ownership change. As a result, if we earn net taxable
income, our ability to use our pre-change net operating loss
carryforwards to offset U.S. federal taxable income may
become subject to limitations, which could potentially result in
increased future tax liability to us.
34
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements.
Forward-looking statements relate to future events or our future
financial performance. We generally identify forward-looking
statements by terminology such as may,
will, would, should,
expects, plans, anticipates,
could, intends, target,
projects, contemplates,
believes, estimates,
predicts, assume, intend,
potential, continue or other similar
words or the negative of these terms. These statements are only
predictions. We have based these forward-looking statements
largely on our current expectations and projections about future
events and financial trends that we believe may affect our
business, financial condition and results of operations. The
outcome of the events described in these forward-looking
statements is subject to risks, uncertainties and other factors
described in Risk Factors and elsewhere in this
prospectus. Accordingly, you should not place undue reliance
upon these forward-looking statements. We cannot assure you that
the events and circumstances reflected in the forward-looking
statements will be achieved or occur, the timing of events and
circumstances and actual results could differ materially from
those projected in the forward looking statements.
Forward-looking statements contained in this prospectus include,
but are not limited to, statements about:
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our expectations related to the use of proceeds, if any, from
this offering;
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the progress of, timing of and amount of expenses associated
with our research, development and commercialization activities;
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the timing, conduct and success of our clinical studies for our
product candidates;
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our ability to obtain U.S. and foreign regulatory approval
for our product candidates and the ability of our product
candidates to meet existing or future regulatory standards;
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our expectations regarding federal, state and foreign regulatory
requirements;
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the therapeutic benefits and effectiveness of our product
candidates;
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the accuracy of our estimates of the size and characteristics of
the markets that may be addressed by our product candidates;
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our ability to manufacture sufficient amounts of our product
candidates for clinical studies and products for
commercialization activities;
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our intention to seek to establish strategic collaborations or
partnerships for the development or sale of our product
candidates;
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our expectations as to future financial performance, expense
levels and liquidity sources;
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the timing of commercializing our product candidates;
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our ability to compete with other companies that are or may be
developing or selling products that are competitive with our
product candidates;
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anticipated trends and challenges in our potential markets;
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our ability to attract and retain key personnel; and
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other factors discussed elsewhere in this prospectus.
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The forward-looking statements made in this prospectus relate
only to events as of the date on which the statements are made.
We have included important factors in the cautionary statements
included in this prospectus, particularly in the section
entitled Risk Factors that we believe could cause
actual results or events to differ materially from the
forward-looking statements that we make. Our forward-looking
statements do not reflect the potential impact of any future
acquisitions, mergers, dispositions, joint ventures or
investments we may make. Except as required by law, we do not
assume any intent to update any forward-looking statements after
the date on which the statement is made, whether as a result of
new information, future events or circumstances or otherwise.
36
USE OF
PROCEEDS
The proceeds from the resale of the shares of common stock under
this prospectus are solely for the account of the selling
stockholders identified in this prospectus. We may indirectly
receive proceeds of up to an aggregate of $15,002,400 to the
extent that any selling stockholders exercise warrants to
purchase shares of common stock for cash, which shares may then
be resold under this prospectus; however, we will not directly
receive any proceeds from the sale of shares under this
prospectus. We intend to use the net proceeds generated by
warrant exercises, if any, for general corporate purposes. We
cannot estimate how many, if any, of the warrants will be
exercised as a result of this offering.
37
PRICE
RANGE OF COMMON STOCK
Our common stock has been listed on The NASDAQ Global Market
under the symbol ANTH since our initial public
offering. Prior to that offering, there was no public market for
our common stock. The following table sets forth, for the
periods indicated, the high and low intraday sales prices of our
common stock as reported by The NASDAQ Global Market:
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High
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Low
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First Quarter 2010 (beginning March 2, 2010)
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$
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7.19
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$
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6.88
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Second Quarter 2010
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$
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8.55
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$
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5.07
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Third Quarter 2010
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$
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5.99
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$
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2.82
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Fourth Quarter 2010 (through November 16, 2010)
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$
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6.84
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$
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4.12
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On November 16, 2010, the closing price as reported on The
NASDAQ Global Market of our common stock was $5.67. As of
October 15, 2010, we had approximately 750 holders of record and
beneficial holders of our common stock.
38
DIVIDEND
POLICY
We have never declared or paid any cash dividends on our common
stock. We currently intend to retain any future earnings to
finance the growth and development of our business. Therefore,
we do not anticipate declaring or paying any cash dividends in
the foreseeable future. Any future determination as to the
declaration and payment of dividends, if any, will be at the
discretion of our board of directors and will depend on then
existing conditions, including our financial condition,
operating results, contractual restrictions, capital
requirements, business prospects and other factors our board of
directors may deem relevant.
39
CAPITALIZATION
The following table sets forth our capitalization as of
September 30, 2010.
You should read the following table in conjunction with our
financial statements and related notes, Selected Financial
Data and Managements Discussion and Analysis
of Financial Condition and Results of Operations appearing
elsewhere in this prospectus.
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As of
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September 30,
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2010
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Cash, cash equivalents and short-term investments
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$
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73,087,610
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|
|
Common stock, $0.001 par value, 95,000,000 shares
authorized; 32,796,690 shares issued and outstanding
|
|
|
32,796
|
|
|
|
|
|
Preferred stock, $0.001 par value, 5,000,000 shares
authorized; 0 shares issued and outstanding
|
|
|
|
|
|
|
|
|
Additional paid-in capital
|
|
|
162,494,362
|
|
|
|
|
|
Accumulated comprehensive income
|
|
|
161,987
|
|
|
|
|
|
Deficit accumulated during the development stage
|
|
|
(92,603,647
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
70,085,498
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capitalization
|
|
$
|
70,085,498
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40
SELECTED
FINANCIAL DATA
The following selected financial data should be read together
with our financial statements and the related notes and
Managements Discussion and Analysis of Financial
Condition and Results of Operations appearing elsewhere in
this prospectus. The selected financial data in this section is
not intended to replace our financial statements and the related
notes. Our historical results are not necessarily indicative of
the results to be expected for any future period.
We were incorporated on September 9, 2004. The following
statement of operations data, including share data, for the
years ended December 31, 2007, 2008 and 2009 and for the
cumulative period from September 9, 2004 to
December 31, 2009, and the balance sheet data as of
December 31, 2008 and 2009 have been derived from our
audited financial statements and related notes appearing
elsewhere in this prospectus. The statement of operations data
for the years ended December 31, 2005 and 2006 and the
balance sheet data as of December 31, 2005, 2006 and 2007
have been derived from our audited financial statements not
included in this prospectus. The statement of operations data,
including share data, for the nine months ended
September 30, 2009 and 2010, and the period from
September 9, 2004 (date of inception) through
September 30, 2010, and the balance sheet data as of
September 30, 2010 have been derived from our unaudited
interim financial statements appearing elsewhere in this
prospectus. The unaudited interim financial statements have been
prepared on the same basis as the audited financial statements
and reflect all adjustments necessary to fairly state our
financial position as of September 30, 2010 and the results
of operations for the nine months ended September 30, 2009
and 2010, and for the cumulative period from September 9,
2004 to September 30, 2010. The operating results for any
period are not necessarily indicative of financial results that
may be expected for any future period.
The pro forma basic and diluted net loss per share and pro forma
weighted-average number of shares gives effect to the conversion
of all our outstanding preferred stock into shares of common
stock as if the conversion occurred on the date of issuance.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period from
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 9,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004 (Date of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
Inception) to
|
|
|
|
Year Ended December 31,
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
$
|
345,208
|
|
|
$
|
7,759,106
|
|
|
$
|
23,921,932
|
|
|
$
|
10,882,322
|
|
|
$
|
8,415,414
|
|
|
$
|
18,565,088
|
|
|
$
|
7,727,129
|
|
|
$
|
69,889,069
|
|
General and administrative
|
|
|
205,527
|
|
|
|
822,732
|
|
|
|
2,468,607
|
|
|
|
2,980,170
|
|
|
|
3,425,690
|
|
|
|
4,244,000
|
|
|
|
2,370,482
|
|
|
|
14,161,567
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
(550,735
|
)
|
|
|
(8,581,838
|
)
|
|
|
(26,390,539
|
)
|
|
|
(13,862,492
|
)
|
|
|
(11,841,104
|
)
|
|
|
(22,809,088
|
)
|
|
|
(10,457,611
|
)
|
|
|
(84,050,636
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income (Expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and other income
|
|
|
11,148
|
|
|
|
109,987
|
|
|
|
696,962
|
|
|
|
178,129
|
|
|
|
23,534
|
|
|
|
76,562
|
|
|
|
21,559
|
|
|
|
1,096,322
|
|
Interest and other expense
|
|
|
|
|
|
|
(17,395
|
)
|
|
|
|
|
|
|
(296,303
|
)
|
|
|
(385,922
|
)
|
|
|
(4,641,169
|
)
|
|
|
(289,776
|
)
|
|
|
(5,340,789
|
)
|
Beneficial conversion feature
|
|
|
|
|
|
|
(190,000
|
)
|
|
|
|
|
|
|
(4,118,544
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,308,544
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense)
|
|
|
11,148
|
|
|
|
(97,408
|
)
|
|
|
696,962
|
|
|
|
(4,236,718
|
)
|
|
|
(362,388
|
)
|
|
|
(4,564,607
|
)
|
|
|
(268,217
|
)
|
|
|
(8,553,011
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(539,587
|
)
|
|
$
|
(8,679,246
|
)
|
|
$
|
(25,693,577
|
)
|
|
$
|
(18,099,210
|
)
|
|
$
|
(12,203,492
|
)
|
|
$
|
(27,373,695
|
)
|
|
$
|
(10,725,828
|
)
|
|
$
|
(92,603,647
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share basic and
diluted(1)
|
|
$
|
(1.38
|
)
|
|
$
|
(13.82
|
)
|
|
$
|
(28.15
|
)
|
|
$
|
(13.47
|
)
|
|
$
|
(8.06
|
)
|
|
$
|
(1.40
|
)
|
|
$
|
(7.16
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of shares used in per share
calculation basic and
diluted(2)
|
|
|
390,279
|
|
|
|
627,904
|
|
|
|
912,668
|
|
|
|
1,343,420
|
|
|
|
1,513,598
|
|
|
|
19,567,058
|
|
|
|
1,498,108
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma net loss per share basic and
diluted(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(1.24
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma weighted-average number of shares used in per share
calculation basic and
diluted(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,854,380
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
footnotes on following page
41
|
|
(1)
|
Diluted earnings per share, or EPS, is identical to basic EPS
since common equivalent shares are excluded from the
calculation, as their effect is anti-dilutive.
|
(2)
|
For accounting purposes only, the number of issued and
outstanding shares for the years ended December 31, 2005,
2006, 2007, 2008 and 2009 and the nine months ended
September 30, 2009 and 2010 do not include weighted-average
shares of unvested stock of 478,799, 297,596, 261,649, 230,028,
110,079, 121,542 and 52,612, respectively. These shares are
subject to a risk of repurchase by us until such shares are
vested. See Note 2 to our financial statements for more
information.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
As of September 30,
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
381,964
|
|
|
$
|
20,781,916
|
|
|
$
|
152,744
|
|
|
$
|
7,895,113
|
|
|
$
|
3,803,384
|
|
|
$
|
51,208,720
|
|
Short-term investments
|
|
|
|
|
|
|
|
|
|
|
5,825,000
|
|
|
|
|
|
|
|
|
|
|
|
21,878,890
|
|
Working capital
|
|
|
232,136
|
|
|
|
19,629,639
|
|
|
|
(2,907,995
|
)
|
|
|
(495,836
|
)
|
|
|
(14,344,436
|
)
|
|
|
70,063,385
|
|
Total assets
|
|
|
404,091
|
|
|
|
20,856,892
|
|
|
|
6,193,213
|
|
|
|
8,034,154
|
|
|
|
5,888,789
|
|
|
|
74,923,205
|
|
Indebtedness
|
|
|
150,790
|
|
|
|
1,174,621
|
|
|
|
12,058,184
|
|
|
|
8,494,417
|
|
|
|
18,167,645
|
|
|
|
4,837,707
|
|
Convertible preferred stock
|
|
|
804,951
|
|
|
|
28,892,004
|
|
|
|
28,892,004
|
|
|
|
52,123,859
|
|
|
|
52,123,859
|
|
|
|
|
|
Deficit accumulated during the development stage
|
|
|
(554,427
|
)
|
|
|
(9,233,673
|
)
|
|
|
(34,927,250
|
)
|
|
|
(53,026,460
|
)
|
|
|
(65,229,952
|
)
|
|
|
(92,603,647
|
)
|
Total stockholders (deficit) equity
|
|
|
253,301
|
|
|
|
19,682,271
|
|
|
|
(5,864,971
|
)
|
|
|
(460,263
|
)
|
|
|
(12,278,856
|
)
|
|
|
70,085,498
|
|
42
SELLING
SECURITY HOLDERS
On September 24, 2010, we closed a private placement
transaction with certain accredited investors pursuant to which
we sold an aggregate of 10,500,000 units at a purchase
price of $3.00 per unit, with each unit consisting of one share
of common stock and a Warrant to purchase an additional
0.40 shares of common stock. Each Warrant is exercisable in
whole or in part at any time until September 24, 2015 at a
per share exercise price of $3.30, subject to certain
adjustments as specified in the Warrant.
In connection with the private placement, we entered into a
registration rights agreement, pursuant to which we agreed to
register the resale of the shares of common stock and the common
stock underlying the Warrants. This prospectus covers the resale
of such shares, as well as 5,517,349 shares of common stock
and 163,200 shares of common stock issuable upon
outstanding warrants held by existing stockholders who have
piggyback registration rights, by the selling
stockholders and their trustees, pledges, doners or successors.
The following table sets forth certain information regarding the
selling stockholders and the shares of common stock beneficially
owned by them and issuable to the selling stockholders upon a
cash exercise of the warrants, which information is available to
us as of October 21, 2010. The selling stockholders may
offer the shares under this prospectus from time to time and may
elect to sell some, all or none of the shares set forth next to
their name. As a result, we cannot estimate the number of shares
of common stock that a selling stockholder will beneficially own
after termination of sales under this prospectus. However, for
the purposes of the table below, we have assumed that, after
completion of the offering, none of the shares covered by this
prospectus will be held by the selling stockholders. In
addition, a selling stockholder may have sold, transferred or
otherwise disposed of all or a portion of that holders
shares of common stock since the date on which they provided
information for this table. We have not made independent
inquiries about this. We are relying on written commitments from
the selling stockholders to notify us of any changes in their
beneficial ownership after the date they originally provided
this information. See section entitled Plan of
Distribution beginning on page 46.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
# of Shares
|
|
|
|
|
|
# of Shares
|
|
|
# of Shares
|
|
|
% of Shares
|
|
|
|
Beneficially
|
|
|
# of
|
|
|
Underlying
|
|
|
Beneficially
|
|
|
Beneficially
|
|
|
|
Owned Before
|
|
|
Shares
|
|
|
Warrants
|
|
|
Owned After
|
|
|
Owned After
|
|
Selling Stockholder
|
|
Offering(1)
|
|
|
Offered
|
|
|
Offered
|
|
|
Offering(1)
|
|
|
Offering(1)
|
|
|
Caduceus Private Investments IV,
LP(2)
|
|
|
4,783,068
|
|
|
|
3,333,334
|
|
|
|
1,333,334
|
|
|
|
116,400
|
|
|
|
|
*
|
Visium Balanced Master Fund,
Ltd.(3)
|
|
|
1,750,000
|
|
|
|
1,250,000
|
|
|
|
500,000
|
|
|
|
|
|
|
|
|
|
MPM Bioventures IV-QP,
L.P.(4)
|
|
|
1,350,539
|
|
|
|
937,241
|
|
|
|
374,897
|
|
|
|
38,401
|
|
|
|
|
*
|
MPM Bioventures IV GMBH & Co. Beteiligungs
KG(4)
|
|
|
52,031
|
|
|
|
36,108
|
|
|
|
14,443
|
|
|
|
1,480
|
|
|
|
|
*
|
MPM Asset Management Investors BV4
LLC(4)
|
|
|
38,402
|
|
|
|
26,651
|
|
|
|
10,660
|
|
|
|
1,091
|
|
|
|
|
*
|
Camber Capital Master Fund,
L.P.(5)
|
|
|
1,274,980
|
|
|
|
910,700
|
|
|
|
364,280
|
|
|
|
|
|
|
|
|
|
Camber Capital Fund II,
L.P.(5)
|
|
|
34,440
|
|
|
|
24,600
|
|
|
|
9,840
|
|
|
|
|
|
|
|
|
|
Arthur J. Remillard Jr.
Trust(5)
|
|
|
90,580
|
|
|
|
64,700
|
|
|
|
25,880
|
|
|
|
|
|
|
|
|
|
Redmile Capital Fund,
L.P.(6)
|
|
|
539,067
|
|
|
|
306,600
|
|
|
|
122,640
|
|
|
|
109,827
|
|
|
|
|
*
|
Redmile Capital Offshore Fund,
Ltd.(6)
|
|
|
467,561
|
|
|
|
272,572
|
|
|
|
109,029
|
|
|
|
85,960
|
|
|
|
|
*
|
Redmile Capital Offshore Fund II,
Ltd.(6)
|
|
|
401,052
|
|
|
|
224,161
|
|
|
|
89,664
|
|
|
|
87,227
|
|
|
|
|
*
|
Redmile Ventures,
Ltd.(6)
|
|
|
42,000
|
|
|
|
30,000
|
|
|
|
12,000
|
|
|
|
|
|
|
|
|
|
Baker Brothers Life Sciences,
L.P.(7)
|
|
|
1,089,900
|
|
|
|
778,500
|
|
|
|
311,400
|
|
|
|
|
|
|
|
|
|
14159,
L.P.(7)
|
|
|
30,100
|
|
|
|
21,500
|
|
|
|
8,600
|
|
|
|
|
|
|
|
|
|
HBM BioCapital (USD),
L.P.(8)
|
|
|
298,276
|
(9)
|
|
|
50,000
|
|
|
|
20,000
|
|
|
|
228,276
|
|
|
|
|
*
|
HBM BioCapital (EUR),
L.P.(8)
|
|
|
1,690,241
|
(10)
|
|
|
283,333
|
|
|
|
113,333
|
|
|
|
1,293,575
|
|
|
|
3.94
|
%
|
A.M. Pappas Life Science Ventures III,
L.P.(11)
|
|
|
1,707,032
|
(12)
|
|
|
439,352
|
|
|
|
175,741
|
|
|
|
1,091,939
|
|
|
|
3.32
|
%
|
PV III CEO Fund,
L.P.(11)
|
|
|
106,108
|
(13)
|
|
|
27,315
|
|
|
|
10,926
|
|
|
|
67,867
|
|
|
|
|
*
|
43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
# of Shares
|
|
|
|
|
|
# of Shares
|
|
|
# of Shares
|
|
|
% of Shares
|
|
|
|
Beneficially
|
|
|
# of
|
|
|
Underlying
|
|
|
Beneficially
|
|
|
Beneficially
|
|
|
|
Owned Before
|
|
|
Shares
|
|
|
Warrants
|
|
|
Owned After
|
|
|
Owned After
|
|
Selling Stockholder
|
|
Offering(1)
|
|
|
Offered
|
|
|
Offered
|
|
|
Offering(1)
|
|
|
Offering(1)
|
|
|
Caxton Advantage Life Sciences Fund,
L.P.(14)
|
|
|
1,560,509
|
|
|
|
250,000
|
|
|
|
100,000
|
|
|
|
1,210,509
|
|
|
|
3.68
|
%
|
New Emerging Medical Opportunities Fund L.P.
|
|
|
876,197
|
|
|
|
166,667
|
|
|
|
66,667
|
|
|
|
642,863
|
|
|
|
1.96
|
%
|
DAFNA LifeScience
Ltd(15)
|
|
|
11,666
|
|
|
|
8,333
|
|
|
|
3,333
|
|
|
|
|
|
|
|
|
|
DAFNA LifeScience Market Neutral
Ltd(15)
|
|
|
8,866
|
|
|
|
6,333
|
|
|
|
2,533
|
|
|
|
|
|
|
|
|
|
DAFNA LifeScience Select
Ltd(15)
|
|
|
26,134
|
|
|
|
18,667
|
|
|
|
7,467
|
|
|
|
|
|
|
|
|
|
Kingsbrook Opportunities Master
Fund LP(16)
|
|
|
46,666
|
|
|
|
33,333
|
|
|
|
13,333
|
|
|
|
|
|
|
|
|
|
Deerfield Special Situations Fund,
L.P.(17)
|
|
|
734,300
|
|
|
|
382,000
|
|
|
|
152,800
|
|
|
|
199,500
|
|
|
|
|
*
|
Deerfield Special Situations Fund International,
Limited(17)
|
|
|
1,190,700
|
|
|
|
618,000
|
|
|
|
247,200
|
|
|
|
325,500
|
|
|
|
|
*
|
VantagePoint Venture Partners IV, L.P. and affiliated
entities(18)
|
|
|
6,466,942
|
|
|
|
5,517,349
|
|
|
|
163,200
|
|
|
|
786,393
|
|
|
|
2.38
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
26,667,357
|
|
|
|
16,017,349
|
|
|
|
4,363,200
|
|
|
|
6,286,808
|
|
|
|
19.08
|
%
|
|
|
(1)
|
Beneficial ownership is determined in accordance with the rules
of the SEC and includes voting or investment power with respect
to the shares indicated in the table. Percentage ownership
calculations are based on 32,835,437 shares outstanding as
of September 30, 2010.
|
(2)
|
OrbiMed Advisors LLC, a registered investment adviser under the
Investment Advisers Act of 1940, as amended, is the sole
managing member of OrbiMed Capital GP IV LLC, which is the sole
general partner of Caduceus Private Investments IV, LP. Samuel
D. Isaly is the owner of a controlling interest in OrbiMed
Advisors LLC. As such, OrbiMed Advisors LLC, OrbiMed Capital GP
IV LLC and Mr. Isaly may be deemed to have voting and
investment power with respect to such shares.
|
(3)
|
Jacob Gottlieb, Managing Member of JG Asset, LLC, which is the
General Partner of Visium Asset Management, L.P., which is the
investment managed to pooled investment funds, may be deemed to
have voting and investment power with respect to such shares.
|
(4)
|
Ansbert Gadicke, Luke Evnin, John Vander Vort, Ashley
Dombkowski, William Greene, Vaughn Kailian, Steven St. Peter and
James Scope may be deemed to have voting and investment power
with respect to such shares.
|
(5)
|
Stephen Du Bois may be deemed to have voting and investment
power with respect to such shares.
|
(6)
|
Redmile Group, LLC, investment manager to the selling
stockholder, may be deemed to have voting and investment power
with respect to such shares.
|
(7)
|
Julian C. Baker, Managing Member of Baker Brothers Life
Sciences, L.P. and 14159, L.P., may be deemed to have voting and
investment power with respect to such shares.
|
(8)
|
The board of directors of HBM BioCapital Ltd., the general
partner of HBM BioCapital (USD), L.P. and HBM BioCapital (EUR),
L.P., has sole voting and dispositive power with respect to such
shares. The board of directors of HBM BioCapital Ltd. consists
of John Arnold, Sophia Harris, Richard Coles, Dr. Andreas
Wicki and John Urquhart, none of whom has individual voting or
investment power with respect to the shares.
|
(9)
|
Includes 4,575 shares issuable upon exercise of a common
stock purchase warrant not being offered for resale under this
prospectus.
|
|
|
(10)
|
Includes 25,930 shares issuable upon exercise of a common
stock purchase warrant not being offered for resale under this
prospectus.
|
(11)
|
Arthur M. Pappas, in his role as chairman of the investment
committee of AMP&A Management III, LLC, the general partner
of A.M. Pappas Life Science Ventures III, L.P. and PV III
CEO Fund, L.P., has voting and investment authority over these
shares. Mr. Pappas disclaims beneficial ownership of these
shares except to the extent of his pecuniary interest arising
therein.
|
(12)
|
Includes 25,897 shares issuable upon exercise of a common
stock purchase warrant not being offered for resale under this
prospectus.
|
(13)
|
Includes 1,610 shares issuable upon exercise of a common
stock purchase warrant not being offered for resale under this
prospectus.
|
footnotes continued on following page
44
|
|
(14)
|
Includes 30,506 shares issuable upon exercise of a common
stock purchase warrant not being offered for resale under this
prospectus and options to purchase an additional
6,107 shares of common stock that are exercisable within
60 days of September 30, 2010 that are owned of record
by Dr. A. Rachel Leheny over which Caxton Advantage Life
Sciences Fund, L.P. may be deemed to hold voting power. Caxton
Advantage Venture Partners, L.P. has voting and investment power
with respect to such shares. Decisions by Caxton Advantage
Venture Partners, L.P. with respect to such shares are made by
Advantage Life Sciences Partners, LLC, the Managing General
Partner of Caxton Advantage Venture Partners, L.P., together
with the investment committee of Caxton Advantage Venture
Partners, L.P. Dr. Leheny and Eric Roberts have authority
to take action on behalf of Advantage Life Sciences Partners,
LLC as members of Advantage Life Sciences Partners, LLC. The
investment committee of Caxton Advantage Venture Partners, L.P.
as of the date hereof is comprised of (i) Mr. Roberts,
(ii) Dr. Leheny, (iii) Bruce Kovner and
(iv) Peter DAngelo and the consent of four members is
required with respect to any decision by the Investment
Committee. Dr. Leheny is a director of Anthera, is
(i) a Managing Director of Caxton Advantage Venture
Partners, L.P., which is the General Partner of Caxton Advantage
Life Sciences Fund, L.P., a life-sciences venture capital fund
that she co-founded in 2006 and is (ii) a member of
Advantage Life Sciences Partners LLC. Mr. Roberts and
Dr. Leheny and the members of the Caxton Advantage Venture
Partners, L.P. investment committee disclaim beneficial
ownership, except to the extent of their proportionate pecuniary
interests, either directly, or indirectly through Caxton
Advantage Venture Partners, L.P. (or through any other entity
which is a limited partner in Caxton Advantage Life Sciences
Fund, L.P.), in Caxton Advantage Life Sciences Fund, L.P.
|
(15)
|
Nathan Fischel, MD, CFA and Fariba Ghodsian, Ph.D., may be
deemed to have voting and investment power with respect to such
shares.
|
(16)
|
Kingsbrook Partners LP (Kingsbrook Partners) is the
investment manager of Kingsbrook Opportunities Master
Fund LP (Kingsbrook Opportunities) and
consequently has voting and investment discretion over
securities held by Kingsbrook Opportunities. Kingbrook
Opportunities GP LLC (Opportunities GP) is the
general partner of Kingbrook Opportunities and may be considered
the beneficial owner of any securities deemed to be beneficially
owned by Kingsbrook Opportunities. KB GP LLC (GP
LLC) is the general partner of Kingsbrook Partners. Ari J.
Storch, Adam J. Chill and Scott M. Wallace are the sole managing
members of Opportunities GP and GP LLC and as a result may be
considered beneficial owners of any securities deemed
beneficially owned by Opportunities GP and GP LLC. Each of
Kingsbrook Partners, Opportunities GP, GP LLC and
Messrs. Storch, Chill and Wallace disclaim beneficial
ownership of these securities.
|
(17)
|
James Flynn, General Partner of Deerfield Special Situations
Fund, L.P. and Deerfield Special Situations
Fund International, Limited, may be deemed to have voting
and investment power with respect to such shares.
|
(18)
|
Includes (i) 5,695,228 shares of common stock
(4,998,725 shares of which are registered for resale under
this prospectus) and 147,861 shares of common stock
issuable upon exercise of warrants (all of which are registered
for resale under this prospectus), all owned of record by
VantagePoint Venture Partners IV (Q), L.P.,
(ii) 570,147 shares of common stock
(500,421 shares of which are registered for resale under
this prospectus) and 14,801 shares of common stock issuable
upon exercise of warrants (all of which are registered for
resale under this prospectus), all owned of record by
VantagePoint Venture Partners IV, L.P.,
(iii) 20,739 shares of common stock
(18,203 shares of which are registered for resale under
this prospectus) and 538 shares of common stock issuable
upon exercise of warrants (all of which are registered for
resale under this prospectus), all owned of record by
VantagePoint Venture Partners IV Principals Fund, L.P., and
(iv) options to purchase an additional 17,628 shares
of common stock that are exercisable within 60 days of
September 30, 2010 that are owned of record by Annette
Bianchi, over which VantagePoint has sole voting and investment
power. Ms. Bianchi, a director of Anthera, is a Managing
Director at VantagePoint. Alan E. Salzman, through his authority
to cause the general partner of the limited partnerships that
directly hold such shares to act, may be deemed to have voting
and investment power with respect to such shares.
Mr. Salzman disclaims beneficial ownership with respect to
such shares except to the extent of his pecuniary interest
therein.
|
45
PLAN OF
DISTRIBUTION
We are registering an aggregate of 20,380,549 shares of
common stock issued to the selling stockholders and issuable
upon exercise of certain warrants issued to the selling
stockholders to permit the resale of such shares of common stock
by the holders thereof from time to time after the date of this
prospectus. We will not receive any of the proceeds from the
sale by the selling stockholders of the shares of common stock.
We will bear all fees and expenses incident to our obligation to
register the shares of common stock.
The selling stockholders may sell all or a portion of the shares
of common stock beneficially owned by them and offered hereby
from time to time directly or through one or more underwriters,
broker-dealers or agents. If the shares of common stock are sold
through underwriters or broker-dealers, the selling stockholders
will be responsible for underwriting discounts or commissions or
agents commissions. The shares of common stock may be sold
on any national securities exchange or quotation service on
which the securities may be listed or quoted at the time of
sale, in the
over-the-counter
market or in transactions otherwise than on these exchanges or
systems or in the
over-the-counter
market and in one or more transactions at fixed prices, at
prevailing market prices at the time of the sale, at varying
prices determined at the time of sale, or at negotiated prices.
These sales may be effected in transactions, which may involve
crosses or block transactions. The selling stockholders may use
any one or more of the following methods when selling shares:
|
|
|
|
|
ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
|
|
|
|
|
|
block trades in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the
block as principal to facilitate the transaction;
|
|
|
|
purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
|
|
|
|
an exchange distribution in accordance with the rules of the
applicable exchange;
|
|
|
|
privately negotiated transactions;
|
|
|
|
settlement of short sales entered into after the effective date
of the registration statement of which this prospectus is a part;
|
|
|
|
broker-dealers may agree with the selling stockholders to sell a
specified number of such shares at a stipulated price per share;
|
|
|
|
through the writing or settlement of options or other hedging
transactions, whether such options are listed on an options
exchange or otherwise;
|
|
|
|
a combination of any such methods of sale; and
|
|
|
|
any other method permitted pursuant to applicable law.
|
The selling stockholders also may resell all or a portion of the
shares in open market transactions in reliance upon
Rule 144 under the Securities Act, as permitted by that
rule, or Section 4(1) under the Securities Act, if
available, rather than under this prospectus, provided that they
meet the criteria and conform to the requirements of those
provisions.
46
Broker-dealers engaged by the selling stockholders may arrange
for other broker-dealers to participate in sales. If the selling
stockholders effect such transactions by selling shares of
common stock to or through underwriters, broker-dealers or
agents, such underwriters, broker-dealers or agents may receive
commissions in the form of discounts, concessions or commissions
from the selling stockholders or commissions from purchasers of
the shares of common stock for whom they may act as agent or to
whom they may sell as principal. Such commissions will be in
amounts to be negotiated, but, except as set forth in a
supplement to this prospectus, in the case of an agency
transaction will not be in excess of a customary brokerage
commission in compliance with the Financial Industry Regulatory
Authority or FINRA, Rule 2440; and in the case of a
principal transaction a markup or markdown in compliance with
FINRA IM-2440.
In connection with sales of the shares of common stock or
otherwise, the selling stockholders may enter into hedging
transactions with broker-dealers or other financial
institutions, which may in turn engage in short sales of the
shares of common stock in the course of hedging in positions
they assume. The selling stockholders may also sell shares of
common stock short and if such short sale shall take place after
the date that this registration statement is declared effective
by the SEC, the selling stockholders may deliver shares of
common stock covered by this prospectus to close out short
positions and to return borrowed shares in connection with such
short sales. The selling stockholders may also loan or pledge
shares of common stock to broker-dealers that in turn may sell
such shares, to the extent permitted by applicable law. The
selling stockholders may also enter into option or other
transactions with broker-dealers or other financial institutions
or the creation of one or more derivative securities which
require the delivery to such broker-dealer or other financial
institution of shares offered by this prospectus, which shares
such broker-dealer or other financial institution may resell
pursuant to this prospectus (as supplemented or amended to
reflect such transaction). Notwithstanding the foregoing, the
selling stockholders have been advised that they may not use
shares registered on this registration statement to cover short
sales of our common stock made prior to the date the
registration statement, of which this prospectus forms a part,
has been declared effective by the SEC.
The selling stockholders may, from time to time, pledge or grant
a security interest in some or all of the warrants or shares of
common stock owned by them and, if they default in the
performance of their secured obligations, the pledgees or
secured parties may offer and sell the shares of common stock
from time to time pursuant to this prospectus or any amendment
to this prospectus under Rule 424(b)(3) or other applicable
provision of the Securities Act, amending, if necessary, the
list of selling stockholders to include the pledgee, transferee
or other successors in interest as selling stockholders under
this prospectus. The selling stockholders also may transfer and
donate the shares of common stock in other circumstances in
which case the transferees, donees, pledgees or other successors
in interest will be the selling beneficial owners for purposes
of this prospectus.
In addition, as used in this prospectus, the selling
stockholders shall include individuals and/or entities to whom
VantagePoint may assign its registration rights, including other
funds under common control with VantagePoint, such funds
limited or general partners, limited liability company members
and/or individuals or entities who have been granted by a
limited partnership or limited liability company the right to
receive such distributions. The selling stockholders may from
time to time offer and sell pursuant to this prospectus any or
all of the common stock offered hereby.
The selling stockholders and any broker-dealer or agents
participating in the distribution of the shares of common stock
may be deemed to be underwriters within the meaning
of Section 2(11) of the Securities Act in connection with
such sales. In such event, any commissions paid, or any
discounts or concessions allowed to, any such broker-dealer or
agent and any profit on the resale of the shares purchased by
them may be deemed to be underwriting commissions or discounts
under the Securities Act. selling stockholders who are
underwriters within the meaning of
Section 2(11) of the Securities Act will be subject to the
applicable prospectus delivery requirements of the Securities
Act including
47
Rule 172 thereunder and may be subject to certain statutory
liabilities of, including but not limited to, Sections 11,
12 and 17 of the Securities Act and
Rule 10b-5
under the Securities Exchange Act of 1934, as amended, or the
Exchange Act.
Each selling stockholder has informed the Company that it is not
a registered broker-dealer and does not have any written or oral
agreement or understanding, directly or indirectly, with any
person to distribute the common stock. Upon the Company being
notified in writing by a selling stockholder that any material
arrangement has been entered into with a broker-dealer for the
sale of common stock through a block trade, special offering,
exchange distribution or secondary distribution or a purchase by
a broker or dealer, a supplement to this prospectus will be
filed, if required, pursuant to Rule 424(b) under the
Securities Act, disclosing (i) the name of each such
selling stockholder and of the participating broker-dealer(s),
(ii) the number of shares involved, (iii) the price at
which such the shares of common stock were sold, (iv) the
commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable, (v) that such
broker-dealer(s) did not conduct any investigation to verify the
information set out or incorporated by reference in this
prospectus, and (vi) other facts material to the
transaction. In no event shall any broker-dealer receive fees,
commissions and markups, which, in the aggregate, would exceed
eight percent (8.0%).
Under the securities laws of some states, the shares of common
stock may be sold in such states only through registered or
licensed brokers or dealers. In addition, in some states the
shares of common stock may not be sold unless such shares have
been registered or qualified for sale in such state or an
exemption from registration or qualification is available and is
complied with.
There can be no assurance that any selling stockholder will sell
any or all of the shares of common stock registered pursuant to
the registration statement, of which this prospectus forms a
part.
Each selling stockholder and any other person participating in
such distribution will be subject to applicable provisions of
the Exchange Act and the rules and regulations thereunder,
including, without limitation, to the extent applicable,
Regulation M of the Exchange Act, which may limit the
timing of purchases and sales of any of the shares of common
stock by the selling stockholder and any other participating
person. To the extent applicable, Regulation M may also
restrict the ability of any person engaged in the distribution
of the shares of common stock to engage in market-making
activities with respect to the shares of common stock. All of
the foregoing may affect the marketability of the shares of
common stock and the ability of any person or entity to engage
in market-making activities with respect to the shares of common
stock.
We will pay all expenses of the registration of the shares of
common stock pursuant to the registration rights agreement,
including, without limitation, SEC filing fees and expenses of
compliance with state securities or blue sky laws;
provided, however, that each selling stockholder
will pay all underwriting discounts and selling commissions, if
any and any related legal expenses incurred by it. We will
indemnify the selling stockholders against certain liabilities,
including some liabilities under the Securities Act, in
accordance with the registration rights agreement, or the
selling stockholders will be entitled to contribution. We may be
indemnified by the selling stockholders against civil
liabilities, including liabilities under the Securities Act,
that may arise from any written information furnished to us by
the selling stockholders specifically for use in this
prospectus, in accordance with the related registration rights
agreements, or we may be entitled to contribution.
48
MANAGEMENTS
DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read together
with our financial statements and the related notes appearing
elsewhere in this prospectus. This discussion contains
forward-looking statements reflecting our current expectations
that involve risks and uncertainties. See Special Note
Regarding Forward-Looking Statements for a discussion of
the uncertainties, risks and assumptions associated with these
statements. Actual results and the timing of events could differ
materially from those discussed in our forward-looking
statements as a result of many factors, including those set
forth under Risk Factors and elsewhere in this
prospectus.
Overview
We are a biopharmaceutical company focused on developing and
commercializing products to treat serious diseases associated
with inflammation, including cardiovascular and autoimmune
diseases. We currently have one Phase 3 clinical program,
varespladib, and two Phase 2 clinical programs,
A-623 and
A-001. Two
of our product candidates, varespladib and
A-001, are
designed to inhibit a novel enzyme target known as secretory
phospholipase
A2,
or
sPLA2.
Elevated levels of
sPLA2
have been implicated in a variety of acute inflammatory
conditions, including acute coronary syndrome and acute chest
syndrome associated with sickle cell disease, as well as in
chronic diseases, including stable coronary artery disease. In
addition, our Phase 2 product candidate,
A-623,
targets elevated levels of B-cell activating factor, or BAFF,
which has been associated with a variety of B-cell mediated
autoimmune diseases, including systemic lupus erythematosus, or
lupus, lupus nephritis, rheumatoid arthritis, multiple
sclerosis, Sjögrens Syndrome, Graves Disease
and others.
We were incorporated and commenced operations in September 2004.
Since our inception, we have generated significant losses. As of
September 30, 2010, we had an accumulated deficit of
approximately $92.6 million. As of the date of this
prospectus, we have never generated any revenue and have
generated only interest income from cash and cash equivalents
and short-term investments. We expect to incur substantial and
increasing losses for at least the next several years as we
pursue the development and commercialization of our product
candidates. In their report on our financial statements for the
year ended December 31, 2009, our independent auditors
included an explanatory paragraph regarding concerns about our
ability to continue as a going concern. Our financial statements
contain additional note disclosures describing the circumstances
that led to this disclosure.
To date, we have funded our operations through equity offerings
and private placements of convertible debt, raising an aggregate
of approximately $146.0 million. We will need substantial
additional financing to continue to develop our product
candidates, obtain regulatory approvals and to fund operating
expenses, which we will seek to raise through public or private
equity or debt financings, collaborative or other arrangements
with third parties or through other sources of financing. We
cannot assure you that such funds will be available on terms
favorable to us, if at all. In addition to the normal risks
associated with development-stage companies, we may never
successfully complete development of any of our product
candidates, obtain adequate patent protection for our
technology, obtain necessary government regulatory approval for
our product candidates or achieve commercial viability for any
approved product candidates. In addition, we may not be
profitable even if we succeed in commercializing any of our
product candidates.
Revenue
To date, we have not generated any revenue. We do not expect to
generate revenue unless or until we obtain regulatory approval
of, and commercialize, our product candidates or in- license
additional products that generate revenue. We intend to seek to
generate revenue from a combination of product sales, up-front
fees and milestone payments in connection with collaborative or
strategic relationships
49
and royalties resulting from the licensing of the commercial
rights to our intellectual property. We expect that any revenue
we generate will fluctuate from quarter to quarter as a result
of the nature, timing and amount of milestone payments we may
receive upon the sale of our products, to the extent any are
successfully commercialized, as well as any revenue we may
receive from our collaborative or strategic relationships.
Research
and Development Expenses
Since our inception, we have focused our activities on our
product candidate development programs. We expense research and
development costs as they are incurred. Research and development
expenses consist of personnel costs, including salaries,
benefits and stock-based compensation, clinical studies
performed by contract research organizations, or CROs, materials
and supplies, licenses and fees and overhead allocations
consisting of various administrative and facilities-related
costs. Research and development activities are also separated
into three main categories: licensing, clinical development and
pharmaceutical development. Licensing costs consist primarily of
fees paid pursuant to license agreements. Historically, our
clinical development costs have included costs for preclinical
and clinical studies. We expect to incur substantial clinical
development costs for our Phase 3 clinical study named VISTA- 16
for varespladib and for our Phase 2b clinical study named
PEARL-SC for
A-623, as
well as for the development of our other product candidates.
Pharmaceutical development costs consist of expenses incurred
relating to clinical studies and product formulation and
manufacturing.
We expense both internal and external research and development
costs as incurred. We are developing our product candidates in
parallel, and we typically use our employee and infrastructure
resources across several projects. Thus, some of our research
and development costs are not attributable to an individually
named project, but rather are allocated across our clinical
stage programs. These unallocated costs include salaries,
stock-based compensation charges and related fringe benefit
costs for our employees, consulting fees and travel.
The following table shows our total research and development
expenses for the years ended December 31, 2007, 2008 and
2009, the nine months ended September 30, 2009 and 2010,
and for the period from September 9, 2004 (Date of
Inception) through September 30, 2010:
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For the Period
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September 9,
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2004 (Date of
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Nine Months Ended
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Inception) to
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Year Ended December 31,
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September 30,
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September 30,
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2007
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2008
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2009
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2010
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2009
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2010
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Allocated costs:
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A-001
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$
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2,302,454
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$
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456,633
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$
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192,979
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$
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125,954
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$
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148,220
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$
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6,646,000
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Varespladib
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12,053,943
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7,370,850
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5,535,529
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11,885,724
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(2)
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5,503,466
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39,746,369
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(3)
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A-623
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6,004,667
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(1)
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100,851
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34,179
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3,643,827
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15,699
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9,787,244
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(1)
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Unallocated costs
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3,560,868
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2,953,988
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2,652,727
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2,909,583
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2,059,744
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13,709,456
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Total development
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$
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23,921,932
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$
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10,882,322
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$
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8,415,414
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$
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18,565,088
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$
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7,727,129
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$
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69,889,069
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(1)
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Includes a one-time license initiation fee of $6.0 million
pursuant to a license agreement with Amgen.
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(2)
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Includes milestone payments of $3.5 million pursuant to
amendments to the license agreements with each of Eli Lilly and
Shionogi & Co. Ltd., which were paid in the form of
shares of common stock.
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(3)
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Includes a one-time license fee initiation of $4.0 million
pursuance to a license agreement with each of Eli Lilly and
Shionogi & Co. Ltd., which were paid in the form of
shares of preferred stock.
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50
We expect our research and development expenses to increase
significantly as we continue to develop our product candidates.
We began enrollment of patients in the VISTA-16 study of
varespladib for the treatment of patients experiencing acute
coronary syndrome in June 2010. We also initiated the
PEARL-SC
study of
A-623 in
July 2010. We intend to fund our clinical studies with existing
cash and future offerings.
We expect that a large percentage of our research and
development expenses in the future will be incurred in support
of our current and future clinical development programs. These
expenditures are subject to numerous uncertainties in timing and
cost to completion. As we obtain results from clinical studies,
we may elect to discontinue or delay clinical studies for
certain product candidates or programs in order to focus our
resources on more promising product candidates or programs.
Completion of clinical studies may take several years or more,
but the length of time generally varies according to the type,
complexity, novelty and intended use of a product candidate. The
cost of clinical studies may vary significantly over the life of
a program as a result of differences arising during clinical
development, including:
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the number of sites included in the studies;
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the length of time required to enroll suitable patient subjects;
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the number of patients that participate in the studies;
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the number of doses that patients receive;
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the drop-out or discontinuation rates of patients; and
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the duration of patient
follow-up.
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Our expenses related to clinical studies are based on estimates
of the services received and efforts expended pursuant to
contracts with multiple research institutions and clinical
research organizations that conduct and manage clinical studies
on our behalf. The financial terms of these agreements are
subject to negotiation and vary from contract to contract and
may result in uneven payment flows. Generally, these agreements
set forth the scope of work to be performed at a fixed fee or
unit price. Payments under the contracts depend on factors such
as the successful enrollment of patients or the completion of
clinical study milestones. Expenses related to clinical studies
generally are accrued based on contracted amounts and the
achievement of milestones such as number of patients enrolled.
If timelines or contracts are modified based upon changes to the
clinical study design or scope of work to be performed, we
modify our estimates of accrued expenses accordingly on a
prospective basis.
None of our product candidates has received U.S. Food and
Drug Administration, or FDA, or foreign regulatory marketing
approval. In order to grant marketing approval, the FDA or
foreign regulatory agencies must conclude that clinical data
establishes the safety and efficacy of our product candidates
and that the manufacturing facilities, processes and controls
are adequate. Despite our efforts, our product candidates may
not offer therapeutic or other improvement over existing,
comparable drugs, be proven safe and effective in clinical
studies, or meet applicable regulatory standards.
As a result of the uncertainties discussed above, we are unable
to determine the duration and completion costs of our
development projects or when and to what extent we will receive
cash inflows from the commercialization and sale of an approved
product candidate, if ever.
51
General
and Administrative Expenses
General and administrative expenses consist primarily of
compensation for employees in executive and operational
functions, including clinical, chemical manufacturing,
regulatory, finance and business development. Other significant
costs include professional fees for legal services, including
legal services associated with obtaining and maintaining
patents. We will continue to incur significant general and
administrative expenses as a public company, including costs for
insurance, costs related to the hiring of additional personnel,
payment to outside consultants, lawyers and accountants and
complying with the corporate governance, internal controls and
similar requirements applicable to public companies.
Critical
Accounting Policies and Estimates
Our managements discussion and analysis of our financial
condition and results of operations is based on our financial
statements, which have been prepared in accordance with
accounting principles generally accepted in the United States,
or GAAP. The preparation of these financial statements requires
us to make estimates and judgments that affect the reported
amounts of assets, liabilities and expenses. On an ongoing
basis, we evaluate these estimates and judgments, including
those described below. We base our estimates on our historical
experience and on various other assumptions that we believe to
be reasonable under the circumstances. These estimates and
assumptions form the basis for making judgments about the
carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results and experiences may
differ materially from these estimates.
While our significant accounting policies are more fully
described in Note 2 to our financial statements included at
the end of this prospectus, we believe that the following
accounting policies are the most critical to aid you in fully
understanding and evaluating our reported financial results and
affect the more significant judgments and estimates that we use
in the preparation of our financial statements.
Accrued
Clinical Expenses
As part of the process of preparing our financial statements, we
are required to estimate our accrued expenses. This process
involves reviewing open contracts and purchase orders,
communicating with our applicable personnel to identify services
that have been performed on our behalf and estimating the level
of service performed and the associated cost incurred for the
service when we have not yet been invoiced or otherwise notified
of actual cost. The majority of our service providers invoice us
monthly in arrears for services performed. We make estimates of
our accrued expenses as of each balance sheet date in our
financial statements based on facts and circumstances known to
us at that time. We periodically confirm the accuracy of our
estimates with the service providers and make adjustments if
necessary. Examples of estimated accrued clinical expenses
include:
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fees paid to CROs in connection with clinical studies;
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fees paid to investigative sites in connection with clinical
studies;
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fees paid to contract manufacturers in connection with the
production of clinical study materials; and
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fees paid to vendors in connection with the preclinical
development activities.
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We base our expenses related to clinical studies on our
estimates of the services received and efforts expended pursuant
to contracts with multiple research institutions and CROs that
conduct and manage clinical studies on our behalf. The financial
terms of these agreements are subject to negotiation, vary from
contract to contract and may result in uneven payment flows.
Payments under some of these contracts depend on factors such as
the successful enrollment of patients and the completion of
clinical
52
study milestones. In accruing service fees, we estimate the time
period over which services will be performed and the level of
effort to be expended in each period. If the actual timing of
the performance of services or the level of effort varies from
our estimate, we adjust the accrual accordingly. If we do not
identify costs that we have begun to incur or if we
underestimate or overestimate the level of services performed or
the costs of these services, our actual expenses could differ
from our estimates.
Stock-Based
Compensation
Effective January 1, 2006, we adopted the provisions of
FASB ASC 718, Compensation Stock
Compensation, using the modified prospective method.
Compensation costs related to all equity instruments granted
after January 1, 2006 are recognized at the grant-date fair
value of the awards. Additionally, we are required to include an
estimate of the number of awards that will be forfeited in
calculating compensation costs, which are recognized over the
requisite service period of the awards on a straight-line basis.
We estimate the fair value of our share-based payment awards on
the date of grant using an option-pricing model.
We recognized employee stock-based compensation expense of
approximately $75,000 in 2007, $143,000 in 2008, $254,000 in
2009, and $344,000 for the nine months ended September 30,
2010. As of September 30, 2010, we had $2.2 million in
total unrecognized compensation cost related to non-vested
employee stock-based compensation arrangements. The intrinsic
value of all outstanding vested and non-vested stock-based
compensation arrangements, based on $4.19 per share, which is
the closing sale price of our common stock as reported on The
NASDAQ Global Market on September 30, 2010, is
$3.9 million, based on 1,307,066 shares of our common
stock issuable upon exercise of stock options at a
weighted-average exercise price of $1.27 per share and
333,000 shares of unvested restricted stock units at a
weighted-average purchase price of $5.15 per share.
We calculate the fair value of stock-based compensation awards
using the Black-Scholes option-pricing model. For the years
ended December 31, 2007, 2008 and 2009, and the nine months
ended September 30, 2010, the weighted-average assumptions
used in the Black-Scholes model were 6.25 years for the
expected terms, 81%, 81%, 74% and 74% for the expected
volatility, 4.54%, 3.08%, 2.10% and 2.10% for the risk free rate
and 0.0% for dividend yield, respectively. Expense amounts for
future awards for any particular quarterly or annual period
could be affected by changes in our assumptions. The
weighted-average expected option terms for 2007, 2008, 2009 and
the nine months ended September 30, 2010 reflect the
application of the simplified method set out in FASB
ASC 718-10.
The simplified method defines the life as the average of the
contractual term of the stock-based compensation award and the
weighted-average vesting period for all tranches. Estimated
volatility for fiscal 2007, 2008, 2009 and nine months ended
September 30, 2010 also reflects the application of
interpretive guidance provided in FASB
ASC 718-10
and, accordingly, incorporates historical volatility of similar
public entities.
The exercise price of options to purchase our common stock
granted to our employees, directors and consultants was the fair
value of our common stock on the date of grant. Prior to our
initial public offering in March 2010, the fair value of our
common stock was determined by our board of directors as there
was no public market for our common stock at that time. Our
board of directors determined the fair value of our common stock
based on several factors, including:
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the rights, preferences and privileges of our preferred stock
(which was then outstanding) relative to our common stock;
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our performance and stage of development;
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53
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the likelihood of achieving a liquidity event for the shares of
our common stock underlying these stock options, such as an
initial public offering or sale of our company, given prevailing
market conditions;
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the trading value of common stock of public companies comparable
to our company;
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the sale prices of comparable acquisition transactions of public
companies comparable to ours; and
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the available data resulting from our clinical studies and
development to date.
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In considering the rights, preferences and privileges of our
preferred stock relative to our common stock, our board of
directors considered the following rights, preferences and
privileges of our
Series B-1
and
Series B-2
preferred stock:
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a senior liquidation preference of $7.28 per share in the event
of any sale of our company or similar liquidity event;
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a right to participate alongside our common stock in the event
of any sale or similar liquidity event with a 3.5x cap on such
participation;
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a senior non-cumulative dividend of 7.0% of the original issue
price;
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protection against dilutive issuances of new shares;
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a right to convert each share of preferred stock into common
stock;
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|
a right to receive quarterly unaudited and annual audited
financial statements, to inspect our books and records and to
meet with our management team;
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a right to vote with other holders of preferred and common stock
to elect members of our board of directors; and
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a right to vote separately on issues such as changes in capital
structure, interested party transactions, mergers, sales and
acquisitions.
|
Specifically, with respect to liquidation preference and
participation features, each share of our
Series B-1
and
Series B-2
preferred stock had a liquidation preference equal to the price
per share at which such share was sold, and in addition, would
have participated with the common stock on proceeds available
for distribution in a buy-out or sale of our company until such
preferred shares received
three-and-one-half
times the original price per share. As a result of these
participation rights and preferences, the preferred shareholders
would have received substantially more of our companys
value in the event of the dissolution or liquidation of our
company, such as in a buy-out or sale of our company, or on the
payment of the dividends. For example, on a buy-out or sale of
our company, the
Series B-1
and
B-2 shareholders
were each entitled to receive liquidation preferences of $7.28
per share, before then participating equally with the common
shareholders in the remaining value of our company until they
have received $25.46 per share.
In addition, we obtained the reports of independent valuation
firms with respect to their estimates of the fair values of our
common stock. We obtained reports of the fair value of our
common stock as of October 31, 2006 on December 4,
2006, as of December 31, 2007 on February 12, 2008,
and as of October 15, 2008 on October 24, 2008. In
estimating the fair value of our common stock, the
54
independent firms used the income approach. The income approach
is an estimate of the present value of the future monetary
benefits expected to flow to the owners of a business. It
requires a projection of the cash flows that the business
expected to generate over a forecast period and an estimate of
the present value of cash flows beyond that period, which is
referred to as residual value. These cash flows are converted to
present value by means of discounting, using a rate of return
that accounts for the time value of money and the appropriate
degree of risks inherent in the business. After calculation of
the companys enterprise value using this approach, the
value of a share of common stock is then discounted for lack of
marketability, or the inability to readily sell shares, which
increases the owners exposure to changing market
conditions and increases the risk of ownership.
In its report as of December 31, 2007, the independent
valuation firm estimated our enterprise value using discounted
cash flows, a terminal value based on comparable publicly traded
company revenue multiples and a risk-adjusted discount rate of
39.1%. Our enterprise value was estimated to be approximately
$34.0 million. This enterprise value was then allocated
among the various classes of our securities, including preferred
stock, common stock and options to purchase common stock using
the Black-Scholes option-pricing model, which yielded an
estimated value per share of our common stock of $1.76, which
was in turn reduced by a discount for lack of marketability of
24.0% using a protective put analysis and an estimated time to
liquidity of two years, which resulted in an estimated value per
share of $1.34.
In its report as of October 15, 2008, the independent
valuation firm estimated our enterprise value using discounted
cash flows, a terminal value based on comparable publicly traded
company revenue multiples and a risk-adjusted discount rate of
32.6%. Our enterprise value was estimated to be approximately
$60.6 million. This enterprise value was then allocated
among the various classes of our securities, including preferred
stock, common stock and options to purchase common stock using
the Black-Scholes option-pricing model, which yielded an
estimated value per share of our common stock of $2.02, which
was in turn reduced by a discount for lack of marketability of
25.0% using a protective put analysis and an estimated time to
liquidity of two years, which resulted in an estimated value per
share of $1.51.
On October 13, 2009, our board of directors determined an
estimated fair value per share of $7.70 for our common stock.
Our board of directors examined the enterprise values of 10 peer
companies in the life sciences industry and used the mean
enterprise value to approximate our anticipated enterprise value
upon completion of a public offering. Our board of directors
used the mean enterprise value, rather than a multiple of
earnings or revenue, since we have no earnings or revenue, nor
do any of the companies in the peer group. We selected the peer
group based on the following criteria: publicly traded drug
development companies that have one or more pharmaceutical
compounds targeted at patient markets of approximately the same
size as the target market for our compounds in Phase 2 or Phase
3 clinical studies and no compounds yet approved for general
use. To estimate our enterprise value, our board of directors
discounted the enterprise value by 15% to reflect a lack of
marketability. Our board of directors then further discounted
the estimated enterprise value by an additional 25% to reflect
the time our board of directors estimated would be necessary to
complete our initial public offering as well as the risk that
such offering would not be completed. 100% of this enterprise
value was then allocated to our common stock, assuming the
conversion of all shares of preferred stock outstanding and the
exercise of all outstanding options and warrants, which yielded
an estimated fair value of our common stock of $7.70 per share.
In determining the valuation of our common stock, our board of
directors did not take into account (i) the expected timing
of commercialization of our varespladib product candidate, other
than 2012 being the earliest possible time of commercialization,
which is already reflected in the discount for lack of
marketability and liquidity, or (ii) any future revenues
and operating profits expected to be generated from sales of
varespladib.
55
Based on the factors listed above, our board of directors
determined the fair value of our common stock for option grants
made in October 2009 to be $7.70 per share, for option grants
made in February and April 2009 to be $1.51 per share, and for
option grants made in 2008 to be $1.34 per share. The following
table summarizes by grant date the number of shares of common
stock subject to options granted in 2008 and 2009 through the
date of our initial public offering and the associated per-share
exercise price. The exercise prices were set by our board of
directors at prices believed to equal the fair value of our
common stock at each of the grant dates.
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Grant Date
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Number of Options
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Per Share Exercise Price
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|
2/21/2008
|
|
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287,086
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|
$
|
1.34
|
|
6/26/2008
|
|
|
40,887
|
|
|
$
|
1.34
|
|
2/18/2009
|
|
|
367,395
|
|
|
$
|
1.51
|
|
4/15/2009
|
|
|
26,281
|
|
|
$
|
1.51
|
|
10/13/2009
|
|
|
11,682
|
|
|
$
|
7.70
|
|
The estimated fair value common stock from June 2008 to February
2009 increased from $1.34 per share to $1.51 per share. The
change in estimated fair value was primarily the result of an
increase in the estimated enterprise value of the company from
$34.0 million to $60.6 million, and reflected the
following positive factors:
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|
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successful completion of enrollment of our Phase 2b FRANCIS
study; and
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|
|
the conclusion in February 2009 of a DSMB evaluation that our
IMPACTS study was well-tolerated and should continue.
|
The positive factors set forth above were partially offset by:
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|
|
a sharp deterioration in financial markets with accompanying
decrease in market capitalization of companies comparable to
ours;
|
|
|
|
increased difficulty in raising equity financing with
accompanying financing uncertainty; and
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|
|
|
increased risk of failure to achieve an initial public offering,
sale of the company or other similar liquidity event.
|
While no single factor listed above was specifically quantified
or weighted greater than another in estimating the
companys enterprise value, each was taken into account in
calculating the discount rate for the discounted cash flow
analysis, estimating the time to liquidity and the expense that
would be required to achieve liquidity.
The estimated fair value of our common stock from April 2009 to
October 2009 increased from $1.51 per share to $7.70 per share.
The change in estimated fair value primarily reflected the
following factors:
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|
|
we successfully achieved the primary endpoint of our Phase 2b
FRANCIS study in July 2009;
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|
|
an analysis of secondary endpoints from FRANCIS revealed
generally favorable efficacy trends in August 2009;
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|
|
a successful initial public offering of a company in our
industry; and
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|
|
|
progress towards our initial public offering.
|
56
While no single factor listed above was specifically quantified
or weighted greater than another in estimating the
companys enterprise value, each was taken into account in
estimating the time to liquidity and the expense that would be
required to achieve liquidity.
The initial public offering price of our common stock was $7.00
per share. The difference between the estimated fair value of
our common stock of $7.70 per share in October 2009 and the
initial public offering price took into account several factors
considered by our board of directors and the underwriters:
|
|
|
|
|
an analysis of the typical valuation ranges seen in initial
public offerings for companies in our industry with similar
market capitalization for the last five years;
|
|
|
|
a review of then current market conditions and the results of
operations, competitive position and the stock performance of
our competitors; and
|
|
|
|
consideration of our history as a private company and previous
valuation reports received by independent valuation firms.
|
As of September 30, 2010, 1,307,066 shares of our
common stock were issuable upon exercise of stock options.
Results
of Operations
Comparison
of the Nine Months Ended September 30, 2010 and
2009
Research and Development
Expenses. Research and development expenses
were $18.6 million for the nine months ended
September 30, 2010, compared with $7.7 million for the
nine months ended September 30, 2009. The
$10.9 million increase in our research and development
expenses was primarily attributable to the recognition of a
$3.5 million non-cash charge related to milestone payments
recorded in connection with the initiation of our Phase 3
clinical study of varespladib, which was paid through the
issuance of 531,914 shares of common stock; and increased
CRO and manufacturing cost related to the launch of our
Phase 3 clinical study of varespladib and Phase 2
clinical study of
A-623, as
well as increased headcount to support these clinical studies.
General and Administrative
Expenses. General and administrative expenses
were $4.2 million for the nine months ended
September 30, 2010, compared with $2.7 million for the
nine months ended September 30, 2009. The $1.5 million
increase was primarily attributable to increased headcount and
professional services incurred in connection with our financial
audit and other costs associated with operating as a public
company.
Interest and Other Income. Interest and
other income was $76,562 for the nine months ended
September 30, 2010, compared with $21,559 for the nine
months ended September 30, 2009. The increase in interest
and other income was due to higher cash and investment balances
in the current year due to proceeds received from the IPO and
the September private placement offering as compared to the
prior year.
Interest and Other Expense. Interest
and other expense was $4.6 million for the nine months
ended September 30, 2010, compared with $0.3 million for
the nine months ended September 30, 2009. Interest and
other expense recorded during the nine months ended
September 30, 2010 included a $4.5 million non-cash
charge recorded as part of interest and other expense related to
the amortization of discounts on the Companys convertible
promissory notes and the mark-to-market adjustment relating to
warrants and embedded derivative connected to the Companys
convertible promissory notes.
57
Interest and other expense recorded during the comparable period
in 2009 consisted of interest accrued on past due license fee
obligations.
Comparison
of the Years Ended December 31, 2009 and 2008
Research and Development
Expenses. Research and development expenses
were $8.4 million for the year ended December 31,
2009, compared with $10.9 million for the year ended
December 31, 2008. The $2.5 million decrease in our
research and development expenses was due to the decreased
activity in our Phase 2 clinical study designed to examine the
impact of varespladib when administered to patients within
96 hours of an acute coronary syndrome event in the third
quarter of 2009 as the study progressed toward completion.
General and Administrative
Expenses. General and administrative expenses
were $3.4 million for the year ended December 31,
2009, compared with $3.0 million for the year ended
December 31, 2008. The $0.4 million increase was
primarily attributable to expenses relating to the expansion of
our intellectual property portfolio.
Interest and Other Income. Interest and
other income was $24,000 for the year ended December 31,
2009, compared with $178,000 for the year ended
December 31, 2008. The decrease in interest and other
income was due to lower average cash balances.
Interest and Other Expense. Interest
and other expense was $386,000 for the year ended
December 31, 2009, compared with $296,000 for the year
ended December 31, 2008. Interest and other expense
recorded in 2009 consisted of interest accrued for convertible
promissory notes and amortization of note discount and debt
issuance cost. Interest and other expense recorded in 2008
consisted of interest accrued on past due license fee
obligations.
Beneficial Conversion Feature. In
connection with the issuance of convertible promissory notes in
2008, we recorded expense related to the beneficial conversion
feature of the notes in the amount of $4.1 million for the
year ended December 31, 2008. The expense was amortized
from the issuance date of the notes to the date of their
conversion into shares of
Series B-2
convertible preferred stock in August 2008. The convertible
promissory notes issued in 2009 included a beneficial conversion
feature that would be measured and recorded upon a triggering
event as defined in the agreement.
Comparison
of the Years Ended December 31, 2008 and December 31,
2007
Research and Development
Expenses. Research and development expenses
were $10.9 million for the year ended December 31,
2008, compared with $23.9 million for the year ended
December 31, 2007. The $13.0 million decrease in our
research and development expenses reflects a one-time license
initiation fee of $6.0 million recognized in 2007 in
connection with a worldwide, exclusive license agreement we
entered into with Amgen (see Note 5 to our financial
statements for further details). The remaining decrease of
$7.0 million was primarily attributable to reduced clinical
costs associated with our Phase 2 clinical studies for the
development of varespladib. In 2007, we initiated and completed
two Phase 2 clinical studies for varespladib, while in 2008, we
initiated a single Phase 2b clinical study for varespladib.
General and Administrative
Expenses. General and administrative expenses
were $3.0 million for the year ended December 31,
2008, compared with $2.5 million for the year ended
December 31, 2007. The $0.5 million increase was
primarily attributable to our implementation of our vacation
policy, professional fees relating to the expansion of our
intellectual property portfolio and travel relating to business
development activities primarily consisting of scientific and
industry conferences and symposiums.
58
Interest and Other Income. Interest and
other income was $178,000 for the year ended December 31,
2008, compared with $697,000 for the year ended
December 31, 2007. The decrease in interest and other
income of approximately $519,000 was primarily attributable to
lower average cash balances and lower average interest rates
during 2008.
Interest Expense. Interest expense was
$296,000 for the year ended December 31, 2008, compared
with no interest expense for the year ended December 31,
2007. The interest expense during the year ended
December 31, 2008 was due to interest recognized in
connection with issuance of convertible promissory notes in
February and May 2008, which were converted into shares of our
Series B-2
convertible preferred stock in connection with our
Series B-2
financing consummated in August 2008 and interest accrued in
connection with a license fee payable due to Amgen.
Beneficial Conversion Features. For the
year ended December 31, 2008, we recorded $4.1 million
in expense related to the beneficial conversion features of our
convertible promissory notes, which were convertible into shares
of our
Series B-2
convertible preferred stock at a discount of 25% from the
original issue price of our
Series B-2
convertible preferred stock. There were no outstanding notes
with similar terms during 2007.
Liquidity
and Capital Resources
To date, we have funded our operations primarily through private
placements of preferred stock, common stock and convertible debt
and our initial public offering. As of September 30, 2010,
we had received net proceeds of approximately
$119.7 million from the sale of equity securities and net
proceeds of approximately $26.3 million from the issuance
of convertible promissory notes. As of September 30, 2010,
we had cash, cash equivalents and short-term investments of
approximately $73.1 million.
Cash
Flows
Nine
Months Ended September 30, 2010
For the nine months ended September 30, 2010, we incurred a
net loss of approximately $27.4 million.
Net cash used in operating activities was approximately
$18.6 million. The net loss is higher than cash used in
operating activities by $8.8 million. The primary drivers
for the difference are adjustments for non-cash charges such as
stock-based compensation of approximately $352,866, amortization
of note discount and debt issuance cost of approximately
$769,000, issuance of $3.5 million worth of common stock in
lieu of cash milestone payments due to Eli Lilly and
Shionogi & Co., Ltd., the conversion of approximately
$300,000 of accrued interest into shares of common stock upon
conversion of certain convertible promissory notes, mark to
market adjustments relating to warrant and derivative liability
of $3.8 million, and increase in operating assets and
liabilities of approximately $195,000.
Net cash used by investing activities was $21.7 million and
was primarily driven by the purchase of short-term investments
during the period.
Net cash provided by financing activities was approximately
$87.7 million and consisted of proceeds of
$61.2 million received from the issuance of common stock at
our IPO, the exercise of the overallotment option by our
underwriters in connection with our IPO, the release of funds
held in an escrow account concurrent with the closing of our
IPO, and proceeds of $29.6 million received from the
issuance of common stock and warrants in connection with the
private placement offering, offset by approximately
$2.9 million of issuance cost paid during the period.
59
Nine
Months Ended September 30, 2009
For the nine months ended September 30, 2009, we incurred a
net loss of approximately $10.7 million.
Net cash used in operating activities was approximately
$10.3 million. The net loss is higher than cash used in
operating activities by $0.4 million The primary drivers
for the difference are adjustments for non-cash charges such as
depreciation and amortization of approximately $15,000,
stock-based compensation of $206,000 due to increased headcount
and corresponding equity grants made to new and existing
employees, and increase in current liabilities of approximately
$613,000 due to increased expense relating to our Phase 2
clinical study activity and a decrease in license fee payable by
$500,000, partially offset by decrease in current assets of
approximately $30,000.
Net cash provided by financing activities was approximately
$10.0 million and consisted of proceeds received from the
issuance of convertible promissory notes.
Year
Ended December 31, 2009
For the year ended December 31, 2009, we incurred a net
loss of approximately $12.2 million.
Net cash used in operating activities was approximately
$17.2 million. The net loss is higher than cash used in
operating activities by $5.0 million. The primary drivers
for the difference are adjustments for non-cash charges such as
depreciation of $18,000, stock-based compensation of
approximately $342,000 and amortization of note discount and
debt issuance cost of approximately $216,000, a decrease in
current liabilities of approximately $598,000 primarily due to
payments made to CROs for the achievement of clinical milestones
and a $5.0 million license fee payment made to Amgen.
Net cash provided by financing activities was approximately
$13.0 million and consisted of net proceeds of
$13.3 million received from the issuance of convertible
promissory notes and escrow notes, partially offset by
approximately $274,000 in expense paid in connection with our
initial public offering.
Year
Ended December 31, 2008
For the year ended December 31, 2008, we incurred a net
loss of $18.1 million.
Net cash used in operating activities was approximately
$17.1 million. The net loss is higher than cash used in
operating activities by $1.0 million. The primary drivers
for the difference are adjustments for non-cash charges such as
depreciation and amortization of $22,000 and stock-based
compensation of $195,000 due to increased headcount and
corresponding equity grants made to new and existing employees,
issuance of convertible preferred stock in lieu of interest
payments of $156,000, beneficial conversion feature of
$4.1 million and a decrease in current assets of $31,000,
offset by a decrease in current liabilities of $2.6 million
due to payments made to vendors for Phase 2 clinical study
activities previously completed and a decrease in license fee
payable of $1.0 million due to payments made.
Net cash provided by investing activities was approximately
$5.8 million and consisted of proceeds received from the
sale or maturity of short-term investments.
Net cash provided by financing activities was approximately
$19.0 million and consisted primarily of private placements
of our convertible preferred stock, through which we received
net proceeds of $6.8 million, and issuance of convertible
promissory notes for $12.2 million, which were converted
into
Series B-2
convertible preferred stock during 2008.
Year
Ended December 31, 2007
For the year ended December 31, 2007, we incurred a net
loss of $25.7 million.
60
Net cash used in operating activities was approximately
$15.0 million. The net loss is higher than cash used in
operating activities by $10.7 million. The primary drivers
for the difference are adjustments for non-cash charges such as
depreciation and amortization of $19,000, amortization of
discount on short-term investments of $130,000 and stock-based
compensation of $87,000, offset by an increase in current
liabilities of $4.8 million as a result of increased Phase
2 clinical study expenses, an increase of license fee payable of
$6.0 million due the completion of a licensing agreement
with Amgen to acquire the rights to
A-623 and an
increase in current assets of $62,000.
Net cash used in investing activities was approximately
$5.8 million, consisting primarily of purchases of
short-term investments of $14.8 million, offset by proceeds
from the sale or maturity of these investments totaling
$9.1 million.
Net cash provided by financing activities was approximately
$119,000, which consisted of cash proceeds from the exercise of
stock options.
Selected
Quarterly Financial Data (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
|
March 31
|
|
|
June 30
|
|
|
September 30
|
|
|
December 31
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
$
|
2,996,942
|
|
|
$
|
2,366,494
|
|
|
$
|
2,111,817
|
|
|
$
|
3,407,069
|
|
General and administrative
|
|
|
849,251
|
|
|
|
742,992
|
|
|
|
713,367
|
|
|
|
674,560
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS
|
|
|
(3,846,193
|
)
|
|
|
(3,109,486
|
)
|
|
|
(2,825,184
|
)
|
|
|
(4,081,629
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income and other expense (net)
|
|
|
37,938
|
|
|
|
(49,312
|
)
|
|
|
(108,521
|
)
|
|
|
1,721
|
|
Beneficial conversion features
|
|
|
|
|
|
|
(1,392,601
|
)
|
|
|
(2,725,943
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS
|
|
$
|
(3,808,255
|
)
|
|
$
|
(4,551,399
|
)
|
|
$
|
(5,659,648
|
)
|
|
$
|
(4,079,908
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share basic and diluted
|
|
$
|
(3.15
|
)
|
|
$
|
(3.45
|
)
|
|
$
|
(4.05
|
)
|
|
$
|
(2.83
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computing basic and diluted net loss per share
|
|
|
1,210,757
|
|
|
|
1,317,862
|
|
|
|
1,398,120
|
|
|
|
1,443,843
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
|
March 31
|
|
|
June 30
|
|
|
September 30
|
|
|
December 31
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
$
|
2,914,766
|
|
|
$
|
2,286,415
|
|
|
$
|
2,525,948
|
|
|
$
|
688,285
|
|
General and administrative
|
|
|
846,243
|
|
|
|
999,331
|
|
|
|
884,908
|
|
|
|
695,208
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS
|
|
|
(3,761,009
|
)
|
|
|
(3,285,746
|
)
|
|
|
(3,410,856
|
)
|
|
|
(1,383,493
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income and other expense (net)
|
|
|
(24,351
|
)
|
|
|
(50,310
|
)
|
|
|
(193,556
|
)
|
|
|
(94,171
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS
|
|
$
|
(3,785,360
|
)
|
|
$
|
(3,336,056
|
)
|
|
$
|
(3,604,412
|
)
|
|
$
|
(1,477,664
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share basic and diluted
|
|
$
|
(2.57
|
)
|
|
$
|
(2.23
|
)
|
|
$
|
(2.37
|
)
|
|
$
|
(0.95
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computing basic and diluted net loss per share
|
|
|
1,470,722
|
|
|
|
1,496,011
|
|
|
|
1,520,875
|
|
|
|
1,557,708
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
61
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
|
March 31
|
|
|
June 30
|
|
|
September 30
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
$
|
5,241,814
|
|
|
$
|
6,438,149
|
|
|
$
|
6,885,125
|
|
General and administrative
|
|
|
1,224,110
|
|
|
|
1,509,869
|
|
|
|
1,510,021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS
|
|
|
(6,465,924
|
)
|
|
|
(7,948,018
|
)
|
|
|
(8,395,146
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income and other expense (net)
|
|
|
(4,637,868
|
)
|
|
|
11,655
|
|
|
|
61,606
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS
|
|
$
|
(11,103,792
|
)
|
|
$
|
(7,936,363
|
)
|
|
|
(8,333,540
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share basic and diluted
|
|
$
|
(0.83
|
)
|
|
$
|
(0.36
|
)
|
|
$
|
(0.36
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computing basic and diluted net loss per share
|
|
|
13,344,231
|
|
|
|
22,223,941
|
|
|
|
22,964,279
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contractual
Obligations and Commitments
The following table summarizes our long-term contractual
obligations and commitments as of September 30, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period
|
|
|
|
|
Less Than
|
|
|
|
|
|
After
|
|
|
Total
|
|
1 Year
|
|
1-3 Years
|
|
4-5 Years
|
|
5 Years
|
|
Operating lease
obligations(1)
|
|
$
|
40,536
|
|
|
$
|
34,296
|
|
|
$
|
6,240
|
|
|
$
|
|
|
|
$
|
|
|
|
|
(1) |
Operating lease obligations reflect our obligation to make
payments in connection with a sublease that commenced in October
2008 and will expire on January 31, 2011 for approximately
7,800 square feet of office space and office equipment
leases that commenced in October 2007 and will expire in June
2013.
|
The above amounts exclude potential payments to be made under
our license agreements to our licensors that are based on the
progress of our product candidates in development, as these
payments are not determinable. Under our license agreement with
Eli Lilly and Shionogi & Co., Ltd. to develop and
commercialize certain
sPLA2
inhibitors, we are obligated to make additional milestone
payments upon the achievement of certain development,
regulatory, and commercial objectives. We are also obligated to
pay royalties on future net sales of products that are developed
and approved as defined by this collaboration. Our obligation to
pay royalties with respect to each licensed product in each
country will expire upon the later of (a) 10 years
following the date of the first commercial sale of such licensed
product in such country, and (b) the first date on which
generic version(s) of the applicable licensed product achieve a
total market share, in the aggregate, of 25% or more of the
total unit sales of wholesalers to pharmacies of licensed
product and all generic versions combined in the applicable
country.
Also excluded from the table above are potential milestone
payments on the development of
A-623. Under
our license agreement with Amgen to develop and commercialize
A-623, we
are obligated to make additional milestone payments upon the
achievement of certain development, regulatory, and commercial
objectives. We are also obligated to pay royalties on future net
sales of products that are developed and approved as defined by
this collaboration. Our royalty obligations as to a particular
licensed product will be payable, on a
country-by-country
and licensed
product-by-licensed
product basis, for the longer of (a) the date of expiration
of the last to expire valid claim within the licensed patents
that covers the manufacture, use or sale, offer to sell, or
import of such licensed product by us
62
or a sublicensee in such country, or (b) 10 years
after the first commercial sale of the applicable licensed
product in the applicable country.
Funding
Requirements
We expect to incur substantial expenses and generate significant
operating losses as we continue to advance our product
candidates into preclinical studies and clinical studies and as
we:
|
|
|
|
|
continue clinical development of the Phase 3 VISTA-16 study for
varespladib;
|
|
|
|
continue clinical development of the Phase 2b PEARL-SC study for
A-623;
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hire additional clinical, scientific and management
personnel; and
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implement new operational, financial and management information
systems.
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Our future capital uses and requirements depend on numerous
forward-looking factors. These factors include the following:
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the progress of preclinical development and clinical studies of
our product candidates;
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the time and costs involved in obtaining regulatory approvals;
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delays that may be caused by evolving requirements of regulatory
agencies;
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the costs involved in filing and prosecuting patent applications
and enforcing or defending patent claims;
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our ability to establish, enforce and maintain selected
strategic alliances; and
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the acquisition of technologies, product candidates and other
business opportunities that require financial commitments.
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To date, we have not generated any revenue. We do not expect to
generate revenue unless or until we obtain regulatory approval
of, and commercialize, our product candidates. We expect our
continuing operating losses to result in increases in cash used
in operations over the next several years. Our future capital
requirements will depend on a number of factors including the
progress and results of our clinical studies, the costs, timing
and outcome of regulatory review of our product candidates, our
revenue, if any, from successful development and
commercialization of our product candidates, the costs of
commercialization activities, the scope, progress, results and
costs of preclinical development, laboratory testing and
clinical studies for other product candidates, the emergence of
competing therapies and other market developments, the costs of
preparing, filing and prosecuting patent applications and
maintaining, enforcing and defending intellectual property
rights, the extent to which we acquire or invest in other
product candidates and technologies, and our ability to
establish collaborations and obtain milestone, royalty or other
payments from any collaborators.
We expect our existing resources as of the date of this
prospectus, to be sufficient to fund our planned operations,
including our continued product candidate development, for at
least the next 12 months. However, we may require
significant additional funds earlier than we currently expect to
conduct additional or extended clinical studies and seek
regulatory approval of our product candidates. Because of the
numerous risks and uncertainties associated with the development
and commercialization of our
63
product candidates, we are unable to estimate the amounts of
increased capital outlays and operating expenditures associated
with our current and anticipated clinical studies.
Additional funding may not be available to us on acceptable
terms or at all. In addition, the terms of any financing may
adversely affect the holdings or the rights of our stockholders.
For example, if we raise additional funds by issuing equity
securities or by selling debt securities, if convertible,
further dilution to our existing stockholders may result. To the
extent our capital resources are insufficient to meet our future
capital requirements, we will need to finance our future cash
needs through public or private equity offerings, collaboration
agreements, debt financings or licensing arrangements.
If adequate funds are not available, we may be required to
terminate, significantly modify or delay our development
programs, reduce our planned commercialization efforts, or
obtain funds through collaborators that may require us to
relinquish rights to our technologies or product candidates that
we might otherwise seek to develop or commercialize
independently. We may elect to raise additional funds even
before we need them if the conditions for raising capital are
favorable.
Off-Balance
Sheet Arrangements
We do not currently have, nor have we ever had, any
relationships with unconsolidated entities or financial
partnerships, such as entities often referred to as structured
finance or special purpose entities, established for the purpose
of facilitating off-balance sheet arrangements or other
contractually narrow or limited purposes. In addition, we do not
engage in trading activities involving non-exchange traded
contracts.
Quantitative
and Qualitative Disclosure About Market Risk
Our primary exposure to market risk is interest income
sensitivity, which is affected by changes in the general level
of U.S. interest rates. However, since a majority of our
investments are in short-term certificates of deposit,
FDIC-insured corporate bonds and money market funds, we do not
believe we are subject to any material market risk exposure. We
do not have any material derivative financial instruments.
Recent
Accounting Pronouncements
In June 2009, the FASB issued FASB ASC 105, Generally
Accepted Accounting Principles, that establishes the FASB
Accounting Standards Codification as the sole source of
Generally Accepted Accounting Principles, or GAAP. Pursuant to
the provisions of FASB ASC 105, we have updated references
to GAAP in our financial statements issued for the period ending
December 31, 2009 and thereafter. The adoption of FASB
ASC 105 had no impact on our financial position or results
of operations.
In June 2008, the FASB issued FASB
ASC 815-40,
Derivatives and Hedging. FASB
ASC 815-40
provides guidance on how to determine if certain instruments (or
embedded features) are considered indexed to a companys
own stock, including instruments similar to warrants to purchase
the companys stock. FASB
ASC 815-40
requires companies to use a two-step approach to evaluate an
instruments contingent exercise provisions and settlement
provisions in determining whether the instrument is considered
to be indexed to its own stock and therefore exempt from the
application of FASB ASC 815. Although FASB
ASC 815-40
is effective for fiscal years beginning after December 15,
2008, any outstanding instrument at the date of adoption will
require a retrospective application of the accounting through a
cumulative effect adjustment to retained earnings upon adoption.
We do not expect the adoption of FASB
ASC 815-40
to have a material impact on either our financial position or
results of operations.
64
BUSINESS
Overview
We are a biopharmaceutical company focused on developing and
commercializing products to treat serious diseases associated
with inflammation, including cardiovascular and autoimmune
diseases. We currently have one Phase 3 clinical program,
varespladib, and two Phase 2 clinical programs,
A-623 and
A-001. Two
of our product candidates, varespladib and
A-001, are
designed to inhibit a novel enzyme target known as secretory
phospholipase
A2,
or
sPLA2.
Elevated levels of
sPLA2
have been implicated in a variety of acute inflammatory
conditions, including acute coronary syndrome and acute chest
syndrome associated with sickle cell disease, as well as in
chronic diseases, including stable coronary artery disease, or
CAD. In addition, our Phase 2 product candidate,
A-623,
targets elevated levels of
B-lymphocyte
stimulator, or BLyS, also known as B-cell Activating Factor, or
BAFF, which has been associated with a variety of B-cell
mediated autoimmune diseases, including systemic lupus
erythematosus, or lupus, lupus nephritis, or LN, rheumatoid
arthritis, multiple sclerosis, Sjögrens Syndrome,
Graves Disease and others.
Product
Development Programs
We have worldwide rights to develop and commercialize our
products in all indications and markets, with the exception of
Japan where Shionogi & Co., Ltd. retains commercial
rights to our
sPLA2
product candidates. Our current development plans are focused on
acute treatment and orphan indications that may provide an
accelerated and cost-efficient path to regulatory approval and
commercialization. We believe that certain of these markets can
be commercialized through a limited specialty sales force. In
addition, we believe that our product candidates can also
address market opportunities in chronic indications and we may
seek development and commercialization partners to address
chronic, non-specialty and international markets.
Inflammation
and Diseases
The inflammatory process is a powerful and essential early line
of defense for protection against injury and to repair body
tissue. As a result, it is tightly regulated by the body to
ensure appropriate activation and prompt resolution. However,
under certain circumstances, the normal process can malfunction,
leading to acute or chronic inflammation or inappropriate
activation directed against the bodys own tissues. All of
these circumstances can cause significant damage to cells and
tissues, leading to a range of inflammatory disorders, such as
cardiovascular and autoimmune diseases.
65
Our
sPLA2
Inhibition Portfolio
Building upon our knowledge of the regulation of inflammatory
pathways and the growing body of evidence that links
inflammation to multiple disease states, we believe that we have
developed a leadership position in the field of
sPLA2
inhibition. Our
sPLA2
inhibitors have been studied in a number of inflammatory
disorders in multiple therapeutic areas. The effect of our
sPLA2
inhibitors on
sPLA2
concentration and activity have been implicated in acute
coronary syndrome and acute chest syndrome associated with
sickle cell disease. We currently have the two most advanced
sPLA2
inhibitors in clinical development.
Our lead product candidate, varespladib (an oral prodrug of
A-001), is a
broad-spectrum inhibitor of
sPLA2
enzymes and is being evaluated in a Phase 3 clinical study for
short-term (16-week) treatment of patients who have experienced
an acute coronary syndrome. The American Heart Association
defines acute coronary syndrome as any group of clinical
symptoms related to acute myocardial ischemia, including
unstable angina, or UA. Varespladib, when combined with Lipitor
(atorvastatin), is one of only a few therapeutics in development
with the potential to offer a unique and synergistic treatment
approach targeting inflammation, elevated lipid levels and
atherosclerosis as part of physician-directed standard of care.
Through its novel mechanism of action, varespladib may have
applications in a broad range of acute and chronic
cardiovascular diseases. Based on the successful results of our
recently completed Phase 2b clinical study, we initiated a Phase
3 clinical study, VISTA-16, in patients with acute coronary
syndrome in June 2010.
Our second product candidate, varespladib sodium,
A-001, is an
intravenously administered inhibitor of
sPLA2,which
is in a Phase 2 clinical study for the prevention of acute chest
syndrome associated with sickle cell disease. Acute chest
syndrome is a form of inflammation-induced lung failure and is
the most common cause of death in patients with sickle cell
disease. Given that there are currently no approved drugs for
the prevention of acute chest syndrome associated with sickle
cell disease, we have received orphan drug designation and fast
track status from the FDA for
A-001.
We also have a broad series of additional
sPLA2
inhibitors designed with distinct chemical scaffolds in
preclinical development. These product candidates are intended
to provide new
sPLA2
inhibitors for our existing target indications as well as new
candidates for other therapeutic areas. Our lead candidate
within the series,
A-003, is
chemically distinct from
A-001 and
varespladib and has shown increased potency against the target
enzymes and higher drug exposure after dosing in preclinical
studies. As a result,
A-003 may
confer beneficial pharmacodynamic effects in patients and can be
formulated for oral or intravenously administered use. We plan
to file an investigational new drug application, or IND, for
A-003 in the
future and we may continue to assess additional new compounds.
We have explored the use of our varespladib and
A-001
sPLA2
inhibitors as both topical and inhalation therapies in animal
models for the treatment of atopic dermatitis and asthma,
respectively. Results from a standard mouse model of edema
demonstrated that topically administered varespladib was
equivalent to the marketed immunosuppressant Elidel in resolving
inflammation. In a sheep model of allergen-induced asthma,
inhaled
A-001
demonstrated an improvement in lung function similar to inhaled
steroids.
sPLA2
Biology
sPLA2
is a family of enzymes directly involved in the acute and
chronic steps of an inflammatory response.
sPLA2
activity is highly elevated during the early stages of
inflammation, and its acute effects serve to substantially
amplify the inflammatory process. The
sPLA2
enzyme catalyzes the first step in the arachidonic acid pathway
of inflammation, one of the main metabolic processes for the
production of inflammatory mediators, which, when amplified, are
responsible for causing damage to cells and tissue.
Specifically,
sPLA2
breaks down phospholipids that result in the formation of fatty
acids such as
66
arachidonic acid. Arachidonic acid is subsequently metabolized
to form several pro-inflammatory and thrombogenic molecules.
In cardiovascular diseases such as acute coronary syndrome,
excess
sPLA2
activity has acute and chronic implications on disease
progression and patient outcomes. In published studies and our
own clinical studies, significant elevations in
sPLA2
activity and mass have been seen from 24 hours to two weeks
following an acute coronary syndrome and can persist for up to
an additional 12 weeks thereafter. Shortly after a heart
attack,
sPLA2
is dramatically elevated, amplifying inflammation that is
associated with more frequent and secondary cardiovascular
events. This resulting elevated level of inflammation is
problematic for acute coronary syndrome patients who are already
at higher risk of complications during the weeks following their
initial event. For example, increased inflammation can
destabilize vulnerable vascular lesions or atherosclerotic
plaque, destroy damaged but viable cardiac cells and adversely
modify lipids, any of which may lead to the recurrence of a
major adverse cardiovascular event, or MACE.
Historical and recent clinical results have demonstrated
circulating levels of
sPLA2
are significantly correlated with a well-established
inflammatory marker, C-reactive protein, or CRP. These and other
clinical studies have also demonstrated that
sPLA2
independently predicts coronary events in patients that have
recently experienced an acute coronary syndrome and patients
with stable CAD independent of other standard risk factors. In a
stable cardiovascular patient,
sPLA2
not only sustains chronic vascular inflammation as discussed
earlier, but it also adversely remodels lipoproteins such as
low-density lipoprotein cholesterol, or LDL-C.
sPLA2
interacts with LDL-C in a series of reactions that result in
smaller, more pro-atherogenic and pro-inflammatory LDL-C
particles. Moreover, these modified lipoproteins have a reduced
affinity for LDL-C receptors, which are responsible for removal
of cholesterol from the body. As a result, LDL-C remains in
circulation longer and has a greater tendency to deposit in the
artery wall. This increased LDL-C deposition and sustained
chronic vascular inflammation may contribute to the development
of atherosclerosis.
The family of
sPLA2
enzymes includes at least three forms that play a role in
inflammation and the development of cardiovascular disease or
lung injury. While
sPLA2
enzymes are a member of the phospholipase family that includes a
lipoprotein associated phospholipase
A2,
or
Lp-PLA2,
there are important distinctions. Although both are present in
blood,
Lp-PLA2
is mostly bound to LDL-C and high-density lipoprotein, or HDL,
while
sPLA2
enzymes are not. Based on our clinical studies, we believe that
our
sPLA2
inhibitor, varespladib, can be distinguished from other
PLA2
enzyme inhibitors such as those targeted at inhibiting
Lp-PLA2
because varespladib treatment:
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is synergistic with HMG-CoA reductase inhibitors, or statins,
including Lipitor (atorvastatin), in reducing LDL-C, total
cholesterol and non-HDL cholesterol in patients with CAD;
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lowers circulating small, dense and pro-atherogenic, or
plaque-building LDL-C particles, while
Lp-PLA2
inhibition has not demonstrated similar effects;
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has been shown to lower CRP, a well-established marker of
inflammation in a statistically significant manner; and
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reduces plaque volume and aneurysms in standard rodent models of
atherosclerosis and has demonstrated synergistic reductions of
plaque volume in standard rodent models of atherosclerosis when
used in combination with statins.
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In diseases such as acute chest syndrome, a very serious form of
lung injury associated with sickle cell disease,
sPLA2
acts acutely on a number of substrates that amplify the
inflammatory disease process. Sickle cell disease is a genetic
disorder which leads to the structural alteration, or
sickling, of
67
otherwise healthy red blood cells. Patients with sickle cell
disease experience periods of intense pain known as
vaso-occlusive crisis, or VOC, as structurally altered red blood
cells bind together and occlude small blood vessels that supply
blood and nutrients to vital tissue and bone.
sPLA2
levels are dramatically elevated in sickle cell patients during
an episode of VOC as well as within 24 to 48 hours of the
onset of acute chest syndrome. During VOC, microscopic fat
emboli, or droplets of fat from the bone marrow, are prevalent
and can break free and become lodged in the lung. These emboli
are substrates for
sPLA2
enzymes and provide fuel for an already established inflammatory
response, increasing lung injury. In addition,
sPLA2
has been demonstrated to degrade human lung surfactant, a
component necessary in maintaining appropriate lung function,
which further complicates lung injury.
We believe that early intervention with a drug designed to
inhibit
sPLA2
activity may offer a unique opportunity to reduce the
complications associated with certain inflammatory diseases such
as acute coronary syndrome in cardiovascular patients and acute
chest syndrome in patients with sickle cell disease.
Our
BAFF Antagonism Portfolio
BAFF has been associated with a wide range of B-cell mediated
autoimmune diseases including lupus, LN, rheumatoid arthritis,
multiple sclerosis, Sjögrens Syndrome, Graves
Disease and others. The role of BAFF in lupus and rheumatoid
arthritis has recently been validated in multiple clinical
studies with other BAFF antagonists. We are advancing the
development of our BAFF inhibitor molecule,
A-623, a
selective peptibody, to exploit its broad potential clinical
utility in autoimmune diseases. A peptibody is a novel fusion
protein that is distinct from an antibody. We have worldwide
rights to
A-623 in all
potential indications. We have initiated PEARL-SC, the Phase 2b
clinical study of
A-623, for
the treatment of Systemic Lupus Erythematosus (lupus). Lupus
patients suffer from a chronic autoimmune disease, which often
leads to severe skin rash, fatigue, joint pain, major organ
complications and cardiovascular disease.
A-623
demonstrates anti-BAFF activity and has shown statistically
significant reductions in B-cells in two Phase 1 clinical
studies in patients with lupus. We believe
A-623 may
offer a number of potential differentiations over other BAFF
antagonists, as well as other novel B-cell directed therapies
including:
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convenient, at-home, patient-administered subcutaneous dosing
with a range of dosing frequencies including monthly and weekly;
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the ability to bind to both membrane-bound and soluble BAFF;
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selective modulation and reduction of relevant B-cell
sub-types in
lupus patients;
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a novel molecular structure, which may confer differentiating
pharmacokinetic and pharmacodynamic characteristics, potentially
providing efficacy and dosing benefits, as well as manufacturing
benefits and lower cost of goods based on a bacterial
fermentation manufacturing process; and
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multiple binding domains achieve highest reported affinity for
inhibition of BAFF.
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Product
Development Programs
We have focused our product development programs on
anti-inflammatory therapeutics for cardiovascular diseases,
lupus and other serious diseases for which we believe that
current treatments are either inadequate or non-existent. Our
current product development programs are listed in the table
below.
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Worldwide
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Development
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Product
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Product Candidate
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Phase
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Rights
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Description
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Next Milestone(s)
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Lead Development Programs
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Varespladib with Lipitor (atorvastatin)
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Phase 3
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Anthera(1)
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Orally administered sPLA2 inhibitor
Indicated for the prevention of secondary MACE following an acute coronary syndrome (16-week treatment)
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1000 patient biomarker futility analysis in the first quarter of 2011
Data Safety Monitoring Board, or DSMB, review of clinical data in the first quarter of 2011
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A-623
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Phase 2b
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Anthera
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Selective peptibody antagonist of BAFF cytokine being developed for the treatment of B-cell mediated autoimmune diseases
Indicated for systemic lupus erythematosus
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Selection of bulk drug contract manufacturer in the fourth quarter of 2010
Completion of technology transfer to contract manufacturer in the first quarter of 2011
Initiation of Phase 3 manufacturing campaign from cell bank in the second quarter of 2011
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Additional Programs
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A-001-varespladib
sodium
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Phase 2
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Anthera(1)
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Intravenous sPLA2 inhibitor with orphan drug and fast track status
Indicated for prevention of acute chest syndrome in hospitalized patients with sickle cell disease
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Publication of IMPACTS data
Submission of IMPACTS-2 protocol to FDA
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Varespladib
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Phase 2
investigator study
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Anthera(1)
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Orally administered
sPLA2
inhibitor to reduce inflammatory markers in patients undergoing
interventional cardiovascular procedures
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Enrollment complete. Data publication targeted in
2011
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(1) |
Shionogi & Co., Ltd. retains product rights in Japan
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Varespladib
Varespladib is an orally administered pro-drug of
A-001, which
is a broad-spectrum, once-daily inhibitor of the IIa, V and X
iso-forms of the
sPLA2
enzyme that has demonstrated potent anti-inflammatory,
lipid-lowering and lipid-modulating treatment effects in
multiple clinical studies. We have commenced the Phase 3
VISTA-16 study to evaluate varespladib in combination with
atorvastatin therapy, specifically Lipitor, for the short-term
(16-week) treatment of acute coronary syndrome. We have an
agreement with the FDA on an SPA for the VISTA-16 study. An SPA
provides an opportunity for the clinical study sponsor to
receive feedback from the FDA regarding the adequacy of a
clinical study to meet regulatory and scientific requirements if
conducted in accordance with the SPA agreement. An SPA is not a
guarantee of an approval of a product candidate or any
permissible claims about the product candidate.
69
To date, over 1,000 patients and healthy volunteers in at
least 15 clinical studies have been exposed to varespladib.
Varespladib was generally well-tolerated in studies where
patients were exposed to a maximum of 48 weeks of therapy.
Varespladib has been studied in combination with Lipitor
(atorvastatin) in a Phase 2b clinical study in acute coronary
syndrome patients and two earlier Phase 2 clinical studies in
stable CAD patients, the majority of whom were on various statin
therapies.
We currently have all worldwide product rights to varespladib,
except in Japan where Shionogi & Co., Ltd. retains
rights. We originally licensed our
sPLA2
inhibitor portfolio, including varespladib and
A-001, from
Eli Lilly & Company, or Eli Lilly, and
Shionogi & Co., Ltd. in July 2006.
Market
Opportunity Acute Coronary Syndrome
According to the American Heart Association, over
18 million people in the United States have experienced an
acute coronary syndrome and an estimated 1.5 million
Americans will have a new or recurrent heart attack. In
addition, the American Heart Association estimates that
worldwide, cardiovascular disease kills an estimated
17.5 million people each year. According to British Heart
Foundation statistics, CAD, which often leads to acute coronary
syndrome or heart attacks, accounts for 1.9 million deaths
in Europe annually. According to the World Health Organization,
or the WHO, cardiovascular disease is the most common cause of
death in the western world and a major cause of hospital
admissions. In addition, the American Heart Association provides
that for people over the age of 40, 20% of them will die within
one year following an initial heart attack, and over one-third
of them will die within the first five years of an initial heart
attack. These numbers are expected to increase given an aging
population, as well as the rising epidemics of diabetes and
obesity, two conditions known to increase the risk of acute
coronary syndrome.
The American Heart Association defines acute coronary syndrome
as any group of clinical signs and symptoms related to acute
myocardial ischemia. Acute myocardial ischemia can often present
as chest pain due to insufficient blood supply to the heart
muscle that results from CAD. Acute coronary syndrome covers a
spectrum of clinical conditions that include ST-elevated
myocardial infarction, or STEMI, non-ST-elevated myocardial
infarction, or NSTEMI, and UA. Both STEMI and NSTEMI are forms
of a heart attack, where damage to the heart muscle occurs due
to ischemia, which is lack of blood flow to tissues due to a
blockage of a vessel. Typically, UA results in chest pain from
ischemia, but does not cause permanent damage to the heart
muscle.
Furthermore, for any patient who experiences an acute coronary
syndrome, the risk of a secondary MACE is significantly
increased immediately following the initial event. Large
clinical outcome studies such as MIRACL and PROVE-IT have
previously reported, and data from our own FRANCIS Phase 2b
clinical study supports, the 16-week rate of secondary MACE in
acute coronary syndrome patients to be between 6.1% and 14.8%.
Current treatments for CAD other than interventional procedures
include a variety of medications such as aspirin, statins and
anti-platelet and anti-coagulant therapeutics. These medications
are used to offer both acute and chronic benefits to patients.
For patients presenting with acute coronary syndrome,
therapeutics are administered quickly to improve blood flow to
the heart and limit the risk associated with continued ischemia
and thrombosis, which is the formation of a blood clot inside a
vessel, which obstructs blood flow. In addition, interventional
procedures and other medications, such as statins that are
initiated early primarily for lipid benefits, are continued in
an attempt to provide chronic protection against secondary MACE
through improvement in lipid profiles such as lowering LDL-C.
Inflammation
in Cardiovascular Disease
In patients experiencing an acute coronary syndrome, the
relationship between higher levels of inflammation, as measured
by CRP,
sPLA2
and interleukin-6, or IL-6, and increased risk for MACE has
70
been demonstrated extensively. In numerous clinical studies with
a variety of therapeutic interventions, reductions in CRP have
been correlated with reductions in subsequent MACE. We believe,
if our Phase 3 pivotal study is successful, that varespladib
would represent the first anti-inflammatory therapeutic approved
for prevention of MACE.
CRP is the most commonly used marker of inflammation. It has
been independently and strongly correlated with adverse
cardiovascular outcomes in multiple clinical studies. Although a
causative role for CRP has not been established, inflammation is
known to promote acute coronary syndrome and CRP may play a
direct role in both vascular inflammation as well as plaque
rupture.
Statins reduce the level of CRP and other markers of
inflammation in patients with stable CAD. In April 2001, the
Journal of the American Medical Association published results
from the MIRACL study describing the effect of statins in acute
coronary syndrome, where inflammation is greatly elevated. 3,086
were randomized within 96 hours of their index event to
treatment with high-dose Lipitor (atorvastatin) or placebo.
Lipitor (atorvastatin) significantly reduced secondary MACE
after 16 weeks. A second paper from the same study,
published in Circulation in 2003, described the rapid decline of
inflammatory markers in patients on statin treatment that was
associated with reduced MACE. After 16 weeks, Lipitor
(atorvastatin) reduced CRP levels by 34%.
More recently, in 2005, the New England Journal of Medicine
published data from the PROVE-IT study. A total of
3,745 patients were randomized to either intensive statin
therapy with 80 mg Lipitor (atorvastatin) or moderate
statin therapy with 40 mg pravastatin. Patients with low
CRP or LDL-C had fewer MACE than those with higher levels of
either CRP or LDL-C. Patients who had both LDL-C
< 70 mg/dL and CRP < 1 mg/L had the
fewest number of secondary events over all.
LDL-C
in Cardiovascular Disease
The direct relationship between lower LDL-C levels and reduced
risk for major cardiovascular events has been consistently
demonstrated for over a decade in 18 outcome studies involving
over 119,000 patients. Results from large clinical outcome
studies demonstrate achieving incrementally lower LDL-C levels
reduces the risk of future cardiovascular events and provides
continued patient benefit. As a result, the lipid treatment
guidelines have been revised to establish more aggressive LDL-C
treatment goals over time. The most recent guidelines from the
National Cholesterol Education Programs Adult Treatment
Panel III, or NCEP ATP III, updated in 2004 advocate treatment
goals for LDL-C below 100 mg/dL for high-risk patients and
70 mg/dL for very high-risk patients. Given the breadth of
more recent clinical data available, we believe that future
treatment guidelines from the NCEP will likely establish new
LDL-C treatment goals that apply the 70 mg/dL standard or
lower to a broader population of at risk patients. Patients
enrolled in our FRANCIS Phase 2b clinical study and our planned
Phase 3 acute coronary syndrome study represent high-risk
patients as defined by the NCEP.
In order to achieve these more aggressive LDL-C targets, doctors
prescribe other approved lipid-lowering therapies such as
cholesterol absorption inhibitors, nicotinic acid and fish oils
in combination with statins to further reduce LDL-C. Still, many
acute coronary syndrome patients who represent the NCEP ATP III
guideline categories of high-risk and very high-risk do not
achieve these recommended lipid goals despite maximum
lipid-lowering therapies. Moreover, substantial residual risk
remains even among the group of patients that do achieve these
aggressive LDL-C goals suggesting additional biological
mechanisms, including inflammation, may be relevant.
This is exemplified in a November 2008 publication in the New
England Journal of Medicine that detailed the results from a
17,000 patient, multinational, primary prevention study
named JUPITER. The study randomized patients with relatively
normal levels of LDL-C, but elevated levels of inflammation
based on CRP to statin or placebo therapy. The JUPITER study was
stopped early because those
71
patients randomized to statin therapy demonstrated a
statistically significant reduction in CRP, which also
translated to a statistically significant reduction in
cardiovascular events versus those on placebo. The reduction in
events was well in excess of that which would be predicted from
historical data evaluating LDL-C reductions alone. While these
results were generated in a primary prevention setting, we
believe that the benefits of reducing inflammation may prove to
be even more meaningful in settings where patients are in a
hyper-inflammatory state, such as following an acute coronary
syndrome. As a result of these studies, we believe that there is
a substantial need for novel therapies that provide meaningful
reductions in inflammation while also improving LDL-C levels in
high-risk cardiovascular patients beyond the benefits of statin
therapy. Therefore, it is our belief that targeting inflammation
and elevated LDL-C with
sPLA2
inhibition during the early phase of an acute coronary syndrome
will further improve patient outcomes.
We believe that varespladib is one of only a few novel drugs in
development with the potential to offer a clinical benefit to
high-risk cardiovascular patients. Varespladibs unique
mechanism provides potent anti-inflammatory activity, as
measured by reductions in
sPLA2,
CRP and IL-6; incremental lipid-lowering, as measured by LDL-C;
and lipid-modulating activity beyond that achievable with statin
therapy alone. Furthermore, because of their complementary
mechanisms, we believe that the combination of statins and
varespladib can provide synergistic anti-inflammatory and
lipid-lowering benefits. We also have preliminary data to
suggest that varespladib may be synergistic with other
cardiovascular therapeutic regimens, such as niacin.
Pivotal
VISTA-16 Study Acute Coronary Syndrome
In February 2008, based on the results from Phase 2 stable CAD
studies, as discussed below, we met with the FDA to discuss the
next steps of clinical development of varespladib during our end
of Phase 2 meeting. As a result of that meeting and the results
from our Phase 2b acute coronary syndrome study, we submitted an
SPA to the FDA for the Phase 3 VISTA-16 study of varespladib for
the short-term
(16-week)
treatment of patients who have recently experienced an acute
coronary syndrome. We reached agreement with the FDA on all
aspects of the VISTA-16 study protocol, including patient
inclusion/exclusion criteria, study size, statistical
considerations, efficacy endpoints, study duration,
randomization and lipid management strategies.
An independent DSMB will continually evaluate the performance of
the VISTA-16 study over time to ensure patient safety. In
addition, after a minimum of 1,000 patients have been
enrolled in the VISTA-16 study, an independent committee not
involved with the VISTA-16 study will complete a biomarker
futility analysis to ensure patient levels of inflammation, as
measured by
sPLA2,
CRP and IL-6, and lipid profiles, as measured by LDL-C, have met
pre-specified reductions from baseline at various time-points.
These markers of inflammation and lipid profiles are
well-established in the clinical community and pharmaceutical
industry as independent predictors of future cardiovascular risk
and, if positive, will provide additional validation of our
previous findings from the FRANCIS Phase 2b clinical study. At
the
72
same time, the independent DSMB will review all clinical data
from the VISTA-16 study to ensure no emergent adverse safety
signal.
In June 2010, we initiated enrollment in the VISTA-16 clinical
study. Pursuant to our SPA agreement with the FDA, our
multinational, randomized, double-blind, placebo-controlled
Phase 3 acute coronary syndrome VISTA-16 study will enroll up to
6,500 patients in up to 15 countries and up to 500 centers.
However, enrollment may be stopped anytime after a minimum of
385 adjudicated endpoint events as described in the protocol
have occurred. This number of events will allow us to detect a
treatment effect on the composite endpoint as low as 18.1% with
a p-value of less than 0.05. We may increase the sample size if
the adjudicated endpoint events occur at a lower rate than we
expect. Patients will be randomized at entry to receive
16 weeks of either 500 mg once-daily of varespladib or
placebo in addition to a 20, 40 or 80 milligram dose of Lipitor
(atorvastatin). The dose of Lipitor (atorvastatin) may be
adjusted after eight weeks if the patients LDL-C level
remains above 100mg/dL. Survival status will be obtained for
patients six months after the completion of dosing. The clinical
study will recruit a similar population of high-risk
cardiovascular patients with acute coronary syndrome to those
enrolled in the FRANCIS study. As in FRANCIS, randomization must
occur within 96 hours of hospitalization for the acute
coronary syndrome event, or if already hospitalized, within
96 hours of event diagnosis. Patient blood chemistry will
be evaluated at baseline, 24 hours and weeks one, two,
four, eight and 16. Randomization is being stratified by the
presence or absence of lipid-lowering therapy prior to the index
event as well as the type of acute coronary syndrome event, such
as UA, NSTEMI or STEMI. The number of subjects who undergo
percutaneous coronary intervention following the index event and
prior to randomization will be limited to no more than 55% of
the total patient population.
The primary endpoint of the VISTA-16 study is to determine
whether 16 weeks of once-daily treatment with varespladib
plus a dose of Lipitor (atorvastatin) is superior to placebo
plus Lipitor (atorvastatin) in
73
the time to the first occurrence of the combined endpoint of
cardiovascular death, non-fatal myocardial infarction, non-fatal
stroke or documented UA with objective evidence of ischemia
requiring hospitalization as defined by recent FDA draft
guidance.
On July 22, 2009 the Center for Drug Education and Research
division of the FDA issued draft recommendations for
standardized definitions for cardiovascular outcomes trials. The
VISTA-16 clinical study endpoint definitions conform to these
guidelines.
Components
of VISTA-16 Primary Endpoint
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Cardiovascular Death
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Non-Fatal Myocardial Infarction
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Non-Fatal Stroke
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Documented UA with Objective Evidence of Ischemia Requiring
Hospitalization
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A secondary endpoint for the VISTA-16 study is to determine
whether varespladib plus a dose of Lipitor (atorvastatin) is
superior to placebo plus Lipitor (atorvastatin) in the time to
the first occurrence of the combined endpoint of all cause
mortality, non-fatal myocardial infarction, non-fatal stroke or
documented UA with objective evidence of ischemia requiring
hospitalization. A comparison between treatment groups will also
be made for each component of the primary efficacy endpoint.
Additionally, the time to multiple occurrences of any non-fatal
component of the composite primary endpoint will also be
explored. The biomarkers CRP, IL-6, LDL-C and
sPLA2,
will also be evaluated at each time point of the clinical study.
Historical
Clinical Studies
Phase 2b Acute Coronary Syndrome Study FRANCIS
(Fewer Recurrent Acute coronary events with Near-term
Cardiovascular Inflammation Suppression)
In July 2008, we initiated a randomized, double-blind,
placebo-controlled Phase 2b clinical study that enrolled 625
acute coronary syndrome patients across 35 centers in three
countries. Given the drugs combined anti-inflammatory,
lipid-lowering and lipid-modulating effects, we evaluated the
effects of varespladib in acute coronary syndrome patients with
high levels of inflammation and dislipidemia. The clinical study
was designed to evaluate the safety and efficacy of varespladib
when co-administered with the highest dose (80 mg) of
Lipitor (atorvastatin). The clinical study randomized all
patients to a minimum of 24 weeks of treatment with either
500 mg once-daily of varespladib or placebo in combination
with 80 mg Lipitor (atorvastatin) and physician-directed
standard of care.
Patients were eligible for enrollment if they had a diagnosis of
UA, NSTEMI or STEMI. In addition, they must have had one of the
following risk factors: diabetes, body mass index (BMI)
³
25 kg/m2,
³
CRP
³
2 mg/L (NSTEMI/STEMI) or CRP
³
3 mg/L (UA) and presence of three (pre-defined)
characteristics of metabolic syndrome. Subjects must have been
randomized within
£
96 hours of hospital admission for the index event, or, if
already hospitalized, within
£
96 hours of index event diagnosis. Any percutaneous
revascularization was required to occur prior to randomization.
In addition, because we wanted to assess the effects of
varespladib with the highest available dose of Lipitor
(atorvastatin), patients were not allowed to use any other
lipid-lowering therapies during the clinical study.
Follow-up
visits for evaluation occurred post-randomization at weeks two,
four, eight, 12, 16, 20, 24 and then monthly thereafter until
clinical study completion. All enrolled subjects remained on
treatment until all subjects had been treated for a minimum of
24 weeks or until the occurrence of MACE. Patients
randomized into the FRANCIS study had baseline characteristics
such as LDL-C
74
indexed-event risk factors and demographics similar to other
studies of this type. All patients who completed the clinical
study received a final evaluation.
The primary efficacy endpoint evaluated the change in LDL-C
after 500 patients completed eight weeks of treatment.
LDL-C is the most widely recognized surrogate for predicting
cardiovascular risk where percentage reductions in LDL-C have
been highly correlated with reductions in future cardiovascular
risk. Secondary endpoints included:
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changes in established markers of inflammation such as
sPLA2,
CRP and IL-6; and
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the occurrence of secondary MACE (for purposes of this clinical
study, all-cause mortality, non-fatal myocardial infarction,
documented UA requiring urgent hospitalization,
revascularization occurring
³
60 days post the index event or non-fatal stroke).
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Results of the primary endpoint demonstrated a statistically
significant incremental LDL-C reduction of 5.7% (p = 0.0023) in
varespladib treated patients versus those treated with
80 mg Lipitor (atorvastatin) alone after eight weeks of
therapy. A p-value is a probability with a value ranging from 0
to 1, which indicates the likelihood that a clinical study is
different between treatment and control groups. P-values below
0.05 are typically referred to as statistically significant. A
statistically significant difference was observed in LDL-C
reduction from baseline as early as two weeks after treatment.
The treatment effect was maintained throughout the observation
period.
Figure 1: Mean Percentage Change in LDL-C from Baseline
Secondary endpoints measured effects of varespladib on
sPLA2,
CRP and IL-6 levels, which are well-established markers of
inflammation. While the FRANCIS study was not designed to
demonstrate statistically significant changes in CRP and IL-6,
the results were consistent with previous studies, which
demonstrated improvement across these biomarkers and achieved
statistical significance at some time points.
sPLA2
concentration was statistically significantly reduced from the
earliest time point of two weeks through the 16-week time point
(p < 0.0001) as compared to high-dose statin (80 mg
Lipitor (atorvastatin)) therapy alone. While our first
sPLA2
measurement in this clinical study occurred at two
75
weeks, data from previous clinical studies utilizing varespladib
or A-001
demonstrated reductions in
sPLA2
as early as two days following treatment.
Figure 2: Median Percentage Change in
sPLA2
Concentration from Baseline
In addition, treatment-related reductions in CRP and IL-6 levels
were also greater in varespladib treated patients compared to
those treated with placebo at all time points in the clinical
study. The percent decrease in CRP at week two was nearly
two-fold greater among varespladib and 80 mg Lipitor
(atorvastatin) treated patients than those treated with placebo
and 80 mg Lipitor (atorvastatin) alone (-39% versus -20%, p
= 0.183), and at week 16, the difference between treatment
groups was statistically significant (-82% versus -73%, p =
0.0067). At weeks two, four, eight and 16, varespladib treated
patients had numerically reduced levels of CRP versus patients
treated with placebo.
Figure 3: Median Percentage Change in CRP Concentration from
Baseline
The percent decrease in IL-6 in patients on varespladib at week
two was more than three times the reduction in IL-6 in patients
on placebo (-18% versus -5.1%, p = 0.18).
76
Figure 4: Median Percentage Change in IL-6 Concentration from
Baseline
Treatment with varespladib resulted in more subjects with LDL-C
levels lower than 70 mg/dL and lower than 50 mg/dL
than those on placebo (80 mg Lipitor (atorvastatin) and
physician-directed standard of care) alone at eight, 16 and
24 weeks of treatment. As discussed above, the NCEP ATP III
guidelines have established an LDL-C of 70 mg/dL as an
optional target for very high-risk patients. As indicated in the
table below, the data suggests varespladib treatment helps
patients achieve their LDL-C target levels more quickly and
maintain them longer than with high-dose statin (80 mg
Lipitor (atorvastatin)) therapy alone.
Finally, given the importance of reducing inflammation as well
as LDL-C following an acute coronary syndrome event, we examined
the proportion of patients in the clinical study that were able
to achieve both LDL-C levels less than 70 mg/dL and CRP
levels below 1 mg/L. As indicated in the figure below,
significantly more patients at week four and week 16 (p = 0.02
and p = 0.01) reached this combined target when treated with
varespladib and 80 mg Lipitor (atorvastatin) than with
placebo and 80 mg Lipitor (atorvastatin) alone. (The actual
proportion of subjects in the varespladib group was 25% and 16%
in the placebo group). Additionally, in the PROVE-IT study a
comparable proportion (16%) of patients treated with 80 mg
Lipitor (atorvastatin) achieved these goals.
77
Figure 5: Percentage of Patients with LDL-C <
70 mg/dL, < 50mg/dL and Achieving Combined Targets of
CRP < 1.0 mg/L and LDL-C < 70 mg/dL
We also conducted an exploratory analysis of MACE in the
clinical study. At 16 weeks, there were 14 (4.2%) MACE in
the varespladib treated group as compared to 19 (6.1%) in the
placebo group. At the completion of the clinical study, all
patients had received at least six months of therapy and there
were 23 (7.4%) MACE in the varespladib treated group as compared
to 24 (7.7%) MACE in the placebo group. While the MACE analysis
was not designed to demonstrate any statistical differences
between the two treatment groups, we believe that the results
are encouraging and will help us to design our VISTA-16 study.
Overall, varespladib was generally well-tolerated in this
clinical study and no imbalance was seen in dropouts due to drug
effects. After completing patient treatment, overall exposure to
varespladib was a mean of 30 weeks and median of
34 weeks. In total, 485 total patients completed six months
of treatment, with 167 subjects completing 40 weeks and 70
completing 44 weeks. There was no imbalance of overall
adverse events between the treatment arms. During the clinical
study, at week four and week eight, occasional mild and
transient elevations in liver enzymes, defined as elevations
three times the upper limit of normal, were seen among more
patients taking varespladib, but the frequency and magnitude of
the elevations were not meaningfully different between the
active and control groups at the end of the clinical study. The
frequency of the elevations was also similar to that reported
for Lipitor (atorvastatin) and other currently approved
lipid-lowering agents. Furthermore, there were no effects on
blood pressure or the QT interval, an electro-cardiographic
safety endpoint.
Summary data from FRANCIS was presented at the American College
of Cardiology meeting in 2010 and we anticipate publishing
detailed results from the study in 2010 in a scientific journal.
78
Phase 2 Stable Coronary Artery Disease Study
PLASMA (Phospholipase Levels and Serological Markers of
Atherosclerosis): Varespladib Twice-Daily Versus Placebo
Our Phase 2 PLASMA study was designed to confirm the safety and
effect of varespladib on
sPLA2
concentration, other inflammatory biomarkers and lipids in
patients with stable CAD. In October 2007, we completed a
randomized, double-blind, placebo-controlled study evaluating
four doses of varespladib administered twice-daily versus
placebo among 396 patients with stable CAD from 38 centers
in two countries. The clinical study enrolled patients more than
12 weeks after a myocardial infarction or six weeks after
an episode of UA. The varespladib doses tested were 50 mg,
100 mg, 250 mg and 500 mg administered twice per
day. Following randomization, patients were treated for eight
weeks and safety and efficacy evaluations were conducted at
weeks two, four and eight. Physician-directed standard of care
therapies were permitted during the clinical study, including
259 patients who were on background statin therapy.
The primary endpoint of the clinical study was the change in
sPLA2
concentration from baseline to week eight in varespladib, across
all doses, versus placebo patients. Secondary endpoints in the
clinical study included the change in lipids, including LDL-C,
lipoprotein subclasses and certain inflammatory biomarkers, from
baseline to each of weeks two, four and eight.
Our Phase 2 PLASMA results were selected for a late-breaking
presentation at the American Cardiology Conference and published
in the Lancet journal in February 2009. Results from the
clinical study demonstrated that treatment with varespladib led
to statistically significant reductions in
sPLA2,
LDL-C and various plaque-building and pro-inflammatory forms of
LDL-C. In patients receiving varespladib, there were incremental
reductions in CRP versus placebo (-55.6% versus -24.8%, p =
0.47) from baseline to eight weeks.
Among all patients treated with varespladib, median
sPLA2
concentration decreased by 86.7% from baseline to week eight, as
compared to 4.8% in the placebo group (p < 0.0001). Median
sPLA2
concentration decreased among the varespladib groups in a
dose-dependent manner.
At week eight, across all dosage groups, LDL-C was reduced by
9.7% versus placebo (p = 0.0035). In a subgroup of patients
taking statins with LDL-C > 70 mg/dL, LDL-C was
reduced by 12.0% (p = 0.0065) versus placebo at the
eight week time point. Notably, the reductions in LDL-C appear
to be driven primarily by a shift in the distribution of LDL-C
particles with fewer pro-atherogenic, pro-inflammatory small
LDL-C particles present in the circulation. In addition,
statistically significant reductions from baseline to week eight
were seen in total cholesterol and non-HDL cholesterol in the
overall clinical study population treated with varespladib.
Varespladib was generally well-tolerated among all patients
treated. In general, adverse effects were mild or moderate with
no imbalance of adverse events in the varespladib groups as
compared to placebo. The most common adverse effects seen in the
varespladib groups were headache (6.4%) and nausea (5.4%). There
were mild and transient elevations of liver function tests,
defined as elevations three times the upper limit of normal, in
patients taking varespladib.
Phase 2 Stable Coronary Artery Disease Study
PLASMA-2 (Phospholipase Levels and Serological Markers of
Atherosclerosis -2): Once-Daily of Varespladib Versus
Placebo
Based on data from our first PLASMA study, we initiated a second
Phase 2 clinical study (PLASMA-2) to evaluate the effect of
once-daily varespladib treatment on inflammatory and lipid
biomarkers. In December 2007, we completed a randomized,
double-blind, placebo-controlled Phase 2 clinical study
evaluating two doses of varespladib versus placebo amongst
138 patients with stable CAD. The clinical study, conducted
in the United States, involved 13 clinical sites. Following
randomization to one of two
79
doses of varespladib or placebo, patients were treated for eight
weeks with safety and efficacy evaluations at weeks two, four
and eight. Physician-directed standard of care therapies were
permitted during the clinical study, including 123 patients
(89.1%) who were on background statin therapy.
The primary endpoint of the clinical study was a comparison
between once-daily doses of varespladib and placebo in changes
in
sPLA2
concentration at week eight. Secondary endpoints in the clinical
study included measurements of lipids including LDL-C and
certain other inflammatory biomarkers from baseline to each of
weeks two, four and eight.
Results of the primary endpoint,
sPLA2,
were statistically significant and consistent with those
generated from the first PLASMA study described above. Patients
on varespladib demonstrated a 77.8% reduction in
sPLA2
concentration as compared to an increase of 8.3% in placebo
treated patients (p < 0.0001). Pharmacokinetic data
indicated that once-daily dosing with varespladib would be
sufficient to achieve over 90% inhibition of
sPLA2
mass and activity over a
24-hour
period.
The anti-inflammatory, lipid-lowering and lipid-modulating
effects of varespladib treatment were consistent with those seen
in the first PLASMA study: LDL-C was decreased by 8.3% compared
to 0.7% in placebo (p = 0.014). Due to the small size of this
clinical study, and the low baseline inflammation present in
these patients, no meaningful changes with CRP could be detected
between the active and control groups. As was observed in the
first clinical study, there were statistically significant
reductions from baseline to week eight in total cholesterol and
non-HDL cholesterol in the overall clinical study population
treated with varespladib.
The adverse effect profile for varespladib was consistent with
earlier studies and there was no imbalance of adverse events
among the varespladib groups and placebo. Varespladib was
generally well-tolerated. The most common effects seen in the
varespladib groups were diarrhea (6.7%), nausea (5.6%), any
increase in alanine aminotransferase (5.6%), which is an enzyme
that indicates liver cell injury, and any increase in aspartate
aminotransferase (5.6%), which is another enzyme that indicates
liver cell injury. However, mild and transient elevations of
these liver enzymes, defined as elevations three times the upper
limit of normal, were infrequent in patients taking varespladib.
Table 6: Placebo-corrected Percent Decrease from Baseline to
Week Eight in Biomarkers
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LDL
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Total
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Non-HDL
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Oxidized
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sPLA2
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Cholesterol
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Cholesterol
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Cholesterol
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LDL-C
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PLASMA
(All doses varespladib)
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81.9%
(p < 0.0001)
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9.7%
(p = 0.0035)
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4.9%
(p = 0.0069)
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7.2%
(p = 0.0009)
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5.4%
(p = 0.0065)
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PLASMA-2
(500 mg varespladib)*
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86.1%
(p < 0.0001)
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13.9%
(p = 0.0007)
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9.2%
(p = 0.0006)
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14.2%
(p = 0.0001)
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7.3%
(pNS)
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*
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Dose selected for Phase 3
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Probability not significant
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Investigator-Sponsored Phase 2 Percutaneous Intervention
Study SPIDER-PCI
(sPLA2)
Inhibition to Decrease Enzyme Release After PCI): Varespladib
Once-Daily Versus Placebo for up to
10 Days.
In May 2007, Dr. Vladimir Dzavik at University Health
Network Hospital in Toronto, Ontario, Canada initiated an
investigator sponsored study with varespladib in patients
undergoing a percutaneous intervention, or PCI. The primary
endpoint of this study was to determine if inhibition of
sPLA2
with varespladib will result in a decrease in peri-PCI
myocardial necrosis, or heart muscle damage, as measured by
elevations of myocardial enzyme markers creatine kinase-MB, or
CK-MB, or troponin I. The study was to enroll a maximum of
164 patients who are scheduled to undergo PCI. Elevated
levels of troponin I following PCI are associated with an
increase in in-hospital complications and, in one
80
study, were an independent predictor of major cardiac events.
After PCI, circulating levels of
sPLA2
increase and patients with higher levels have an increased risk
of events after a two-year
follow-up.
This study explores the notion that
sPLA2
inhibition may reduce myocardial damage after PCI and improve
patient outcomes.
As of August 2009, enrollment and dosing in the SPIDER-PCI
investigator study were completed with 144 patients
evaluated for purposes of assessing the primary endpoint. On
December 11, 2009, we received a statistical analysis of
the patient evaluations, which showed that the primary endpoint
of the study, a reduction in the elevation of CK-MB or troponin
I above the upper limit of normal at six to eight hours or 18 to
24 hours, was not met (varespladib patients 57% versus
placebo patients 51%, p = 0.55). However, the results
showed statistically significant reductions of
sPLA2
as early as 18 hours post-PCI procedure, which persisted
throughout the five days of dosing (-93.0%, p < 0.001).
Consistent with results from other clinical studies with
varespladib, there were numerical reductions in CRP from
baseline versus placebo at three to five days (-82.1%, p = 0.23).
Previous
Experience at Eli Lilly and Shionogi & Co.,
Ltd.
Eli Lilly and Shionogi & Co., Ltd. previously
conducted a series of clinical studies evaluating varespladib
and A-001 in
various inflammatory conditions. In total, at least 17 Phase 1
and Phase 2 clinical studies evaluated varespladib and
A-001 as a
treatment in sepsis, rheumatoid arthritis, asthma and ulcerative
colitis, an inflammatory bowel disease. Results from these
studies provide a large body of safety data for varespladib and
A-001 with
more than 1,000 healthy volunteers and subjects receiving
treatment.
Throughout these studies, varespladib was generally
well-tolerated.
Non-Clinical
Studies with Varespladib and
A-001
Approximately 150 preclinical pharmacology and toxicology
studies have been completed with varespladib and
A-001,
including two-year rat and mouse carcinogenicity studies,
one-year primate study and three-month rat study in combination
with Lipitor (atorvastatin).
A-623
A-623 is a
peptibody antagonist of the BAFF cytokine that is initially
being developed as a treatment for lupus. BLyS, also known as
B-cell activating factor, or BAFF, is a tumor necrosis family
member and is critical to the development, maintenance and
survival of B-cells. It is primarily expressed by macrophages,
monocytes and dendritic cells and interacts with three different
receptors on B-cells including BAFF receptor, or BAFF-R, B-cell
maturation, or BCMA, and transmembrane activator and cyclophilin
ligand interactor, or TACI. The BAFF-R receptor is expressed
primarily on peripheral B-cells.
Two randomized, dose-ranging, placebo-controlled Phase 1
clinical studies
A-623 in 104
lupus patients have already been completed. Results from these
studies demonstrated
A-623
generated anti-BAFF activity and showed statistically
significant reductions in B-cells of
50-70% (p
< 0.001) in lupus patients across multiple subcutaneous and
intravenous formulations.
After successfully reactivating our Investigational New Drug
Application, or IND, we initiated a Phase 2b clinical study with
A623 for the treatment of lupus in July 2010 called PEARL-SC. We
may also study
A-623 in
other B-cell mediated autoimmune diseases such as
Sjögrens Syndrome or orphan indications such as
myasthenia gravis and pemphigus. We are actively pursuing a
partnership with major pharmaceutical companies to develop and
commercialize
A-623.
81
We intend to advance the development of our BAFF targeting
molecule,
A-623, a
selective peptibody, to exploit its broad clinical utility in
autoimmune diseases.
A-623, as a
peptibody directed against BAFF, was developed as an alternative
to antibodies and is produced in escherichia coli versus
antibodies that are produced in mammalian cells. In addition,
A-623 offers
a number of potential differentiations over other anti-BAFF
compounds, as well as other novel B-cell directed therapies,
including:
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convenient, at-home, patient-administered subcutaneous dosing
with a range of dosing frequencies including monthly and weekly;
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ability to bind to both membrane-bound and soluble BAFF, which
may confer differentiating pharmacodynamic characteristics;
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non-glycosylated protein that is produced in a bacterial
fermentation manufacturing process, which may reduce the
potential to be immunogenic, and may provide manufacturing
benefits and lower cost of goods; and
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multiple binding domains achieve highest reported affinity for
inhibition of BAFF.
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Market
Opportunity
Lupus is an autoimmune disorder that involves inflammation that
causes swelling, pain and tissue damage throughout the body.
Lupus can affect any part of the body, but especially the skin,
heart, brain, lungs, joints and the kidneys. The course of the
disease is unpredictable, with periods of illness, called flares
alternating with remission. The Lupus Foundation estimates that
approximately 1.5 million people in the United States and
five million worldwide suffer from lupus. Although lupus may
affect people of either sex, women are 10 times more likely to
suffer from the disease than men, according to the Lupus
Foundation.
Patients with active lupus may have a broad range of symptoms
related to the inflammation. Inflammation of the brain may cause
seizures and other neurologic abnormalities. Inflammation of the
heart may cause heart failure or sudden death. Lung inflammation
causes shortness of breath. Lupus may also cause swollen joints
and severe rash. In addition, LN may lead to kidney dialysis or
transplantation.
Although the cause of lupus is still not completely understood,
B-cell activation and autoantibody production are known to be
central to the process. Evidence has emerged that
over-expression of BAFF plays an important role in this disease
process. In preclinical studies, transgenic mice created to
over-express BAFF begin to exhibit symptoms similar to lupus. In
addition, treatment of these same mice with BAFF antagonists
appears to ameliorate the disease.
PEARL-SC
Phase 2b Clinical Study in Patients with Lupus
Based on positive results among 104 patients in our Phase
1a and 1b clinical studies, we initiated a Phase 2b clinical
study in lupus patients called PEARL-SC. PEARL-SC is a
randomized, placebo-controlled, phase 2b clinical study which
may enroll up to 600 patients in approximately
60 centers worldwide. Subjects will be randomized into
three active subcutaneous treatment arms and one placebo
treatment arm for a minimum of 24 weeks. The primary
endpoint of the PEARL-SC study will be clinical improvement at
24 weeks in responder rates of a composite systemic lupus
erythematosus responder index, or SRI, in the pooled treatment
arms versus placebo. The primary SRI endpoint is a composite
score based upon changes in SELENA and SLEDAI disease activity
scale, Physicians Global Assessment scores and British
Isles Lupus Assessment Group scores, which are clinical
standards for the measurement of disease severity in lupus
patients. Secondary endpoints will include safety, improvement
in other clinical assessment scores, clinical response in
patients with various baseline disease severities, resolution of
fatigue, steroid utilization and time to flare. An interim
biomarker analysis to establish the appropriate drug effect on
total B-cells is included early in the study. Initially we
intend to randomize
82
only 480 patients. This total number of patients will allow
us to detect a treatment effect of 14% with a p-value of 0.05
between the pooled active arms and the placebo arm.
The following table represents our current PEARL-SC study as
well as a the option to further extend the study for collection
of long-term safety collection.
On November 16, 2010, we placed a voluntary hold on the
PEARL-SC study due to problems found with product vials. Patient
enrollment in the study has been temporarily suspended and
patients currently enrolled in the study will discontinue dosing
while we conduct a complete analysis of the problem. There have
been no reports of patient-related side effects or problems with
drug administration that could be attributed to this problem.
Future
Development of
A-623
A-623
Manufacturing Strategy
In May 2010, we successfully completed a manufacturing campaign
for a high concentration
A-623
injection formulation for subcutaneous administration.
Manufacturing was conducted per current good manufacturing
practices, or cGMP, and the product was released to clinical
sites in July 2010. Our active and placebo inventory is
sufficient to complete dosing of 120 patients for up to
16 weeks of therapy. In August 2010, we manufactured a
second batch of vials of the high-concentration
A-623
injection formulation from 34 liters of Amgen manufactured bulk
drug substance and, upon appropriate quality inspection and
testing, plan to release this batch for clinical use by November
2010. Upon successful release of this batch, we believe we will
have sufficient clinical material, both placebo and
A-623, to
dose up to 480 patients for a minimum of six months in the
PEARL-SC study.
We are currently evaluating proposals from a number of contract
manufacturers, or CMOs, with large-scale GMP manufacturing
capabilities for the production of
A-623. In
the fourth quarter of 2010, we
83
expect to announce the selection of a CMO and to begin the
technical transfer of the full manufacturing process to a large
scale contract manufacturer. As a result, in early 2011, we plan
to initiate manufacturing of GMP bulk product for eventual
pivotal clinical studies and an optional expansion
and/or
extension of the PEARL-SC study.
The following chart outlines the basic manufacturing steps
required for the production of
A-623.
A-623
Regulatory Strategy
In July 2010, we received clearance from the FDA to begin
recruitment of lupus patients into the PEARL-SC clinical study.
The approved protocol allows for enrollment of up to
600 patients treated for a maximum of 12 months.
Patients enrolled in this study will be randomized into three
active treatment arms and one placebo arm. Subsequent to this
approval the FDA requested additional information regarding
characterization and qualification of the manufactured vials of
A-623. In
addition the FDA requested minor changes to aspects of PEARL-SC
study including collection of ECG testing at the end of dosing
and a recommendation for a corticosteroid tapering strategy.
Neither of these changes are considered material to the conduct
of the PEARL-SC study. The FDA also recommended we submit to the
IND analytical and comparability data from our recently
completed manufacturing lot of
A-623 vials
and a comparability proposal for purposes of soliciting their
input prior to implementation. We submitted a response to the
FDA in October 2010.
It is our intent to continuously submit results of comparability
testing from all of our manufacturing campaigns to the FDA. We
also intend to discuss with the FDA a comparability proposal
that would ensure future batches of material manufactured by our
eventual CMO would meet the FDAs standards for
equivalence. If these batches meet specification and the FDA
agrees A-623
product manufactured by our CMO meets comparability
requirements, we believe these batches could be used to further
extend and expand the PEARL-SC study
and/or
initiate identical Phase 3 clinical studies for purposes of
registration.
Historical
Clinical Studies
Prior to our in-licensing of
A-623, Amgen
completed two Phase 1 clinical studies of
A-623 in
lupus patients to evaluate the safety and pharmacokinetics of
single and multiple doses of drug using intravenous and
subcutaneous formulations. Prior to conducting Phase 1 clinical
studies in lupus patients, Amgen conducted a pre-Phase 1
clinical study in lupus patients. In Amgens pre-Phase 1
clinical study, individual B-cell subsets, such as mature
naïve B-cells, activated B-cells and memory B-cells, all
therapeutic targets for
A-623, were
quantified in order to characterize the specific B-cell subset
abnormalities associated with lupus.
The randomized, placebo-controlled, dose-escalation Phase 1a
clinical study evaluated
A-623 as a
single intravenous or subcutaneous therapy among 56 lupus
patients. Intravenous doses included 1, 3 and 6 mg/kg, and
subcutaneous doses included 0.1, 0.3, 1 and 3 mg/kg. The
primary endpoint was to assess the safety and tolerability of
single dose administrations of
A-623.
Secondary endpoints were designed to assess the plasma
pharmacokinetic profile and immunogenicity of
A-623.
Results from this clinical study indicated the safety and
tolerability of
A-623
administered as single dose of intravenous or subcutaneous was
comparable to placebo. Single doses of
A-623
exhibited linear pharmacokinetics after both intravenous and
subcutaneous administration. There were comparable adverse
events between the
A-623 and
placebo groups with no deaths reported. In addition, no
neutralization antibodies were seen
84
across all doses. The most common adverse events were nausea
(15%), headache (10%), upper respiratory tract infection (10%)
and diarrhea (8%).
A-623 was
evaluated in a randomized, placebo-controlled, multi-dose Phase
1b clinical study as an intravenous or subcutaneous therapy
among 63 lupus patients. The intravenous dose was 6 mg/kg,
and subcutaneous doses included 0.3, 1 and 3 mg/kg.
Patients received their doses of
A-623 or
placebo once-weekly for four weeks. The primary endpoint was to
assess the safety and tolerability of multiple dose
administrations of
A-623.
Secondary endpoints were designed to assess the plasma
pharmacokinetic profile and immunogenicity of
A-623 after
multiple doses. Results showed that multiple doses of
A-623
exhibited dose-proportional pharmacokinetics after both
intravenous and subcutaneous administration. Further, results
demonstrated a dose-dependent decrease in total B-cells as early
as 15 days of treatment, and total B-cell reduction (up to
approximately
60-70% of
baseline) reached its nadir after about 160 days of
therapy. By six months after treatment, the B-cell populations
had returned to baseline levels.
Figure 7: Total B-cell Depletion
An experimental analysis was also conducted to assess B-cell
subsets in patients following multiple doses. Results
demonstrated that
A-623
selectively modulate certain B-cell subsets and induced trends
toward normalizing the B-cell abnormalities that were observed
in lupus patients in the pre-Phase 1 clinical study.
85
Results indicated that the tolerability of
A-623
administered as multiple doses of intravenous or subcutaneous
administration was generally comparable to placebo. There were
no deaths reported between the
A-623 and
placebo. Few neutralization antibodies were seen, and all
resolved in subsequent visits. Based on these results and
published data from competitor studies, we initiated a Phase 2b
clinical study evaluating
A-623 in
lupus patients during the second half of 2010.
A-001
A-001 is an
intravenously administered, potent, broad-spectrum inhibitor of
sPLA2,
including forms IIa, V and X.
A-001 is
currently being evaluated in a Phase 2 clinical study for the
prevention of acute chest syndrome associated with sickle cell
disease in at-risk patients. Substantial scientific evidence
implicates
sPLA2
activity in the development of acute chest syndrome associated
with sickle cell disease, as well as other forms of acute lung
injury. The FDA granted orphan drug and fast-track designation
for A-001
for the prevention of acute chest syndrome in at-risk patients.
We currently retain all worldwide product rights, except in
Japan where Shionogi & Co., Ltd. retains rights. We
also licensed
A-001 from
Eli Lilly and Shionogi & Co., Ltd. in July 2006.
sPLA2
levels increase in advance of acute chest syndrome episodes and
can be used alongside the presence of fever to strongly predict
an impending episode. There is a strong correlation between
levels of CRP and
sPLA2
in this patient population. Patients with acute chest syndrome
associated with sickle cell disease can exhibit levels of
sPLA2
that can be 100 times greater than normal. We believe that early
intervention with
A-001 to
inhibit
sPLA2
activity may offer a novel preventative therapy to improve
outcome among sickle cell disease patients presenting with a
high risk of acute chest syndrome.
Market
Opportunity
Sickle cell disease is a lifelong genetic, blood disorder
typically diagnosed during early childhood. According to the
Sickle Cell Information Center, in the United States, over
70,000 people currently suffer from the disease and
approximately 1,000 children are born with the disease annually.
According to Medtech Insight, in Europe, there are over
200,000 people suffering from the disease, and the numbers
increase dramatically in Africa, where, according to the WHO,
200,000 children alone are born with sickle cell disease each
year. Life expectancy for these patients is significantly
shortened, with most expected to live only until their mid-40s.
The disease is characterized by structurally altered red blood
cells that assume an abnormal shape, similar to a sickle, and
produce an altered form of hemoglobin. These altered red blood
cells have a shortened life-cycle, become stiff and have
difficulty passing through the bodys small blood vessels.
At times, these abnormal cells may obstruct or block blood flow
through small blood vessels, leading to significant damage in
tissue and bone. This damage is more commonly labeled as VOC.
During VOC, blockage occurs within the circulation of the long
bones, causing microscopic bone damage. Fragments of bone or
bone fat may break free and embolize to the lungs, causing lung
injury.
VOC is a common trigger for the more serious complication of
acute chest syndrome associated with sickle cell disease. Acute
chest syndrome exhibits symptoms and characteristics similar to
acute lung injury. There are an estimated 10,000 episodes of
acute chest syndrome associated with sickle cell disease per
year in the United States. It represents the most common cause
of death in sickle cell patients and the second most common
cause of hospitalization among such patients. A majority of
sickle cell patients will experience at least one episode of
acute chest syndrome and repeated episodes can result in
progressive lung disease. The disorder is most common in the
two- to four- year age group and gradually declines in incidence
with age.
There are no marketed therapies targeting acute chest syndrome
associated with sickle cell disease. The most common treatment
regimen includes heavy doses of corticosteroids, opiates,
transfusion and
86
antibiotics while the patient suffers through the attack. In
addition, hydroxyurea, a chemotherapy, was found to reduce the
frequency of VOC and the need for blood transfusions in adult
patients with sickle cell disease. However, all of these
therapeutics are associated with significant adverse effects
while only offering limited patient benefit.
Our planned multinational, randomized, double-blind,
placebo-controlled Phase 3 clinical study will enroll up to
200 patients with sickle cell disease who are at an
elevated risk of developing acute chest syndrome as a result of
fever, vaso-occlusive crisis, and CRP 5.0 mg/l
³
at the time of hospitalization. Patients will be randomized to
receive a continuous infusion of
A-001 or
placebo for 48 hours after randomization. The primary
endpoint of this study will be freedom from acute chest syndrome
as determined by physician assessment and independent review of
chest X-rays. This study represents a unique treatment approach
for a small, orphan designated indication. As a result the
appropriateness of the design and endpoints of this study for
purposes of registration will only be known at the conclusion of
the study and upon submission to the FDA.
Historical
Clinical Studies
Phase 2 Acute Chest Syndrome in Hospitalized Patients with
Sickle Cell Disease Study Investigation of the
Modulation of Phospholipase in Acute Chest Syndrome, or
IMPACTS.
In January 2007, we initiated a randomized, double-blind,
placebo-controlled Phase 2 clinical study to assess the safety
and tolerability of escalating doses of
A-001
therapy when administered as a
48-hour
continuous infusion. The clinical study was designed to enroll
up to 75 patients across approximately 30 sites in the
United States. This clinical study enrolls hospitalized sickle
cell disease patients, at risk for acute chest syndrome on the
basis of VOC, fever and serum
sPLA2
concentration level greater than 50 mg/mL. The primary
endpoint for the clinical study was designed to assess safety
and tolerability. Secondary endpoints included the absence of
acute chest syndrome, suppression of
sPLA2,
reduced need for blood transfusions and assessment of
pharmacokinetics.
The first group of patients was randomized 2:1 to receive low
dose A-001
or placebo as a
48-hour
continuous infusion. A pre-specified interim analysis was
conducted in February 2009 after the 30th patient completed
treatment to examine safety and adjust dosing schedules. The
interim data was
87
balanced between two dosing arms of 30 mug/kg/hr (n =
11) and 55 mug/kg/hr (n = 6). Interim results indicated
serum levels of
A-001 when
dosed at 55 mug/kg/hr reduced
sPLA2
activity levels by more than 80% from baseline within
48 hours. Furthermore, the prevention of acute chest
syndrome associated with sickle cell disease appeared to be
related to the level of
sPLA2
activity. The DSMB recommended the clinical study continue based
on safety and tolerability. In addition, given the safety
profile, the DSMB approved the addition of a higher dose group
of 110 mug/kg/hr via continuous infusion during the second half
of the clinical study. We believe that the data suggest
A-001 can
suppress
sPLA2
at levels that may prevent the complication of acute chest
syndrome associated with sickle cell disease.
Table 8: Reductions of
sPLA2
activity from baseline and incidence of acute chest syndrome
(including placebo patients and patients receiving
A-001).
Exploratory analysis to determine correlation between degree of
sPLA2
suppression and incidence of acute chest syndrome.
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48-Hour
sPLA2Activity
as
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a Percentage of Baseline
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0.0% < 25.0%
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³25%
< 50%
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³50%
< 75%
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³
75%
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Number of Subjects
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7
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7
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3
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12
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Number of Subjects Developing Acute Chest Syndrome(%)
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0(0
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2(28
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1(33
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4(25)
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Our
Strategy
Our objective is to develop and commercialize our product
candidates to treat serious diseases associated with
inflammation, including cardiovascular and autoimmune diseases.
To achieve these objectives, we intend to initially focus on:
Advancing
Varespladib Through Phase 3.
Inflammatory processes and lipid abnormalities are central to
the onset of acute coronary syndrome and the development of CAD.
varespladib operates through a novel mechanism of action to
offer both targeted anti-inflammatory activity and incremental
lipid reductions, including LDL-C, when used in combination with
statins. Despite the benefits of statin therapy, many acute
coronary syndrome patients still remain at substantial risk of a
coronary event, suggesting additional biological mechanisms may
be relevant, including inflammation. We believe that combination
therapy with varespladib and statins will provide acute coronary
syndrome patients with a unique, short-term therapeutic option
unavailable with existing agents today. In addition, we believe
that an opportunity exists in the future to evaluate varespladib
in chronic indications such as CAD.
Advancing
Clinical Development of
A-623.
We are advancing the development of
A-623 to
exploit the broad potential clinical utility of BAFF antagonism.
We have initiated the Phase 2b clinical study known as PEARL-SC
in lupus patients. We may opportunistically enter into
collaborations with third parties for development of this
compound in lupus or in other B-cell mediated diseases, such as
multiple sclerosis, rheumatoid arthritis or Sjögrens
Syndrome, that may benefit from BAFF antagonism, including
securing corporate partners whose capabilities complement ours.
We are also actively pursuing a partnership with major
pharmaceutical companies to develop and commercialize
A-623. We
believe that a partnership could enable us to obtain funding for
development of
A-623 and to
accelerate its clinical, manufacturing and commercial
development with collaborators whose capabilities complement
ours.
We are seeking to structure a partnership that allows us to
retain significant control over the development and
commercialization of
A-623 in the
United States, and to retain economic interests in regions
outside of the United States. Given the recent positive results
of a BAFF-specific antagonist in multiple large, late-stage
clinical studies, we believe that
A-623 could
be an attractive product candidate
88
for pharmaceutical companies interested in exploiting
opportunities in autoimmune diseases directed at lupus, as well
as to other B-cell related autoimmune diseases.
In the future, if additional funds are available, we may develop
A-001, an
intravenous
sPLA2
inhibitor for prevention of acute chest syndrome associated with
sickle cell disease, because we identified that elevations in
sPLA2
activity are known to precede and predict disease progression.
Given that there are currently no approved drugs for the
prevention of acute chest syndrome associated with sickle cell
disease, we have received orphan drug designation and fast track
status from the FDA for
A-001.
Leveraging
Our
sPLA2
Expertise to Develop Products for Additional Disease
Indications.
We believe that we have developed a leadership position in the
field of
sPLA2
inhibition. Beyond our acute coronary syndrome and acute chest
syndrome program, we believe that
sPLA2
inhibition may have applications in other acute disease settings
where early intervention may have an impact and reduce
anti-inflammatory activity, such as acute lung injury.
Additionally, we believe that we can apply our
sPLA2
expertise to develop novel therapeutics for a number of chronic
diseases. For example,
sPLA2
has been shown to be involved in the development of such chronic
inflammatory diseases as atherosclerosis and dermatitis. We plan
to pursue these indications opportunistically and potentially in
collaboration with third parties.
We are also developing new and unique
sPLA2
inhibitor compounds for additional therapeutic areas.
A-003 is our
second generation lead candidate. We plan to continue
preclinical development of
A-003 for an
IND filing and we will continue to assess additional new
compounds.
Developing
Commercial Strategies Designed to Maximize Our Product
Candidates Market Potential.
Our primary product candidates are focused on either the acute
care setting in the hospital or highly-specialized physician
segments, such as rheumatologists. We believe that we can build
a small, focused sales force capable of marketing our products
effectively in acute care and orphan indications such as acute
coronary syndrome and acute chest syndrome associated with
sickle cell disease. In other chronic indications such as CAD,
we intend to seek commercial collaborations with companies that
have a large, dedicated sales force focused on general
practitioners and cardiologists and we plan to seek
commercialization partners for products in non-specialty and
international markets.
Competition
Our industry is highly competitive and subject to rapid and
significant technological change. Our potential competitors
include large pharmaceutical and biotechnology companies,
specialty pharmaceutical and generic drug companies, academic
institutions, government agencies and research institutions. We
believe that key competitive factors that will affect the
development and commercial success of our product candidates are
efficacy, safety and tolerability profile, reliability,
convenience of dosing, price and reimbursement.
Many of our potential competitors, including many of the
organizations named below, have substantially greater financial,
technical and human resources than we do and significantly
greater experience in the discovery and development of product
candidates, obtaining FDA and other regulatory approvals of
products and the commercialization of those products.
Accordingly, our competitors may be more successful than we may
be in obtaining FDA approval for drugs and achieving widespread
market acceptance. Our competitors drugs may be more
effective, or more effectively marketed and sold, than any drug
we may commercialize and may render our product candidates
obsolete or non-competitive before we can recover the expenses
of developing and commercializing any of our product candidates.
We anticipate that we will face intense and increasing
competition as new drugs enter the market and
89
advanced technologies become available. Finally, the development
of new treatment methods for the diseases we are targeting could
render our drugs non-competitive or obsolete.
The
sPLA2
product candidates we are currently developing, if approved,
will face intense competition, either as monotherapies or in
combination therapies. Although there are no
sPLA2
inhibitors currently approved by the FDA, we are aware of other
pharmaceutical companies, as described below, that are
developing product candidates in this area for separate
indications.
sPLA2
in Acute Coronary Syndrome
Our lead product candidate, varespladib, for the short-term
(16-week) treatment of acute coronary syndrome has a dual
mechanism of action that we believe confers anti-inflammatory
and lipid-lowering and lipid-modulating benefits. The market for
cardiovascular therapeutics and acute coronary syndrome,
specifically, is especially large and competitive. A wide range
of medications are typically administered to patients suffering
an acute coronary syndrome event in order to reduce ischemia and
thrombosis and improve blood flow. We expect that varespladib
for the treatment of acute coronary syndrome patients, if
approved, may compete with the following anti-inflammatory
therapeutics in development.
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Compound
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Stage
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Company
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Indications
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Notes
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Darapladib
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Phase 3
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GlaxoSmithKline plc
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Acute coronary
syndrome
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Lp-PLA2
Inhibitor
Collaboration with Human
Genome Sciences, Inc.
Various back-up compounds
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VIA-2291
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Phase 2
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Via Pharmaceuticals, Inc.
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Acute coronary
syndrome or
atherosclerosis
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5-lipoxygenase inhibitor
Discussions on-going with
FDA
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E-5555
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Phase 2
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Eisai Inc.
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Acute coronary
syndrome or
atherosclerosis
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600 patient study completed
October 2009
Thrombin receptor
antagonist
Evaluating biomarkers and
events
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Other
Agents Under Development
Additionally, we are aware of other products in development that
are being tested for anti-inflammatory benefits in patients with
acute coronary syndrome such as Via Pharmaceuticals, Inc. and
its
5-lipoxygenase,
or 5-LO, inhibitor, which has been evaluated in Phase 2 clinical
studies, GlaxoSmithKline plc and its product candidate,
darapladib, which is an
Lp-PLA2
inhibitor currently being evaluated in Phase 3 clinical studies.
If approved, these products or others in development may compete
directly with varespladib.
Approved
Categories of Drugs
Statins Treatment with varespladib is
designed to offer anti-inflammatory benefits for acute coronary
syndrome patients that are additive to treatment with statins.
However, statin therapy is thought to confer some element of
anti-inflammatory benefit as monotherapy. In certain
circumstances, it is possible the anti-inflammatory benefits of
statin monotherapy with products such as Lipitor (atorvastatin),
which is marketed by Pfizer Inc., Crestor (rosuvastatin), which
is marketed by AstraZeneca UK Limited and Zocor (simvastatin),
which is marketed by Merck & Co., Inc. may be viewed
as competitive to that offered by varespladib.
90
Other Lipid-Lowering Therapies
Increasingly, additional lipid-lowering agents are being
administered either in combination with statins or as
monotherapy to help acute coronary syndrome patients reduce
levels of LDL-C. varespladib has demonstrated LDL-C lowering
benefits when tested as monotherapy and in combination with
statin therapy. To the extent acute coronary syndrome patients
need additional LDL-C lowering, varespladib may compete for use
with other approved agents such as Vytorin, which is a fixed
dose combination therapy combining ezetimibe and Zocor, Tricor
(fenofibrate tablets) and Niaspan (niacin), both of which are
marketed by Abbott Laboratories, Zetia (ezetimibe) and fish oils
(omega-3).
Lupus
No new therapies have been approved for lupus in the last
50 years. Current therapies such as non-steroidal
anti-inflammatory drugs, or NSAIDs, corticosteroids and
immunosuppressants generally act to hold back broadly the
proliferation of many types of cells, including white blood
cells. However, use of these agents is associated with
significant adverse events and broad immune suppression.
Recently, several new biological agents under development have
targeted BAFF (or BLyS) and other B-cell related pathways for
the treatment of lupus. These product candidates include
Benlysta (belimumab) from Human Genome Sciences, Inc., LY2127399
from Eli Lilly and Company, atacicept, or TACI-Ig, from
ZymoGenetics Inc. and what we believe to be more non-specific
B-cell depleting agents such as Rituxan from Genentech, Inc. and
epratuzumab from Immunomedics, Inc. We believe that
A-623 may
offer potential differentiation from these agents, including:
demonstrated dosing flexibility with both subcutaneous and
intravenous delivery; selective modulation and reduction of
relevant B-cell types in lupus patients; the ability to bind to
both membrane-bound and soluble BAFF; its smaller size as
compared to a full antibody, which may confer differentiating
pharmacokinetic and pharmacodynamic characteristics; and
distinct patent protection based on a novel and proprietary
technology developed and commercialized by Amgen, which may also
confer potential manufacturing advantages with lower cost of
goods based on a bacterial fermentation manufacturing process.
91
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Compound
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Stage
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Company
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Indications
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Notes
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Benlysta (intravenous and subcutaneous)
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BLA submission
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Human Genome Sciences, Inc./GlaxoSmithKline plc
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Lupus
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Monoclonal antibody against BAFF, an agent that demonstrated partial reduction in B-cells
Inhibits soluble BAFF only
Positive results reported in two Phase 3 clinical studies
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Atacicept (intravenous)
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Phase 3
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ZymoGenetics Inc./Merck Serono S.A.
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Lupus, LN
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Fusion protein against BAFF and APRIL; Phase 3 clinical study in LN stopped due to safety issues
Phase 3 clinical study in lupus on-going
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Epratuzumab (intravenous)
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Phase 2b
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Immunomedics, Inc./UCB S.A.
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Lupus, Non-Hodgkins Lymphoma
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Humanized antibody against CD-22, an agent that specifically targets B-cells and leads to partial depletion of peripheral B-cells
Positive Phase 2b clinical study results reported
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LY2127399 (subcutaneous)
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Phase 2
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Eli Lilly and Company
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Rheumatoid Arthritis Multiple Myelomas
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Monoclonal antibody against BAFF inhibits soluble and membrane-bound BAFF
Recent positive results in RA study
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Ocrelizumab (intravenous)
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Phase 3
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F. Hoffman - La Roche Ltd./Biogen Idec Inc.
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LN
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Monoclonal antibody against CD-20 that leads to rapid and profound depletion of circulating B-cells
Phase 3 clinical study in lupus halted
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Lupuzor (subcutaneous)
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Phase 2b
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Cephalon, Inc./ImmuPharma PLC
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Lupus
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Modulates CD4 T cells
Positive Phase 2b clinical study results reported
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sPLA2
for Acute Chest Syndrome Associated with Sickle Cell
Disease
There are no currently approved agents for treatment or
prophylaxis of acute chest syndrome associated with sickle cell
disease. Droxia (hydroxyurea) is approved for prevention of VOC
in sickle cell disease and thus could reduce the pool of
patients with VOC at risk for acute chest syndrome. In addition,
there is evidence in the literature that blood transfusions may
prevent the occurrence of acute chest syndrome associated with
sickle cell disease, and a randomized clinical study is underway
by the National Heart, Lung and Blood Institute to explore this
possibility.
Intellectual
Property
Our policy is to pursue, maintain and defend patent rights,
developed internally and licensed from third parties, to protect
the technology, inventions and improvements that are
commercially important to the development of our business. We
also rely on trade secrets that may be important to the
development of our business.
Our success will depend significantly on our ability to:
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obtain and maintain patent and other proprietary protection for
the technology, inventions and improvements we consider
important to our business;
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defend our patents;
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preserve the confidentiality of our trade secrets; and
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operate our business without infringing the patents and
proprietary rights of third parties.
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Varespladib
and
A-001
As of the date of this prospectus, our licensed varespladib and
A-001 patent
portfolio includes:
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13 U.S. patents;
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One pending U.S. non-provisional patent application;
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Five European, or EP, patents, each validated in one or more of
Austria, Belgium, Denmark, France, Germany, Greece, Ireland,
Italy, Liechtenstein, Luxembourg, the Netherlands, Portugal,
Spain, Sweden, Switzerland and the United Kingdom;
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One pending EP patent application;
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20 non-EP foreign patents in Argentina, Australia, Brazil,
Canada, China, Finland, India, Malaysia, Mexico, the
Philippines, South Korea, Taiwan and Turkey; and
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Four pending non-EP foreign patent applications in Brazil, Japan
and Thailand.
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We hold exclusive worldwide licenses from Eli Lilly and
Shionogi & Co., Ltd. to all of these patents and
patent applications with the exception of licensing rights in
Japan, which Shionogi & Co., Ltd. retains. These
licenses are described below under
Licenses. The patents and applications
described above contain claims directed to varespladib and
A-001
compositions of matter and to various methods of making and
using varespladib and
A-001,
including methods of treating various inflammatory conditions.
The issued U.S. patents are currently scheduled to expire
between 2014 and 2021.
As of the date of this prospectus, our internally developed
varespladib and
A-001 patent
portfolio includes:
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Four pending U.S. non-provisional patent applications;
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Two pending U.S. provisional patent applications;
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Two pending Patent Cooperation Treaty, or PCT, patent
applications; and
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National phase applications in the European Patent Office, the
Eurasian Patent Organization and 17 other countries (Australia,
Brazil, Canada, China, Hong Kong, India, Indonesia, Israel,
Japan, Malaysia, Mexico, New Zealand, The Philippines,
Singapore, South Africa, South Korea and Vietnam).
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We own, and therefore hold all worldwide rights in and to, these
patent applications, which contain claims directed to
varespladib and
A-001
compositions of matter and methods of treating various
cardiovascular indications.
A-003
As of the date of this prospectus, our licensed
A-003 patent
portfolio includes:
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One licensed pending U.S. non-provisional patent
application (also listed above as covering varespladib and
A-001);
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Five EP patents (two also listed above as covering varespladib
and A-001),
each validated in one or more of Albania, Austria, Belgium,
Denmark, Finland, France, Germany, Greece, Ireland, Italy,
Latvia, Liechtenstein, Lithuania, Luxembourg, the Netherlands,
Portugal, Romania, Slovenia, Spain, Sweden, Switzerland and the
United Kingdom;
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15 non-EP foreign patents (six also listed above as
covering varespladib and A-001) in Argentina, Australia, Canada,
China, India, Mexico, South Korea and Taiwan; and
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One pending non-EP foreign patent application in Brazil (also
listed above as covering varespladib and A-001).
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We hold exclusive worldwide licenses from Eli Lilly and
Shionogi & Co., Ltd. to these patents and patent
applications with the exception of licensing rights in Japan,
which Shionogi & Co., Ltd. retains. These licenses are
described below under Licenses. The
patents and applications listed above contain claims directed to
A-003
compositions of matter and to various methods of making and
using A-003,
including methods of treating various inflammatory indications.
The issued U.S. patents are currently scheduled to expire
between 2017 and 2018.
As of the date of this prospectus, our internally developed
A-003 patent
portfolio includes:
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Three U.S. non-provisional patent applications (all also
listed above as covering varespladib and
A-001);
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Two pending U.S. provisional patent applications (both also
listed above as covering varespladib and
A-001);
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Two pending PCT patent applications (both also listed above as
covering varespladib and
A-001); and
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National phase applications in the European Patent Office, the
Eurasian Patent Organization and 17 other countries (Australia,
Brazil, Canada, China, Hong Kong, India, Indonesia, Israel,
Japan, Malaysia, Mexico, New Zealand, The Philippines,
Singapore, South Africa, South Korea and Vietnam).
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We own, and therefore hold all worldwide rights in and to, these
patent applications, which contain claims directed to
A-003
compositions of matter and methods of treating various
cardiovascular indications.
New
sPLA2
Compounds
As of the date of this prospectus, our new
sPLA2
compound patent portfolio includes over 30 licensed
U.S. patents, one pending U.S. nonprovisional patent
application, three EP patents, one pending EP patent
application, four non-EP foreign patents, and one pending
non-EP foreign patent application not listed above as
covering A-001, varespladib or A-003. We hold exclusive
worldwide licenses from Eli Lilly and Shionogi & Co.,
Ltd. to these patents and patent applications with the exception
of licensing rights in Japan, which Shionogi & Co.,
Ltd. retains. These licenses are described below under
Licenses. The patents and applications
listed above contain claims directed to various
sPLA2
second generation compounds, as well as methods of making and
using these new
sPLA2
compounds. The issued U.S. patents are currently scheduled
to expire between 2013 and 2024.
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A-623
As of the date of this prospectus, our
A-623 patent
portfolio includes:
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Two U.S. patents;
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One pending U.S. non-provisional patent application;
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One EP patent validated in Albania, Austria, Belgium, Cyprus,
Denmark, Finland, France, Germany, Greece, Ireland, Italy,
Latvia, Liechtenstein, Lithuania, Luxembourg, Monaco, the
Netherlands, Portugal, Romania, Slovenia, Spain, Sweden,
Switzerland, Turkey and the United Kingdom;
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Two pending EP patent applications;
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Ten non-EP foreign patents in Australia, China, Estonia, Eurasia
(validated in all nine Eurasian countries), Japan, New Zealand,
Singapore, South Korea and South Africa; and
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14 pending non-EP foreign patent applications in Brazil,
Bulgaria, Canada, China, the Czech Republic, Hong Kong, Hungary,
Israel, Mexico, Norway, the Philippines, Poland, Serbia and
Slovakia.
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We hold exclusive worldwide licenses from Amgen to all of these
patents and patent applications. In addition, we hold a
non-exclusive worldwide license to one pending
U.S. non-provisional patent application, one
EP patent, one pending EP patent application, ten
non-EP foreign patents, and over 30 pending
non-EP foreign patent applications relating to general
peptibody compositions and formulations.
The U.S. patent system permits the filing of provisional
and non-provisional patent applications. A non-provisional
patent application is examined by the U.S. Patent Office,
or USPTO, and can mature into a patent once the USPTO determines
that the claimed invention meets the standards for
patentability. A provisional patent application is not examined,
and automatically expires 12 months after its filing date.
As a result, a provisional patent application cannot mature into
a patent. The requirements for filing a provisional patent
application are not as strict as those for filing a
non-provisional patent application. Provisional applications are
often used, among other things, to establish an early filing
date for a subsequent non-provisional patent application.
The filing date of a non-provisional patent application is used
by the USPTO to determine what information is prior art when it
considers the patentability of a claimed invention. If certain
requirements are satisfied, a non-provisional patent application
can claim the benefit of the filing date of an earlier filed
provisional patent application. As a result, the filing date
accorded by the provisional patent application may remove
information that otherwise could preclude the patentability of
an invention.
Depending upon the timing, duration and specifics of FDA
approval of varespladib,
A-623,
A-001,
A-003 or one
or more new
sPLA2
compounds, one or more of the U.S. patents listed above may
be eligible for limited patent term restoration under the Drug
Price Competition and Patent Term Restoration Act of 1984,
commonly referred to as the Hatch-Waxman Act. See
Regulatory Matters Patent Term
Restoration and Marketing Exclusivity.
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Licenses
Eli Lilly
and Shionogi & Co., Ltd.
In July 2006, we entered into a license agreement with Eli Lilly
and Shionogi & Co., Ltd., pursuant to which we
obtained an exclusive license in all countries except for Japan
to certain technology and compounds relating to
sPLA2
inhibitors. The licensed technology was largely developed under
a research and development agreement between Eli Lilly and
Shionogi & Co., Ltd., which was entered into between
the two parties in August 1992 and terminated in December 2004.
Under the agreement, we obtained exclusive rights to
(i) use licensed patent rights and know-how to identify and
develop
sPLA2
inhibitors, (ii) develop, make, have made, use, import,
offer for sale and sell licensed compounds and pharmaceutical
formulations thereof, including varespladib,
A-001,
A-003 and
other
sPLA2
inhibitors and (iii) grant sublicenses. The licensed patent
rights include a specific set of previously filed U.S. and
foreign patents and applications, as well as any applications
filed after the execution date by Eli Lilly or
Shionogi & Co., Ltd. that relate to licensed know-how.
Certain patents and applications within the licensed patent
rights are defined as core patents. Although the
agreement does not allow us to sell or offer for sale licensed
products in Japan, it does allow us to conduct preclinical and
clinical studies in Japan in support of applications for
marketing authorization outside of Japan, and to make and have
made licensed products in Japan for use or sale outside of
Japan. Eli Lilly and Shionogi & Co., Ltd. retain the
right to use licensed products for research purposes only. Eli
Lilly also retains the right to conduct studies of specific
compounds in animals for research purposes, but only with our
prior written approval. In addition, Shionogi & Co.,
Ltd. retains the non-exclusive right to make and have made
licensed products for supply to us, as well as its rights to
continue research, development and marketing of licensed
technology in Japan.
Upon entering into the license agreement, we took over all
prosecution and maintenance of core patents prosecuted and
maintained by Eli Lilly prior to the agreement. All core patents
prosecuted and maintained by Shionogi & Co., Ltd.
prior to the agreement remained under the control of
Shionogi & Co., Ltd. Licensed patent rights that were
not classified as core remained under the control of Eli Lilly
and Shionogi & Co., Ltd. However, control of certain
of these patents and applications has since been transferred to
us following the decision by Eli Lilly or Shionogi &
Co., Ltd. to discontinue prosecution and maintenance.
Upon entering into the license agreement, we made one-time
payments of cash in the amount of $250,000 and issued shares of
convertible preferred stock with a total aggregate value of
$2.3 million to Eli Lilly and Shionogi & Co.,
Ltd. In addition, we are required to make various milestone
payments, including payment upon initiation of the first Phase 3
clinical study for a particular product. We amended the
milestone payment terms with each of Eli Lilly and
Shionogi & Co., Ltd. to no later than 12 months
from the enrollment of the first patient in a Phase 3 clinical
study for varespladib. In consideration for the extension, the
milestone payments increased to $1.75 million to each
party. The $1.75 million milestone payment to Eli Lilly was
paid in the form of 265,957 shares of our common stock
issued at the price per share at which shares were sold to the
public in our initial public offering, minus any per-share
underwriting discounts, commissions or fees. The
$1.75 million milestone payment to Shionogi &
Co., Ltd. was paid in the form of 265,957 shares of our
common stock issued at the price per share at which shares were
sold to the public in our initial public offering, minus any
per-share underwriting discounts, commissions or fees. We are
also required to pay tiered royalty payments on net sales, which
increase as a percentage as net sales increase. Both the
milestone and royalty payment schedules vary depending on the
specific formulation (e.g., oral versus intravenously
administered). For varespladib, we are required to pay up to
$3.5 million (as discussed above) upon achievement of
certain clinical development milestones and up to
$32.0 million upon achievement of certain approval and
post-approval sales milestones. For
A-001, we
are required to pay up to $3.0 million upon achievement of
certain clinical development milestones and up to
$25.0 million upon
96
achievement of certain approval and post-approval sales
milestones. For other product formulations that we are not
currently developing, we would be required to pay up to
$2.0 million upon achievement of certain clinical
development milestones and up to $35.5 million upon
achievement of certain approval and post-approval sales
milestones. Our royalty payments vary based upon type of
formulation and annual net sales, but generally range from the
mid-single digits to the low double digits. Our royalty payment
obligations for a particular licensed product in a particular
country begin on the date of the first commercial sale of the
licensed product in that country, and end upon the later of
10 years from the date of first commercial sale in that
country or the first date on which a generic version of the
licensed product reaches a 25% total market share in that
country.
The license agreement will remain in effect for the length of
our royalty obligation on a
product-by-product
and
country-by-country
basis, unless we elect to terminate earlier or until termination
by mutual agreement. Upon expiration of the agreement, our
license will remain in effect and will convert to an
irrevocable, perpetual royalty-free license. If we fail to meet
our obligations under the agreement, Eli Lilly or
Shionogi & Co., Ltd. can terminate the agreement,
resulting in a loss of our exclusive rights to the licensed
technology.
Amgen
In December 2007, we entered into a license agreement with
Amgen, pursuant to which we obtained an exclusive worldwide
license to certain technology and compounds relating to
A-623, as
well as a non-exclusive worldwide license to technology relating
to certain peptibody compositions of matter and formulations.
Under the agreement, we obtained exclusive rights under the
licensed patents and know-how to research, develop, make, have
made, use, sell, offer for sale and import pharmaceutical
products containing
A-623, as
well as the right to grant sublicenses. The licensed patents
included a specific set of previously filed U.S. and
foreign patents and applications, as well as any applications
filed after the execution date by Amgen and covering licensed
know-how. During the period of the agreement, we are responsible
for the filing, prosecution, defense and maintenance of all
exclusively licensed
A-623
patents and applications. Amgen retains the right to review all
documents relating to said filing, prosecution, defense and
maintenance, and we are required to incorporate all reasonable
comments or suggestions that Amgen makes with regard to these.
During the seven-year period after execution of the agreement,
Amgen is prohibited from clinically developing or
commercializing any BAFF peptibody. Similarly, we are prohibited
during the term of the agreement from clinically developing or
commercializing any molecule other than
A-623 that
modulates BAFF as the primary intended therapeutic mechanism of
action.
The license agreement provided for a first installment fee of
$3.0 million and a second installment fee of
$3.0 million upon the earlier of our termination of the
agreement or February 1, 2009. We have paid all of these
up-front fees. In addition, we are required to make various
milestone payments upon the achievement of certain development,
regulatory and commercial objectives, including payment upon
initiation of the first Phase 3 clinical study for any
A-623
formulation. We are also required to pay up to
$10.0 million upon achievement of certain pre-approval
clinical development milestones and up to $23.0 million
upon achievement of certain post- approval milestones.
Furthermore, we are required to make tiered quarterly royalty
payments on net sales, which increase as a percentage from the
high single digits to the low double digits as net sales
increase. Our royalty payment obligations for a particular
product in a particular country begin on the date of the first
commercial sale of the licensed product in that country, and end
upon the later of 10 years from the date of first
commercial sale in that country or the expiration date of the
last valid claim of a licensed patent that covers the
manufacture, use or sale, offer to sell or import of the product.
97
The license agreement will remain in effect until we elect to
terminate, or until termination for material breach by either
party or insolvency on our part. Under these terms, Amgen can
terminate the agreement if we fail to meet our obligations,
resulting in a loss of our exclusive rights to the licensed
technology.
On October 16, 2009, we executed an amendment to the
license agreement to amend certain terms and conditions,
including the terms and conditions on which technology transfer
activities, support and assistance would be provided to us and
forgiveness of accrued interest on an unpaid license fee, which
has since been paid in full.
Manufacturing
and Supply
We currently rely on contract manufacturers to produce drug
substances and drug products required for our clinical studies
under cGMP with oversight by our internal managers. We plan to
continue to rely upon contract manufacturers and, potentially,
collaboration partners to manufacture commercial quantities of
our product candidates if and when approved for marketing by the
FDA. We currently rely on a single manufacturer for the
preclinical and clinical supplies of each of our product
candidates and do not currently have agreements in place for
redundant supply or a second source for any of our product
candidates. We believe that there are other manufacturers and
alternate sources of supply that can satisfy our clinical study
requirements without significant delay or material additional
costs should our current manufacturer fail to meet our needs.
However, should a supplier or a manufacturer on which we have
relied to produce a product candidate provide us with a faulty
product or such product is later recalled, we would likely
experience significant delays and material additional costs.
Sales and
Marketing
Given our stage of development, we have not developed a
commercial organization or distribution capabilities. We expect
that we would develop these capabilities once we receive Phase 3
data in contemplation of FDA approval and the commercial launch
of our product candidates. In order to commercialize any of our
product candidates, we must develop these capabilities
internally or through collaboration with third parties. In
selected therapeutic areas where we feel that any approved
products can be commercialized by a specialty sales force that
calls on a limited and focused group of physicians, acute care
and orphan indications such as acute coronary syndrome and acute
chest syndrome associated with sickle cell disease, we may seek
to commercialize these product candidates alone. In therapeutic
areas that require a large sales force selling to a large and
diverse prescribing population, such as chronic indications such
as CAD, we currently plan to partner with third parties to
commercialize our product candidates while retaining rights to
co-promote our products to a select audience of high prescribing
physicians in the United States only, thereby supplementing or
enhancing the efforts of a commercial partner. We also plan to
seek commercialization partners for products in non-specialty
and international markets.
In North America and Western Europe, patients in the target
markets for our product candidates are largely managed by
medical specialists in the areas of cardiology and internal
medicine. Historically, companies have experienced substantial
commercial success through the deployment of specialized sales
forces that can address a majority of key prescribers,
particularly within the cardiovascular disease marketplace.
Therefore, we expect to utilize a specialized sales force in
North America for the sales and marketing of product candidates
that we may successfully develop. Based upon sales models, we
estimate that we could effectively promote (supplementing a
commercial partners sales efforts) the treatment of acute
coronary syndrome to 3,000 cardiologists with approximately 300
sales representatives in North America and Western Europe. If we
obtain additional label indications for varespladib or
A-001, we
may choose to increase our sales force size to promote these new
uses. Due to their concentrated and focused nature, specialty
target audiences may be reached with more focused and
cost-effective marketing campaigns. Outside of North America,
and in situations or markets where a more favorable return may
be realized through licensing commercial rights to a third
party, we may license a portion or all of our
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commercial rights in a territory to a third party in exchange
for one or more of the following: up-front payments, research
funding, development funding, milestone payments and royalties
on drug sales.
We intend to build the commercial infrastructure necessary to
bring varespladib,
A-623 and
A-001 to
market alone or in collaboration with a co-development or
co-promotion partner. In addition to a specialty sales force,
sales management, internal sales support and an internal
marketing group, we will need to establish capabilities to
manage key accounts, such as managed care organizations,
group-purchasing organizations, specialty pharmacies and
government accounts. We may also choose to employ medical sales
liaisons personnel to support the product.
Regulatory
Matters
Government
Regulation and Product Approval
Government authorities in the United States at the federal,
state and local level, and other countries, extensively
regulate, among other things, the research, development,
testing, manufacture, quality control, approval, labeling,
packaging, storage, record-keeping, promotion, advertising,
distribution, marketing, export and import of products such as
those we are developing. Our product candidates must be approved
by the FDA through the new drug application, or NDA, process,
and our biological product candidate,
A-623, must
be approved by the FDA through the biologics license
application, or BLA, process before they may legally be marketed
in the United States.
United
States Drug Development Process
In the United States, the FDA regulates drugs under the Federal
Food, Drug, and Cosmetic Act, or FDCA, and implementing
regulations and biological products under both the FDCA and the
Public Health Service Act, or the PHSA, and implementing
regulations. The process of obtaining regulatory approvals and
compliance with appropriate federal, state, local and foreign
statutes and regulations require the expenditure of substantial
time and financial resources. Failure to comply with the
applicable U.S. requirements at any time during the product
development process, approval process, or after approval, may
subject an applicant to administrative or judicial sanctions.
These sanctions could include the FDAs refusal to approve
pending applications, withdrawal of an approval, a clinical
hold, warning letters, product recalls, product seizures, total
or partial suspension of production or distribution,
injunctions, fines, refusals of government contracts,
restitution, disgorgement or civil or criminal penalties. The
process required by the FDA before a drug or biological product
may be marketed in the United States generally involves the
following:
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completion of preclinical laboratory tests, animal studies and
formulation studies according to Good Laboratory Practices
regulations;
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submission to the FDA of an IND, which must become effective
before human clinical studies may begin;
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performance of adequate and well-controlled human clinical
studies according to Good Clinical Practices, or GCP, to
establish the safety and efficacy of the proposed drug or
biological product for its intended use;
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submission to the FDA of an NDA for a new drug or BLA for a
biological product;
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satisfactory completion of an FDA inspection of the
manufacturing facility or facilities at which the drug or
biological product is produced to assess compliance with
cGMP; and
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FDA review and approval of the NDA or BLA.
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The testing and approval process requires substantial time,
effort and financial resources and we cannot be certain that any
approvals for our product candidates will be granted on a timely
basis, if at all.
Once a pharmaceutical or biological product candidate is
identified for development, it enters the preclinical testing
stage. Preclinical tests include laboratory evaluations of
product chemistry, toxicity, formulation and stability, as well
as animal studies to assess its potential safety and efficacy.
An IND sponsor must submit the results of the preclinical tests,
together with manufacturing information, analytical data and any
available clinical data or literature, to the FDA as part of the
IND. The sponsor will also include a protocol detailing, among
other things, the objectives of the initial clinical study, the
parameters to be used in monitoring safety and the effectiveness
criteria to be evaluated if the initial clinical study lends
itself to an efficacy evaluation. Some preclinical testing may
continue even after the IND is submitted. The IND automatically
becomes effective 30 days after receipt by the FDA, unless
the FDA places the clinical study on a clinical hold within that
30-day time
period. In such a case, the IND sponsor and the FDA must resolve
any outstanding concerns before the clinical study can begin.
Clinical holds also may be imposed by the FDA at any time before
or during studies due to safety concerns or non-compliance.
All clinical studies must be conducted under the supervision of
one or more qualified investigators in accordance with GCP
regulations. These regulations include the requirement that all
research subjects provide informed consent. Further, an
institutional review board, or IRB, must review and approve the
plan for any clinical study before it commences at any
institution. An IRB considers, among other things, whether the
risks to individuals participating in the studies are minimized
and are reasonable in relation to anticipated benefits. The IRB
also approves the information regarding the clinical study and
the consent form that must be provided to each clinical study
subject or his or her legal representative and must monitor the
clinical study until completed.
Each new clinical protocol and any amendments to the protocol
must be submitted to the IND for FDA review, and to the IRBs for
approval. Protocols detail, among other things, the objectives
of the clinical study, dosing procedures, subject selection and
exclusion criteria, and the parameters to be used to monitor
subject safety.
Human clinical studies are typically conducted in three
sequential phases that may overlap or be combined:
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Phase 1. The product is initially
introduced into healthy human subjects and tested for safety,
dosage tolerance, absorption, metabolism, distribution and
excretion. In the case of some products for severe or
life-threatening diseases, especially when the product may be
too inherently toxic to ethically administer to healthy
volunteers, the initial human testing is often conducted in
patients.
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Phase 2. Involves studies in a limited
patient population to identify possible adverse effects and
safety risks, to preliminarily evaluate the efficacy of the
product for specific targeted diseases and to determine dosage
tolerance and optimal dosage and schedule.
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Phase 3. Clinical studies are
undertaken to further evaluate dosage, clinical efficacy and
safety in an expanded patient population at geographically
dispersed clinical study sites. These studies are intended to
establish the overall risk/benefit ratio of the product and
provide an adequate basis for product labeling.
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Progress reports detailing the results of the clinical studies
must be submitted at least annually to the FDA and safety
reports must be submitted to the FDA and the investigators for
serious and unexpected adverse events. Phase 1, Phase 2 and
Phase 3 testing may not be completed successfully within any
100
specified period, if at all. The FDA or the sponsor may suspend
or terminate a clinical study at any time on various grounds,
including a finding that the research subjects or patients are
being exposed to an unacceptable health risk. Similarly, an IRB
can suspend or terminate approval of a clinical study at its
institution if the clinical study is not being conducted in
accordance with the IRBs requirements or if the drug or
biological product has been associated with unexpected serious
harm to patients.
Concurrent with clinical studies, companies usually complete
additional animal studies and must also develop additional
information about the chemistry and physical characteristics of
the product and finalize a process for manufacturing the product
in commercial quantities in accordance with cGMP requirements.
The manufacturing process must be capable of consistently
producing quality batches of the product candidate and, among
other things, the manufacturer must develop methods for testing
the identity, strength, quality and purity of the final product.
Additionally, appropriate packaging must be selected and tested
and stability studies must be conducted to demonstrate that the
product candidate does not undergo unacceptable deterioration
over its shelf life.
U.S.
Review and Approval Processes
The results of product development, preclinical studies and
clinical studies, along with descriptions of the manufacturing
process, analytical tests conducted on the drug or biological
product, proposed labeling and other relevant information, are
submitted to the FDA as part of an NDA for a new drug or BLA for
a biological product, requesting approval to market the product.
The submission of an NDA or BLA is subject to the payment of a
substantial user fee; a waiver of such fee may be obtained under
certain limited circumstances.
In addition, under the Pediatric Research Equity Act of 2003, or
PREA, which was reauthorized under the Food and Drug
Administration Amendments Act of 2007, an NDA or BLA or
supplement to an NDA or BLA must contain data to assess the
safety and effectiveness of the drug or biological product for
the claimed indications in all relevant pediatric subpopulations
and to support dosing and administration for each pediatric
subpopulation for which the product is safe and effective. The
FDA may grant deferrals for submission of data or full or
partial waivers. Unless otherwise required by regulation, PREA
does not apply to any drug or biological product for an
indication for which orphan designation has been granted.
The FDA reviews all NDAs and BLAs submitted to ensure that they
are sufficiently complete for substantive review before it
accepts them for filing. The FDA may request additional
information rather than accept a NDA or BLA for filing. In this
event, the NDA or BLA must be re-submitted with the additional
information. The re-submitted application also is subject to
review before the FDA accepts it for filing. Once the submission
is accepted for filing, the FDA begins an in-depth substantive
review. The FDA reviews an NDA to determine, among other things,
whether a product is safe and effective for its intended use and
whether its manufacturing is cGMP-compliant to assure and
preserve the products identity, strength, quality and
purity. The FDA reviews a BLA to determine, among other things,
whether the product is safe, has an acceptable purity profile
and is adequately potent, and whether its manufacturing meets
standards designed to assure the products continued
identity, sterility, safety, purity and potency. Before
approving an NDA or BLA, the FDA will inspect the facility or
facilities where the product is manufactured. The FDA will not
approve an application unless it determines that the
manufacturing processes and facilities are in compliance with
cGMP requirements and adequate to assure consistent production
of the product within required specifications. The FDA may refer
the NDA or BLA to an advisory committee for review, evaluation
and recommendation as to whether the application should be
approved and under what conditions. An advisory committee is a
panel of experts who provide advice and recommendations when
requested by the FDA on matters of importance that come before
the agency. The FDA is not bound by the recommendation of an
advisory committee but it generally follows such recommendations.
101
The approval process is lengthy and difficult and the FDA may
refuse to approve an NDA or BLA if the applicable regulatory
criteria are not satisfied or may require additional clinical
data or other data and information. Even if such data and
information is submitted, the FDA may ultimately decide that the
NDA or BLA does not satisfy the criteria for approval. Data
obtained from clinical studies are not always conclusive and the
FDA may interpret data differently than we interpret the same
data. The FDA will issue a complete response letter if the
agency decides not to approve the NDA or BLA in its present
form. The complete response letter usually describes all of the
specific deficiencies in the NDA or BLA identified by the FDA.
The deficiencies identified may be minor, for example, requiring
labeling changes, or major, for example, requiring additional
clinical studies. Additionally, the complete response letter may
include recommended actions that the applicant might take to
place the application in a condition for approval. If a complete
response letter is issued, the applicant may either resubmit the
NDA or BLA, addressing all of the deficiencies identified in the
letter, or withdraw the application
If a product receives regulatory approval, the approval may be
significantly limited to specific diseases and dosages or the
indications for use may otherwise be limited, which could
restrict the commercial value of the product. Further, the FDA
may require that certain contraindications, warnings or
precautions be included in the product labeling. In addition,
the FDA may require Phase 4 testing which involves clinical
studies designed to further assess a drug or biological
products safety and effectiveness after NDA or BLA
approval and may require testing and surveillance programs to
monitor the safety of approved products that have been
commercialized.
Patent
Term Restoration and Marketing Exclusivity
Depending upon the timing, duration and specifics of FDA
approval of the use of our product candidates, some of our
U.S. patents may be eligible for limited patent term
extension under the Drug Price Competition and Patent Term
Restoration Act of 1984, commonly referred to as the
Hatch-Waxman Amendments. The Hatch-Waxman Amendments permit a
patent restoration term of up to five years as compensation for
patent term lost during the FDA regulatory review process.
However, patent term restoration cannot extend the remaining
term of a patent beyond a total of 14 years from the
products approval date. The patent term restoration period
is generally one-half the time between the effective date of an
IND and the submission date of an NDA plus the time between the
submission date of an NDA and the approval of that application.
Only one patent applicable to an approved drug is eligible for
the extension and the application for the extension must be
submitted prior to the expiration of the patent. The USPTO, in
consultation with the FDA, reviews and approves the application
for any patent term extension or restoration. In the future, we
intend to apply for restorations of patent term for some of our
currently owned or licensed patents to add patent life beyond
their current expiration dates, depending on the expected length
of the clinical studies and other factors involved in the filing
of the relevant NDA.
Market exclusivity provisions under the FDCA can also delay the
submission or the approval of certain competitor applications.
The FDCA provides a five-year period of non-patent marketing
exclusivity within the United States to the first applicant to
gain approval of an NDA for a new chemical entity. A drug is a
new chemical entity if the FDA has not previously approved any
other new drug containing the same active moiety, which is the
molecule or ion responsible for the action of the drug
substance. During the exclusivity period, the FDA may not accept
for review an abbreviated new drug application, or ANDA, or a
505(b)(2) NDA submitted by another company for another version
of such drug where the applicant does not own or have a legal
right of reference to all the data required for approval.
However, an application may be submitted after four years if it
contains a certification of patent invalidity or
non-infringement. The FDCA also provides three years of
marketing exclusivity for an NDA, 505(b)(2) NDA or supplement to
an existing NDA if new clinical investigations, other than
bioavailability studies, that were conducted or sponsored by the
applicant are deemed by the FDA to be essential to the approval
of the application, for example new indications, dosages or
strengths of an
102
existing drug. This three-year exclusivity covers only the
conditions associated with the new clinical investigations and
does not prohibit the FDA from approving ANDAs for drugs
containing the original active agent. Five-year and three-year
exclusivity will not delay the submission or approval of a full
NDA. However, an applicant submitting a full NDA would be
required to conduct or obtain a right of reference to all of the
preclinical studies and adequate and well-controlled clinical
studies necessary to demonstrate safety and effectiveness. HR
3590 provides 12 years of data exclusivity for innovator
biologics. During this exclusivity period, competitors are
barred from relying on the innovators safety and efficacy
data to gain FDA approval. Therefore, a competitor seeking to
obtain marketing approval during this exclusivity period would
be required to conduct their own preclinical and clinical
studies.
Pediatric exclusivity is another type of exclusivity in the
United States. Pediatric exclusivity, if granted, adds an
additional six months to an existing exclusivity or statutory
delay in approval resulting from a patent certification. This
six-month exclusivity, which runs from the end of other
exclusivity protection or patent delay, may be granted based on
the voluntary completion of a pediatric study in accordance with
an FDA-issued Written Request for such a study. The
current pediatric exclusivity provision was reauthorized in
September 2007.
Orphan
Drug Designation
Under the Orphan Drug Act, the FDA may grant orphan designation
to a drug or biological product intended to treat a rare disease
or condition, which is generally a disease or condition that
affects fewer than 200,000 individuals in the United States, or
more than 200,000 individuals in the United States and for which
there is no reasonable expectation that the cost of developing
and making a drug or biological product available in the United
States for this type of disease or condition will be recovered
from sales of the product. Orphan product designation must be
requested before submitting an NDA or BLA. After the FDA grants
orphan product designation, the identity of the therapeutic
agent and its potential orphan use are disclosed publicly by the
FDA. Orphan product designation does not convey any advantage in
or shorten the duration of the regulatory review and approval
process.
If a product that has orphan designation subsequently receives
the first FDA approval for the disease or condition for which it
has such designation, the product is entitled to orphan product
exclusivity, which means that the FDA may not approve any other
applications to market the same drug or biological product for
the same indication, except in very limited circumstances, for
seven years. Competitors, however, may receive approval of
different products for the indication for which the orphan
product has exclusivity or obtain approval for the same product
but for a different indication for which the orphan product has
exclusivity. Orphan product exclusivity also could block the
approval of one of our products for seven years if a competitor
obtains approval of the same drug or biological product as
defined by the FDA or if our product candidate is determined to
be contained within the competitors product for the same
indication or disease. If a drug or biological product
designated as an orphan product receives marketing approval for
an indication broader than what is designated, it may not be
entitled to orphan product exclusivity.
The FDA also administers a clinical research grants program,
whereby researchers may compete for funding to conduct clinical
studies to support the approval of drugs, biologics, medical
devices and medical foods for rare diseases and conditions. A
product does not have to be designated as an orphan product to
be eligible for the grant program. An application for an orphan
grant should propose one discrete clinical study to facilitate
FDA approval of the product for a rare disease or condition. The
clinical study may address an unapproved new product or an
unapproved new use for a product already on the market.
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Expedited
Development and Review Programs
The FDA has a fast track program that is intended to expedite or
facilitate the process for reviewing new drugs and biological
products that meet certain criteria. Specifically, new drugs and
biological products are eligible for fast track designation if
they are intended to treat a serious or life-threatening
condition and demonstrate the potential to address unmet medical
needs for the condition. Fast track designation applies to the
combination of the product and the specific indication for which
it is being studied. For a fast track product, the FDA may
consider for review on a rolling basis sections of the NDA or
BLA before the complete application is submitted, if the sponsor
provides a schedule for the submission of the sections of the
NDA or BLA, the FDA agrees to accept sections of the NDA or BLA
and determines that the schedule is acceptable, and the sponsor
pays any required user fees upon submission of the first section
of the NDA or BLA.
A fast track product may also be eligible for other types of FDA
programs intended to expedite development and review, such as
priority review and accelerated approval. A fast track product
is eligible for priority review if it has the potential to
provide safe and effective therapy where no satisfactory
alternative therapy exists or a significant improvement in the
treatment, diagnosis or prevention of a disease compared to
marketed products. The FDA will attempt to direct additional
resources to the evaluation of an application for a new drug or
biological product designated for priority review in an effort
to facilitate the review. Additionally, a fast track product may
be eligible for accelerated approval. Drug or biological
products studied for their safety and effectiveness in treating
serious or life-threatening illnesses and that provide
meaningful therapeutic benefit over existing treatments may
receive accelerated approval, which means that they may be
approved on the basis of adequate and well-controlled clinical
studies establishing that the product has an effect on a
surrogate endpoint that is reasonably likely to predict a
clinical benefit, or on the basis of an effect on a clinical
endpoint other than survival or irreversible morbidity. As a
condition of approval, the FDA may require that a sponsor of a
drug or biological product receiving accelerated approval
perform adequate and well-controlled post-marketing clinical
studies. Fast track designation, priority review and accelerated
approval do not change the standards for approval but may
expedite the development or approval process.
We have been granted fast track designation for our product
candidate,
A-001, for
the prevention of acute chest syndrome associated with sickle
cell disease in at-risk patients. Even though we have received
fast track designation for
A-001, the
FDA may later decide that
A-001 no
longer meets the conditions for qualification. In addition,
obtaining fast track designation may not provide us with a
material commercial advantage.
Post-Approval
Requirements
Any drug or biological products for which we receive FDA
approvals are subject to continuing regulation by the FDA,
including, among other things, record-keeping requirements,
reporting of adverse experiences with the product, providing the
FDA with updated safety and efficacy information, product
sampling and distribution requirements, complying with certain
electronic records and signature requirements and complying with
FDA promotion and advertising requirements. The FDA strictly
regulates labeling, advertising, promotion and other types of
information on products that are placed on the market. Drugs and
biological products may be promoted only for the approved
indications and in accordance with the provisions of the
approved label. Further, manufacturers of drugs and biological
products must continue to comply with cGMP requirements, which
are extensive and require considerable time, resources and
ongoing investment to ensure compliance. In addition, changes to
the manufacturing process generally require prior FDA approval
before being implemented and other types of changes to the
approved product, such as adding new indications and additional
labeling claims, are also subject to further FDA review and
approval.
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Drug and biological product manufacturers and other entities
involved in the manufacturing and distribution of approved drugs
or biological products are required to register their
establishments with the FDA and certain state agencies, and are
subject to periodic unannounced inspections by the FDA and
certain state agencies for compliance with cGMP and other laws.
The cGMP requirements apply to all stages of the manufacturing
process, including the production, processing, sterilization,
packaging, labeling, storage and shipment of the drug or
biological product. Manufacturers must establish validated
systems to ensure that products meet specifications and
regulatory standards, and test each product batch or lot prior
to its release.
Manufacturers of biological products must also report to the FDA
any deviations from cGMP that may affect the safety, purity or
potency of a distributed product; or any unexpected or
unforeseeable event that may affect the safety, purity or
potency of a distributed product. The regulations also require
investigation and correction of any deviations from cGMP and
impose documentation requirements.
We rely, and expect to continue to rely, on third parties for
the production of clinical and commercial quantities of our
products. Future FDA and state inspections may identify
compliance issues at the facilities of our contract
manufacturers that may disrupt production or distribution or may
require substantial resources to correct.
The FDA may withdraw a product approval if compliance with
regulatory standards is not maintained or if problems occur
after the product reaches the market. Later discovery of
previously unknown problems with a product may result in
restrictions on the product or even complete withdrawal of the
product from the market. Further, the failure to maintain
compliance with regulatory requirements may result in
administrative or judicial actions, such as fines, warning
letters, holds on clinical studies, product recalls or seizures,
product detention or refusal to permit the import or export of
products, refusal to approve pending applications or
supplements, restrictions on marketing or manufacturing,
injunctions or civil or criminal penalties.
In addition, from time to time, legislation is drafted,
introduced and passed in Congress that could significantly
change the statutory provisions governing the approval,
manufacturing and marketing of products regulated by the FDA.
For example, in September 2007, the Food and Drug Administration
Amendments Act of 2007 was enacted, giving the FDA enhanced
post-market authority, including the authority to require
post-market studies and clinical studies, labeling changes based
on new safety information and compliance with a risk evaluation
and mitigation strategy, or REMS, approved by the FDA. In
determining whether a REMS is necessary, the FDA must consider
the size of the population likely to use the drug or biological
product, the seriousness of the disease or condition to be
treated, the expected benefit of the product, the duration of
treatment, the seriousness of known or potential adverse events
for varespladib and whether the product is a new molecular
entity. We have submitted a REMS as an appendix to the SPA. If
the FDA determines our REMS is necessary, we must submit a REMS
plan as part of an NDA or BLA. The FDA may require that a REMS
include various elements, such as a medication guide, patient
package insert, a communication plan to educate health care
providers, limitations on who may prescribe or dispense the
product, or other measures.
Failure to comply with any requirements under the new law may
result in significant penalties. The new law also authorizes
significant civil money penalties for the dissemination of false
or misleading
direct-to-consumer
advertisements and allows the FDA to require companies to submit
direct-to-consumer
television drug advertisements for FDA review prior to public
dissemination. Additionally, the new law expands the clinical
study registry so that sponsors of all clinical studies, except
for Phase 1 clinical studies, are required to submit certain
clinical study information for inclusion in the clinical study
registry data bank. In addition to new legislation, the FDA
regulations and policies are often revised or reinterpreted by
the agency in ways that may significantly affect our business
and our
105
products. It is impossible to predict whether further
legislative or FDA regulation or policy changes will be enacted
or implemented and what the impact of such changes, if any, may
be.
Foreign
Regulation
In addition to regulations in the United States, we will be
subject to a variety of foreign regulations governing clinical
studies and commercial sales and distribution of our products to
the extent we choose to sell any products outside of the United
States. Whether or not we obtain FDA approval for a product, we
must obtain approval of a product by the comparable regulatory
authorities of foreign countries before we can commence clinical
studies or marketing of the product in those countries. The
approval process varies from country to country and the time may
be longer or shorter than that required for FDA approval. The
requirements governing the conduct of clinical studies, product
licensing, pricing and reimbursement vary greatly from country
to country.
In the European Union, our products are subject to extensive
regulatory requirements, which provide, among other things, that
no medicinal product may be placed on the market of a European
Union member state unless a marketing authorization has been
issued by the European Medicines Agency or a national competent
authority. European Union member states require both regulatory
clearance by the national competent authority and a favorable
ethics committee opinion prior to the commencement of a clinical
study.
Under the European Union regulatory systems, we may submit
marketing authorization applications either under a centralized
or decentralized procedure. The centralized procedure provides
for the grant of a single marketing authorization that is valid
for all European Union member states. The centralized procedure
is compulsory for medicines produced by certain biotechnological
processes, products with a new active substance indicated for
the treatment of certain diseases such as neurodegenerative
disorder or diabetes and products designated as orphan medicinal
products, and optional for those products which are highly
innovative or for which a centralized process is in the interest
of patients. The decentralized procedure of approval provides
for approval by one or more other, or concerned, member states
of an assessment of an application performed by one member
state, known as the reference member state. Under the
decentralized approval procedure, an applicant submits an
application, or dossier, and related materials (draft summary of
product characteristics, draft labeling and package leaflet) to
the reference member state and concerned member states. The
reference member state prepares a draft assessment and drafts of
the related materials within 120 days after receipt of a
valid application. Within 90 days of receiving the
reference member states assessment report, each concerned
member state must decide whether to approve the assessment
report and related materials. If a member state cannot approve
the assessment report and related materials on the grounds of
potential serious risk to public health, the disputed points may
eventually be referred to the European Commission, whose
decision is binding on all member states.
Reimbursement
Sales of pharmaceutical products depend significantly on the
availability of third-party reimbursement. Third-party payors
include government health administrative authorities, including
at the federal and state level, managed care providers, private
health insurers and other organizations. We anticipate
third-party payors will provide reimbursement for our products.
However, these third-party payors are increasingly challenging
the price and examining the cost-effectiveness of medical
products and services. In addition, significant uncertainty
exists as to the reimbursement status of newly approved health
care products. We may need to conduct expensive pharmacoeconomic
studies in order to demonstrate the cost-effectiveness of our
products. Our product candidates may not be considered
cost-effective. It is time consuming and expensive for us to
seek reimbursement from third-party payors. Reimbursement may
not be available or sufficient to allow us to sell our products
on a competitive and profitable basis.
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In addition, the U.S. Congress and state legislatures from
time to time propose and adopt initiatives aimed at cost
containment, which could impact our ability to sell our products
profitably. For example, in March 2010, President Obama signed
into law the Patient Protection and Affordable Care Act, and the
associated reconciliation bill, which we refer to collectively
as the Health Care Reform Law, a sweeping law intended to
broaden access to health insurance, reduce or constrain the
growth of healthcare spending, enhance remedies against fraud
and abuse, add new transparency requirements for healthcare and
health insurance industries, impose new taxes and fees on the
health industry and impose additional health policy reforms.
Effective October 1, 2010, the Health Care Reform Law
revises the definition of average manufacturer price
for reporting purposes, which could increase the amount of
Medicaid drug rebates to states once the provision is effective.
Further, beginning in 2011, the new law imposes a significant
annual fee on companies that manufacture or import certain
branded prescription drug products and biologic agents.
Substantial new provisions affecting compliance also have been
enacted, which may require us to modify our business practices
with healthcare practitioners. We will not know the full effects
of the Health Care Reform Law until applicable federal and state
agencies issue regulations or guidance under the new law.
Although it is too early to determine the effect of the Health
Care Reform Law, the new law appears likely to continue the
pressure on pharmaceutical pricing, especially under the
Medicare program, and also may increase our regulatory burdens
and operating costs.
The Medicare Prescription Drug, Improvement, and Modernization
Act of 2003, or the MMA, imposed new requirements for the
distribution and pricing of prescription drugs for Medicare
beneficiaries, and included a major expansion of the
prescription drug benefit under a new Medicare Part D.
Medicare Part D went into effect on January 1, 2006.
Under Part D, Medicare beneficiaries may enroll in
prescription drug plans offered by private entities which will
provide coverage of outpatient prescription drugs. Part D
plans include both stand-alone prescription drug benefit plans
and prescription drug coverage as a supplement to Medicare
Advantage plans. Unlike Medicare Part A and B, Part D
coverage is not standardized. Part D prescription drug plan
sponsors are not required to pay for all covered Part D
drugs, and each drug plan can develop its own drug formulary
that identifies which drugs it will cover and at what tier or
level. However, Part D prescription drug formularies must
include drugs within each therapeutic category and class of
covered Part D drugs, though not necessarily all the drugs
in each category or class. Any formulary used by a Part D
prescription drug plan must be developed and reviewed by a
pharmacy and therapeutic committee.
It is not clear what effect the MMA will have on the prices paid
for currently approved drugs and the pricing options for new
drugs approved after January 1, 2006. Government payment
for some of the costs of prescription drugs may increase demand
for products for which we receive marketing approval. However,
any negotiated prices for our products covered by a Part D
prescription drug plan will likely be lower than the prices we
might otherwise obtain. Moreover, while the MMA applies only to
drug benefits for Medicare beneficiaries, private payors often
follow Medicare coverage policy and payment limitations in
setting their own payment rates. Any reduction in payment that
results from the MMA may result in a similar reduction in
payments from non-governmental payors.
There are also laws that govern a companys eligibility to
participate in Medicare and Medicaid reimbursements. For
example, a company may be debarred from participation if it is
found to have violated federal anti-kickback laws, which could
have a significant effect on a companys ability to operate
its business.
The cost of pharmaceuticals continues to generate substantial
governmental and third-party payor interest. We expect that the
pharmaceutical industry will experience pricing pressures due to
the trend toward managed healthcare, the increasing influence of
managed care organizations, and additional legislative
proposals. Indeed, we expect that there will continue to be a
number of federal and state proposals to implement governmental
pricing controls and limit the growth of healthcare costs,
including the cost of prescription drugs. At the present time,
Medicare is prohibited from negotiating directly with
pharmaceutical
107
companies for drugs. However, Congress is considering passing
legislation that would lift the ban on federal negotiations.
While we cannot predict whether such legislative or regulatory
proposals will be adopted, the adoption of such proposals could
harm our business, financial condition and results of operations.
Some third-party payors also require pre-approval of coverage
for new or innovative drug therapies before they will reimburse
healthcare providers that use such therapies. While we cannot
predict whether any proposed cost-containment measures will be
adopted or otherwise implemented in the future, the announcement
or adoption of these proposals could have a material adverse
effect on our ability to obtain adequate prices for our product
candidates and operate profitably.
In addition, in some foreign countries, the proposed pricing for
a drug must be approved before it may be lawfully marketed. The
requirements governing drug pricing vary widely from country to
country. For example, the European Union provides options for
its member states to restrict the range of medicinal products
for which their national health insurance systems provide
reimbursement and to control the prices of medicinal products
for human use. A member state may approve a specific price for
the medicinal product or it may instead adopt a system of direct
or indirect controls on the profitability of the company placing
the medicinal product on the market. In some countries, pricing
negotiations with governmental authorities can take six to
12 months or longer after the receipt of marketing
approval. To obtain reimbursement or pricing approval in some
countries, we may be required to conduct a clinical trial that
compares the cost-effectiveness of our product candidate to
other available therapies. There can be no assurance that any
country that has price controls or reimbursement limitations for
pharmaceutical products will allow favorable reimbursement and
pricing arrangements for any of our products.
Employees
As of September 30, 2010, we had 25 employees, nine of
whom hold an M.D., Ph.D. or Pharm. D. All of our employees
are engaged in administration, finance, clinical, regulatory and
business development functions. None of our employees are
represented by a labor union, and we believe that our relations
with our employees are good.
Property
and Facilities
We are currently subleasing approximately 7,800 square feet
of office space in Hayward, California, which we occupy under a
sublease that commenced on October 1, 2008 and will expire
on January 31, 2011. We believe our existing facilities are
adequate for our current needs and that any additional space we
need will be available in the future on commercially reasonable
terms.
Legal
Proceedings
We are not currently subject to any material legal proceedings.
108
MANAGEMENT
Executive
Officers and Directors
The following table sets forth information regarding our
executive officers and directors, including their ages as of
September 30, 2010.
|
|
|
|
|
|
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Name
|
|
Age
|
|
Position
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Paul F. Truex
|
|
|
42
|
|
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Chief Executive Officer, President and Director
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Christopher P. Lowe
|
|
|
43
|
|
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Chief Financial Officer and Vice President of Administration
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Colin Hislop, M.D.
|
|
|
53
|
|
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Chief Medical Officer and Senior Vice President
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Debra Odink, Ph.D.
|
|
|
46
|
|
|
Senior Vice President, Pharmaceutical Research and Development
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Georgina Kilfoil
|
|
|
42
|
|
|
Senior Vice President, Product Development and Clinical
Operations
|
Christopher S.
Henney, Ph.D.(1)
|
|
|
69
|
|
|
Chairman of the Board of Directors
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Annette
Bianchi(1)
|
|
|
52
|
|
|
Director
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James I.
Healy, M.D., Ph.D.(2)
|
|
|
45
|
|
|
Director
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A. Rachel
Leheny, Ph.D.(3)
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Director
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Donald J.
Santel(2)(3)
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Director
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Daniel K.
Spiegelman(2)
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Director
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David E.
Thompson(1)(3)
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Director
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(1)
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Member of nominating and corporate governance committee.
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(2)
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Member of audit committee.
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(3)
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Member of compensation committee.
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Paul F. Truex. Mr. Truex has
served as our President and Chief Executive Officer since our
inception in September 2004 and as a member of our board of
directors since November 2004. Prior to founding Anthera,
Mr. Truex served as a Director, President and Chief
Executive Officer of Peninsula Pharmaceuticals, Inc., a
biopharmaceutical company, from the commencement of its
operations in October 2001. Prior to Peninsula, Mr. Truex
was Vice President of Commercial Development for Vicuron, Inc.
from April 2000 to September 2001. From July 1997 to April 2000,
Mr. Truex held various positions at Eli Lilly and Company.
Mr. Truex holds an M.B.A. in marketing and finance from
Indiana University and a B.A. in economics from the University
of Waterloo. Mr. Truex is a director of Trius Therapeutics,
Inc. and Eiger Biopharmaceuticals, Inc. Our board of directors
has concluded that Mr. Truex should serve on our board
based on his deep knowledge of our Company gained from his
positions as President and Chief Executive Officer, as well as
his substantial experience in the pharmaceutical industry.
Christopher P. Lowe. Mr. Lowe has
served as our Chief Financial Officer and Vice President of
Administration since November 2007. Beginning in September 2005
and up until he joined the company, Mr. Lowe served as Vice
President of Finance & Administration and, beginning
in January 2006, as Chief Financial Officer of Asthmatx,
Inc., a medical technology company. Previously, Mr. Lowe
was with Peninsula Pharmaceuticals, Inc., as Corporate
Controller from June 2004 to October 2004 and Chief Accounting
Officer from October 2004 until June 2005. Mr. Lowe holds a
B.S. in business administration from California Polytechnic
State University, San Luis Obispo and an M.B.A.
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from Saint Marys University, Texas. Mr. Lowe is a
director of Hansen Medical Corporation, a medical device company.
Colin Hislop, M.D. Dr. Hislop
has served as our Senior Vice President and Chief Medical
Officer since June 2010. Prior to that, he served as our Senior
Vice President of Cardiovascular Products since November 2005
and also served as a consultant to the company from July 2005
through November 2005. From October 2004 until June 2005,
Dr. Hislop was Vice President, Clinical Development for
Peninsula Pharmaceuticals, Inc. where he oversaw three global
development programs for Peninsulas anti-infective product
portfolio. From September 2001 until September 2004,
Dr. Hislop served as Vice President of Clinical Development
at CV Therapeutics, Inc., a biopharmaceutical company.
Dr. Hislop holds a B.Sc. in medical biochemistry from the
University of Surrey, and a degree in medicine from the
University of London.
Debra Odink, Ph.D. Dr. Odink
was promoted to Senior Vice President of Pharmaceutical Research
and Development in June 2010. Prior to that, she served as our
Vice President of Pharmaceutical Research and Development since
December 2005. From September 2002 until July 2005,
Dr. Odink served as Vice President of Pharmaceutical
Chemistry and Product Development at Peninsula Pharmaceuticals,
Inc., a biopharmaceutical company, where she was responsible for
manufacturing and product development strategies for assets
licensed to Peninsula. Dr. Odink holds a B.S. in chemistry
from California State University, Stanislaus and a Ph.D. in
inorganic chemistry from the University of California at Davis.
Georgina Kilfoil. Ms. Kilfoil has
served as our Senior Vice President, Product Development and
Project Management since March 2010. Prior to joining us,
Ms. Kilfoil was a project management consultant with
InClin, Inc., a consulting company. From January 2004 through
July 2005, Ms. Kilfoil was the Vice President, Alliance and
Project Management of Peninsula Pharmaceuticals, Inc.
Ms. Kilfoil holds a B.S. in pharmacology from the
University of Bristol, United Kingdom and an M.B.A. from
the Australian Graduate School of Management, Sydney, Australia.
Christopher S.
Henney, Ph.D. Dr. Henney has served
as the Chairman of our board of directors since August 2008 and
has been a member of our board of directors since April 2005.
Dr. Henney served as Chairman and Chief Executive Officer
of Dendreon Corporation, a biotechnology company he
co-founded,
from 1995 until his retirement in July 2004. Dr. Henney was
previously a founder of Immunex Corp. and Icos Corp.
Dr. Henney holds a B.Sc. with honors in medical
biochemistry, a Ph.D. in experimental pathology and a D.Sc. for
contributions to the field of immunology, all from the
University of Birmingham, England. Dr. Henney served as a
director of AVI BioPharma Inc. from March 2009 until June 2010
and is currently the Chairman and a director of Oncothyreon,
Inc. and is vice-chairman and a director of Cyclacel
Pharmaceuticals, Inc. Our board of directors has determined that
Dr. Henney is a valuable addition to our board based upon
his long history with the Company and his extensive experience
in the biotechnology industry.
Annette Bianchi. Ms. Bianchi has
served as a member of our board of directors since August 2006.
Ms. Bianchi has served as a Managing Director at
VantagePoint Venture Partners, a venture capital firm, since
2004. From 1999 to 2004, Ms. Bianchi served as a Managing
Director at Pacific Venture Group, a dedicated health care fund.
From 1992 to 1999, Ms. Bianchi served as a General Partner
at Weiss, Peck & Greer Venture Partners, a venture
capital firm. From 1985 to 1992, Ms. Bianchi served as an
associate and a General Partner of Burr, Egan,
Deleage & Co., a venture capital firm. From 2005
through 2008, Ms. Bianchi served as a director of Conceptus
Inc. Ms. Bianchi holds a B.S.E. and an M.S.E. in Biomedical
Engineering from the University of Pennsylvania and an M.B.A.
from The Wharton School of the University of Pennsylvania. Our
board of directors has determined that Ms. Bianchis
substantial experience regarding investing in companies in the
health care industry and
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her education in biomedical engineering give her the appropriate
set of skills to serve as a member of our board.
James I.
Healy, M.D., Ph.D. Dr. Healy
has served as a member of our board of directors since August
2006. Dr. Healy is a Managing Member of Sofinnova
Management VI, LLC, the general partner of Sofinnova Venture
Partners VI, L.P., a fund managed by Sofinnova Ventures, Inc., a
venture capital firm, a position he has held since June 2000.
Prior to Sofinnova, Dr. Healy began his private equity
career at Sanderling Ventures, and has been an early investor
and board member of numerous biopharmaceutical companies.
Dr. Healy holds a B.A. in molecular biology and a B.A. in
Scandinavian studies from the University of California at
Berkeley, an M.D. from Stanford University School of Medicine
and a Ph.D. in immunology from Stanford University.
Dr. Healy is a director of InterMune, Inc. and Amarin
Corporation plc, both biopharmaceutical companies. Based on
Dr. Healys extensive experience as a director of
numerous biopharmaceutical companies and his medical training,
our board of directors has determined that Dr. Healy
possesses the necessary attributes to serve on our board.
A. Rachel
Leheny, Ph.D. Dr. Leheny has served
as a member of our board of directors since August 2008.
Dr. Leheny is (i) a Managing Director of Caxton
Advantage Venture Partners, L.P., which is the General Partner
of Caxton Advantage Life Sciences Fund, L.P., a life-sciences
venture capital fund that she co-founded in 2006 and (ii) a
member of Advantage Life Sciences Partners LLC, the Managing
General Partner of Caxton Advantage Venture Partners, L.P. Prior
to that, from April 2000 to June 2002, she was head of the
biotechnology research team at Lehman Brothers. Before Lehman,
from April 1998 to April 2000, Dr. Leheny headed the
biotechnology research team at UBS Warburg and before that, from
April 1993 to April 1998, worked at Hambrecht & Quist,
most recently as Managing Director and Senior Analyst.
Dr. Leheny holds an A.B. in chemistry from Harvard and a
Ph.D. from Columbia University. She did post-doctoral work at
the University of California at Berkeley, where she was a
National Institutes of Health fellow and lecturer. Due to
Dr. Lehenys vast experience with respect to the life
sciences industry, both from investment and educational
standpoints, our board of directors believes that
Dr. Leheny has skills enabling her to contribute
meaningfully to our board and our Company.
Donald J. Santel. Mr. Santel has
served as a member of our board of directors since October 2007.
From February 2000 until January 2007, Mr. Santel held
various positions in and was a member of the board of directors
of CoTherix, Inc., a pharmaceutical company he co-founded. From
October 2003 to August 2004, Mr. Santel served as President
and Chief Operating Officer of CoTherix and from August 2004
until January 2007, Mr. Santel served as Chief Executive
Officer. From June 2008 through June 2009, Mr. Santel
served as a consultant and from June 2009 until the present,
Mr. Santel has served as the Chief Executive Officer of
Hyperion Therapeutics, Inc., a pharmaceutical company.
Mr. Santel holds a B.S.E. in biomedical engineering from
Purdue University and an M.S. in electrical engineering from the
University of Minnesota. Based on Mr. Santels
executive experience and service on other boards of directors in
the biotechnology and pharmaceutical industries, our board of
directors believes Mr. Santel has the appropriate set of
skills to serve as a member of our board.
Daniel K.
Spiegelman. Mr. Spiegelman has served as
a member of our board of directors since February 2010.
Currently, Mr. Spiegelman provides management and financial
consulting services to biotechnology companies. From January
1998 to May 2009, Mr. Spiegelman served as Senior Vice
President and Chief Financial Officer of CV Therapeutics, Inc.,
a biopharmaceutical company that was acquired by Gilead
Sciences, Inc. in April 2009. From July 1991 to January 1998,
Mr. Spiegelman served at Genentech, Inc., most recently as
Treasurer. Mr. Spiegelman also serves on the board of
directors of Affymax, Inc., Cyclacel Pharmaceuticals, Inc.,
Omeros Corporation and Oncothyreon, Inc., all of which are
publicly-traded biopharmaceutical companies. Mr. Spiegelman
also previously served on the board of directors of Xcyte
Therapies, Inc. from 2003 through 2006, a publicly-traded
company, until Cyclacel acquired Xcyte via reverse merger in
2006. Mr. Spiegelman holds a B.A. in economics
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from Stanford University and an M.B.A. from the Stanford
Graduate School of Business. Due to Mr. Spiegelmans
experience in serving as a director of multiple publicly-traded
biopharmaceutical companies, as well as his prior employment at
various pharmaceutical companies, our board of directors has
concluded that Mr. Spiegelman possesses the necessary
attributes to serve on our board.
David E. Thompson. Mr. Thompson
has served as a member of our board of directors since November
2005. Mr. Thompson served as Vice President of Corporate
Strategy Business Development for Eli Lilly and Company from
January 2001 until his retirement in July 2005. Thereafter, he
was a partner at VantagePoint Venture Partners from 2006 through
2008. Mr. Thompson holds a B.S. and an M.B.A. from Michigan
State University. Our board of directors believes
Mr. Thompson is suited to serve on our board due to his
substantial investing experience and prior experience working in
the pharmaceutical industry.
Composition
of VISTA-16 Study Steering Committee
Stephen J.
Nicholls, M.D., Ph.D. Dr. Nicholls
is the chairman of the Phase 3 Steering Committee for our
VISTA-16 (Vascular Inflammation Suppression to Treat Acute
Coronary Syndrome 16 weeks) study.
Dr. Nicholls has been Assistant Professor of Molecular
Medicine and Associate Director of the Cleveland Clinic
Coordinating Center for Clinical Research since 2006.
Dr. Nicholls holds a medical degree from the University of
Adelaide in Australia and completed his doctoral studies at the
Heart Research Institute in Sydney, Australia. Dr. Nicholls
later completed a postdoctoral fellowship in atherosclerosis
imaging with intravascular ultrasound at the Cleveland Clinic.
Dr. Nicholls received the Young Investigator Award at the
13th Symposium of the International Atherosclerosis Society and
was a finalist for the Samuel A. Levine Young Investigator Award
of the American Heart Association. Dr. Nicholls speaks
frequently at international meetings on a wide variety of topics
including atherosclerosis imaging and preventive cardiology and
serves on the editorial board of Arteriosclerosis, Thrombosis,
and Vascular Biology and the European Journal of Cardiovascular
Prevention and Rehabilitation.
John J.P.
Kastelein, M.D., Ph.D. Dr. Kastelein
is a member of the Phase 3 Steering Committee for our VISTA-16
study. Dr. Kastelein has been a Professor of Medicine and
Chairman of the Department of Vascular Medicine at the Academic
Medical Center, or AMC, of the University of Amsterdam since
January 2003, where Dr. Kastelein holds the Strategic Chair
of Genetics of Cardiovascular Disease. Dr. Kastelein holds
a medical degree from the University of Amsterdam and also
received subsequent specialty training in internal medicine from
the AMC. Dr. Kastelein also received training in medical
genetics, lipidology and molecular biology at the University of
British Columbia, Vancouver. Dr. Kastelein is the founder
of the Lipid Research Clinic in Amsterdam. Dr. Kastelein is
president of the Dutch Atherosclerosis Society and chairs the
National Scientific Committee on Familial Hypercholesterolemia.
Dr. Kastelein is also a member of the Royal Dutch Society
for Medicine & Physics, the Council for Basic Science
of the American Heart Association and the European
Atherosclerosis Society. In addition, Dr. Kastelein is a
board member of the International Task Force for Coronary Heart
Disease Prevention and was recently appointed to the Executive
Board of the International Atherosclerosis Society.
Composition
of Scientific Advisory Board
Stephen J.
Nicholls, M.D., Ph.D. Dr. Nicholls
is a member of our Scientific Advisory Board. Dr. Nicholls
has been Assistant Professor of Molecular Medicine and Associate
Director of the Cleveland Clinic Coordinating Center for
Clinical Research since 2006. Dr. Nicholls holds a medical
degree from the University of Adelaide in Australia and
completed his doctoral studies at the Heart Research Institute
in Sydney, Australia. Dr. Nicholls later completed a
postdoctoral fellowship in atherosclerosis imaging with
intravascular ultrasound at the Cleveland Clinic.
Dr. Nicholls received the Young Investigator Award at the
13th Symposium of the International Atherosclerosis Society and
was a finalist for the Samuel A. Levine Young Investigator Award
of the American Heart Association.
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Dr. Nicholls speaks frequently at international meetings on
a wide variety of topics including atherosclerosis imaging and
preventive cardiology and serves on the editorial board of
Arteriosclerosis, Thrombosis, and Vascular Biology and the
European Journal of Cardiovascular Prevention and Rehabilitation.
John J.P.
Kastelein, M.D., Ph.D. Dr. Kastelein
is a member of our Scientific Advisory Board. Dr. Kastelein
has been a Professor of Medicine and Chairman of the Department
of Vascular Medicine at the Academic Medical Center, or AMC, of
the University of Amsterdam since January 2003, where
Dr. Kastelein holds the Strategic Chair of Genetics of
Cardiovascular Disease. Dr. Kastelein holds a medical
degree from the University of Amsterdam and also received
subsequent specialty training in internal medicine from the AMC.
Dr. Kastelein also received training in medical genetics,
lipidology and molecular biology at the University of British
Columbia, Vancouver. Dr. Kastelein is the founder of the
Lipid Research Clinic in Amsterdam. Dr. Kastelein is
president of the Dutch Atherosclerosis Society and chairs the
National Scientific Committee on Familial Hypercholesterolemia.
Dr. Kastelein is also a member of the Royal Dutch Society
for Medicine & Physics, the Council for Basic Science
of the American Heart Association and the European
Atherosclerosis Society. In addition, Dr. Kastelein is a
board member of the International Task Force for Coronary Heart
Disease Prevention and was recently appointed to the Executive
Board of the International Atherosclerosis Society.
David D.
Waters, M.D. Dr. Waters is a member
of our Scientific Advisory Board. Dr. Waters was Chief of
Cardiology at San Francisco General Hospital and the
Maurice Eliaser Jr. Distinguished Professor of Medicine at
University of California, San Francisco from 1999 to 2007,
and is now Emeritus Professor in the Department of Medicine. He
completed medical school at the University of Western Ontario
and did his Internal Medicine training at McGill University.
After completing his cardiology fellowship training at Emory
University, he was a Canadian Heart Foundation Research Fellow
at Cedars-Sinai Medical Center in Los Angeles. From 1976 to 1992
he worked at the Montreal Heart Institute, where he was Director
of the Research Center from 1988 to 1992. Dr. Waters has
published more than 300 manuscripts, mainly related to coronary
artery disease, has written more than 60 book chapters, and has
lectured in 40 countries. He is a member of the editorial boards
of several major cardiology journals and was for several years
an associate editor of the Journal of the American College of
Cardiology. His early research involved vasospastic angina, risk
stratification in acute coronary syndromes and trials of
antiplatelet and antithrombotic therapy for unstable angina. For
most of his career he has been involved in clinical trials
assessing the effect of different interventions, including
hormone replacement therapy and cholesterol lowering therapy,
upon the progression of coronary disease or upon clinical
endpoints.
Richard Furie, M.D. Dr. Furie is
Chief of the Division of Rheumatology and Allergy-Clinical
Immunology at the North Shore-Long Island Jewish Health System.
He directs the Hospitals SLE and Autoimmune Disease
Treatment Center, which has become nationally recognized for its
role in the development of new therapies for SLE. Regarded as
one of the senior rheumatologists in the New York metropolitan
area, he has been on the Boards of Directors of the local
chapters of the Arthritis Foundation and the Lupus Alliance of
America and is a member of the editorial board of the Lupus
Foundation of America Lupus News. Dr. Furie continues to
serve on many committees of the American College of Rheumatology
after completing a three-year term as chair of the Annual
Scientific Meeting.
Kenneth Kalunian, M.D. Dr.
Kalunian is a Professor in the Division of Rheumatology, Allergy
and Immunology at the University of California, San Diego
School of Medicine. He serves as the Associate Director of the
UCSD Center for Innovative Therapy. Dr. Kalunian completed
fellowships at the Lutheran General Hospital for arthroscopic
surgery and the University of California, Los Angeles for
rheumatology. He has authored over 50 peer-reviewed papers and
serves on several committees, including the Collective Data
Analysis Initiative for the Lupus Foundation, serving as the
Chair.
113
Michelle Petri, M.D. Dr. Petri is
a Professor of Medicine at the Johns Hopkins University School
of Medicine. She is also the Director of the Hopkins Lupus
Cohort, a longitudinal study of morbidity and mortality in SLE.
In addition, she serves as the
Co-Director
of the Hopkins Lupus Pregnancy Center. Previously, she completed
two fellowship programs at the University of California,
San Francisco in allergy and immunology and rheumatology.
Lee S. Simon, M.D., FACP, FACR Dr. Simon is a
Rheumatologist and a Principal at SDG LLC, a consulting firm
that helps companies create successful drug development
programs. He also serves as a regulatory consultant to Leerink
Swann/Medacorp. Previously, Dr. Simon was the
Division Director of Analgesic, Anti-inflammatory and
Ophthalmologic Drug Products (DAAODP) within the Center for Drug
Evaluation and Research (CDER) of the U.S. FDA, where he
was the recipient of several Quality Performance Awards, as well
as a Faculty Recognition Award. Before joining the FDA, he was
an Associate Professor of Medicine at Harvard Medical School.
Dr. Simon is a fellow of the American College of Physicians
and the American College of Rheumatology. In 2003, he was
awarded the Scientific Leadership Award by the Lupus Research
Institute. He has served on editorial boards of multiple
journals and has authored more than 110 original publications,
review articles and chapters, as well as co-edited four books.
David Wofsy, M.D. Dr. Wofsy is a
Professor of Medicine and Microbiology/Immunology at the
University of California, San Francisco, where he also
serves as Associate Dean for Admissions. He has served as Chief
of Rheumatology at the San Francisco VA Medical Center and
as Director of the Department of Medicine Clinical Trials Center
at UCSF. Dr. Wofsy is also a former President of the
American College of Rheumatology. He is best known for his
research in murine models of SLE, where he developed and tested
several novel treatment strategies. Dr. Wofsys
current clinical research is devoted to testing novel biologic
therapies for patients with SLE.
Board
Composition
Our board of directors consists of eight directors, seven of
whom qualify as independent directors according to
the rules and regulations of The NASDAQ Global Market. Our
amended and restated certificate of incorporation provides for a
classified board of directors divided into three classes with
members of each class of directors serving staggered three-year
terms. As a result, a portion of our board of directors will be
elected each year. Ms. Bianchi, Dr. Healy and
Dr. Leheny have been designated Class II directors
whose terms will expire at the 2011 annual meeting of
stockholders. Dr. Henney, Mr. Spiegelman and
Mr. Truex have been designated Class III directors
whose terms will expire at the 2012 annual meeting of
stockholders. Mr. Santel and Mr. Thompson have been
designated Class I directors whose terms will expire at the
2013 annual meeting of stockholders.
Our amended and restated certificate of incorporation also
provides that the number of authorized directors will be
determined from time to time by resolution of our board of
directors and any vacancies in our board of directors and newly
created directorships may be filled only by our board of
directors. Any additional directorships resulting from an
increase in the number of directors will be distributed among
the three classes, so that, as nearly as possible, each class
will consist of one-third of the total number of directors. Our
amended and restated certificate of incorporation further
provides for the removal of a director only for cause or by the
affirmative vote of the holders of 75% or more of the shares
then entitled to vote at an election of our directors. These
provisions and the classification of our board of directors may
have the effect of delaying or preventing changes in the control
or management of the company.
There are no family relationships among any of our directors or
executive officers.
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Our board of directors has considered the relationships of all
directors and, where applicable, the transactions involving them
described below under Certain Relationships and Related
Person Transactions, and determined that each of them does
not have any relationship which would interfere with the
exercise of independent judgment in carrying out his or her
responsibility as a director and that each non-employee director
qualifies as an independent director under the applicable rules
of The NASDAQ Global Market.
Committees
of the Board of Directors
Our board of directors has established an audit committee, a
compensation committee and a nominating and corporate governance
committee, each of which operates pursuant to a separate charter
adopted by our board of directors. The composition and
responsibilities of each committee are described below. Members
serve on these committees until their resignation or until
otherwise determined by our board of directors.
The composition and function of our board of directors and all
of our committees complies with all applicable requirements of
the Sarbanes-Oxley Act of 2002, The NASDAQ Global Market and
SEC rules and regulations.
Audit
Committee
Mr. Spiegelman, Mr. Santel and Dr. Healy
currently serve on our audit committee. Mr. Spiegelman
chairs the audit committee. All members of our audit committee
meet the requirements for financial literacy under the
applicable rules and regulations of the SEC and The NASDAQ
Global Market. Our board of directors has determined that
Mr. Spiegelman is an audit committee financial
expert as defined under the applicable rules of the SEC
and has the requisite financial sophistication as defined under
the applicable rules and regulations of The NASDAQ Global
Market. In addition, our audit committee is composed entirely of
independent directors in accordance with current NASDAQ listing
standards and meets the enhanced independence standards
established by the Sarbanes-Oxley Act of 2002 and related
rulemaking of the SEC that apply to companies that have recently
completed an initial public offering. The audit committee
operates under a written charter that satisfies the applicable
standards of the SEC and The NASDAQ Global Market.
The audit committees responsibilities include:
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appointing, approving the compensation of, and assessing the
independence of our independent registered public accounting
firm;
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pre-approving auditing and permissible non-audit services, and
the terms of such services, to be provided by our independent
registered public accounting firm;
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reviewing and discussing with management and the independent
registered public accounting firm our annual and quarterly
financial statements and related disclosures;
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coordinating the oversight and reviewing the adequacy of our
internal controls over financial reporting;
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establishing policies and procedures for the receipt and
retention of accounting-related complaints and concerns; and
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preparing the audit committee report required by SEC rules to be
included in our annual proxy statement.
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Compensation
Committee
Mr. Thompson, Dr. Leheny and Mr. Santel currently
serve on our compensation committee. Mr. Thompson chairs
the compensation committee. All of the members of our
compensation committee are independent under the applicable
rules and regulations of the SEC, The NASDAQ Global Market and
the Internal Revenue Code.
The compensation committees responsibilities include:
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annually reviewing and approving corporate goals and objectives
relevant to compensation of our chief executive officer;
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evaluating the performance of our chief executive officer in
light of such corporate goals and objectives and determining the
compensation of our chief executive officer;
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reviewing and approving the compensation of all our other
officers;
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overseeing and administering our incentive-based compensation
and equity plans; and
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reviewing and making recommendations to our board of directors
with respect to director compensation.
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Nominating
and Corporate Governance Committee
Dr. Henney, Ms. Bianchi and Mr. Thompson
currently serve on our nominating and corporate governance
committee. Dr. Henney chairs the nominating and corporate
governance committee. All of the members of our nominating and
corporate governance committee are independent under the
applicable rules and regulations of the SEC and The NASDAQ
Global Market.
The nominating and corporate governance committees
responsibilities include:
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developing and recommending to our board of directors criteria
for selecting board and committee membership;
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establishing procedures for identifying and evaluating director
candidates, including nominees recommended by stockholders;
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identifying individuals qualified to become board members;
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recommending to our board of directors the persons to be
nominated for election as directors and each of the boards
committees;
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developing and recommending to our board of directors a set of
corporate governance guidelines; and
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overseeing the evaluation of our board of directors, its
committees and management.
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Board
Diversity
Our nominating and corporate governance committee is responsible
for reviewing with the board of directors, on an annual basis,
the appropriate characteristics, skills and experience required
for the board of directors as a whole and its individual
members. In evaluating the suitability of individual candidates
(both new candidates and current members), the nominating and
corporate governance
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committee, in recommending candidates for election, and the
board of directors, in approving (and, in the case of vacancies,
appointing) such candidates, takes into account many factors,
including: personal and professional integrity, ethics and
values; experience in corporate management, such as serving as
an officer or former officer of a publicly held company;
experience in the industries in which we compete; experience as
a board member of another publicly held company; diversity of
expertise and experience in substantive matters pertaining to
our business relative to other board members; conflicts of
interest; and practical and mature business judgment. The board
of directors evaluates each individual in the context of the
board of directors as a whole, with the objective of assembling
a group that can best maximize the success of the business and
represent stockholder interests through the exercise of sound
judgment using its diversity of experience in these various
areas.
Compensation
Committee Interlocks and Insider Participation
None of the members of the compensation committee is or has at
any time during the past fiscal year been an officer or employee
of the company. None of the members of the compensation
committee has formerly been an officer of the company. None of
our executive officers serve or in the past fiscal year has
served as a member of the board of directors or compensation
committee of any other entity that has one or more executive
officers serving as a member of our board of directors or
compensation committee.
Compensation
Policies and Practices as related to Risk Management
Our board of directors has overall responsibility for the
oversight of the Companys risk management process, which
is designed to support the achievement of organizational
objectives, including strategic objectives, to improve long-term
organizational performance and enhance shareholder value. Risk
management includes not only understanding company specific
risks and the steps management implements to manage those risks,
but also what level of risk is acceptable and appropriate for
the Company. Management is responsible for establishing our
business strategy, identifying and assessing the related risks
and implementing appropriate risk management practices. Our
board of directors reviews our business strategy and
managements assessment of the related risk, and discusses
with management the appropriate level of risk for the Company.
With respect to compensation policies and practices, our
Compensation Committee participates in the design of
compensation structures that create incentives that encourage a
level of risk-taking behavior consistent with the Companys
business strategy.
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COMPENSATION
DISCUSSION AND ANALYSIS
This section discusses our executive compensation policies and
arrangements as they relate to our named executive officers who
are listed in the compensation tables set forth below. The
following discussion should be read together with the
compensation tables and related disclosures set forth below.
Background
and Objectives
We are a biopharmaceutical company focused on developing and
commercializing products to treat serious diseases associated
with inflammation, including cardiovascular and autoimmune
diseases. The success of development companies is significantly
influenced by the quality and motivation of their work forces.
As a result, we face significant competition for executives and
other talented employees from numerous pharmaceutical research
and development companies in the San Francisco Bay Area.
With this in mind, we strive to provide what we believe is a
competitive total compensation package to our executive officers
through a combination of base salary, short-term cash incentives
and long-term equity compensation, in addition to broad-based
employee benefits programs, in order to closely align the
interests of our executive officers with those of our
stockholders, to attract talented individuals to manage and
operate all aspects of our business, to reward these individuals
fairly and to retain those individuals who meet our high
expectations and support the achievement of our business
objectives.
Role of
Compensation Committee and Executive Officers
Our executive compensation program is administered by our
compensation committee of our board of directors. Our
compensation committee is responsible for overseeing our
executive compensation policies, plans and programs, reviewing
our achievements as a company and the achievements of our
individual officers, recommending to our board of directors the
type and level of compensation for our named executive officers
and our directors. The primary goal of our compensation
committee is to closely align the interests of our named
executive officers with those of our stockholders. To achieve
this goal, our compensation committee relies on compensation
that is designed to attract and retain executives whose
abilities are critical to our long-term success, that motivates
individuals to perform at their highest level and that rewards
achievement.
The annual responsibilities of our compensation committee
include the following:
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reviewing and approving corporate goals and objectives relevant
to the compensation of our Chief Executive Officer;
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evaluating the performance of our Chief Executive Officer in
light of such corporate goals and objectives and determining the
compensation of our Chief Executive Officer; and
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reviewing and approving the level of equity awards, annual
salary and bonuses for our named executive officers and other
employees.
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In reviewing and approving these matters, our compensation
committee considers such matters as it deems appropriate,
including our financial and operating performance, the alignment
of interests of our executive officers and our stockholders and
our ability to attract and retain qualified individuals. For
executive compensation decisions, including decisions relating
to the grant of stock options and other equity awards to our
named executive officers, our compensation committee typically
considers the recommendations of Mr. Truex, our Chief
Executive Officer. Mr. Truex also generally participates in
our compensation committees deliberations about executive
compensation matters. However, Mr. Truex does not
participate in the deliberation or determination of his own
compensation.
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Our compensation committee has not established any formal
policies or guidelines for allocating compensation between
current and long-term equity compensation, or between cash and
non-cash compensation. In determining the amount and mix of
compensation elements and whether each element provides the
correct incentives and rewards for performance consistent with
our short-term and long-term goals and objectives, our
compensation committee relies on its judgment about each
individuals performance in a rapidly changing business
environment rather than adopting a formulaic approach to
compensatory decisions that are too narrowly responsive to
short-term changes in business performance. In making
determinations about performance, our compensation committee
does not solely rely on formal goals or metrics, but rather
takes into account input from appropriate members of management
with respect to an individuals performance, as well as its
own observations.
Role of
Compensation Consultant
Our compensation committee has the authority under its charter
to engage the services of any consulting firm or other outside
advisor to assist it. In late 2007, our compensation committee
engaged J. Thelander Consulting, an independent consulting
firm selected by our compensation committee, to review the
compensation of our named executive officers and other key
employees. J. Thelander Consulting compared the base salary,
bonus and equity awards offered to these employees with
aggregated data from 193 pre-IPO companies in the biotechnology,
medical device, IT/software, cleantech and health care space.
These 193 companies were selected because they were at a
similar stage of development as we are and the majority of such
companies were also based on the west coast and had levels of
funding ranging from $15 million to $70 million.
Accordingly, our compensation committee determined that these
companies represented the types of companies with which we
compete for executive employees. Based on our goal of attracting
and retaining talented individuals to serve as executive
officers in a competitive market, J. Thelander Consulting
recommended targeting the 75th percentile of base salary,
bonus and equity compensation offered by this group of
companies. J. Thelander Consulting recommended targeting the
75th percentile of compensation at comparable companies in
order to attract above-average executives, since attracting and
retaining top talent is important to a smaller company like
ours. To that end, J. Thelander Consulting recommended that we
increase our offered base salary and bonus compensation for
executive officers, and maintain the current level of offered
equity compensation. Our compensation committee considered the
recommendations and determined that the current compensation
packages for our executive officers were sufficient in light of
current market conditions, input from management and the desire
to allocate resources to our clinical development study instead.
J. Thelander Consulting also reviewed the change in control and
severance benefits we had in place at the time for our
executives, which included all of our named executive officers.
J. Thelander Consulting recommended that we maintain our current
benefit levels for cash severance and health benefits, which are
12 months cash severance and benefits continuation
for our Chief Executive Officer and six months cash
severance and benefits continuation for our other executive
officers, but provide for 100% acceleration of equity awards
vesting in connection with the termination of employment of our
executive officers in certain circumstances. At the time of J.
Thelander Consultings review, our change of control and
severance benefits provided acceleration of 12 months of
equity award vesting for our Chief Executive Officer and Chief
Medical Officer and six months of equity award vesting for our
other executive officers. Our compensation committee considered
the recommendations and determined that the existing change of
control and severance provisions for our executive officers were
adequate to provide security to our executive officers whose
leadership and experience would be crucial to maximize
stockholder value during the course of ordinary business.
In September 2009, our compensation committee engaged J.
Thelander Consulting to review and provide comparative data on
the base salary, bonus and equity compensation of (i) chief
executive officers of private biotechnology companies with
funding levels between $50 to $70 million and
(ii) chief
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executive officers and other executive officers of publicly
traded biotechnology companies with a market capitalization
between $220 to $375 million. J. Thelander Consulting also
provided a review of the board compensation of such publicly
traded biotechnology companies. Our compensation committee
reviewed the report by J. Thelander Consulting, but has not yet
made a determination on any changes to our executive
compensation.
J. Thelander Consulting was retained by and reported directly to
our compensation committee.
Compensation
Elements
Base Salary. The base salaries of our
named executive officers are primarily established based on the
scope of their responsibilities and performance, taking into
account the J. Thelander Consulting comparable company data and
based upon our compensation committees understanding of
compensation paid to similarly situated executives, and adjusted
as necessary to recruit or retain specific individuals. In
making determinations about the performance of our named
executive officers, our compensation committee takes into
account corporate goals, which are set annually by our
compensation committee and generally include milestones related
to our preclinical and clinical studies and fundraising, as well
as informal individual goals, which are position-specific and
are communicated to the named executive officer over the course
of the year. In 2008, our corporate goals focused on clinical
development of our product candidates, including achieving full
enrollment in our Phase 2b clinical study and receiving advice
from the FDA on a Special Protocol Assessment for a Phase 3
clinical study protocol for varespladib, while our 2009
corporate goals focused on the continued clinical development of
our product candidates, including completion of our Phase 2b
clinical study for varespladib.
We typically review the base salaries of our named executive
officers annually. We may also increase the base salary of an
executive officer at other times if a change in the scope of the
executives responsibilities, such as promotion, justifies
such consideration. Although we do not target a specific
percentile range, we believe that a competitive base salary
relative to the companies with which we compete for executives
is a necessary element of any compensation program that is
designed to attract and retain talented and experienced
executives. We also believe that attractive base salaries can
motivate and reward executives for their overall performance.
Base salaries are established in part based on experience,
skills and expected contributions of our executives and our
executives performance during the prior year.
As part of its annual evaluation of salaries in 2008 for our
named executive officers, our board of directors elected to
maintain salaries for Mr. Truex and our other named
executive officers at then-current levels. This determination
was based on the recommendation of our compensation committee
that such base salary provided adequate fixed income as compared
to comparable company data and our compensation committees
own understanding of compensation at other pre-IPO companies in
comparable industries, based in part on their respective
experience on the board of directors of such companies, as well
as managements view that base salaries should generally
stay at the same level.
In February 2009, upon our compensation committees
recommendation, our board of directors approved temporary
reduction in cash compensation of approximately 14% on average
for all of our employees, including our named executive
officers, which compensation reduction was reinstated in August
2009. This measure was taken in connection with the redeployment
of resources to our research and development activities and the
elimination of four positions in light of the financing and
economic environment. In connection with this salary reduction,
Mr. Truex was granted special authority by our board of
directors to allocate in his sole discretion options to purchase
an aggregate of 26,285 shares to individuals, including our
named executive officers, who had demonstrated high achievement
toward our goals.
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On April 21, 2010, as part of its annual review of
compensation, the board of directors, upon the recommendation of
the compensation committee, approved annual base salary
adjustments for Company employees, including certain of the
Companys named executive officers, which became effective
on May 1, 2010. The adjusted base salaries for such named
executive officers are as follows:
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Annual Base Salary Prior
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Annual Base Salary
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Named Executive Officer
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to May 1, 2010
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Effective May 1, 2010
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Paul F. Truex,
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$
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300,000
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$
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425,000
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President and Chief Executive Officer
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Christopher P. Lowe,
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$
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250,000
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$
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300,000
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Chief Financial Officer and Vice President of Administration
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James E. Pennington,
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$
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290,000
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$
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290,000
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M.D., Senior Clinical Fellow
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Colin Hislop,
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$
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270,000
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$
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320,000
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M.D., Senior Vice President and Chief Medical Officer
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Debra Odink,
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$
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200,000
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$
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225,000
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Ph.D., Senior Vice President, Pharmaceutical Research and
Development
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In connection with Dr. Odinks promotion to Senior
Vice President, Pharmaceutical Research and Development in June
2010, her annual base salary was increased from $225,000 to
$250,000.
Cash Bonuses. As of December 31,
2009, we did not have a formal cash incentive program. While we
have paid cash bonuses based on the achievement of approved
operational milestones in the past, we did not establish a
formal cash incentive program, nor did we pay any bonuses based
on corporate goals in 2008 or 2009. Our 2008 and 2009 corporate
goals were informal, but focused on the achievement of the
following: in 2008, (1) developing and implementing an
adjusted clinical development plan for our product candidates
based on changes in market conditions and regulatory guidance
and (2) obtaining additional financing; and in 2009,
(1) continued clinical development of our product
candidates, and (2) obtaining additional financing. For
2008, our compensation committee made the decision not to pay
annual bonuses based on the need to manage expenses and allocate
resources to our clinical development programs, and did not
formally evaluate whether our 2008 corporate goals had been
achieved. We did not have additional individual performance
goals for our named executive officers in 2008 or 2009. Our
compensation committee has the authority to award discretionary
performance-based cash bonuses to our executive officers and
certain non-executive employees. Our compensation committee
considers awarding such discretionary bonuses in the event of
extraordinary short-term efforts and achievements by our
executives and employees, as recommended by management. No such
discretionary bonuses were awarded in 2008. In 2009,
discretionary bonuses were awarded to certain of our employees,
including Dr. Hislop and Dr. Odink, in recognition of
their efforts in connection with certain business development
efforts.
On March 24, 2010, the board of directors adopted the
Companys Executive Incentive Bonus Plan, or the Bonus
Plan, which applies to certain key executives, or the
Executives, that are recommended by the compensation committee
and selected by the Board. The Bonus Plan provides for bonus
payments based upon the attainment of performance targets
established by the Board and related to financial and
operational metrics with respect to the Company or any of its
subsidiaries, or the Performance Goals, which would include the
achievement of clinical study or operational milestones, results
of clinical studies and achievement of specified financial
metrics or objectives. Any bonuses paid under the Bonus Plan
shall be based upon objectively determinable bonus formulas that
tie such bonuses to one or more
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performance targets relating to the Performance Goals. The bonus
formulas shall be adopted in each performance period by the
Board and communicated to each Executive. No bonuses shall be
paid under the Bonus Plan unless and until the Board makes a
determination with respect to the attainment of the performance
objectives. Notwithstanding the foregoing, the Company may
adjust bonuses payable under the Bonus Plan based on achievement
of individual performance goals or pay bonuses (including,
without limitation, discretionary bonuses) to Executives under
the Bonus Plan based upon such other terms and conditions as the
Board may in its discretion determine.
Each Executive shall have a targeted bonus opportunity set for
each performance period. The maximum bonus payable to an
Executive under the Bonus Plan is 125% of the Executives
bonus opportunity. The Performance Goals will be measured at the
end of each fiscal year after the Companys financial
reports have been published or such other appropriate time as
the Board shall determine. If the Performance Goals are met,
payments will be made within 30 days thereafter, and if met
for the previous fiscal year, not later than March 31. An
Executive must be employed by the Company as of the payment date
in order to receive a bonus payment, provided that the Board may
make exceptions to this requirement, in its sole discretion,
including, without limitation, in the case of an
Executives termination of employment, retirement, death or
disability.
Equity Incentive Compensation. We
generally grant stock options to our employees, including our
named executive officers, in connection with their initial
employment with us. We also typically grant stock options on an
annual basis as part of annual performance reviews of our
employees. Our compensation committee has established grant
guidelines for our employees, other than our Chief Executive
Officer, based on an employees position. These guidelines
specify a range of equity grant amounts, expressed as a
percentage of our common stock outstanding on a fully-diluted
basis, which range from 0.02% to 2.75%, depending on position.
Grant guidelines for our named executive officers, other than
our Chief Executive Officer, range from 0.25% to 2.75%, and
ranges for each position are as follows:
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Principal Position
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Grant Guidelines
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Chief Financial Officer
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1.25% 2.5%
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Chief Medical Officer
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1.25% 2.5%
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Senior Vice President, Clinical/Medical
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1.0% 2.0%
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Vice President, Non-Clinical/Pre-Clinical
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0.25% 1.0%
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Our compensation committee has not established grant guidelines
for our Chief Executive Officer and any grants made are at the
discretion of our board of directors.
Each of our named executive officers has either purchased
restricted shares of common stock or received stock options to
purchase shares of common stock in connection with their initial
employment with us. We grant equity incentive compensation to
our executive officers because we believe doing so will motivate
our executives by aligning their interests more closely with the
interests of our stockholders. Certain employees, including
Mr. Truex, were granted restricted stock in 2004 and 2005
because we believed that it was appropriate for our initial key
employees to have an immediate equity stake, and because we
believed owning restricted stock would more closely align the
interests of the recipient with those of our stockholders. Now
that we are a more mature company, we believe it is generally
more appropriate to grant options to employees, as is the
general practice at other companies with which we compete for
talent, although we may continue to grant restricted stock or
grant other types of equity awards when we deem it appropriate
and in our stockholders best interests.
In connection with their initial employment, each of our named
executive officers was granted stock options to purchase shares
of our common stock, for an aggregate of 259,928 shares at
an exercise price equal to the fair value of such shares at the
dates of grant, which ranged from $0.14 to $1.34 per
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share. The options held by each named executive officer are
subject to vesting in order to encourage each named executive
officer to remain with us for several years, and subject to the
other provisions of their respective option agreements, which
are described below.
Prior to our initial public offering, equity incentive grants to
our named executive officers and other employees were made at
the discretion of our board of directors with the recommendation
of our compensation committee out of our 2005 Equity Incentive
Plan, or 2005 Equity Plan. In determining equity incentive
grants, the compensation committee considered the grant
guidelines it had established for each position, along with the
equity incentives already provided to an employee. Our
compensation committee also considered individual performance,
based on an informal evaluation of the individuals
contribution to our corporate goals (which generally include
milestones related to our preclinical and clinical studies and
fundraising) and input received from management.
Our 2008 corporate goals included:
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initiation of our Phase 2b FRANCIS study;
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developing a regulatory path for our cardiovascular program;
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continued enrollment of patients in our IMPACTS study on the
schedule prescribed by the clinical study protocol; and
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obtaining financing sufficient to fund the above goals.
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Our 2009 corporate goals included:
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completion of our Phase 2b FRANCIS study;
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completion of the technology transfer of
A-623 from
Amgen;
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successful evaluation by a DSMB of the safety profile of
A-001; and
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obtaining financing sufficient to fund the above goals.
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In 2008, our board of directors granted options to purchase a
total of 327,973 shares of common stock to our employees,
directors and consultants, including options to purchase a total
of 122,663 shares of common stock to our named executive
officers, all at an exercise price of $1.34 per share, which
represented the fair value of our common stock on the dates of
grant, as determined by our board of directors. In 2009, our
board of directors granted options to purchase a total of
405,358 shares of common stock to our employees, directors
and consultants, including options to purchase a total of
198,011 shares of common stock to our named executive
officers, at exercise prices of $1.51 and $7.70 per share, which
represented the fair value of our common stock on the dates of
grant, as determined by our board of directors. In exercising
its discretion to determine the amount of each grant for
recommendation to our board of directors, the compensation
committee generally took into account each individuals
contributions towards the achievement of our annual corporate
goals; however, in 2008, no named executive officers received
grants of equity awards, other than Mr. Lowe, whose grant
of 122,663 options to purchase shares of our common stock, were
made in connection with his initial employment. Furthermore, in
2009, upon the compensation committees recommendation, our
board of directors approved grants of equity awards to
employees, including our named executive officers, who received
a temporary reduction in cash compensation as discussed above
and whose performance supported our 2008 corporate goals.
Mr. Truex, Mr. Lowe, Dr. Pennington,
Dr. Hislop and Dr. Odink each received grants of
equity awards based upon the management teams
contributions to our 2008
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corporate goals on a relative scale dependent on such named
executive officers job function and responsibility. The
amount of each grant was based upon industry data as well as
such named executive officers current level of equity
awards. In addition, as discussed above in connection with the
salary reduction, Mr. Truex was granted special authority
by our board of directors to allocate in his sole discretion
options to purchase shares of our common stock to individuals
who had demonstrated high achievement toward our corporate
goals, which individuals included our named executive officers.
Dr. Hislop received an equity award in April 2009, which
grant was based on Dr. Hislops contributions to our
FRANCIS study. All of these grants were made to further motivate
the recipients by aligning their interests more closely with our
stockholders over the next several years by providing them with
an equity interest in the company.
The exercise price of each stock option granted under our 2005
Equity Plan was based on the fair value of our common stock on
the date of grant. Historically, the fair value of our common
stock for purposes of determining the exercise price of stock
options has been determined by our board of directors based on
its analysis of a number of factors including, among others, the
total company valuation implied by our rounds of financing, the
market value of similarly situated public companies, our
anticipated future risks and opportunities, the rights and
preferences of our preferred stock and the discounts customarily
applicable to common stock of privately-held companies. We
engaged independent valuation firms to assess the fair value of
our common stock during 2006, 2007 and 2008. Based on several
factors considered by our board of directors, including the
valuation reports prepared by such firms, we determined the fair
value of our common stock or option grants made in February and
April 2009 to be $1.51 per share, and for options grants made in
2008 to be $1.34 per share. Based on several factors considered
by our board of directors, we determined the fair value of our
option grants made in October 2009 to be $7.70 per share.
Following our initial public offering, all stock options
continue to be granted with an exercise price equal to the fair
value of our common stock on the date of grant, but fair value
is defined as the closing market price of a share of our common
stock on the date of grant. We do not currently have any
program, plan or practice of setting the exercise price based on
a date or price other than the fair value of our common stock on
the grant date.
Stock option awards provide our named executive officers and
other employees with the right to purchase shares of our common
stock at a fixed exercise price, subject to their continued
employment. Stock options are earned on the basis of continued
service and generally vest over four years, beginning with
vesting as to 25% of the award on the one-year anniversary of
the date of grant, and pro-rata vesting monthly thereafter. Our
stock options may also be exercised prior to the award vesting
in full, subject to our right of repurchase. In addition, we
have also granted options to purchase smaller amounts of stock,
typically fewer than 10,000 shares, which are immediately
vested to recognize employee contributions, including those of
our named executive officers. Furthermore, we generally grant
incentive stock options to employees up to the statutory limit,
then non-statutory options thereafter and non-statutory options
to non-employees. See the section entitled
Potential Payments Upon Termination or Change
in Control for a discussion of the change in control
provisions related to stock options.
While we have only granted restricted stock awards to certain of
our initial key employees, we have the authority to do so under
our 2005 Equity Plan and our Amended and Restated 2010 Stock
Option and Incentive Plan, or 2010 Equity Plan. Restricted stock
awards provide our named executive officers and other employees
with the ability to purchase shares of our common stock at a
fixed purchase price at the time of grant by entering into a
restricted stock purchase agreement. Similar to stock options,
shares of restricted stock are earned on the basis of continued
service and generally vest over four years, beginning with
vesting as to 25% of the award on the one year anniversary of
the date of grant and pro-rata vesting quarterly thereafter. See
the section below entitled Potential Payments
Upon Change in Control and Termination for a discussion of
the change in control provisions related to restricted stock.
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After our initial public offering, we adopted an equity award
grant policy that formalized how we grant equity-based awards to
officers and employees. Under our equity award grant policy, all
grants must be approved by our board of directors or
compensation committee. All stock options will be awarded with
an exercise price equal to the fair value of our common stock
and calculated based on our closing market price on the last
trading day of the quarter in which the grant is approved.
Other Compensation. We currently
maintain broad-based benefits that are provided to all
employees, including health insurance, life and disability
insurance, dental insurance and a 401(k) plan.
As discussed below in Severance and Change in
Control Agreements and in Potential
Payments Upon Change in Control and Termination, we have,
for all named executive officers (other than
Dr. Pennington), agreements providing certain benefits upon
termination of their employment in relation to a change in
control, including the acceleration of vesting of restricted
stock and options. Our goal in providing severance and change in
control benefits is to offer sufficient cash continuity
protection such that our executives will focus their full time
and attention on the requirements of the business rather than
the potential implications for their respective positions. We
prefer to have certainty regarding the potential severance
amounts payable to the named executive officers under certain
circumstances, rather than negotiating severance at the time
that a named executive officers employment terminates. We
have also determined that accelerated vesting provisions in
connection with a termination following a change of control are
appropriate because they will encourage our restricted stock and
option holders, including our named executive officers, to stay
focused in such circumstances, rather than the potential
implications for them.
All of our named executive officers, except for
Dr. Pennington, are party to severance agreements that
provide benefits upon termination of employment in connection
with a change of control. In addition, in December 2007, our
compensation committee recommended and our board of directors
agreed that Mr. Lowe, our Chief Financial Officer, should
be offered the same change of control severance benefit levels
as our Chief Executive Officer, in light of his role in the
company.
Tax and Accounting Treatment of
Compensation. Section 162(m) of the
Internal Revenue Code places a limit of $1.0 million per
person on the amount of compensation that we may deduct in any
one year with respect to each of our named executive officers
other than the chief financial officer. There is an exemption
from the $1.0 million limitation for performance-based
compensation that meets certain requirements. Grants of stock
options and stock appreciation rights under our 2010 Equity Plan
are intended to qualify for the exemption. Restricted stock
awards and restricted stock unit awards under our 2010 Equity
Plan, as well as performance cash awards, may qualify for the
exemption if certain additional requirements are satisfied. To
maintain flexibility in compensating officers in a manner
designed to promote varying corporate goals, our compensation
committee has not adopted a policy requiring all compensation to
be deductible. Although tax deductions for some amounts that we
pay to our named executive officers as compensation may be
limited by section 162(m), that limitation does not result
in the current payment of increased federal income taxes by us
due to our significant net operating loss carry-forwards. Our
compensation committee may approve compensation or changes to
plans, programs or awards that may cause the compensation or
awards to exceed the limitation under section 162(m) if it
determines that such action is appropriate and in our best
interests.
We account for equity compensation paid to our employees under
the rules of FASB ASC 718, which requires us to estimate
and record an expense for each award of equity compensation over
the service period of the award. Accounting rules also require
us to record cash compensation as an expense at the time the
obligation is incurred.
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Summary
Compensation Table 2009 and 2008
The following table summarizes the compensation that we paid to
our Chief Executive Officer, Chief Financial Officer and each of
our three other most highly compensated executive officers
during the years ended December 31, 2009 and 2008. We refer
to these officers in this prospectus as our named executive
officers.
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Option
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Name and Principal Position
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Year
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Salary ($)
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Bonus ($)
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Awards
($)(1)
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Total ($)
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Paul F. Truex
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2009
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$
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281,837
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$
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88,125
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$
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369,962
|
|
President, Chief Executive Officer, and Director
|
|
|
2008
|
|
|
$
|
300,000
|
|
|
|
|
|
|
$
|
|
|
|
$
|
300,000
|
|
Christopher P. Lowe
|
|
|
2009
|
|
|
$
|
241,174
|
|
|
|
|
|
|
$
|
23,500
|
|
|
$
|
264,674
|
|
Chief Financial Officer and
Vice President of Administration
|
|
|
2008
|
|
|
$
|
250,000
|
|
|
|
|
|
|
$
|
117,411
|
|
|
$
|
367,411
|
|
James E. Pennington, M.D.
|
|
|
2009
|
|
|
$
|
228,845
|
|
|
|
|
|
|
$
|
29,375
|
|
|
$
|
258,220
|
|
Executive Vice President and
|
|
|
2008
|
|
|
$
|
290,000
|
|
|
|
|
|
|
$
|
|
|
|
$
|
290,000
|
|
Chief Medical
Officer(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Colin Hislop, M.D.
|
|
|
2009
|
|
|
$
|
259,621
|
|
|
$
|
1,247
|
|
|
$
|
28,795
|
|
|
$
|
289,663
|
|
Senior Vice President, Cardiovascular Products
|
|
|
2008
|
|
|
$
|
270,000
|
|
|
|
|
|
|
$
|
|
|
|
$
|
270,000
|
|
Debra Odink, Ph.D.
|
|
|
2009
|
|
|
$
|
158,580
|
|
|
$
|
3,996
|
|
|
$
|
29,375
|
|
|
$
|
191,951
|
|
Vice President, Pharmaceutical Research and Development
|
|
|
2008
|
|
|
$
|
200,000
|
|
|
|
|
|
|
$
|
|
|
|
$
|
200,000
|
|
|
|
(1)
|
This column reflects the aggregate grant date fair value of
equity awards granted in 2009 or 2008 as calculated in
accordance with FASB ASC 718. See Note 8 to our financial
statements for a discussion of the assumptions made in
determining the valuation of option awards.
|
(2)
|
As of May 1, 2010, Dr. Pennington ceased serving as our Chief
Medical Officer and Executive Vice President and commenced his
role with us as Senior Clinical Fellow.
|
Grants of
Plan-Based Awards
The following table sets forth certain information with respect
to awards under our equity and non-equity incentive plans made
by us to our named executive officers and stock options awarded
to our named executive officers for the year ended
December 31, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
|
|
|
|
|
|
Option
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
|
Grant Date
|
|
|
|
|
Number of
|
|
Exercise or
|
|
Fair Value of
|
|
|
|
|
Securities
|
|
Base Price of
|
|
Stock and
|
|
|
|
|
Underlying
|
|
Option
|
|
Option
|
Name
|
|
Grant Date
|
|
Options(1)
|
|
Awards ($/sh)
|
|
Awards
($)(2)
|
|
Paul F. Truex
|
|
|
2/18/2009
|
|
|
|
66,376
|
|
|
$
|
1.51
|
|
|
$
|
66,761
|
|
|
|
|
2/18/2009
|
|
|
|
21,240
|
|
|
$
|
1.51
|
|
|
$
|
21,364
|
|
Christopher P. Lowe
|
|
|
2/18/2009
|
|
|
|
23,364
|
|
|
$
|
1.51
|
|
|
$
|
23,500
|
|
James E. Pennington, M.D.
|
|
|
2/18/2009
|
|
|
|
29,205
|
|
|
$
|
1.51
|
|
|
$
|
29,375
|
|
Colin Hislop, M.D.
|
|
|
2/18/2009
|
|
|
|
23,364
|
|
|
$
|
1.51
|
|
|
$
|
23,500
|
|
|
|
|
4/15/2009
|
(3)
|
|
|
5,257
|
|
|
$
|
1.51
|
|
|
$
|
5,295
|
|
Debra Odink, Ph.D.
|
|
|
2/18/2009
|
|
|
|
29,205
|
|
|
$
|
1.51
|
|
|
$
|
29,375
|
|
|
|
(1)
|
Unless otherwise noted in the footnotes, these options vest in
equal monthly installments over four years. The vesting
commencement date of these grants is August 12, 2008.
|
(2)
|
The grant date fair value of each equity award is computed in
accordance with FASB ASC 718, excluding the effect of
estimated forfeitures. See Note 8 to our financial
statements for a discussion of the assumptions made in
determining the valuation of option awards.
|
(3)
|
These options were fully vested on the grant date.
|
126
Outstanding
Equity Awards at Fiscal Year-End
The following table sets forth certain information with respect
to outstanding equity awards as of December 31, 2009 with
respect to our named executive officers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market
|
|
|
|
Number of
|
|
|
Number of
|
|
|
|
|
|
|
|
|
Number
|
|
|
Value of
|
|
|
|
Securities
|
|
|
Securities
|
|
|
|
|
|
|
|
|
of Shares
|
|
|
Shares or
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
or Units
|
|
|
Units of
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Option
|
|
|
Option
|
|
|
of Stock
|
|
|
Stock
|
|
|
|
Options
|
|
|
Options
|
|
|
Exercise
|
|
|
Expiration
|
|
|
That have
|
|
|
That have
|
|
Name
|
|
Exercisable (#)
|
|
|
Unexercisable (#)*
|
|
|
Price ($)
|
|
|
Date
|
|
|
not Vested
(#)(1)
|
|
|
not Vested
($)(2)
|
|
|
Paul F. Truex
|
|
|
21,417
|
|
|
|
1,947
|
(3)
|
|
$
|
0.14
|
|
|
|
4/6/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
362,826
|
|
|
|
|
|
|
$
|
0.26
|
|
|
|
1/23/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
44,252
|
|
|
|
22,124
|
(4)
|
|
$
|
1.51
|
|
|
|
2/18/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
14,161
|
|
|
|
7,079
|
(5)
|
|
$
|
1.51
|
|
|
|
2/18/2019
|
|
|
|
|
|
|
|
|
|
Christopher P. Lowe
|
|
|
2,920
|
(9)
|
|
|
|
|
|
$
|
0.14
|
|
|
|
3/6/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
39,004
|
|
|
|
35,882
|
(6)
|
|
$
|
1.34
|
|
|
|
2/21/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
24,884
|
|
|
|
22,893
|
(7)
|
|
$
|
1.34
|
|
|
|
2/21/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
15,540
|
|
|
|
7,824
|
(4)
|
|
$
|
1.51
|
|
|
|
2/18/2019
|
|
|
|
|
|
|
|
|
|
James E. Pennington, M.D.
|
|
|
26,103
|
|
|
|
11,864
|
(8)
|
|
$
|
0.26
|
|
|
|
10/24/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
19,471
|
|
|
|
9,734
|
(4)
|
|
$
|
1.51
|
|
|
|
2/18/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,857
|
|
|
$
|
252,999
|
|
Colin Hislop, M.D.
|
|
|
145,130
|
|
|
|
|
|
|
$
|
0.26
|
|
|
|
1/23/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
15,577
|
|
|
|
7,787
|
(4)
|
|
$
|
1.51
|
|
|
|
2/18/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
5,257
|
|
|
|
|
|
|
$
|
1.51
|
|
|
|
4/15/2019
|
|
|
|
|
|
|
|
|
|
Debra Odink, Ph.D.
|
|
|
19,471
|
|
|
|
9,734
|
(4)
|
|
$
|
1.51
|
|
|
|
2/18/2019
|
|
|
|
|
|
|
|
|
|
|
|
* |
Unless otherwise noted in the footnotes, these options vest over
four years as follows: 25% of the shares vest one year following
the vesting commencement date, with the remaining 75% vesting in
equal monthly installments over the next three years. All
unvested options granted pursuant to the 2005 Equity Plan
contain an early exercise feature subject to the Companys
right of repurchase.
|
|
|
(1)
|
The number in this column represents shares of unvested stock
options that were acquired upon exercise of stock options prior
to the stock option vesting in full and which remain subject to
the Companys right of repurchase as of December 31,
2009.
|
(2)
|
The fair value of our common stock as of December 31, 2009
was $7.70 per share.
|
(3)
|
The vesting commencement date of this incentive stock option is
April 6, 2006.
|
(4)
|
This incentive stock option vests in equal monthly installments
over four years commencing on August 12, 2008.
|
(5)
|
This non-statutory stock option vests in equal monthly
installments over four years commencing on August 12, 2008.
|
(6)
|
The vesting commencement date of this incentive stock option is
November 26, 2007.
|
(7)
|
The vesting commencement date of this non-statutory stock option
is November 26, 2007.
|
(8)
|
The vesting commencement date of this incentive stock option is
March 19, 2007.
|
(9)
|
These options were granted to Mr. Lowe on March 6,
2006 in his capacity as a consultant to the Company and vested
immediately on the grant date.
|
127
Option
Exercises and Stock Vested
Stock
Vested 2009
The following table sets forth certain information with respect
to the stock vested during the year ended December 31, 2009
with respect to our named executive officers. There were no
exercised stock options during the year ended December 31,
2009 with respect to our named executive officers.
|
|
|
|
|
|
|
|
|
|
|
Stock Awards
|
|
|
Number
|
|
|
|
|
of Shares
|
|
Value
|
|
|
Acquired on
|
|
Realized on
|
Name
|
|
Vesting (#)
|
|
Vesting
($)(3)
|
|
Paul F. Truex
|
|
|
|
|
|
|
|
|
Christopher P. Lowe
|
|
|
|
|
|
|
|
|
James E. Pennington, M.D.
|
|
|
26,285
|
(1)
|
|
|
195,560
|
|
Colin Hislop, M.D.
|
|
|
|
|
|
|
|
|
Debra Odink, Ph.D.
|
|
|
18,141
|
(2)
|
|
|
134,969
|
|
|
|
(1)
|
On April 23, 2007, Dr. Pennington exercised
105,140 shares underlying a stock option award prior to the
award vesting in full. During the year ended December 31,
2009, the Companys right of repurchase lapsed with respect
to the number of shares in this column.
|
(2)
|
On October 19, 2007, Dr. Odink exercised
72,565 shares underlying a stock option award prior to the
award vesting in full. During the year ended December 31,
2009, the Companys right of repurchase lapsed with respect
to the number of shares in this column.
|
(3)
|
This column reflects the intrinsic value realized for shares
vested in 2009, which represents the difference between the fair
value of our common stock as of December 31, 2009 and the
exercise price of the stock option.
|
Stock and
Benefit Plans
2005
Equity Incentive Plan
Our 2005 Equity Plan was adopted by our board of directors and
approved by our stockholders in April 2005. We reserved
2,175,817 shares of our common stock for the issuance of
awards under the 2005 Equity Plan.
Our 2005 Equity Plan is administered by our board of directors,
which has the authority to delegate full power and authority to
a committee of the board. Our board of directors or any
committee delegated by our board of directors has the power to
select the individuals to whom awards will be granted, to make
any combination of awards to participants, to accelerate the
exercisability or vesting of any award, to provide substitute
awards and to determine the specific terms and conditions of
each award, subject to the provisions of the 2005 Equity Plan.
The 2005 Equity Plan permits us to make grants of incentive
stock options, non-qualified stock options, restricted stock
awards and stock appreciation rights to employees, directors and
consultants. Stock options granted under the 2005 Equity Plan
have a maximum term of 10 years from the date of grant and
incentive stock options have an exercise price of no less than
the fair market value of our common stock on the date of grant.
Upon a sale event in which all awards are not assumed or
substituted by the successor entity, the vesting of awards under
the 2005 Equity Plan shall be accelerated in full prior to the
sale event and all stock options issued thereunder will
terminate.
All stock option awards that are granted to our named executive
officers are covered by a stock option agreement. Except as
noted above, under the stock option agreements, 25% of the
shares vest on the
128
first anniversary of the grant date and the remaining shares
vest monthly over the following three years. Our board of
directors may accelerate the vesting schedule in its discretion.
We did not engage in any option repricing or other modification
to any of our outstanding equity awards during the fiscal year
ended December 31, 2009.
Our board of directors determined not to grant any further
awards under the 2005 Equity Plan after the completion of our
initial public offering. We have adopted the 2010 Equity Plan
under which we expect to make all future awards.
Amended
and Restated 2010 Stock Option and Incentive Plan
In February 2010, our board of directors, upon the
recommendation of our compensation committee, approved the 2010
Equity Plan, which was also approved by our stockholders. Our
board of directors subsequently approved the amendment and
restatement of our 2010 Equity Plan, which was approved by our
stockholders at our annual stockholders meeting held in
July 2010. The 2010 Equity Plan became effective upon the
consummation of our initial public offering and replaced the
2005 Equity Plan, as our board of directors determined not to
make additional awards under that plan once the 2010 Equity Plan
became effective. The 2010 Equity Plan provides flexibility to
our compensation committee to use various equity-based incentive
awards as compensation tools to motivate our workforce.
We initially reserved 233,644 shares of our common stock
for the issuance of awards under the 2010 Equity Plan plus an
additional 35,670 shares of common stock available for
grant under our 2005 Equity Plan, which shares will be added to
the shares reserved under our 2010 Equity Plan, and an
additional 200,000 shares that were added by the amendment
and restatement approved at our 2010 annual stockholders
meeting. The 2010 Equity Plan provides that the number of shares
reserved and available for issuance under the plan will
automatically increase each January 1, beginning in 2011,
by 4% of the outstanding number of shares of common stock on the
immediately preceding December 31. This number is subject
to adjustment in the event of a stock split, stock dividend or
other change in our capitalization.
The shares we issue under the 2010 Equity Plan are authorized
but unissued shares or shares that we reacquire. The shares of
common stock underlying any awards that are forfeited, canceled,
held back upon exercise or settlement of an award to satisfy the
exercise price or tax withholding, reacquired by us prior to
vesting, satisfied without any issuance of stock, expire or are
otherwise terminated (other than by exercise) under the 2010
Equity Plan are added back to the shares of common stock
available for issuance under the 2010 Equity Plan.
The 2010 Equity Plan is administered by our board of directors
under recommendation by our compensation committee. Our board of
directors has full power to select, from among the individuals
eligible for awards, the individuals to whom awards will be
granted, to make any combination of awards to participants and
to determine the specific terms and conditions of each award,
subject to the provisions of the 2010 Equity Plan. The board of
directors may delegate to our compensation committee or our
Chief Executive Officer the authority to grant options to
certain individuals. Persons eligible to participate in the 2010
Equity Plan will be those of our full or part-time officers,
employees, non-employee directors and other key persons
(including consultants and prospective employees) as selected
from time to time by our board of directors in its discretion.
The 2010 Equity Plan permits the granting of (i) options to
purchase common stock intended to qualify as incentive stock
options under Section 422 of the Internal Revenue Code and
(ii) options that do not so qualify. The option exercise
price of each option will be determined by our compensation
committee but may not be less than 100% of the fair market value
of the common stock on the date of grant. The
129
term of each option will be fixed by our compensation committee
and may not exceed 10 years from the date of grant. Our
compensation committee will determine at what time or times each
option may be exercised.
Our board of directors may award stock appreciation rights
subject to such conditions and restrictions as our compensation
board of directors may determine. Stock appreciation rights
entitle the recipient to shares of common stock equal to the
value of the appreciation in the stock price over the exercise
price. The exercise price shall not be less than the fair market
value of the common stock on the date of grant.
Our board of directors may award restricted shares of common
stock to participants subject to such conditions and
restrictions as our compensation committee may determine. These
conditions and restrictions may include the achievement of
certain performance goals
and/or
continued employment with us through a specified restricted
period. Our compensation committee may award restricted stock
units to any participants. Restricted stock units are ultimately
payable in the form of shares of common stock and may be subject
to such conditions and restrictions as our compensation
committee may determine. These conditions and restrictions may
include the achievement of certain performance goals
and/or
continued employment through a specified vesting period. Our
board of directors may also grant shares of common stock which
are free from any restrictions under the 2010 Equity Plan.
Unrestricted stock may be granted to any participant in
recognition of past services or other valid consideration and
may be issued in lieu of cash compensation due to such
participant.
Our board of directors may grant performance share awards to any
participant which entitles the recipient to receive shares of
common stock upon the achievement of certain performance goals
and such other conditions as our compensation committee shall
determine.
Our board of directors may grant dividend equivalent rights to
participants which entitle the recipient to receive credits for
dividends that would be paid if the recipient had held specified
shares of common stock.
Our board of directors may grant cash bonuses under the 2010
Equity Plan to participants. The cash bonuses may be subject to
the achievement of certain performance goals.
The 2010 Equity Plan also provides that upon the effectiveness
of a sale event as defined in the 2010 Equity Plan,
except as otherwise provided by our compensation committee in
the award agreement, all awards will automatically terminate,
unless the parties to the sale event agree that such awards will
be assumed or continued by the successor entity. Awards with
conditions and restrictions relating to the attainment of
performance goals may become vested and non-forfeitable in
connection with a sale event in the compensation
committees discretion. In addition, in the case of a sale
event in which our stockholders will receive cash consideration,
we may make or provide for a cash payment to participants
holding options and stock appreciation rights equal to the
difference between the per share cash consideration and the
exercise price of the options or stock appreciation rights.
No awards may be granted under the 2010 Equity Plan after the
date that is 10 years from the date of stockholder approval.
2010
Employee Stock Purchase Plan
Our board of directors adopted the Anthera Pharmaceuticals, Inc.
2010 Employee Stock Purchase Plan, or the 2010 ESPP, and our
stockholders approved the 2010 ESPP at our 2010 annual
stockholders meeting. We have reserved 100,000 shares
of common stock for issuance thereunder plus on January 1,
2011 and each January 1 thereafter, the number of shares of
stock reserved and available for issuance under the Plan shall
be cumulatively increased by the lesser of (i) one percent
(1%) of the number of
130
shares of common stock issued and outstanding on the immediately
preceding December 31 or (ii) 250,000 shares of common
stock. Under the 2010 ESPP, eligible employees of the Company
and certain designated subsidiaries of the Company may authorize
the Company to deduct amounts from their compensation, which
amounts are used to enable the employees to purchase shares of
the Companys common stock. The purpose of the 2010 ESPP is
to attract and retain key personnel, and encourage stock
ownership by the Companys employees.
The 2010 ESPP is a broad-based employee stock purchase plan
under Section 423 of the Internal Revenue Code of 1986, as
amended, and the regulations thereunder, or the Code.
The shares that are reserved under the 2010 ESPP have an
aggregate value of approximately $0.4 million based on the
closing price of the common stock as reported on The NASDAQ
Global Market on September 30, 2010.
The 2010 ESPP is administered by the person or persons appointed
by the Companys board of directors. The 2010 ESPP provides
that all employees of the Company and any designated
subsidiaries of the Company who work at least 20 hours per
week are eligible to participate in the 2010 ESPP, except for
persons who are deemed under Section 423(b)(3) of the Code
to own five percent (5%) or more of the voting stock of the
Company. Participation by any eligible employee is voluntary.
The number of employees potentially eligible to participate in
the 2010 ESPP is approximately 20 persons.
The 2010 ESPP provides for two offering periods
within each year, and the first commenced on September 1,
2010 and will end on December 31, 2010. Thereafter,
offering periods will commence on the first business day
occurring on or after each January 1 and ending on the last
business day occurring on or before the following June 30,
and the second commencing on the first business day occurring on
or after each July 1 and ending on the last business day
occurring on or before the following December 31. Eligible
employees may elect to become participants in the 2010 ESPP by
enrolling prior to each semi-annual date to purchase shares
under the 2010 ESPP. Shares are purchased through the
accumulation of payroll deductions of not less than one percent
(1%) nor more than ten percent (10%) of each participants
compensation. The maximum number of shares of common stock that
can be purchased under the 2010 ESPP during any one calendar
year is that number having a fair market value of $25,000 on the
first day of the purchase period pursuant to which the shares
are purchased. The number of shares to be purchased with respect
to any purchase period will be the lesser of (a) the number
of shares determined by dividing the participants balance
in the plan account on the last day of the purchase period by
the purchase price per share for the stock,
(b) 5,000 shares, and (c) such other lesser
maximum number of shares as shall have been established by the
administrator in advance of the offering. The purchase price per
share will be 85% of the fair market value of the common stock
as of the first date or the ending date of the applicable
semi-annual purchase period, whichever is less.
A participants right to purchase shares during a purchase
period under the 2010 ESPP is not transferable by the
participant except by will or by the laws of descent and
distribution. Employees may cease their participation in the
offering at any time during the offering period, and
participation automatically ceases on termination of employment
with the Company.
The number of shares that are reserved for issuance under the
2010 ESPP is subject to adjustment for stock splits and similar
events. The proceeds received by the Company from exercise under
the 2010 ESPP will be used for the general purposes of the
Company. Shares issued under the 2010 ESPP may be authorized but
unissued shares or shares reacquired by the Company and held in
its treasury.
The 2010 ESPP shall remain in full force and effect until
suspended or discontinued by our board of directors. Our board
of directors may, at any time, terminate the 2010 ESPP; provided
that the 2010 ESPP shall automatically terminate in accordance
with its terms as of the tenth anniversary of its
131
adoption by the board of directors. Our board of directors may
at any time, and from time to time, amend the 2010 ESPP in any
respect, except that without the approval within
12 months of such board action by the stockholders, no
amendment may be made increasing the number of shares approved
for the 2010 ESPP or making any other change that would require
stockholder approval in order for the 2010 ESPP, as amended, to
qualify as an employee stock purchase plan under
Section 423(b) of the Code.
401(k)
Savings Plan
We have established a 401(k) plan to allow our employees to save
on a tax-favorable basis for their retirement. We do not match
any contributions made by any employees, including our named
executive officers, pursuant to the plan.
Pension
Benefits
None of our named executive officers participate in or have
account balances in pension benefit plans sponsored by us.
Nonqualified
Defined Contribution and Other Nonqualified Defined Compensation
Plans
None of our named executive officers participate in or have
account balances in non-qualified defined contribution plans or
other deferred compensation plans maintained by us.
Proprietary
Information and Inventions Agreements
Each of our named executive officers has also entered into a
standard form agreement with respect to proprietary information
and inventions. Among other things, this agreement obligates
each named executive officer to refrain from disclosing any of
our proprietary information received during the course of
employment and, with some exceptions, to assign to us any
inventions conceived or developed during the course of
employment.
Severance
and Change in Control Arrangements
We consider it essential to the best interests of our
stockholders to foster the continuous employment of our key
management personnel. In this regard, we recognize that the
possibility of a change in control may exist and that the
uncertainty and questions that it may raise among management
could result in the departure or distraction of management
personnel to the detriment of the Company and our stockholders.
In order to reinforce and encourage the continued attention and
dedication of certain key members of management, we have entered
into several change in control agreements and severance
agreements with certain of our executive officers.
In these agreements, the definition of change in
control generally means the occurrence, in a single
transaction or in a series of related transactions of any one or
more of the following events, subject to specified events:
(a) any Exchange Act Person (defined in the change in
control agreements generally as any natural person, entity, or
group not including the Company or any subsidiaries) becomes the
owner of securities representing more than 50% of the combined
voting power of our then outstanding securities; (b) a
merger, consolidation or similar transaction involving the
Company is consummated and immediately after the consummation of
such merger, consolidation, or similar transaction, our
stockholders immediately prior thereto do not own either
outstanding voting securities representing more than 50% of the
combined outstanding voting power of the surviving entity or
more than 50% of the combined outstanding voting power of the
parent of the surviving entity in such merger, consolidation, or
similar transaction; or (c) a sale, lease, license or other
disposition of all or substantially all of our consolidated
assets is consummated.
132
In these agreements, cause means:
(a) gross negligence or willful misconduct in the
performance of duties that is not cured within 30 days of
written notice, where such gross negligence or willful
misconduct has resulted or is likely to result in substantial
and material damage to the Company; (b) repeated
unexplained or unjustified absence; (c) a material and
willful violation of any federal or state law;
(d) commission of any act of fraud with respect to the
Company; or (e) commission of an act of moral turpitude or
conviction of or entry of a plea of nolo contendere to a felony.
Constructive Termination means an
officers resignation within 180 days of the
occurrence of any of the following events without the
officers prior written consent, provided the officer
provides notice within 90 days of the first occurrence of
such event and such event remains uncured 30 days after
delivery of the written notice: (a) a material diminution
of such officers duties, responsibilities or authority;
(b) a material diminution of base compensation; or
(c) a material change in the geographic location at which
the officer provides services to us.
Paul
F. Truex
On October 15, 2009, we entered into an amended and
restated change in control agreement with Mr. Truex. Upon
the occurrence of a change in control or within 12 months
thereafter, if we terminate Mr. Truexs employment for
any reason other than for cause or if there is a constructive
termination, in either case, Mr. Truex is entitled to
receive as severance compensation 100% of his then-current base
salary for a period of up to 12 months and payment of
continuation coverage premiums for health, dental, and vision
benefits for Mr. Truex and his covered dependants, if any,
for a period of 12 months pursuant to COBRA. In addition,
Mr. Truex is entitled to receive (i) 12 months
accelerated vesting of any unvested options to purchase our
common stock and (ii) the immediate lapsing of any vesting
restrictions on any restricted stock awards as of the date of
termination.
Christopher
P. Lowe
On October 12, 2009, we entered into an amended and
restated change in control agreement with Mr. Lowe. Upon
the occurrence of a change in control or within 12 months
thereafter, if we terminate Mr. Lowes employment for
any reason other than for cause or if there is a constructive
termination, in either case, Mr. Lowe is entitled to
receive as severance compensation 100% of his then-current base
salary for a period of up to 12 months and payment of
continuation coverage premiums for health, dental, and vision
benefits for Mr. Lowe and his covered dependants, if any,
for a period of 12 months pursuant to COBRA. In addition,
Mr. Lowe is entitled to receive (i) 12 months
accelerated vesting of any unvested options to purchase our
common stock and (ii) the immediate lapsing of any vesting
restrictions on any restricted stock awards as of the date of
termination.
James
E. Pennington, M.D.
On October 15, 2009, we entered into an amended and
restated severance benefits agreement with Dr. Pennington,
which provides certain benefits upon the termination of
employment. If we terminate Dr. Penningtons
employment for any reason other than for cause or if there is a
constructive termination, in either case, Dr. Pennington is
entitled to receive as severance compensation 100% of his
then-current base salary and payment of continuation coverage
premiums for health, dental, and vision benefits for
Dr. Pennington and his covered dependents, if any, for a
period of 12 months pursuant to COBRA. In addition,
Dr. Pennington is entitled to receive:
(i) 12 months accelerated vesting of his
unvested options to purchase our common stock and (ii) the
immediate lapsing of any vesting restrictions on any restricted
stock awards as of the date of termination. This agreement was
terminated on May 1, 2010, and Dr. Pennington is
therefore no longer entitled to the severance benefits
thereunder.
On June 2, 2010, we entered into an employment agreement
with Dr. Pennington, which replaces the amended and
restated severance benefits agreement entered into on
October 15, 2009. The employment
133
agreement provides that, as of May 1, 2010, and for a
period of one year thereafter, Dr. Pennington will serve as
our Senior Clinical Fellow. Dr. Penningtons annual
base salary will remain unchanged and any unvested portions of
Dr. Penningtons outstanding option grants shall be
modified in that they shall vest (and the repurchase option with
respect to any early exercised option grants shall lapse) over
twelve months from May 1, 2010.
In addition, should we terminate Dr. Penningtons
employment prior to May 1, 2011 for any reason other than
for cause or if there is a constructive termination, then
Dr. Pennington is entitled to receive his base salary and
COBRA premiums for health benefits to the same extent as if he
had remained employed through May 1, 2011. Additionally,
upon such termination of employment, all unvested shares to
purchase our common stock pursuant to stock options shall become
vested and any vesting restrictions on any restricted stock
awards that Dr. Pennington holds as of the date of such
termination of employment shall lapse.
Colin
Hislop, M.D.
On October 15, 2009, we entered into an amended and
restated change in control agreement with Dr. Hislop. Upon
the occurrence of a change in control or within 12 months
thereafter, if we terminate Dr. Hislops for any
reason other than for cause or if there is a constructive
termination, in either case, Dr. Hislop is entitled to
receive as severance compensation 100% of his then-current base
salary for a period of up to six months and payment of
continuation coverage premiums for health, dental, and vision
benefits for Dr. Hislop and his covered dependants, if any,
for a period of six months pursuant to COBRA. In addition,
Dr. Hislop is entitled to receive (i) six months
accelerated vesting of any unvested options to purchase our
common stock and (ii) the immediate lapsing of any vesting
restrictions on any restricted stock awards as of the date of
termination.
Debra
Odink, Ph.D.
On October 15, 2009, we entered into an amended and
restated change in control agreement with Dr. Odink. Upon
the occurrence of a change in control or within 12 months
thereafter, if we terminate Dr. Odinks employment for
any reason other than for cause or if there is a constructive
termination, in either case, Dr. Odink is entitled to
receive as severance compensation 100% of her then-current base
salary for a period of up to six months and payment of
continuation coverage premiums for health, dental, and vision
benefits for Dr. Odink and her covered dependants, if any,
for a period of six months pursuant to COBRA. In addition,
Dr. Odink is entitled to receive (i) six months
accelerated vesting of any unvested options to purchase our
common stock and (ii) the immediate lapsing of any vesting
restrictions on any restricted stock awards as of the date of
termination.
Georgina
Kilfoil
On July 7, 2010, we entered into a change in control
agreement with Ms. Kilfoil. Upon the occurrence of a change in
control or within 12 months thereafter, if we terminate
Ms. Kilfoils employment for any reason other than for
cause or if there is a constructive termination, in either case,
Ms. Kilfoil is entitled to receive as severance
compensation 100% of her then-current base salary for a period
of up to 12 months and payment of continuation coverage
premiums for health, dental and vision benefits for
Ms. Kilfoil and her covered dependants, if any, for a
period of 12 months pursuant to COBRA. In addition,
Ms. Kilfoil is entitled to receive (i) 12 months
accelerated vesting of any unvested options to purchase our
common stock and (ii) the immediate lapsing of any vesting
restrictions on any restricted stock awards as of the date of
termination.
All payments and benefits are conditioned on the
executives execution and non-revocation of a general
release agreement at the time of termination. All payments due
upon termination (as discussed in this
134
entire section) may be delayed up to six months from the
termination date if necessary to avoid adverse tax treatment
under Section 409A of the Internal Revenue Code.
Potential
Payments Upon Change in Control and Termination
The tables below reflect potential payments and benefits
available for each of our named executive officers upon
termination in connection with a change in control or
termination, assuming the date of occurrence is
December 31, 2009. See section entitled
Severance and Change in Control
Agreements above.
Named Executive Officer Benefits and Payments Upon
Termination(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary
|
|
|
|
|
Termination within
|
|
|
Involuntary
|
|
One Year of Change
|
Name
|
|
Termination(2)
|
|
in
Control(3)
|
|
Paul F. Truex
|
|
|
|
|
|
$
|
310,630
|
|
Christopher P. Lowe
|
|
|
|
|
|
$
|
259,483
|
|
James E. Pennington, M.D.
|
|
$
|
297,385
|
|
|
$
|
297,385
|
|
Colin Hislop, M.D.
|
|
|
|
|
|
$
|
139,792
|
|
Debra Odink, Ph.D.
|
|
|
|
|
|
$
|
104,663
|
|
|
|
(1)
|
Assumes triggering event effective as of December 31, 2009.
Upon a voluntary termination or termination for cause, each
named executive officer would receive any earned but unpaid base
salary and unpaid vacation accrued until December 31, 2009.
These payments would be available to all employees upon
termination.
|
(2)
|
Includes continuation of base salary determined as of
December 31, 2009 and health, dental and vision benefits
for 12 months for Dr. Pennington.
|
(3)
|
Includes continuation of base salary determined as of
December 31, 2009 and health, dental and vision benefits
for 12 months for Mr. Truex, Mr. Lowe and
Dr. Pennington. All other named executive officers receive
six months continuation of base salary and benefits.
|
Acceleration
of Vesting of Options upon
Termination(1)
|
|
|
|
|
|
|
|
|
|
|
Number of Shares of
|
|
Number of Shares of
|
|
|
Accelerated Stock and Value
|
|
Accelerated Stock and Value
|
|
|
Upon Involuntary
|
|
Upon Involuntary
|
|
|
Termination and in
|
|
Termination and not in
|
|
|
Connection with a
|
|
Connection with a
|
Name
|
|
Change in
Control(2)
|
|
Change in
Control(3)
|
|
Paul F. Truex
|
|
$
|
73,472
|
(4)
|
|
|
|
|
Christopher P. Lowe
|
|
$
|
189,183
|
(5)
|
|
|
|
|
James E. Pennington, M.D.
|
|
$
|
261,169
|
(6)
|
|
$
|
261,169
|
(6)
|
Colin Hislop, M.D.
|
|
$
|
8,015
|
(7)
|
|
|
|
|
Debra Odink, Ph.D.
|
|
$
|
10,019
|
(8)
|
|
|
|
|
|
|
(1)
|
Assumes triggering event effective as of December 31, 2009
and excludes vested stock held as of such date. There was no
public market for our common stock in 2009. We have estimated
the market value of the accelerated option shares based on the
difference between our initial public offering price of $7.00
per share and the exercise price of such accelerated options.
|
(2)
|
Includes acceleration of options for 12 months for
Mr. Truex, Mr. Lowe and Dr. Pennington. All other
named executive officers have six months acceleration of
options.
|
(3)
|
Includes acceleration of options for 12 months for
Dr. Pennington.
|
(4)
|
12,897 of Mr. Truexs options would accelerate upon
involuntary termination and in connection with a change of
control.
|
(5)
|
33,510 of Mr. Lowes options would accelerate upon
involuntary termination and in connection with a change of
control.
|
135
|
|
(6)
|
39,426 of Dr. Penningtons options would accelerate
upon involuntary termination, including 26,285 shares with
respect to which the Companys right of repurchase would
lapse, which shares were acquired by Dr. Pennington upon
exercise of options containing an early exercise feature.
|
(7)
|
1,460 of Dr. Hislops options would accelerate upon
involuntary termination and in connection with a change of
control.
|
(8)
|
1,825 of Dr. Odinks options would accelerate upon
involuntary termination and in connection with a change of
control.
|
Director
Compensation
In June 2008, the board of directors, upon the recommendation of
our compensation committee, adopted a formal compensation
program for the Chairman of our board of directors and our
independent directors who were not affiliated with any of our
investors. Pursuant to this program, the chairman of our board
of directors, Dr. Henney, received a $20,000 annual
retainer fee plus an additional $60,000 as consideration for his
services as Chairman. Pursuant to this program, two of our
directors, Mr. Santel and Mr. Thompson, received a
$20,000 annual retainer fee, as well as $2,000 for each board
meeting attended in person ($1,000 for meetings attended by
telephone conference).
Under the director compensation program effective prior to
January 2010, each non-employee director initially received
(i) a nonqualified stock option to purchase
14,602 shares of our common stock upon election and
(ii) each year thereafter an additional nonqualified stock
option to purchase 5,841 shares of our common stock. One
quarter of the shares issuable pursuant to the initial
nonqualified stock option vested upon the completion of one year
of continuous service by such director following the date of
commencement of the vesting of such option; the remaining three
quarters of the shares issuable pursuant to each such option
vested in equal monthly installments over a period of three
years until the date that is the fourth anniversary of the date
of the option grant. The shares issuable pursuant to the annual
nonqualified stock option vested in equal monthly installments
over a period of four years. All of these options have an
exercise price equal to the fair market value of our common
stock on the date of the grant. The option numbers set forth
above take into account our
1-for-1.712
reverse stock split of our common stock effected on
February 22, 2010.
In January 2010, the board of directors approved changes to the
current director compensation program, which apply to all
non-employee directors. Each non-employee director receives a
$40,000 annual retainer fee instead of per-meeting fees. In
consideration for their services, the Chairman of our board of
directors receives an additional $40,000, the chairman of our
Audit Committee receives an additional $15,000 and the chairman
of our compensation committee receives an additional $10,000,
each on an annual basis.
In addition, since the completion of our initial public
offering, each new non-employee director receives a
non-qualified stock option to purchase 25,000 shares of our
common stock upon joining the Board, which vests over a
four-year period from the date of grant. In addition, each
non-employee director receives a non-qualified stock option to
purchase 12,000 shares of our common stock each year, which
vests over a one-year period from the date of grant. Any new
Chairman of our board of directors would receive a non-qualified
stock option to purchase 45,000 shares of our common stock
upon election to the Board, which would vest over a four-year
period from the date of grant. Our Chairman also receives a
non-qualified stock option to purchase 15,000 shares of our
common stock each year, which vests over a one-year period from
the date of grant.
All members of our board of directors are eligible to receive
full reimbursement for travel expenses arising from their
attendance of our board meetings.
136
Director
Compensation Table 2009
The following table sets forth information with respect to the
compensation earned by our non-employee directors during the
fiscal year ended December 31, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees Earned
|
|
Option
|
|
|
|
|
or Paid
|
|
Awards
|
|
|
Name
|
|
in Cash ($)
|
|
($)(1)
|
|
Total ($)
|
|
Christopher S. Henney, Ph.D. (Chairman)
|
|
$
|
80,000
|
|
|
$
|
5,875
|
(2)
|
|
$
|
85,875
|
|
Annette Bianchi
|
|
|
|
|
|
$
|
5,875
|
(3)
|
|
$
|
5,875
|
|
James I. Healy, M.D., Ph.D.
|
|
|
|
|
|
$
|
5,875
|
|
|
$
|
5,875
|
|
A. Rachel Leheny, Ph.D.
|
|
|
|
|
|
$
|
14,688
|
(4)
|
|
$
|
14,688
|
|
Donald J. Santel
|
|
$
|
35,000
|
|
|
$
|
5,875
|
(5)
|
|
$
|
40,875
|
|
Daniel K.
Spiegelman(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
David E. Thompson
|
|
$
|
34,000
|
|
|
$
|
5,875
|
(7)
|
|
$
|
39,875
|
|
|
|
(1)
|
This column reflects the aggregate grant date fair value of
equity awards granted in 2009 and calculated in accordance with
FASB ASC 718, excluding the effect of estimated
forfeitures. See Note 8 to our financial statements for a
discussion of the assumptions made in determining the valuation
of option awards.
|
(2)
|
Dr. Henney held 40,887 shares underlying stock options
as of December 31, 2009.
|
(3)
|
Ms. Bianchi held 20,443 shares underlying stock
options as of December 31, 2009.
|
(4)
|
Dr. Leheny held 14,602 shares underlying stock options
as of December 31, 2009.
|
(5)
|
Mr. Santel held 20,443 shares underlying stock options
as of December 31, 2009.
|
(6)
|
Mr. Spiegelman joined our board of directors on
February 2, 2010.
|
(7)
|
Mr. Thompson held 17,523 shares underlying stock
options as of December 31, 2009.
|
137
CERTAIN
RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
Since January 1, 2007, we have engaged in the following
transactions with our directors, executive officers, holders of
more than 5% of our voting securities, each of whom we refer to
as a Beneficial Owner, or any member of the immediate family of
any of the foregoing persons.
Private
Placements of Securities
2008
Note Financing
The following discussion does not give effect to the conversion
of our preferred stock into shares of common stock in connection
with our initial public offering. On February 15, 2008 and
May 14, 2008, we sold convertible promissory notes, or the
2008 notes, to certain of our existing investors for an
aggregate purchase price of $12.2 million. The 2008 notes
accrued interest at a rate of 4.2% per annum and had a maturity
date of the earliest of (i) September 30, 2008,
(ii) immediately prior to (A) our underwritten public
offering pursuant to the Securities Act of 1933, as amended, or
the Securities Act, (B) any consolidation or merger of the
Company with or into another into any other corporation or
entity or (C) a sale of all or substantially of the assets
or intellectual property of the Company or (iii) an event
of default pursuant to the terms of the 2008 notes. In August
2008, in connection with our
Series B-2
preferred stock financing described below, the full principal
amount of the 2008 notes, along with accrued but unpaid interest
thereon of $155,630, were automatically converted into an
aggregate of 2,264,178 shares of our
Series B-2
convertible preferred stock at a conversion price of
approximately $5.46, or 75% of the issue price of our
Series B-2
convertible preferred stock sold in our
Series B-2
preferred stock financing.
The following table summarizes the participation in the sale of
the 2008 notes by any of our current directors, executive
officers, Beneficial Owners or any member of the immediate
family of any of the foregoing persons:
|
|
|
|
|
|
|
|
|
|
|
Aggregate
|
|
|
Series B-2 Convertible
|
|
|
|
Consideration
|
|
|
Preferred Shares Issued Upon
|
|
Name
|
|
Paid
|
|
|
Conversion of Principal of Notes
|
|
|
VantagePoint Venture Partners IV, L.P. and affiliated entities,
or VantagePoint
|
|
$
|
5,652,174
|
(1)
|
|
|
1,035,765
|
|
Sofinnova Venture Partners VI, L.P. and affiliated entities, or
Sofinnova
|
|
$
|
4,662,056
|
(2)
|
|
|
854,326
|
|
A.M. Pappas Life Science Ventures III, L.P. and affiliated
entities, or Pappas
|
|
$
|
1,290,512
|
(3)
|
|
|
236,487
|
|
|
|
|
|
|
|
|
|
|
TOTAL:
|
|
$
|
11,604,742
|
|
|
|
2,126,578
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Consists of (i) a convertible promissory note with a
principal amount of $1,536,261 purchased by VantagePoint Venture
Partners IV (Q), L.P. on February 15, 2008,
(ii) a convertible promissory note with a principal amount
of $3,584,609 purchased by VantagePoint Venture Partners IV
(Q), L.P. on May 14, 2008, (iii) a convertible
promissory note with a principal amount of $153,795 purchased by
VantagePoint Venture Partners IV, L.P. on February 15,
2008, (iv) a convertible promissory note with a principal
amount of $358,857 purchased by VantagePoint Venture Partners
IV, L.P. on May 14, 2008, (v) a convertible promissory
note with a principal amount of $5,596 purchased by VantagePoint
Venture Partners IV Principals Fund, L.P. on
February 15, 2008 and (vi) a convertible promissory
note with a principal amount of $13,057 purchased by
VantagePoint Venture Partners IV Principals Fund, L.P. on
May 14, 2008. Annette Bianchi, a member of our board of
directors, is a Managing Director at VantagePoint. Alan E.
Salzman, through his authority to cause the general partner of
the limited partnerships that directly hold such shares to act,
may be deemed to have voting and investment power with respect
to such shares. Mr. Salzman disclaims beneficial ownership
with respect to such shares and other shares as described in
this section, except to the extent of his pecuniary interest
therein.
|
footnotes continued on following page
138
|
|
(2)
|
Consists of (i) a convertible promissory note with a
principal amount of $948,617 purchased by Sofinnova Venture
Partners VI, L.P. on February 15, 2008 and (ii) a
convertible promissory note with a principal amount of
$3,713,439 purchased by Sofinnova Venture Partners VI, L.P. on
May 14, 2008. Alain Azan, Eric Buatois, Michael Powell and
Dr. James I. Healy are the managing members of the general
partner of the limited partnership that directly holds such
shares, and as such, may be deemed to share voting and
investment power with respect to such shares. Dr. Healy is
a member of our board of directors. Messrs. Azan, Buatois
and Powell and Dr. Healy disclaim beneficial ownership,
except to the extent of their proportionate pecuniary interest
in Sofinnova.
|
(3)
|
Consists of (i) a convertible promissory note with a
principal amount of $223,272 purchased by A.M. Pappas Life
Science Ventures III, L.P. on February 15, 2008,
(ii) a convertible promissory note with a principal amount
of $13,881 purchased by PV III CEO Fund, L.P. on
February 15, 2008, (iii) a convertible promissory note
with a principal amount of $991,704 purchased by
A.M. Pappas Life Science Ventures III, L.P. on May 14,
2008 and (iv) a convertible promissory note with a
principal amount of $61,655 purchased by PV III CEO Fund, L.P.
on May 14, 2008. Arthur M. Pappas, in his role as chairman
of the investment committee of AMP&A Management III, LLC,
the general partner of A. M. Pappas Life Science Ventures III,
L.P. and PV III CEO Fund, L.P., has voting and investment
authority over these shares. Mr. Pappas disclaims
beneficial ownership of these shares except to the extent of his
pecuniary interest arising therein.
|
Series B-2
Preferred Stock Financing
The following discussion does not give effect to the conversion
of our preferred stock into shares of common stock in connection
with our initial public offering. On August 12, 2008, we
sold in a private placement (i) an aggregate of
3,226,244 shares of our
Series B-2
convertible preferred stock, $0.001 par value per share,
and (ii) warrants, which we refer to as the 2008 warrants,
to purchase an aggregate of 240,516 shares of our common
stock, par value $0.001 per share, at an exercise price of $1.34
per share, which transaction we refer to as our
Series B-2
preferred stock financing. Excluding the 2,264,178 shares
of our
Series B-2
convertible preferred stock that were issued upon the conversion
of $12.2 million of principal and $155,630 interest accrued
on the 2008 notes at a conversion price of approximately $5.46,
or 75% of the issue price of our
Series B-2
convertible preferred stock, the remaining 962,066 shares
were sold at a per share price of $7.28.
The following table summarizes the participation in our
Series B-2
preferred stock financing by any of our current directors,
executive officers, Beneficial Owners or any member of the
immediate family of any of the foregoing persons:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares of Common
|
|
|
|
Aggregate
|
|
|
Shares of Series
|
|
|
Stock Issuable Upon
|
|
|
|
Consideration
|
|
|
B-2 Convertible
|
|
|
the Exercise of 2008
|
|
Name
|
|
Paid
|
|
|
Preferred Stock
|
|
|
Warrants
|
|
|
VantagePoint
|
|
$
|
5,727,421
|
(1)
|
|
|
1,049,554
|
|
|
|
|
|
Sofinnova
|
|
$
|
4,719,515
|
(2)
|
|
|
864,855
|
|
|
|
|
|
Pappas
|
|
$
|
1,306,155
|
(3)
|
|
|
239,353
|
|
|
|
|
|
Caxton Advantage Life Sciences Fund,
L.P.(4)
|
|
$
|
3,500,003
|
|
|
|
481,033
|
|
|
|
120,258
|
|
HBM BioCapital, L.P. and affiliated entities, or HBM
BioCapital(5)
|
|
$
|
3,500,003
|
|
|
|
481,033
|
|
|
|
120,258
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL:
|
|
$
|
18,753,097
|
|
|
|
3,115,828
|
|
|
|
240,516
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
This aggregate consideration was paid by conversion of
(i) convertible promissory notes in a total principal
amount of $5,120,870 issued to VantagePoint Venture
Partners IV (Q), L.P. on February 15, 2008 and
May 14, 2008 and $68,176 accrued but unpaid interest
thereon, (ii) convertible promissory notes in a total
principal amount of $512,652 issued to VantagePoint Venture
Partners IV, L.P. on February 15, 2008 and May 14,
2008 and $6,825 accrued but unpaid interest thereon and
(iii) convertible promissory notes in a total principal
amount of $18,652 issued to VantagePoint Venture
Partners IV Principals Fund, L.P. on February 15, 2008
and May 14, 2008 and $246 accrued but unpaid interest
thereon. Includes 950,897 shares of
|
footnotes continued on following page
139
|
|
|
Series B-2
convertible preferred stock owned of record by VantagePoint
Venture Partners IV (Q), L.P., 95,194 shares of
Series B-2
convertible preferred stock owned of record by VantagePoint
Venture Partners IV, L.P. and 3,463 shares of
Series B-2
convertible preferred stock owned of record by VantagePoint
Venture Partners IV Principals Fund, L.P.
|
|
|
(2)
|
This aggregate consideration was paid by conversion of
convertible promissory notes in a total principal amount of
$4,662,056 issued to Sofinnova Venture Partners VI, L.P. on
February 15, 2008 and May 14, 2008 and $57,459 accrued
but unpaid interest thereon.
|
(3)
|
This aggregate consideration was paid by conversion of
(i) convertible promissory notes in a total principal
amount of $1,214,977 issued to A.M. Pappas Life Science
Ventures III, L.P. on February 15, 2008 and May 14,
2008 and $14,729 accrued but unpaid interest thereon and
(ii) convertible promissory notes in a total principal
amount of $75,536 issued to PV III CEO Fund, L.P. on
February 15, 2008 and May 14, 2008 and $913 accrued
but unpaid interest thereon. Includes 225,344 shares of
Series B-2
convertible preferred stock owned of record by A. M. Pappas Life
Science Ventures III, L.P. and 14,009 shares of
Series B-2
convertible preferred stock owned of record by PV III CEO Fund,
L.P.
|
(4)
|
Dr. A. Rachel Leheny, a member of our board of directors,
is (i) a Managing Director of Caxton Advantage Venture
Partners, L.P., which is the General Partner of Caxton Advantage
Life Sciences Fund, L.P., a life-sciences venture capital fund
that she co-founded in 2006 and (ii) a member of Advantage
Life Sciences Partners LLC. Caxton Advantage Venture Partners,
L.P. has voting and investment power with respect to such
shares. Decisions by Caxton Advantage Venture Partners, L.P.
with respect to such shares are made by Advantage Life Sciences
Partners, LLC, the Managing General Partner of Caxton Advantage
Venture Partners, L.P., together with the investment committee
of Caxton Advantage Venture Partners, L.P. Dr. Leheny and
Eric Roberts have authority to take action on behalf of
Advantage Life Sciences Partners, LLC as members of Advantage
Life Sciences Partners, LLC. Mr. Roberts and
Dr. Leheny and the members of the Caxton Advantage Venture
Partners, L.P. investment committee disclaim beneficial
ownership, except to the extent of their proportionate pecuniary
interests, either directly, or indirectly through Caxton
Advantage Venture Partners, L.P. (or through any other entity
which is a limited partner in Caxton Advantage Life Sciences
Fund, L.P.), in Caxton Advantage Life Sciences Fund, L.P.
|
(5)
|
Includes 408,878 shares of
Series B-2
convertible preferred stock owned of record by HBM BioCapital
(EUR) L.P. and 72,155 shares of
Series B-2
convertible preferred stock owned of record by HBM BioCapital
(USD) L.P. The board of directors of HBM BioCapital Ltd., the
general partner of both HBM BioCapital (EUR) L.P. and HBM
BioCapital (USD) L.P., together the HBM BioCapital Funds, has
sole voting and dispositive power with respect to such shares.
The board of directors of HBM BioCapital Ltd. consists of John
Arnold, Sophia Harris, Richard Coles, Dr. Andreas Wicki and
John Urquhart, each of whom disclaims beneficial ownership with
regard to the shares and other shares as described in this
section, except to the extent of their proportionate pecuniary
interests in HBM BioCapital Ltd.
|
2009
Note and Warrant Financing
In July and September 2009, we sold convertible promissory
notes, or the 2009 notes, that were secured by a first priority
security interest in all of our assets, and warrants, or the
2009 warrants, to purchase shares of our equity securities to
certain of our existing investors for an aggregate purchase
price of $10.0 million. We refer to these transactions
collectively as our 2009 note and warrant financing. The 2009
notes accrued interest at a rate of 8% per annum and had a
maturity date of the earliest of (i) July 17, 2010,
(ii) the date of the sale of all or substantially all of
our equity interests or assets or (iii) an event of default
pursuant to the terms of the 2009 notes. The 2009 notes were
automatically convertible into the securities that were sold in
our next equity financing at a 25% discount to the price to
which such securities were sold to other investors, or they were
alternatively convertible into shares of our
Series B-2
convertible preferred stock in connection with a change of
control of the Company. Each 2009 warrant is exercisable for the
security into which each 2009 note was converted, at the price
at which that security was sold to other investors. Depending on
when the 2009 notes converted, each 2009 warrant would be
exercisable for a number of shares equal to the quotient
obtained by dividing (x) (i) 25% of the principal amount of
the accompanying 2009 notes, in the event the conversion
occurred prior to April 1, 2010, or (ii) 50% of the
principal amount of the accompanying 2009 notes, in the event
the conversion occurred on or after April 1, 2010, by
(y) the purchase price of the securities into which the
note was ultimately converted. In addition, if a sale of all or
substantially all of our equity interests or assets occurred
prior to our next equity financing and any 2009 note had not
been converted, we were obligated to pay such 2009 note holder
an amount equal to the accrued interest and two times the
outstanding principal amount on such note in conjunction with
the closing of such sale. The 2009 notes converted into shares
of common stock in connection with our initial public offering,
and thus no principal or interest payments were ever made on the
notes and no amounts remain due under such notes.
140
The following table summarizes the participation in the 2009
bridge financing by any of our current directors, executive
officers, Beneficial Owners or any member of the immediate
family of any of the foregoing persons:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate
|
|
|
Shares Acquired
|
|
|
Shares Underlying
|
|
|
|
Consideration
|
|
|
upon Conversion
|
|
|
Outstanding
|
|
Name
|
|
Paid
|
|
|
of
Notes(a)
|
|
|
Warrants(b)
|
|
|
VantagePoint
|
|
$
|
4,569,675
|
(1)
|
|
|
907,345
|
|
|
|
163,200
|
|
Sofinnova
|
|
$
|
2,951,720
|
(2)
|
|
|
586,088
|
|
|
|
105,418
|
|
Pappas
|
|
$
|
770,225
|
(3)
|
|
|
152,932
|
|
|
|
27,507
|
|
Caxton Advantage Life Sciences Fund, L.P.
|
|
$
|
854,190
|
(4)
|
|
|
169,605
|
|
|
|
30,506
|
|
HBM BioCapital
|
|
$
|
854,190
|
(5)
|
|
|
169,605
|
|
|
|
30,505
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL:
|
|
$
|
10,000,000
|
|
|
|
1,985,575
|
|
|
|
357,136
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Numbers in this column were calculated by dividing (x) the
sum of (i) principal and (ii) accrued interest by
(y) the conversion price of $5.25 per share.
|
(b)
|
Numbers in this column were calculated by dividing (x) the
quotient of (i) the principal and (ii) 25% by
(y) the initial public offering price of $7.00 per share.
|
(1)
|
Consists of (i) a convertible promissory note with a
principal amount of $1,656,051 purchased by VantagePoint Venture
Partners IV (Q), L.P. on July 17, 2009, (ii) a
convertible promissory note with a principal amount of
$2,484,076 purchased by VantagePoint Venture Partners IV
(Q), L.P. on September 9, 2009, (iii) a convertible
promissory note with a principal amount of $165,788 purchased by
VantagePoint Venture Partners IV, L.P. on July 17, 2009,
(iv) a convertible promissory note with a principal amount
of $248,681 purchased by VantagePoint Venture Partners IV, L.P.
on September 9, 2009, (v) a convertible promissory
note with a principal amount of $6,031 purchased by VantagePoint
Venture Partners IV Principals Fund, L.P. on July 17,
2009 and (vi) a convertible promissory note with a
principal amount of $9,047 purchased by VantagePoint Venture
Partners IV Principals Fund, L.P. on September 9, 2009.
|
(2)
|
Consists of (i) a convertible promissory note with a
principal amount of $1,180,688 purchased by Sofinnova Venture
Partners VI, L.P. on July 17, 2009 and (ii) a
convertible promissory note with a principal amount of
$1,771,032 purchased by Sofinnova Venture Partners VI, L.P. on
September 9, 2009.
|
(3)
|
Consists of (i) a convertible promissory note with a
principal amount of $290,058 purchased by A.M. Pappas Life
Science Ventures III, L.P. on July 17, 2009, (ii) a
convertible promissory note with a principal amount of $435,086
purchased by A.M. Pappas Life Science Ventures III, L.P. on
September 9, 2009, (iii) a convertible promissory note
with a principal amount of $18,032 purchased by PV III CEO Fund,
L.P. on July 17, 2009 and (iv) a convertible
promissory note with a principal amount of $27,049 purchased by
PV III CEO Fund, L.P. on September 9, 2009.
|
(4)
|
Consists of (i) a convertible promissory note with a
principal amount of $341,676 purchased by Caxton Advantage Life
Sciences Fund, L.P. on July 17, 2009 and (ii) a
convertible promissory note with a principal amount of $512,514
purchased by Caxton Advantage Life Sciences Fund, L.P. on
September 9, 2009.
|
(5)
|
Consists of (i) a convertible promissory note with a
principal amount of $290,424 purchased by HBM BioCapital (EUR)
L.P. on July 17, 2009, (ii) a convertible promissory
note with a principal amount of $435,637 purchased by HBM
BioCapital (EUR) L.P. on September 9, 2009, (iii) a
convertible promissory note with a principal amount of $51,252
purchased by HBM BioCapital (USD) L.P. on July 17, 2009 and
(iv) a convertible promissory note with a principal amount
of $76,877 purchased by HBM BioCapital (USD) L.P. on
September 9, 2009.
|
2009
Equity Financing
On September 25, 2009, we entered into a stock purchase
agreement, as amended to add an additional purchaser on
November 3, 2009, with certain existing holders of our
preferred stock for the sale of shares of our common stock equal
to $20.5 million divided by the price per share at which
shares of our common stock were sold to the public in our
initial public offering, or IPO, minus any per-share
underwriting discounts, commissions or fees. We refer to this
transaction as the 2009 equity financing. Pursuant to the terms
of the stock purchase agreement, the investors deposited
$20.5 million into an escrow account for the purchase of
the shares. On December 11, 2009, we entered into a note
purchase agreement and amended escrow agreement with the
investors to release $3.4 million of the $20.5 million
held in the escrow account and issued such investors convertible
promissory notes for the released
141
amount, which notes we refer to as the escrow notes and which
are more fully described below. The balance of the funds, or
$17.1 million, held in the escrow account would be released
simultaneously with the closing of an IPO in which the aggregate
net proceeds to us (after underwriting discounts, commissions
and fees) were at least $50.0 million. On February 24,
2010, we amended the stock purchase agreement and escrow
agreement with such holders to provide that the funds held in
the escrow account would be released simultaneously with the
closing of an IPO in which the aggregate net proceeds to us
(after underwriting discounts, commissions and fees) were at
least $20.0 million. The funds held in the escrow account
were released in connection with the closing of our initial
public offering on March 4, 2010.
The following table summarizes commitments made to participate
in the 2009 equity financing by any of our current directors,
executive officers, Beneficial Owners or any member of the
immediate family of any of the foregoing:
|
|
|
|
|
|
|
|
|
|
|
Aggregate Consideration
|
|
|
Shares Issued
|
|
|
|
to be Paid upon Closing
|
|
|
upon Release of
|
|
Name
|
|
of the 2009 Equity Financing
|
|
|
Escrow
Account(a)
|
|
|
VantagePoint
|
|
$
|
7,586,035
|
(1)
|
|
|
1,152,891
|
|
Sofinnova
|
|
$
|
4,898,784
|
|
|
|
744,496
|
|
Pappas
|
|
$
|
1,279,265
|
(2)
|
|
|
194,416
|
|
Caxton Advantage Life Sciences Fund, L.P.
|
|
$
|
1,417,958
|
|
|
|
215,495
|
|
HBM BioCapital
|
|
$
|
1,417,958
|
(3)
|
|
|
215,495
|
|
|
|
|
|
|
|
|
|
|
TOTAL:
|
|
$
|
16,600,000
|
|
|
|
2,522,793
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Numbers in this column calculated by dividing the
Aggregate Consideration to be Paid upon Closing of the
2009 Equity Financing by $6.58 (which equals the price per
share to the public in our initial public offering less the
underwriting discounts, commissions and fees).
|
(1)
|
Includes approximately $6,872,948 to be paid by VantagePoint
Ventures IV (Q), L.P., approximately $688,053 to be paid by
VantagePoint Venture Partners IV, L.P. and approximately $25,034
to be paid by VantagePoint Venture Partners IV Principals
Fund, L.P.
|
(2)
|
Includes approximately $1,204,428 to be paid by A.M. Pappas
Life Science Ventures III, L.P. and approximately $74,837 to be
paid by PV III CEO Fund, L.P.
|
(3)
|
Includes approximately $1,205,264 to be paid by HBM BioCapital
(EUR) L.P. and approximately $212,694 to be paid by HBM
BioCapital (USD) L.P.
|
One additional purchaser, Shionogi & Co., Ltd., who is
not a current director, executive officer, Beneficial Owner or a
member of the immediate family of any of the foregoing, had also
committed $0.5 million to our 2009 equity financing, and
thus received 75,987 shares upon release of the escrow
account.
2009
Escrow Notes
On December 11, 2009, we sold convertible promissory notes,
or the escrow notes, that were secured by a first priority
security interest in all of our assets to purchase shares of our
equity securities to certain of our existing investors for an
aggregate purchase price of $3.4 million. The escrow notes
accrued interest at a rate of 8% per annum and had a maturity
date of the earlier of (i) July 17, 2010 or
(ii) an event of default pursuant to the terms of the
escrow notes. The escrow notes were automatically convertible
into common stock upon the consummation of an IPO in which the
aggregate net proceeds to us (after underwriting discounts,
commissions and fees) were at least $50.0 million, at the
price per share in which shares were sold to the public, minus
any per-share underwriting discounts, commissions or fees.
However, if an IPO was not consummated by February 28,
2010, the escrow notes became exchangeable for exchange notes in
the same principal amount plus any accrued interest
142
thereon, which would be automatically convertible into the
securities that were sold in our next equity financing at a 25%
discount to the price in which such securities were sold to
other investors, or they were alternatively convertible into
shares of our
Series B-2
convertible preferred stock in connection with a change of
control of the Company. In addition, each exchange note that
would be issued would be accompanied by a warrant, which would
be exercisable for the security into which the accompanying
exchange note, if any, was converted, at the price at which that
security was sold to other investors. Depending on when the
exchange notes converted, each warrant would be exercisable for
a number of shares equal to the quotient obtained by dividing
(x) (i) 25% of the principal amount of the accompanying
exchange notes, in the event the conversion occurred prior to
April 1, 2010, or (ii) 50% of the principal amount of
the accompanying exchange notes, in the event the conversion
occurred on or after April 1, 2010, by (y) the
purchase price of the securities into which the exchange note
was ultimately converted. Furthermore, if a sale of all or
substantially all of our equity interests or assets occurred
prior to our next equity financing and any exchange note had not
converted, we were obligated to pay such exchange note holder an
amount equal to the accrued interest and two times the
outstanding principal amount on such note in conjunction with
the closing of such sale. On February 24, 2010, the note
holders waived their right to exchange the escrow notes for
exchange notes and warrants unless our initial public offering
was not consummated by March 31, 2010. In addition, on
February 24, 2010, we amended the note purchase agreement
relating to the escrow notes to provide that the escrow notes
were automatically convertible into common stock upon the
consummation of an initial public offering in which the
aggregate net proceeds to us (after underwriting discounts,
commissions and fees) were at least $20.0 million. The
escrow notes automatically converted into common stock upon the
closing of our initial public offering on March 4, 2010,
and thus no principal or interest payments were ever made on the
notes and no amounts remain due under such notes. Moreover,
because the escrow notes were not exchanged, no warrants were
ever issued in connection with such notes.
The following table summarizes the participation in the 2009
escrow notes by any of our current directors, executive
officers, Beneficial Owners or any member of the immediate
family of any of the foregoing persons:
|
|
|
|
|
|
|
|
|
|
|
Aggregate
|
|
|
Shares Issued upon
|
|
|
|
Consideration
|
|
|
Conversion
|
|
Name
|
|
Paid
|
|
|
of Escrow
Notes(a)
|
|
|
VantagePoint
|
|
$
|
1,553,766
|
(1)
|
|
|
240,222
|
|
Sofinnova
|
|
$
|
1,003,366
|
|
|
|
155,127
|
|
Pappas
|
|
$
|
262,018
|
(2)
|
|
|
40,509
|
|
Caxton Advantage Life Sciences Fund, L.P.
|
|
$
|
290,425
|
|
|
|
44,901
|
|
HBM BioCapital
|
|
$
|
290,425
|
(3)
|
|
|
44,901
|
|
|
|
|
|
|
|
|
|
|
TOTAL:
|
|
$
|
3,400,000
|
|
|
|
525,660
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Calculated by dividing (x) the sum of
(i) Aggregate Consideration to be Paid and
(ii) accrued interest by (y) $6.58 (which equals the
price per share to the public in our initial public offering
less the underwriting discounts, commissions and fees).
|
(1)
|
Consists of (i) a convertible promissory note with a
principal amount of $1,407,712 purchased by VantagePoint Venture
Partners IV (Q), L.P., (ii) a convertible promissory
note with a principal amount of $140,927 purchased by
VantagePoint Venture Partners IV, L.P. and (iii) a
convertible promissory note with a principal amount of $5,127
purchased by VantagePoint Venture Partners IV Principals
Fund, L.P.
|
(2)
|
Consists of (i) a convertible promissory note with a
principal amount of $246,690 purchased by A.M. Pappas Life
Science Ventures III, L.P. and (ii) a convertible
promissory note with a principal amount of $15,328 purchased by
PV III CEO Fund, L.P.
|
(3)
|
Consists of (i) a convertible promissory note with a
principal amount of $246,861 purchased by HBM BioCapital (EUR)
L.P. and (ii) a convertible promissory note with a
principal amount of $43,564 purchased by HBM BioCapital (USD)
L.P.
|
143
September
2010 Private Placement
On September 20, 2010, we entered into a securities
purchase agreement with certain accredited investors pursuant to
which we sold, on September 24, 2010, an aggregate of
10,500,000 units, with each unit consisting of one share of
our common stock and a Warrant to purchase 0.40 shares of
our common stock. The purchase price per unit was $3.00. Piper
Jaffray & Co. served as our lead placement agent and
Wedbush PacGrow Life Sciences served as co-placement agent in
the private placement. Each Warrant is exercisable in whole or
in party at any time until September 24, 2015 at a per
share exercise price of $3.30, subject to certain adjustments as
specified in the Warrant.
The following table summarizes the participation in the private
placement by any of our current directors, executive officers,
Beneficial Owners or any member of the immediate family of any
of the foregoing persons:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares of Common
|
|
|
|
Aggregate
|
|
|
Shares of Common
|
|
|
Stock Underlying
|
|
Name
|
|
Consideration Paid
|
|
|
Stock Issued
|
|
|
Outstanding Warrants
|
|
|
Caxton Advantage Life Sciences Fund, L.P.
|
|
$
|
750,000
|
|
|
|
250,000
|
|
|
|
100,000
|
|
HBM
BioCapital(1)
|
|
$
|
999,999
|
|
|
|
333,333
|
|
|
|
133,333
|
|
Pappas(2)
|
|
$
|
1,400,001
|
|
|
|
466,667
|
|
|
|
186,667
|
|
Caduceus Private Investments IV, LP
|
|
$
|
10,000,002
|
|
|
|
3,333,334
|
|
|
|
1,333,334
|
|
Visium Balanced Master Fund, Ltd.
|
|
$
|
3,750,000
|
|
|
|
1,250,000
|
|
|
|
500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
16,900,002
|
|
|
|
5,633,334
|
|
|
|
2,253,334
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Includes 283,333 shares of common stock and a Warrant to
purchase 113,333 shares of common stock issued to HBM
BioCapital (EUR), L.P. and 50,000 shares of common stock
and a warrant to purchase 20,000 shares of common stock
issued to HBM BioCapital (USD), L.P.
|
(2)
|
Includes 439,352 shares of common stock and a Warrant to
purchase 175,741 shares of common stock issued to
A.M. Pappas Life Science Ventures III, L.P. and
27,315 shares of common stock and a Warrant to purchase
10,926 shares of common stock issued to PV III CEO Fund,
L.P.
|
Other
Related-Party Transaction
The spouse of Georgina Kilfoil, our Senior Vice President,
Product Development and Clinical Operations, is the Chief
Executive Officer of InClin, Inc., or InClin. Ms. Kilfoil
was a consultant for Inclin until joining us in March 2010. We
use InClins clinical research organization services to
supplement the clinical research organization services we
receive from other providers. For the time period beginning
January 1, 2009 and ending December 31, 2010, we
expect that we will have paid Inclin approximately
$1.0 million for the clinical research organization
services it provides to us.
Indemnification
Agreements
We have entered into indemnification agreements with each of our
directors and certain of our executive officers. As permitted by
the Delaware General Corporation Law, we have adopted provisions
in our amended and restated certificate of incorporation that
limit or eliminate the personal liability of our directors to us
for monetary damages for a breach of their fiduciary duty as a
director, except for liability for:
|
|
|
|
|
any breach of the directors duty of loyalty to us or our
stockholders;
|
|
|
|
any act or omission not in good faith or that involves
intentional misconduct or a knowing violation of law;
|
144
|
|
|
|
|
any unlawful payments related to dividends or unlawful stock
repurchases, redemptions or other distributions; or
|
|
|
|
any transaction from which the director derived an improper
personal benefit.
|
Pursuant to our amended and restated certificate of
incorporation and amended and restated bylaws, we are obligated,
to the maximum extent permitted by Delaware law, to indemnify
each of our directors and officers against expenses (including
attorneys fees), judgments, fines, settlements and other
amounts actually and reasonably incurred in connection with any
proceeding, arising by reason of the fact that such person is or
was an agent of the corporation. A director or
officer includes any person who is or was a director
or officer of us or as a director, partner, trustee, officer,
employee or agent of any other corporation, partnership, limited
liability company, joint venture, trust, employee benefit plan,
foundation, association, organization or other legal entity
which such person is or was serving at our request, but does not
include the status of a person who is serving or has served as a
director, officer, employee or agent of a constituent
corporation absorbed in a merger or consolidation transaction
with the Company with respect to such persons activities
prior to said transaction unless specifically authorized by our
board of directors or our stockholders. Pursuant to our amended
and restated bylaws, we also have the power to indemnify our
employees to the extent permitted under Delaware law. Our
amended and restated bylaws provide that we shall advance
expenses to directors in connection with any proceeding in which
such director is involved because of his or her status as a
director and we may, at the discretion of our board of
directors, advance expenses to officers and employees in
connection with any proceeding in which such officer or employee
is involved because of his or her status as such. Our amended
and restated bylaws permit us to purchase and maintain insurance
on behalf of any person who is or was a director, officer,
employee or agent of us or, at our request, served in such a
capacity for another enterprise.
We have entered into indemnification agreements with each of our
directors and certain of our executive officers that are, in
some cases, broader than the specific indemnification provisions
permitted by Delaware law, and that may provide additional
procedural protection. The indemnification agreements require
us, among other things, to:
|
|
|
|
|
indemnify officers and directors against certain liabilities
that may arise because of their status as officers or directors;
and
|
|
|
|
advance expenses, as incurred, to officers and directors in
connection with a legal proceeding, subject to limited
exceptions.
|
At present, there is no pending litigation or proceeding
involving any of our directors, officers or employees in which
indemnification is sought, nor are we aware of any threatened
litigation or proceeding that may result in claims for
indemnification.
Procedures
for Approval of Related Person Transactions
The Audit Committee shall conduct an appropriate review of all
related party transactions for potential conflict of interest
situations on an ongoing basis, and the approval of the Audit
Committee shall be required for all such transactions. The Audit
Committee may establish such policies and procedures as it deems
appropriate to facilitate such review.
145
PRINCIPAL
STOCKHOLDERS
The following table sets forth information with respect to the
beneficial ownership of our common stock as of
September 30, 2010, the most recent practicable date, and
as adjusted to reflect the sale of common stock offered by the
selling stockholders in this offering, for:
|
|
|
|
|
each beneficial owner of more than 5% of our outstanding common
stock;
|
|
|
|
each of our named executive officers and directors; and
|
|
|
|
all of our executive officers and directors as a group.
|
Beneficial ownership is determined in accordance with the rules
of the SEC. These rules generally attribute beneficial ownership
of securities to persons who possess sole or shared voting power
or investment power with respect to those securities and include
shares of common stock issuable upon the exercise of stock
options that are immediately exercisable or exercisable within
60 days after September 30, 2010, but excludes
unvested stock options, which contain an early exercise feature.
Except as otherwise indicated, all of the shares reflected in
the table are shares of common stock and all persons listed
below have sole voting and investment power with respect to the
shares beneficially owned by them, subject to applicable
community property laws. The information is not necessarily
indicative of beneficial ownership for any other purpose.
Percentage ownership calculations for beneficial ownership are
based on 32,835,437 shares outstanding as of
September 30, 2010 and calculations for beneficial
ownership after this offering assume the selling stockholders
have sold all shares offered hereby. Except as otherwise
indicated in the table below, addresses of named beneficial
owners are in care of Anthera Pharmaceuticals, Inc., 25801
Industrial Blvd., Suite B, Hayward, California 94545.
In computing the number of shares of common stock beneficially
owned by a person and the percentage ownership of that person,
we deemed outstanding shares of common stock subject to options
or warrants held by that person that are currently exercisable
or exercisable within 60 days of
146
September 30, 2010. We did not deem these shares
outstanding, however, for the purpose of computing the
percentage ownership of any other person.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of
|
|
|
|
|
|
Percentage of
|
|
|
|
|
|
|
Common
|
|
|
|
|
|
Common
|
|
|
|
Shares
|
|
|
Stock
|
|
|
Shares
|
|
|
Stock
|
|
|
|
Beneficially
|
|
|
Beneficially
|
|
|
Beneficially
|
|
|
Beneficially
|
|
|
|
Owned
|
|
|
Owned
|
|
|
Owned
|
|
|
Owned
|
|
|
|
Before
|
|
|
Before
|
|
|
After
|
|
|
After
|
|
Name of Beneficial Owner
|
|
Offering
|
|
|
Offering
|
|
|
Offering
|
|
|
Offering
|
|
|
5% or Greater Stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
VantagePoint Venture Partners IV, L.P. and affiliated entities,
or
VantagePoint(1)
|
|
|
6,466,942
|
|
|
|
19.59
|
%
|
|
|
786,393
|
|
|
|
2.38
|
%
|
Sofinnova Venture Partners VI, L.P. and affiliated entities, or
Sofinnova(2)
|
|
|
4,177,621
|
|
|
|
12.68
|
%
|
|
|
4,177,621
|
|
|
|
12.68
|
%
|
HBM BioCapital, L.P. and affiliated
entities(3)
|
|
|
1,988,517
|
|
|
|
6.03
|
%
|
|
|
1,521,851
|
|
|
|
4.61
|
%
|
A.M. Pappas Life Science Ventures III, L.P. and affiliated
entities(4)
|
|
|
1,813,140
|
|
|
|
5.49
|
%
|
|
|
1,159,806
|
|
|
|
3.51
|
%
|
Caduceus Private Investments IV,
LP(5)
|
|
|
4,783,068
|
|
|
|
14.00
|
%
|
|
|
116,400
|
|
|
|
|
*
|
Visium Balanced Master Fund,
Ltd.(6)
|
|
|
1,750,000
|
|
|
|
5.25
|
%
|
|
|
|
|
|
|
|
|
All 5% or greater stockholders as a group
|
|
|
20,979,288
|
|
|
|
59.38
|
%
|
|
|
7,762,071
|
|
|
|
21.97
|
%
|
Named Executive Officers and Directors:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul F.
Truex(7)
|
|
|
1,124,530
|
|
|
|
3.38
|
%
|
|
|
1,124,530
|
|
|
|
3.38
|
%
|
Christopher P.
Lowe(8)
|
|
|
225,749
|
|
|
|
*
|
|
|
|
225,749
|
|
|
|
*
|
|
James E.
Pennington, M.D.(9)
|
|
|
165,357
|
|
|
|
*
|
|
|
|
165,357
|
|
|
|
*
|
|
Colin
Hislop, M.D.(10)
|
|
|
174,482
|
|
|
|
*
|
|
|
|
174,482
|
|
|
|
*
|
|
Debra
Odink, Ph.D.(11)
|
|
|
119,745
|
|
|
|
*
|
|
|
|
119,745
|
|
|
|
*
|
|
Christopher S.
Henney, Ph.D.(12)
|
|
|
107,429
|
|
|
|
*
|
|
|
|
107,429
|
|
|
|
*
|
|
Annette
Bianchi(13)
|
|
|
17,628
|
|
|
|
*
|
|
|
|
17,628
|
|
|
|
*
|
|
James I.
Healy, M.D., Ph.D.(2)(14)
|
|
|
4,202,064
|
|
|
|
12.75
|
%
|
|
|
4,202,064
|
|
|
|
12.75
|
%
|
A. Rachel
Leheny, Ph.D.(15)
|
|
|
1,566,616
|
|
|
|
4.75
|
%
|
|
|
1,216,616
|
|
|
|
3.69
|
%
|
Donald J.
Santel(16)
|
|
|
18,541
|
|
|
|
*
|
|
|
|
18,541
|
|
|
|
*
|
|
Daniel K.
Spiegelman(17)
|
|
|
4,000
|
|
|
|
*
|
|
|
|
4,000
|
|
|
|
*
|
|
David E.
Thompson(18)
|
|
|
35,636
|
|
|
|
*
|
|
|
|
35,636
|
|
|
|
*
|
|
All named executive officers and directors as a group
(12 persons)
|
|
|
7,761,777
|
|
|
|
22.88
|
%
|
|
|
7,411,777
|
|
|
|
21.85
|
%
|
|
|
*
|
Represents beneficial ownership of less than 1% of the shares of
common stock.
|
(1)
|
Includes (i) 5,695,228 shares of common stock
(4,998,725 shares of which are registered for resale under
this prospectus) and 147,861 shares of common stock
issuable upon exercise of warrants (all of which are registered
for resale under this prospectus), all owned of record by
VantagePoint Venture Partners IV (Q), L.P.,
(ii) 570,147 shares of common stock
(500,421 shares of which are registered for resale under
this prospectus) and 14,801 shares of common stock issuable
upon exercise of warrants (all of which are registered for
resale under this prospectus), all owned of record by
VantagePoint Venture Partners IV, L.P.,
(iii) 20,739 shares of common stock
(18,203 shares of which are registered for resale under
this prospectus) and 538 shares of common stock issuable
upon exercise of warrants (all of which are registered for
resale under this prospectus), all owned of record by
VantagePoint Venture Partners IV Principals Fund, L.P., and
(iv) options to purchase an additional 17,628 shares
of common stock that are exercisable within 60 days of
September 30, 2010 that are owned of record by Annette
Bianchi, over which VantagePoint has sole voting and investment
power. Ms. Bianchi, a director of Anthera, is a Managing
Director at VantagePoint. Alan E. Salzman, through his authority
to cause the general partner of the limited partnerships that
directly hold such shares to act, may be deemed to have voting
and investment power with respect to such shares.
Mr. Salzman disclaims beneficial ownership with respect to
such shares except to the extent of his pecuniary interest
therein. The address for VantagePoint Venture Partners is 1001
Bayhill Drive, Suite 300, San Bruno, CA 94066.
|
(2)
|
Includes (i) 3,360,574 shares of common stock and
86,996 shares of common stock issuable upon exercise of
warrants, all owned of record by Sofinnova Venture Partners VI,
L.P.; (ii) 665,820 shares of common stock and
17,237 shares of common stock issuable upon exercise of
warrants, all owned of record by Sofinnova Venture
Partners VI GmbH & Co. KG; and
|
footnotes continued on following page
147
|
|
|
(iii) 45,809 shares of
common stock and 1,185 shares of common stock issuable upon
exercise of warrants, all owned of record by Sofinnova Venture
Affiliates VI, L.P. Alain Azan, Eric Buatois, Michael Powell and
Dr. James I. Healy are the managing members of the general
partner of the limited partnership that directly hold such
shares, and as such, may be deemed to share voting and
investment power with respect to such shares. Dr. Healy is
a director of Anthera. Messrs. Azan, Buatois and Powell and
Dr. Healy disclaim beneficial ownership, except to the
extent of their proportionate pecuniary interest in Sofinnova.
The address for Sofinnova Ventures is 850 Oak Grove Ave., Menlo
Park, CA 94025.
|
|
|
(3)
|
Includes (i) 1,550,978 shares of common stock
(283,333 shares of which are registered for resale under
this prospectus) and 139,263 shares of common stock
issuable upon exercise of warrants (113,333 shares of which
are registered for resale under this prospectus), all owned of
record by HBM BioCapital (EUR) L.P. and
(ii) 273,701 shares of common stock (50,000 of
which are registered for resale under this prospectus) and
24,575 shares of common stock issuable upon exercise of
warrants (20,000 of which are registered for resale under
this prospectus), all owned of record by HBM BioCapital (USD)
L.P., collectively, the HBM BioCapital Funds. The board of
directors of HBM BioCapital Ltd., the general partner of the HBM
BioCapital Funds, has sole voting and dispositive power with
respect to such shares. The board of directors of HBM BioCapital
Ltd. consists of John Arnold, Sophia Harris, Richard Coles,
Dr. Andreas Wicki and John Urquhart, none of whom has
individual voting or investment power with respect to the
shares. The address for the HBM BioCapital Funds is
c/o HBM
BioCapital Ltd., Centennial Towers, 3rd Floor, 2454 West
Bay Road, Grand Cayman, Cayman Islands.
|
(4)
|
Includes (i) 1,505,394 shares of common stock
(439,352 of which are registered for resale under this
prospectus) and 201,638 shares of common stock issuable
upon exercise of warrants (175,741 of which are registered for
resale under this prospectus), all owned of record by A. M.
Pappas Life Science Ventures III, L.P. and
(ii) 93,572 shares of common stock (27,315 of
which are registered for resale under this prospectus) and
12,536 shares of common stock issuable upon exercise of
warrants (10,926 of which are registered for resale under
this prospectus), all owned of record by PV III CEO Fund, L.P.
Arthur M. Pappas, in his role as chairman of the investment
committee of AMP&A Management III, LLC, the general partner
of A. M. Pappas Life Science Ventures III, L.P. and PV III CEO
Fund, L.P., has voting and investment authority over these
shares. Mr. Pappas disclaims beneficial ownership of these
shares except to the extent of his pecuniary interest arising
therein. The address for both A. M. Pappas Life Science Ventures
III, L.P. and PV III CEO Fund, L.P. is 2520 Meridian Parkway,
Suite 400, Durham, NC 27713.
|
(5)
|
Includes 3,449,734 shares of common stock
(3,333,334 shares of which are registered for resale under
this prospectus) and 1,333,334 shares of common stock
issuable upon exercise of warrants (all of which are registered
for resale under this prospectus), all owned of record by
Caduceus Private Investments, LP. OrbiMed Advisors LLC, a
registered investment adviser under the Investment Advisers Act
of 1940, as amended, is the sole managing member of OrbiMed
Capital GP IV LLC, which is the sole general partner of Caduceus
Private Investments IV, LP. Samuel D. Isaly is the owner of a
controlling interesting in OrbiMed Advisors LLC. As such,
OrbiMed Advisors LLC, OrbiMed Capital GP IV LLC and
Mr. Isaly may be deemed to have voting and investment power
with respect to such shares. The address for OrbiMed Advisors
LLC is 767 Third Avenue, 30th Floor, New York, New
York 10017.
|
(6)
|
Includes 1,250,000 shares of common stock and
500,000 shares of commons stock issuable upon exercise of
warrants, all of which are registered for resale under this
prospectus, all owned of record by Visium Balanced Master Fund,
Ltd. Jacob Gottlieb, Managing Member of JG Asset, LLC, which is
the General Partner of Visium Asset Management, L.P., which is
the investment managed to pooled investment funds, may be deemed
to have voting and investment power with respect to such shares.
The address for Visium Balanced Master Fund, Ltd. is
950 Third Avenue, New York, NY 10022.
|
(7)
|
Includes 693,253 shares of common stock and options to
purchase an additional 431,277 shares of common stock that
are exercisable within 60 days of September 30, 2010,
all owned of record by Paul F. Truex.
|
(8)
|
Includes (i) 9,637 shares of common stock owned of
recorded by Dina Gonzalez, Mr. Lowes spouse,
(ii) options to purchase 112,592 shares of common
stock that are exercisable within 60 days of
September 30, 2010 and 22,523 shares of common stock
owned of record by Mr. Lowe and
(iii) 80,997 shares of common stock owned of record by
BioVest III. Mr. Lowe has sole voting and sole investment
power with respect to the shares owned of record by BioVest III.
Mr. Lowe disclaims beneficial ownership with respect to
such shares except to the extent of his pecuniary interest
therein. The address for BioVest III is 25801 Industrial
Blvd., Suite B, Hayward, CA 94545.
|
(9)
|
Includes 105,140 shares of common stock, 8,762 shares
of which are subject to the Companys right of repurchase,
and options to purchase an additional 60,217 shares of
common stock that are exercisable within 60 days of
September 30, 2010 owned of record by Dr. Pennington.
As of May 1, 2010, Dr. Pennington ceased serving as our Chief
Medical Officer and Executive Vice President and commenced his
role with us as Senior Clinical Fellow.
|
|
|
(10)
|
Includes 20,524 shares of common stock and options to
purchase an additional 153,958 shares of common stock that
are exercisable within 60 days of September 30, 2010
owned of record by Dr. Hislop.
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(11)
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Includes 96,928 shares of common stock and options to
purchase an additional 22,817 shares of common stock that
are exercisable within 60 days of September 30, 2010,
all owned of record by the Debra A. Odink Living Trust, for
which Dr. Odink serves as trustee.
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(12)
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Includes 102,429 shares of common stock, 12,900 shares
of which are subject to the Companys right of repurchase
and options to purchase an additional 5,000 shares of
common stock that are exercisable within 60 days of
September 30, 2010, owned of record by Dr. Henney.
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(13)
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Includes options to purchase 17,628 shares of common stock
that are exercisable within 60 days of September 30,
2010 owned of record by Ms. Bianchi. VantagePoint has sole
voting and investment power with respect to these shares, and
Ms. Bianchi
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footnotes continued on following page
148
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disclaims beneficial ownership
thereof except to the extent of her pecuniary interest in the
shares of common stock issuable upon exercise of the option.
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(14)
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Includes 20,443 shares of common stock owned of record by
Dr. Healy, 6,815 shares of which are subject to the
Companys right of repurchase and options to purchase an
additional 4,000 shares of common stock that are exercisable
within 60 days of September 30, 2010, owned of record by
Dr. Healy.
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(15)
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Includes (i) 1,423,896 shares of common stock
(250,000 shares of which are registered for resale under
this prospectus) and 130,506 shares of common stock
issuable upon exercise of warrants (100,000 shares of which
are registered for resale under this prospectus), all owned of
record by Caxton Advantage Life Sciences Fund, L.P. and
(ii) options to purchase an additional 12,214 shares
of common stock that are exercisable within 60 days of
September 30, 2010 that are owned of record by Dr. A.
Rachel Leheny over which Caxton Advantage Life Sciences Fund,
L.P. may be deemed to hold voting power with respect to 6,107 of
these shares. Caxton Advantage Venture Partners, L.P. has voting
and investment power with respect to such shares. Decisions by
Caxton Advantage Venture Partners, L.P. with respect to such
shares are made by Advantage Life Sciences Partners, LLC, the
Managing General Partner of Caxton Advantage Venture Partners,
L.P., together with the investment committee of Caxton Advantage
Venture Partners, L.P. Dr. Leheny and Eric Roberts have
authority to take action on behalf of Advantage Life Sciences
Partners, LLC as members of Advantage Life Sciences Partners,
LLC. The investment committee of Caxton Advantage Venture
Partners, L.P. as of the date hereof is comprised of
(i) Mr. Roberts, (ii) Dr. Leheny,
(iii) Bruce Kovner and (iv) Peter DAngelo and
the consent of four members is required with respect to any
decision by the Investment Committee. Dr. Leheny is a
director of Anthera, is (i) a Managing Director of Caxton
Advantage Venture Partners, L.P., which is the General Partner
of Caxton Advantage Life Sciences Fund, L.P., a life-sciences
venture capital fund that she co-founded in 2006 and is
(ii) a member of Advantage Life Sciences Partners LLC.
Mr. Roberts and Dr. Leheny and the members of the
Caxton Advantage Venture Partners, L.P. investment committee
disclaim beneficial ownership, except to the extent of their
proportionate pecuniary interests, either directly, or
indirectly through Caxton Advantage Venture Partners, L.P. (or
through any other entity which is a limited partner in Caxton
Advantage Life Sciences Fund, L.P.), in Caxton Advantage Life
Sciences Fund, L.P. The address for Caxton Advantage Life
Sciences Fund, L.P. is 500 Park Avenue, New York, NY 10022.
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(16)
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Includes options to purchase 18,541 shares of common stock
that are exercisable within 60 days of September 30,
2010 owned of record by the Donald J. Santel and Kelly L.
McGinnis Revocable Living Trust.
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(17)
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Includes options to purchase 4,000 shares of common stock
that are exercisable within 60 days of September 30,
2010.
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(18)
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Includes 20,443 shares of common stock and options to
purchase an additional 15,193 shares of common stock that
are exercisable within 60 days of September 30, 2010
owned of record by Mr. Thompson.
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149
DESCRIPTION
OF CAPITAL STOCK
General
The following description of our capital stock is intended as a
summary only and is qualified in its entirety by reference to
our amended and restated certificate of incorporation and
amended and restated bylaws, which are filed as exhibits to the
registration statement of which this prospectus forms a part,
and to the applicable provisions of the Delaware General
Corporation Law. We refer in this section to our amended and
restated certificate of incorporation as our certificate of
incorporation, and we refer to our amended and restated bylaws
as our bylaws.
Our authorized capital stock consists of 95,000,000 shares
of common stock, par value $0.001 per share, and
5,000,000 shares of preferred stock, par value $0.001 per
share, all of which shares of preferred stock are undesignated.
As of September 30, 2010, 32,835,437 shares of our
common stock were outstanding. In addition, as of
September 30, 2010, we had outstanding options to purchase
1,307,066 shares of our common stock under our 2010 Stock
Option Plan at a weighted-average exercise price of $1.27 per
share, 1,209,566 of which were exercisable, 333,000 shares
of restricted stock units which vest over a weighted-average
2.96 years, and outstanding warrants to purchase
4,557,136 shares of our common stock.
Common
Stock
The holders of our common stock are entitled to one vote for
each share held on all matters submitted to a vote of the
stockholders. The holders of our common stock do not have any
cumulative voting rights. Holders of our common stock are
entitled to receive ratably any dividends declared by our board
of directors out of funds legally available for that purpose,
subject to any preferential dividend rights of any outstanding
preferred stock. Our common stock has no preemptive rights,
conversion rights or other subscription rights or redemption or
sinking fund provisions.
In the event of our liquidation, dissolution or winding up,
holders of our common stock will be entitled to share ratably in
all assets remaining after payment of all debts and other
liabilities and any liquidation preference of any outstanding
preferred stock. The shares registered in this offering are, and
the shares underlying the warrants will be, when issued and paid
for, validly issued, fully paid and non-assessable.
Preferred
Stock
Our board of directors is authorized, subject to any limitations
prescribed by law, without stockholder approval, to issue from
time to time up to an aggregate of 5,000,000 shares of
preferred stock, in one or more series, each series to have such
rights and preferences, including voting rights, dividend
rights, conversion rights, redemption privileges and liquidation
preferences as our board of directors determines. The rights of
the holders of common stock will be subject to, and may be
adversely affected by, the rights of holders of any preferred
stock that may be issued in the future. Issuance of preferred
stock, while providing desirable flexibility in connection with
possible acquisitions and other corporate purposes, could have
the effect of making it more difficult for a third party to
acquire, or of discouraging a third party from attempting to
acquire, a majority of our outstanding voting stock. We
currently have no shares of preferred stock outstanding and we
have no present plans to issue any shares of preferred stock.
Warrants
As of September 30, 2010, warrants exercisable for an
aggregate of up to 4,557,136 shares of our common stock
were outstanding. Warrants were issued in connection with a
bridge financing
150
arrangement, are exercisable for 357,136 shares of our common
stock and will expire upon the earlier of either July or
September, 2014, as applicable, or upon the date of the sale of
all or substantially of our equity interests or assets. In
addition, Warrants to purchase 4,200,000 shares of common stock
were issued in a private placement transaction that closed on
September 24, 2010. Such Warrants expire on September 24,
2015. Each of the warrants contains a customary net issuance
feature, which allows the warrant holder to pay the exercise
price of the warrant by forfeiting a portion of the exercised
warrant shares with a value equal to the aggregate exercise
price.
Registration
Rights
Second
Amended and Restated Investor Rights Agreement
Holders of approximately 13,380,000 shares of our common
stock have rights, under the terms of an investor rights
agreement between us and these holders, to require us to file
registration statements under the Securities Act, subject to
limitations and restrictions, or request that their shares be
covered by a registration statement that we are otherwise
filing, subject to specified exceptions. We refer to these
shares as registrable securities. The investor rights agreement
does not provide for any liquidated damages, penalties or other
rights in the event we do not file a registration statement.
These rights will continue in effect following this offering.
Demand Registration Rights. At any time
after August 29, 2010, subject to certain exceptions, the
holders of (a) a majority of the registrable securities
issuable upon the conversion of our
Series A-1
convertible preferred stock or (b) two-thirds of the
then-outstanding registrable securities issuable upon the
conversion of our
Series A-2
convertible preferred stock,
Series B-1
convertible preferred stock and
Series B-2
convertible preferred stock have the right to demand that we
file a registration statement covering the offering and sale of
at least a majority of the registrable securities then
outstanding (or a lesser percent if the anticipated aggregate
offering price, net of underwriting discounts and commissions,
would exceed $5.0 million).
We have the ability to delay the filing of such registration
statement under specified conditions or if our board of
directors deems it advisable to delay such filing or if we are
in possession of material nonpublic information that would be in
our best interests not to disclose. Postponements at the
discretion of our board of directors cannot exceed 120 days
during any twelve-month period. We are not obligated to file a
registration statement on more than one occasion upon the
request of the holders of a majority of the registrable
securities issuable upon the conversion of our
Series A-1
convertible preferred stock, and we are not obligated to file a
registration statement on more than two occasions upon the
request of the holders of two-thirds of the then-outstanding
registrable securities issuable upon the conversion of our
Series A-2
convertible preferred stock,
Series B-1
convertible preferred stock and
Series B-2
convertible preferred stock.
Form S-3
Registration Rights. If we are eligible to
file a registration statement on
Form S-3,
the holders of the registrable securities described above have
the right, on one or more occasions, to request registration on
Form S-3
of the sale of the registrable securities held by such holder
provided such securities are anticipated to have an aggregate
sale price (net of underwriting discounts and commissions, if
any) in excess of $1.0 million.
We have the ability to delay the filing of such registration
statement under specified conditions, such as for a period of
time prior to our intention to make a public offering, if our
board of directors deems it advisable to delay such filing or if
we are in possession of material nonpublic information that
would be in our best interests not to disclose. Such
postponements cannot exceed 120 days during any
12-month
period. We are not obligated to effect more than two
registrations of registrable securities on
Form S-3
in any
12-month
period.
151
Piggyback Registration Rights. The
holders of the registrable securities described above have
piggyback registration rights. Under these provisions, if we
register any securities for public sale, including pursuant to
any stockholder-initiated demand registration, these holders
will have the right to include their shares in the registration
statement, subject to customary exceptions. The underwriters of
any underwritten offering will have the right to limit the
number of shares having registration rights to be included in
the registration statement, and piggyback registration rights
are also subject to the priority rights of stockholders having
demand registration rights in any demand registration. In
connection with this registration statement, holders have
exercised their piggyback registration rights with respect to an
aggregate of 5,680,549 shares of common stock.
Expenses of Registration. We will pay
all registration expenses, other than underwriting discounts and
commissions, related to any demand,
Form S-3
or piggyback registration, including reasonable attorneys
fees and disbursements of one counsel for the holders of
registrable securities in an amount not to exceed an aggregate
of $25,000.
Indemnification. The investor rights
agreement contains customary cross-indemnification provisions,
under which we are obligated to indemnify the selling
stockholders in the event of material misstatements or omissions
in the registration statement attributable to us, and each
selling stockholder is obligated to indemnify us for material
misstatements or omissions in the registration statement due to
information provided by such stockholder provided that such
information was not changed or altered by us.
Expiration of Registration Rights. The
registration rights granted under the investor rights agreement
will terminate in March 2017.
Registration
Rights with Respect to September 2010 Private
Placement
In connection with the private placement described under the
section entitled Selling Security Holders, we
entered into a registration rights agreement, or the
Registration Rights Agreement, with the investors in the private
placement. The Registration Rights Agreement provides that we
will file a resale registration statement, of which
this prospectus is a part, covering all of the shares of common
stock and the common stock underlying the Warrants issued in the
private placement, up to the maximum number of shares able to be
registered pursuant to applicable SEC regulations, within
30 days of the closing of the private placement. If any
shares of common stock are unable to be included on the initial
registration statement, we have agreed to file subsequent
registration statements until all the shares have been
registered. Under the terms of the Registration Rights
Agreement, we are obligated to maintain the effectiveness of the
resale registration statement until all securities
therein are sold or otherwise can be sold pursuant to
Rule 144, without any restrictions. The Registration Rights
Agreement contains customary terms and conditions for a
transaction of this type, including certain customary cash
penalties on the Company for our failure to satisfy specified
filing and effectiveness time periods.
Anti-Takeover
Effects of Delaware Law and Provisions of Our Certificate of
Incorporation and Bylaws
Our certificate of incorporation and bylaws includes a number of
provisions that may have the effect of delaying, deferring or
preventing another party from acquiring control of us and
encouraging persons considering unsolicited tender offers or
other unilateral takeover proposals to negotiate with our board
of directors rather than pursue non-negotiated takeover
attempts. These provisions include the items described below.
Board Composition and Filling
Vacancies. In accordance with our certificate
of incorporation, our board is divided into three classes
serving staggered three-year terms, with one class being elected
each year. Our certificate of incorporation also provides that
directors may be removed only for cause and then only by the
affirmative vote of the holders of 75% or more of the shares
then entitled to vote at an
152
election of directors. Furthermore, any vacancy on our board of
directors, however occurring, including a vacancy resulting from
an increase in the size of our board, may only be filled by the
affirmative vote of a majority of our directors then in office
even if less than a quorum. The classification of directors,
together with the limitations on removal of directors and
treatment of vacancies, has the effect of making it more
difficult for stockholders to change the composition of our
board of directors.
No Written Consent of Stockholders. Our
certificate of incorporation provides that all stockholder
actions are required to be taken by a vote of the stockholders
at an annual or special meeting, and that stockholders may not
take any action by written consent in lieu of a meeting. This
limit may lengthen the amount of time required to take
stockholder actions and would prevent the amendment of our
bylaws or removal of directors by our stockholders without
holding a meeting of stockholders.
Meetings of Stockholders. Our
certificate of incorporation and bylaws provide that only a
majority of the members of our board of directors then in office
may call special meetings of stockholders and only those matters
set forth in the notice of the special meeting may be considered
or acted upon at a special meeting of stockholders. Our bylaws
limit the business that may be conducted at an annual meeting of
stockholders to those matters properly brought before the
meeting.
Advance Notice Requirements. Our bylaws
establish advance notice procedures with regard to stockholder
proposals relating to the nomination of candidates for election
as directors or new business to be brought before meetings of
our stockholders. These procedures provide that notice of
stockholder proposals must be timely given in writing to our
corporate secretary prior to the meeting at which the action is
to be taken. Generally, to be timely, notice must be received at
our principal executive offices not less than 90 days nor
more than 120 days prior to the first anniversary date of
the annual meeting for the preceding year. Our bylaws specify
the requirements as to form and content of all
stockholders notices. These requirements may preclude
stockholders from bringing matters before the stockholders at an
annual or special meeting.
Amendment to Certificate of Incorporation and
Bylaws. As required by the Delaware General
Corporation Law, any amendment of our certificate of
incorporation must first be approved by a majority of our board
of directors, and if required by law or our certificate of
incorporation, must thereafter be approved by a majority of the
outstanding shares entitled to vote on the amendment and a
majority of the outstanding shares of each class entitled to
vote thereon as a class, except that the amendment of the
provisions relating to stockholder action, board composition,
limitation of liability and the amendment of our certificate of
incorporation must be approved by not less than 75% of the
outstanding shares entitled to vote on the amendment, and not
less than 75% of the outstanding shares of each class entitled
to vote thereon as a class. Our bylaws may be amended by the
affirmative vote of a majority of the directors then in office,
subject to any limitations set forth in the bylaws; and may also
be amended by the affirmative vote of at least 75% of the
outstanding shares entitled to vote on the amendment, or, if our
board of directors recommends that the stockholders approve the
amendment, by the affirmative vote of the majority of the
outstanding shares entitled to vote on the amendment, in each
case voting together as a single class.
Undesignated Preferred Stock. Our
certificate of incorporation provides for 5,000,000 authorized
shares of preferred stock. The existence of authorized but
unissued shares of preferred stock may enable our board of
directors to render more difficult or to discourage an attempt
to obtain control of us by means of a merger, tender offer,
proxy contest or otherwise. For example, if in the due exercise
of its fiduciary obligations, our board of directors were to
determine that a takeover proposal is not in the best interests
of our stockholders, our board of directors could cause shares
of preferred stock to be issued without stockholder approval in
one or more private offerings or other transactions that might
dilute the voting or other rights of the proposed acquirer or
insurgent stockholder or stockholder group. In this regard, our
certificate of incorporation grants our board of directors broad
power to establish
153
the rights and preferences of authorized and unissued shares of
preferred stock. The issuance of shares of preferred stock could
decrease the amount of earnings and assets available for
distribution to holders of shares of common stock. The issuance
may also adversely affect the rights and powers, including
voting rights, of these holders and may have the effect of
delaying, deterring or preventing a change in control of us.
Section 203
of the Delaware General Corporation Law
We are subject to the provisions of Section 203 of the
Delaware General Corporation Law. In general, Section 203
prohibits a publicly held Delaware corporation from engaging in
a business combination with an interested
stockholder for a three-year period following the time
that this stockholder becomes an interested stockholder, unless
the business combination is approved in a prescribed manner. A
business combination includes, among other things, a
merger, asset or stock sale or other transaction resulting in a
financial benefit to the interested stockholder. An
interested stockholder is a person who, together
with affiliates and associates, owns, or did own within three
years prior to the determination of interested stockholder
status, 15% or more of the corporations voting stock.
Under Section 203, a business combination between a
corporation and an interested stockholder is prohibited unless
it satisfies one of the following conditions:
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before the stockholder became interested, our board of directors
approved either the business combination or the transaction
which resulted in the stockholder becoming an interested
stockholder;
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upon consummation of the transaction which resulted in the
stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction commenced,
excluding for purposes of determining the voting stock
outstanding, shares owned by persons who are directors and also
officers, and employee stock plans, in some instances, but not
the outstanding voting stock owned by the interested
stockholder; or
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at or after the time the stockholder became interested, the
business combination was approved by our board of directors of
the corporation and authorized at an annual or special meeting
of the stockholders by the affirmative vote of at least
two-thirds of the outstanding voting stock which is not owned by
the interested stockholder.
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Section 203
defines a business combination to include:
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any merger or consolidation involving the corporation and the
interested stockholder;
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any sale, transfer, pledge or other disposition involving the
interested stockholder of 10% or more of the assets of the
corporation;
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subject to exceptions, any transaction that results in the
issuance of transfer by the corporation of any stock of the
corporation to the interested stockholder;
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subject to exceptions, any transaction involving the corporation
that has the effect of increasing the proportionate share of the
stock of any class or series of the corporation beneficially
owned by the interest stockholder; and
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the receipt by the interested stockholder of the benefit of any
loans, advances, guarantees, pledges or other financial benefits
provided by or through the corporation.
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154
In general, Section 203 defines an interested stockholder
as any entity or person beneficially owing 15% or more of the
outstanding voting stock of the corporation and any entity or
person affiliated with or controlling or controlled by the
entity or person.
The
NASDAQ Global Market Listing
Our common stock is listed on The NASDAQ Global Market under the
trading symbol ANTH.
Transfer
Agent and Registrar
The transfer agent and registrar for our common stock is
American Stock Transfer & Trust Company, LLC.
155
SHARES ELIGIBLE
FOR FUTURE SALE
As of September 30, 2010, we have outstanding an aggregate
of 32,835,437 shares of common stock. Of these shares, all
shares sold in this offering will be freely tradable without
restriction or further registration under the Securities Act,
except for any shares purchased by our affiliates,
as that term is defined in Rule 144 under the Securities
Act, whose sales would be subject to certain limitations and
restrictions described below. Of the remaining
16,818,088 shares of common stock outstanding,
10,213,596 shares are restricted securities as that term is
defined in Rule 144 under the Securities Act or restricted
due to
lock-up
agreements as described below. Restricted securities may be sold
in the public market only if registered or if they qualify for
exemption under Rule 144 under the Securities Act, which
rule is summarized below, or another exemption.
As a result of the
lock-up
agreements described below and the provisions of Rule 144
under the Securities Act, the shares of our common stock
(excluding the shares sold in this offering) that will be
available for sale in the public market are as follows:
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Approximate
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Number of
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Date of Availability of Sale
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Shares
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As of the effective date of this prospectus
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14,920,360
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30 days after the effective date of this prospectus,
although a portion of such shares will be subject to volume
limitations pursuant to Rule 144
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1,897,728
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Lock-Up
Agreements
In connection with the private placement that closed on
September 24, 2010, certain of our directors and officers
have agreed not to, directly or indirectly, offer, sell,
contract to sell or otherwise dispose of, or enter into any
transaction that is designed to, or could be expected to, result
in the disposition of any shares of our common stock or other
securities convertible into or exchangeable or exercisable for
shares of our common stock or derivatives of our common stock
owned by these persons prior to this offering or common stock
issuable upon exercise of options or warrants held by these
persons for a period of 30 days after the effective date of
the registration statement of which this prospectus is a part
without the prior written consent of Piper Jaffray &
Co., the placement agent for the private placement.
Transfers can be made during the
lock-up
period in the case of (a) shares of common stock acquired
in open market transactions, (b) gifts or for estate
planning purposes and distributions to partners, members or
stockholders of the transferor where the transferee signs a
lock-up
agreement, and (c) shares of common stock (i) effected
pursuant to an exchange of underwater options with
the Company, (ii) pursuant to an existing plan, contract or
instruction that satisfies the requirements of Rule
10b5-1(c)(1)(i)(B),
(iii) as forfeitures of common stock to satisfy tax withholding
obligations of the stockholder in connection with the vesting or
exercise of equity awards by the stockholder pursuant to our
equity plans, or pursuant to a net exercise or cashless exercise
by the stockholder of outstanding equity awards pursuant to our
equity plans, or (iv) pursuant to the conversion or sale
of, or an offer to purchase, all or substantially all of our
outstanding common stock, whether pursuant to a merger, tender
offer or otherwise; provided that in the case of a transfer in
clauses (c)(iii) or (iv) above, no filing under
Section 16(a) of the Exchange Act shall be required or
shall be voluntarily made in connection with such transactions.
Rule 144
In general, under Rule 144, a person who is not our
affiliate and has not been our affiliate at any time during the
preceding three months will be entitled to sell any shares of
our common stock that such
156
person has beneficially owned for at least six months, including
the holding period of any prior owner other than one of our
affiliates, without regard to volume limitations. Sales of our
common stock by any such person would be subject to the
availability of current public information about us if the
shares to be sold were beneficially owned by such person for
less than one year. If such shares to be sold were beneficially
owned by such person for at least one year, a person may sell
shares of our common stock acquired from us, without regard to
volume limitations or the availability of public information
about us.
In addition, under Rule 144, our affiliates who have
beneficially owned shares of our common stock for at least six
months, including the holding period of any prior owner other
than one of our affiliates, would be entitled to sell within any
three-month period a number of shares that does not exceed the
greater of:
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1% of the number of shares of our common stock then outstanding,
which will equal approximately 328,354 shares immediately
after this offering; and
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the average weekly trading volume in our common stock on The
NASDAQ Global Market during the four calendar weeks preceding
the date of filing of a Notice of Proposed Sale of Securities
Pursuant to Rule 144 with respect to the sale.
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Sales under Rule 144 by our affiliates are also subject to
manner of sale provisions and notice requirements and to the
availability of current public information about us.
Registration
of Shares in Connection with Compensatory Benefit
Plans
We have filed registration statements under the Securities Act
covering shares of common stock issued or reserved for issuance
under our 2005 Plan, 2010 Plan and 2010 ESPP. Accordingly,
shares registered under these registration statements will,
subject to vesting provisions and Rule 144 public
information, volume limitation or notice filing provisions
applicable to our affiliates, be available for sale in the open
market immediately after any applicable
lock-up
agreements expire.
Registration
Rights
Excluding the shares held by the selling stockholders that are
being registered hereby, the holders of approximately
7,861,000 shares of our common stock have certain rights
with respect to the registration of such shares under the
Securities Act. See the section entitled Description of
Capital Stock Registration Rights. Upon the
effectiveness of a registration statement covering these shares,
the shares would become freely tradable.
157
CERTAIN
U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain U.S. federal income
tax considerations relating to the acquisition, ownership and
disposition of common stock. Except where noted, this summary
deals only with common stock held as a capital asset by a
stockholder, and does not discuss the U.S. federal income
tax considerations applicable to a stockholder that is subject
to special treatment under U.S. federal income tax laws,
including: a dealer in securities or currencies; a financial
institution; a regulated investment company; a real estate
investment trust; a tax-exempt organization; an insurance
company; a person holding common stock as part of a hedging,
integrated, conversion or straddle transaction or a person
deemed to sell common stock under the constructive sale
provisions of the Internal Revenue Code of 1986, as amended, or
the Tax Code; a trader in securities that has elected the
mark-to-market
method of accounting; a person liable for alternative minimum
tax; an entity that is treated as a partnership for
U.S. federal income tax purposes; a person that received
such common stock in connection with services provided; a
U.S. person whose functional currency is not
the U.S. dollar; a controlled foreign
corporation; a passive foreign investment
company; or a U.S. expatriate.
This summary is based upon provisions of the Tax Code, and
applicable regulations, rulings and judicial decisions in effect
as of the date hereof. Those authorities may be changed, perhaps
retroactively, or may be subject to differing interpretations,
so as to result in U.S. federal income tax consequences
different from those discussed below. This summary does not
address all aspects of U.S. federal income tax, does not
deal with all tax considerations that may be relevant to
stockholders in light of their personal circumstances and does
not address any state, local, foreign, gift, estate or
alternative minimum tax considerations.
For purposes of this discussion, a U.S. holder
is a beneficial holder of common stock that is: an individual
citizen or resident of the United States; a corporation (or any
other entity treated as a corporation for U.S. federal
income tax purposes) created or organized in or under the laws
of the United States, any state thereof or the District of
Columbia; an estate the income of which is subject to
U.S. federal income taxation regardless of its source; a
trust if it (1) is subject to the primary supervision of a
court within the United States and one or more U.S. persons
have the authority to control all substantial decisions of the
trust or (2) has a valid election in effect under
applicable U.S. Treasury regulations to be treated as a
U.S. person.
For purposes of this discussion, a
non-U.S. holder
is a beneficial holder of common stock (other than a partnership
or any other entity or arrangement that is treated as a
partnership for U.S. federal income tax purposes) that is a
non-resident alien individual or foreign corporation for
U.S. federal income tax purposes.
If a partnership (or an entity or arrangement that is treated as
a partnership for U.S. federal income tax purposes) holds
common stock, the tax treatment of a partner will generally
depend upon the status of the partner and the activities of the
partnership. A partner of a partnership holding common stock is
urged to consult its own tax advisors.
Holders of common stock are urged to consult their own tax
advisors concerning their particular U.S. federal income
tax consequences in light of their specific situations, as well
as the tax consequences arising under the laws of any other
taxing jurisdiction.
U.S.
Holders
Ownership and Disposition of Common
Stock. The following discussion is a summary
of certain U.S. federal income tax considerations relevant
to a U.S. holder of common stock.
158
Distributions with respect to common stock, if any, will be
includible in the gross income of a U.S. holder as ordinary
dividend income to the extent paid out of current or accumulated
earnings and profits, as determined for U.S. federal income
tax purposes. Any portion of a distribution in excess of current
or accumulated earnings and profits would be treated as a return
of the holders tax basis in its common stock and then as
gain from the sale or exchange of the common stock. Under
current law, if certain requirements are met, a maximum 15%
U.S. federal income tax rate will apply to any dividends
paid to a holder of common stock who is a U.S. individual
and that is included in the U.S. holders income prior
to January 1, 2011.
Distributions constituting dividends for U.S. federal
income tax purposes to U.S. holders that are corporate
stockholders may qualify for the 70% dividends received
deduction, or DRD, which is generally available to corporate
stockholders that own less than 20% of the voting power or value
of the outstanding stock of the distributing corporation. A
U.S. holder that is a corporate stockholder holding 20% or
more of the distributing corporation may be eligible for an 80%
DRD. No assurance can be given that we will have sufficient
earnings and profits (as determined for U.S. federal income
tax purposes) to cause any distributions to be treated as
dividends eligible for a DRD. In addition, a DRD is available
only if certain holding periods and other taxable income
requirements are satisfied. The length of time that a
stockholder has held stock is reduced by any period during which
the stockholders risk of loss with respect to the stock is
diminished by reason of the existence of certain options,
contracts to sell, short sales, or other similar transactions.
Also, to the extent that a corporation incurs indebtedness that
is directly attributable to an investment in the stock on which
the dividend is paid, all or a portion of the DRD may be
disallowed. In addition, any dividend received by a corporation
may also be subject to the extraordinary distribution provisions
of the Tax Code.
A U.S. holder of common stock will generally recognize gain
or loss on the taxable sale, exchange, or other disposition of
such stock in an amount equal to the difference between such
U.S. holders amount realized on the sale and its tax
basis in the common stock sold. A U.S. holders amount
realized should equal the amount of cash and the fair market
value of any property received in consideration of its stock.
The gain or loss will be capital gain or loss if the
U.S. holder holds the common stock as a capital asset, and
will be long-term capital gain or loss if the common stock is
held for more than one year at the time of disposition. Capital
loss can generally only be used to offset capital gain
(individuals may also offset excess capital losses against up to
$3,000 of ordinary income per tax year). Under current law,
long-term capital gain recognized by an individual
U.S. holder prior to January 1, 2011 is subject to a
maximum 15% U.S. federal income tax rate.
Non-U.S.
Holders
Ownership and Disposition of Common
Stock. The following discussion is a summary
of certain U.S. federal tax considerations relevant to a
non-U.S. holder
of common stock.
Distributions treated as dividends that are paid to a
non-U.S. holder,
if any, with respect to the shares of common stock will be
subject to withholding tax at a 30% rate (or lower applicable
income tax treaty rate) unless the dividends are effectively
connected with the
non-U.S. holders
conduct of a trade or business in the United States. If a
non-U.S. holder
is engaged in a trade or business in the United States and
dividends with respect to the common stock are effectively
connected with the conduct of that trade or business and, if
required by an applicable income tax treaty, are attributable to
a U.S. permanent establishment, then the
non-U.S. holder
will be subject to U.S. federal income tax on those
dividends on a net income basis (although the dividends will be
exempt from the 30% U.S. federal withholding tax, provided
certain certification requirements are satisfied) in the same
manner as if received by a U.S. person as defined under the
Tax Code. Any such effectively connected income received by a
foreign corporation may, under certain circumstances, be subject
to an additional branch profits tax at a 30% rate (or lower
applicable income tax treaty rate). To claim the exemption from
withholding with respect
159
to any such effectively connected income, the
non-U.S. holder
must generally furnish to us or our paying agent a properly
executed IRS
Form W-8ECI
(or applicable successor form).
A
non-U.S. holder
of shares of common stock who wishes to claim the benefit of an
exemption or reduced rate of withholding tax under an applicable
treaty must furnish to us or our paying agent a valid IRS
Form W-8BEN
(or applicable successor form) certifying such holders
qualification for the exemption or reduced rate. If a
non-U.S. holder
is eligible for a reduced rate of U.S. withholding tax
pursuant to an income tax treaty, it may obtain a refund of any
excess amounts withheld by filing an appropriate claim for
refund with the Internal Revenue Service.
Non-U.S. holders
may recognize gain upon the sale, exchange, redemption or other
taxable disposition of common stock. Such gain generally will
not be subject to U.S. federal income tax unless:
(i) that gain is effectively connected with the conduct of
a trade or business in the United States (and, if required by an
applicable income tax treaty, is attributable to a
U.S. permanent establishment) by a
non-U.S. holder;
(ii) the
non-U.S. holder
is a non-resident alien individual who is present in the United
States for 183 days or more in the taxable year of that
disposition, and certain other conditions are met; or
(iii) we are or have been a U.S. real property
holding corporation for U.S. federal income tax
purposes. We believe that we are not and we do not anticipate
becoming a U.S. real property holding
corporation for U.S. federal income tax purposes.
If a
non-U.S. holder
is an individual described in clause (i) of the preceding
paragraph, the
non-U.S. holder
will generally be subject to tax on the net gain at regular
graduated U.S. federal income tax rates. If the
non-U.S. holder
is an individual described in clause (ii) of the preceding
paragraph, the
non-U.S. holder
will generally be subject to a flat 30% tax on the gain, which
may be offset by U.S. source capital losses even though the
non-U.S. holder
is not considered a resident of the United States. If a
non-U.S. holder
is a foreign corporation that falls under clause (i) of the
preceding paragraph, it will be subject to tax on its net gain
in the same manner as if it were a U.S. person as defined
under the Tax Code and, in addition, the
non-U.S. holder
may be subject to the branch profits tax at a rate equal to 30%
of its effectively connected earnings and profits or at such
lower rate as may be specified by an applicable income tax
treaty.
Information
Reporting and Backup Withholding Tax
We report to our U.S. holders and the IRS the amount of
dividends paid during each calendar year, and the amount of any
tax withheld. All distributions to holders of common stock are
subject to any applicable withholding. Under U.S. federal
income tax law, interest, dividends, and other reportable
payments may, under certain circumstances, be subject to
backup withholding at the then applicable rate
(currently 28%). Backup withholding generally applies to a
U.S. holder if the holder (i) fails to furnish its
social security number or other taxpayer identification number,
or TIN, (ii) furnishes an incorrect TIN, (iii) fails
to properly report interest or dividends, or (iv) under
certain circumstances, fails to provide a certified statement,
signed under penalty of perjury, that the TIN provided is its
correct number and that it is a U.S. person that is not
subject to backup withholding. Backup withholding is not an
additional tax but merely an advance payment, which may be
refunded to the extent it results in an overpayment of tax and
the appropriate information is supplied to the IRS. Certain
persons are exempt from backup withholding, including, in
certain circumstances, financial institutions.
We also report to our
non-U.S. holders
and the IRS the amount of dividends paid during each calendar
year, and the amount of any tax withheld. These information
reporting requirements apply even if no withholding was required
because the distributions were effectively connected with the
non-U.S. holders
conduct of a United States trade or business, or withholding was
reduced or eliminated by an applicable income tax treaty. This
information also may be made available under a specific treaty
or agreement with the tax authorities in the country in which
the
non-U.S. holder
resides or is established. Backup
160
withholding, however, generally will not apply to distributions
to a
non-U.S. holder
of our common stock provided the
non-U.S. holder
furnishes to us or our paying agent the required certification
as to its
non-U.S. status,
such as by providing a valid IRS
Form W-8BEN
or IRS
Form W-8ECI,
or certain other requirements are met. Notwithstanding the
foregoing, backup withholding may apply if either we or our
paying agent has actual knowledge, or reason to know, that the
holder is a U.S. person that is not an exempt recipient.
New
Legislation Relating to Foreign Accounts
Newly enacted legislation may impose withholding taxes on
certain types of payments made to foreign financial
institutions and certain other
non-U.S. entities.
Under this legislation, the failure to comply with additional
certification, information reporting and other specified
requirements could result in withholding tax being imposed on
payments of dividends and sales proceeds to U.S. holders
who own the shares through foreign accounts or foreign
intermediaries and certain
non-U.S. holders.
The legislation imposes a 30% withholding tax on dividends on,
and gross proceeds from the sale or other disposition of, our
common stock paid to a foreign financial institution or to a
foreign non-financial entity, unless (i) the foreign
financial institution undertakes certain diligence and reporting
obligations or (ii) the foreign non-financial entity either
certifies it does not have any substantial United States owners
or furnishes identifying information regarding each substantial
United States owner. If the payee is a foreign financial
institution, it must enter into an agreement with the United
States Treasury requiring, among other things, that it undertake
to identify accounts held by certain United States persons or
United States-owned foreign entities, annually report certain
information about such accounts, and withhold 30% on payments to
account holders whose actions prevent it from complying with
these reporting and other requirements. The legislation would
apply to payments made after December 31, 2012. Prospective
investors should consult their tax advisors regarding this
legislation.
161
The validity of the shares of common stock offered by this
prospectus will be passed upon for us by Goodwin Procter LLP,
San Francisco, California.
The financial statements as of December 31, 2008 and 2009
and for each of the three years in the period ended
December 31, 2009 and for the period from September 9,
2004 (Date of Inception) to December 31, 2009 included in
this prospectus have been audited by Deloitte & Touche
LLP, an independent registered public accounting firm, as stated
in their report appearing herein (which report expresses an
unqualified opinion and includes an explanatory paragraph
regarding the Companys development stage status and the
Companys ability to continue as a going concern) and have
been so included on reliance upon the report of such firm given
upon their authority as experts in auditing and accounting.
WHERE YOU
CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on
Form S-1
under the Securities Act, as amended, with respect to the shares
of common stock offered by this prospectus. This prospectus does
not contain all of the information included in the registration
statement. For further information pertaining to us and our
common stock, you should refer to the registration statement and
the exhibits and schedules filed with the registration
statement. Whenever we make reference in this prospectus to any
of our contracts, agreements or other documents, the references
are not necessarily complete, and you should refer to the
exhibits attached to the registration statement for copies of
the actual contract, agreement or other document.
We are subject to the informational requirements of the
Securities Exchange Act and file annual, quarterly and current
reports, proxy statements and other information with the SEC.
You can read our SEC filings, including the registration
statement, over the Internet at the SECs website at
www.sec.gov. You may also read and copy any document we file
with the SEC at its Public Reference Room at
100 F Street, N.E., Washington, D.C., 20549.
You may also obtain copies of the documents at prescribed rates
by writing to the Public Reference Room of the SEC at
100 F Street, N.E., Washington, D.C., 20549.
Please call the SEC at
1-800-SEC-0330
for further information on the operation of the public reference
facility.
162
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|
|
|
|
|
F-2
|
|
|
|
|
F-3
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|
Statements of Operations for the years ended
December 31, 2007, 2008 and 2009, and for the period from
September 9, 2004 (Date of Inception) to December 31,
2009 (Audited), the nine months ended September 30, 2009
and 2010, and for the period from September 9, 2004 (Date
of Inception) September 30, 2010 (Unaudited)
|
|
|
F-4
|
|
|
|
|
F-5
|
|
Statements of Cash Flows for the years ended
December 31, 2007, 2008 and 2009, and the period from
September 9, 2004 (Date of Inception) to December 31,
2009 (Audited), the nine months ended September 30, 2009
and 2010, and for the period from September 9, 2004 (Date
of Inception) September 30, 2010 (Unaudited)
|
|
|
F-8
|
|
|
|
|
F-10
|
|
F-1
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Anthera Pharmaceuticals, Inc.
Hayward, California
We have audited the accompanying balance sheets of Anthera
Pharmaceuticals, Inc. (a development stage company)(the
Company) as of December 31, 2009 and 2008, and
the related statements of operations, stockholders deficit
and comprehensive income (loss), and cash flows for each of the
three years in the period ended December 31, 2009 and for
the period from September 9, 2004 (Date of Inception) to
December 31, 2009. These financial statements are the
responsibility of the Companys management. Our
responsibility is to express an opinion on the financial
statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. The Company was not required to
have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audits included
consideration of internal control over financial reporting as a
basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Companys internal control over
financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all
material respects, the financial position of the Company as of
December 31, 2009 and 2008, and the results of its
operations and its cash flows for each of the three years in the
period ended December 31, 2009 and for the period from
September 9, 2004 (Date of Inception) to December 31,
2009, in conformity with accounting principles generally
accepted in the United States of America.
The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern. The
Company is a development stage enterprise engaged in developing
therapeutics to treat diseases associated with inflammation. As
discussed in Note 1 to the financial statements, the
deficiency in working capital at December 31, 2009 and the
Companys operating losses since inception raise
substantial doubt about its ability to continue as a going
concern. Managements plans concerning these matters are
also described in Note 1 to the financial statements. The
financial statements do not include any adjustments that might
result from the outcome of these uncertainties.
/s/ Deloitte &
Touche LLP
San Francisco, California
January 28, 2010
(except for the last four paragraphs of Note 12, as to
which the date is February 24, 2010)
F-2
ANTHERA
PHARMACEUTICALS, INC.
(A Development Stage Company)
BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
September 30,
|
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
7,895,113
|
|
|
$
|
3,803,384
|
|
|
$
|
51,208,720
|
|
Short term investments
|
|
|
|
|
|
|
|
|
|
|
21,878,890
|
|
Restricted cash
|
|
|
40,000
|
|
|
|
|
|
|
|
|
|
Prepaid expenses and other current assets
|
|
|
63,468
|
|
|
|
19,825
|
|
|
|
1,813,482
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
7,998,581
|
|
|
|
3,823,209
|
|
|
|
74,901,092
|
|
Property and equipment net
|
|
|
27,779
|
|
|
|
12,994
|
|
|
|
22,113
|
|
Deferred financing cost
|
|
|
|
|
|
|
1,922,183
|
|
|
|
|
|
Other assets
|
|
|
7,794
|
|
|
|
130,403
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
$
|
8,034,154
|
|
|
$
|
5,888,789
|
|
|
$
|
74,923,205
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
1,597,300
|
|
|
$
|
3,145,706
|
|
|
$
|
2,798,085
|
|
Accrued clinical study
|
|
|
1,461,179
|
|
|
|
565,034
|
|
|
|
967,917
|
|
Accrued liabilities
|
|
|
319,893
|
|
|
|
767,663
|
|
|
|
497,785
|
|
Accrued payroll and related costs
|
|
|
116,045
|
|
|
|
153,235
|
|
|
|
573,920
|
|
Warrant and derivative liabilities
|
|
|
|
|
|
|
406,130
|
|
|
|
|
|
Convertible promissory notes
|
|
|
|
|
|
|
13,129,877
|
|
|
|
|
|
License fee payable
|
|
|
5,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
8,494,417
|
|
|
|
18,167,645
|
|
|
|
4,837,707
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
8,494,417
|
|
|
|
18,167,645
|
|
|
|
4,837,707
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies (Note 5)
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity (deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A-1
convertible preferred stock, $0.001 par value,
552,530 shares authorized, issued and outstanding at
December 31, 2008 and 2009; (aggregate liquidation value of
$813,508 as of December 31, 2008 and 2009); 0 shares
outstanding at September 30, 2010
|
|
|
552
|
|
|
|
552
|
|
|
|
|
|
Series A-2
convertible preferred stock, $0.001 par value,
1,635,514 shares authorized; 1,620,669, shares issued and
outstanding at December 31, 2008 and 2009; (aggregate
liquidation value of $8,323,782 as of December 31, 2008 and
2009); 0 shares outstanding at September 30, 2010
|
|
|
1,621
|
|
|
|
1,621
|
|
|
|
|
|
Series B-1
convertible preferred stock, $0.001 par value,
2,751,168 shares authorized; 2,746,865 shares issued
and outstanding at December 31, 2008 and 2009; (aggregate
liquidation value of $19,986,220 as of December 31, 2008
and 2009); 0 shares outstanding at September 30, 2010
|
|
|
2,747
|
|
|
|
2,747
|
|
|
|
|
|
Series B-2
convertible preferred stock, $0.001 par value,
7,009,345 shares authorized; 3,226,244 shares issued
and outstanding at December 31, 2008 and December 31,
2009; (aggregate liquidation value of $23,474,182 as of
December 31, 2008 and 2009); 0 shares outstanding at
September 30, 2010
|
|
|
3,226
|
|
|
|
3,226
|
|
|
|
|
|
Preferred stock, $0.001 par value
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $0.001 par value, 18,443,341 shares
authorized at December 31, 2008 and 2009;
95,000,000 shares authorized at September 30, 2010;
1,454,890, 1,566,199 and 32,796,690 shares issued and
outstanding at December 31, 2008, 2009 and
September 30, 2010, respectively
|
|
|
1,455
|
|
|
|
1,566
|
|
|
|
32,796
|
|
Additional paid-in capital
|
|
|
52,557,756
|
|
|
|
52,941,384
|
|
|
|
162,494,362
|
|
Accumulated other comprehensive income (loss)
|
|
|
(1,160
|
)
|
|
|
|
|
|
|
161,987
|
|
Deficit accumulated the during the development stage
|
|
|
(53,026,460
|
)
|
|
|
(65,229,952
|
)
|
|
|
(92,603,647
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity (deficit)
|
|
|
(460,263
|
)
|
|
|
(12,278,856
|
)
|
|
|
70,085,498
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
$
|
8,034,154
|
|
|
$
|
5,888,789
|
|
|
$
|
74,923,205
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to financial statements.
F-3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative
|
|
|
|
|
|
|
|
|
Cumulative
|
|
|
|
|
|
|
|
|
|
|
|
|
Period
|
|
|
|
|
|
|
|
|
Period
|
|
|
|
|
|
|
|
|
|
|
|
|
from
|
|
|
|
|
|
|
|
|
from
|
|
|
|
|
|
|
|
|
|
|
|
|
September 9,
|
|
|
|
|
|
|
|
|
September 9,
|
|
|
|
|
|
|
|
|
|
|
|
|
2004
|
|
|
|
|
|
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
(Date of
|
|
|
|
|
|
|
|
|
(Date of
|
|
|
|
|
|
|
|
|
|
|
|
|
Inception)
|
|
|
|
|
|
|
|
|
Inception)
|
|
|
|
|
|
|
|
|
|
|
|
|
to
|
|
|
Nine Months Ended
|
|
|
to
|
|
|
|
Years Ended December 31,
|
|
|
December 31,
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
$
|
23,921,932
|
|
|
$
|
10,882,322
|
|
|
$
|
8,415,414
|
|
|
$
|
51,323,981
|
|
|
$
|
18,565,088
|
|
|
$
|
7,727,129
|
|
|
$
|
69,889,069
|
|
General and administrative
|
|
|
2,468,607
|
|
|
|
2,980,170
|
|
|
|
3,425,690
|
|
|
|
9,917,567
|
|
|
|
4,244,000
|
|
|
|
2,730,482
|
|
|
|
14,161,567
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
26,390,539
|
|
|
|
13,862,492
|
|
|
|
11,841,104
|
|
|
|
61,241,548
|
|
|
|
22,809,088
|
|
|
|
10,457,611
|
|
|
|
84,050,636
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS
|
|
|
(26,390,539
|
)
|
|
|
(13,862,492
|
)
|
|
|
(11,841,104
|
)
|
|
|
(61,241,548
|
)
|
|
|
(22,809,088
|
)
|
|
|
(10,457,611
|
)
|
|
|
(84,050,636
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and other income
|
|
|
696,962
|
|
|
|
178,129
|
|
|
|
23,534
|
|
|
|
1,019,760
|
|
|
|
76,562
|
|
|
|
21,559
|
|
|
|
1,096,322
|
|
Interest and other expense
|
|
|
|
|
|
|
(296,303
|
)
|
|
|
(385,922
|
)
|
|
|
(699,620
|
)
|
|
|
(4,641,169
|
)
|
|
|
(289,776
|
)
|
|
|
(5,340,789
|
)
|
Beneficial conversion features
|
|
|
|
|
|
|
(4,118,544
|
)
|
|
|
|
|
|
|
(4,308,544
|
)
|
|
|
|
|
|
|
|
|
|
|
(4,308,544
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense)
|
|
|
696,962
|
|
|
|
(4,236,718
|
)
|
|
|
(362,388
|
)
|
|
|
(3,988,404
|
)
|
|
|
(4,564,607
|
)
|
|
|
(268,217
|
)
|
|
|
(8,553,011
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS
|
|
$
|
(25,693,577
|
)
|
|
$
|
(18,099,210
|
)
|
|
$
|
(12,203,492
|
)
|
|
$
|
(65,229,952
|
)
|
|
$
|
(27,373,695
|
)
|
|
$
|
(10,725,828
|
)
|
|
$
|
(92,603,647
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share basic and diluted
|
|
$
|
(28.15
|
)
|
|
$
|
(13.47
|
)
|
|
$
|
(8.06
|
)
|
|
|
|
|
|
$
|
(1.40
|
)
|
|
$
|
(7.16
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of shares used in per share
calculation basic and diluted
|
|
|
912,668
|
|
|
|
1,343,420
|
|
|
|
1,513,598
|
|
|
|
|
|
|
|
19,567,058
|
|
|
|
1,498,108
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to financial statements.
F-4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
Accumulated
|
|
|
Total
|
|
|
|
Convertible
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Other
|
|
|
During
|
|
|
Stockholders
|
|
|
|
Preferred Stock
|
|
|
Common Stock
|
|
|
Paid-In
|
|
|
Comprehensive
|
|
|
Development
|
|
|
Equity
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Loss
|
|
|
Stage
|
|
|
(Deficit)
|
|
|
DATE OF INCEPTION September 9, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock to founders for cash
|
|
|
|
|
|
$
|
|
|
|
|
140,186
|
|
|
$
|
140
|
|
|
$
|
100
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
240
|
|
Issuance of common stock to founders for service
|
|
|
|
|
|
|
|
|
|
|
735,981
|
|
|
|
736
|
|
|
|
524
|
|
|
|
|
|
|
|
|
|
|
|
1,260
|
|
Repurchase of common stock from founder
|
|
|
|
|
|
|
|
|
|
|
(73,014
|
)
|
|
|
(73
|
)
|
|
|
(52
|
)
|
|
|
|
|
|
|
|
|
|
|
(125
|
)
|
Issuance of Series A convertible preferred stock for cash
at $1.47 per share, net of issuance cost of $8,555
|
|
|
526,955
|
|
|
|
527
|
|
|
|
|
|
|
|
|
|
|
|
766,768
|
|
|
|
|
|
|
|
|
|
|
|
767,295
|
|
Issuance of Series A convertible preferred stock in
exchange for service at $1.47 per share
|
|
|
25,575
|
|
|
|
25
|
|
|
|
|
|
|
|
|
|
|
|
37,631
|
|
|
|
|
|
|
|
|
|
|
|
37,656
|
|
Issuance of common stock upon exercise of stock options
|
|
|
|
|
|
|
|
|
|
|
33,292
|
|
|
|
33
|
|
|
|
4,527
|
|
|
|
|
|
|
|
|
|
|
|
4,560
|
|
Reclass of early exercise of stock options to liability
|
|
|
|
|
|
|
|
|
|
|
(29,204
|
)
|
|
|
(29
|
)
|
|
|
(3,971
|
)
|
|
|
|
|
|
|
|
|
|
|
(4,000
|
)
|
Stock-based compensation expense related to consultant options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
842
|
|
|
|
|
|
|
|
|
|
|
|
842
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(554,427
|
)
|
|
|
(554,427
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE December 31, 2005
|
|
|
552,530
|
|
|
|
552
|
|
|
|
807,241
|
|
|
|
807
|
|
|
|
806,369
|
|
|
|
|
|
|
|
(554,427
|
)
|
|
|
253,301
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of Series A convertible preferred stock to
Series A-1
convertible preferred stock at a ratio of 1:1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of
Series A-2
convertible preferred stock for cash at $5.14 per
share net of issuance cost of $202,019
|
|
|
1,138,677
|
|
|
|
1,139
|
|
|
|
|
|
|
|
|
|
|
|
5,645,093
|
|
|
|
|
|
|
|
|
|
|
|
5,646,232
|
|
Issuance of
Series A-2
convertible preferred stock upon conversion of convertible
promissory notes at $3.85 and $5.14 per share
|
|
|
224,248
|
|
|
|
224
|
|
|
|
|
|
|
|
|
|
|
|
961,527
|
|
|
|
|
|
|
|
|
|
|
|
961,751
|
|
Issuance of
Series A-2
convertible preferred stock in exchange for licensed technology
at $5.14 per share
|
|
|
257,744
|
|
|
|
258
|
|
|
|
|
|
|
|
|
|
|
|
1,323,524
|
|
|
|
|
|
|
|
|
|
|
|
1,323,782
|
|
Beneficial conversion feature related to conversion of
convertible promissory notes into
Series A-1
convertible preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
190,000
|
|
|
|
|
|
|
|
|
|
|
|
190,000
|
|
Issuance of Series B convertible preferred stock for cash
at $7.28 per share net of issuance cost of $20,930
|
|
|
2,619,568
|
|
|
|
2,620
|
|
|
|
|
|
|
|
|
|
|
|
19,036,450
|
|
|
|
|
|
|
|
|
|
|
|
19,039,070
|
|
Issuance of Series B convertible preferred stock in
exchange for licensed technology at $7.28 per share
|
|
|
127,297
|
|
|
|
127
|
|
|
|
|
|
|
|
|
|
|
|
926,091
|
|
|
|
|
|
|
|
|
|
|
|
926,218
|
|
Issuance of common stock upon exercise of stock options
|
|
|
|
|
|
|
|
|
|
|
125,581
|
|
|
|
126
|
|
|
|
17,074
|
|
|
|
|
|
|
|
|
|
|
|
17,200
|
|
Reclass of early exercise of stock options to liability
|
|
|
|
|
|
|
|
|
|
|
(36,810
|
)
|
|
|
(37
|
)
|
|
|
(5,006
|
)
|
|
|
|
|
|
|
|
|
|
|
(5,043
|
)
|
Stock-based compensation expense related to consultant options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,358
|
|
|
|
|
|
|
|
|
|
|
|
4,358
|
|
Stock-based compensation expense related to employee options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,648
|
|
|
|
|
|
|
|
|
|
|
|
4,648
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,679,246
|
)
|
|
|
(8,679,246
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE December 31, 2006
|
|
|
4,920,064
|
|
|
$
|
4,920
|
|
|
|
896,012
|
|
|
$
|
896
|
|
|
$
|
28,910,128
|
|
|
$
|
|
|
|
$
|
(9,233,673
|
)
|
|
$
|
19,682,271
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to financial statements.
F-5
ANTHERA
PHARMACEUTICALS, INC.
(A Development Stage Company)
STATEMENTS OF
STOCKHOLDERS EQUITY (DEFICIT) AND COMPREHENSIVE LOSS
(Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
Accumulated
|
|
|
Total
|
|
|
|
Convertible
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Other
|
|
|
During
|
|
|
Stockholders
|
|
|
|
Preferred Stock
|
|
|
Common Stock
|
|
|
Paid-In
|
|
|
Comprehensive
|
|
|
Development
|
|
|
Equity
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Loss
|
|
|
Stage
|
|
|
(Deficit)
|
|
|
BALANCE December 31, 2006
|
|
|
4,920,064
|
|
|
$
|
4,920
|
|
|
|
896,012
|
|
|
$
|
896
|
|
|
$
|
28,910,128
|
|
|
$
|
|
|
|
$
|
(9,233,673
|
)
|
|
$
|
19,682,271
|
|
Issuance of common stock upon exercise of stock options
|
|
|
|
|
|
|
|
|
|
|
493,605
|
|
|
|
494
|
|
|
|
118,426
|
|
|
|
|
|
|
|
|
|
|
|
118,920
|
|
Reclass of early exercise of stock options liability
|
|
|
|
|
|
|
|
|
|
|
(240,165
|
)
|
|
|
(240
|
)
|
|
|
(60,333
|
)
|
|
|
|
|
|
|
|
|
|
|
(60,573
|
)
|
Issuance of common stock for service
|
|
|
|
|
|
|
|
|
|
|
16,355
|
|
|
|
16
|
|
|
|
2,434
|
|
|
|
|
|
|
|
|
|
|
|
2,450
|
|
Stock-based compensation expense related to consultant options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,489
|
|
|
|
|
|
|
|
|
|
|
|
12,489
|
|
Stock-based compensation expense related to employee options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
74,861
|
|
|
|
|
|
|
|
|
|
|
|
74,861
|
|
Change in other comprehensive loss unrealized loss
on investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,812
|
)
|
|
|
|
|
|
|
(1,812
|
)
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(25,693,577
|
)
|
|
|
(25,693,577
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(25,695,389
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE December 31, 2007
|
|
|
4,920,064
|
|
|
|
4,920
|
|
|
|
1,165,807
|
|
|
|
1,166
|
|
|
|
29,058,005
|
|
|
|
(1,812
|
)
|
|
|
(34,927,250
|
)
|
|
|
(5,864,971
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of Series B convertible preferred stock to
Series B-1
convertible preferred stock at a ratio of 1:1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of
Series B-2
convertible preferred stock for cash at $7.28 per
share net of issuance cost of $242,327 and warrants
issuance (below)
|
|
|
962,066
|
|
|
|
962
|
|
|
|
|
|
|
|
|
|
|
|
6,512,241
|
|
|
|
|
|
|
|
|
|
|
|
6,513,203
|
|
Issuance of
Series B-2
convertible preferred stock upon conversion of convertible
promissory notes at $5.46 per share
|
|
|
2,235,661
|
|
|
|
2,235
|
|
|
|
|
|
|
|
|
|
|
|
12,197,765
|
|
|
|
|
|
|
|
|
|
|
|
12,200,000
|
|
Issuance of
Series B-2
convertible preferred stock in lieu of interest payment at $5.46
per share
|
|
|
28,517
|
|
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
155,601
|
|
|
|
|
|
|
|
|
|
|
|
155,630
|
|
Issuance of warrants in connection with issuance of
Series B-2
convertible preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
244,478
|
|
|
|
|
|
|
|
|
|
|
|
244,478
|
|
Beneficial conversion feature related to conversion of
convertible promissory notes into
Series B-2
convertible preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,118,544
|
|
|
|
|
|
|
|
|
|
|
|
4,118,544
|
|
Issuance of common stock upon exercise of stock options
|
|
|
|
|
|
|
|
|
|
|
179,886
|
|
|
|
180
|
|
|
|
67,925
|
|
|
|
|
|
|
|
|
|
|
|
68,105
|
|
Release of early exercise of stock options liability
|
|
|
|
|
|
|
|
|
|
|
128,180
|
|
|
|
128
|
|
|
|
12,773
|
|
|
|
|
|
|
|
|
|
|
|
12,901
|
|
Repurchase of common stock upon employee termination
|
|
|
|
|
|
|
|
|
|
|
(18,983
|
)
|
|
|
(19
|
)
|
|
|
(4,856
|
)
|
|
|
|
|
|
|
|
|
|
|
(4,875
|
)
|
Stock-based compensation expense related to consultant options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
51,874
|
|
|
|
|
|
|
|
|
|
|
|
51,874
|
|
Stock-based compensation expense related to employee options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
143,406
|
|
|
|
|
|
|
|
|
|
|
|
143,406
|
|
Change in other comprehensive loss unrealized gain
on investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
652
|
|
|
|
|
|
|
|
652
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(18,099,210
|
)
|
|
|
(18,099,210
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(18,098,558
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE December 31, 2008
|
|
|
8,146,308
|
|
|
|
8,146
|
|
|
|
1,454,890
|
|
|
|
1,455
|
|
|
|
52,557,756
|
|
|
|
(1,160
|
)
|
|
|
(53,026,460
|
)
|
|
|
(460,263
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock upon exercise of stock options
|
|
|
|
|
|
|
|
|
|
|
19,089
|
|
|
|
19
|
|
|
|
15,255
|
|
|
|
|
|
|
|
|
|
|
|
15,274
|
|
Release of early exercise of stock options liability
|
|
|
|
|
|
|
|
|
|
|
92,220
|
|
|
|
92
|
|
|
|
26,027
|
|
|
|
|
|
|
|
|
|
|
|
26,119
|
|
Stock-based compensation expense related to consultant options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
88,382
|
|
|
|
|
|
|
|
|
|
|
|
88,382
|
|
Stock-based compensation expense related to employee options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
253,964
|
|
|
|
|
|
|
|
|
|
|
|
253,964
|
|
Change in other comprehensive loss unrealized gain
on investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,160
|
|
|
|
|
|
|
|
1,160
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12,203,492
|
)
|
|
|
(12,203,492
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12,202,332
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2009
|
|
|
8,146,308
|
|
|
$
|
8,146
|
|
|
|
1,566,199
|
|
|
$
|
1,566
|
|
|
$
|
52,941,384
|
|
|
$
|
|
|
|
$
|
(65,229,952
|
)
|
|
$
|
(12,278,856
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to financial statements.
F-6
ANTHERA
PHARMACEUTICALS, INC.
(A Development Stage Company)
STATEMENTS OF
STOCKHOLDERS EQUITY (DEFICIT) AND COMPREHENSIVE LOSS
(Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
Accumulated
|
|
|
Total
|
|
|
|
Convertible
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Other
|
|
|
During
|
|
|
Stockholders
|
|
|
|
Preferred Stock
|
|
|
Common Stock
|
|
|
Paid-In
|
|
|
Comprehensive
|
|
|
Development
|
|
|
Equity
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Loss
|
|
|
Stage
|
|
|
(Deficit)
|
|
|
BALANCE December 31, 2009
|
|
|
8,146,308
|
|
|
$
|
8,146
|
|
|
|
1,566,199
|
|
|
$
|
1,566
|
|
|
$
|
52,941,384
|
|
|
$
|
|
|
|
$
|
(65,229,952
|
)
|
|
$
|
(12,278,856
|
)
|
Conversion of convertible preferred stock to common stock at a
ratio of 1:1*
|
|
|
(8,146,308
|
)
|
|
|
(8,146
|
)
|
|
|
8,146,308
|
|
|
|
8,146
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for cash at $7.00 per share
net of issuance cost of $3,039,257*
|
|
|
|
|
|
|
|
|
|
|
6,000,000
|
|
|
|
6,000
|
|
|
|
37,075,034
|
|
|
|
|
|
|
|
|
|
|
|
37,081,034
|
|
Issuance of common stock upon conversion of convertible
promissory notes and accrued interest at $5.25 and $6.28 per
share*
|
|
|
|
|
|
|
|
|
|
|
2,511,235
|
|
|
|
2,511
|
|
|
|
13,880,601
|
|
|
|
|
|
|
|
|
|
|
|
13,883,112
|
|
Issuance of common stock upon release of escrow funds*
|
|
|
|
|
|
|
|
|
|
|
2,598,780
|
|
|
|
2,599
|
|
|
|
17,097,373
|
|
|
|
|
|
|
|
|
|
|
|
17,099,972
|
|
Issuance of common stock upon cashless exercise of warrants
|
|
|
|
|
|
|
|
|
|
|
194,474
|
|
|
|
194
|
|
|
|
218
|
|
|
|
|
|
|
|
|
|
|
|
412
|
|
Issuance of common stock to collaborator in lieu of milestone
payment
|
|
|
|
|
|
|
|
|
|
|
531,914
|
|
|
|
532
|
|
|
|
3,499,468
|
|
|
|
|
|
|
|
|
|
|
|
3,500,000
|
|
Issuance of common stock upon exercise of overallotment by
underwriters net of issuance cost of $17,291
|
|
|
|
|
|
|
|
|
|
|
604,492
|
|
|
|
605
|
|
|
|
3,959,662
|
|
|
|
|
|
|
|
|
|
|
|
3,960,267
|
|
Issuance of common stock upon exercise of stock options
|
|
|
|
|
|
|
|
|
|
|
118,878
|
|
|
|
119
|
|
|
|
89,066
|
|
|
|
|
|
|
|
|
|
|
|
89,185
|
|
Issuance of common stock upon private placement transaction, net
of issuance cost of $468,964
|
|
|
|
|
|
|
|
|
|
|
10,500,000
|
|
|
|
10,500
|
|
|
|
23,806,591
|
|
|
|
|
|
|
|
|
|
|
|
23,817,091
|
|
Issuance of warrants in conjunction with private placement
transaction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,323,944
|
|
|
|
|
|
|
|
|
|
|
|
5,323,944
|
|
Net change of early exercise of stock options and liability
|
|
|
|
|
|
|
|
|
|
|
24,410
|
|
|
|
24
|
|
|
|
(5,336
|
)
|
|
|
|
|
|
|
|
|
|
|
(5,312
|
)
|
Reclass of warrant and derivative liability to equity in
conjunction with conversion of convertible promissory notes into
common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,473,491
|
|
|
|
|
|
|
|
|
|
|
|
4,473,491
|
|
Stock-based compensation expense related to consultant options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,399
|
|
|
|
|
|
|
|
|
|
|
|
8,399
|
|
Stock-based compensation expense related to employee options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
344,467
|
|
|
|
|
|
|
|
|
|
|
|
344,467
|
|
Change in other comprehensive loss unrealized gain
on investments and foreign currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
161,987
|
|
|
|
|
|
|
|
161,987
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(27,373,695
|
)
|
|
|
(27,373,695
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(27,211,708
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance September 30, 2010
|
|
|
|
|
|
|
|
|
|
|
32,796,690
|
|
|
$
|
32,796
|
|
|
$
|
162,494,362
|
|
|
$
|
161,987
|
|
|
$
|
(92,603,647
|
)
|
|
$
|
70,085,498
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to financial statements.
F-7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 9,
|
|
|
|
|
|
|
|
|
September 9,
|
|
|
|
|
|
|
|
|
|
|
|
|
2004
|
|
|
|
|
|
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
(Date of
|
|
|
|
|
|
|
|
|
(Date of
|
|
|
|
|
|
|
|
|
|
|
|
|
Inception) to
|
|
|
|
|
|
|
|
|
Inception) to
|
|
|
|
Years Ended December 31,
|
|
|
December 31,
|
|
|
Nine Months Ended September 30,
|
|
|
September 30,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
CASH FLOW FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(25,693,577
|
)
|
|
$
|
(18,099,210
|
)
|
|
$
|
(12,203,492
|
)
|
|
$
|
(65,229,952
|
)
|
|
$
|
(27,373,695
|
)
|
|
$
|
(10,725,828
|
)
|
|
$
|
(92,603,647
|
)
|
Adjustments to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
18,922
|
|
|
|
21,997
|
|
|
|
18,451
|
|
|
|
72,327
|
|
|
|
12,453
|
|
|
|
14,599
|
|
|
|
84,780
|
|
Amortization of discount on short-term investments
|
|
|
(130,248
|
)
|
|
|
|
|
|
|
|
|
|
|
(130,248
|
)
|
|
|
|
|
|
|
|
|
|
|
(130,248
|
)
|
Realized loss on short-term investments
|
|
|
|
|
|
|
7,522
|
|
|
|
1,160
|
|
|
|
8,682
|
|
|
|
|
|
|
|
1,160
|
|
|
|
8,682
|
|
Realized gain from disposal of property and equipment
|
|
|
|
|
|
|
|
|
|
|
(214
|
)
|
|
|
(214
|
)
|
|
|
|
|
|
|
|
|
|
|
(214
|
)
|
Stock-based compensation expense employees
|
|
|
74,861
|
|
|
|
143,406
|
|
|
|
253,964
|
|
|
|
476,879
|
|
|
|
344,467
|
|
|
|
203,215
|
|
|
|
821,346
|
|
Stock-based compensation expense consultants
|
|
|
12,489
|
|
|
|
51,874
|
|
|
|
88,382
|
|
|
|
157,945
|
|
|
|
8,399
|
|
|
|
2,889
|
|
|
|
166,344
|
|
Issuance of common stock for consulting service
|
|
|
2,450
|
|
|
|
|
|
|
|
|
|
|
|
41,366
|
|
|
|
|
|
|
|
|
|
|
|
41,366
|
|
Issuance of common and preferred stock for service and license
fee
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,250,000
|
|
|
|
3,500,000
|
|
|
|
|
|
|
|
5,750,000
|
|
Issuance of common and preferred stock in lieu of interest
payment
|
|
|
|
|
|
|
155,630
|
|
|
|
|
|
|
|
157,381
|
|
|
|
173,194
|
|
|
|
|
|
|
|
640,493
|
|
Beneficial conversion feature
|
|
|
|
|
|
|
4,118,544
|
|
|
|
|
|
|
|
4,308,544
|
|
|
|
|
|
|
|
|
|
|
|
4,308,544
|
|
Amortization of discount on convertible promissory notes
|
|
|
|
|
|
|
|
|
|
|
136,722
|
|
|
|
136,722
|
|
|
|
768,948
|
|
|
|
39,266
|
|
|
|
985,314
|
|
Amortization of debt issuance cost
|
|
|
|
|
|
|
|
|
|
|
79,644
|
|
|
|
79,644
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark to market adjustment on warrant and derivative liability
|
|
|
|
|
|
|
|
|
|
|
(715
|
)
|
|
|
(715
|
)
|
|
|
3,796,491
|
|
|
|
|
|
|
|
3,795,776
|
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid expenses and other assets
|
|
|
(62,269
|
)
|
|
|
31,182
|
|
|
|
51,437
|
|
|
|
(19,826
|
)
|
|
|
(1,793,658
|
)
|
|
|
29,812
|
|
|
|
(1,813,484
|
)
|
Accounts payable
|
|
|
3,002,254
|
|
|
|
(2,176,982
|
)
|
|
|
(212,623
|
)
|
|
|
1,384,676
|
|
|
|
1,413,408
|
|
|
|
125,931
|
|
|
|
2,798,084
|
|
Accrued clinical study
|
|
|
1,160,717
|
|
|
|
65,013
|
|
|
|
(896,145
|
)
|
|
|
565,034
|
|
|
|
402,883
|
|
|
|
109,007
|
|
|
|
967,917
|
|
Accrued liabilities
|
|
|
8,489
|
|
|
|
135,137
|
|
|
|
473,889
|
|
|
|
732,192
|
|
|
|
(248,095
|
)
|
|
|
348,720
|
|
|
|
174,179
|
|
Accrued payroll and related costs
|
|
|
651,529
|
|
|
|
(578,910
|
)
|
|
|
37,190
|
|
|
|
153,235
|
|
|
|
420,685
|
|
|
|
29,020
|
|
|
|
573,920
|
|
License fee payable
|
|
|
6,000,000
|
|
|
|
(1,000,000
|
)
|
|
|
(5,000,000
|
)
|
|
|
|
|
|
|
|
|
|
|
(500,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
|
(14,954,383
|
)
|
|
|
(17,124,797
|
)
|
|
|
(17,172,350
|
)
|
|
|
(54,856,328
|
)
|
|
|
(18,574,520
|
)
|
|
|
(10,322,209
|
)
|
|
|
(73,430,848
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment purchases
|
|
|
(27,145
|
)
|
|
|
(6,752
|
)
|
|
|
(3,852
|
)
|
|
|
(85,507
|
)
|
|
|
(21,572
|
)
|
|
|
(3,853
|
)
|
|
|
(107,079
|
)
|
Proceeds from disposal of property and equipment
|
|
|
|
|
|
|
|
|
|
|
400
|
|
|
|
400
|
|
|
|
|
|
|
|
|
|
|
|
400
|
|
Purchase of short-term investments
|
|
|
(14,800,564
|
)
|
|
|
|
|
|
|
|
|
|
|
(14,800,564
|
)
|
|
|
(22,458,692
|
)
|
|
|
|
|
|
|
(37,259,256
|
)
|
Proceeds from sale of short-term investments
|
|
|
9,104,000
|
|
|
|
5,818,132
|
|
|
|
|
|
|
|
14,922,132
|
|
|
|
747,000
|
|
|
|
|
|
|
|
15,669,132
|
|
Restricted cash
|
|
|
(70,000
|
)
|
|
|
30,000
|
|
|
|
40,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
(5,793,709
|
)
|
|
|
5,841,380
|
|
|
|
36,548
|
|
|
|
(36,461
|
)
|
|
|
(21,733,264
|
)
|
|
|
(3,853
|
)
|
|
|
(21,696,803
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of convertible notes
|
|
|
|
|
|
|
12,200,000
|
|
|
|
13,400,000
|
|
|
|
26,560,000
|
|
|
|
|
|
|
|
10,000,000
|
|
|
|
26,560,000
|
|
Payment of debt issuance cost
|
|
|
|
|
|
|
|
|
|
|
(97,317
|
)
|
|
|
(97,317
|
)
|
|
|
(210,282
|
)
|
|
|
|
|
|
|
(307,599
|
)
|
Net proceeds from issuance of preferred stock
|
|
|
|
|
|
|
6,757,681
|
|
|
|
|
|
|
|
32,210,278
|
|
|
|
|
|
|
|
|
|
|
|
32,210,278
|
|
Payment of financing cost for initial public offering
and private offering
|
|
|
|
|
|
|
|
|
|
|
(273,884
|
)
|
|
|
(273,884
|
)
|
|
|
(2,949,473
|
)
|
|
|
|
|
|
|
(3,223,357
|
)
|
Proceeds from issuance of common stock net of
repurchase
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
115
|
|
|
|
90,788,900
|
|
|
|
|
|
|
|
90,789,015
|
|
Proceeds from exercise of stock options
|
|
|
118,920
|
|
|
|
68,105
|
|
|
|
15,274
|
|
|
|
224,059
|
|
|
|
89,185
|
|
|
|
15,213
|
|
|
|
313,244
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
118,920
|
|
|
|
19,025,786
|
|
|
|
13,044,073
|
|
|
|
58,623,251
|
|
|
|
87,718,330
|
|
|
|
10,015,213
|
|
|
|
146,341,581
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,210
|
)
|
|
|
|
|
|
|
(5,210
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
|
|
(20,629,172
|
)
|
|
|
7,742,369
|
|
|
|
(4,091,729
|
)
|
|
|
3,803,384
|
|
|
|
47,405,336
|
|
|
|
(310,849
|
)
|
|
|
51,208,720
|
|
CASH AND CASH EQUIVALENTS Beginning of period
|
|
|
20,781,916
|
|
|
|
152,744
|
|
|
|
7,895,113
|
|
|
|
|
|
|
|
3,803,384
|
|
|
|
7,895,113
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS End of period
|
|
$
|
152,744
|
|
|
$
|
7,895,113
|
|
|
$
|
3,803,384
|
|
|
$
|
3,803,384
|
|
|
$
|
51,208,720
|
|
|
$
|
7,584,264
|
|
|
$
|
51,208,720
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-8
ANTHERA
PHARMACEUTICALS, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 9,
|
|
|
|
|
|
|
|
|
September 9,
|
|
|
|
|
|
|
|
|
|
|
|
|
2004
|
|
|
|
|
|
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
(Date of
|
|
|
|
|
|
|
|
|
(Date of
|
|
|
|
|
|
|
|
|
|
|
|
|
Inception) to
|
|
|
|
|
|
|
|
|
Inception) to
|
|
|
|
Years Ended December 31,
|
|
|
December 31,
|
|
|
Nine Months Ended September 30,
|
|
|
September 30,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
SUPPLEMENTAL CASH DISCLOSURES OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
|
|
|
$
|
1,413
|
|
|
$
|
|
|
|
$
|
15,229
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
15,229
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxes paid
|
|
$
|
8,235
|
|
|
$
|
4,379
|
|
|
$
|
4,900
|
|
|
$
|
29,587
|
|
|
$
|
18,972
|
|
|
$
|
2,299
|
|
|
$
|
48,559
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NONCASH INVESTMENT AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of convertible promissory notes and accrued interest
into
Series A-2
convertible preferred stock and
Series B-2
convertible preferred stock
|
|
$
|
|
|
|
$
|
12,355,630
|
|
|
$
|
|
|
|
$
|
13,317,381
|
|
|
$
|
13,883,112
|
|
|
$
|
|
|
|
$
|
27,200,493
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beneficial conversion feature
|
|
$
|
|
|
|
$
|
4,118,544
|
|
|
$
|
|
|
|
$
|
4,308,544
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
4,308,544
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued and deferred offering cost
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,648,299
|
|
|
$
|
1,648,299
|
|
|
|
284,864
|
|
|
|
837,536
|
|
|
|
284,864
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued and deferred debt issuance cost
|
|
$
|
|
|
|
$
|
|
|
|
$
|
112,730
|
|
|
$
|
112,730
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unamortized debt discount charged to equity in conjunction with
conversion of promissory notes into common stock
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
185,883
|
|
|
$
|
|
|
|
$
|
185,883
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification of warrant and derivative liabilities to
additional paid-in capital
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
406,130
|
|
|
$
|
|
|
|
$
|
406,130
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclass of issuance costs charged to equity
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
3,508,221
|
|
|
$
|
|
|
|
$
|
3,508,221
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to financial statements.
F-9
ANTHERA
PHARMACEUTICALS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO DECEMBER
31, 2009 (AUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2010, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO SEPTEMBER
30, 2010 (UNAUDITED)
|
|
1.
|
ORGANIZATION
AND DESCRIPTION OF BUSINESS
|
Anthera Pharmaceuticals, Inc., the Company or Anthera, was
incorporated on September 9, 2004 in the state of Delaware.
During 2006, the Company opened its headquarters in
San Mateo, California, and subsequently moved to Hayward,
California. Anthera is a biopharmaceutical company focused on
developing and commercializing therapeutics to treat serious
diseases associated with inflammation, including cardiovascular
and autoimmune diseases. Two of the Companys primary
product candidates, varespladib and
A-001, are
inhibitors of the family of human enzymes known as secretory
phospholipase
A2,
or
sPLA2.
The Companys other primary product candidate,
A-623,
targets elevated levels of
B-cell
activating factor, or BAFF. The Companys activities since
inception have consisted principally of acquiring product and
technology rights, raising capital, and performing research and
development. Accordingly, the Company is considered to be in the
development stage as of December 31, 2009, as defined by
the Financial Accounting Standard Board, or FASB, Accounting
Standard Codification, or ASC, 915. Successful completion of the
Companys development programs and, ultimately, the
attainment of profitable operations are dependent on future
events, including, among other things, its ability to access
potential markets; secure financing, develop a customer base;
attract, retain and motivate qualified personnel; and develop
strategic alliances. As of December 31, 2009, the Company
has been funded by private equity and debt financings. Although
management believes that the Company will be able to
successfully fund its operations, there can be no assurance that
the Company will be able to do so or that the Company will ever
operate profitably.
The Company expects to continue to incur substantial losses over
the next several years during its development phase. To fully
execute its business plan, the Company will need to complete
certain research and development activities and clinical
studies. Further, the Companys product candidates will
require regulatory approval prior to commercialization. These
activities may span many years and require substantial
expenditures to complete and may ultimately be unsuccessful. Any
delays in completing these activities could adversely impact the
Company. The Company plans to meet its capital requirements
primarily through issuances of equity securities and, in the
longer term, revenue from product sales.
The accompanying financial statements have been prepared in
conformity with accounting principles generally accepted in the
United States, or GAAP, which contemplate continuation of the
Company as a going concern. During the year ended
December 31, 2009, the Company incurred a net loss of
$12,203,492 and had negative cash flows from operations of
$17,172,350. In addition, the Company had an accumulated deficit
of $65,229,952 at December 31, 2009. The Company expects to
incur additional operating losses and negative cash flows for
the foreseeable future. Failure to generate revenue or raise
additional capital would adversely affect the Companys
ability to achieve its intended business objectives.
Going
Concern
The Company has historically incurred losses since inception.
Because of these historical losses, the Company will require
additional working capital to develop business operations. The
Company intends
F-10
ANTHERA
PHARMACEUTICALS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL
STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO DECEMBER
31, 2009 (AUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2010, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO SEPTEMBER
30, 2010 (UNAUDITED)
to raise additional working capital through private placements,
public offerings, bank financing or advances from related
parties or shareholder loans.
The continuation of the Companys business is dependent
upon obtaining further financing and ultimately achieving a
profitable level of operations. The issuance of additional
equity securities by the Company could result in a significant
dilution in the equity interests of the Companys current
or future stockholders. Obtaining commercial loans, assuming
those loans would be available, will increase liabilities and
future cash commitments.
There are no assurances that the Company will be able to either
(i) achieve a level of revenues adequate to generate
sufficient cash flow from operations; or (ii) obtain
additional financing through either private placements, public
offerings or bank financing necessary to support the
Companys working capital requirements. To the extent that
funds generated from operations and any private placements,
public offerings or bank financing are insufficient, the Company
will have to raise additional working capital. No assurance can
be given that additional financing will be available, or if
available, will be on terms acceptable to the Company. If
adequate working capital is not available, the Company may cease
operations.
These conditions raise substantial doubt about the
Companys ability to continue as a going concern. The
financial statements do not include any adjustments relating to
the recoverability and classification of asset carrying amounts
or the amount and classification of liabilities that might be
necessary should the Company be unable to continue as a going
concern.
|
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
|
Unaudited
Interim Financial Information
The accompanying interim balance sheet as of September 30,
2010, the statements of operations and cash flows for the nine
months ended September 30, 2009 and 2010, and for the
cumulative period from September 9, 2004 (date of
inception) to September 30, 2010 and the statements of
stockholders equity (deficit) and comprehensive loss for
the nine months ended September 30, 2010 are unaudited. The
unaudited interim financial statements have been prepared on the
same basis as the audited financial statements. In the opinion
of management, the unaudited interim financial statements
include all adjustments, consisting of normal recurring
adjustments, necessary for the fair presentation of the
Companys financial position at September 30, 2010 and
the Companys results of operations and cash flows for the
nine months ended September 30, 2009 and 2010 and for the
cumulative period from September 9, 2004 (date of
inception) to September 30, 2010. The results for the nine
months ended September 30, 2010 are not necessarily
indicative of the results to be expected for the year ending
December 31, 2010 or for any future period.
F-11
ANTHERA
PHARMACEUTICALS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL
STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO DECEMBER
31, 2009 (AUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2010, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO SEPTEMBER
30, 2010 (UNAUDITED)
Use of
Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of expenses
during the reporting period. Significant estimates include
assumptions made in the accrual of clinical costs and
stock-based compensation. Actual results could differ from those
estimates.
Cash
and Cash Equivalents
The Company considers all highly liquid instruments purchased
with an original maturity or remaining maturities of three
months or less at the date of purchase to be cash equivalents.
Short-Term
Investments
The Company has designated its investments as available for sale
and the investment are carried at fair value. The Company
determines the appropriate classification of securities at the
time of purchase and reevaluates such classification as of each
balance sheet date. Securities with maturity exceeding three
months but less than one year are classified as short-term
investments. Realized gains and losses and declines in value
judged to be other than temporary are determined based on
specific identification method and are reported in the
statements of operations. The Company includes any unrealized
gains and losses on short-term investments in stockholders
equity as a component of other comprehensive income (loss).
Restricted
Cash
At December 31, 2008, the Company had restricted cash of
$40,000 to collateralize the Companys corporate credit
card. The credit card was cancelled in November 2009.
Concentration
of Credit Risk
Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of cash, cash
equivalents and short-term investments. The Companys cash
equivalents consist of cash, certificates of deposit with
maturities less than three months and treasury money market
funds. The Companys short-term investments consist of
certificates of deposit and corporate bonds with maturities
exceeding three months but less than one year. The Company has
not experienced any losses in such accounts. The Company
believes it is not exposed to significant credit risk related to
cash, cash equivalents and short-term investments.
Property
and Equipment Net
Property and equipment are stated at cost, less accumulated
depreciation. Depreciation is computed over the estimated useful
lives of the respective assets, which range from three to five
years, using the straight-line method. Repairs and maintenance
costs are expensed as incurred. Leasehold improvements
F-12
ANTHERA
PHARMACEUTICALS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL
STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO DECEMBER
31, 2009 (AUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2010, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO SEPTEMBER
30, 2010 (UNAUDITED)
are stated at cost and amortized using the straight-line method
over the term of the lease or the life of the related asset,
whichever is shorter.
Deferred
Financing Cost
Deferred financing costs included costs directly attributable to
the Companys offering of its equity securities. In
accordance with FASB
ASC 340-10,
Other Assets and Deferred Costs, these costs are deferred
and capitalized as part of other assets. Costs attributable to
the equity offerings will be charged against the proceeds of the
offering once completed.
Long-Lived
Assets
The Companys long-lived assets and other assets are
reviewed for impairment in accordance with the guidance of the
FASB
ASC 360-10,
Property, Plant, and Equipment, whenever events or
changes in circumstances indicate that the carrying amount of
the asset may not be recoverable. Recoverability of an asset to
be held and used is measured by a comparison of the carrying
amount of an asset to the future undiscounted cash flows
expected to be generated by the asset. If such asset is
considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the asset
exceeds its fair value. Through December 31, 2009, the
Company had not experienced impairment losses on its long-lived
assets.
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.
Valuation techniques used to measure fair value, as required by
Topic 820 of the FASB ASC, must maximize the use of observable
inputs and minimize the use of unobservable inputs.
The standard describes a fair value hierarchy based on three
levels of inputs, of which the first two are considered
observable and the last unobservable, that may be used to
measure fair value. The Companys assessment of the
significance of a particular input to the fair value
measurements requires judgment, and may affect the valuation of
the assets and liabilities being measured and their placement
within the fair value hierarchy. The three levels of input are:
Level 1 Quoted prices in active
markets for identical assets or liabilities.
Level 2 Inputs other than
Level 1 that are observable, either directly or indirectly,
such as quoted prices for similar assets or liabilities; quoted
prices in markets that are not active; or other inputs that are
observable or can be corroborated by observable market data for
substantially the full term of the assets or liabilities.
Level 3 Unobservable inputs that
are supported by little or no market activity and that are
significant to the fair value of the assets or liabilities.
F-13
ANTHERA
PHARMACEUTICALS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL
STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO DECEMBER
31, 2009 (AUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2010, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO SEPTEMBER
30, 2010 (UNAUDITED)
Following is a description of the Companys valuation
methodologies for assets and liabilities measured at fair value.
Where quoted prices are available in an active market, fair
value is based upon quoted market prices, and are classified in
level 1 of the valuation hierarchy. If quoted market prices
are not available, fair value is based upon observable inputs
such as quoted prices for similar assets or liabilities, quoted
prices in markets that are not active, or other inputs that are
observable or can be corroborated by observable market data, the
assets or liabilities are classified in level 2 of the
valuation hierarchy. When quoted prices and observable inputs
are unavailable, fair values are based on internally developed
cash flow models and are classified in level 3 of the
valuation hierarchy. The internally developed cash flow models
primarily use, as inputs, estimates for interest rates and
discount rates including yields of comparable traded instruments
adjusted for illiquidity and other risk factors, amount of cash
flows and expected holding periods of the assets. These inputs
reflect the Companys own assumptions about the assumptions
market participants would use in pricing the assets including
assumptions about risk developed based on the best information
available in the circumstances.
Other financial instruments, including accounts payable and
accrued liabilities, are carried at cost, which the Company
believes approximates fair value because of the short-term
maturity of these instruments.
Research
and Development Costs
Research and development expenses consist of personnel costs,
including salaries, benefits and stock-based compensation,
clinical studies performed by contract research organizations,
or CROs, materials and supplies, licenses and fees, and overhead
allocations consisting of various administrative and facilities
related costs. Research and development activities are also
separated into three main categories: research, clinical
development, and pharmaceutical development. Research costs
typically consist of preclinical and toxicology costs. Clinical
development costs include costs for Phase 1 and 2 clinical
studies. Pharmaceutical development costs consist of expenses
incurred in connection with product formulation and chemical
analysis.
The Company charges research and development costs, including
clinical study costs, to expense when incurred, consistent with
the guidance of FASB ASC 730, Research and
Development. Clinical study costs are a significant
component of research and development expenses. All of the
Companys clinical studies are performed by third-party
CROs. The Company accrues costs for clinical studies performed
by CROs on a straight-line basis over the service periods
specified in the contracts and adjusts the estimates, if
required, based upon the Companys ongoing review of the
level of effort and costs actually incurred by the CROs. The
Company monitors levels of performance under each significant
contract, including the extent of patient enrollment and other
activities through communications with the CROs, and adjusts the
estimates, if required, on a quarterly basis so that clinical
expenses reflect the actual effort expended by each CRO.
F-14
ANTHERA
PHARMACEUTICALS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL
STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO DECEMBER
31, 2009 (AUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2010, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO SEPTEMBER
30, 2010 (UNAUDITED)
All material CRO contracts are terminable by the Company upon
written notice and the Company is generally only liable for
actual effort expended by the CROs and certain noncancelable
expenses incurred at any point of termination.
Amounts paid in advance related to incomplete services will be
refunded if a contract is terminated. Some contracts include
additional termination payments that become due and payable if
the Company terminates the contract. Such additional termination
payments are only recorded if a contract is terminated.
Comprehensive
Income (Loss)
Comprehensive income (loss) consists of other comprehensive
income and net loss. Other comprehensive income includes certain
changes in equity that are excluded from net income (loss).
Specifically, the Company includes unrealized gains (losses) on
available for sale securities in other comprehensive income
(loss). Comprehensive income (loss) for each period presented is
set forth in the Statement of Stockholders Equity
(Deficit) and Comprehensive Loss.
Income
Taxes
The Company accounts for income taxes in accordance with FASB
ASC 740, Income Taxes. FASB ASC 740 prescribes
the use of the liability method whereby deferred tax asset and
liability account balances are determined based on differences
between the financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and
laws that will be in effect when the differences are expected to
reverse. The Company provides a valuation allowance, if
necessary, to reduce deferred tax assets to their estimated
realizable value.
FASB
ASC 740-10
clarifies the accounting for income taxes, by prescribing a
minimum recognition threshold a tax position is required to meet
before being recognized in the financial statements. It also
provides guidance on derecognition, measurement and
classification of amounts relating to uncertain tax positions,
accounting for and disclosure of interest and penalties,
accounting in interim periods, disclosures and transition
relating to the adoption of the new accounting standard. FASB
ASC 740-10
is effective for fiscal years beginning after December 15,
2006. The Company adopted FASB
ASC 740-10
as of January 1, 2007, as required, and determined that the
adoption of FASB
ASC 740-10
did not have a material impact on the Companys financial
position and results of operations.
Net
Loss Per Share
The Company computes net loss per share in accordance with FASB
ASC 260, Earnings Per Share, under which basic net
loss attributable to common stockholders per share is computed
by dividing income available to common stockholders (the
numerator) by the weighted-average number of common shares
outstanding (the denominator) during the period. Shares issued
during the period and shares reacquired during the period are
weighted for the portion of the period that they were
outstanding. The computation of diluted EPS is similar to the
computation of basic EPS except that the denominator is
F-15
ANTHERA
PHARMACEUTICALS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL
STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO DECEMBER
31, 2009 (AUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2010, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO SEPTEMBER
30, 2010 (UNAUDITED)
increased to include the number of additional common shares that
would have been outstanding if the dilutive potential common
shares had been issued. In addition, in computing the dilutive
effect of convertible securities, the numerator is adjusted to
add back any convertible preferred dividends and the after-tax
amount of interest recognized in the period associated with any
convertible debt. The numerator also is adjusted for any other
changes in income or loss that would result from the assumed
conversion of those potential common shares, such as
profit-sharing expenses. Diluted EPS is identical to basic EPS
since common equivalent shares are excluded from the
calculation, as their effect is anti-dilutive.
The following table summarizes the Companys calculation of
net loss per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
Nine Months Ended September 30,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
Historical net loss per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(25,693,577
|
)
|
|
$
|
(18,099,210
|
)
|
|
$
|
(12,203,492
|
)
|
|
($
|
27,373,695
|
)
|
|
$
|
(10,725,828
|
)
|
Denominator
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding
|
|
|
1,174,317
|
|
|
|
1,573,448
|
|
|
|
1,623,677
|
|
|
|
19,619,670
|
|
|
|
1,619,650
|
|
Less: Weighted-average shares subject to repurchase
|
|
|
(261,649
|
)
|
|
|
(230,028
|
)
|
|
|
(110,079
|
)
|
|
|
(52,612
|
)
|
|
|
(121,542
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for basic and diluted net loss per share
|
|
|
912,668
|
|
|
|
1,343,420
|
|
|
|
1,513,598
|
|
|
|
19,567,058
|
|
|
|
1,498,108
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per share
|
|
$
|
(28.15
|
)
|
|
$
|
(13.47
|
)
|
|
$
|
(8.06
|
)
|
|
$
|
(1.40
|
)
|
|
$
|
(7.16
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-16
ANTHERA
PHARMACEUTICALS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL
STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO DECEMBER
31, 2009 (AUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2010, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO SEPTEMBER
30, 2010 (UNAUDITED)
The following table shows weighted-average historical dilutive
common share equivalents outstanding, which are not included in
the above historical calculation, as the effect of their
inclusion is anti-dilutive during each period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
Nine Months Ended September 30,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
Options to purchase common stock
|
|
|
103,322
|
|
|
|
539,234
|
|
|
|
932,544
|
|
|
|
749,613
|
|
|
|
526,102
|
|
Common stock subject to repurchase
|
|
|
261,649
|
|
|
|
230,028
|
|
|
|
110,079
|
|
|
|
52,612
|
|
|
|
121,542
|
|
Warrants to purchase common
stock(1)
|
|
|
|
|
|
|
94,230
|
(1)
|
|
|
240,516
|
(1)
|
|
|
464,828
|
|
|
|
194,474
|
|
Convertible preferred stock (on an as-if-converted basis)
|
|
|
4,920,064
|
|
|
|
6,184,045
|
|
|
|
8,146,308
|
|
|
|
|
|
|
|
8,146,308
|
|
Restricted stock units
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
93,220
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,285,035
|
|
|
|
7,047,537
|
|
|
|
9,429,447
|
|
|
|
1,360,273
|
|
|
|
8,988,426
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
These warrants expire at the earliest of (i) seven years
after the issuance date, (ii) the closing of the
Companys first initial public offering or (iii) upon
consummation by the Company of any consolidation or merger. Each
of the warrants contains a customary net issuance feature, which
allows the warrant holder to pay the exercise price of the
warrant by forfeiting a portion of the executed warrant shares
with a value equal to the aggregate exercise
|
(2)
|
These warrants expire at the earlier of July 2014 and September
2014 or upon the date of the sale of all or substantially of the
Companys equity interests or assets. Each of the warrants
contains a customary net issuance feature, which allows the
warrant holder to pay the exercise price of the warrant by
forfeiting a portion of the exercised warrant shares with a
value equal to the aggregate exercise price.
|
Stock-Based
Compensation
Effective January 1, 2006, the Company adopted the
provisions of FASB ASC 718, Compensation
Stock Compensation, using the modified prospective method.
Compensation costs related to all equity instruments granted
after January 1, 2006 are recognized at the grant-date fair
value of the awards. Additionally, the Company is required to
include an estimate of the number of awards that will be
forfeited in calculating compensation costs, which are
recognized over the requisite service period of the awards on a
straight-line basis. The Company estimates the fair value of its
share-based payment awards on the date of grant using an
option-pricing model.
The Company uses the Black-Scholes option-pricing model as the
method for determining the estimated fair value of stock
options. The Black-Scholes model requires the use of highly
subjective and complex assumptions which determine the fair
value of share-based awards, including the options
expected term and the price volatility of the underlying stock.
Expected Term The Companys
expected term represents the period that the Companys
stock-based awards are expected to be outstanding and is
determined using the simplified method.
F-17
ANTHERA
PHARMACEUTICALS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL
STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO DECEMBER
31, 2009 (AUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2010, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO SEPTEMBER
30, 2010 (UNAUDITED)
Expected Volatility Expected
volatility is estimated using comparable public company
volatility for similar terms.
Expected Dividend The Black-Scholes
valuation model calls for a single expected dividend yield as an
input and the Company has never paid dividends and has no plans
to pay dividends.
Risk-Free Interest Rate The risk-free
interest rate used in the Black-Scholes valuation method is
based on the U.S. Treasury zero-coupon issues in effect at
the time of grant for periods corresponding with the expected
term of option.
Estimated Forfeitures The estimated
forfeiture rate is determined based on the Companys
historical forfeiture rates to date. The Company will monitor
actual expenses and periodically update the estimate.
Equity instruments issued to nonemployees are recorded at their
fair value as determined in accordance with FASB
ASC 505-50,
Equity, and are periodically revalued as the equity
instruments vest and are recognized as expense over the related
service period.
Recently
Issued Accounting Standards
In June 2009, the FASB issued FASB ASC 105, Generally
Accepted Accounting Principles, which establishes the FASB
Accounting Standards Codification as the sole source of
authoritative generally accepted accounting principles. Pursuant
to the provisions of FASB ASC 105, the Company has updated
references to GAAP in its financial statements issued for the
period ended December 31, 2009. The adoption of FASB
ASC 105 did not impact the Companys financial
position or results of operations.
In June 2008, the FASB issued FASB
ASC 815-40,
Derivatives and Hedging, that provides guidance on how to
determine if certain instruments (or embedded features) are
considered indexed to a companys own stock, including
instruments similar to warrants to purchase the companys
stock. FASB
ASC 815-40
requires companies to use a two-step approach to evaluate an
instruments contingent exercise provisions and settlement
provisions in determining whether the instrument is considered
to be indexed to its own stock and therefore exempt from the
application of FASB ASC 815. FASB
ASC 815-40
became effective January 1, 2009. Any outstanding
instrument at the date of adoption requires a retrospective
application of the accounting through a cumulative effect
adjustment to retained earnings upon adoption. The
Companys adoption of this guidance did not have a material
impact on either its financial position or results of operations.
|
|
3.
|
DEFERRED
FINANCING COST
|
At December 31, 2009, the Company capitalized and deferred
$1,922,183 of financing cost attributable to the Companys
anticipated initial public offering, which will be charged
against the proceeds once the initial public offering is
completed.
F-18
ANTHERA
PHARMACEUTICALS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL
STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO DECEMBER
31, 2009 (AUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2010, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO SEPTEMBER
30, 2010 (UNAUDITED)
The deferred financing costs were charged against the proceeds
upon the closing of the Companys IPO in March 2010.
|
|
4.
|
PROPERTY
AND EQUIPMENT
|
At December 31, 2008 and 2009 and September 30, 2010,
property and equipment consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
September 30,
|
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
Computers and software
|
|
$
|
64,925
|
|
|
$
|
66,548
|
|
|
$
|
77,319
|
|
Office equipment and furniture
|
|
|
16,730
|
|
|
|
16,730
|
|
|
|
16,730
|
|
Leasehold improvements
|
|
|
|
|
|
|
|
|
|
|
10,802
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total property and equipment
|
|
|
81,655
|
|
|
|
83,278
|
|
|
|
104,851
|
|
Less accumulated depreciation
|
|
|
(53,876
|
)
|
|
|
(70,284
|
)
|
|
|
(82,738
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
$
|
27,779
|
|
|
$
|
12,994
|
|
|
$
|
22,113
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation expense for the years ended December 31, 2007,
2008 and 2009 and for the period from September 9, 2004
(Date of Inception) to December 31, 2009 was $18,922,
$21,997, $18,451 and $72,327, respectively.
Depreciation expense for the nine months ended
September 30, 2009 and 2010 and for the period from
September 9, 2004 (Date of Inception) to September 30,
2010 was $14,599, $12,453 and $84,780, respectively.
|
|
5.
|
COMMITMENTS
AND CONTINGENCIES
|
Leases
The Company leases its office facilities under an operating
lease that expires in September 2010. Rent expense for the years
ended December 31, 2007, 2008 and 2009 and for the period
from September 9, 2004 (Date of Inception) to
December 31, 2009, were $97,314, $115,506, $165,016 and
$398,025, respectively. Future minimum payments under the
operating lease for the year ending December 31, 2010 are
$70,146.
Rent expense for the nine months ended September 30, 2009
and 2010, and for the period from September 9, 2004 (Date
of Inception) to September 30, 2010, were $117,609, $77,787
and $495,812, respectively.
In addition to the facility lease, the Company leases office
equipment under operating lease agreements, which began in 2007
and ends in 2013. Rental expense for the years ended
December 31, 2007, 2008 and 2009, and the period from
September 9, 2004 (Date of Inception) to December 31,
2009, was
F-19
ANTHERA
PHARMACEUTICALS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL
STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO DECEMBER
31, 2009 (AUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2010, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO SEPTEMBER
30, 2010 (UNAUDITED)
$2,910, $15,216, $17,129 and $35,255, respectively. Future
minimum payments under the operating lease for the years ending
December 31, 2010, 2011, 2012 and 2013 are $12,750, $3,120,
$3,120 and $1,560, respectively.
Rental expense for the nine months ended September 30, 2009
and 2010, and the period from September 9, 2004 (Date of
Inception) to September 30, 2010, were $12,730, $12,640 and
$47,896, respectively.
Other
Commitments
In July 2006, the Company entered into a license agreement with
Shionogi & Co., Ltd. and Eli Lilly and Company, or Eli
Lilly, to develop and commercialize certain
sPLA2
inhibitors for the treatment of inflammatory diseases. The
agreement granted the Company commercialization rights to
Shionogi & Co., Ltd.s and Eli Lillys
sPLA2
inhibitors, including varespladib and
A-001. Under
the terms of the agreement, the Companys license is
worldwide, with the exception of Japan where
Shionogi & Co., Ltd. has retained rights. Pursuant to
this license agreement, the Company paid Shionogi &
Co., Ltd. and Eli Lilly a one-time license initiation fee of
$250,000. Additionally, in consideration for the licensed
technology, the Company issued 257,744 shares of
Series A-2
convertible preferred stock, or
Series A-2,
at $5.14 per share and 127,297 shares of
Series B-1
convertible preferred stock at $7.28 per share with a total
aggregate value of $2.3 million to Shionogi &
Co., Ltd. and Eli Lilly. As there is no future alternative use
for the technology and in accordance with the guidance of the
Research and Development topic of the FASB ASC, the Company
recorded the initiation and license fees in research and
development expenses during the year ended December 31,
2006. There was no outstanding obligation pursuant to the
license agreement in the years ended December 31, 2008 and
2009. The Company is obligated to make additional milestone
payments upon the achievement of certain development, regulatory
and commercial objectives, which includes a $1.5 million
milestone payment to each party upon the start of a Phase 3
clinical study. The Company amended the milestone payment terms
in 2009 with each of Eli Lilly and Shionogi & Co.,
Ltd. to no later than 12 months from the enrollment of the
first patient in a Phase 3 clinical study for varespladib. In
consideration for the extension, the milestone payments
increased to $1.75 million to each party. (See
Note 12).
The Company is also obligated to make additional milestone
payments of up to $5.0 million and pay tiered royalties,
which increase as a percentage from the mid-single digits to the
low double digits as net sales increase, of up to
$92.5 million on future net sales of products that are
developed and approved as defined by this collaboration. The
Companys obligation to pay royalties with respect to each
licensed product in each country will expire upon the later of
(a) 10 years following the date of the first
commercial sale of such licensed product in such country, and
(b) the first date on which generic version(s) of the
applicable licensed product achieve a total market share, in the
aggregate, of 25% or more of the total unit sales of wholesalers
to pharmacies of licensed product and all generic versions
combined in the applicable country.
F-20
ANTHERA
PHARMACEUTICALS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL
STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO DECEMBER
31, 2009 (AUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2010, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO SEPTEMBER
30, 2010 (UNAUDITED)
In December 2007, the Company entered into with Amgen Inc., or
Amgen, a worldwide, exclusive license agreement, or the Amgen
Agreement, to develop and commercialize
A-623 for
the treatment of systemic lupus erythematosus, or lupus. Under
the terms of the Amgen Agreement, the Company was required to
pay a nonrefundable, upfront license fee of $6.0 million,
payable in two installments with the first installment due
within 90 days from the effective date of the agreement and
the second installment due on the earlier of
(i) termination of the agreement by the Company or
(ii) February 1, 2009. As there is no future
alternative use for the technology, the Company expensed the
license fee in research and development expenses during the year
ended December 31, 2007. The outstanding obligation
pursuant to the license agreement was $5.0 million as of
December 31, 2008. Pursuant the terms of the Amgen
Agreement, if the Company fails to make any payment to Amgen
under the agreement, interest will accrue on a daily basis equal
to 2% above the then applicable prime rate. On October 16,
2009, the Company executed an amendment to the license agreement
with Amgen to amend certain terms and conditions, including the
terms and conditions on which technology transfer activities,
support and assistance would be provided to the Company.
Pursuant to the terms of this amendment, the Company paid off
the license fee on October 19, 2009. Upon receipt of the
license fee payment, $297,383 of accrued interest was forgiven
by Amgen.
Under the terms of the Amgen Agreement, the Company is obligated
to make additional milestone payments to Amgen of up to
$33.0 million upon the achievement of certain development
and regulatory milestones. The Company is also obligated to pay
tiered royalties on future net sales of products, ranging from
high single digits to the low double digits, that are developed
and approved as defined by this collaboration. The
Companys royalty obligations as to a particular licensed
product will be payable, on a
country-by-country
and licensed
product-by-licensed
product basis, for the longer of (a) the date of expiration
of the last to expire valid claim within the licensed patents
that covers the manufacture, use or sale, offer to sell, or
import of such licensed product by the Company or a sublicense
in such country, or (b) 10 years after the first
commercial sale of the applicable licensed product in the
applicable country.
|
|
6.
|
CONVERTIBLE
PROMISSORY NOTES AND EQUITY FINANCING
|
In April 2006, the Company issued convertible promissory notes
to a group of individuals, or Holders, in exchange for an
aggregate principal amount of $570,000, or Bridge Loan. The
Bridge Loan was converted into
Series A-2
convertible preferred stock at a discount of 25% resulting in a
$3.85 per share price in August 2006. The interest on these
loans was 7% per annum and accrued interest of $13,816 was paid
out to the Holders upon closing of our
Series A-2
convertible preferred stock. In connection with the conversion
of the Bridge Loan, a beneficial conversion feature of $190,000
representing the difference between the conversion price and the
fair value of the preferred shares multiplied by the number of
shares converted was recorded as non-cash interest expense and
an increase in additional paid-in capital.
In June 2006, the Company issued two additional convertible
promissory notes to two new investors for an aggregate principal
amount of $390,000. The notes were converted into
Series A-2
convertible
F-21
ANTHERA
PHARMACEUTICALS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL
STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO DECEMBER
31, 2009 (AUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2010, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO SEPTEMBER
30, 2010 (UNAUDITED)
preferred stock at the issuance price of our
Series A-2
convertible preferred stock, or $5.14 per share, in August 2006.
The interest on these loans was 8% per annum. A portion of
accrued interest in the amount of $1,751 was converted into
Series A-2
convertible preferred stock and the remainder of accrued
interest was paid out to the investors.
During February and May 2008, the Company issued convertible
promissory notes to its existing investors in exchange for an
aggregate principal amount of $12.2 million. The interest
on these loans was 4.2% per annum. The notes and accrued
interest of $155,630 were converted into
Series B-2
convertible preferred stock at the issuance price of our
Series B-2
convertible preferred stock, or $5.46 per share, in August 2008.
In connection with the terms of the convertible promissory
notes, a charge for the beneficial conversion feature of
$4.1 million representing the difference between the
conversion price and the fair value of the preferred shares
multiplied by the number of shares converted was recorded as
non-cash interest expense and an increase to additional paid-in
capital.
On August 12, 2008, the Company issued
2,267,178 shares of its
Series B-2
convertible preferred stock to certain of its existing investors
in exchange for conversion of $12.2 million of aggregate
principal amount of and $155,630 of aggregate interest accrued
upon convertible promissory notes and 962,066 shares of its
Series B-2
convertible preferred stock to two new investors in exchange for
$7.0 million of cash. In connection with the issuance of
our
Series B-2
convertible preferred stock, the Company issued warrants to
purchase 240,516 shares of the Companys common stock
to those investors purchasing shares for cash.
On July 17, 2009 and September 9, 2009, the Company
sold (i) convertible promissory notes, or the 2009 notes,
that are secured by a first priority security interest in all of
the Companys assets, and (ii) warrants, or the 2009
warrants, to purchase shares of the Companys equity
securities to certain of its existing investors for an aggregate
purchase price of $10.0 million. These transactions are
collectively referred to as the 2009 bridge financing. The 2009
notes accrue interest at a rate of 8% per annum and have a
maturity date of the earliest of (i) July 17, 2010,
(ii) the date of the sale of all or substantially all of
the Companys equity interests or assets or (iii) an
event of default pursuant to the terms of the 2009 notes. The
2009 notes are automatically convertible into the securities
that are sold in the next equity financing at a 25% discount to
the price to which such securities are sold to other investors,
or they are alternatively convertible into shares of the
Companys
Series B-2
convertible preferred stock in connection with a change of
control of the Company. In addition, if a sale of all or
substantially all of the equity interests or assets of the
Company should occur prior to the next equity financing and any
2009 note has not been converted, the Company is obligated to
pay such 2009 note holder an amount equal to the accrued
interest and two times the outstanding principal amount on such
note in conjunction with the closing of such sale.
On September 25, 2009, the Company executed a stock
purchase agreement, which was amended to add an additional
purchaser on November 3, 2009, with certain existing
preferred stock holders for the sale of shares of the
Companys common stock equal to $20.5 million divided by
the price per share at which shares of the Companys common
stock are sold to the public in an initial public offering,
minus
F-22
ANTHERA
PHARMACEUTICALS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL
STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO DECEMBER
31, 2009 (AUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2010, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO SEPTEMBER
30, 2010 (UNAUDITED)
any per-share underwriting discounts, commissions or fees.
Pursuant to the terms of the stock purchase agreement, the
investors deposited $20.5 million into an escrow account
for the purchase of the shares. Pursuant to the escrow
agreement, the funds held in the escrow account will be released
simultaneously with the closing of an initial public offering in
which the aggregate net proceeds to the Company (after
underwriting discounts, commissions and fees) are at least
$50.0 million.
On December 11, 2009, the Company entered into a note
purchase agreement and amended the September 2009 stock purchase
and escrow agreements. The agreements provided for the release
of $3.4 million of the $20.5 million held in the
escrow account. The Company issued convertible promissory notes,
or the escrow notes, for the released amount to the investors.
The escrow notes accrue interest at a rate of 8% per annum and
have a maturity date of the earlier of (i) July 17,
2010 or (ii) an event of default pursuant to the terms of
the escrow notes. The escrow notes are automatically convertible
into shares of common stock upon the consummation of an initial
public offering in which the aggregate net proceeds to the
Company (after underwriting discounts, commissions and fees) are
at least $50.0 million, at the price per share at which
shares are sold to the public, minus any per-share underwriting
discounts, commissions or fees. However, if an initial public
offering is not consummated by February 28, 2010, the
escrow notes become exchangeable for exchange notes in the same
principal amount plus any accrued interest thereon, which are
automatically convertible into the securities that are sold in
the next equity financing at a 25% discount to the price in
which such securities are sold to other investors, or they are
alternatively convertible into shares of the Companys
Series B-2
convertible preferred stock in connection with a change of
control of the Company. Furthermore, if a sale of all or
substantially all of the equity interests or assets of the
Company should occur prior to the next equity financing and any
exchange note has not converted, the Company shall pay such
exchange note holder an amount equal to the accrued interest and
two times the outstanding principal amount on such note in
conjunction with the closing of such sale.
Common
Stock
At December 31, 2008 and 2009, the Company was authorized
to issue 17,523,364 and 18,443,341 shares of common stock,
respectively, and had reserved the following shares for future
issuance:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2009
|
|
|
Conversion of
Series A-1
convertible preferred stock
|
|
|
552,530
|
|
|
|
552,530
|
|
Conversion of
Series A-2
convertible preferred stock
|
|
|
1,620,669
|
|
|
|
1,620,669
|
|
Conversion of
Series B-1
convertible preferred stock
|
|
|
2,746,865
|
|
|
|
2,746,865
|
|
Conversion of
Series B-2
convertible preferred stock
|
|
|
3,226,244
|
|
|
|
3,226,244
|
|
Warrants for purchase of common stock
|
|
|
240,516
|
|
|
|
240,516
|
|
Common stock options outstanding
|
|
|
957,125
|
|
|
|
1,323,776
|
|
F-23
ANTHERA
PHARMACEUTICALS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL
STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO DECEMBER
31, 2009 (AUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2010, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO SEPTEMBER
30, 2010 (UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2009
|
|
|
Common stock options available for future grant under stock
option plan
|
|
|
405,311
|
|
|
|
19,571
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
9,749,260
|
|
|
|
9,730,171
|
|
|
|
|
|
|
|
|
|
|
In November 2004, the Company issued 876,167 shares of
restricted common stock to founders of the Company for $0.001
per share. The restricted common stock vested over a three-year
period ending December 31, 2007.
At September 30, 2010, the Company is authorized to issue
100,000,000 shares of capital stock, of which
95,000,000 shares are designated as common stock, par value
$0.001 per share. Holders of common stock are entitled to one
vote per share on all matters to be voted upon by the
stockholders of the Company. Subject to the preferences that may
be applicable to any outstanding shares of preferred stock, the
holders of common stock are entitled to receive ratably such
dividends, if any, as may be declared by the Board of Directors.
No dividends have been declared to date.
At September 30, 2010, the Company had reserved the
following shares for future issuance (unaudited):
|
|
|
|
|
Warrants for purchase of common stock
|
|
|
4,557,136
|
|
Common stock options outstanding
|
|
|
1,307,066
|
|
Restricted stock units outstanding
|
|
|
333,000
|
|
Common stock options available for future grant under stock
option plan
|
|
|
24,314
|
|
|
|
|
|
|
Total
|
|
|
6,221,516
|
|
|
|
|
|
|
Convertible
Preferred Stock
At December 31, 2008 and 2009, the Company was authorized
to issue the following shares of preferred stock:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2009
|
|
|
Shares designated Series A convertible preferred stock
|
|
|
|
|
|
|
|
|
Shares designated
Series A-1
convertible preferred stock
|
|
|
552,530
|
|
|
|
552,530
|
|
Shares designated
Series A-2
convertible preferred stock
|
|
|
1,635,514
|
|
|
|
1,635,514
|
|
Shares designated Series B convertible preferred stock
|
|
|
5,081,775
|
|
|
|
|
|
Shares designated
Series B-1
convertible preferred stock
|
|
|
2,751,168
|
|
|
|
2,751,168
|
|
Shares designated
Series B-2
convertible preferred stock
|
|
|
3,606,892
|
|
|
|
7,009,345
|
|
|
|
|
|
|
|
|
|
|
Total authorized shares of preferred stock
|
|
|
13,627,879
|
|
|
|
11,948,557
|
|
|
|
|
|
|
|
|
|
|
F-24
ANTHERA
PHARMACEUTICALS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL
STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO DECEMBER
31, 2009 (AUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2010, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO SEPTEMBER
30, 2010 (UNAUDITED)
The
Series A-1
convertible preferred stock,
Series A-2
convertible preferred stock, Series B convertible preferred
stock,
Series B-1
convertible preferred stock and
Series B-2
convertible preferred stock are collectively referred to as
series preferred. The holders of the series preferred have
various rights and privileges. In fiscal year 2005, the Company
issued 552,530 shares of Series A convertible
preferred stock that was subsequently reclassified into
Series A-1
convertible preferred stock, or
Series A-1
preferred, at a ratio of 1:1 in fiscal year 2006. In fiscal year
2006, the Company issued 2,746,865 shares of Series B
convertible preferred stock that was subsequently reclassified
into
Series B-1
convertible preferred stock, or
Series B-1
preferred, at a ratio of 1:1 in fiscal year 2008. In fiscal
2008, the Company issued 3,226,244 shares of
Series B-2
convertible preferred stock.
Voting
Each holder of shares of the series preferred is entitled to the
number of votes equal to the number of shares of common stock
into which such shares of series preferred could be converted
and have equal voting rights and powers of the common stock.
Dividend
Rights
Holders of series preferred, in preference to the holders of
common stock, are entitled to receive, when and as declared by
the board of directors, but only out of funds that are legally
available, cash dividends at the rate of 7% of the original
issuance price per annum on each outstanding share of series
preferred. The original issuance prices for
Series A-1
preferred,
Series A-2
convertible preferred stock, or
Series A-2
preferred,
Series B-1
preferred and
Series B-2
convertible preferred stock, or
Series B-2
preferred, were $1.47, $5.14, $7.28 and $7.28 per share,
respectively. Such dividends are payable only when, as and if
declared by the board of directors and are noncumulative.
Conversion
Holders of series preferred are entitled, at any time, to cause
their shares to be converted into fully paid and nonassessable
shares of common stock. The conversion rate in effect at any
time for conversion of each series of series preferred is
determined by dividing (i) the original issuance price of
the series preferred with respect to such series by
(ii) the applicable series preferred conversion price. The
conversion price of the series preferred is the original issue
price for such series (subject to adjustment). Additionally, the
preferred stock will automatically convert into shares of common
stock based on the then-effective series preferred conversion
price (i) at any time upon the affirmative election of the
holders of at least two-thirds of the outstanding shares of
preferred stock, or (ii) immediately upon the closing of a
public offering pursuant to an effective registration statement
under the Securities Act of 1933, as amended, covering the offer
and sale of common stock for the account of the Company in which
the valuation of the Company, before giving effect to such
offering, is at least $200.0 million and the aggregate
proceeds to the Company (after underwriting discounts,
commission and fees) are at least $50.0 million. Upon such
automatic conversion, any declared and unpaid dividends are
payable in cash to the preferred shareholders.
F-25
ANTHERA
PHARMACEUTICALS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL
STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO DECEMBER
31, 2009 (AUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2010, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO SEPTEMBER
30, 2010 (UNAUDITED)
In connection with the completion of the Companys IPO on
March 4, 2010, all of the Companys shares of
preferred stock outstanding at the time of the offering were
converted into an aggregate of 8,146,308 shares of common
stock. As of September 30, 2010, no liquidation preference
remained.
The Companys Fifth Amended and Restated Certificate of
Incorporation designates 5,000,000 shares of the
Companys capital stock as undesignated preferred stock.
Liquidation
Upon any liquidation, dissolution, or winding up of the Company,
whether voluntary or involuntary, a Liquidation Event, before
any distribution or payment is made to holders of common stock,
the holders of series preferred are entitled to be paid, with
equal priority and pro rata, out of the assets of the Company
legally available for distribution, or the consideration
received in such transaction, for each share of series preferred
held by them, an amount equal to the original issuance price per
share, plus all accrued or declared but unpaid dividends
(appropriately adjusted for any stock dividend, stock split,
recapitalization and the like). After payment of the full
liquidation preference of the series preferred, the remaining
assets of the Company, if any, shall be distributed ratably to
the holders of the common stock, our
Series A-2
preferred,
Series B-1
preferred and
Series B-2
preferred stockholders, on an as-converted-to-common-stock
basis, until such time as such holders of
Series A-2
preferred,
Series B-1
preferred and
Series B-2
preferred have received a distribution equal to
three-and-a-half
times the original issue price of such series. If there are
still assets left to be distributed by the Company, then the
remaining assets shall be distributed ratably to the holders of
the common stock.
Redemption
Shares of series preferred are not redeemable by the Company.
Warrants
In August 2008, in connection with the issuance of
Series B-2
preferred, the Company issued 240,516 warrants to two new
investors for the purchase of common stock at $1.34 per share.
The warrants expire at the earliest of (i) seven years from
the issuance date, (ii) the closing date of the
Companys first initial public offering or (iii) upon
consummation by the Company of any consolidation or merger. The
Company valued the warrants using the Black-Scholes valuation
model with the following assumptions: expected volatility of
72%, risk-free interest rate of 3.46% and expected term of seven
years. The fair value of the warrants was calculated to be
$224,478 and recorded as issuance cost and an increase to
additional paid-in capital. As of December 31, 2009,
240,516 warrants remain outstanding. Each of the warrants
contains a net issuance feature, which allows the warrant holder
to pay the exercise price of the warrant by forfeiting a portion
of the exercised warrant shares with a value equal to the
aggregate exercise. The warrants were exercised upon the closing
of the Companys IPO on March 4, 2010.
F-26
ANTHERA
PHARMACEUTICALS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL
STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO DECEMBER
31, 2009 (AUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2010, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO SEPTEMBER
30, 2010 (UNAUDITED)
In connection with the issuance of the 2009 notes discussed in
Note 6, the Company issued warrants to each note holder to
purchase shares of equity securities. Each 2009 warrant is
exercisable for the security into which each 2009 note is
converted, at the price at which that security is sold to other
investors. Depending on when the 2009 notes are converted, each
2009 warrant may be exercisable for a number of shares equal to
the quotient obtained by dividing (x) (i) 25% of the
principal amount of the accompanying 2009 notes, in the event
the conversion occurs prior to April 1, 2010, or
(ii) 50% of the principal amount of the accompanying 2009
notes, in the event the conversion occurs on or after
April 1, 2010, by (y) the purchase price of the
securities into which the note is ultimately converted. The
Company accounts for the 2009 warrants in accordance with FASB
ASC 480, which requires that a financial instrument, other
than outstanding shares, that, at inception, is indexed to an
obligation to repurchase the issuers equity shares,
regardless of the timing of the redemption feature, and may
require the issuer to settle the obligation by transferring
assets, be classified as liability. The Company measured the
fair value of its warrant liability on the date of issuance of
the 2009 notes using the Black-Scholes valuation model with the
following assumptions: expected volatility of 78%, risk-free
interest rate of 2.34% and expected term of five years. The
Company then applied probability factors to the different
possible conversion scenarios and calculated the fair value of
the 2009 warrants to be $320,000, which amount was recorded as a
discount to the 2009 notes. The discount is amortized as
interest expense over the terms of the 2009 notes. The Company
will re-measure the fair value of its warrant liability at each
subsequent reporting period until the number of shares
underlying the warrants and the exercise price become known.
Changes in the fair value of the 2009 warrants will be
recognized as non-operating income or expense. For the year
ended December 31, 2009, the Company re-measured the fair
value of its warrant liability and adjusted the liability to
$319,285.
Upon conversion of the 2009 notes into shares of common stock at
the completion of the Companys IPO, the fair value of the
2009 warrants was re-measured again by the Company and the
aggregate fair value of $1.5 million was recorded in
non-operating expense during the three months ended
March 31, 2010. Concurrent with the conversion of the 2009
notes, the Company calculated the number of warrant shares to be
357,136 based on 25% of the principal amount of the accompanying
2009 notes and the IPO price of the Companys common stock
of $7.00 per share. The warrant liability and unamortized
discount were reclassified to additional
paid-in-capital
as a result of the conversion of the 2009 notes.
In connection with the issuance of the escrow notes, which are
exchangeable for exchange notes, each exchange note that is
issued will be accompanied by a warrant, which is exercisable
for the security into which the accompanying exchange note, if
any, is converted, at the price at which that security is sold
to other investors. Depending on when the exchange notes are
converted, each warrant may be exercisable for a number of
shares equal to the quotient obtained by dividing (x)
(i) 25% of the principal amount of the accompanying
exchange notes, in the event the conversion occurs prior to
April 1, 2010, or (ii) 50% of the principal amount of
the accompanying exchange notes, in the event the conversion
occurs on or after April 1, 2010, by (y) the purchase
price of the securities into which the exchange note is
ultimately converted. The Company accounts for the potential
issuance of the warrants in accordance with FASB ASC 480,
which requires that a financial instrument, other than
F-27
ANTHERA
PHARMACEUTICALS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL
STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO DECEMBER
31, 2009 (AUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2010, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO SEPTEMBER
30, 2010 (UNAUDITED)
outstanding shares, that, at inception, is indexed to an
obligation to repurchase the issuers equity shares,
regardless of the timing of the redemption feature, and may
require the issuer to settle the obligation by transferring
assets, be classified as liability. The Company measured the
fair value of its derivative using the Black-Scholes valuation
model with the following assumptions: expected volatility of
78%, risk-free interest rate of 2.34% and expected term of five
years. The Company then applied probability factors to the
different possible exchange and conversion scenarios and
calculated the fair value of the warrants to be $86,845, which
amount was recorded as a discount to the escrow notes. The
discount is amortized as interest expense over the terms of the
escrow notes. The Company will re-measure the fair value of its
derivative at each subsequent reporting period until the number
of shares of warrants and the exercise price become known.
Changes in the fair value of the warrants will be recognized as
non-operating income or expense.
The escrow notes were converted into shares of the
Companys common stock upon the closing of its IPO. As a
result of the conversion taking place prior to the exchange of
the escrow notes into exchange notes, the Companys
obligation to issue the warrants was eliminated. Consequently,
the Company reclassified the unamortized discount into
additional paid-in capital and reduced the fair value of the
warrant liability to zero.
Embedded
Derivative
The 2009 notes and the escrow notes discussed in Note 8
contained a contingent automatic redemption feature and a
contingent put option that meet the definition of an embedded
derivative as defined in the Derivatives and Hedging topic of
FASB ASC 815 because these notes contain features with
implicit or explicit terms that affect some or all of the cash
flows or the value of other exchanges required by a contract in
a manner similar to a derivative instrument. As a result, the
Company evaluated these embedded derivative features under the
guidance of FASB ASC 815 and determined that the embedded
derivative features should be separated from the 2009 notes and
escrow notes and recognized as derivative instruments. Pursuant
to the guidance of FASB ASC 815, if a hybrid instrument
contains more than one embedded derivative feature that would
individually warrant separate accounting as a derivative
instrument, those embedded derivative features shall be bundled
together as a single, compound embedded derivative that shall
then be bifurcated and accounted for separately from the host
contract unless a fair value election is made. Since the Company
may not make a fair value election, the contingent automatic
redemption and the contingent put option should be bundled
together as a single, compound embedded derivative and separated
from the 2009 notes and escrow notes. The Company recognized the
bundled embedded derivative as a derivative liability with
initial and subsequent measurements at fair value and changes in
fair value recorded in earnings. Upon conversion of the 2009
notes and escrow notes into shares of common stock at the
completion of the Companys IPO, the Company re-measured
the fair value of the embedded derivative and recorded a charge
of $2.5 million in non-operating expense during the nine
months ended September 30, 2010.
F-28
ANTHERA
PHARMACEUTICALS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL
STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO DECEMBER
31, 2009 (AUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2010, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO SEPTEMBER
30, 2010 (UNAUDITED)
Option
Plan
The Companys 2005 Equity Incentive Plan, or the 2005
Equity Plan, was adopted by the board of directors in January
2005. The 2005 Equity Plan permits the granting of incentive and
non-statutory stock options, restricted stock, stock
appreciation rights, performance units, performance shares and
other stock awards to eligible employees, directors and
consultants. The Company grants options to purchase shares of
common stock under the 2005 Equity Plan at no less than the fair
market value of the underlying common stock as of the date of
grant. Options granted under the 2005 Equity Plan have a maximum
term of 10 years and generally vest over four years at the
rate of 25% of total shares underlying the option. Selected
grants vest immediately or over a shorter vesting period.
The 2005 Equity Plan allows the option holders to exercise their
options prior to vesting. Unvested shares are subject to
repurchase by the Company at the option of the Company. Unvested
shares subject to repurchase have been excluded from the number
of shares outstanding. Option activity in the table below
includes options exercised prior to vesting. At
December 31, 2008 and 2009 and September 30, 2010,
161,646, 69,424 and 38,747 shares were subject to
repurchase with a corresponding liability of $56,715, $31,131,
and $34,814, respectively.
On February 1, 2010, the Companys board of directors
adopted the 2010 Stock Option and Incentive Plan (the 2010
Plan) effective upon consummation of the IPO, which was
also approved by the Companys stockholders. The Company
initially reserved 233,644 shares of common stock for
issuance under the 2010 Plan, plus 35,670 shares remaining
available for grant under the Companys 2005 Equity
Incentive Plan, plus any additional shares returned under the
Companys 2005 Equity Incentive Plan (the 2005
Plan) as a result of the cancellation of options or the
repurchase of shares issued pursuant to the 2005 Plan. On
July 9, 2010, the Companys stockholders approved an
increase to the aggregate number of shares initially available
for grant under the 2010 Plan by 200,000 shares to
433,644 shares of common stock, plus 35,670 shares
remaining available for grant under the 2005 Plan, plus any
additional shares referred under the 2005 Plan as a result of
the cancellation of options or repurchase of shares issued under
the 2005 Plan. In addition, the 2010 Plan provides for annual
increases in the number of shares available for issuance
thereunder on the first day of each fiscal year, beginning with
the 2011 fiscal year, equal to four percent (4%) of the
outstanding shares of the Companys common stock on the
last day of the immediately preceding fiscal year. The maximum
aggregate number of shares of stock that may be issued in the
form of incentive stock options shall not exceed the lesser of
(i) the number of shares reserved and available for
issuance under the Plan or (ii) 1,460,280 shares of
stock, subject in all cases to adjustment including
reorganization, recapitalization, reclassification, stock
dividend, stock split, reverse stock split or other similar
change in the Companys capital stock. The 2010 Plan
permits the granting of incentive and non-statutory stock
options, restricted and unrestricted stock awards, restricted
stock units, stock appreciation rights, performance share
awards, cash-based awards and dividend equivalent rights to
eligible employees, directors and consultants. The option
exercise price of an option granted under the 2010 Plan may not
F-29
ANTHERA
PHARMACEUTICALS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL
STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO DECEMBER
31, 2009 (AUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2010, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO SEPTEMBER
30, 2010 (UNAUDITED)
be less than 100% of the fair market value of a share of the
Companys Common Stock on the date the stock option is
granted. Options granted under the 2010 Equity Plan have a
maximum term of 10 years and generally vest over four
years. In addition, in the case of certain large stockholders,
the minimum exercise price of incentive options must equal 110%
of fair market value on the date of grant and the maximum term
is limited to five years.
The 2010 Plan does not allow the option holders to exercise
their options prior to vesting.
F-30
ANTHERA
PHARMACEUTICALS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL
STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO DECEMBER
31, 2009 (AUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2010, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO SEPTEMBER
30, 2010 (UNAUDITED)
The following table summarizes stock option activity for the
Company from inception to December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
Average
|
|
|
|
Shares
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
|
Available for
|
|
|
Number of
|
|
|
Exercise
|
|
|
Contractual
|
|
|
|
Grant
|
|
|
Options
|
|
|
Price
|
|
|
Life in Years
|
|
|
Balance at September 9, 2004 (Date of Inception)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares authorized
|
|
|
248,247
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options granted
|
|
|
(187,202
|
)
|
|
|
187,202
|
|
|
$
|
0.14
|
|
|
|
|
|
Options exercised
|
|
|
|
|
|
|
(33,292
|
)
|
|
$
|
0.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2005
|
|
|
61,045
|
|
|
|
153,910
|
|
|
$
|
0.14
|
|
|
|
8.42
|
|
Shares authorized
|
|
|
1,285,047
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options granted
|
|
|
(65,998
|
)
|
|
|
65,998
|
|
|
$
|
0.14
|
|
|
|
|
|
Options exercised
|
|
|
|
|
|
|
(125,581
|
)
|
|
$
|
0.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2006
|
|
|
1,280,094
|
|
|
|
94,327
|
|
|
$
|
0.14
|
|
|
|
6.89
|
|
Shares authorized
|
|
|
292,056
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options granted
|
|
|
(1,339,655
|
)
|
|
|
1,339,655
|
|
|
$
|
0.26
|
|
|
|
|
|
Options exercised
|
|
|
|
|
|
|
(493,605
|
)
|
|
$
|
0.25
|
|
|
|
|
|
Options cancelled
|
|
|
92,642
|
|
|
|
(92,642
|
)
|
|
$
|
0.24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2007
|
|
|
325,137
|
|
|
|
847,735
|
|
|
$
|
0.26
|
|
|
|
8.08
|
|
Shares authorized
|
|
|
350,467
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options granted
|
|
|
(327,973
|
)
|
|
|
327,973
|
|
|
$
|
1.34
|
|
|
|
|
|
Options exercised
|
|
|
|
|
|
|
(179,886
|
)
|
|
$
|
0.38
|
|
|
|
|
|
Options cancelled
|
|
|
38,697
|
|
|
|
(38,697
|
)
|
|
$
|
0.42
|
|
|
|
|
|
Repurchase
|
|
|
18,983
|
|
|
|
|
|
|
$
|
0.26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008
|
|
|
405,311
|
|
|
|
957,125
|
|
|
$
|
0.60
|
|
|
|
8.28
|
|
Options granted
|
|
|
(405,358
|
)
|
|
|
405,358
|
|
|
$
|
1.69
|
|
|
|
|
|
Options exercised
|
|
|
|
|
|
|
(19,089
|
)
|
|
$
|
0.80
|
|
|
|
|
|
Options cancelled
|
|
|
19,618
|
|
|
|
(19,618
|
)
|
|
$
|
0.92
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2009
|
|
|
19,571
|
|
|
|
1,323,776
|
|
|
$
|
0.92
|
|
|
|
7.94
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Vested as of December 31, 2009
|
|
|
|
|
|
|
979,452
|
|
|
$
|
0.78
|
|
|
|
7.71
|
|
Ending Vested and Expected to Vest as of December 31, 2009
|
|
|
|
|
|
|
1,323,776
|
|
|
$
|
0.92
|
|
|
|
7.94
|
|
The grant date total fair value of employee options vested
during the years ended December 31, 2007, 2008 and 2009
were $95,439, $113,166 and $358,121, respectively. The total
intrinsic value of options exercised during the years ended
December 31, 2007, 2008 and 2009 was $5,390, $109,741 and
$13,550, respectively. Total proceeds received for options
exercised during years ended December 31, 2008 and 2009 was
$68,105 and $15,274, respectively.
F-31
ANTHERA
PHARMACEUTICALS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL
STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO DECEMBER
31, 2009 (AUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2010, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO SEPTEMBER
30, 2010 (UNAUDITED)
The grant date total fair value of employee options vested
during the nine months ended September 30, 2009 and 2010,
and for the period from September 9, 2004 (Date of
Inception) to September 30, 2010, were $316,453, $145,294
and $729,628, respectively. The total intrinsic value of options
exercised during the years the nine months ended
September 30, 2010 and for the period from
September 9, 2004 (Date of Inception) to September 30,
2010, were $667,566 and $794,000, respectively. There were no
options exercised during the nine months ended
September 30, 2009.
Information about stock options outstanding, vested and expected
to vest as of December 31, 2009, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, Vested and Expected to Vest
|
|
|
Options Vested
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
|
|
|
Remaining
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Contractual Life
|
|
|
Exercise
|
|
|
Number of
|
|
Exercise Price
|
|
Shares
|
|
|
(in Years)
|
|
|
Price
|
|
|
Shares
|
|
|
$0.14
|
|
|
33,584
|
|
|
|
6.22
|
|
|
$
|
0.14
|
|
|
|
31,637
|
|
$0.26
|
|
|
603,162
|
|
|
|
7.15
|
|
|
$
|
0.26
|
|
|
|
577,354
|
|
$1.34
|
|
|
300,776
|
|
|
|
8.16
|
|
|
$
|
1.34
|
|
|
|
146,231
|
|
$1.51
|
|
|
374,572
|
|
|
|
9.14
|
|
|
$
|
1.51
|
|
|
|
212,548
|
|
$7.70
|
|
|
11,682
|
|
|
|
9.78
|
|
|
$
|
7.70
|
|
|
|
11,682
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,323,776
|
|
|
|
7.94
|
|
|
|
|
|
|
|
979,452
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes stock option activity during the
nine months ended September 30, 2010 (unaudited):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
|
|
|
|
Number of
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Aggregate
|
|
|
|
Options
|
|
|
Price
|
|
|
Life in Years
|
|
|
Intrinsic Value
|
|
|
Balance as of December 31, 2009
|
|
|
1,323,776
|
|
|
$
|
0.92
|
|
|
|
7.94
|
|
|
$
|
17,312,745
|
|
Options granted
|
|
|
112,000
|
|
|
$
|
4.82
|
|
|
|
|
|
|
|
|
|
Options exercised
|
|
|
(118,878
|
)
|
|
$
|
0.75
|
|
|
|
|
|
|
|
|
|
Options cancelled
|
|
|
(9,832
|
)
|
|
$
|
1.50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of September 30, 2010
|
|
|
1,307,066
|
|
|
$
|
1.27
|
|
|
|
6.85
|
|
|
$
|
3,932,101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Vested Stock Options as of September 30, 2010
|
|
|
1,012,144
|
|
|
$
|
0.90
|
|
|
|
7.01
|
|
|
$
|
3,374,209
|
|
Ending Vested and Expected to Vest Stock Options as of
September 30, 2010
|
|
|
1,307,066
|
|
|
$
|
1.27
|
|
|
|
6.85
|
|
|
$
|
3,932,101
|
|
F-32
ANTHERA
PHARMACEUTICALS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL
STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO DECEMBER
31, 2009 (AUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2010, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO SEPTEMBER
30, 2010 (UNAUDITED)
As of September 30, 2010, there are 24,314 shares
available for grant under the 2010 Plan.
Information about stock options outstanding, vested and expected
to vest as of September 30, 2010 (unaudited), is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, Vested and Expected to Vest
|
|
|
Options Vested
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
Remaining
|
|
|
Average
|
|
|
|
|
|
|
Number of
|
|
|
Contractual Life
|
|
|
Exercise
|
|
|
Number of
|
|
Range of Exercise Price
|
|
Shares
|
|
|
(in Years)
|
|
|
Price
|
|
|
Shares
|
|
|
$0.14 $0.14
|
|
|
4,672
|
|
|
|
5.55
|
|
|
$
|
0.14
|
|
|
|
4,672
|
|
$0.26 $0.26
|
|
|
567,161
|
|
|
|
6.40
|
|
|
$
|
0.26
|
|
|
|
555,351
|
|
$1.34 $1.34
|
|
|
266,352
|
|
|
|
7.41
|
|
|
$
|
1.34
|
|
|
|
183,771
|
|
$1.51 $1.51
|
|
|
345,199
|
|
|
|
8.40
|
|
|
$
|
1.51
|
|
|
|
242,168
|
|
$4.19 $7.70
|
|
|
123,682
|
|
|
|
3.48
|
|
|
$
|
5.76
|
|
|
|
26,182
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,307,066
|
|
|
|
6.85
|
|
|
$
|
0.90
|
|
|
|
1,012,144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted
Stock Units
During 2010, the Company granted restricted stock unit awards
under its 2010 Plan representing an aggregate of
273,000 shares of common stock. The restricted stock units
granted represent a right to receive shares of common stock at a
future date determined in accordance with the participants
award agreement. An exercise price and monetary payment are not
required for receipt of restricted stock units or the shares
issued in settlement of the award. Instead, consideration is
furnished in the form of the participants services to the
Company. Substantially all of the restricted stock units vest
over four years. Compensation cost for these awards is based on
the closing price of the Companys common stock on the date
of grant and recognized as compensation expense on a
straight-line basis over the requisite service period.
Compensation expense recognized was $176,933 for the nine months
ended September 30, 2010. At September 30, 2010, the
unrecognized compensation cost related to these awards was
$1.54 million, which is expected to be recognized on a
straight-line basis over 2.96 years.
Early
Exercise of Employee Options
Stock options granted under the Companys stock option plan
provide employee option holders the right to elect to exercise
unvested options in exchange for restricted common stock.
Unvested shares, which amounted to 161,646 and 69,424 at
December 31, 2008 and 2009, respectively, were subject to a
repurchase right held by the Company at the original issuance
price in the event the optionees employment is terminated
either voluntarily or involuntarily. For exercises of employee
options, this right lapses 25% on the first anniversary of the
vesting start date and in 36 equal monthly amounts thereafter.
These repurchase terms are considered to be a forfeiture
provision and do not result in variable accounting. The shares
purchased by the employees pursuant to the early exercise of
stock
F-33
ANTHERA
PHARMACEUTICALS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL
STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO DECEMBER
31, 2009 (AUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2010, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO SEPTEMBER
30, 2010 (UNAUDITED)
options are not deemed to be outstanding until those shares
vest. In addition, cash received from employees for exercise of
unvested options is treated as a refundable deposit shown as a
liability in the Companys financial statements. For the
periods ended December 31, 2008 and 2009, cash received for
early exercise of options totaled to $30,953 and $6,615,
respectively. As the shares vest, the shares and liability are
released into common stock and additional paid-in capital.
The activity of unvested shares for the year ended
December 31, 2009 as a result of early exercise of options
granted to employees is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
Average
|
|
Unvested Shares
|
|
Shares
|
|
|
Grant Price
|
|
|
Balance as of December 31, 2007
|
|
|
289,824
|
|
|
$
|
0.24
|
|
Early exercise of options
|
|
|
59,191
|
|
|
$
|
0.62
|
|
Vested
|
|
|
(168,386
|
)
|
|
$
|
0.22
|
|
Repurchases
|
|
|
(18,983
|
)
|
|
$
|
0.26
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2008
|
|
|
161,646
|
|
|
$
|
0.34
|
|
Early exercise of options
|
|
|
4,381
|
|
|
$
|
1.51
|
|
Vested
|
|
|
(96,603
|
)
|
|
$
|
0.35
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2009
|
|
|
69,424
|
|
|
$
|
0.45
|
|
|
|
|
|
|
|
|
|
|
During the nine months ended September 30, 2010, cash
received for early exercise of options totaled $24,714. The
activity of unvested shares for the period ended
September 30, 2010 as a result of early exercise of options
granted to employees is as follows (unaudited):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
Average
|
|
Unvested Shares
|
|
Shares
|
|
|
Grant Price
|
|
|
Balance as of December 31, 2009
|
|
|
69,424
|
|
|
$
|
0.45
|
|
Early exercise of options
|
|
|
18,011
|
|
|
$
|
1.37
|
|
Vested
|
|
|
(42,421
|
)
|
|
$
|
0.34
|
|
Repurchases
|
|
|
(6,267
|
)
|
|
$
|
0.26
|
|
|
|
|
|
|
|
|
|
|
Balance as of September 30, 2010
|
|
|
38,747
|
|
|
$
|
1.11
|
|
|
|
|
|
|
|
|
|
|
2010
Employee Stock Purchase Plan
On July 9, 2010, the Companys stockholders approved
the Anthera Pharmaceuticals, Inc. 2010 Employee Stock Purchase
Plan (the 2010 ESPP). The Company has reserved
100,000 shares of common stock for issuance thereunder plus
on January 1, 2011 and each January 1 thereafter, the
F-34
ANTHERA
PHARMACEUTICALS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL
STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO DECEMBER
31, 2009 (AUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2010, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO SEPTEMBER
30, 2010 (UNAUDITED)
number of shares of stock reserved and available for issuance
under the Plan shall be cumulatively increased by the lesser of
(i) one percent (1%) of the number of shares of common
stock issued and outstanding on the immediately preceding
December 31 or (ii) 250,000 shares of common stock.
Under the 2010 ESPP, eligible employees of the Company and
certain designated subsidiaries of the Company may authorize the
Company to deduct amounts from their compensation, which amounts
are used to enable the employees to purchase shares of the
Companys common stock. The purchase price per share will
be 85% of the fair market value of the common stock as of the
first date or the ending date of the applicable semi-annual
purchase period, whichever is less (the Look-Back
Provision). The 15% discount and the Look-Back Provision
make the 2010 ESPP compensatory under
ASC 718-50-25-2,
Compensation Stock Compensation
Employee Share Purchase Plans Recognition. The
Black-Scholes option pricing model was used to value the
employee stock purchase rights. For the nine months ended
September 30, 2010 and the period from September 9,
2004 (Inception Date) through September 30, 2010, the
following weighted-average assumptions were used in the
valuation of the stock purchase rights:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period from
|
|
|
|
|
|
|
|
|
|
September 9,
|
|
|
|
|
|
|
|
|
|
2004 (Date of
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
Inception) to
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2010
|
|
|
2010
|
|
|
2010
|
|
|
Expected Volatility
|
|
|
67
|
%
|
|
|
67
|
%
|
|
|
67
|
%
|
Dividend Yield
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
Risk-Free Interest Rate
|
|
|
0.16
|
%
|
|
|
0.16
|
%
|
|
|
0.16
|
%
|
Expected Term (years)
|
|
|
0.33
|
|
|
|
0.33
|
|
|
|
0.33
|
|
The Company received $14,433 in contribution from participants
during the three and nine months ended September 30, 2010.
Compensation expense recognized for the three and nine months
ended September 30, 2010 was $5,139. As of
September 30, 2010, no shares have been issued and
100,000 shares were available for future purchase under the
2010 ESPP.
F-35
ANTHERA
PHARMACEUTICALS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL
STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO DECEMBER
31, 2009 (AUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2010, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO SEPTEMBER
30, 2010 (UNAUDITED)
Stock-Based
Compensation Expense
Total employee stock-based compensation expense recognized under
FASB ASC 718 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period from
|
|
|
|
|
|
|
|
|
Period from
|
|
|
|
|
|
|
|
|
|
|
|
|
September 9,
|
|
|
|
|
|
|
|
|
September 9,
|
|
|
|
|
|
|
|
|
|
|
|
|
2004
|
|
|
|
|
|
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
(Date of
|
|
|
|
|
|
|
|
|
(Date of
|
|
|
|
|
|
|
|
|
|
|
|
|
Inception) to
|
|
|
Nine Months Ended
|
|
|
Inception) to
|
|
|
|
Years Ended December 31,
|
|
|
December 31,
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
Research and development
|
|
$
|
44,066
|
|
|
$
|
45,544
|
|
|
$
|
101,395
|
|
|
$
|
194,002
|
|
|
$
|
114,476
|
|
|
$
|
83,712
|
|
|
$
|
308,478
|
|
General and administrative
|
|
|
30,795
|
|
|
|
97,862
|
|
|
|
152,569
|
|
|
|
282,877
|
|
|
|
229,991
|
|
|
|
119,503
|
|
|
|
512,868
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stock-based compensation
|
|
$
|
74,861
|
|
|
$
|
143,406
|
|
|
$
|
253,964
|
|
|
$
|
476,879
|
|
|
$
|
344,467
|
|
|
$
|
203,215
|
|
|
$
|
821,346
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2007, 2008 and 2009, total compensation
cost related to unvested stock options not yet recognized was
$161,996, $330,381 and $456,288, which is expected to be
allocated to expenses over a weighted-average period of 2.25,
2.33 and 2.25 years, respectively.
As of September 30, 2010, total compensation cost related
to unvested stock options not yet recognized was $629,035, which
is expected to be allocated to expenses over a weighted-average
period of 1.49 years.
The assumptions used in the Black-Scholes option-pricing model
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period from
|
|
|
|
|
|
|
|
|
Period from
|
|
|
|
|
|
|
|
|
|
|
|
|
September 9,
|
|
|
|
|
|
|
|
|
September 9,
|
|
|
|
|
|
|
|
|
|
|
|
|
2004 (Date of
|
|
|
|
|
|
|
|
|
2004 (Date of
|
|
|
|
|
|
|
|
|
|
|
|
|
Inception) to
|
|
|
Nine Months Ended
|
|
|
Inception) to
|
|
|
|
Years Ended December 31,
|
|
|
December 31,
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
Expected Volatility
|
|
|
81
|
%
|
|
|
81
|
%
|
|
|
74
|
%
|
|
|
80
|
%
|
|
|
69
|
%
|
|
|
74
|
%
|
|
|
79
|
%
|
Dividend Yield
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
Risk-Free Interest Rate
|
|
|
4.54
|
%
|
|
|
3.08
|
%
|
|
|
2.10
|
%
|
|
|
3.96
|
%
|
|
|
1.91
|
%
|
|
|
2.10
|
%
|
|
|
3.86
|
%
|
Expected Term (years)
|
|
|
6.25
|
|
|
|
6.25
|
|
|
|
6.25
|
|
|
|
6.25
|
|
|
|
6.25
|
|
|
|
6.25
|
|
|
|
6.25
|
|
The weighted-average grant date fair values of stock options
granted during the years ended December 31, 2007, 2008 and
2009, and for the period from September 9, 2004 (Date of
Inception) to December 31, 2009 were $0.17, $0.96, $1.01
and $0.44 per share, respectively.
F-36
ANTHERA
PHARMACEUTICALS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL
STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO DECEMBER
31, 2009 (AUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2010, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO SEPTEMBER
30, 2010 (UNAUDITED)
The weighted-average grant date fair values of stock options
granted during the nine months ended September 30, 2009 and
2010, and for the period from September 9, 2004 (Date of
Inception) to September 30, 2010 were $1.01, $3.10 and
$0.57 per share, respectively.
Nonemployee
Stock-Based Compensation
The Company accounts for stock options granted to nonemployees
as required by the Equity Topic of the FASB ASC. In connection
with stock options granted to consultants, the Company recorded
$12,489, $51,874, $88,382 and $157,945 for nonemployee
stock-based compensation during the years ended
December 31, 2007, 2008 and 2009, and for the period from
September 9, 2004 (Date of Inception) to December 31,
2009, respectively. These amounts were based upon the fair value
of the vested portion of the grants.
In connection with stock options granted to consultants, the
Company recorded $2,899, $8,399 and $166,344 for nonemployee
stock-based compensation during the nine months ended
September 30, 2009 and 2010, and for the period from
September 9, 2004 (Date of Inception) to September 30,
2010, respectively.
The assumptions used in the Black-Scholes option-pricing model
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period from
|
|
|
|
|
|
|
|
|
Period from
|
|
|
|
|
|
|
|
|
|
|
|
|
September 9,
|
|
|
|
|
|
|
|
|
September 9,
|
|
|
|
|
|
|
|
|
|
|
|
|
2004 (Date of
|
|
|
|
|
|
|
|
|
2004 (Date of
|
|
|
|
|
|
|
|
|
|
|
|
|
Inception) to
|
|
|
Nine Months
|
|
|
Inception) to
|
|
|
|
Years Ended December 31,
|
|
|
December 31,
|
|
|
Ended September 30,
|
|
|
September 30,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2009
|
|
|
2009
|
|
|
2010
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
Expected Volatility
|
|
|
98
|
%
|
|
|
98
|
%
|
|
|
98
|
%
|
|
|
98
|
%
|
|
|
98
|
%
|
|
|
98
|
%
|
|
|
98
|
%
|
Dividend Yield
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
Risk-Free Interest Rate
|
|
|
4.40
|
%
|
|
|
3.67
|
%
|
|
|
3.57
|
%
|
|
|
3.69
|
%
|
|
|
3.13
|
%
|
|
|
3.16
|
%
|
|
|
3.67
|
%
|
Expected Term (years)
|
|
|
10.00
|
|
|
|
9.26
|
|
|
|
9.94
|
|
|
|
9.71
|
|
|
|
9.09
|
|
|
|
7.86
|
|
|
|
9.63
|
|
Amounts expensed during the remaining vesting period will be
determined based on the fair value at the time of vesting.
The Company maintains a defined contribution 401(k) plan, or the
401(k) Plan. Employee contributions are voluntary and are
determined on an individual basis, limited by the maximum
amounts allowable under federal tax regulations. The Company has
made no contributions to the 401(k) Plan since its inception.
F-37
ANTHERA
PHARMACEUTICALS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL
STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO DECEMBER
31, 2009 (AUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2010, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO SEPTEMBER
30, 2010 (UNAUDITED)
The Company has incurred net operating losses since inception.
The Company has not reflected any benefit of such net operating
loss carryforwards in the accompanying financial statements and
has established a full valuation allowance against its deferred
tax assets.
Deferred income taxes reflect the net tax effects of
(a) temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the
amounts used for income tax purposes, and (b) operating
losses and tax credit carryforwards.
The significant components of the Companys deferred tax
assets for the years ended December 31, 2008 and 2009 are
as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2009
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Net operating loss carryforwards
|
|
$
|
15,550,186
|
|
|
$
|
20,254,375
|
|
Tax credits
|
|
|
2,158,679
|
|
|
|
2,378,197
|
|
Intangible assets
|
|
|
3,545,262
|
|
|
|
3,279,699
|
|
Accrued bonus
|
|
|
46,226
|
|
|
|
61,040
|
|
Accrued liabilities
|
|
|
133,486
|
|
|
|
91,529
|
|
Stock-based compensation
|
|
|
12,913
|
|
|
|
68,439
|
|
Other
|
|
|
1,366
|
|
|
|
5,828
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
21,448,118
|
|
|
|
26,139,107
|
|
Deferred tax liabilities
|
|
|
|
|
|
|
|
|
Valuation allowance
|
|
|
(21,448,118
|
)
|
|
|
(26,139,107
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax asset
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
A reconciliation of the statutory tax rates and the effective
tax rates for the years ended December 31, 2007, 2008 and
2009 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
Statutory rate
|
|
|
34
|
%
|
|
|
34
|
%
|
|
|
34
|
%
|
State tax
|
|
|
7
|
%
|
|
|
5
|
%
|
|
|
6
|
%
|
Tax credit
|
|
|
5
|
%
|
|
|
2
|
%
|
|
|
1
|
%
|
Beneficial conversion feature
|
|
|
0
|
%
|
|
|
(8
|
)%
|
|
|
0
|
%
|
Other
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
(3
|
)%
|
Valuation allowance
|
|
|
(46
|
)%
|
|
|
(33
|
)%
|
|
|
(38
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rates
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-38
ANTHERA
PHARMACEUTICALS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL
STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO DECEMBER
31, 2009 (AUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2010, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO SEPTEMBER
30, 2010 (UNAUDITED)
Realization of the future tax benefits is dependent on the
Companys ability to generate sufficient taxable income
within the carryforward period. Because of the Companys
recent history of operating losses, management believes that the
deferred tax assets arising from the above-mentioned future tax
benefits are currently not likely to be realized and,
accordingly, has provided a full valuation allowance. The net
valuation allowance increased by $5,935,955 and $4,690,989 for
the years ended December 31, 2008 and 2009, and $26,139,107
for the period from September 9, 2004 (Date of Inception)
to December 31, 2009.
Net operating losses and tax credit carryforwards as of
December 31, 2009, are as follows:
|
|
|
|
|
|
|
|
|
|
|
Amount
|
|
|
Expiration Years
|
|
|
Net operating losses federal
|
|
$
|
50,815,735
|
|
|
|
Beginning 2024
|
|
Net operating losses state
|
|
$
|
51,025,382
|
|
|
|
Beginning 2014
|
|
Tax credits federal
|
|
$
|
2,396,967
|
|
|
|
Beginning 2024
|
|
Tax credits state
|
|
$
|
1,172,671
|
|
|
|
Not applicable
|
|
Utilization of the net operating loss carryforwards and credits
may be subject to a substantial annual limitation due to the
ownership change limitations provided by the Internal Revenue
Code of 1986, as amended, or the IRC, and similar state
provisions. The Company has not performed a detailed analysis to
determine whether an ownership change under Section 382 of
the IRC has occurred. The effect of an ownership change would be
the imposition of an annual limitation on the use of net
operating loss carryforwards attributable to periods before the
change.
The Company accounts for income taxes in accordance with FASB
ASC 740, Income Taxes, and adopted the provisions of
FASB
ASC 740-10
on January 1, 2007. As a result of the implementation of
FASB
ASC 740-10,
the Company did not record any changes to the liability for
unrecognized tax benefits related to tax positions taken in
prior periods, and no corresponding change in accumulated
deficit was recorded. At the adoption date of January 2,
2007, the Company had $80,000 unrecognized tax benefits, none of
which would affect its income tax expense if recognized to the
extent the Company continues to maintain a full valuation
allowance against its deferred tax assets.
As of December 31, 2009, the Company had unrecognized tax
benefits of $892,410, all of which would not currently affect
the Companys effective tax rate if recognized due to the
Companys deferred tax assets being fully offset by a
valuation allowance. The Company did not anticipate any
significant
F-39
ANTHERA
PHARMACEUTICALS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL
STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO DECEMBER
31, 2009 (AUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2010, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO SEPTEMBER
30, 2010 (UNAUDITED)
change to the unrecognized tax benefit balance as of
December 31, 2009. A reconciliation of the beginning and
ending amount of unrecognized tax benefits is as follows:
|
|
|
|
|
|
|
Amount
|
|
|
Balance as January 1, 2007
|
|
$
|
79,855
|
|
Additions based on tax positions related to current year
|
|
|
566,326
|
|
|
|
|
|
|
Balance as December 31, 2007
|
|
|
646,181
|
|
Additions based on tax positions related to current year
|
|
|
162,381
|
|
|
|
|
|
|
Balance as of December 31, 2008
|
|
|
808,562
|
|
Additions based on tax positions related to current year
|
|
|
83,848
|
|
|
|
|
|
|
Balance as of December 31, 2009
|
|
|
892,410
|
|
|
|
|
|
|
The Company would classify interest and penalties related to
uncertain tax positions in income tax expense, if applicable.
There was no interest expense or penalties related to
unrecognized tax benefits recorded through December 31,
2009. The tax years 2004 through 2009 remain open to examination
by one or more major taxing jurisdictions to which the Company
is subject.
The Company does not anticipate that total unrecognized net tax
benefits will significantly change prior to the end of 2009.
|
|
11.
|
RELATED
PARTY TRANSACTIONS
|
For the years ended December 31, 2007, 2008 and 2009, and
for the period from September 9, 2004 (Date of Inception)
to December 31, 2009, the Company paid $71,100, $22,200,
$38,274 and $131,574, respectively, for clinical management
services rendered by an outside organization where one of the
founders is employed.
For the nine months ended September 30, 2010, and the
period from September 9, 2004 (Date of Inception) to
September 30, 2010, the Company paid $489,670, and
$621,203, respectively. There was no payment made to this
organization for the nine months ended September 30, 2009.
|
|
12.
|
EVENTS
SUBSEQUENT TO DECEMBER 31, 2009
|
On January 28, 2010, Eli Lilly and the Company entered into
an agreement in which the parties agreed that the
$1.75 million milestone payment due to Eli Lilly no later
than 12 months from the enrollment of the first patient in
a Phase 3 clinical study for varespladib will be paid in the
form of shares of the Companys common stock issued at the
price per share at which shares are sold to the public in an
initial public offering, minus any per-share underwriting
discounts, commissions or fees. The Company is obligated to
issue such shares to Eli Lilly within 10 business days after the
closing of an initial public offering.
F-40
ANTHERA
PHARMACEUTICALS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL
STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO DECEMBER
31, 2009 (AUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2010, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO SEPTEMBER
30, 2010 (UNAUDITED)
On November 8, 2009, the Companys board of directors
approved a 1 -for- 1.712 reverse split of the Companys
common stock that was effected on February 22, 2010. The
financial statements for the period from September 9, 2004
(Date of Inception) to December 31, 2009 give retroactive
effect to the reverse split.
On February 24, 2010, Shionogi & Co., Ltd. and
the Company entered into an agreement in which the parties
agreed that the $1.75 million milestone payment due to
Shionogi & Co., Ltd. no later than 12 months from
the enrollment of the first patient in a Phase 3 clinical study
for varespladib will be paid in the form of shares of the
Companys common stock issued at the price per share at
which shares are sold to the public in the initial public
offering, minus any per-share underwriting discounts,
commissions or fees. The shares will be issued within 10
business days after the closing of this offering.
On February 24, 2010, the Company amended the September
2009 stock purchase agreement and escrow agreement to provide
that the $17.1 million of funds held in the escrow account
will be released simultaneously with the closing of an initial
public offering in which the aggregate net proceeds to the
Company (after underwriting discounts, commissions and fees) are
at least $20.0 million.
On February 24, 2010, the holders of escrow notes issued in
December 2009 waived their right to exchange the escrow notes
for exchange notes and warrants unless an initial public
offering is not consummated by March 31, 2010. In addition,
on February 24, 2010, the Company amended the December 2009
note purchase agreement to provide that the escrow notes are
automatically convertible into shares of common stock upon the
consummation of an initial public offering in which the
aggregate net proceeds to the Company (after underwriting
discounts, commissions and fees) are at least $20.0 million.
|
|
13.
|
CASH
EQUIVALENTS AND INVESTMENTS
|
The Companys cash equivalents and short-term investments
as of September 30, 2010 are as follows (unaudited):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
|
|
|
|
Cost
|
|
|
Gain/(Losses)
|
|
|
Fair Value
|
|
|
Cash
|
|
$
|
625,961
|
|
|
$
|
|
|
|
$
|
625,961
|
|
Money market funds
|
|
|
50,582,760
|
|
|
|
|
|
|
|
50,582,760
|
|
Certificates of deposit
|
|
|
12,851,000
|
|
|
|
(11,276
|
)
|
|
|
12,839,724
|
|
Corporate bonds
|
|
|
9,074,163
|
|
|
|
(34,998
|
)
|
|
|
9,039,165
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
73,133,884
|
|
|
$
|
(46,274
|
)
|
|
$
|
73,087,610
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less amounts classified as cash and cash equivalents
|
|
|
(51,208,720
|
)
|
|
|
|
|
|
|
(51,208,720
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
21,925,164
|
|
|
$
|
(46,274
|
)
|
|
$
|
21,878,890
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-41
ANTHERA
PHARMACEUTICALS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL
STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO DECEMBER
31, 2009 (AUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2010, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO SEPTEMBER
30, 2010 (UNAUDITED)
There were no realized gains or losses recorded for the three
months ended September 30, 2009 and immaterial realized
losses recorded for the nine months ended September 30,
2009.
The contractual maturities of investments are less than one year
at September 30, 2010.
|
|
14.
|
FAIR
VALUE OF INSTRUMENTS
|
As of September 30, 2010, the Company held
$21.9 million short-term investments, which consisted of
certificates of deposit and FDIC insured corporate bonds. These
securities were classified as short-term based on their maturity
terms being less than one year. The Company included any
unrealized gains and losses on short-term investments in
stockholders equity as a component of other comprehensive
income (loss). Individual securities with a fair value below the
cost basis at September 30, 2010 were evaluated to
determine if they were
other-than-temporarily
impaired.
The following table presents the Companys fair value
hierarchy for its financial assets measured at fair value on a
recurring basis as of September 30, 2010 (unaudited):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Cash
|
|
$
|
625,961
|
|
|
$
|
625,961
|
|
|
$
|
|
|
|
$
|
|
|
Money market funds
|
|
|
50,582,760
|
|
|
|
50,582,760
|
|
|
|
|
|
|
|
|
|
Certificates of deposit
|
|
|
12,839,724
|
|
|
|
12,839,724
|
|
|
|
|
|
|
|
|
|
Corporate bonds
|
|
|
9,039,165
|
|
|
|
9,039,165
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investments
|
|
$
|
73,087,610
|
|
|
$
|
73,087,610
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company did not have any financial liabilities,
non-financial assets or non-financial liabilities that were
required to be measured at fair value as of September 30,
2010.
|
|
15.
|
EVENTS
SUBSEQUENT TO FEBRUARY 24, 2010 (Unaudited)
|
On February 26, 2010, the Companys Registration
Statement on
Form S-1
was declared effective for its initial public offering
(IPO), pursuant to which the Company sold
6,000,000 shares of its common stock at a public offering
price of $7.00 per share. The Company received gross proceeds of
approximately $42.0 million from this transaction, before
underwriting discounts and commissions. Concurrent with the
closing of the IPO, the Company received an aggregate of
$17.1 million from the issuance of 2,598,780 shares of
its common stock to certain of its investors pursuant to a
common stock purchase agreement.
On April 6, 2010, the Company sold 604,492 shares of
common stock to the underwriters of its IPO pursuant to the
underwriters exercise of their over-allotment option and
received net proceeds of approximately $4.0 million.
F-42
ANTHERA
PHARMACEUTICALS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL
STATEMENTS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO DECEMBER
31, 2009 (AUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2010, AND FOR
THE
PERIOD FROM SEPTEMBER 9, 2004 (DATE OF INCEPTION) TO SEPTEMBER
30, 2010 (UNAUDITED)
On July 9, 2010, the Companys stockholders approved
the Anthera Pharmaceuticals, Inc. 2010 Employee Stock Purchase
Plan (the 2010 ESPP). The Company has reserved
100,000 shares of common stock for issuance thereunder plus
on January 1, 2011 and each January 1 thereafter, the
number of shares of stock reserved and available for issuance
under the Plan shall be cumulatively increased by the lesser of
(i) one percent (1%) of the number of shares of common
stock issued and outstanding on the immediately preceding
December 31 or (ii) 250,000 shares of common stock.
Under the 2010 ESPP, eligible employees of the Company and
certain designated subsidiaries of the Company may authorize the
Company to deduct amounts from their compensation, which amounts
are used to enable the employees to purchase shares of the
Companys common stock. The purchase price per share will
be 85% of the fair market value of the common stock as of the
first date or the ending date of the applicable semi-annual
purchase period, whichever is less. The purpose of the 2010 ESPP
is to attract and retain key personnel, and encourage stock
ownership by the Companys employees.
On September 24, 2010, the Company closed a private
placement transaction with certain accredited investors pursuant
to which the Company sold an aggregate of 10,500,000 units
at a purchase price of $3.00 per unit, with each unit consisting
of one share of common stock and a Warrant to purchase an
additional 0.40 shares of common stock. Each Warrant is
exercisable in whole or in part at any time until
September 24, 2015 at a per share exercise price of $3.30,
subject to certain adjustments as specified in the Warrant. The
Company received gross proceeds of $31.5 million pursuant
to the transaction.
F-43
of Common Stock
PROSPECTUS
November 17, 2010