UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-K
|
|
|
þ
|
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
|
|
|
For the fiscal year ended
December 31, 2009
|
or
|
o
|
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
|
|
|
For the transition period
from to
|
Commission file number:
000-50772
Inhibitex, Inc.
(Exact name of Registrant as
specified in its charter)
|
|
|
Delaware
|
|
74-2708737
|
(State or other jurisdiction
of
incorporation or organization)
|
|
(I.R.S. Employer
Identification Number)
|
|
|
|
9005 Westside Parkway
Alpharetta, GA
(Address of Principal
Executive Offices)
|
|
30009
(Zip Code)
|
(678) 746-1100
(Registrants telephone
number, including area code)
Securities
registered pursuant to section 12(b) of the Act:
|
|
|
Title of Each Class
|
|
Name of Each Exchange on Which Registered
|
|
Common Stock, par value $.001 per share
|
|
Nasdaq Capital Market
|
Securities registered pursuant to Section 12(g) of the
Act:
None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes o No þ
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Exchange
Act. Yes o No þ
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such
files). Yes o No o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of registrants knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
Form 10-K. þ
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2
of the Exchange Act. (Check one):
|
|
|
|
Large
accelerated
filer o
|
Accelerated
filer o
|
Non-accelerated
filer o
|
Smaller
reporting
company þ
|
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act). Yes o No þ
The approximate aggregate market value of the common stock held
by non-affiliates of the registrant, based on the closing price
on June 30, 2009 was $13,038,120.
Number of shares of Common Stock outstanding as of
March 10, 2010: 61,562,606.
DOCUMENTS
INCORPORATED BY REFERENCE:
Portions of the definitive Proxy Statement with respect to the
2010 Annual Meeting of Stockholders to be filed with the
Securities and Exchange Commission (Part III).
PART I
SPECIAL
NOTE ON FORWARD-LOOKING STATEMENTS
This Annual Report on
Form 10-K
contains forward-looking statements. These forward-looking
statements are principally contained in the sections entitled
Item 1-Business,
Item 2-Properties
and
Item 7-Managements
Discussion and Analysis of Financial Condition and Results of
Operations. These forward-looking statements involve known
and unknown risks, uncertainties and other factors that may
cause actual results, performance, achievements or events to be
materially different from any future results, performance,
achievements or events expressed or implied by the
forward-looking statements. In some cases, you can identify
forward-looking statements by terms such as may,
will, should, could,
would, expect, plan,
intend, anticipate, believe,
estimate, project, predict,
forecast, potential, likely
or possible, as well as the negative of such
expressions, and similar expressions intended to identify
forward-looking statements. These forward-looking statements
include, without limitation, statements relating to:
|
|
|
Our ability to successfully advance and develop our preclinical
and clinical-stage product candidates;
|
|
|
the expected timing of certain milestones and events, and the
development plans associated with our product candidates;
|
|
|
our ability to successfully execute our strategy;
|
|
|
the expected timing of completing our Phase II trial of
FV-100, a product candidate we are developing to treat shingles,
and having top-line data available;
|
|
|
the expected timing of filing our investigational new drug
application (IND) and initiation of Phase I clinical
trial for INX-189, a product candidate we are developing to
treat infections caused by hepatitis C virus
(HCV);
|
|
|
our goal to complete a Phase Ib trial of INX-189 in HCV infected
patients;
|
|
|
our plans to support our existing collaboration with Pfizer and
other MSCRAMM intellectual property;
|
|
|
the potential for our product candidates to address a number of
current therapeutic limitations, such as inadequate potency,
diminishing efficacy due to the emergence of drug-resistant
viruses, toxic or adverse side effects, complex dosing
schedules, inconvenient routes of administration, combination
therapy, acute pan and post herpetic neuralgia
(PHN), and other unmet needs in their intended
indications.
|
|
|
the size of the potential markets for FV-100, INX-189 and a
staphylococcal vaccine;
|
|
|
our intent to establish strategic licenses, collaborations or
partnerships in the future to accelerate the development and
commercialization of our product candidates;
|
|
|
our plans not to allocate any additional resources to advance
Aurexis and length of time it may take to enter into a
co-development, collaboration or similar business transaction
for Aurexis;
|
|
|
|
the number of months that our current cash, cash equivalents,
and short-term investments will allow us to operate;
|
|
|
|
our future financing requirements, the factors that may
influence the timing and amount of these requirements, and how
we expect to fund them;
|
|
|
potential future revenue from collaborative research agreements,
partnerships, license agreements or materials transfer
agreements;
|
|
|
our ability to generate product-related revenue in the future;
|
|
|
the adequacy of our office and laboratory facility; and
|
|
|
anticipated future and increased losses from operations and the
potential volatility of our quarterly and annual operating costs.
|
3
These statements reflect our current views with respect to
future events and are based on assumptions and subject to risks
and uncertainties including, without limitation: either we, the
United States Food and Drug Adminstration, or an investigational
review board suspending or terminating the clinical development
of FV-100 for lack of safety, manufacturing issues or other
clinical reasons; FV-100 not demonstrating sufficient efficacy
in reducing the incidence and severity of shingles-related
symptoms, including acute pain and PHN, to be clinically
relevant or commercially viable; not obtaining regulatory
approval on a timely basis, or at all, to advance the
development of a INX-189 into clinical trials; the results of
ongoing or future preclinical studies of INX-189 not supporting
its further development; Pfizer not terminating our license and
collaborative research agreements; our maintaining sufficient
resources, including executive management and key employees; our
ability to successfully develop current and future product
candidates through the regulatory process either in
collaboration with a partner or independently; our ongoing or
future preclinical studies or clinical trials not demonstrating
an appropriate safety
and/or
efficacy profile of our product candidates; our ability to
secure and use third-party clinical and preclinical research and
data management organizations and manufacturers; these
third-party organizations not fulfilling their contractual
obligations or otherwise performing satisfactorily in the
future; manufacturing and maintaining sufficient quantities of
preclinical and clinical trial material on hand to complete our
preclinical studies or clinical trials on a timely basis;
failure to obtain regulatory approval to market our product
candidates; our ability to protect and maintain our proprietary
intellectual property rights from unauthorized use by others or
not infringing on the intellectual property rights of others;
our collaborators failing to fulfill their obligations under our
agreements with them in the future; our ability to attract
suitable organizations to collaborate on the development and
commercialization of our product candidates; the inherent
uncertainties of estimates of market size for our product
candidates; the condition of the financial equity and debt
markets and our ability to raise sufficient funding in such
markets; our ability to manage our current cash reserves as
planned; changes in general economic business or competitive
conditions; and other statements contained elsewhere in this
Annual Report on
Form 10-K
and risk factors described in or referred to in greater detail
in the Risk Factors section of this
Form 10-K.
There may be events in the future that we are unable to predict
accurately, or over which we have no control. You should read
this
Form 10-K
and the documents that we reference herein and have been filed
or incorporated by reference as exhibits completely and with the
understanding that our actual future results may be materially
different from what we expect. Our business, financial
condition, results of operations, and prospects may change. We
may not update these forward-looking statements, even though our
situation may change in the future, unless we have obligations
under the federal securities laws to update and disclose
material developments related to previously disclosed
information. We qualify all of the information presented in this
Form 10-K,
and particularly our forward-looking statements, by these
cautionary statements.
Inhibitex®,
MSCRAMM®,
and
Aurexis®
are registered trademarks of Inhibitex, Inc.
Overview
We are a biopharmaceutical company focused on the development of
differentiated anti-infective products to prevent or treat
serious infections. Our research and development efforts are
currently focused on small molecule antiviral compounds, and in
particular, orally-available therapies to treat herpes zoster,
also referred to as shingles, and chronic infections caused by
HCV. Currently available antiviral therapies have a number of
therapeutic limitations that include inadequate potency,
significant adverse side effects, complex dosing schedules,
inconvenient methods of administration, and diminishing efficacy
due to the emergence of drug-resistant viruses. We believe that
our antiviral drug candidates have the potential to address a
number of these limitations as well as unmet clinical needs in
their respective intended indications. In addition to our
antiviral programs, we have also licensed the rights to certain
intellectual property from our MSCRAMM protein platform to
Pfizer for the development of active vaccines to prevent
staphylococcal infections.
We believe there are significant business advantages in focusing
on the development of new compounds to treat infectious
diseases, and in particular viral infections, which include the
following:
|
|
|
infectious disease research and development programs, and in
particular those focusing on antivirals, generally have shorter
development cycle times when compared to other therapeutic areas
such as cardiovascular and central nervous system disorders;
|
4
|
|
|
historical data suggest that anti-infective development programs
that enter clinical development generally have a higher clinical
success rate, on average, as compared to various other
development program areas such as oncology, cardiovascular and
central nervous system disorders;
|
|
|
the clinical and regulatory pathway for many anti-infective
indications are well established and understood;
|
|
|
many antiviral targets have been validated in previous
preclinical studies or clinical trials of other compounds, thus
providing the ability to benchmark or otherwise compare the
safety and efficacy of new compounds at relatively early stages
of development; and
|
|
|
the emergence of drug resistant strains creates a continuing
need for new drugs to treat certain infectious diseases, thus
creating new markets and growing business opportunities.
|
We have not received regulatory approval to sell or market any
of our current or past product candidates, nor do we have any
commercialization capabilities; therefore, it is possible that
we may never successfully derive any commercial revenues from
any of our existing or future product candidates. We were
incorporated in the state of Delaware in May 1994.
Background
Infectious diseases are caused by pathogens present in the
environment, such as viruses and bacteria, which enter the body
through the skin or mucous membranes and overwhelm its natural
defenses. Some infections are systemic, meaning they can affect
the entire body, while others are localized in one location,
organ or system within the body. The severity of infectious
diseases varies depending on the nature of the infectious agent,
as well as the degree to which the bodys immune system or
available therapies can prevent or fight the infection. The
market for anti-infective drugs can be divided into three
general categories: antiviral, antibacterial and antifungal.
The widespread use of anti-infective drugs has led to a
significant reduction in the morbidity and mortality associated
with infectious diseases. However, for many infectious diseases,
current treatment options are associated with suboptimal
treatment outcomes, significant drug-related adverse or toxic
side effects, complex dosing schedules and inconvenient methods
of administration, such as injection or infusion. These factors
often lead to patients discontinuing treatment or failing to
fully comply with treatment dosing schedules. As a result,
physicians are often required to modify therapy regimens
throughout the course of treatment to avoid treatment failures.
Moreover, a patients failure to comply fully with a
treatment dosing schedule can both accelerate and exacerbate
drug resistance. The ability of both viruses and bacteria to
adapt rapidly to existing or new treatments through genetic
mutations allows new strains to develop that are highly
resistant to currently available drugs. In recent years, the
increasing prevalence of drug resistant strains has created
ongoing treatment challenges with respect to many infectious
diseases, including HIV/AIDS and Staphylococcus aureus
(S. aureus) infections.
Viruses
Viruses are microscopic infectious agents consisting of an outer
layer of protein surrounding a core of genetic material
comprised of DNA or RNA. Viruses generally must invade living
host cells in order to replicate and spread. In many cases, the
bodys immune system can effectively combat an infection
caused by a virus. However, with certain viral infections, the
bodys immune system is unable to fully destroy the
responsible virus, which results in persistent viral replication
and the subsequent infection of healthy cells by the virus. This
ultimately leads to the deterioration or destruction of the
infected cells, resulting in disease.
Infections caused by viruses can be acute or chronic. Acute
infection associated with viruses such as influenza or varicella
zoster virus (VZV), generally lasts for a relatively
short period of time, and in most cases will ultimately
self-resolve in most immunocompetent individuals. Chronic
infections, such as those caused by HCV, dont typically
self-resolve and can cause disease for months or years if left
untreated. Viruses can also be characterized as either latent or
active. A latent virus, such as VZV, can remain in the body for
long periods of time after the initial infection and generally
will only cause disease when the bodys immune system
5
weakens, fails or is suppressed. An active virus can cause a
persistent infection or disease over an extended period of time,
such as infections caused by HCV.
Vaccines have been used for many years to prevent active viral
infections from occurring. Antiviral drugs designed to treat or
suppress rather than prevent viral diseases are generally small
molecule, chemical compounds. Antiviral drugs are increasingly
being developed to inhibit the replication of specific viruses,
while some are active against a family of viruses.
Viruses that develop resistance to antiviral drugs are
increasingly a major challenge in the treatment of viral
infections. The ability of viruses to mutate spontaneously
during replication allows drug-resistant strains to emerge when
patients are using drugs that do not quickly and completely
inhibit viral replication. Resistance occurs because viruses
will continually make millions of copies of themselves every
day, some of which will contain mutations in their genetic
material. Mutations that confer a replication advantage in the
presence of a suppressive antiviral drug will give rise to viral
strains that are resistant or partially resistant to that drug.
These mutated viruses, while initially low in number, will
eventually become the predominant strain in an infected patient.
Once this occurs, the treatment benefit of that antiviral drug
often diminishes, resulting in treatment failure and the need
for an alternate therapy with different or possibly new drugs,
or classes of drugs. In general, viruses that cause chronic
infections, such as HCV, are more likely to develop drug
resistance due to the long-term and persistent exposure of the
virus to the antiviral therapy.
Bacteria
Unlike viruses, bacteria do not generally need to invade a
living host cell in order to grow and replicate. Bacteria are
unicellular, self-propagating microorganisms that multiply
through growth in bacterial cell size and the subsequent
division of the cell. Bacteria can be broadly classified into
two categories based upon the composition of their cell walls:
gram-positive or gram-negative. Many antibacterial drugs that
are effective against gram-positive bacteria are less effective
or totally ineffective against gram-negative bacteria, and vice
versa. Antibacterial drugs that are active against a large
number of both classes of bacteria are often referred to as
broad-spectrum antibacterials.
Antibiotics, which are small molecule compounds, comprise the
vast majority of currently marketed antibacterial drugs.
Antibiotics have proved to be highly successful in controlling
the morbidity and mortality that accompany many bacterial
infections. However, due to the widespread use and overuse of
antibiotics over time, and the ability of bacteria to quickly
develop drug resistance, many antibiotics now have diminished or
limited efficacy. The inability to effectively treat serious
infections caused by drug-resistant bacteria with antibiotics
has led to increased mortality rates, prolonged hospitalizations
and increased health care costs, and has become a public health
issue of significant concern. Accordingly, in recent years, a
number of novel approaches to prevent and treat bacterial
infections, including new classes of antibiotics, vaccines and
the use of antibodies, have emerged in development.
Vaccines
Vaccines represent a approach in broadening the available
clinical tools against the global health problem of
hospital-acquired, or nosocomial bacterial infections. S.
aureus is the most frequent pathogen to cause nosocomial
infections and affects a wide range of different patient groups.
Infections are associated with a longer hospital stay, worse
clinical outcome and high treatment costs. Mainly due to
antibiotic overuse, many resistant strains of S. aureus
have emerged. The most concerning of those is
methicillin-resistant S. aureus (MRSA), the
incidence of which has increased rapidly in both the hospital
and more recently, the community setting. The high incidence of
S. aureus infections and the increasing occurrence of
drug-resistant strains are the key drivers for vaccine
development. The increasing incidence and the decreasing
efficacy of available antibiotics against S. aureus
suggest that a vaccine to prevent such infections would be
highly useful. Particularly in the hospital setting, vaccination
of patients could potentially prevent a large number of S.
aureus infections; but the emergence of certain MRSA strains
such as USA300 in the community setting indicates that
vaccination would also be particularly useful for high-risk
community groups including athletes or prison inmates. Due to
the increasing selective pressure on S. aureus, new
resistance mutations can be
6
expected to emerge against available drugs. To be able to
control S. aureus infections, it will therefore be
crucial to develop new therapeutic approaches, and an effective
vaccine could prove highly useful in both hospital and community
settings to limit further spread of the pathogen and to reduce
costs to healthcare systems.
Our
Pipeline
The following table summarizes key information regarding our
anti-infective product candidates:
|
|
|
|
|
|
|
|
|
Drug
|
|
|
|
Stage of
|
|
|
|
Marketing
|
Candidate
|
|
Indication
|
|
Development
|
|
Status
|
|
Rights
|
|
Antivirals
|
|
|
|
|
|
|
|
|
FV-100
|
|
Treatment of
Herpes Zoster
(shingles)
|
|
Clinical
|
|
Phase II trial in progress
|
|
Inhibitex
|
INX-189
|
|
|
|
|
|
|
|
|
HCV Nucleotide Polymerase
Inhibitor
|
|
Treatment of Chronic
Hepatitis C Infection
|
|
Preclinical
|
|
Expect IND filing and initiation of a
Phase I trial in first half of 2010
|
|
Inhibitex
|
|
|
|
|
|
|
|
|
|
Antibacterials
|
|
|
|
|
|
|
|
|
Staphylococcal Vaccines
|
|
Active Vaccine to
Prevent S. aureus
infections
|
|
Clinical
|
|
Phase I trial in progress
|
|
Pfizer
|
Aurexis
|
|
Treatment of S. aureus
Bloodstream Infections
|
|
Clinical
|
|
Completed Phase IIa; seeking to
out-license
|
|
Inhibitex
|
FV-100
for Shingles
FV-100 is an orally available nucleoside analogue prodrug of
CF-1743 that we are developing for the treatment of herpes
zoster, or shingles, which is an infection caused by the
reactivation of VZV. Published preclinical studies demonstrate
that FV-100 is significantly more potent against VZV than
acyclovir, valacyclovir, and famciclovir, the FDA-approved drugs
used for the treatment of shingles. Preclinical studies further
demonstrate that FV-100 has a much more rapid onset of antiviral
activity, and can fully inhibit the replication of VZV more
rapidly than these drugs at significantly lower concentration
levels. We believe these characteristics provide the potential
for FV-100 to reduce the incidence, severity, and duration of
shingles-related symptoms, including acute pain, PHN and
lesions. In addition, pharmacokinetic data from our Phase I
clinical trial suggests that FV-100 has the potential to be
dosed orally
once-a-day
at significantly lower levels than valacyclovir, acyclovir, and
famciclovir.
We initiated a Phase II clinical trial for FV-100 in 2009.
The Phase II trial is a well-controlled, double-blind study
comparing two arms of FV-100 to an active control
(valacyclovir). The trial protocol calls for the enrollment and
randomization of approximately 350 patients, aged
50 years and older to one of three treatment arms:
200 mg FV-100 administered once daily; 400 mg FV-100
administered once daily; and 1,000 mg valacyclovir
administered three times per day. In addition to further
evaluating its safety, the main objectives of the trial are to
evaluate the potential therapeutic benefit of FV-100 in reducing
the severity and duration of shingles-related pain, the
incidence of PHN, and the time to lesion healing. We anticipate
having top-line data available from this trial in the fourth
quarter of 2010.
Market
Opportunity for the Treatment of Shingles
VZV, a DNA virus and a member of the herpes virus group, is the
virus that causes both chickenpox and herpes zoster, or
shingles. Chickenpox, the initial infection caused by VZV in an
individual, generally occurs during childhood. After the
chickenpox infection subsides, VZV remains latent in the
individuals dorsal root and cranial nerve ganglia, but can
re-emerge later in life. Therefore, individuals who have had
chickenpox are at risk for shingles.
7
Although shingles can occur in any individual with a prior VZV
infection, its incidence varies with its key risk factors, which
are advanced age and immune status. A study in 2007 suggested
that based on age- and sex-adjusted estimates of the incidence
of shingles extrapolated to the general population of the United
States (U.S.) that there are nearly 1 million
cases annually. Shingles incidence rates in the European Union
and Japan, when extrapolated to the size of the current
population suggest that there are approximately 1.5 and
0.5 million annual shingles cases, respectively. Shingles
is largely a disease of the aged or aging, with over 50% of all
cases occurring in individuals over the age of 60, and
approximately 80% occurring in individuals over the age of 40.
Due to the aging of the population in many industrialized
countries, as well as the increasing use of immunosuppressive
agents in transplant patients and the increased numbers of
immunosuppressed patients from cancer therapy, the incidence of
shingles is expected to increase. It is estimated that
approximately 20% of all persons in the U.S. will suffer
from shingles at some point during their lifetime.
The symptoms associated with shingles generally include
localized lesions, rash and pain. In certain cases the patient
may notice localized prodomal pain prior to the appearance of
any lesions; however, the first symptom of shingles is generally
lesions that will continue to form for a week or more. While
such lesions generally follow the path of nerves that emanate
from the spinal cord around the torso, the infection is also
commonly found on the face, neck, and in certain cases,
systemically. Within several weeks, the lesions in the infected
areas will typically begin to crust over and heal, and these
dermatological symptoms generally will resolve within a month.
In rare instances, lesions may never appear, but pain will be
present. Fewer than 20% of patients experience significant
systemic symptoms from shingles, such as fever, headache,
malaise, or fatigue.
The pain associated with an episode of shingles is attributed to
damage caused to the nerve fibers by the replication of VZV and
the subsequent inflammation associated with the infection. Pain
symptoms are commonly described as a burning sensation, with
bouts of stabbing and shooting pain, often set off by contact
with the infected area. The majority of shingles patients
experience acute pain for several weeks in connection with their
active infection. For some patients, shingles-related pain does
not resolve when the rash and lesions heal but, rather,
continues for months, or possibly years. Persistent
shingles-related pain that lasts more than several months is
referred to as PHN, and it is the most common complication of
shingles. Approximately 20% of all shingles patients experience
PHN, although the incidence of PHN is more prevalent in patients
over 60 years of age. Previous studies have established
that additional risk factors for PHN include greater acute pain
intensity, severity of the dermatological symptoms or lesions,
and the presence and greater severity of a painful prodrome
preceding the lesions or rash.
Valacyclovir, acyclovir and famciclovir are oral antivirals
currently indicated and approved by the FDA, and regulatory
agencies in many other countries, to treat shingles. These drugs
are referred to as pan-herpetic drugs, as they are
used to treat infections caused by various herpes viruses,
including herpes simplex 1 and 2, and VZV. IMS data indicates
that the majority of the approximately $2.3 billion in
annual sales these drugs generate in the U.S. in 2008 was
for use in treating infections caused by herpes simplex 1 and 2,
and not VZV. Unlike those drugs, FV-100 only demonstrates
antiviral activity against VZV, and not the other herpes
viruses. Based upon an analysis by IMS Health, Inc.
(IMS) data, we estimate that approximately
15-20% of
all retail prescriptions for valacyclovir, acyclovir and
famciclovir are for the treatment of herpes zoster, and that the
size of the market for oral antivirals to treat shingles is in
excess of $350 million per year in the U.S.
Limitations
of Current Therapies
Data from various clinical trials demonstrate that a seven day
administration of valacyclovir, acyclovir, or famciclovir,
beginning less than 72 hours after the first appearance of
a shingles-related rash or lesion, can lessen the duration of
the dermatological symptoms associated with shingles, and the
average duration of shingles-related pain. However, these
currently approved antiviral drugs, when used to treat shingles,
have a number of limitations, including the following:
|
|
|
No Approved Label for the Reduction of Acute Pain and
PHN. Currently, there are no oral antiviral
therapies indicated for the reduction or prevention of
shingles-related acute pain or PHN. There is also no cure for
PHN per se; rather, treatment of PHN is accomplished through
pain management. The most commonly prescribed medications are
opioids, antidepressants, anticonvulsants, or a topical
lidocaine or
|
8
|
|
|
|
|
capsaicin patch. Previously published clinical data demonstrate
that antiviral therapy can reduce the duration of
shingles-related pain and PHN, and we believe a more potent,
faster acting anti-VZV compound, such as FV-100, has the
potential to more rapidly inhibit the replication of VZV, thus
reducing shingles-related nerve damage and therefore further
reducing acute pain and PHN. We believe an antiviral therapy
that can further reduce the severity
and/or
duration of acute pain and the prevalence of PHN may have a
significant competitive advantage relative to the currently
available antiviral shingles therapies.
|
|
|
|
Inconvenient Dosing. Due to their suboptimal
pharmacokinetic properties and potency against VZV, current
pan-herpetic oral antiviral therapies require shingles patients
to take three to five oral doses each day for seven to ten days.
Specifically, current dosing regimens for the treatment of
shingles are as follows: valacyclovir 1,000 mg,
three times per day; famciclovir 500 mg, three
times per day; and acyclovir 800 mg, five times
per day. Given the fact that many shingles patients are elderly,
are taking other medications, and may have difficulty ingesting
large tablets or caplets, such dosing regimens are inconvenient
and can result in non-compliance, resulting in less than optimal
treatment outcomes. We believe that an effective antiviral
therapy that can be administered via convenient,
once-a-day
oral administration may have a competitive advantage relative to
current shingles therapies.
|
|
|
Current Antiviral Drugs Must be Adjusted for Patients with
Insufficient Renal Function. Although current
pan-herpetic oral antiviral therapies are generally safe and
well tolerated in shingles patients, dosing of valacyclovir,
famciclovir and acyclovir must be adjusted for certain patients
with insufficient renal (kidney) function to avoid potential
adverse events. Clinical data from our Phase I trials of FV-100
in healthy volunteers indicated that FV-100 was generally well
tolerated and does not appear to be primarily excreted through
the kidneys. While its safety profile will be further studied in
the ongoing Phase II trial and any future clinical trials
we may conduct, we believe the dosing of FV-100 will not need to
be adjusted for patients with insufficient renal function. We
believe that an oral antiviral therapy that has a similar or
better safety profile to valacyclovir, famciclovir and
acyclovir, and is not required to be adjusted for patients with
insufficient renal function, may have a competitive advantage
over currently approved shingles therapies.
|
We believe there is a significant unmet need for a more potent,
faster acting,
once-a-day
oral antiviral agent, such as FV-100, which has the potential to
reduce the incidence, severity, and duration of shingles-related
symptoms, including rash, lesions, acute pain and PHN. Due to
its demonstrated potency and ability to rapidly penetrate cells
in vitro, we also believe that the amount of FV-100
necessary to fully inhibit the viral replication of VZV may be
significantly lower than that of the current antiviral
therapies, resulting in smaller doses and potentially fewer side
effects. We also believe that the pharmacokinetic properties of
FV-100, as observed in preclinical studies and our Phase I
trials, may provide for less frequent oral dosing than
valacyclovir, acyclovir and famciclovir.
FV-100
Clinical Trials
Phase II. In May 2009, we initiated a
well-controlled, double-blind study Phase II clinical trial
comparing two doses of FV-100 to an active control
(valacyclovir). The trial protocol calls for the enrollment and
randomization of approximately 350 patients, aged
50 years and older with shingles-associated pain, who will
be equally randomized to one of three treatment arms:
200 mg FV-100 administered once daily; 400 mg
FV-100
administered once daily; and 1,000 mg valacyclovir
administered three times per day. In addition to further
evaluating its safety, the primary objectives of the trial are
to evaluate the therapeutic benefit of
FV-100 in
reducing the severity and duration of shingles-related acute
pain, the incidence of PHN, the time to lesion healing, and the
use of concomitant pain medications.
There are planned safety assessments by an independent Data
Safety and Monitoring Board (DSMB) when each
quartile of patients has been enrolled and has completed
30 days of
follow-up,
as well as an interim efficacy analysis on the primary endpoint
when the second quartile of patients has completed 30 days
of follow up. In January 2010, we indicated that the DSMB had
reviewed safety data from the first quartile of subjects and
recommended to continue the trial as planned. We expect the
second quartile DSMB review and interim efficacy analysis to
occur shortly. Further, we anticipate completing enrollment in
and having top-line data available from this trial in the fourth
quarter of 2010.
9
Phase I. In February 2009, we completed a
blinded, placebo controlled multiple ascending dose trial
designed to evaluate the safety and pharmacokinetics of five
oral doses of FV-100 (100, 200, 400 and 800 mg administered
once daily and 400 mg administered twice daily, each for
seven days) in healthy subjects aged 18 to 55. Each dose cohort
consisted of six subjects that received FV-100 and two that
received placebo. The results of the trial demonstrated that
there were no serious adverse events and FV-100 appeared to be
generally well tolerated at all dose levels. Further,
pharmacokinetic data demonstrated that all doses studied
maintained mean plasma levels of CF-1743, the active form of
FV-100, which exceeded its
EC50
for at least 24 hours, supporting the evaluation of
once-a-day
dosing of FV-100 in future clinical trials. The
EC50
represents the concentration of drug that is required for 50%
inhibition of viral replication in vitro.
In January 2009, we also completed a blinded, placebo controlled
Phase I trial to evaluate single and multiple doses of FV-100 in
healthy subjects 65 years of age and older. One dose cohort
consisted of twelve healthy subjects, ten of whom received a
single administration of 400 mg of FV-100 and two of whom
received placebo, and the second cohort also consisted of twelve
healthy subjects, ten of whom received 400 mg of
FV-100
administered twice daily for seven consecutive days and two of
whom received placebo. The results of this trial demonstrated no
significant safety differences between these subjects and those
from the multiple ascending dose trial.
In August 2008, we completed a Phase I single ascending dose
clinical trial of FV-100. The blinded, placebo-controlled trial
evaluated the safety and pharmacokinetics of four doses of
FV-100 in six cohorts of healthy volunteers (100, 200, 400, and
800 mg, as well as a two 400 mg food effect groups).
Each cohort consisted of six subjects that received FV-100 and
two that received placebo. There were no serious adverse events
observed and the compound appeared to be generally well
tolerated in the trial. In addition, pharmacokinetic data
demonstrated that all doses evaluated in the trial maintained
plasma levels of CF-1743, the active form of FV-100, which
exceeded its
EC50
for at least 24 hours.
In December 2007, we completed a blinded, placebo-controlled
single ascending dose Phase I clinical trial of FV-100, which
was conducted under an exploratory IND. The trial was designed
to evaluate the safety and pharmacokinetics of three oral doses
of FV-100 (10, 20 and 40 mg) in healthy volunteers 18 to
55 years of age. Each of the three dose cohorts consisted
of six subjects that received FV-100 and two that received
placebo. The results of the trial demonstrated that there were
no serious adverse events observed and that the compound
appeared to be generally well tolerated. In addition,
pharmacokinetic data demonstrated that all three doses achieved
plasma levels of CF-1743, the active form of FV-100, which
exceeded the
EC50,
with the 40 mg dose maintaining such levels for
approximately eight hours.
HCV
Nucleoside Polymerase Inhibitors
Modified nucleoside inhibitors (nucleoside analogues) is a class
of small molecule compounds that have a proven record of success
as antiviral agents. These natural small chemical compounds
function as the building blocks of human and viral genetic
material, commonly referred to as deoxyribonucleic acid
(DNA) or ribonucleic acid (RNA).
Modified nucleoside inhibitors are small molecules that
effectively target viral polymerases, the enzymes that replicate
viral genetic information. Mimicking the role of natural or
unmodified nucleosides, nucleoside inhibitors are incorporated
by viral polymerases into replicating viral genomes. This event
leads to chain termination, preventing the virus from
reproducing its genetic material. Modified nucleosides need to
be phosphorylated to their corresponding 5-triphosphates
by the host cell kinases. In many cases, however, nucleoside
analogues are poor substrates for the kinases and the
pharmacologically active triphosphate species cannot be
considered as possible drug candidates due to their high
instability and poor cellular permeation. In many cases, the
limiting step in this process is represented by the conversion
to the corresponding 5-monophosphate.
Our collaborators at Cardiff University in Wales, United Kingdom
(Cardiff) have developed the aryloxy-phosphoramidate
ProTide approach, which allows the delivery of the
monophosphorylated nucleoside analogue (nucleotide)
into the cell, bypassing the first phosphorylation step. Cardiff
has previously reported the successful application of this
ProTide approach to 2-methyl purines (adenosine and
guanosine). Through our ongoing research and collaboration with
Cardiff, we have synthesized an extensive array of ProTide
derivatives of 2-C- methyl guanosine nucleotide
analogues that target the RNA-dependent RNA polymerase
(NS5b) of
10
HCV. In the first half of 2009 we selected INX-189 as our lead
compound and initiated IND-enabling studies. We have completed
the requisite good laboratory practices (GLP)
preclinical studies needed to support the filing of an IND for
INX-189 with the FDA. We anticipate filing an IND for INX-189
shortly, and subject to FDA review, anticipate initiating a
Phase I clinical trial of INX-189 in the first half of 2010.
INX-189 has demonstrated in the HCV genotype 1a
(EC90=
42 nM), 1b
(EC90=
38 nM), and 2a
(EC90=
7 nM), cell-based replicon assays. In addition, INX-189
exhibited a high degree of synergy in combination with ribavirin
in the HCV genotype 1b replicon assay. In vitro data from
primary human hepatocytes indicated that INX-189 is rapidly and
efficiently converted to the active triphosphate with a
half-life of approximately 26 hours. Furthermore, oral
dosing studies in multiple animal species indicate that INX-189
is effectively extracted by the liver through first-pass
metabolism and converted to levels of active triphosphate
predicted to exceed those required to exhibit antiviral
activity. The pharmacokinetics in these studies support
evaluating INX-189 under
once-a-day
dosing in future clinical trials.
Market
Opportunity for the Treatment of HCV
HCV is a virus that is a common cause of viral hepatitis, an
inflammation of the liver. HCV infection is contracted by
contact with blood or other body fluids of an individual
infected with HCV. HCV disease progression occurs over a period
of 20 to 30 years, during which patients generally do not
exhibit any symptoms of the disease. HCV is a leading cause of
chronic liver disease, including cirrhosis, organ failure and
cancer, and the leading cause of death from liver disease in the
U.S. HCV is often found among hemodialysis patients,
hemophiliacs and recipients of blood transfusions before 1992.
HCV is now transmitted primarily through the sharing of needles
used for injection drug use and by pregnant women infecting
their children in utero. The World Health Organization
estimates that approximately 170 million people worldwide
are infected with HCV as of 2004. Of these individuals, it is
estimated that approximately 130 million are chronically
infected with an increased risk of developing liver cirrhosis or
liver cancer. HCV is responsible for more than half of all liver
cancer cases and two-thirds of all liver transplants in the
developed world. The Center for Disease Control
(CDC) estimates that approximately 4 million
people in the U.S. are chronically infected with HCV as of
2006, yet projects that only about 100,000 of these patients are
currently under treatment. Because symptoms of this chronic
disease do not typically appear until its later stages, carriers
often do not realize they are infected, and therefore do not
seek treatment. Current therapies to treat HCV infections
generated worldwide sales of approximately $2.2 billion in
2005, and sales of these products and new approved products are
forecast to increase to more than $4.4 billion by 2010 and
$8.8 billion by 2015.
There are several genotypes and subtypes of HCV. At least six
major genotypes of HCV have been identified, each with multiple
subtypes. Genotypes are designated with numbers (genotypes 1-6)
and subtypes with letters. HCV genotypes 1, 2, 3, and 4 are
found worldwide, but their prevalence varies among geographic
regions. Genotype 1 and its subtypes (1a and 1b) are the most
common genotype globally, accounting for approximately 70% of
infections. Patients with genotype 2 or 3 represent
approximately 25% of the worldwide chronically infected HCV
population and the remaining 5% is comprised of genotypes 4
through 6.
Limitations
of Current Therapies for the Treatment of HCV
Infection
The current standard of care for the treatment of chronic
hepatitis C infection is a combination of once-weekly
pegylated interferon-alpha and twice-daily oral administration
of ribavirin for up to 48 weeks, depending on the HCV
genotype. Interferon-alpha is administrated by injection and
results in abnormally high levels of this cytokine circulating
systemically throughout the body. Therapy with interferon-alpha
causes a number of side effects in many patients, including
depression, a drop in blood cell count and flu-like symptoms.
These symptoms may be experienced during the entire 48-week
course of therapy that is standard for treatment of patients
infected with HCV genotype1, who are the most difficult patient
group to treat. These side effects may make patients feel worse
than the foregoing treatment, which reduces their motivation to
initiate or continue therapy. Many patients take additional
drugs to treat these side effects, further increasing the cost
and the risk of additional side effects. As a result, poor
compliance with the current standard of care may decrease the
patient response rate.
In addition to these side effects, current therapies do not cure
the disease or provide sustained elimination of the virus,
called sustained virologic response (SVR), for a
large proportion of chronically infected patients.
11
For example, approximately 50 percent of the genotype
1 patients, which represent the largest portion of HCV
patients in the U.S., Europe and Japan, do not achieve a SVR six
months after the end of the treatment with the current standard
of care. Due to the lack of alternative treatments, patients
without a SVR response have no other treatment option but to
undergo a second 48-week course of interferon-alpha-based
therapy with a different brand of interferon-alpha, the outcome
of which is generally
sub-optimal.
In order to improve the treatment outcomes of patients with
chronic hepatitis C and reduce or eliminate the side
effects and toxicities associated with the current standard of
care, there are a number of pharmaceutical and biopharmaceutical
companies pursuing the development of various classes of
antiviral compounds that can directly inhibit the replication of
HCV by specifically targeting different proteins and enzymes of
the virus. Accordingly, direct acting antiviral, or DAA, therapy
is now emerging as a potential complement, or possibly an
alternative, to the current standard of care. Several classes of
DAA compounds are currently in clinical development, including
protease inhibitors, which are the most clinically advanced
class, nucleoside and non-nucleoside polymerase inhibitors, and
other emerging novel antivirals that inhibit different molecular
targets of HCV. To date, data from a number of clinical trials
evaluating various direct acting antivirals in combination with
standard of care demonstrate superior SVR rates as compared to
standard of care alone. Notwithstanding the improved treatment
outcomes reflected by these trials combining a single DAA with
standard of care, it is believed that two or more classes of
direct acting antivirals will ultimately be used in combination
with the current standard of care, or possibly as its
replacement, in order to optimize the potential of direct
antiviral therapy. This would be akin to what has evolved in the
treatment of HIV/AIDS.
There are currently two approaches to inhibiting the activity of
the HCV polymerase. In general, polymerase inhibitors can be
assigned to two broad categories on the basis of their chemical
structure and mechanism of action: nucleoside analogue
inhibitors and non-nucleoside analogue inhibitors. Nucleoside
analogues are generally converted to nucleotide analogues by
host cell kinases. Nucleoside analogues target the active site
of the polymerase and they can either compete with natural
nucleoside triphosphate (NTP) substrates or/and act
as chain terminators, or cause of a mutational
error catastrophe by being incorporated into the
elongating nascent RNA molecule. The second category of
compounds is the non-nucleoside analogue inhibitors, which
typically bind to allosteric surface cavities of the HCV
polymerase. The activity of non-nucleoside compounds depends on
their ability to bind relatively tightly to specific amino acid
sequences and often involves multiple molecular interactions. If
any of these interactions are missing due to a change in the
polymerase sequence, then binding cannot occur properly. The
probability of this happening tends to be higher with
non-nucleoside than with nucleoside/nucleotide analogues.
We are focused on developing the use of ProTide nucleotide
analogues that mimic nucleotides normally recognized by the
enzyme as it builds a new copy of the viral genome. Similar to
current HIV/AIDS therapy, where nucleosides have become a
cornerstone of combination therapy, we believe NS5b
nucleoside/nucleotide polymerase inhibitors will play a similar
role in the treatment of chronic hepatitis C infections.
Certain potential advantages that nucleoside/nucleotide
analogues have over protease inhibitors, as well as
non-nucleoside polymerase inhibitors, are as follows:
|
|
|
Nucleoside/nucleotide polymerase analogues have the highest
genetic barrier to resistance due to their ability to bind in
the active site of the HCV polymerase and mutations in the
active site significantly reduce the fitness of the virus.
|
|
|
Nucleoside/nucleotide polymerase analogues exhibit antiviral
activity against all the various genotypes of HCV. Protease and
non-nucleoside inhibitors have typically shown variable potency
against HCV genotypes 1a and 1b, and reduced or no activity
against genotypes 2a, 3a or 4. This genotype specificity
suggests that protease and non-nucleoside inhibitors would need
to be combined with a nucleoside analogue to provide therapeutic
coverage across the breadth of HCV genotypes found globally.
|
|
|
Nucleoside/nucleotide polymerase analogues do not require
boosting with ritonavir. Several of the protease inhibitors
currently in development require boosting with ritonavir to
enhance their pharmacokinetics. The addition of ritonavir to the
treatment regimen for HCV may require extensive drug-drug
interactions studies prior to licensure.
|
12
The FDA has not yet approved any direct acting antivirals for
the treatment of infections caused by HCV, but a number of
pharmaceutical and biotechnology companies are developing
nucleoside/nucleotide and non-nucleoside HCV polymerase
inhibitors. To our knowledge, the most advanced
nucleoside/nucleotide and non-nucleoside polymerase inhibitors
are currently in Phase II clinical trials.
Staphylococcal
Vaccine
In 2001, we entered into an exclusive worldwide license and
collaboration agreement with Wyeth (since acquired by Pfizer,
Inc. (Pfizer) in 2009) for the development of
active vaccines against staphylococcus from our MSCRAMM protein
platform. In consideration for this license, we received an
upfront payment and the right to receive future milestone
payments, financial support of certain research and development
activities, and royalty payments on product sales. Pfizer is
responsible for all clinical development, manufacturing and
marketing of the vaccine.
In January 2010, we announced that Pfizer had initiated
recruitment for a randomized, double-blind Phase I clinical
trial to evaluate the safety, tolerability, and immunogenicity
of three ascending dose levels of a
3-antigen
S. aureus vaccine (SA3Ag) in 408 healthy adults. Upon the
initiation of this trial we received a milestone payment of
$0.7 million and are eligible to receive future regulatory
milestone payment, as well as royalties on any future net sales.
Market
Opportunity for Staphylococcal Vaccine
The Centers for Disease Control and Prevention (CDC)
as of 2007 estimates that each year, approximately
1.7 million infections and 99,000 associated deaths occur
in U.S. hospitals, making nosocomial infections one of the
leading overall causes of death. Nosocomial infections
constitute a significant economical burden, as they cause a
large range of additional costs to health services, patients and
society. These include material and personnel costs as well as
costs related to lost productivity, disability or caring
activities. Most of these costs are directly related to the
prolonged hospital stay that becomes inevitable for many
patients suffering from a nosocomial infection. The number of
extra days a patient has to spend in the hospital varies
depending on the type of infection he or she is suffering from,
and can extend from days to weeks. In 2000, the CDC estimated
the prolonged stay at 1 4 days for a urinary
tract infection, 7 8 days for an infection at
the site of a surgery procedure, 7 21 days for
a bloodstream infection, and 7 30 days for
pneumonia. Further, the CDC estimated the total additional costs
of hospital-associated infections at nearly $5 billion per
year, ranging from $600 for a urinary tract infection to $50,000
or more for prolonged bloodstream infections.
S. aureus is the most frequent pathogen in nosocomial
infections, associated with many different types of infection
and a worse clinical outcome in a wide range of patients. The
emergence of the
hard-to-treat
MRSA, in both the hospital and more recently, the community
setting, and the additional costs of treatment have provided a
strong rationale to investigate preventive strategies against
S. aureus infection. From a practical point of view,
vaccination appears to be highly feasible for several key target
groups such as patients undergoing planned surgeries, the
approximately 500,000 patients receiving end stage renal
disease therapy in the U.S. as of 2006, patients receiving
chronic long-term care, and the elderly.
Staphylococcal
Vaccine Clinical Trials
Phase I. In January 2010, we announced that
Pfizer had initiated recruitment for a randomized, double-blind
Phase I clinical trial to evaluate the safety, tolerability, and
immunogenicity of three ascending dose levels of a
3-antigen
S. aureus vaccine (SA3Ag) in 408 healthy
adults. The SA3Ag vaccine contains an antigen originating from
our MSCRAMM protein platform. The primary outcome measures of
the trial are an assessment of safety and tolerability as
determined by local reactions, systemic events, and adverse
events. The secondary outcome measures include an assessment of
immunogenicity one month post-vaccination and the effect of the
SA3Ag vaccine on the number of S. aureus bacteria that
naturally occur on the skin and within the nose.
13
Aurexis
Aurexis is a humanized monoclonal antibody we have evaluated as
a first-line therapy, in combination with antibiotics, for the
treatment of serious, life-threatening S. aureus
bloodstream infections in hospitalized patients. Aurexis
targets clumping factor A, (ClfA) a protein found on
the surface of virtually all strains of S. aureus,
including MRSA. We have completed an exploratory 60 patient
Phase II trial of Aurexis in patients with confirmed S.
aureus bloodstream infections. The results suggested that a
single dose of Aurexis, administered intravenously, was
generally safe and well tolerated in these patients. Aurexis has
been granted Fast Track designation by the FDA for the
adjunctive treatment of S. aureus bloodstream infections.
Due to our strategic focus on developing oral antivirals, and
more specifically advancing the development of FV-100, INX-189
and other compounds in our HCV polymerase program, we currently
do not intend to allocate any additional resources to advance
the clinical development of Aurexis. We continue to seek
licensing, co-development collaborations, or other business
arrangements that can provide financial resources and other
synergistic capabilities to support its further development.
Market
Opportunity for the Treatment of S. aureus Infections
As of 2007, it was estimated that approximately 94,000 invasive
MRSA infections occurred in the United States in 2005 and these
infections were associated with death in almost 19,000 cases.
The economic burden of MRSA infections is substantial. MRSA
hospitalizations cost nearly double that for non-MRSA
stays $14,000 for MRSA stays compared with $7,600
for non-MRSA stays. The average length of stay in the hospital
for a patient with MRSA infection was more than double that for
non-MRSA stays 10.0 days versus 4.6 days.
These data support the need for the development of newer
therapies with novel mechanisms of action designed to either
prevent or mitigate the progression of SAB.
There are at least four categories of benefits that may be
realized by adjunctive Aurexis therapy: first, reduced mortality
and morbidity (complications) associated with MRSA and
methicillin sensitive S. aureus bacteremia; second,
reduced length of stay in the ICU, thereby reducing the costs
associated with the overall hospital stay; third, reduced
antibiotics utilization consistent with CDC and NIH guidelines,
thereby reducing the pressure on the development of antibiotic
resistance; and fourth, reduced rates of relapse of infection.
Moreover, the ability to be used prophylactically in high-risk
patients gives Aurexis a unique advantage over antibiotics where
their prophylactic use is discouraged.
Aurexis
Clinical Trials
Phase II. In May 2005, we reported the results
from a 60 patient Phase II clinical trial of Aurexis,
in combination with antibiotics, for the treatment of documented
S. aureus bacteremia in hospitalized patients. Patients
were randomized to receive antibiotic therapy in combination
with either Aurexis, at 20 mg/kg, or placebo. Both Aurexis
and the placebo were administered intravenously as a single
dose. In this trial, standard of care antibiotic therapy was
selected by the individual investigators. Subjects were followed
for 57 days or until early termination from the trial.
The primary objectives of the Phase II trial were to
evaluate the safety, pharmacokinetics, and biological activity
of a single dose of Aurexis. In the trial, Aurexis appeared to
be generally well tolerated. Further, favorable trends were
observed in the composite primary endpoint of mortality, relapse
rate and infection-related complications, and a number of
secondary endpoints and ad-hoc analyses, including the
progression in the severity of sepsis, the number of days in the
intensive care unit, and the resolution of complications
associated with S. aureus bacteremia. The Phase II
trial was not powered or designed to demonstrate statistically
significant differences among the treatment arms in measures of
efficacy. Accordingly, these preliminary findings were not
statistically significant.
HIV
Integrase Inhibitors
In September 2007, we obtained an exclusive worldwide license
from the University of Georgia Research Foundation,
(UGARF) for intellectual property covering a series
of HIV integrase inhibitors. In August
14
2008, we announced that we had assigned our HCV nucleoside
polymerase inhibitor preclinical program a higher
priority than our HIV preclinical program and had
realigned our internal resources in order to maximize the
potential of accelerating our HCV program. In July, 2009 we
terminated the license agreement, and all intellectual property
covering HIV integrase inhibitors reverted back to UGARF. The
conclusion of this agreement did not have a material effect on
our financial position or operations.
Our
Strategy
Our goal is to become a leading biopharmaceutical company that
develops differentiated products that can prevent and treat
serious infections. In order to achieve this strategic goal, we
intend to employ the following strategies:
|
|
|
Focus Our Resources on the Development of Our Antiviral
Product Candidates. In the near-tern, we plan to
focus our resources on further developing our most advanced
antiviral compounds, FV-100 for the treatment of shingles and
INX-189 for the treatment of chronic hepatitis C, through
the completion of their respective proof of concept clinical
trials. More specifically, we plan to:
|
|
|
|
|
|
Complete a Phase II proof of concept clinical trial of
FV-100 in shingles patients in the fourth quarter of
2010; and
|
|
|
|
file an IND and initiate a Phase I clinical trial for INX-189 in
the first half of 2010, with the goal of completing a Phase Ib
trial of INX-189 in HCV infected patients in 2011.
|
|
|
|
Conduct preclinical studies on potential
back-up and
follow-on HCV nucleotide polymerase inhibitors that possess
different chemical structures and properties than
INX-189. We have a number of potential
back-up and
follow on HCV nucleotide polymerase inhibitors that we are
evaluating in various stages of research and preclinical
development.
|
|
|
Continue to support our existing MSCRAMM programs, including
our MSCRAMM based license and collaboration agreement with
Pfizer for the development of staphylococcal vaccines as
needed. Pfizer recently initiated a Phase I trial
of a staphylococcal vaccine, which includes intellectual
property covered under our license agreement with them. Pfizer
is responsible for all preclinical, clinical and commercial
activities relating to the program, while we maintain
intellectual property covered under the license and provide
additional research support as needed. Further, we currently do
not plan to allocate any additional developmental resources to
our MSCRAMM protein and antibody platform, including Aurexis.
However, we do intend to continue to maintain the intellectual
property and to pursue licensing, co-development collaborations
or other business arrangements that can provide financial and
other synergistic capabilities to support the further
development and commercialization of our MSCRAMM protein and
antibody platform.
|
|
|
Accelerate and Sustain Growth Through
Collaborations. We intend to establish strategic
licenses and collaborations, partnerships or alliances with
leading pharmaceutical or biopharmaceutical companies with
greater financial, clinical development, manufacturing and
commercialization capabilities that we believe can accelerate
the development
and/or
commercialization of our antiviral product candidates after we
have independently established their clinical proof of concept.
|
Research
and Development
Our research and development expense in 2009 and 2008 was
$15.4 million and $12.5 million, respectively. We plan
to focus our resources primarily on the clinical development of
our most advanced antiviral compounds, namely FV-100, which we
are developing for the treatment of shingles, and INX-189, our
nucleotide polymerase inhibitor for the treatment of chronic
hepatitis C.
Sales and
Marketing
We currently do not have any commercialization or sales and
marketing capabilities, and currently have no plans to invest in
or build such capabilities internally. At this time, we
anticipate partnering or collaborating with, or licensing
certain rights to, other larger pharmaceutical or
biopharmaceutical companies to support the
15
development of our antiviral product candidates through
late-stage clinical development, and if successful,
commercialization. However, other than our existing license
agreement with Pfizer, we may decide not to license any
development and commercialization rights to our product
candidates in the future.
Manufacturing
We do not own or operate any facilities in which we could
formulate and manufacture our product candidates. We currently
rely on contract manufacturers to produce all materials required
to conduct preclinical studies and clinical trials under current
good manufacturing practices, (cGMP) with oversight
by our management team. We currently rely on a single group of
manufacturers for the preclinical and clinical trial materials
of each of our product candidates. However, we have identified
alternate sources of supply and other contract manufacturers
that can produce materials for our preclinical and clinical
trial requirements. If a contract manufacture fails to deliver
on schedule, or at all, it could delay or interrupt the
development process and affect our operating results.
We have used contract manufacturers to produce clinical trial
material for use in the clinical trials of FV-100. As of
December 31, 2009, we have a maximum purchase commitment of
$0.1 million under these agreements and have no other
long-term, non-cancellable financial obligations under these
agreements.
We have recently begun to use a different group of contract
manufacturers to produce clinical trial material for use in our
planned clinical trials of INX-189. As of December 31,
2009, our maximum purchase commitment is $0.4 million under
these agreements, and we have no other long-term,
non-cancellable financial obligations under these agreements.
Competition
Our industry is highly competitive and characterized by rapid
technological change and government regulation. Key competitive
factors in our industry include, among others, the ability to
successfully advance the development of a product candidate
through preclinical and clinical trials; the efficacy,
toxicological, safety, resistance or cross-resistance, and
dosing profile of a product or product candidate; the timing and
scope of regulatory approvals, if ever achieved; reimbursement
rates for and the average selling price of competing products
and pharmaceutical products in general; the availability of raw
materials and qualified contract manufacturing and manufacturing
capacity; manufacturing costs; intellectual property and patent
rights and their protection; and sales and marketing
capabilities. If ultimately approved, FV-100, INX-189, or any
product candidate from our current or future development
programs would compete against existing therapies or other
product candidates in various stages of clinical development
that we believe could become available in the future for the
treatment of shingles, chronic hepatitis C and the
prevention of staphylococcal infections . Some of the large
pharmaceutical companies that currently market products that
would compete with our product candidates, if approved, include,
but are not limited to: GlaxoSmithKline, Novartis and Merck in
the shingles market and Merck and Roche in the hepatitis C
market.
In addition to existing therapies, there are many other
pharmaceutical and biopharmaceutical companies developing
numerous direct acting antiviral product candidates across
various classes of compounds for the treatment of chronic
hepatitis C, including, but not limited to, Abbott, Anadys
Pharmaceuticals, Bristol Myers Squibb, Gilead, Idenix
Pharmaceuticals, Johnson and Johnson, Merck, Novartis, Pfizer,
Pharmasset, Roche, and Vertex, which may compete with INX-189 or
any other HCV nucleotide polymerase inhibitor we may develop in
the future. Most of the product candidates being developed by
these companies, and in particular those that belong to the
class of compounds referred to as protease inhibitors, are
further advanced in their clinical development than INX-189.
Further, Idenix Pharmaceuticals and Pharmasset are developing
nucleotide analogues, which are similar to the approach we are
using for INX-189. Moreover, their compounds have advanced
further in clinical development and are currently in
Phase II clinical trials.
While there are many direct acting antiviral compounds in
various stages of clinical development, none have been approved
for sale by the FDA or EMEA. Accordingly, the competitive
landscape for the treatment of chronic hepatitis C is
expected to be highly dynamic over the next five to ten years.
In order to compete effectively in this market in the future, we
believe a direct acting antiviral will need to demonstrate a
favorable
16
toxicity profile, superior potency, high resistance barriers,
and be amenable to combination with other direct acting
antivirals in a low fixed oral dose.
Developing pharmaceutical product candidates is a highly
competitive, expensive and risky activity with a long business
cycle. Many organizations, including the large pharmaceutical
and biopharmaceutical companies that have existing products on
the market or in clinical development that could compete with
FV-100 or INX-189, have substantially more capital resources
than we have, and much greater capabilities and experience than
we have in research and discovery, designing and conducting
preclinical studies and clinical trials, operating in a highly
regulated environment, manufacturing drug substances and drug
products, and marketing and sales. Our competitors may be more
successful than we are in obtaining FDA or other regulatory
approvals for their product candidates and achieving broad
market acceptance once they are approved. Our competitors
drugs or product candidates may be more effective, have fewer
negative side effects, be more convenient to administer, have a
more favorable drug-resistance profile, or be more effectively
marketed and sold than any drug we, or our potential
collaborators, may commercialize. New drugs, or classes of drugs
from competitors, may render our product candidates obsolete or
non-competitive before we are able to successfully develop them
or, if approved, before we can recover the expenses of
developing and commercializing them. We anticipate that we or
our collaborators will face intense and increasing competition
as new drugs and drug classes enter the market and advanced
technologies or new drug targets become available. If our
product candidates do not demonstrate any competitive advantages
over existing drugs, new drugs or product candidates, we or our
future collaborators may terminate the development or
commercialization of our product candidates at any time in the
future.
We anticipate that our product candidates, and in particular
FV-100 if successfully developed and approved, will compete
directly or indirectly with existing generic drugs, or drugs
that will be generic by the time our product candidates may be
approved for sale. Generic drugs are drugs whose patent
protection has expired, and generally have an average selling
price substantially lower than drugs protected by intellectually
property rights. Unless a patented drug can differentiate itself
from a generic drug in a meaningful manner, the existence of
generic competition in any indication will generally impose
significant pricing pressure on competing drugs.
Intellectual
Property Rights and Patents
Patents and other proprietary intellectual rights are crucial in
our business, and are essential to justify the development of
our product candidates. We have sought, and intend to continue
to seek, patent protection for our inventions and rely upon
patents, trade secrets, know-how, continuing technological
innovations and licensing opportunities to develop and maintain
a competitive advantage for our product candidates. In order to
protect these rights, know-how and trade secrets, we typically
require employees, consultants, collaborators and advisors to
enter into confidentiality agreements with us, generally stating
that they will not disclose any confidential information about
us to third parties for a certain period of time, and will
otherwise not use confidential information for anyones
benefit but ours.
As patent applications in the U.S. are maintained in
secrecy until patents are issued, unless earlier publication is
required under applicable law or in connection with patents
filed under the Patent Cooperation Treaty (PCT) or
as publication of discoveries in the scientific or patent
literature often lags behind the actual discoveries, we cannot
be certain that we or our licensors were the first to make the
inventions described in these pending patent applications or
that we or our licensors were the first to file patent
applications for such inventions. Furthermore, the patent
positions of biotechnology and pharmaceutical companies are
highly uncertain and involve complex legal and factual
questions, and therefore, the breadth of claims allowed in
biotechnology and pharmaceutical patents or their enforceability
cannot be predicted. We cannot be sure that any patents will be
issued or that patents licensed to us will be issued from any of
these patent applications or, should any patents issue, that we
will be provided with adequate protection against potentially
competitive products. Furthermore, we cannot be sure that
patents issued or licensed to us will be of any commercial
value, or that private parties or competitors will not
successfully challenge these patents or circumvent our patent
position in the U.S. or abroad. In the absence of adequate
patent protection, our business may be adversely affected by
competitors who develop comparable technology or products.
17
Pursuant to the terms of the Uruguay Round Agreements Act,
patents filed on or after June 8, 1995 have a term of
20 years from the date of filing, irrespective of the
period of time it may take for the patent to ultimately issue.
This may shorten the period of patent protection afforded to our
products as patent applications in the biopharmaceutical sector
often take considerable time to issue. Under the Drug Price
Competition and Patent Term Restoration Act of 1984, a sponsor
may obtain marketing exclusivity for a period of time following
FDA approval of certain drug applications, regardless of patent
status, if the drug is a new chemical entity or if new clinical
studies were used to support the marketing application for the
drug. The Drug Price Competition and Patent Term Restoration Act
of 1984 also allows a patent owner to obtain an extension of
applicable patent terms for a period equal to one-half the
period of time elapsed between the filing of an IND and the
filing of the corresponding New Drug Application
(NDA) plus the period of time between the filing of
the NDA and FDA approval, with a five year maximum patent
extension. We cannot be sure that we will be able to take
advantage of either the patent term extension or marketing
exclusivity provisions of this law.
The pharmaceutical industry places considerable importance on
obtaining patent and trade secret protection for new
technologies, products and processes. Our success depends, in
part, on our ability to develop and maintain a strong patent
position for our intellectual property and product candidates in
clinical development, both in the U.S. and in other
countries. Litigation or other legal proceedings may be
necessary to defend against claims of infringement, to enforce
our patents, or to protect our trade secrets, and could result
in substantial cost to us and diversion of our efforts. We
intend to file applications as appropriate for patents
describing the composition of matter of our drug candidates, the
proprietary processes for producing such compositions, and the
uses of our products and drug candidates. The patent positions
of companies in the pharmaceutical and biopharmaceutical
industry involve complex legal and factual questions and
therefore, their enforceability cannot be predicted with any
certainty. Our issued patents, those licensed to us, and those
that may be issued to us in the future may be challenged,
invalidated or circumvented, and the rights granted there under
may not provide us with proprietary protection or competitive
advantages against competitors with similar technology.
Furthermore, our competitors may independently develop similar
technologies or duplicate any technology developed by us.
Because of the extensive time required for development, testing
and regulatory review of a potential drug product candidate, it
is possible that our patent rights in any of our product
candidates may expire before such products can be approved for
sale and commercialized, or that our relevant patent rights will
remain in force for only a short period following
commercialization. Expiration of patents or rights we directly
own or license could adversely affect our ability to protect
future product development and, consequently, our operating
results and financial position.
Our success will depend significantly on our ability to:
|
|
|
obtain and maintain patent and other intellectual property
rights for the technology, inventions and improvements we
consider important to our product candidates;
|
defend our patents and proprietary rights;
|
|
|
preserve the confidentiality of our trade secrets; and
|
|
|
operate without infringing the patents and proprietary rights of
third parties.
|
We have an exclusive global license to an issued patent and
pending patent applications with respect to FV-100 in the
U.S. and internationally. The earliest projected expiration
date for patents which may issue from those patent applications
is approximately 2018, while many of the patent applications
will not expire until at least 2027.
We have an exclusive global license to multiple pending patent
applications, including a corresponding PCT application,
relating to INX-189 and a number of our preclinical HCV
nucleotide polymerase inhibitors. The earliest projected
expiration date for any patents that may issue with claims
related to INX-189 is approximately 2029.
We currently own or are licensed under numerous patents and
patent applications in the U.S. and foreign countries
related to our MSCRAMM protein platform. We have four issued
U.S. patents relating to the ClfA
18
protein found on S. aureus and antibodies to the protein.
These patents will expire in 2014, 2014, 2016, and 2017
respectively, if not extended. There are no corresponding
foreign rights available for the ClfA protein and nucleic acid
sequences. Two issued U.S. patents and their international
counterparts relate to Aurexis and contain claims to monoclonal
antibodies recognizing the ClfA protein. The U.S. patents
will expire in 2022 if not extended. We have two issued
U.S. patents and corresponding foreign rights relating to
multi-component vaccines for staphylococci. These patents will
expire in 2019 if not extended.
Licenses
In 2007, we acquired the rights to an exclusive worldwide
license from Cardiff, which includes FV-100, a bicyclic
nucleoside analogue for the treatment of VZV infections. The
license agreement calls for us to make certain contingent
milestone payments and pay a royalty on the sale of any products
that utilize the underlying intellectual property. We may
terminate this agreement upon 90 days notice. Cardiff may
terminate upon 90 days following certain specified breaches
of the license agreement by us.
In 2007, we entered into an exclusive worldwide license
agreement with Cardiff and Katholieke Universiteit in Leuven,
Belgium for intellectual property covering a series of HCV
nucleotide polymerase inhibitors in exchange for an upfront
license fee, future milestone payments and royalties on future
net sales. The agreement calls for us to make certain milestone
payments and pay a royalty on the sale of any products that
utilize the underlying intellectual property. We may terminate
this agreement upon 90 days notice. Cardiff and Katholieke
Universiteit may terminate upon 90 days following certain
specified breaches of the license agreement by us.
In October 2009, we entered into a second exclusive worldwide
license agreement with Cardiff for intellectual property
covering certain HCV nucleotide polymerase inhibitors in
exchange for future milestone payments and royalties on future
net sales. The agreement calls for us to make certain milestone
payments and pay a royalty on the sale of any products that
utilize the underlying intellectual property. We may terminate
this agreement upon 90 days notice. Cardiff may terminate
upon 90 days following certain specified breaches of the
license agreement by us. Pursuant to this license agreement, we
entered into a cooperative research agreement with Cardiff under
which we have agreed to collectively pay Cardiff approximately
$0.3 million in annual sponsored research payments over
approximately two years. Christopher McGuigan, a member of our
Board of Directors, holds the following positions at Cardiff
University Welsh School of Pharmacy: Professor, Chairman,
Department Research Committee; Director of Research; and Head of
Medicinal Chemistry.
In 2000, we executed an exclusive license from the Texas
A&M University System (Texas A&M) for a
number of issued U.S. patents, their related pending
U.S. divisional applications and corresponding
international filings with claims to MSCRAMM nucleic acids,
proteins, antibodies, and vaccines. BioResearch Ireland/Trinity
College Dublin is a co-owner of certain issued patents and
patent applications. We may terminate the license without cause
upon 60 days written notice. Otherwise, this agreement will
terminate upon the expiration of all licensed patents. We have
agreed to pay Texas A&M a royalty based on net sales for
any product sold utilizing these licenses. We are obligated to
pay a minimum royalty of $25,000 annually.
In 1996, we obtained an exclusive license from BioResearch
Ireland (BRI) under two issued U.S. patents and
a pending U.S. patent application directed to the ClfA
nucleic acid, protein, and antibodies. This license will
terminate upon the expiration of all licensed patents. We may
terminate the license agreement as to any patent or patent
application upon 90 days notice. We have agreed to pay BRI
a royalty based on net sales for any product sold utilizing
these licenses.
Pfizer,
Inc.
In August 2001, we entered into an exclusive worldwide license
and development collaboration agreement with Wyeth (subsequently
acquired by Pfizer in 2009) under which we granted Pfizer
exclusive rights to our MSCRAMM proteins for use in the
development and commercialization of human vaccines against
staphylococcal organisms. Under the agreement, the development,
manufacture and sale of any products resulting from the
collaboration are the responsibility of Pfizer. We may terminate
this agreement if Pfizer fails to use reasonable commercial
efforts to bring related products to market. Pfizer may
terminate the agreement without
19
cause upon six months notice. Otherwise, this agreement will
terminate upon the expiration of all of the licensed patents in
2023. Pursuant to this agreement, we have received
$7.3 million in an upfront license fee and annual research
support payments from Pfizer as of December 31, 2009. We
are entitled to receive minimum research support payments of
$1.0 million per year until commercial sales reach a
targeted threshold for any product developed under this
agreement. We are also entitled to receive milestone payments
upon the commencement of each Phase I, Phase II and
Phase III clinical trial, the filing of a biologic drug
application and regulatory approval of a licensed product. If
all such milestones are achieved relative to at least one
licensed product, we would be entitled to receive a minimum of
$10.0 million in milestone payments under the agreement.
The maximum amount of milestone payments we could receive with
respect to all licensed products is $15.5 million. Finally,
we are also entitled to royalties on net sales of related
products manufactured, sold or distributed by Pfizer. In January
2010, we announced that Pfizer had commenced enrollment in a
Phase I study with a staphylococcal vaccine that includes an
antigen covered under this license agreement, which resulted in
a milestone payment to us.
Pharmaceutical
Pricing and Reimbursement
In the U.S. and most foreign markets, any revenue
associated with the sale of our product candidates, if approved,
will depend largely upon the availability of reimbursement from
third-party payers. Third-party payers include various
government health authorities such as The Centers for Medicare
and Medicaid Services, (CMS) which administers
Medicare and Medicaid in the U.S., managed-care providers,
private health insurers and other organizations. Third-party
payers are increasingly challenging the price and examining the
cost-effectiveness of medical products and services, including
pharmaceuticals. In addition, significant uncertainty exists as
to the reimbursement status of newly approved pharmaceutical
products. Our products may ultimately not be considered
cost-effective, and adequate third-party reimbursement may not
be available to enable us to maintain price levels sufficient to
support a profitable operation or generate an appropriate return
on our investment in product development.
The U.S. and foreign governments periodically propose and
pass legislation designed to reduce the cost of healthcare and
pharmaceutical products. Accordingly, legislation and
regulations affecting the pricing of pharmaceuticals may change
before any of our product candidates are ever approved for sale.
In addition, the adoption of new legislation could further limit
reimbursement for pharmaceuticals. Further, an increasing
emphasis on managed care in the U.S. has and will continue
to increase the pressure on pharmaceutical pricing. The
marketability of our products may suffer if the government and
other third-party payers fail to provide adequate coverage and
reimbursement rates for our product candidates.
We, and our existing collaborators, intend to obtain coverage
and reimbursement from these third-party payers for any of our
products that may be approved for sale; however, we cannot
assure you that we will be successful in obtaining adequate
coverage, reimbursement, or pricing, if any.
Regulatory
Matters
Overview
The preclinical and clinical testing, manufacture, labeling,
storage, distribution, promotion, sale and export, reporting and
record-keeping of drug product candidates is subject to
extensive regulation by numerous governmental authorities in the
U.S., principally the U.S. Food and Drug Administration,
(FDA) and corresponding state agencies, and
regulatory agencies in foreign countries.
Non-compliance with applicable regulatory requirements can
result in, among other things, total or partial suspension of
the clinical development of a product candidate, manufacturing
and marketing, failure of the government to grant marketing
approval, withdrawal of marketing approvals, fines, injunctions,
seizure of products and criminal prosecution.
20
U.S.
Regulatory Approval
Pursuant to FDA regulations, we are required to successfully
undertake a long and rigorous development process before any of
our product candidates can be marketed or sold in the
U.S. This regulatory process typically includes the
following steps:
|
|
|
the completion of satisfactory preclinical studies under the
FDAs GLP regulation;
|
|
|
the submission and acceptance of an IND that must become
effective before human clinical trials may begin;
|
|
|
obtaining the approval of an Institutional Review Board
(IRB) at each site where we plan to conduct a
clinical trial to protect the welfare and rights of human
subjects in clinical trials;
|
|
|
the successful completion of a series of adequate and
well-controlled human clinical trials to establish the safety,
purity, potency and efficacy of any product candidate for its
intended use, which conform to the FDAs good clinical
practice (GCP) regulations;
|
|
|
the development and demonstration of manufacturing processes
that conform to FDA-mandated current Good Manufacturing
Practices (cGMPs); and
|
|
|
the submission to, and review and approval by, the FDA of a NDA
or a BLA prior to any commercial sale or shipment of a product.
|
Successfully completing this development process requires a
substantial amount of time and financial resources. We cannot
assure you that this process will result in the granting of an
approval for any of our product candidates on a timely basis, if
at all or that we will have sufficient financial resources to
see the process through to completion.
Preclinical
Studies
Preclinical studies generally include laboratory, or
in vitro, evaluation of a product candidate, its
chemistry, formulation, stability and toxicity, as well as
certain in vivo animal studies to assess its potential
safety and biologic activity. We must submit the results of
these preclinical studies, together with other information,
including manufacturing records, analytical data and the
clinical trial protocol, to the FDA as part of an IND, which
must become effective before we may begin any human clinical
trials. An IND generally becomes effective 30 days after
receipt by the FDA, unless the FDA, within this
30-day time
period, raises concerns or questions about the intended conduct
of the trials and imposes what is referred to as a clinical
hold. If one or more of our product candidates is placed on
clinical hold, we will be required to resolve any outstanding
issues to the satisfaction of the FDA before we could begin, or
continue, clinical trials of such product candidates.
Preclinical studies supportive of an IND generally take a year
or more to complete, and there is no guarantee that an IND based
on those studies will become effective, allowing human clinical
testing to begin.
Certain preclinical studies must be conducted in compliance with
the FDAs GLP regulations and the U.S. Department of
Agricultures Animal Welfare Act. Violations of these
regulations can, in some cases, lead to invalidation of the
studies, requiring such studies to be conducted again.
Clinical
Trials
This clinical trial phase of drug development follows a
successful IND submission and involves the activities necessary
to demonstrate the safety, tolerability, efficacy and dosage of
an investigational new drug substance in humans, as well as the
ability to produce the drug substance in accordance with the
FDAs cGMP, requirements. Clinical trials are conducted
under protocols detailing, among other things, the objectives of
the study and the parameters to be used in assessing the safety
and the efficacy of the product candidate. Each clinical trial
protocol must be submitted to the FDA, as part of the IND, prior
to beginning the trial. Each trial must be reviewed, approved
and conducted under the auspices of an IRB and, with limited
exceptions, requires the patients informed consent to
participate in the trial. Sponsors, investigators, and IRBs also
must satisfy extensive GCPs, including regulations and
guidelines for obtaining informed consent from the study
subjects,
21
complying with the protocol and investigational plan, adequately
monitoring the clinical trial, and reporting serious adverse
events on a timely basis. The FDA, the IRB or the sponsor may
suspend a clinical trial at any time on various grounds,
including a finding that the subjects or patients are being
exposed to an unacceptable health risk.
Clinical trials to support a NDA or BLA for marketing approval
are typically conducted in three sequential phases:
Phase I, II and III, with Phase IV clinical
trials often conducted after marketing approval has been
granted. The FDA may require sponsors to conduct Phase IV
clinical trials to study certain safety issues. Data from these
activities are compiled in a NDA or a BLA for submission to the
FDA requesting approval to market the drug. These phases may be
compressed, may overlap, or may be omitted in some circumstances.
|
|
|
Phase I: After an IND becomes effective, Phase
I human clinical trials can begin. A product candidate is
typically introduced either into healthy human subjects or in
some cases, patients with the medical condition for which the
product candidate is intended to be used. Generally, the purpose
of a Phase I trial is to assess a product candidates
safety and the ability of the human body to tolerate it.
Absorption, metabolism, distribution and pharmacokinetic trials
are also generally performed at this stage. Phase I trials
typically evaluate these aspects of the investigational drug in
both single doses as well as multiple doses.
|
|
|
Phase II: During Phase II trials, a
product candidate is generally studied in an exploratory trial
or trials in a limited number of patients with the disease or
medical condition for which it is intended to be used in order
to (i) further identify any possible adverse side effects
and safety risks, (ii) assess the preliminary or potential
efficacy or biologic activity of the product candidate for
specific targeted diseases or medical conditions, and
(iii) assess dose tolerance and determine the optimal dose
for a subsequent Phase II or Phase III trial.
Phase II trials generally involve patients who are divided
into one or more groups that will get one of several dose levels
of the product candidate, and a control group that will not be
treated with the product candidate and may receive a placebo or
a drug already on the market for the same indication.
|
|
|
Phase III: If and when one or more
Phase II trials demonstrate that a specific dose or range
of doses of a product candidate is potentially effective and has
an acceptable safety profile, one or more Phase III trials
are generally undertaken to further demonstrate or confirm
clinical efficacy and to further evaluate the safety of the
investigational drug in an expanded patient population, with the
goal of evaluating its overall risk-benefit relationship.
Phase III trials are generally designed to reach a specific
goal or endpoint, the achievement of which is intended to
demonstrate the product candidates clinical efficacy. The
successful demonstration of clinical efficacy and safety in one
or more Phase III trials is typically a prerequisite to the
filing of a NDA or BLA for a product candidate.
|
In the case of product candidates being developed for serious or
life-threatening diseases, such as HCV, Phase I trials may be
conducted in patients with the respective disease rather than in
healthy volunteers. These studies may provide initial evidence
of activity or efficacy traditionally obtained in Phase II
clinical trials, and therefore these trials may be referred to
as Phase I/II or Phase Ib clinical trials.
A company may request an
end-of-Phase II
Meeting with the FDA to assess the safety of the dose
regimen to be studied in the Phase III clinical trial, to
evaluate the planned design of a Phase III trial, and to
identify any additional information that will be needed to
support a NDA. If a Phase III clinical trial has been the
subject of discussion at an
end-of-Phase II
Meeting, the trial sponsor is eligible for a Special
Protocol Assessment, (SPA) by the FDA, a process by
which the FDA, at the request of the sponsor, will evaluate the
trial protocol and issues relating to the protocol within
45 days to assess whether it is deemed to be adequate to
meet the scientific and regulatory requirements identified by
the sponsor. If the FDA and the sponsor reach agreement on the
design and size of a Phase III clinical trial intended to
form the primary basis of an efficacy claim in a NDA or BLA, the
FDA may reduce the understanding to writing. The SPA, however,
is not a guarantee of product approval by the FDA, or approval
of any permissible claims about the product.
Throughout the various phases of clinical development, samples
of the product candidate made in different batches are tested
for stability to establish any shelf life constraints. In
addition, large-scale production protocols and written standard
operating procedures for each aspect of commercial manufacture
and testing must be developed. Phase I, II,
and III testing may not be completed successfully within
any specified time
22
period, if at all. The FDA closely monitors the progress of each
of the three phases of clinical development that are conducted
under an IND and may, at its discretion, reevaluate, alter,
suspend, or terminate further evaluation or trials based upon
the data accumulated to that point and the FDAs assessment
of the risk/benefit ratio to the subject or patient. The FDA,
the sponsor, or an IRB may suspend or terminate a clinical trial
at any time for various reasons, including a finding that the
subjects or patients are being exposed to an unacceptable health
risk. The FDA can also request additional clinical trials be
conducted as a condition to product approval or advancement to
the next stage of development. Additionally, new government
requirements may be established that could delay or prevent
regulatory approval of products under development. Furthermore,
IRBs, which are independent entities constituted to protect
human subjects in the institutions in which clinical trials are
being conducted, have the authority to suspend clinical trials
in their respective institutions at any time for a variety of
reasons, including safety issues. A Data Safety Monitoring Board
may suspend or terminate a clinical trial at any time on various
grounds, including a finding that the subjects or patients are
being exposed to an unacceptable health or safety risk.
Clinical trials performed outside the U.S. under an IND
must meet the same requirements that apply to studies conducted
in the U.S. The FDA may accept a foreign clinical study not
conducted under an IND only if the study is well-designed,
well-conducted, performed by qualified investigators, and
conforms to the ethical principles contained in the Declaration
of Helsinki, or with the laws and regulations of the country in
which the research was conducted, whichever provides greater
protection of the human subjects.
Certain information about clinical trials, including a
description of the study, participation criteria, location of
study sites, and contact information, is required to be sent to
the National Institutes of Health, (NIH) for
inclusion in a publicly-accessible database that is available at
www.clinicaltrials.gov. Sponsors also are subject to certain
state laws imposing requirements to make publicly available
certain information on clinical trial results. In addition, the
Food and Drug Administration Amendments Act of 2007 directed the
FDA to issue regulations that will require sponsors to submit to
the NIH the results of all controlled clinical studies, other
than Phase I studies.
New Drug
and Biologics License Applications
If and when we believe that all the requisite clinical trials
for a product candidate have been completed with satisfactory
and supporting clinical data, we must submit a NDA or BLA to the
FDA in order to obtain approval for the marketing and sale of a
product candidate in the U.S. Among many other items, a NDA
or BLA typically includes the results of all preclinical and
toxicology studies and human clinical trials and a description
of the manufacturing process and quality control methods. The
FDA must approve the NDA or BLA prior to the marketing and sale
of the related product. The FDA may deny a NDA or BLA if it
believes all applicable regulatory criteria are not satisfied,
or it may require additional data, including clinical,
toxicology, safety or manufacturing data prior to approval. The
FDA has 60 days from its receipt of a NDA or BLA to review
the application to ensure that it is sufficiently complete for a
substantive review before accepting it 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 amended with
the additional information. The FDA may also refer applications
for novel drug products or drug products which present difficult
questions of safety or efficacy to an advisory committee,
typically a panel that includes clinicians and other experts,
for review, evaluation and a recommendation as to whether the
application should be approved. The FDA is not bound by the
recommendation of an advisory committee.
A NDA or BLA can receive either standard or priority review. A
drug candidate representing a potentially significant
improvement in the treatment, prevention or diagnosis of a life
threatening or serious disease may receive priority review. In
addition, product candidates studied for their safety and
effectiveness in treating serious or life-threatening illnesses
that provide meaningful therapeutic benefit over existing
treatments may also receive accelerated approval on the basis of
adequate and well-controlled clinical trials establishing that
the drug product has an effect on a surrogate endpoint that is
reasonably likely to predict 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 receiving accelerated approval
perform adequate and
23
well-controlled post-marketing Phase IV clinical trials.
Priority review and accelerated approval do not change the
standards for approval, but may expedite the approval process.
If the results of the FDAs evaluation of the NDA or BLA,
and inspection of manufacturing facilities are favorable, the
FDA will issue an approval letter. An approval letter authorizes
commercial marketing of the drug with specific prescribing
information for a specific indication. As a condition of NDA or
BLA approval, the FDA may require post-approval testing,
including Phase IV trials, and surveillance to monitor the
drugs safety or efficacy and may impose other conditions,
including labeling or distribution restrictions which can
materially impact the potential market and profitability of the
drug. Once granted, product approvals may be withdrawn if
compliance with regulatory standards is not maintained or
problems are identified following initial marketing.
If the FDA determines that it cannot approve the application in
its present form, it generally issues what is referred to as a
complete response letter. A complete response letter will
describe all of the specific deficiencies that the agency has
identified in an application that must be met in order to secure
final approval of the NDA or BLA. If and when those conditions
are met to the FDAs satisfaction, the FDA will typically
re-review the application and possibly issue an approval letter.
However, even after submitting this additional information, the
FDA ultimately may decide that the application does not satisfy
the regulatory criteria for approval. It can take several years
for the FDA to approve a NDA or BLA once it is submitted, and
the actual time required for any product candidate to be
approved may vary substantially, depending upon the nature,
complexity and novelty of the product candidate.
We cannot assure you that the FDA, or any other similar
regulatory agency in another country, will grant approval for
any of our product candidates on a timely basis, if at all.
Success in preclinical or early-stage clinical trials does not
assure success in later stage clinical trials. Data obtained
from preclinical and clinical activities is not always
conclusive and may be susceptible to varying interpretations
that could delay, limit or prevent regulatory approval.
Post-Approval Regulations
If and when a product candidate receives regulatory approval to
be marketed and sold, the approval is typically limited to
specific clinical indications. Further, even after regulatory
approval is obtained, subsequent discovery of previously unknown
safety problems with a product may result in restrictions on its
use, or even complete withdrawal of the product from the market.
Any FDA-approved products manufactured or distributed by us are
subject to continuing regulation by the FDA, including
record-keeping requirements and reporting of adverse events or
experiences. Further, drug manufacturers and their
subcontractors are required to register their establishments
with the FDA and state agencies, and are subject to periodic
inspections by the FDA and state agencies for compliance with
cGMP regulations, which impose rigorous procedural and
documentation requirements upon us and our contract
manufacturers. We cannot be certain that we, or our present or
future contract manufacturers or suppliers, will be able to
comply with cGMP regulations and other FDA regulatory
requirements. Failure to comply with these requirements may
result in, among other things, total or partial suspension of
production activities for our current and future product
candidates, failure of the FDA to grant approval for marketing
of such product candidates, and withdrawal, suspension, or
revocation of marketing approvals.
If the FDA approves one or more of our product candidates, we or
our collaborators and our contract manufacturers must provide
the FDA with certain updated safety, efficacy and manufacturing
information. Product changes, as well as certain changes in the
manufacturing process or facilities where the manufacturing
occurs or other post-approval changes may necessitate additional
FDA review and approval. We rely, and expect to continue to
rely, on third parties for the formulation and manufacture 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 require substantial resources to
correct.
The labeling, advertising, promotion, marketing and distribution
of an approved drug or biologic product must also comply with
FDA and Federal Trade Commission, (FTC) requirements
which include, among others,
24
standards and regulations for
direct-to-consumer
advertising, off-label promotion, industry sponsored scientific
and educational activities, and promotional activities involving
the Internet. The FDA and FTC have very broad enforcement
authority, and failure to abide by these regulations can result
in penalties, including the issuance of a Warning Letter
directing the company to correct deviations from regulatory
standards and enforcement actions that can include seizures,
fines, injunctions and criminal prosecution.
The FDAs policies may change in the future and additional
government regulations may be enacted that could prevent or
delay regulatory approval of our product candidates. Moreover,
increased attention to the containment of health care costs in
the U.S. and in foreign markets could result in new
government regulations that could have a material adverse effect
on our business. We cannot predict the likelihood, nature or
extent of adverse governmental regulation that might arise from
future legislative or administrative action, either in the
U.S. or abroad, or the impact such changes could have on
our business.
Once an approval is granted, the FDA may withdraw the approval
if compliance with regulatory standards is not maintained or if
problems occur after the product reaches the market. After
approval, some types of changes to the approved product, such as
adding new indications, manufacturing changes and additional
labeling claims, are subject to further FDA review and approval.
In addition, the FDA may require testing and surveillance
programs to monitor the effect of approved products that have
been commercialized, and in some circumstances the FDA has the
power to prevent or limit further marketing of a product based
on the results of these post-marketing programs.
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. In addition, FDA regulations
and guidance are often revised or reinterpreted by the agency in
ways that may significantly affect our business and our
products. It is impossible to predict whether legislative
changes will be enacted, or whether FDA regulations, guidance or
interpretations will change or what the impact of such changes,
if any, may be.
Fast
Track Drug Status
The FDA has developed Fast Track policies, which
provide for the potential for an expedited review of a NDA or
BLA. However, there is no assurance that the FDA will, in fact,
accelerate the review process for a Fast Track product
candidate. Fast Track status is provided only for those new and
novel therapies that are intended to treat persons with
life-threatening and severely debilitating diseases where there
is a defined unmet medical need, especially where no
satisfactory alternative therapy exists or the new therapy
appears to be significantly superior to existing alternative
therapies. During the development of product candidates that
qualify for this status, the FDA may expedite consultations and
reviews of these experimental therapies. Fast Track status also
provides for the potential for a priority review,
whereby the FDA agrees to reduce the time it takes to review a
NDA or BLA. The FDA can base approval of a marketing application
for a Fast Track product on a clinical endpoint or on a
surrogate endpoint that is reasonably likely to predict clinical
benefit. The FDA generally requires as a condition of the
approval of an application for certain Fast Track products,
additional post-approval studies or Phase IV clinical
studies to validate the surrogate endpoint or confirm the effect
on the clinical endpoint. Further, Fast Track status allows for
a rolling NDA or BLA submission, whereby portions of the
application can be submitted to the FDA for review prior to the
completion of the entire application. A rolling submission could
result in a reduction in the length of time it would otherwise
take the FDA to complete its review of the application. Fast
Track status may be revoked by the FDA at any time if the
clinical results of a trial fail to continue to support the
assertion that the respective product candidate has the
potential to address an unmet medical need. In addition, Fast
Track status may be granted for a specific application of a drug
candidate. Aurexis has been granted Fast Track status.
Foreign
Regulatory Approval
Outside of the U.S., our ability to market any of our existing
or future product candidates will also be contingent upon
receiving marketing authorizations from the appropriate foreign
regulatory authorities whether or not FDA approval has been
obtained. The foreign regulatory approval process in most
industrialized
25
countries generally includes risks that are similar to the FDA
approval process described above. The requirements governing
conduct of clinical trials and marketing authorizations, and the
time required to obtain requisite approvals may vary widely from
country to country and differ from that required for FDA
approval.
Under European Union regulatory systems, we may submit marketing
authorization applications either under a centralized or
decentralized procedure. The centralized procedure, which is
compulsory for medicines produced by certain biotechnological
processes and optional for those which are highly innovative,
provides for the grant of a single marketing authorization that
is valid for all European Union member states. The decentralized
procedure provides for a member state, known as the reference
member state, to assess an application, with one or more other
member states subsequently approving that assessment. Under this
procedure, an applicant submits an application, or dossier, and
related materials, including a 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.
Employees
As of December 31, 2009, we had 32 full-time
employees, 24 of whom were engaged in research and development,
clinical, regulatory, chemistry and manufacturing, and eight of
whom were engaged in administration, finance, and business
development activities. All of our employees have entered into
non-disclosure agreements with us regarding our intellectual
property, trade secrets and other confidential information. None
of our employees is represented by a labor union or covered by a
collective bargaining agreement, nor have we experienced any
work stoppages. We believe that we maintain satisfactory
relations with our employees.
Available
Information
We file reports with the Securities and Exchange Commission,
(SEC) including annual reports on
Form 10-K,
Quarterly Reports on
Form 10-Q,
and other reports from time to time. The public may read and
copy any materials filed with the SEC at the SECs Public
Reference Room at 100 F Street, NE, Washington, DC
20549 on official business days during the hours of
10:00 AM to 3:00PM. The public may obtain information on
the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330.
We are an electronic filer and the SEC maintains an Internet
site at www.sec.gov that contains the reports, proxy and
information statements, and other information filed
electronically. Our website address is www.inhibitex.com. Please
note that these website addresses are provided as inactive
textual references only. We make available free of charge
through our website our Annual Report on
Form 10-K,
Quarterly Reports on
Form 10-Q,
Current Reports on
Form 8-K,
and all amendments to those reports as soon as reasonably
practicable after such material is electronically filed with or
furnished to the SEC. The information provided on our website is
not part of this report, and is therefore not incorporated by
reference unless such information is otherwise specifically
referenced elsewhere in this report.
26
You should carefully consider the following discussion of
risks, together with the other information contained in this
Form 10-K.
The occurrence of any of the following risks could materially
harm our business, our financial condition, and our ability to
raise additional capital in the future or ever become
profitable. In that event, the market price of our common stock
could decline and you could lose part or all of your
investment.
Risks
Relating to our Development of our Product Candidates
All of
our product candidates are in the early stages of development
and their commercial viability remains subject to future
preclinical studies, clinical trials, regulatory approvals and
the risks generally inherent in these activities. If we are
unable to successfully advance or develop our product
candidates, our business will be materially
harmed.
In the near-term, failure to successfully advance the
development of one or more of our product candidates may have a
material adverse effect on us. To date, we have not successfully
developed or commercially marketed, distributed or sold any
product candidates. The success of our business depends
primarily upon our ability to successfully advance the
development of our product candidates through preclinical
studies and clinical trials, have these product candidates
approved for sale by the FDA or regulatory authorities in other
countries, and ultimately, have our product candidates
successfully commercialized by us or a strategic collaborator.
We have initiated a Phase II trial for FV-100, a product
candidate we are developing to treat shingles and anticipate
completing this trial in the fourth quarter. Further, we plan to
file an IND for INX-189, a nucleotide polymerase inhibitor we
are developing to treat chronic hepatitis C infections,
and, subject to FDA review, initiate a Phase I clinical trial in
the first half of 2010. We cannot assure you that the results of
planned or ongoing preclinical studies or clinical trials will
support or justify the continued development of one or both of
these product candidates, or that we will receive approval from
the FDA, or a similar regulatory authority in other countries,
to the advance the development of our product candidates.
Our product candidates must satisfy rigorous regulatory
standards of safety and efficacy before we can advance or
complete their clinical development, or they can be approved for
sale. To satisfy these standards, we must engage in expensive
and lengthy testing, preclinical studies and clinical trials,
develop acceptable manufacturing processes, and obtain
regulatory approval of our product candidates. Despite these
efforts, our product candidates may not:
|
|
|
offer therapeutic or other benefits over existing comparable
drugs or other product candidates in development;
|
|
|
be proven to be safe and effective in current and future
preclinical studies or clinical trials;
|
|
|
have the desired effects (or may include undesirable or
unexpected effects);
|
|
|
meet applicable regulatory standards;
|
|
|
be capable of being formulated and manufactured in commercially
suitable quantities and at an acceptable cost; or
|
be successfully commercialized by us or by collaborators.
Even if we demonstrate favorable results in preclinical studies
and early-stage clinical trials, we cannot assure you that the
results of later stage clinical trials will be favorable and
continue to support the development of our product candidates. A
number of companies in the pharmaceutical and biopharmaceutical
industries have experienced significant delays, setbacks and
failure in all stages of development, including late-stage
clinical trials, even after achieving promising results in
preclinical testing or early-stage clinical trials. Accordingly,
results from completed preclinical studies and early-stage
clinical trials of our product candidates may not be predictive
of the results we may obtain in later-stage trials. Furthermore,
even if the data collected from preclinical studies or clinical
trials involving our product candidates demonstrate a
satisfactory safety and efficacy profile, such results may not
be sufficient to support the submission of an IND application,
the
27
initiation or continuation of human clinical trials, or a NDA or
BLA to obtain regulatory approval from the FDA in the
U.S. to market and sell the product.
Our product candidates will require significant additional
research and development efforts, the commitment of substantial
financial resources, and regulatory approvals prior to advancing
into further clinical development or being commercialized by us
or collaborators. We cannot assure you that any of our product
candidates will successfully progress through the drug
development process or will result in commercially viable
products. We do not expect any of our product candidates to be
commercialized by us or collaborators for at least several years.
If the
results of preclinical studies or clinical trials for our
product candidates, including those that are subject to existing
or future license or collaboration agreements, are unfavorable
or delayed, we could be delayed or precluded from the further
development or commercialization of our product candidates,
which could materially harm our business.
In order to further advance the development of, and ultimately
receive regulatory approval to sell, our product candidates, we
must conduct extensive preclinical studies and clinical trials
to demonstrate their safety and efficacy to the satisfaction of
the FDA or regulatory authorities in other countries, as the
case may be. Preclinical studies and clinical trials are
expensive, complex, may take many years to complete, and have
highly uncertain outcomes. Delays, setbacks or failures can
occur at any time, or in any phase of preclinical or clinical
development, and can result from concerns about safety or
toxicity, a lack of demonstrated efficacy or superior efficacy
over other similar products that have been approved for sale or
are in more advanced stages of development, poor study or trial
design, and issues related to the formulation or manufacturing
process of the materials used to conduct the trials. The results
of prior preclinical studies or clinical trials are not
necessarily predictive of the results we may observe in later
stage clinical trials. In many cases, product candidates in
clinical development may fail to show desired safety and
efficacy characteristics despite having favorably demonstrated
such characteristics in preclinical studies or earlier stage
clinical trials.
In addition, we may experience numerous unforeseen events
during, or as a result of, preclinical studies and the clinical
trial process that could delay or prevent our ability to advance
the development, receive regulatory approval, or commercialize
our product candidates, including, but not limited to:
|
|
|
communications with the FDA, or comparable regulatory
authorities in different countries, regarding the scope or
design of the trial;
|
|
|
regulatory authorities or independent review boards
(IRBs) not authorizing us to commence or conduct a
clinical trial at a prospective trial site;
|
|
|
enrollment in our clinical trials being delayed or proceeding at
a slower pace than we expected, or participants dropping out of
our clinical trials at a higher rate than we anticipated;
|
|
|
our third party contractors, upon whom we rely for conducting
preclinical studies and clinical trials, may fail to comply with
regulatory requirements or meet their contractual obligations to
us in a timely manner;
|
|
|
having to suspend or ultimately terminate our clinical trials if
participants are being exposed to unacceptable health risks;
|
|
|
IRBs or regulators requiring that we hold, suspend or terminate
our preclinical studies and clinical trials for various reasons,
including non-compliance with regulatory requirements; and
|
|
|
the supply or quality of drug material necessary to conduct our
preclinical studies or clinical trials being insufficient,
inadequate or unavailable.
|
Even if the data collected from preclinical studies or clinical
trials involving our product candidates demonstrate a
satisfactory safety and efficacy profile, such results may not
be sufficient to support the submission of an IND application,
the initiation or continuation of human clinical trials, or a
New Drug Application (NDA) or Biologics License
Application (BLA) to obtain regulatory approval from
the FDA in the U.S. to market and sell the product.
28
We and
our collaborators must comply with extensive government
regulations in order to advance our product candidates through
the development process and ultimately obtain and maintain
marketing approval for our products in the U.S. and
abroad.
Product candidates that we may receive regulatory approval to
advance through clinical development and ultimately market and
sell are subject to extensive and rigorous domestic and foreign
government regulation. In the U.S., the FDA regulates, among
other things, the development, testing, manufacture, safety,
efficacy, record-keeping, labeling, storage, approval,
advertising, promotion, sale and distribution of pharmaceutical
and biopharmaceutical products. Our product candidates are also
subject to similar regulation by foreign governments to the
extent we seek to develop or market them in those countries. We,
or our collaborators, must provide the FDA and foreign
regulatory authorities, if applicable, with preclinical and
clinical data, as well as data supporting an acceptable
manufacturing process, that appropriately demonstrate our
product candidates safety and efficacy before they can be
approved for the targeted indications. None of our product
candidates have been approved for sale in the U.S. or any
foreign market, and we cannot predict whether we will obtain
regulatory approval for any product candidate we are developing
or plan to develop. The regulatory review and approval process
can take many years, is dependent upon the type, complexity,
novelty of, and medical need for the product, requires the
expenditure of substantial resources, and involves
post-marketing surveillance and vigilance and ongoing
requirements for post-marketing studies or Phase IV
clinical trials. In addition, we or our collaborators may
encounter delays in, or fail to gain, regulatory approval for
our product candidates based upon additional governmental
regulation resulting from future legislative, administrative
action or changes in FDA policy or interpretation during the
period of product development. Delays or failures in obtaining
regulatory approval to advance our product candidates through
clinical development and ultimately commercialize them may:
|
|
|
adversely affect our ability to further develop or commercialize
any of our product candidates;
|
|
|
diminish any competitive advantages that we or our collaborators
may have or attain; and
|
|
|
adversely affect the receipt of potential milestone payments and
royalties from the sale of our products or product revenues.
|
Furthermore, any regulatory approvals, if granted, may later be
withdrawn. If we or our collaborators fail to comply with
applicable regulatory requirements at any time, or if
post-approval safety concerns arise, we or our collaborators may
be subject to restrictions or a number of actions, including:
|
|
|
delays, suspension or termination of clinical trials related to
our products;
|
|
|
refusal by the FDA to review pending applications or supplements
to approved applications;
|
|
|
product recalls or seizures;
|
|
|
suspension of manufacturing;
|
|
|
withdrawals of previously approved marketing
applications; and
|
|
|
fines, civil penalties and criminal prosecutions.
|
Additionally, we or our collaborators may voluntarily suspend or
terminte the preclinical or clinical development of a product
candidate, or withdraw any approved product from the market if
we believe that it may pose an unacceptable safety risk to
patients, or if the product candidate or approved product no
longer meets our business objectives. The ability to develop or
market a pharmaceutical product outside of the U.S. is
contingent upon receiving appropriate authorization from the
respective foreign regulatory authorities. Foreign regulatory
approval processes typically include many, if not all, of the
risks and requirements associated with the FDA regulatory
process for drug development and may include additional risks.
29
We
have limited experience in the development of small molecule
antiviral product candidates and therefore may encounter
difficulties developing our product candidates or managing our
operations in the future.
Our two lead antiviral product candidates, FV-100 and INX-189,
are chemical compounds, also referred to as small molecules. We
have limited experience in the discovery, development and
manufacturing of small molecule antiviral compounds. In order to
successfully develop these product candidates, we must
supplement our research, clinical development, regulatory,
medicinal chemistry, virology and manufacturing capabilities
through the addition of key employees, consultants or
third-party contractors to provide certain capabilities and
skill sets that we do not possess. We cannot assure you that we
will be able to attract or retain such qualified employees,
consultants or third-party contractors with appropriate small
molecule antiviral drug development experience. In the event we
cannot attract such capabilities or successfully develop or
manage our antiviral pipeline, our business could be materially
harmed.
If we
are unable to retain or attract key employees, advisors or
consultants, we may be unable to successfully develop our
product candidates in a timely manner, if at all, or otherwise
manage our business effectively.
We have adopted an operating model that largely relies on the
outsourcing of a number of responsibilities and activities to
third-party consultants and contract organizations in order to
advance the development of our product candidates. Therefore,
our success depends in part on our ability to retain qualified
key management, personnel, and directors to develop, implement
and execute our business strategy and operate the company, as
well as academic and corporate advisors or consultants to assist
us. We are currently highly dependent upon the efforts of our
management team. In order to develop our product candidates, we
need to retain or attract certain personnel, consultants or
advisors with experience in a number of disciplines, including
research and development, clinical trials, medical matters,
government regulation of pharmaceuticals, manufacturing and
chemistry, business development, accounting, finance, human
resources and information systems. Although we have not had
material difficulties in retaining key personnel in the past, we
may not be able to continue to do so in the future on acceptable
terms, if at all. If we lose any key employees, or are unable to
attract and retain qualified key personnel, directors, advisors
or consultants, the development of our product candidates could
be delayed or terminated and our business may be harmed.
If
third party vendors upon whom we rely to conduct our preclinical
studies or clinical trials do not perform or fail to comply with
strict regulations, these studies or trials for our product
candidates may be delayed, terminated, or fail, or we could
incur significant additional expenses.
We have limited resources dedicated to designing, conducting and
managing preclinical studies and clinical trials. We have
historically relied, and intend to continue to rely, on third
parties including clinical research organizations, consultants
and principal investigators to assist us in designing, managing,
monitoring and conducting our preclinical studies and clinical
trials. We rely on these vendors and individuals to perform many
facets of the drug development process, including certain
preclinical studies, the recruitment of sites and patients for
participation in our clinical trials, maintenance of good
relations with the clinical sites, and ensuring that these sites
are conducting our trials in compliance with the trial protocol
and applicable regulations. If these third parties fail to
perform satisfactorily, or do not adequately fulfill their
obligations under the terms of our agreements with them, we may
not be able to enter into alternative arrangements without undue
delay or additional expenditures, and therefore the preclinical
studies and clinical trials of our product candidates may be
delayed or prove unsuccessful. Further, the FDA may inspect some
of the clinical sites participating in our clinical trials in
the U.S., or our third-party vendors sites, to determine
if our clinical trials are being conducted according to good
clinical practices (CGP). If we or the FDA determine
that our third-party vendors are not in compliance with, or have
not conducted our clinical trials according to applicable
regulations, we may be forced to delay, repeat or terminate such
clinical trials. Any delay, repetition or termination of our
clinical trials and preclinical studies could be very costly,
result in the elimination of a development program, and
materially harm our business.
30
If
third-party contract manufacturers, upon whom we rely to
formulate and manufacture our product candidates, do not
perform, fail to manufacture according to our specifications or
fail to comply with strict regulations, our preclinical studies
or clinical trials could be adversely affected and the
development of our product candidates could be delayed or
terminated or we could incur significant additional
expenses.
We do not own or operate any formulation or manufacturing
facilities. We have historically contracted with third-party
contract manufacturers and organizations to formulate and
manufacture the preclinical and clinical materials we use to
test our product candidates in development. We intend to
continue to rely on third-party contractors, at least for the
foreseeable future, to formulate and manufacture these
preclinical and clinical materials. Our reliance on third-party
contract manufacturers exposes us to a number of risks, any of
which could delay or prevent the completion of our preclinical
studies or clinical trials, or the regulatory approval or
commercialization of our product candidates, result in higher
costs, or deprive us of potential product revenues. Some of
these risks include:
|
|
|
our third-party contractors failing to develop an acceptable
formulation to support later-stage clinical trials for, or the
commercialization of, our product candidates;
|
|
|
our contract manufacturers failing to manufacture our product
candidates according to their own standards, our specifications,
current good manufacturing procedures (cGMP), or
otherwise manufacturing material that we or the FDA may deem to
be unusable in our clinical trials;
|
|
|
our contract manufacturers being unable to increase the scale
of, or increase the capacity for, our product candidates. We may
experience a shortage in supply, or the cost to manufacture our
products may increase to the point where it adversely affects
the cost of our product candidates. We cannot assure you that
our contract manufacturers will be able to manufacture our
products at a suitable scale, or we will be able to find
alternative manufacturers acceptable to us that can do so;
|
|
|
our contract manufacturers placing a priority on the manufacture
of their own products, or other customers products;
|
|
|
our contract manufacturers failing to perform as agreed or may
not remain in the contract manufacturing business; and
|
|
|
our contract manufacturers plants being closed as a result
of regulatory sanctions or a natural disaster.
|
Manufacturers of pharmaceutical products are subject to ongoing
periodic inspections by the FDA, the U.S. Drug Enforcement
Administration (DEA) and corresponding state and
foreign agencies to ensure strict compliance with FDA-mandated
cGMPs, other government regulations and corresponding foreign
standards. While we are obligated to audit their performance, we
do not have control over our third-party contract
manufacturers compliance with these regulations and
standards. Failure by our third-party manufacturers, or us, to
comply with applicable regulations could result in sanctions
being imposed on us or the drug manufacturer from the production
of other third-party products. These sanctions may include
fines, injunctions, civil penalties, failure of the government
to grant pre-market approval of drugs, delays, suspension or
withdrawal of approvals, seizures or recalls of product,
operating restrictions and criminal prosecutions, any of which
could significantly and adversely affect our business.
In the
event that we need to change our third-party contract
manufacturers, our preclinical studies, clinical trials or the
commercialization of our product candidates could be delayed,
adversely affected or terminated, or such a change may result in
significantly higher costs.
Due to regulatory restrictions inherent in an IND, NDA or BLA,
various steps in the manufacture of our product candidates may
be sole-sourced. In accordance with cGMPs, changing
manufacturers may require the re-validation of manufacturing
processes and procedures, and may require further preclinical
studies or clinical trials to show comparability between the
materials produced by different manufacturers. Changing our
current or future contract manufacturers may be difficult for us
and could be costly, which could result in our inability to
manufacture our product candidates for an extended period of
time and therefore a delay in the development of our product
candidates. Further, in order to maintain our development time
lines in the event of a change in our third-party contract
manufacturer, we may incur significantly higher costs to
manufacture our product candidates.
31
Our
product candidates may exhibit undesirable side effects when
used alone or in interaction with other approved pharmaceutical
products, which may delay or preclude their further development
or regulatory approval, or limit their use if
approved.
Throughout the drug development process, we must continually
demonstrate the safety of our product candidates to obtain
regulatory approval to advance their clinical development or to
market them. Even if our product candidates demonstrate biologic
activity and clinical efficacy, any unacceptable adverse side
effects or toxicities, when administered alone or in the
presence of other pharmaceutical products, which can arise at
any stage of development, may outweigh their potential benefit.
In preclinical studies and clinical trials we have conducted to-
date, our product candidates have demonstrated an acceptable
safety profile and no unacceptable drug-drug interactions,
although these studies and trials have involved a small number
of subjects or patients over a limited period of time. We may
observe adverse or significant adverse events or drug-drug
interactions in future preclinical studies or clinical trials of
these product candidates, which could result in the delay or
termination of their development, prevent regulatory approval,
or limit their market acceptance if they are ultimately approved.
The
safety or efficacy profile of INX-189 may differ in combination
with other existing or future drugs used to treat chronic
hepatitis C, and therefore may preclude its further development
or approval, which could materially harm or
business.
It is anticipated that in the future, the optimized treatment of
chronic hepatitis C will involve the combination of three
or more antiviral compounds. Accordingly, Phase II and
Phase III clinical trials of other direct acting antiviral
agents similar to INX-189 are now being conducted in combination
with the current standard of care and increasingly, with other
direct acting antivirals in clinical development. Therefore, the
clinical development and commercialization pathway for INX-189,
or any other product candidate we may develop in the future for
the treatment of chronic hepatitis C, will require that it
be evaluated in clinical trials in combination with other
existing or future antivirals. Even if INX-189 demonstrates
meaningful therapeutic benefits equal to or better than our
competitors compounds, an acceptable safety profile, and a
dose amenable to combination therapy in Phase I and other
early-stage clinical trials, INX-189 when combined with other
HCV therapies, it may demonstrate unexpected side effects. We
cannot assure you that INX-189 will be amenable for use in
combination with some, or any, existing therapies or those in
clinical development. Further, to evaluate INX-189 in
combination therapy with other antivirals may require us to
establish collaborations, licensing arrangements or alliances
with third parties in the future. There is no assurance we will
be able to enter into such arrangements on favorable terms, or
at all.
Our
industry is highly competitive and subject to rapid
technological changes. As a result, we may be unable to compete
successfully or develop innovative products, which could harm
our business.
Our industry is highly competitive and characterized by rapid
technological change. Key competitive factors in our industry
include, among others, the ability to successfully advance the
development of a product candidate through preclinical and
clinical trials; the efficacy, toxicological, safety, resistance
or cross-resistance, and dosing profile of a product or product
candidate; the timing and scope of regulatory approvals, if ever
achieved; reimbursement rates for and the average selling price
of competing products and pharmaceutical products in general;
the availability of raw materials and qualified contract
manufacturing and manufacturing capacity; manufacturing costs;
intellectual property and patent rights and their protection;
and sales and marketing capabilities. If ultimately approved,
FV-100, INX-189, or any product candidate from our current or
future development programs would compete against existing
therapies or other product candidates in various stages of
clinical development that we believe may potentially become
available in the future for the treatment of shingles, chronic
hepatitis C and the prevention of staphylococcal
infections. Some of the large pharmaceutical companies that
currently market products that would compete with our product
candidates, if approved, include, but are not limited to:
GlaxoSmithKline, Novartis and Merck in the shingles market and
Merck and Roche in the hepatitis C market.
In addition to existing therapies, there are many other
pharmaceutical and biopharmaceutical companies developing
numerous direct acting antiviral product candidates across
various classes of compounds for the
32
treatment of chronic hepatitis C, including, but not
limited to, Abbott, Anadys Pharmaceuticals, Bristol Myers
Squibb, Gilead, Idenix Pharmaceuticals, Johnson and Johnson,
Merck, Novartis, Pfizer, Pharmasset, Roche, and Vertex , which
may compete with INX-189 or any other HCV nucleotide polymerase
inhibitor we may develop in the future. Most of the product
candidates being developed by these companies, and in particular
those that belong to the class of compounds referred to as
protease inhibitors, are further advanced in their clinical
development than INX-189. Further, Idenix Pharmaceuticals and
Pharmasset are developing nucleotide analogues, which are
similar to the approach we are using for INX-189. Moreover,
their compounds have advanced further in clinical development
and are currently in Phase II clinical trials.
While there are many direct acting antivirals in various stages
of clinical development, none has yet to be approved for sale by
the FDA or EMEA. Accordingly, the competitive landscape for the
treatment of chronic hepatitis C is expected to be highly
dynamic over the next five to ten years. In order to compete
effectively in this market in the future, we believe a direct
acting antiviral will need to demonstrate a favorable toxicity
profile, superior potency, high resistance barriers, and be
amenable to combination with other direct acting antivirals in a
low fixed oral dose.
Developing pharmaceutical product candidates is a highly
competitive, expensive and risky activity with a long business
cycle. Many organizations, including the large pharmaceutical
and biopharmaceutical companies that have existing products on
the market or in clinical development that would compete with
FV-100 or INX-189, have substantially more capital resources
than we have, and much greater capabilities and experience than
we have in research and discovery, designing and conducting
preclinical studies and clinical trials, operating in a highly
regulated environment, manufacturing drug substances and drug
products, and marketing and sales. Our competitors may be more
successful than we are in obtaining FDA or other regulatory
approvals for their product candidates and achieving broad
market acceptance once they are approved. Our competitors
drugs or product candidates may be more effective, have fewer
negative side effects, be more convenient to administer, have a
more favorable drug-resistance profile, or be more effectively
marketed and sold than any drug we, or our potential
collaborators, may commercialize. New drugs, or classes of drugs
from competitors, may render our product candidates obsolete or
non-competitive before we are able to successfully develop them
or, if approved, before we can recover the expenses of
developing and commercializing them. We anticipate that we or
our collaborators will face intense and increasing competition
as new drugs and drug classes enter the market and advanced
technologies or new drug targets become available. If our
product candidates do not demonstrate any competitive advantages
over existing drugs, new drugs or product candidates, we or our
future collaborators may terminate the development or
commercialization of our product candidates at any time in the
future.
We anticipate that our product candidates, and in particular
FV-100 if successfully developed and approved, will compete
directly or indirectly with existing generic drugs, or drugs
that will be generic by the time our product candidates might be
approved for sale. Generic drugs are drugs whose patent
protection has expired, and generally have an average selling
price substantially lower than drugs protected by intellectually
property rights. Unless a patented drug can differentiate itself
from a generic drug in a meaningful manner, the existence of
generic competition in any indication will generally impose
significant pricing pressure on competing drugs.
We also face, and will continue to face, intense competition
from other companies for collaborative arrangements with
pharmaceutical and biopharmaceutical companies, and for
attracting investigators and clinical sites capable of
conducting our preclinical studies and clinical trials. These
competitors, either alone or with their collaborators, may
succeed in developing technologies or products that are safer,
more effective, less expensive or easier to administer than
ours. Accordingly, our competitors may succeed in obtaining FDA
or other regulatory approvals for their product candidates more
rapidly than we can. Companies that can complete clinical
trials, obtain required regulatory approvals and commercialize
their products before their competitors may achieve a
significant competitive advantage, including certain patent and
FDA marketing exclusivity rights that could delay the ability of
competitors to market certain products. We cannot assure you
that product candidates resulting from our research and
development efforts, or from joint efforts with our
collaborators, will be able to compete successfully with our
competitors existing products or products under
development.
33
We do
not have significant internal drug discovery capabilities, and
therefore we are primarily dependent on in-licensing or
acquiring development programs from third parties in order to
obtain additional product candidates.
While we are currently focused on developing our existing
product candidates, if we sought to expand our pipeline, we
would be largely dependent on in-licensing or acquiring product
candidates as we do not have significant internal discovery
capabilities at this time. Accordingly, in order to generate and
expand our development pipeline, we have relied, and will
continue to rely, on obtaining discoveries, new technologies,
intellectual property and product candidates from third-parties
through sponsored research, in-licensing arrangements or
acquisitions. We may face substantial competition from other
biotechnology and pharmaceutical companies, many of which may
have greater resources then we have, in obtaining these
in-licensing, sponsored research or acquisition opportunities.
Additional in-licensing or acquisition opportunities may not be
available to us on terms we find acceptable, if at all.
In-licensed compounds that appear promising in discovery, or
research or preclinical studies may fail to progress into
further preclinical studies or clinical trials at all. Our
research and development efforts may not lead to the discovery
of any additional product candidates that would be suitable for
further preclinical or clinical development. The discovery of
additional product candidates requires significant time, as well
as a substantial commitment of personnel and financial
resources. Three is a great deal of uncertainty inherent in our
research efforts and as a consequence, our ability to expand our
development pipeline with additional product candidates may not
be successful.
If a
product-liability claim is brought against us, our ability to
assert a federal preemption defense may be
limited.
In the recent case of Wyeth v. Levine, decided on
March 4, 2009, the U.S. Supreme Court rejected a
pharmaceutical companys argument that certain failure to
warn claims alleging deficiencies in its labeling were preempted
by federal law because the FDA approved the labels. Although the
courts decision was limited to the facts of that case, if
any of our products are approved for sale by the FDA and
commercialized, this decision may limit our ability to assert a
federal preemption defense in any product liability suit which
may be brought in the future against such product.
If a
product liability claim is successfully brought against us for
uninsured liabilities, or such claim exceeds our insurance
coverage, we could be forced to pay substantial damage awards
that could materially harm our business.
The use of any of our existing or future product candidates in
clinical trials and the sale of any approved pharmaceutical
products may expose us to significant product liability claims.
We currently have product liability insurance coverage for our
clinical trials in the amount of $5.0 million. In the event
any of our product candidates are approved for sale by the FDA
and commercialized, we may need to increase the amount of our
product liability coverage. Such insurance coverage may not
protect us against any or all of the product liability claims
that may be brought against us in the future. We may not be able
to acquire or maintain adequate product liability insurance
coverage at a commercially reasonable cost or in sufficient
amounts or scope to protect us against potential losses. In the
event a product liability claim is brought against us, we may be
required to pay legal and other expenses to defend the claim, as
well as uncovered damage awards resulting from a claim brought
successfully against us. Defending any product liability claim
or claims could require us to expend significant financial and
managerial resources, which could have an adverse effect on our
business.
If our
use of hazardous materials results in contamination or injury,
we could suffer significant financial loss.
Our research activities involve the controlled use of certain
hazardous materials and medical waste. Notwithstanding the
regulations controlling the use and disposal of these materials
as well as the safety procedures we undertake, we cannot
eliminate the risk of accidental contamination or injury from
these materials. In the event of an accident or environmental
discharge or exposure, we may be held liable for any resulting
damages, which may exceed our financial resources and have an
adverse effect on our business.
34
Risks
Relating to the Commercialization of our Product
Candidates
We may
delay or terminate the development of a product candidate at any
time if we believe the perceived market or commercial
opportunity does not justify further investment, which could
materially harm our business.
Even though the results of preclinical studies and clinical
trials that we have conducted or may conduct in the future may
support further development of one or more of our product
candidates, we may delay, suspend or terminate the future
development of a product candidate at any time for strategic,
business, financial or other reasons, including the
determination or belief that the emerging profile of the product
candidate is such that it may not receive FDA approval, nor gain
meaningful acceptance, generate a significant return to
shareholders, or otherwise provide any competitive advantages in
its intended indication or market.
If the
actual or perceived therapeutic benefits of FV-100 are not
sufficiently different from existing generic drugs currently
used to treat shingles, we may terminate the development of
FV-100 at any time, or our ability to generate significant
revenue from the sale of FV-100, if approved, may be limited and
our potential profitability could be harmed.
Valacyclovir, famciclovir and acyclovir are existing generic
drugs currently used to treat shingles patients. Generic drugs
are compounds that have no remaining patent protection, and
generally have an average selling price substantially lower than
drugs protected by patents and intellectual property rights.
Unless a patented drug can differentiate itself from a generic
drug treating the same condition or disease in a meaningful
manner, the existence of generic competition in any indication
may impose significant pricing pressure on patented drugs.
Accordingly, if at any time we believe that FV-100 may not
provide meaningful therapeutic benefits, perceived or real, over
these existing generic drugs, we may terminate or delay its
future development. We cannot provide any assurance that the
ongoing Phase II trial or later-stage clinical trials of
FV-100 will demonstrate any meaningful therapeutic benefits over
existing generic drugs sufficient to justify its continued
development. Further, if we successfully develop FV-100 and it
is approved for sale, we cannot assure you that any real or
perceived therapeutic benefits of FV-100 over generic drugs will
result in a price higher than the existing generic drugs.
If the
actual or perceived therapeutic benefits or the safety profile
of INX-189 are not equal to or better than other direct
anti-viral treatments in clinical development, or if the dosing
of INX-189 is not amenable to combination with other existing or
future anti-viral therapies for the treatment of chronic
hepatitis C, we may terminate the development of INX-189 at any
time, or our ability to generate significant revenue from the
sale of INX-189, if approved, may be limited and our potential
profitability could be harmed.
We are aware of a number of companies developing various classes
of direct acting antiviral product candidates for the treatment
of chronic hepatitis C, some of which are of a similar
class to INX-189. Since many of these product candidates are
further advanced in clinical development than INX-189, their
time to approval and commercialization timelines may be sooner
than those for INX-189. Accordingly, if at any time we believe
that INX-189 may not provide meaningful therapeutic benefits,
perceived or real, equal to or better than our competitors
compounds, or we believe that INX-189 may not have as favorable
a safety profile as potentially competitive compounds, or we
believe INX-189 may not be amendable for use in a combination
therapy with existing or future treatments for chronic
hepatitis C, we may delay or terminate the future
development of INX-189 at any time. We cannot provide any
assurance that future preclinical studies or clinical trials of
INX-189 will demonstrate any meaningful therapeutic benefits
over potentially competitive compounds in development, an
acceptable safety profile sufficient to justify its continued
development, or whether INX-189 is amenable to combination
therapy.
35
If we
fail to enter into collaborations or other sales, marketing and
distribution arrangements with third parties to commercialize
our product candidates, or otherwise fail to establish marketing
and sales capabilities, we may not be able to successfully
commercialize our products.
We currently have no infrastructure to support the
commercialization of any of our product candidates, and have
little, if any, experience in the commercialization of
pharmaceutical products. Therefore, if our product candidates
are ultimately approved for sale, our future profitability will
depend largely on our ability to access or develop suitable
marketing and sales capabilities. We anticipate that we will
need to establish relationships with other companies, through
license and collaborations agreements, to commercialize our
product candidates in North America and in other countries
around the world. To the extent that we enter into these license
and collaboration agreements, or marketing and sales
arrangements with other companies to sell, promote or market our
products in the U.S. or abroad, our product revenues, which
may be in the form of indirect revenue, a royalty, or a split of
profits, will depend largely on their efforts, which may not be
successful. The development of a sales force and marketing
capabilities may result in us incurring significant costs before
the time that we may generate significant revenues. We may not
be able to attract and retain qualified third parties or
marketing or sales personnel, or be able to establish marketing
capabilities or an effective sales force.
If
government and third-party payers fail to provide adequate
reimbursement or coverage for our products or those we develop
through collaborations, our revenues and potential for
profitability will be harmed.
In the U.S. and most foreign markets, our product revenues,
and therefore the inherent value of our product candidates, will
depend largely upon the reimbursement rates established by
third-party payers for such product candidates or products. Such
third-party payers include government health administration
authorities, managed-care organizations, private health insurers
and other organizations. These third-party payers are
increasingly challenging the price and examining the cost
effectiveness of medical products, services and pharmaceuticals.
In addition, significant uncertainty exists as to the
reimbursement status, if any, of newly approved drugs or
pharmaceutical products. Further, the comparative effectiveness
of new compounds over existing therapies and the assessment of
other non-clinical outcomes are increasingly being considered in
the decision by these payers to establish reimbursement rates.
We may also need to conduct post-marketing clinical trials in
order to demonstrate the cost-effectiveness of our products.
Such studies may require us to commit a significant amount of
management time and financial resources. We cannot assure you
that any products we successfully develop will be reimbursed in
part, or at all, by any third-party payers in any countries.
Domestic and foreign governments continue to propose legislation
designed to expand the coverage, yet reduce the cost of
healthcare including pharmaceutical drugs. In some foreign
markets, governments control prescription drugs pricing
and profitability. In the U.S., significant changes in federal
health care policy have been approved. Some of the legislation
could result in reduced reimbursement rates. We expect that
there will continue to be federal and state proposals to
implement more governmental control over reimbursement rates of
pharmaceutical products. In addition, we expect that increasing
emphasis on managed care and government intervention in the
U.S. healthcare system will continue to put downward
pressure on the pricing of pharmaceutical products domestically.
Cost control initiatives could decrease the price that we
receive for any of our product candidates in the future, which
would limit our revenues and profitability. Accordingly,
legislation and regulations affecting the pricing of
pharmaceutical products may change before our product candidates
are approved for sale, which could further limit or eliminate
reimbursement rates for our product candidates. Further,
pressure from social activist groups, whose goal it is to reduce
the cost of drugs, particularly in less developed nations, also
may put downward pressure on the price of drugs, which could
result in downward pressure on the prices of our products in the
absence of generic competition.
If any
product candidates that we develop independently or through
collaborations are approved but do not gain meaningful
acceptance in their intended markets, we are not likely to
generate significant revenues or become
profitable.
Even if our product candidates are successfully developed and we
or a collaborator obtain the requisite regulatory approvals to
commercialize them in the future, they may not gain market
acceptance or utilization
36
among physicians, patients or third party payers. The degree of
market acceptance that any of our product candidates may achieve
will depend on a number of factors, including:
|
|
|
the therapeutic efficacy or perceived benefit of the product
relative to existing therapies, if they exist;
|
|
|
the timing of market approval and existing marketed competitive
drugs;
|
|
|
the level of reimbursement provided by payers to cover the cost
of the product;
|
|
|
the cost of the product to the user or payer;
|
|
|
the convenience and ease of administration of our products;
|
|
|
the products potential advantages over existing or
alternative therapies;
|
|
|
the actual or perceived safety of similar classes of products;
|
|
|
the actual or perceived existence, prevalence and severity of
side effects;
|
|
|
the effectiveness of sales, marketing and distribution
capabilities; and
|
|
|
the scope of the product label approved by the FDA.
|
There can be no assurance that physicians will choose to
prescribe or administer our products, if approved, to the
intended patient population. If our products do not achieve
meaningful market acceptance, or if the market for our products
proves to be smaller than anticipated, we may not generate
significant revenues or ever become profitable.
Even
if we or a collaborator achieve market acceptance for our
products, we may experience downward pricing pressure on the
price of our products due to generic competition or social or
political pressure to lower the cost of drugs, which would
reduce our revenue and future profitability.
Many approved products are already available in generic form in
certain markets and indications that we are developing our
product candidates for, particularly for the treatment of
shingles. If FV-100 is successfully developed and approved, we
expect to face competition from these generic drugs, including
significant price-based competition. Further, pressure from
social activist groups, whose goal it is to reduce the cost of
drugs, particularly in less developed nations, also may put
downward pressure on the price of drugs, which could result in
downward pressure on the prices of our products in the absence
of generic competition.
If
conflicts arise between our collaborators and us, our
collaborators may act in their best interest and not in ours,
which could delay or terminate the development of a product
candidate and adversely affect our business.
Conflicts may arise with our existing or future collaborators if
they pursue alternative therapies for the same diseases or
indications that are targeted by compounds or intellectual
property rights we have licensed to them. Potentially competing
products developed by our existing or future collaborators may
result in development delays or the withdrawal of their support
for our product candidates. Additionally, conflicts may arise if
there is a dispute about the progress of, or other activities
related to, the clinical development of a product candidate, the
achievement and payment of a milestone amount or the ownership
of intellectual property that is developed during the course of
the collaborative arrangement. Similarly, we may disagree with a
collaborator as to which party owns newly- or jointly-developed
intellectual property. Should an agreement be revised or
terminated as a result of a dispute and before we have realized
the anticipated benefits of the collaboration, we may not be
able to obtain certain development support or revenues that we
anticipated receiving.
37
We may
be unable to successfully develop a product candidate that is
the subject of collaboration if our collaborator does not
perform, terminates our agreement, or delays the development of
our product candidate.
We expect to continue to enter into and rely on license and
collaboration agreements or other business arrangements with
third parties to further develop
and/or
commercialize our existing and future product candidates. Such
collaborators or partners may not perform as agreed upon or
anticipated, fail to comply with strict regulations, or elect to
delay or terminate their efforts in developing or
commercializing our product candidates even though we have
performed our obligations under the arrangement. For example, if
an existing or future collaborator does not devote sufficient
time and resources to our collaboration arrangement, we may not
realize the full potential benefits of the arrangement, and our
results of operations may be adversely affected.
A majority of the potential revenue from existing and future
collaborations will likely consist of contingent payments, such
as payments for achieving development or regulatory milestones
and royalties payable on the sales of approved products. The
milestone and royalty revenues that we may receive under these
collaborations will depend primarily upon our
collaborators ability to successfully develop and
commercialize our product candidates. In addition, our
collaborators may decide to enter into arrangements with third
parties to commercialize products developed under our existing
or future collaborations using our technologies, which could
reduce the milestone and royalty revenue that we may receive, if
any. In many cases, we will not be directly involved in the
development or commercialization of our product candidates and
accordingly, will depend entirely on our collaborators. Our
collaboration partners may fail to develop or effectively
commercialize our product candidates because they:
|
|
|
do not allocate the necessary resources due to internal
constraints, such as limited personnel with the requisite
scientific expertise, limited capital resources, or the belief
that other product candidates or programs may have a higher
likelihood of obtaining regulatory approval or may potentially
generate a greater return on investment;
|
|
|
do not have sufficient resources necessary to fully support the
product candidate through clinical development, regulatory
approval and commercialization;
|
|
|
are unable to obtain the necessary regulatory approvals, or
re-evaluate the importance and their support for developing our
product candidate in light of a revised pipeline, business or
financial strategy.
|
In addition, a collaborator may decide to pursue the development
of a competitive product candidate developed outside of our
collaboration with them. If a collaboration partner fails to
develop or effectively commercialize our product candidates for
any of these reasons, we may not be able to replace them with
another partner willing to develop and commercialize our product
candidates under similar terms, if at all. We may also be unable
to obtain, on terms acceptable to us, a license from such
collaboration partner to any of its intellectual property that
may be necessary or useful for us to continue to develop and
commercialize the product candidate. We cannot assure you that
any product candidates will emerge from our relationships with
Pfizer or any other future collaboration agreements we may enter
into for any of our product candidates.
If we
are unable to adequately protect or expand our intellectual
property related to our current or future product candidates,
our business prospects could be harmed.
Our success depends in part on our ability to:
|
|
|
obtain and maintain intellectual property rights;
|
|
|
protect our trade secrets; and
|
|
|
prevent others from infringing on our proprietary rights or
patents.
|
We will be able to protect our proprietary intellectual property
rights from unauthorized use by third parties only to the extent
that our proprietary rights are covered by valid and enforceable
patents or are effectively maintained as trade secrets. The
patent position of pharmaceutical and biopharmaceutical
companies involves
38
complex legal and factual questions, and, therefore, we cannot
predict with certainty whether we will be able to ultimately
enforce our patents or proprietary rights. Therefore, any issued
patents that we own or otherwise have intellectual property
rights to may be challenged, invalidated or circumvented, and
may not provide us with the protection against competitors that
we anticipate.
The degree of future protection for our proprietary intellectual
property rights is uncertain because issued patents and other
legal means afford only limited protection and may not
adequately protect our rights or permit us to gain or keep our
competitive advantage. Our future patent position will be
influenced by the following factors:
|
|
|
we or our licensors may not have been the first to discover the
inventions covered by each of our, or our licensors,
pending patent applications and issued patents, and we may have
to engage in expensive and protracted interference proceedings
to determine priority of invention;
|
|
|
our or our licensors pending patent applications may not
result in issued patents;
|
|
|
our or our licensors issued patents may not provide a
basis for commercially viable products, may not provide us with
any competitive advantages, or may be challenged by third
parties; and
|
|
|
third parties may develop intellectual property around our or
our licensors patent claims to design competitive
intellectual property and ultimately product candidates that
fall outside the scope of our or our licensors patents.
|
Because of the extensive time required for the development,
testing and regulatory review and approval of a product
candidate, it is possible that before any of our product
candidates can be approved for sale and commercialized, our
relevant patent rights may expire, or such patent rights may
remain in force for only a short period following approval and
commercialization. Patent expiration could adversely affect our
ability to protect future product development and, consequently,
our operating results and financial position. Also, patent
rights may not provide us with adequate proprietary protection
or competitive advantages against competitors with similar
technologies. The laws of certain foreign countries do not
protect our intellectual property rights to the same extent as
do the laws of the U.S. and those countries may lack
adequate rules and procedures for defending our intellectual
property rights. For example, we may not be able to prevent a
third party from infringing our patents in a country that does
not recognize or enforce patent rights, or that imposes
compulsory licenses on or restricts the prices of life-saving
drugs. Changes in either patent laws or in interpretations of
patent laws in the U.S. and other countries may diminish
the value of our intellectual property.
We may not develop or obtain rights to products or processes
that are patentable. Even if we or our licensors do obtain
patents, such patents may not adequately protect the products or
technologies we own or have licensed. In addition, we may not
have total control over the patent prosecution of subject matter
that we license from others. Accordingly, we may be unable to
exercise the same degree of control over this intellectual
property as we would over our own. Others may challenge, seek to
invalidate, infringe or circumvent any pending or issued patents
we own or license, and rights we receive under those issued
patents may not provide competitive advantages to us. We cannot
assure you as to the degree of protection that will be afforded
by any of our issued or pending patents, or those licensed by us.
If a
third party claims we are infringing on its intellectual
property rights, we could incur significant expenses, or be
prevented from further developing or commercializing our product
candidates.
Our success will largely depend on our ability to operate
without infringing the patents and other proprietary
intellectual property rights of third parties. This is generally
referred to as having the freedom to operate. The
biotechnology and pharmaceutical industries are characterized by
extensive litigation regarding patents and other intellectual
property rights. The defense and prosecution of intellectual
property claims, U.S. Patent and Trademark Office
(USPT) interference proceedings and related legal
and administrative proceedings, both in the U.S. and
internationally, involve complex legal and factual questions. As
a result, such proceedings are lengthy, costly and
time-consuming and their outcome is highly uncertain. We may
become involved in protracted and expensive litigation in order
to determine the enforceability, scope and validity of the
39
proprietary rights of others, or to determine whether we have
the freedom to operate with respect to the intellectual property
rights of others.
Patent applications in the U.S. are, in most cases,
maintained in secrecy until approximately 18 months after
the patent application is filed. The publication of discoveries
in the scientific or patent literature frequently occurs
substantially later than the date on which the underlying
discoveries were made. Therefore, patent applications relating
to products similar to our product candidates may have already
been filed by others without our knowledge. In the event that a
third party has also filed a patent application covering our
product candidate or other claims, we may have to participate in
an adversarial proceeding, known as an interference proceeding
in the USPT office, or similar proceedings in other countries to
determine the priority of invention. In the event an
infringement claim is brought against us, we may be required to
pay substantial legal fees and other expenses to defend such a
claim and, if we are unsuccessful in defending the claim, we may
be prevented from pursuing the development and commercialization
of a product candidate and may be subject to injunctions
and/or
damage awards.
We are aware of other companies having filed patent applications
attempting to cover broad classes of compounds to treat chronic
hepatitis C in the U.S. and other countries. In the
future, the USPT or a foreign patent office may grant patent
rights to our product candidates or other claims to third
parties. Subject to the issuance of these future patents, the
claims of which will be unknown until issued, we may need to
obtain a license or sublicense to these rights in order to have
the appropriate freedom to further develop or commercialize
them. Any required licenses may not be available to us on
acceptable terms, if at all. If we need to obtain such licenses
or sublicenses, but are unable to do so, we could encounter
delays in the development of our product candidates, or be
prevented from developing, manufacturing and commercializing our
product candidates at all. If it is determined that we have
infringed an issued patent and do not have the freedom to
operate, we could be subject to injunctions,
and/or
compelled to pay significant damages, including punitive
damages. In cases where we have in-licensed intellectual
property, our failure to comply with the terms and conditions of
such agreements could harm our business.
It is becoming common for third parties to challenge patent
claims on any successful product candidate or approved drug. If
we become involved in any patent litigation, interference or
other legal proceedings, we could incur substantial expense, and
the efforts of our technical and management personnel will be
significantly diverted. A negative outcome of such litigation or
proceedings may expose us to loss of our proprietary position or
to significant liabilities, or require us to seek licenses that
may not be available from third parties on commercially
acceptable terms, if at all. We may be restricted or prevented
from developing, manufacturing and selling our product
candidates in the event of an adverse determination in a
judicial or administrative proceeding, or if we fail to obtain
necessary licenses.
Confidentiality
agreements with employees and others may not adequately prevent
disclosure of trade secrets and other proprietary information
and may not adequately protect our intellectual
property.
We rely on trade secrets to protect our technology, especially
where we do not believe patent protection is obtainable.
However, trade secrets are difficult to protect. In order to
protect our proprietary technology and processes, we also rely
in part on confidentiality and intellectual property assignment
agreements with our corporate partners, employees, consultants,
outside scientific collaborators and sponsored researchers and
other advisors. These agreements may not effectively prevent
disclosure of confidential information nor result in the
effective assignment to us of intellectual property, and may not
provide an adequate remedy in the event of unauthorized
disclosure of confidential information or other breaches of the
agreements. In addition, others may independently discover our
trade secrets and proprietary information, and in such case we
could not assert any trade secret rights against such party.
Enforcing a claim that a party illegally obtained and is using
our trade secrets is difficult, expensive and time consuming,
and the outcome is unpredictable. In addition, courts outside
the U.S. may be less willing to protect trade secrets.
Costly and time-consuming litigation could be necessary to seek
to enforce and determine the scope of our proprietary rights,
and failure to obtain or maintain trade secret protection could
adversely affect our competitive business position.
40
Risks
Related to Owning Our Common Stock
We
have experienced operating losses since our inception. We expect
to continue to incur such losses for the foreseeable future and
we may never become profitable.
Since inception (May 13, 1994) and through
December 31, 2009, we have incurred a cumulative deficit of
approximately $245 million. Our losses to date have
resulted principally from:
|
|
|
costs related to supporting our research programs and the
preclinical and clinical development of our product
candidates; and
|
|
|
general and administrative costs relating to supporting our
operations.
|
We anticipate incurring losses from operations for the
foreseeable future, as we continue to conduct significant
laboratory and preclinical testing and conduct extensive and
expensive clinical trials for our product candidates. We cannot
assure you that we will ever generate direct or royalty revenue
from the sale of products, or ever become profitable.
Our
revenues, expenses and results of operations may be subject to
significant fluctuations, which will make it difficult to
compare our operating results from period to
period.
Until we, or a collaborator, have successfully developed one of
our product candidates, we expect that substantially all of our
revenue will result from payments we receive under collaborative
arrangements or license agreements where we grant others the
right to use our intellectual property or know-how. We may not
be able to generate additional revenues under existing or future
collaborative agreements. Furthermore, payments potentially due
to us under our existing and any future collaborative
arrangements, including any milestone and up-front payments, are
intermittent in nature and are subject to significant
fluctuation in both timing and amount, or may never be earned or
paid. Further, our existing collaboration arrangement allows our
partner to terminate the agreement on relatively short notice.
Based on our current strategy, our quarterly and annual
operating costs and revenues may become highly volatile, and
comparisons to previous periods will be difficult to make.
Therefore, our historical and current revenues may not be
indicative of our ability to achieve additional
payment-generating milestones or events in the future. We expect
that our operating results will also vary significantly from
quarter to quarter and year to year as a result of the
initiation, success or failure of preclinical studies or
clinical trials, the timing of the formulation and manufacture
of our product candidates, or other development related factors.
Accordingly, our revenues and results of operations for any
period may not be comparable to the revenues or results of
operations for any other period.
The
reporting requirements of being a publicly-traded company
increase our overall operating costs and subject us to increased
regulatory risk.
As a publicly-traded company, we are subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended
(the Exchange Act), the Sarbanes-Oxley Act of 2002
(the Sarbanes-Oxley Act) and the listing
requirements of the NASDAQ Stock Market LLC. Section 404 of
the Sarbanes-Oxley Act requires that we maintain effective
internal control over financial reporting and disclosure
controls and procedures. In particular, we must perform system
and process evaluation and testing of our internal control over
financial reporting to allow management to assess the
effectiveness of our internal control over financial reporting,
which is expensive and requires the attention of our limited
management resources. Further effective as of the fiscal year of
2010 and onward, our independent auditor will attest on our
internal control over financial reporting. The various financial
reporting, legal, corporate governance and other obligations
associated with being a publicly-traded company require us to
incur significant expenditures and place additional demands on
our board of directors and management, as well as
administrative, operational, and financial resources. If we are
unable to comply with these requirements in a timely and
effective manner, we
and/or our
executive officers may be subject to sanctions by the SEC, and
our ability to raise additional funds in the future maybe
impaired and ultimately affects our business. We will continue
to incur additional expenses as a result of being a
publicly-traded company.
41
In
order to develop our product candidates and support our
operations beyond 24 months, we expect that we will need to
raise additional capital. Such capital may not be available to
us on acceptable terms, if at all, which could materially harm
our business and business prospects, and the price of our common
stock could suffer a decline in value.
We anticipate that our existing cash and cash equivalents and
short-term investments on hand as of the date of this filing,
together with proceeds we expect to receive from our existing
license and collaboration agreement will enable us to operate
through 2011. We have no other committed sources of additional
capital at this time. This guidance assumes that we completes
our ongoing Phase II proof of concept trial of FV-100 in
2010 and initiate a Phase I clinical trial of INX-189 in the
first half of 2010. This estimate does not include the direct
costs associated with continuing the clinical development of
FV-100 or INX-189 beyond these ongoing or planned clinical
trials, or the impact of any other significant transaction or
change in strategy or development plans in the future. We cannot
assure you that funds will be available to us in the future on
acceptable terms, if at all. If adequate funds are not available
to us at all, or on terms that we find acceptable, we may be
required to delay, reduce the scope of, or eliminate research
and development efforts on any or all of our product candidates.
We may also be forced to curtail, restructure, sell, or merge
our operations, or obtain funds by entering into arrangements
with licensees, collaborators or partners on unattractive terms,
or sell or relinquish rights to certain technologies, product
candidates or our intellectual property that we would not
otherwise sell or relinquish in order to continue operations or
the development of our product candidates, assuming any such
arrangements are available at all.
The timing and extent of our future financing needs will depend
on many factors, some of which are very difficult to predict and
others that may be beyond our control, including:
|
|
|
our development plans for our product candidates, including any
changes in our strategy;
|
|
|
the variability, timing and costs associated with conducting
clinical trials, the rate of enrollment in such clinical trials
and the results of these clinical trials:
|
|
|
the variability, timing and costs associated with conducting
preclinical studies;
|
|
|
the cost of formulating and manufacturing preclinical and
clinical trial materials to evaluate our product candidates;
|
|
|
receiving FDA approval to advance the clinical development of
our product candidates in a timely manner, if at all
|
|
|
the cost to obtain regulatory approvals required to advance the
development of our product candidates:
|
|
|
the terms and timing of any collaborative, licensing and other
arrangements that we may establish;
|
|
|
future payments we may receive or make under existing or future
license or collaboration agreements, if any;
|
|
|
the cost to maintain a corporate infrastructure to support being
a publicly-traded company; and
|
|
|
the cost of filing, prosecuting, and enforcing patent and other
intellectual property claims.
|
The
price of our common stock price has been highly volatile, and
your investment in us could suffer a decline in
value.
The market price of our common stock has been highly volatile
since the completion of our initial public offering in June
2004. The market price of our common stock is likely to continue
to be highly volatile and could be subject to wide fluctuations
in response to various factors and events, including but not
limited to:
|
|
|
our ability to successfully advance our product candidates
through preclinical and clinical development;
|
|
|
disclosure of any favorable or unfavorable data from our
preclinical studies or clinical trials, or other regulatory
developments concerning our clinical trials, the formulation and
manufacturing of our product candidates, or those of our
competitors;
|
42
|
|
|
our ability to manage our cash burn rate at an acceptable or
planned level;
|
|
|
the approval or commercialization of new products by us or our
competitors, and the disclosure thereof;
|
|
|
announcements of scientific innovations by us or our competitors;
|
|
|
rumors relating to us or our competitors;
|
|
|
public concern about the safety of our product candidates, or
similar classes of compounds;
|
|
|
litigation to which we may become subject;
|
|
|
actual or anticipated variations in our annual and quarterly
operating results;
|
|
|
changes in general conditions or trends in the biotechnology and
pharmaceutical industries;
|
|
|
changes in drug reimbursement rates or government policies
related to such reimbursement;
|
|
|
announcements by us or our competitors of significant
acquisitions, strategic partnerships, joint ventures or capital
commitments;
|
|
|
new regulatory legislation adopted in the U.S. or abroad;
|
|
|
changes in patent legislation in the U.S. or abroad
|
|
|
our failure to achieve or meet equity research analysts
expectations or their estimates of our business or prospects, or
a change in their recommendations concerning us, the value of
our common stock or our industry in general;
|
|
|
termination or delay in any of our existing or future
collaborative arrangements;
|
|
|
future sales of equity or debt securities, or the perception
that such future sales may occur;
|
|
|
the sale of shares held by our directors or management;
|
|
|
the loss of our eligibility to have shares of our common stock
traded on the NASDAQ Capital Market due to our failure to
maintain minimum listing standards;
|
|
|
changes in accounting principles;
|
|
|
failure to comply with the periodic reporting requirements of
publicly-owned companies under the Exchange Act and the
Sarbanes-Oxley Act of 2002; and
|
|
|
general economic conditions and capital markets.
|
In addition, the stock market in general, and more specifically
the NASDAQ Capital Market, upon which our common stock trades,
and the market for smaller biotechnology stocks in particular
have historically experienced significant price and volume
fluctuations. Volatility in the market price for a particular
biotechnology companys stock has often been unrelated or
disproportionate to the operating performance of that company.
Market and industry factors may seriously harm the market price
of our common stock, regardless of our operating performance.
Due to this volatility, investors may be unable to sell their
shares of our common stock at or above the price they paid,
which could generate losses.
Future
issuances of shares of our common stock may cause our stock
price to decline, even if our business is doing
well.
The issuance of a significant number of shares of our common
stock, or the perception that such future sales could occur,
particularly with respect to sales by our directors, executive
officers, and other insiders or their affiliates, could
materially and adversely affect the market price of our common
stock and impair our ability to raise capital through the sale
of additional equity securities at a price we deem appropriate.
43
If we
raise additional capital in the future, your ownership in us
could be diluted.
Any issuance of equity we may undertake in the future to raise
additional capital could cause the price of our common stock to
decline, or require us to issue shares at a price that is lower
than that paid by holders of our common stock in the past, which
would result in those newly issued shares being dilutive. If we
obtain funds through a credit facility or through the issuance
of debt or preferred securities, these securities would likely
have rights senior to your rights as a common stockholder, which
could impair the value of our common stock.
Insiders
and affiliates continue to have substantial control over us,
which could delay or prevent a change in control.
As of December 31, 2009, our directors and executive
officers, together with their affiliates, beneficially owned, in
the aggregate, approximately 24.8% of the outstanding shares of
our common stock. As a result, these stockholders, acting
together, may have the ability to delay or prevent a change in
control that may be favored by other stockholders and otherwise
exercise significant influence over all corporate actions
requiring stockholder approval, irrespective of how our other
stockholders may vote, including:
|
|
|
the appointment of directors;
|
|
|
the appointment, change or termination of management;
|
|
|
any amendment of our certificate of incorporation or bylaws;
|
|
|
the approval of acquisitions or mergers and other significant
corporate transactions, including a sale of substantially all of
our assets; or
|
|
|
the defeat of any non-negotiated takeover attempt that might
otherwise benefit the public stockholders.
|
A
significant number of shares of our common stock are subject to
issuance upon exercise of outstanding warrants, which upon such
exercise could result in dilution to our security
holders.
As of December 31, 2009, there were outstanding warrants to
purchase an aggregate of 14,053,318 shares of our common
stock, which warrants had a weighted average exercise price of
$1.19. The exercise price
and/or the
number of shares issuable upon exercise of our outstanding
warrants may be adjusted in certain circumstances and subject to
certain limitations, including upon the occurrence of certain
reclassifications or mergers or certain subdivisions or
combinations of the common stock, and the issuance of certain
stock dividends. Although we cannot determine at this time which
of these warrants may ultimately be exercised, it is reasonable
to assume that a warrant may be exercised if the exercise price
thereof is below the market price of our common stock at the
time of exercise. To the extent any of our outstanding warrants
are exercised in the future, additional shares of our common
stock will be issued that will be eligible for resale in the
public market, which could result in dilution to our security
holders. The issuance of additional securities upon the exercise
of warrants could also have an adverse effect on the market
price of our common stock.
We do
not anticipate paying cash dividends, and accordingly,
stockholders must rely on appreciation in the price of our
common stock for any return on their investment in
us.
We anticipate that we will retain our earnings, if any, for
future growth and therefore do not anticipate paying cash
dividends in the future. As a result, only appreciation in the
price of our common stock will provide a return to stockholders.
44
Our
amended and restated certificate of incorporation, our amended
and restated bylaws, as well as Delaware law contain provisions
that could discourage, delay or prevent a change in our control
or our management.
Provisions of our amended and restated certificate of
incorporation, bylaws and the laws of Delaware, the state in
which we are incorporated, may discourage, delay or prevent a
change in control of us or a change in management that
stockholders may consider favorable. These provisions:
|
|
|
establish a classified, or staggered, Board of Directors so that
not all members of our board may be elected at one time;
|
|
|
set limitations on the removal of directors;
|
|
|
limit who may call a special meeting of stockholders;
|
|
|
establish advance notice requirements for nominations for
election to our Board of Directors or for proposing matters that
can be acted upon at stockholder meetings;
|
|
|
prohibit stockholder action by written consent, thereby
requiring all stockholder actions to be taken at a meeting of
our stockholders; and
|
|
|
provide our Board of Directors with the ability to designate the
terms of and issue a new series of preferred stock without
stockholder approval.
|
These provisions could discourage proxy contests and make it
more difficult for you and other stockholders to remove and
elect directors and take other corporate actions. These
provisions could also limit the price that investors might be
willing to pay in the future for shares of our common stock.
We lease our 51,000 square foot office and laboratory
facility, which is located in Alpharetta, Georgia, a northern
suburb of Atlanta. We entered into this lease in December 2003
and occupied this facility during the second quarter of 2005.
Our minimum lease obligations for this facility will approximate
$0.9 to $1.0 million per annum for the lease term of ten
years. We believe that our facility is adequate for our current
business as a conducted, as well as our expected business for
the foreseeable future. We have entered into sublease agreements
for portions of this facility and are seeking additional
sublease agreements for other portions of our facility that are
currently unused.
|
|
ITEM 3.
|
LEGAL
PROCEEDINGS
|
Not Applicable
|
|
ITEM 4.
|
SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
|
Not Applicable
45
PART II
|
|
ITEM 5.
|
MARKET
FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
|
The Companys common stock trades on the NASDAQ Capital
Market under the symbol INHX. At March 10,
2010, the Company had 80 common stockholders of record. This
figure does not represent the actual number of beneficial owners
of common stock because shares are generally held in
street name by securities dealers and others for the
benefit of individual owners who may vote the shares.
The following table shows the range of high and low prices and
year-end closing prices for our common stock for each completed
fiscal quarter since January 1, 2008.
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
High
|
|
Low
|
|
First Quarter
|
|
$
|
.37
|
|
|
$
|
.21
|
|
Second Quarter
|
|
|
.56
|
|
|
|
.24
|
|
Third Quarter
|
|
|
1.33
|
|
|
|
.36
|
|
Fourth Quarter
|
|
|
1.25
|
|
|
|
.67
|
|
Year End Close
|
|
|
|
|
|
$
|
.92
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
High
|
|
Low
|
|
First Quarter
|
|
$
|
.90
|
|
|
$
|
.65
|
|
Second Quarter
|
|
|
.80
|
|
|
|
.57
|
|
Third Quarter
|
|
|
.76
|
|
|
|
.35
|
|
Fourth Quarter
|
|
|
.40
|
|
|
|
.18
|
|
Year End Close
|
|
|
|
|
|
$
|
.26
|
|
The Company has never declared or paid any cash dividends on its
common stock and does not anticipate paying any cash dividends
in the foreseeable future. The Company currently intends to
retain any earnings to fund future growth, product development
and operations.
|
|
ITEM 7.
|
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
You should read this discussion together with the Financial
Statements, related Notes and other financial information
included elsewhere in this
Form 10-K.
The following discussion contains assumptions, estimates and
other forward-looking statements that involve a number of risks
and uncertainties, including those discussed under Risk
Factors, Special Note on Forward-Looking
Statements and elsewhere in this
Form 10-K.
These risks could cause our actual results to differ materially
from those anticipated in these forward-looking statements.
Overview
We are a biopharmaceutical company focused on the development of
differentiated anti-infective products to prevent or treat
serious infections. Our research and development efforts are
currently focused on small molecule antiviral compounds, and in
particular, orally-available therapies to treat herpes zoster,
also referred to as shingles and chronic infections caused by
hepatitis C virus (HCV). Currently available
antiviral therapies have a number of therapeutic limitations
that include inadequate potency, adverse side effects, complex
dosing schedules, inconvenient methods of administration, and
diminishing efficacy due to the emergence of drug-resistant
viruses. We believe that our antiviral product candidates have
the potential to address a number of these limitations as well
as unmet clinical needs in their respective intended
indications. In addition to our antiviral programs, we have also
licensed the rights to certain intellectual property from our
46
MSCRAMM protein platform to Pfizer for the development of active
vaccines to prevent staphylococcal infections.
We have neither received regulatory approval for any of our
product candidates, nor do we have any commercialization
capabilities; therefore, it is possible that we may never
successfully derive significant product revenues from any of our
existing or future preclinical development programs or product
candidates.
We expect that, for the foreseeable future, our operations will
result in a net loss on a quarterly and yearly basis. As of
December 31, 2009, we had an accumulated deficit of
$245 million.
Financial
Operations Overview
Revenue. We have generated revenues from the
licensing of our products, but do not expect substantial
product-related revenues until we or our collaborators obtain
regulatory approval for and commercialize our product
candidates. Our revenues primarily represent the amortization of
up-front license fees and periodic research and development
support payments we have received in connection with license and
collaboration agreements. If our or any of our existing or
future collaborators development efforts result in
regulatory approval and the successful commercialization of any
of our product candidates, we expect the majority of our future
revenues would then result from upfront license fees, milestone
payments, royalties, or other product revenue agreements. In
2010, we expect our revenues will slightly increase from 2009
due to a milestone payment from Pfizer, Inc. (formerly, Wyeth)
in connection with our collaboration agreement with them.
Research and Development Expense. Research and
development expense consists of the costs incurred to license,
develop, test and manufacture our product candidates. These
costs consist primarily of preclinical studies and supplies
associated with development activities by internal staff;
research chemistry; professional fees paid to third-party
service providers in connection with conducting preclinical
studies and treating patients enrolled in our clinical trials
and monitoring, accumulating and evaluating the related data;
salaries and personnel-related expenses for our internal staff,
including benefits and share-based compensation; the cost to
formulate and manufacture product candidates; legal fees
associated with patents and intellectual property; consulting
fees; license and sponsored research fees paid to third parties;
depreciation and laboratory facility costs. We charge all
research and development expenses to operations as incurred.
The following table summarizes our research and development
expense for the years ended December 31, 2009 and 2008.
Direct external costs represent expenses paid to third parties
that specifically relate to product candidates in preclinical or
clinical development, such as the costs to acquire and maintain
licensed programs, payments to third parties for toxicological
studies, contract research organizations that monitor,
accumulate and analyze data from our clinical trials,
investigators who treat the patients enrolled in our clinical
trials and the cost of chemistry, consulting fees, formulation
and manufacturing materials for preclinical studies and clinical
trials. All remaining research and development expenses, such as
salaries and personnel-related expenses, legal fees associated
with patents and intellectual property, supplies, depreciation,
facility costs and other overhead expense, are not tracked to a
specific product development program and are included in
unallocated costs and overhead. Research and development
spending for past periods is not necessarily indicative of
spending in future periods.
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In millions)
|
|
|
Direct external costs:
|
|
|
|
|
|
|
|
|
FV-100
|
|
$
|
4.0
|
|
|
$
|
3.7
|
|
HCV
|
|
|
3.3
|
|
|
|
0.9
|
|
Other preclinical programs
|
|
|
0.4
|
|
|
|
(0.5
|
)
|
Unallocated costs and overhead
|
|
|
7.7
|
|
|
|
8.4
|
|
|
|
|
|
|
|
|
|
|
Total research and development expenses
|
|
$
|
15.4
|
|
|
$
|
12.5
|
|
|
|
|
|
|
|
|
|
|
47
We anticipate that our research and development expense will
increase in 2010, as compared to 2009, due to our clinical
development plans for FV-100 and INX-189. Due to the uncertainty
regarding the timing and regulatory approval of preclinical
studies and clinical trials, our future expenditures are likely
to be highly volatile in future periods depending on the results
of these trials and studies. From time to time, we will make
determinations as to how much funding to direct to these
programs in response to their scientific, clinical and
regulatory success, anticipated market opportunity and the
availability of capital to fund our programs.
A discussion of the risks and uncertainties associated with
completing the development of our existing or future product
candidates, if at all, and some of the possible consequences of
failing to do so, is set forth in the Risk Factors
section of this
Form 10-K.
General and Administrative Expense. General
and administrative expense reflects the costs incurred to manage
and support our research and development activities and
corporate infrastructure. General and administrative expense
consists primarily of salaries and personnel-related expenses,
including share-based compensation for personnel in executive,
finance, accounting, information technology, business
development and human resources functions. Other significant
costs include professional fees for legal, auditing, market
research and other consulting services, as well as premiums for
insurance, other expenses a result of being publicly-traded, and
depreciation and facility expenses. In 2010, we expect our
general and administrative expense to remain relatively
consistent with our 2009 expenses.
Interest and Other Income (Expense),
net. Interest income consists of interest earned
on our cash, cash equivalents and short-term investments.
Interest expense consists of interest incurred on capital leases
and notes payable. Other income and (expense) has historically
consisted of the proceeds from the gain or loss on the disposal
of equipment and foreign currency adjustments.
Critical
Accounting Policies and Estimates
This discussion and analysis of our current financial condition
and historical results of operations are based on our audited
financial statements, which have been prepared in accordance
with generally accepted accounting principles in the
U.S. The preparation of our financial statements requires
us to make estimates and judgments with respect to the selection
and application of accounting policies that affect the reported
amounts of assets, liabilities, revenues and expenses, and the
disclosures of contingent assets and liabilities. We believe the
following critical accounting policies are important in
understanding our financial statements and operating results.
Historically our estimates for our critical accounting policies
have been not been materially inaccurate.
Use of Estimates. The preparation of our
financial statements in conformance with generally accepted
accounting principles in the U.S. requires us to make
estimates and judgments with respect to the selection and
application of accounting policies that affect the reported
amounts of assets, liabilities, revenues and expenses, and the
disclosures of contingent assets and liabilities. We base our
estimates on historical experience, current economic and
industry conditions, and various other factors that are believed
to be reasonable at the time, the results of which form the
basis for making judgments about the carrying values of certain
assets and liabilities. Actual future results may differ from
these estimates under different assumptions or conditions.
Revenue Recognition. We recognize revenue
under licensing and other collaborative research and development
agreements as we perform services or accomplish contractual
obligations. Accordingly, up-front, non-refundable license fees
under agreements in which we have an ongoing research and
development commitment are amortized, on a straight-line basis,
over the term of our ongoing obligations under the agreement.
Revenues received for ongoing research and development
activities under collaborative arrangements are recognized as
the research and development activities are performed pursuant
to the terms of the related agreements. In the event we receive
milestone payments, we will recognize such payments as earned
when all of the conditions of such milestone are achieved.
Accrued Expenses. The preparation of our
financial statements requires us to estimate expenses that we
believe have been incurred but for which we have not yet
received invoices from our vendors, or for employee services
that have not been paid. This process primarily involves
identifying services and activities that have
48
been performed by third-party vendors on our behalf and
estimating the level to which they have been performed and the
associated cost incurred for such service as of each balance
sheet date. Examples of significant expenses for which we
generally accrue based on estimates include fees for services,
such as those provided by certain clinical research and data
management organizations and investigators in conjunction with
the conduct of our clinical trials, certain research
organizations that perform preclinical studies, and fees owed to
certain contract manufacturers in connection with the
formulation or manufacture of materials for our preclinical
studies and clinical trials. In order to estimate costs incurred
to date, but for which we have not been invoiced, we analyze the
progress and related activities, the terms of the underlying
contract or agreement, any invoices received and the budgeted
costs when evaluating the adequacy of the accrued liability for
these related costs. We make these estimates based upon the
facts and circumstances known to us at the time and in
accordance with generally accepted accounting principles.
Recent
Accounting Pronouncements
On October 1, 2009, we adopted the amended guidance for the
fair value measurement of investments in certain entities that
calculate net asset value per share (or its equivalent). This
amendment permits us to measure the fair value of certain
investments, including those with fair values that are not
readily determinable, on the basis of the net asset value per
share of the investment (or its equivalent) if such net asset
value is calculated in a manner consistent with the measurement
principles as of our measurement date. This amendment also
requires enhanced disclosures about the nature and risks of
investments within its scope that are measured at fair value on
a recurring or nonrecurring basis. The adoption of this
amendment did not have a significant impact on our consolidated
financial position or results of operations.
In October 2009, Financial Accounting Standards Board
(FASB) amended the guidance for revenue recognition
in multiple-element arrangements. The guidance will require an
entity to provide updated guidance on whether multiple
deliverables exist, how the deliverables in an arrangement
should be separated, and the consideration allocated, and
allocates revenue in an arrangement using estimated selling
prices of deliverables if a vendor does not have vendor-specific
objective evidence (VSOE) or third-party evidence of
selling price. The guidance also eliminates the use of the
residual method and requires an entity to allocate revenue using
the relative selling price method. This amendment is effective
for us beginning January 1, 2011 and can be applied
prospectively or retrospectively. We are currently evaluating
the impact of this accounting amendment on our consolidated
financial statements.
Results
of Operations
Fiscal
Years Ended December 31, 2009 and 2008
Summary. For 2009, we reported a net loss of
$17.6 million, as compared to a net loss of
$13.2 million in 2008 and basic and diluted net loss per
share of $0.38 in 2009 as compared to $0.31 in 2008. The
increase in net loss and net loss per share, as compared to
2008, was principally due to higher research and development
expense associated with the clinical development of FV-100 and
the preclinical development of INX-189 and the Companys
HCV nucleoside polymerase inhibitor program, lower revenues from
a collaborative license and development agreement and lower net
interest income and other income, offset in part by a reduction
in general and administrative expense. We expect to incur losses
for the foreseeable future as we intend to continue to support
the clinical development of FV-100, INX-189 and the preclinical
development of other HCV nucleoside polymerase inhibitors.
Revenue. Revenue decreased to
$1.2 million in 2009 from $3.2 million in 2008. This
$2.0 million decrease was primarily the result of upfront
license fees received by the Company in 2007 and 2008 being
fully amortized to revenue as of the end of 2008, and to a
lesser extent, lower periodic research-associated support fees
received by the Company in 2009.
49
Research and Development Expense. Research and
development expense increased to $15.4 million in 2009 from
$12.5 million in 2008, representing an increase of
$2.9 million, or 23%. The following table summarizes the
components of our research and development expense for 2009 and
2008.
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In millions)
|
|
|
Direct preclinical, clinical and manufacturing expenses
|
|
$
|
7.6
|
|
|
$
|
4.1
|
|
Salaries, benefits and share-based compensation expenses
|
|
|
3.8
|
|
|
|
4.0
|
|
License fees, legal and other expenses
|
|
|
2.1
|
|
|
|
2.3
|
|
Depreciation and facility related expenses
|
|
|
1.9
|
|
|
|
2.1
|
|
|
|
|
|
|
|
|
|
|
Total research and development expense
|
|
$
|
15.4
|
|
|
$
|
12.5
|
|
|
|
|
|
|
|
|
|
|
Direct preclinical, clinical, and manufacturing costs increased
due to a $2.4 million increase in costs related to
preclinical studies and clinical trial material for INX-189 and
our HCV program, a $0.3 million increase related to the
initiation of the Phase II clinical trial of FV-100, and a
$1.4 million increase related to a reduction in expense in
2008 associated with the favorable settlement of litigation,
offset by $0.6 million decrease in other costs. Salaries,
benefits and share-based compensation expense decreased slightly
due to lower share-based compensation expenses and lower benefit
costs. License fees, patent-related legal fees and other
expenses decreased slightly due to reduced spending.
Depreciation and facility related expenses decreased slightly
due to a reduction in our facility costs as a result of
partially subleasing our facility and lower operating costs.
General and Administrative Expense. General
and administrative expense decreased to $3.6 million in
2009 from $5.1 million in 2008, representing a decrease of
$1.5 million, or 29%. The following table summarizes the
components of our general and administrative expense for 2009
and 2008.
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In millions)
|
|
|
Salaries, benefits and share-based compensation expenses
|
|
$
|
1.6
|
|
|
$
|
2.3
|
|
Professional and legal fees expenses
|
|
|
0.9
|
|
|
|
1.1
|
|
Other expenses
|
|
|
0.9
|
|
|
|
1.1
|
|
Depreciation and facility related expenses
|
|
|
0.2
|
|
|
|
0.6
|
|
|
|
|
|
|
|
|
|
|
Total general and administrative expense
|
|
$
|
3.6
|
|
|
$
|
5.1
|
|
|
|
|
|
|
|
|
|
|
Salaries, benefits and share-based compensation expense
decreased primarily due to lower share-based compensation
expense. Professional and legal fees decreased by
$0.2 million due to lower consulting, legal and auditing
expenses in 2009 than 2008. Other expenses decreased slightly
due to lower insurance premiums and various other expenses.
Depreciation and facility related expenses decreased due to a
$0.3 million loss on rent accrual in 2008 that did not
recur in 2009, and a reduction in our facility as a result of
partially subleasing our facility and lower operating costs.
Interest and Other Income, net. Interest and
other income, net decreased to $0.2 million for 2009 from
$1.3 million in 2008. The decrease of $1.1 million was
largely the result of a decrease in net interest income in 2009
primarily due to lower interest rates in 2009 than 2008.
Liquidity
and Capital Resources
Sources
of Liquidity
Since our inception in May 1994 through December 31, 2009,
we have funded our operations primarily with $237.4 million
in gross proceeds raised from a series of five private equity
financings, our IPO in June 2004, and three private investment
in public equity financings (PIPE).
50
From inception through December 31, 2009, we have also
borrowed a total of $12.8 million under various notes
payable, a credit facility with a commercial bank and capital
leases, and have received approximately $16.0 million in
license fees, collaborative research payments and grants, of
which $0.3 million and $0.7 million were recorded as
deferred revenue as of December 31, 2009 and
December 31, 2008, respectively.
At December 31, 2009, cash, cash equivalents and short-term
investments were $37.9 million and we held no investments
with an average maturity greater than 12 months. Our cash,
cash equivalents and short-term investments are generally held
in a variety of interest-bearing instruments, consisting of
U.S. treasury securities, U.S. government agency
securities, commercial paper, corporate debt and money market
accounts that have an average maturity date of less than
12 months.
Cash
Flows
For the year ended December 31, 2009, cash, cash
equivalents, and short-term investments increased by
$4.8 million, from $33.1 million to
$37.9 million. This increase was primarily the result of
the net proceeds from the issuance of common stock and warrants
of $21.5 million, offset by net cash used for operating
activities and to a lesser extent, the repayment of capital
lease obligations and notes payable.
Net cash used for operating activities was $16.1 million in
2009, which reflects our net loss for the period of
$17.6 million, offset in part by a net increase in
operating liabilities over operating assets of $0.1 million
and non-cash charges of $1.4 million. Our net loss resulted
largely from the cost of funding our clinical trials,
preclinical studies, other research and development activities,
and general and administrative expenses, offset in part by the
amortization of deferred revenue from our license and
collaboration agreements and net interest income. The net
increase in operating liabilities over operating assets reflects
a $0.6 million increase in accrued expenses and a
$0.1 million increase in accounts payable, offset in part
by a $0.2 million increase in prepaid expenses and other
assets and a $0.4 million decrease in deferred revenue.
Net cash used for investing activities was $5.2 million,
which primarily consisted of net proceeds from short-term
investments of $5.2 million and $0.1 million in
proceeds from sale of equipment, offset in part by
$0.1 million in cash paid for capital expenditures.
Net cash from financing activities was $21.2 million, which
consisted of $21.5 million of net proceeds from the
issuance of common stock and warrants during 2009, offset by
$0.3 million in scheduled payments on our capital leases
and notes payable.
Funding
Requirements
Our future funding requirements are difficult to determine and
will depend on a number of factors, including:
|
|
|
our development plans for our product candidates, including any
changes in our strategy;
|
|
|
the variability, timing and costs associated with conducting
clinical trials, the rate of enrollment in such clinical trials
and the results of these clinical trials:
|
|
|
the variability, timing and costs associated with conducting
preclinical studies;
|
|
|
the cost of formulating and manufacturing preclinical and
clinical trial materials to evaluate our product candidates;
|
|
|
receiving regulatory approval to advance the clinical
development of our product candidates in a timely manner, if at
all;
|
|
|
the cost to obtain regulatory approvals required to advance the
development of our product candidates;
|
|
|
the terms and timing of any collaborative, licensing and other
arrangements that we may establish;
|
|
|
future payments we may receive or make under existing or future
license or collaboration agreements, if any;
|
51
|
|
|
the cost to maintain a corporate infrastructure to support being
a publicly-traded company; and
|
|
|
the cost of filing, prosecuting, and enforcing patent and other
intellectual property claims.
|
Based on our current strategy and operating plan, and
considering the potential costs associated with advancing the
development of our product candidates on our planned timelines,
we believe that our existing cash, cash equivalents and
short-term investments of $37.9 million as of
December 31, 2009, including anticipated proceeds from our
existing license and collaboration agreements, will enable us to
operate for a period of at approximately 24 months. Our
estimate assumes that we complete the ongoing Phase II
proof of concept trial of FV-100 and initiate a Phase I clinical
trial of INX-189 in the first half of 2010. This estimate does
not include the direct costs associated with continuing the
clinical development of FV-100 or INX-189 beyond these ongoing
or planned clinical trials, or the impact of any other
significant transaction or change in strategy or development
plans in the future.
We currently do not have any commitments for future funding, nor
do we anticipate that we will generate significant revenue from
the sale of any products in the foreseeable future. Therefore,
in order to meet our anticipated liquidity needs beyond
24 months to continue the development of our product
candidates, or possibly sooner in the event we enter into other
transactions or change our strategy or development plans, we may
need to secure additional capital. We would expect to do so
primarily through the sale of additional common stock or other
equity securities, as well as through proceeds from licensing
agreements, strategic collaborations, forms of debt financing,
or any other financing vehicle. Funds from these sources may not
be available to us on acceptable terms, if at all, and our
failure to raise such funds could have a material adverse impact
on our future business strategy, plans, financial condition and
results of operations. If adequate funds are not available to us
in the future, we may be required to delay, reduce the scope of,
or eliminate one or more of our research and development
programs, or delay or curtail our preclinical studies and
clinical trials. If additional capital is not available to us,
we may need to obtain funds through license agreements,
collaborative or partner arrangements pursuant to which we will
likely relinquish rights to certain product candidates that we
might otherwise choose to develop or commercialize
independently, or be forced to enter into such arrangements
earlier than we would prefer, which would likely result in less
favorable transaction terms. Additional equity financings may be
dilutive to holders of our common stock, and debt financing, if
available, may involve significant payment obligations and
restrictive covenants that restrict how we operate our business.
52
|
|
ITEM 8.
|
FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
|
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
of Inhibitex, Inc.
We have audited the accompanying consolidated balance sheets of
Inhibitex, Inc. as of December 31, 2009 and 2008, and the
related consolidated statements of operations,
stockholders equity, and cash flows for each of the two
years in the period ended December 31, 2009. These
financial statements are the responsibility of the
Companys management. Our responsibility is to express an
opinion on these 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. We were not engaged to perform an
audit of the Companys 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, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Inhibitex, Inc. at December 31, 2009
and 2008, and the consolidated results of its operations and its
cash flows for each of the two years in the period ended
December 31, 2009, in conformity with U.S. generally
accepted accounting principles.
Atlanta, Georgia
March 26, 2010
53
INHIBITEX,
INC.
Consolidated
Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
11,290,332
|
|
|
$
|
11,507,137
|
|
Short-term investments
|
|
|
26,625,496
|
|
|
|
21,634,880
|
|
Prepaid expenses and other current assets
|
|
|
831,196
|
|
|
|
621,797
|
|
Accounts receivable
|
|
|
61,062
|
|
|
|
108,558
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
38,808,086
|
|
|
|
33,872,372
|
|
Property and equipment, net
|
|
|
1,621,392
|
|
|
|
2,328,707
|
|
Other assets
|
|
|
40,290
|
|
|
|
31,876
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
40,469,768
|
|
|
$
|
36,232,955
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
1,590,804
|
|
|
$
|
1,276,215
|
|
Accrued expenses
|
|
|
1,537,637
|
|
|
|
1,001,047
|
|
Current portion of notes payable
|
|
|
78,125
|
|
|
|
312,500
|
|
Current portion of capital lease obligations
|
|
|
207,100
|
|
|
|
254,291
|
|
Current portion of deferred revenue
|
|
|
191,667
|
|
|
|
441,667
|
|
Other current liabilities
|
|
|
202,531
|
|
|
|
224,922
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
3,807,864
|
|
|
|
3,510,642
|
|
Long-term liabilities:
|
|
|
|
|
|
|
|
|
Notes payable, net of current portion
|
|
|
546,875
|
|
|
|
390,625
|
|
Capital lease obligations, net of current portion
|
|
|
180,792
|
|
|
|
387,892
|
|
Deferred revenue, net of current portion
|
|
|
87,500
|
|
|
|
237,500
|
|
Other liabilities, net of current portion
|
|
|
1,096,629
|
|
|
|
1,279,994
|
|
|
|
|
|
|
|
|
|
|
Total long-term liabilities
|
|
|
1,911,796
|
|
|
|
2,296,011
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
5,719,660
|
|
|
|
5,806,653
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
Preferred stock, $.001 par value; 5,000,000 shares
authorized at December 31, 2009 and 2008, none issued and
outstanding at December 31, 2009 and 2008
|
|
|
|
|
|
|
|
|
Common stock, $.001 par value; 150,000,000 and
75,000,000 shares authorized at December 31, 2009 and
2008, respectively; 61,559,782 and 43,380,570 shares issued
and outstanding at December 31, 2009 and 2008, respectively
|
|
|
61,560
|
|
|
|
43,381
|
|
Additional paid-in capital
|
|
|
267,432,572
|
|
|
|
243,825,057
|
|
Accumulated other comprehensive income
|
|
|
8,977
|
|
|
|
111,450
|
|
Warrants
|
|
|
12,133,216
|
|
|
|
13,742,630
|
|
Accumulated deficit
|
|
|
(244,886,217
|
)
|
|
|
(227,296,216
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
34,750,108
|
|
|
|
30,426,302
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
40,469,768
|
|
|
$
|
36,232,955
|
|
|
|
|
|
|
|
|
|
|
See accompany notes to the consolidated financial statements
54
INHIBITEX,
INC.
Consolidated
Statements of Operations
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
License fees and milestones
|
|
$
|
150,000
|
|
|
$
|
1,650,000
|
|
Collaborative research and development
|
|
|
1,000,000
|
|
|
|
1,500,000
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
1,150,000
|
|
|
|
3,150,000
|
|
Operating expense:
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
15,393,066
|
|
|
|
12,548,430
|
|
General and administrative
|
|
|
3,551,682
|
|
|
|
5,075,048
|
|
|
|
|
|
|
|
|
|
|
Total operating expense
|
|
|
18,944,748
|
|
|
|
17,623,478
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(17,794,748
|
)
|
|
|
(14,473,478
|
)
|
Other income, net
|
|
|
36,535
|
|
|
|
87,651
|
|
Interest income, net
|
|
|
168,212
|
|
|
|
1,224,584
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(17,590,001
|
)
|
|
$
|
(13,161,243
|
)
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per share
|
|
$
|
(0.38
|
)
|
|
$
|
(0.31
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average shares used to compute basic and diluted net
loss per share
|
|
|
46,664,811
|
|
|
|
43,090,432
|
|
|
|
|
|
|
|
|
|
|
See accompany notes to the consolidated financial statements
55
INHIBITEX,
INC.
Consolidated
Statement of Stockholders Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
|
|
|
Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Subscription
|
|
|
Common Stock
|
|
|
Additional
|
|
|
Other
|
|
|
Common
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
Par
|
|
|
|
|
|
Par
|
|
|
|
|
|
Par
|
|
|
Paid-in
|
|
|
Comprehensive
|
|
|
Stock
|
|
|
Accumulated
|
|
|
Stockholders
|
|
|
|
Shares
|
|
|
Value
|
|
|
Shares
|
|
|
Value
|
|
|
Shares
|
|
|
Value
|
|
|
Capital
|
|
|
Income (Loss)
|
|
|
Warrants
|
|
|
Deficit
|
|
|
Equity
|
|
|
Balance at January 1, 2008
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
|
42,785,318
|
|
|
$
|
42,785
|
|
|
$
|
240,634,018
|
|
|
$
|
106,480
|
|
|
$
|
15,551,492
|
|
|
$
|
(214,134,973
|
)
|
|
$
|
42,199,802
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of stock options and issuances of restricted stock and
employee stock purchase plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
789,342
|
|
|
|
790
|
|
|
|
14,388
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,178
|
|
Expiration of common stock warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,815,921
|
|
|
|
|
|
|
|
(1,815,921
|
)
|
|
|
|
|
|
|
|
|
Issuance of common stock warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,059
|
|
|
|
|
|
|
|
7,059
|
|
Share-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,491,119
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,491,119
|
|
Repurchase of common stock and retirement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(194,090
|
)
|
|
|
(194
|
)
|
|
|
(130,389
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(130,583
|
)
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13,161,243
|
)
|
|
|
(13,161,243
|
)
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,970
|
|
|
|
|
|
|
|
|
|
|
|
4,970
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13,156,273
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
|
43,380,570
|
|
|
$
|
43,381
|
|
|
$
|
243,825,057
|
|
|
$
|
111,450
|
|
|
$
|
13,742,630
|
|
|
$
|
(227,296,216
|
)
|
|
$
|
30,426,302
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of stock options and issuances of restricted stock and
employee stock purchase plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
221,175
|
|
|
|
221
|
|
|
|
34,971
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,192
|
|
Expiration of common stock warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,548,103
|
|
|
|
|
|
|
|
(5,548,103
|
)
|
|
|
|
|
|
|
|
|
Repurchase of common stock and retirement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10,710
|
)
|
|
|
(11
|
)
|
|
|
(3,202
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,213
|
)
|
Share-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
515,386
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
515,386
|
|
Net issuance of common stock and warrants in connection with
private placement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,968,747
|
|
|
|
17,969
|
|
|
|
17,512,257
|
|
|
|
|
|
|
|
3,938,689
|
|
|
|
|
|
|
|
21,468,915
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(17,590,001
|
)
|
|
|
(17,590,001
|
)
|
Other comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(102,473
|
)
|
|
|
|
|
|
|
|
|
|
|
(102,473
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(17,692,474
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
|
61,559,782
|
|
|
$
|
61,560
|
|
|
$
|
267,432,572
|
|
|
$
|
8,977
|
|
|
$
|
12,133,216
|
|
|
$
|
(244,886,217
|
)
|
|
$
|
34,750,108
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompany notes to the consolidated financial statements
56
INHIBITEX,
INC.
Consolidated
Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(17,590,001
|
)
|
|
$
|
(13,161,243
|
)
|
Adjustments to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
806,152
|
|
|
|
837,094
|
|
Share-based compensation expense
|
|
|
515,386
|
|
|
|
1,491,119
|
|
Gain on sale of property and equipment
|
|
|
(39,890
|
)
|
|
|
(74,076
|
)
|
Amortization of investment premium or discount
|
|
|
84,224
|
|
|
|
(647,417
|
)
|
Changes in operating assets and liabilities, net of acquisition:
|
|
|
|
|
|
|
|
|
Prepaid expenses and other assets
|
|
|
(217,813
|
)
|
|
|
411,812
|
|
Accounts receivable
|
|
|
47,496
|
|
|
|
(63,570
|
)
|
Accounts payable and other liabilities
|
|
|
108,833
|
|
|
|
335,098
|
|
Accrued expenses
|
|
|
536,590
|
|
|
|
(5,367,203
|
)
|
Deferred revenue
|
|
|
(400,000
|
)
|
|
|
(150,000
|
)
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
|
(16,149,023
|
)
|
|
|
(16,388,386
|
)
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
(98,837
|
)
|
|
|
(468,507
|
)
|
Purchases of investments
|
|
|
(34,367,313
|
)
|
|
|
(45,913,947
|
)
|
Proceeds from maturities and sales of investments
|
|
|
29,190,000
|
|
|
|
61,019,763
|
|
Proceeds from sale of property and equipment
|
|
|
39,890
|
|
|
|
81,730
|
|
Cash paid in connection with the acquisition
|
|
|
|
|
|
|
(179,222
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
(5,236,260
|
)
|
|
|
14,539,817
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds from capital lease financing
|
|
|
|
|
|
|
368,121
|
|
Payments on promissory note and capital leases
|
|
|
(332,416
|
)
|
|
|
(1,075,153
|
)
|
Repurchase of common stock
|
|
|
(3,213
|
)
|
|
|
(130,583
|
)
|
Proceeds from the issuance of common stock
|
|
|
35,192
|
|
|
|
15,178
|
|
Proceeds from the issuance of common stock and warrant in
connection with private placement
|
|
|
22,999,996
|
|
|
|
|
|
Financing costs in connection with private placement
|
|
|
(1,531,081
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
21,168,478
|
|
|
|
(822,437
|
)
|
|
|
|
|
|
|
|
|
|
Decrease in cash and cash equivalents
|
|
|
(216,805
|
)
|
|
|
(2,671,006
|
)
|
Cash and cash equivalents at beginning of period
|
|
|
11,507,137
|
|
|
|
14,178,143
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
11,290,332
|
|
|
$
|
11,507,137
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow information:
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
64,054
|
|
|
$
|
67,972
|
|
|
|
|
|
|
|
|
|
|
Non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
Fixed assets capitalized using capital lease
|
|
$
|
|
|
|
$
|
269,854
|
|
See accompany notes to the consolidated financial statements
57
INHIBITEX,
INC.
Inhibitex, Inc. (Inhibitex or the
Company) was incorporated in the state of Delaware
in May 1994. Inhibitex is a biopharmaceutical company focused on
the development of differentiated anti-infective products to
prevent and treat serious infections.
The Company is currently focused on small molecule antiviral
compounds, and in particular, orally-available therapies to
treat herpes zoster, also referred to as shingles and chronic
infections caused by HCV. Currently available antiviral
therapies have a number of therapeutic limitations that include
inadequate potency, significant adverse side effects, complex
dosing schedules, inconvenient methods of administration, and
diminishing efficacy due to the emergence of drug-resistant
viruses. The Company believes that its antiviral drug candidates
have the potential to address a number of these limitations as
well as unmet clinical needs in their respective intended
indications. In addition to the Companys antiviral
programs, it has also licensed the rights to certain
intellectual property from its MSCRAMM protein platform to
Pfizer for the development of active vaccines to prevent
staphylococcal infections.
The Company has not received regulatory approval for any of its
product candidates, and the Company does not have any
commercialization capabilities; therefore, it is possible that
the Company may never successfully derive any significant
revenues from any of its existing or future product candidates.
The Company plans to continue to finance its operations with its
existing cash, cash equivalents and short-term investments, or
through future equity
and/or debt
financings; with proceeds from existing or potential future
collaborations or partnerships; or through other financing
vehicles. The Companys ability to continue its operations
is dependent, in the near-term, upon managing its cash
resources, the successful development of its product candidates,
entering into collaboration or partnership agreements, executing
future financings and ultimately, upon the approval of its
products for sale and achieving positive cash flow from
operations. There can be no assurance that additional funds will
be available on terms acceptable to the Company, or that the
Company will ever generate significant revenue and become
profitable.
|
|
2.
|
Summary
of Significant Accounting Policies
|
Principles of Consolidation. The Company
includes Inhibitex, Inc., a subsidiary FermaVir Pharmaceuticals
and its subsidiary FermaVir Research Corp. The accompanying
consolidated financial statements include all accounts of the
Company and its subsidiaries. All intercompany balances have
been eliminated.
Use of Estimates. The preparation of financial
statements in conformity with U.S. generally accepted
accounting principles, or U.S. GAAP, requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities, the disclosure of contingent assets
and liabilities as of the date of the financial statements and
the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those
estimated.
Cash, Cash Equivalents and Short-Term
Investments. Cash equivalents consist of
short-term, highly liquid investments with original maturities
of 90 or less days when purchased. Investments with original
maturities between 90 and 365 days when purchased are
considered to be short-term investments. The Company has
classified its entire investment portfolio as
available-for-sale.
These securities are recorded as either cash equivalents or
short-term investments. Short-term investments are carried at
the fair value based upon quoted market prices. The amortized
cost of securities is adjusted for amortization of premiums and
accretion of discounts to maturity. Amortization and accretion
are included in interest income, net, and realized gains and
losses are also included in interest income, net. All unrealized
gains and losses are reported in other comprehensive loss. The
cost basis of all securities sold is based on the specific
identification method.
Available-for-sale
securities as of December 31, 2009 and 2008 consisted
primarily of U.S. treasury bills, commercial paper,
U.S. government agency obligations, corporate debt and
money market funds.
58
INHIBITEX,
INC. (Continued)
Fair Value Measurements. In 2008, the Company
adopted the guidance related to fair value measurements
pertaining to financial assets and liabilities. On
January 1, 2009, the Company adopted guidance related to
fair value measurements pertaining to nonfinancial assets and
nonfinancial liabilities. This guidance establishes the
authoritative definition of fair value, which sets out a
framework for measuring fair value and expands the required
disclosures about fair value measurement. The Companys
nonfinancial assets are not required to be carried at fair value
on a recurring basis, but if certain triggering events such that
a nonfinancial asset is required to be evaluated for asset
impairment the nonfinancial asset will be recorded at the lower
of cost or fair value. The adoption of this guidance did not
have a material impact on the Companys consolidated
financial statements.
Fair Value of Financial Instruments. Cash,
cash equivalents and short-term investments are reported at fair
value. The Company believes the recorded values of all of our
other financial instruments approximate their current fair
values. The Company may expand opportunities to use fair value
measurement in financial reporting and permits the Company to
choose to measure many financial instruments and certain other
items at fair value. The Company did not elect to measure any
new assets or liabilities at the respective fair values pursuant
to the fair value option.
Property and Equipment, Net. Property and
equipment are recorded at cost and depreciated using the
straight-line method over the following estimated useful lives
of the related assets:
|
|
|
Asset
|
|
Estimated Life
|
|
Computer software and equipment
|
|
3 years
|
Furniture and fixtures
|
|
7 years
|
Laboratory equipment
|
|
5 years
|
Leasehold improvements
|
|
Lesser of estimated useful life or life of lease
|
When property and equipment are retired or sold, the assets and
accumulated depreciation are removed from the respective
accounts and any gain or loss is recognized in other income,
net. Expenditures for repairs and maintenance are charged to
expense as incurred. The Company performs annual and quarterly
reviews of asset lives and related impairment testing.
Revenue Recognition. To date, the Company has
not generated any significant revenue from the sale of products.
Revenue relates to fees recovered or received for licensed
intellectual property, collaborative research and development
agreements, and materials transfer agreements to the Company.
Up-front, non-refundable license fees under agreements where the
Company has an ongoing research and development commitment are
amortized, on a straight-line basis, over the term of such
commitment as one unit of accounting. Revenue received for
ongoing research and development activities under collaborative
arrangements and materials transfer agreements are recognized as
these activities are performed or accomplished pursuant to the
terms of the related agreements. Development milestone payments
are recognized as revenue when the Company has achieved the
specific milestone and collectability is assured. Any amounts
received in advance of the performance of the related activities
are recorded as deferred revenue until earned.
Accrued Expenses. As part of the process of
preparing the Companys financial statements, management is
required to estimate expenses that the Company has incurred, but
for which it has not been invoiced or earned internal services
that have not been paid. This process involves identifying
services that have been performed on the Companys behalf
and estimating the level and cost of services performed by third
parties as of each balance sheet date. In order to estimate
costs incurred to date, but have not been invoiced, the Company
will analyze the progress and related activities, the terms of
the underlying contract or agreement, any invoices received and
the budgeted costs when evaluating the adequacy of the accrued
liability for these related costs. The Company makes its
estimates based upon the facts and circumstances known to it at
the time.
Prepaid Expenses and Other Current
Assets. Prepaid expenses and other current assets
consist primarily of prepaid expenses and other assets that the
Company has made an advance payment for and that services to be
59
INHIBITEX,
INC. (Continued)
performed or asset utilization will occur in the future. As
services are performed or asset utilization occurs the Company
recognizes the expense and the prepaid or other asset are
amortized by the corresponding amount.
Share-based Compensation. The Company uses the
Black-Scholes method to estimate the value of share-based awards
granted. The Companys forfeiture rate is based on
historical experience as well as anticipated future turnover and
other qualitative factors which may change over time. There may
be adjustments to future periods if actual forfeitures differ
from current estimates. The Companys awards are issued
with graded vesting. The compensation cost for graded vesting
awards is recognized on the straight-line method.
Concentrations of Credit Risk. Cash, cash
equivalents and short-term investments consist of financial
instruments that potentially subject the Company to
concentrations of credit risk to the extent recorded on the
balance sheets. The Company believes that it has established
guidelines for investment of its excess cash that maintain
principal and liquidity through its policies on diversification,
investment maturity, and investment grade.
Limited Suppliers. The Company may rely on
single-source third-party suppliers and contract manufactures to
formulate or manufacture its product candidates, due to inherent
FDA current good manufacturing practices, (cGMP)
requirements. The failure of single-source suppliers or
single-source contract manufactures for production of specific
candidates to deliver on schedule, or at all, could delay or
interrupt the development process and affect the Companys
operating results.
Research and Development Expense. Research and
development expense consists of the costs incurred to license,
develop, test and manufacture product candidates. These costs
consist primarily of preclinical studies and supplies associated
with development activities by internal staff; research
chemistry; professional fees paid to third-party service
providers in connection with conducting preclinical studies and
treating patients enrolled in our clinical trials and
monitoring, accumulating and evaluating the related data;
salaries and personnel-related expenses for our internal staff,
including benefits and share-based compensation; the cost to
formulate and manufacture product candidates; legal fees
associated with patents and intellectual property; consulting
fees, license and sponsored research fees paid to third parties;
depreciation and laboratory facility costs. The Company charges
all research and development expenses to operations as incurred.
General and Administrative Expense. General
and administrative expense reflects the costs incurred to manage
and support our research and development activities. General and
administrative expense consists primarily of salaries and
personnel-related expenses, including share-based compensation
for personnel in executive, finance, accounting, information
technology, business development and human resources functions.
Other significant costs include professional fees for legal,
auditing, market research and other consulting services, as well
as premiums for insurance, other expenses as a result of being
publicly-traded, and depreciation and facility expenses.
Income Taxes. The Company utilizes the
liability method of accounting for income taxes. Deferred tax
assets and liabilities are determined based on the differences
between the financial reporting and tax reporting bases of
assets and liabilities and are measured using the enacted tax
rates and laws that are expected to be in effect when the
differences are expected to reverse. A full valuation allowance
has been recorded to reduce the carrying amounts of net deferred
tax assets to an amount the Company expects to realize in the
future based upon the available evidence at the time. The
Company has no uncertain tax positions and no unrecognized tax
benefits. The Company will recognize accrued interest and
penalties related to unrecognized tax benefits in income tax
expense if and when incurred.
Comprehensive Loss. For the periods presented,
comprehensive loss did not differ materially from reported net
loss.
Lease Accounting. The Company entered into a
lease for its facility (See
Note 8-Commitments)
where leasehold improvements paid by the lessor pursuant to the
lease agreement were capitalized. The leasehold improvement
assets are being amortized over the economic life and the
liability is being amortized over life of the lease, which is
ten years. The amortization is recorded as a discount to rent
expense for the liability and the amortization expense to
leasehold improvements for the asset. The balances of the
capitalized lessor-paid
60
INHIBITEX,
INC. (Continued)
leasehold improvements are classified in the balance sheet as
leasehold improvements for the asset and other liabilities for
the liability (See
Note 10-Other
Liabilities), respectively. In addition, the Company took
possession of the physical use of the facility in January 2005,
at which time the work was initiated on the leasehold
improvements. The leasehold improvements were completed in May
2005. This four month gap constituted a rent holiday. As such,
the Company accrued rent for that time period. This accrued rent
is being amortized as a discount to rent expense over ten year
life of the lease. Further, the Company recognizes rent expense
on a straight-line basis over the life of the lease. The
difference between cash rent payments and rent expense is
recorded as deferred rent liability. The balance of these
deferred rent liabilities are classified in the balance sheet as
other liabilities.
Recent Accounting Pronouncements. On
October 1, 2009, the Company adopted the amended guidance
for the fair value measurement of investments in certain
entities that calculate net asset value per share (or its
equivalent). This amendment permits the Company to measure the
fair value of certain investments, including those with fair
values that are not readily determinable, on the basis of the
net asset value per share of the investment (or its equivalent)
if such net asset value is calculated in a manner consistent
with the measurement principles as of the Companys
measurement date. This amendment also requires enhanced
disclosures about the nature and risks of investments within its
scope that are measured at fair value on a recurring or
nonrecurring basis. The adoption of this amendment did not have
a significant impact on the Companys consolidated
financial position or results of operations.
In October 2009, the FASB amended the guidance for revenue
recognition in multiple-element arrangements. The guidance will
require an entity to provide updated guidance on whether
multiple deliverables exist, how the deliverables in an
arrangement should be separated, and the consideration
allocated; and allocate revenue in an arrangement using
estimated selling prices of deliverables if a vendor does not
have vendor-specific objective evidence (VSOE) or
third-party evidence of selling price. The guidance also
eliminates the use of the residual method and requires an entity
to allocate revenue using the relative selling price method.
This amendment is effective for the Company beginning
January 1, 2011 and can be applied prospectively or
retrospectively. We are currently evaluating the impact of this
accounting amendment on our consolidated financial statements.
Basic and diluted net loss per share have been computed based on
net loss and the weighted-average number of common shares
outstanding during the applicable period. For diluted net loss
per share, common stock equivalents (common shares issuable upon
the exercise of stock options, restricted stock and warrants)
are excluded from the calculation of diluted net loss per share
if their effect is antidilutive. The Company has excluded all
options, restricted stock and warrants to purchase common stock,
as such potential shares are antidilutive.
The following table sets forth the computation of historical
basic and diluted net loss per share:
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Historical
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(17,590,001
|
)
|
|
$
|
(13,161,243
|
)
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
46,664,811
|
|
|
|
43,090,432
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per share
|
|
$
|
(0.38
|
)
|
|
$
|
(0.31
|
)
|
|
|
|
|
|
|
|
|
|
61
INHIBITEX,
INC. (Continued)
The following table outlines potentially dilutive common stock
equivalents outstanding that are not included in the above
historical calculations as the effect of their inclusion was
antidilutive.
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Common stock options
|
|
|
5,740,908
|
|
|
|
4,820,459
|
|
Restricted common stock
|
|
|
|
|
|
|
140,000
|
|
Common stock warrants
|
|
|
14,053,318
|
|
|
|
8,022,863
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
19,794,226
|
|
|
|
12,983,322
|
|
|
|
|
|
|
|
|
|
|
|
|
4.
|
Fair
Value Measurements
|
A fair value hierarchy has been established which requires the
Company to maximize the use of observable inputs, where
available, and minimize the use of unobservable inputs when
measuring fair value. The fair value hierarchy describes three
levels of inputs that may be used to measure fair value:
|
|
|
|
Level 1
|
Quoted prices in active markets for identical assets or
liabilities.
|
|
|
Level 2
|
Observable inputs other than Level 1 prices, 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.
|
The following table sets forth the financial assets and
liabilities that were measured at fair value on a recurring
basis at December 31, 2009, by level within the fair value
hierarchy. The assets and liabilities measured at fair value are
classified in their entirety based on the lowest level of input
that is significant to the fair value measurement.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices in
|
|
|
|
|
|
|
|
|
|
|
|
|
Active Markets for
|
|
|
Significant Other
|
|
|
Significant
|
|
|
|
|
|
|
Identical Assets
|
|
|
Observable Inputs
|
|
|
Unobservable
|
|
December 31, 2009
|
|
Total
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
Inputs (Level 3)
|
|
|
Cash equivalents
|
|
$
|
10,380,463
|
|
|
$
|
10,380,463
|
|
|
$
|
|
|
|
$
|
|
|
Short-term investments
available-for-sale
|
|
|
26,625,496
|
|
|
|
504,023
|
|
|
|
26,121,473
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
37,005,959
|
|
|
$
|
10,884,486
|
|
|
$
|
26,121,473
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents consist primarily of money market funds and
commercial paper with original maturity dates of three months or
less. Short-term investments consist of U.S. agency
securities, U.S. Treasury securities and corporate debt,
classified as
available-for-sale
and have maturities greater than 90 days, but less than
365 days from the date of acquisition.
62
INHIBITEX,
INC. (Continued)
The Company has had no realized gains or losses from the sale of
investments for the twelve months ended December 31, 2009.
The following table shows the unrealized gains and losses and
fair values for those investments as of December 31, 2009
and December 31, 2008 aggregated by major security type:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
|
|
December 31, 2009
|
|
At Cost
|
|
|
Gains
|
|
|
(Losses)
|
|
|
At Fair Value
|
|
|
Certificates of deposit and money market funds
|
|
$
|
10,380,463
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
10,380,463
|
|
Commercial paper
|
|
|
9,635,631
|
|
|
|
9,145
|
|
|
|
|
|
|
|
9,644,776
|
|
Corporate debt
|
|
|
9,183,702
|
|
|
|
956
|
|
|
|
(5,006
|
)
|
|
|
9,179,652
|
|
Debt securities of U.S. government agencies
|
|
|
7,293,200
|
|
|
|
5,273
|
|
|
|
(1,428
|
)
|
|
|
7,297,045
|
|
US Treasury securities
|
|
|
503,986
|
|
|
|
103
|
|
|
|
(66
|
)
|
|
|
504,023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
36,996,982
|
|
|
$
|
15,477
|
|
|
$
|
(6,500
|
)
|
|
$
|
37,005,959
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
|
|
December 31, 2008
|
|
At Cost
|
|
|
Gains
|
|
|
(Losses)
|
|
|
At Fair Value
|
|
|
Certificates of deposit and money market funds
|
|
$
|
11,603,992
|
|
|
$
|
|
|
|
$
|
(386
|
)
|
|
$
|
11,603,606
|
|
Commercial paper
|
|
|
845,999
|
|
|
|
1,551
|
|
|
|
|
|
|
|
847,550
|
|
Corporate debt
|
|
|
9,122,672
|
|
|
|
30,488
|
|
|
|
(8,117
|
)
|
|
|
9,145,043
|
|
Debt securities of U.S. government agencies
|
|
|
10,458,387
|
|
|
|
88,584
|
|
|
|
(791
|
)
|
|
|
10,546,180
|
|
US Treasury securities
|
|
|
754,641
|
|
|
|
157
|
|
|
|
(36
|
)
|
|
|
754,762
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
32,785,691
|
|
|
$
|
120,780
|
|
|
$
|
(9,330
|
)
|
|
$
|
32,897,141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009, the Company had investments in an
unrealized loss position. The Company has determined that the
unrealized losses on these investments at December 31, 2009
are temporary in nature and expects the security to mature at
its stated maturity principal. All
available-for-sale
securities held at December 31, 2009 will mature within one
year or less.
The components of prepaid expenses are as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Interest receivable
|
|
$
|
166,967
|
|
|
$
|
78,004
|
|
Prepaid direct preclinical, clinical and manufacturing
|
|
|
392,797
|
|
|
|
102,756
|
|
Prepaid other
|
|
|
271,432
|
|
|
|
441,037
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
831,196
|
|
|
$
|
621,797
|
|
|
|
|
|
|
|
|
|
|
63
INHIBITEX,
INC. (Continued)
|
|
6.
|
Property
and Equipment
|
The components of property and equipment are as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Laboratory equipment
|
|
$
|
2,044,804
|
|
|
$
|
3,034,990
|
|
Leasehold improvements
|
|
|
2,455,321
|
|
|
|
2,455,321
|
|
Computer software and equipment
|
|
|
671,227
|
|
|
|
574,798
|
|
Office furniture and fixtures
|
|
|
115,002
|
|
|
|
115,002
|
|
|
|
|
|
|
|
|
|
|
Sub-total
|
|
|
5,286,354
|
|
|
|
6,180,111
|
|
Less accumulated depreciation and amortization
|
|
|
(3,664,962
|
)
|
|
|
(3,851,404
|
)
|
|
|
|
|
|
|
|
|
|
Total property and equipment, net
|
|
$
|
1,621,392
|
|
|
$
|
2,328,707
|
|
|
|
|
|
|
|
|
|
|
Included in property and equipment are assets recorded under
capital leases. Amortization of the assets recorded under
capital leases is included in depreciation expense. Depreciation
and amortization expense was $806,152 and $966,345 for the years
ended December 31, 2009 and 2008, respectively.
In 2009, the Company retired $912,594 of laboratory equipment
with a net asset value of $71,664. In 2008, the Company retired
$653,330 in various equipment and software with a net asset
value of $21,601. Remaining net asset value is charged to
depreciation expense upon retirement.
The Company entered into a lease for its office and laboratory
facility (See
Note 8-Commitments)
where leasehold improvements paid by the lessor pursuant to the
lease agreement were capitalized. The leasehold improvement
assets are being amortized over seven years and the liability is
being amortized over the life of lease, which is ten years. The
amortization is recorded as a discount to rent expense for the
liability and the amortization expense to leasehold improvements
for the asset. The balances of the capitalized lessor-paid
leasehold improvements are classified in the balance sheet as
leasehold improvements for the asset and other liabilities for
the liability (See
Note 10-Other
Liabilities), respectively. Net capitalized leasehold
improvements paid by the lessor were $413,521 and $616,821 as of
December 31, 2009 and 2008.
The components of accrued expenses are as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Preclinical, clinical and manufacturing development expense
|
|
$
|
410,207
|
|
|
$
|
149,019
|
|
Payroll and benefits expense
|
|
|
481,765
|
|
|
|
306,694
|
|
Professional fee expense
|
|
|
252,802
|
|
|
|
309,022
|
|
Other operating expense
|
|
|
392,863
|
|
|
|
236,312
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,537,637
|
|
|
$
|
1,001,047
|
|
|
|
|
|
|
|
|
|
|
Lease Commitments. In May 2005, the Company
began a non-cancelable ten year agreement to lease a
51,000 square foot research and office facility. The
Company has the option to extend the term of the lease for two
successive additional periods of five years each by giving prior
written notice.
A portion of the leasehold improvements at the research and
office facility was capitalized as leasehold improvements paid
by the lessor pursuant to the lease agreement. The leasehold
improvement assets are being amortized over seven years and the
liability is being amortized over the life of the lease, which
is ten years.
64
INHIBITEX,
INC. (Continued)
The amortization is recorded as a discount to rent expense for
the liability and as the amortization expense for leasehold
improvements for the asset. The balances of the capitalized
lessor-paid leasehold improvements are classified in the balance
sheet as leasehold improvements for the asset and other
liabilities for the liability (See
Note 10-Other
Liabilities), respectively. In addition, the Company took
possession of the physical use of the facility in January 2005,
at which time the work was initiated on the leasehold
improvements. The leasehold improvements were completed in May
2005. This four month period constituted a rent holiday. As
such, the Company accrued rent for that time period. This
accrued rent is being amortized as a discount to rent over the
ten year life of the lease. Further, the Company recognizes rent
expense on a straight-line basis over the life of the lease
since the minimum rent payments escalate over the lease term.
The difference between cash rent payments and rent expense is
recorded as deferred rent liability. The balance of these
deferred rent liabilities are classified in the balance sheet as
other liabilities (See
Note 10-Other
Liabilities).
In 2008, the Company subleased 6,000 square feet of its
office facility. The initial term on the sublease shall
terminate on December 31, 2013 with an option by the
subtenant to extend the term until April 2015. In connection
with this sublease agreement, the Company accrued a loss on
rent, reflecting the present value net difference in the rent it
expects to receive under the sublease and the estimated cost it
would incur on the subleased space over the life of the
sublease. The balance of this sublease loss liability was
$181,012 and $231,445 as of December 31, 2009 and 2008,
respectively, and is classified in the balance sheet as other
liabilities (See
Note 10-Other
Liabilities). The Company recognizes the sublease rental income
on a straight-line basis over the life of the sublease. The
future minimum sublease rental receipts are disclosed in the
table below.
The Company also leases office equipment under non-cancelable
operating leases. Future minimum lease payments under operating
leases primarily relate to the laboratory and office facility
lease as discussed above. During the years ended
December 31, 2009 and 2008, gross rent expense totaled
approximately $932,000 and $920,000, respectively; these amounts
were offset against sublease rental receipts of $119,000 and
$104,000, respectively. Future minimum payments and receipts
under these operating leases at December 31, 2009 are as
follows:
|
|
|
|
|
|
|
|
|
Year Ending December 31,
|
|
Payments
|
|
|
Receipts
|
|
|
2010
|
|
$
|
926,555
|
|
|
$
|
97,500
|
|
2011
|
|
|
948,710
|
|
|
|
102,000
|
|
2012
|
|
|
967,940
|
|
|
|
106,500
|
|
2013
|
|
|
992,137
|
|
|
|
111,000
|
|
2014 and after
|
|
|
1,358,697
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total minimum lease payments and receipts under operating leases
|
|
$
|
5,194,039
|
|
|
$
|
417,000
|
|
|
|
|
|
|
|
|
|
|
Other Commitments. In October 2009, the
Company entered into a second exclusive royalty-bearing
worldwide license agreement with Cardiff University in Wales,
United Kingdom for intellectual property covering a HCV
nucleoside polymerase inhibitor in exchange for future milestone
payments and royalties on future net sales. The agreement calls
for the Company to make certain milestone payments and pay a
royalty on the sale of any products that utilize the underlying
intellectual property. The Company may terminate this agreement
upon 90 days notice. Pursuant to the above license
agreements, the Company entered into a series of cooperative
research agreements with Cardiff University for which the
Company has a future minimum purchase commitment of
approximately 205,000 pounds sterling in annual cooperative
research agreement funding as of December 31, 2009.
However, the Company may terminate the collaboration agreement
on three months written notice and Cardiff may terminate in the
event of an uncured material breach by the Company.
|
|
9.
|
Capital
Leases and Notes Payable
|
Capital Lease Obligations. The Company has
capital lease obligations related to the acquisition of certain
laboratory and other equipment. The amortization of assets
acquired under these capital leases has been
65
INHIBITEX,
INC. (Continued)
recorded as depreciation expense. These capital leases bear
interest at rates ranging from 6.55% to 14.00%, and expire at
various dates from August 2011 to December 2011. In connection
with a capital lease entered into in 2008, the Company granted
the lessor a warrant to purchase 24,342 common shares at an
exercise price of $0.38 per share. This warrant was recorded at
the estimated fair value of $0.29 per share, using the
Black-Scholes method. This amount will be amortized as interest
expense over the life of the lease.
Future payments under capital lease agreements as of
December 31, 2009 are as follows:
|
|
|
|
|
Year Ending December 31,
|
|
|
|
|
2010
|
|
$
|
238,658
|
|
2011
|
|
|
188,913
|
|
2012
|
|
|
|
|
|
|
|
|
|
Total future minimum lease payments
|
|
|
427,571
|
|
Less amount representing interest
|
|
|
(39,679
|
)
|
|
|
|
|
|
Present value of future minimum lease payments
|
|
|
387,892
|
|
Less current portion of capital lease obligations
|
|
|
(207,100
|
)
|
|
|
|
|
|
Long-term portion of capital lease obligations
|
|
$
|
180,792
|
|
|
|
|
|
|
Notes Payable. On August 3, 2009, the
Company entered into a second amendment to its interest free
loan agreement with a local development authority for
laboratory related leasehold improvements at the
Companys research and headquarters facility. Under
the amended agreement the Company will make one payment of
$78,125 on January 1, 2010 and then make eight quarterly
installments of $60,764 beginning January 1, 2011 with a
final payment $60,763 payable on January 1, 2013. As of
December 31, 2009 and December 31, 2008, $625,000 and
$703,125 were outstanding under this note payable, respectively.
The loan is secured by leasehold lab improvements of the
Companys facility.
Future minimum payments due under notes payable as of
December 31, 2009 are as follows:
|
|
|
|
|
Year Ending December 31,
|
|
|
|
|
2010
|
|
$
|
78,125
|
|
2011
|
|
|
243,056
|
|
2012
|
|
|
243,056
|
|
2013
|
|
|
60,763
|
|
|
|
|
|
|
Total future payments
|
|
$
|
625,000
|
|
|
|
|
|
|
The components of other liabilities are as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Deferred amortization of leasehold improvements and deferred rent
|
|
$
|
1,106,873
|
|
|
$
|
1,240,764
|
|
Other
|
|
|
192,287
|
|
|
|
264,152
|
|
Less current portion of other liabilities
|
|
|
(202,531
|
)
|
|
|
(224,922
|
)
|
|
|
|
|
|
|
|
|
|
Long term portion of other liabilities
|
|
$
|
1,096,629
|
|
|
$
|
1,279,994
|
|
|
|
|
|
|
|
|
|
|
The Company entered into a lease for its office and laboratory
facility (See
Note 8-Commitments)
pursuant to which leasehold improvements paid by the lessor
pursuant to the lease agreement were capitalized. The leasehold
improvement assets are being amortized over seven years and the
liability is being amortized over
66
INHIBITEX,
INC. (Continued)
the life of the lease, which is ten years. The amortization is
recorded as a discount to rent expense for the liability and the
amortization expense to leasehold improvements for the asset.
The balances of the capitalized lessor-paid leasehold
improvements are classified in the balance sheet as leasehold
improvements for the asset and other liabilities for the
liability, respectively. In addition, the Company took
possession of the physical use of the facility in January 2005,
at which time the work was initiated on the leasehold
improvements. The leasehold improvements were completed in May
2005. This four month gap constituted a rent holiday. As such,
the Company accrued rent for that time period. This accrued rent
is being amortized as a discount to rent over the ten year life
of the lease. Further, the Company recognizes rent expense on a
straight-line basis over the life of the lease. The difference
between cash rent payments and rent expense is recorded as
deferred rent. The balance of these deferred rent liabilities
are classified in the balance sheet as other liabilities.
At December 31, 2009, the Company had available federal net
operating loss (NOL) carry forwards of approximately
$195,301,959 and state NOL carry forwards of $186,110,455 which
will begin to expire in the year 2010. A portion of the
Companys existing NOL carry forwards relates to exercises
of non-qualified stock options. The tax benefit of which, when
utilized, will be recorded as an increase to stockholders
equity. The Company also has approximately $4,062,560 of
research and development (R&D) tax credit carry
forwards as of December 31, 2009 which begin to expire in
the year 2017. Included in the Companys carry forwards are
$9,191,505 of federal NOL carry forwards and $119,009 R&D
tax credit carry forwards from the FermaVir acquisition. The
Companys NOL carry forwards and R&D tax credit carry
forwards are subject to certain IRC Section 382 and
Section 383 limitations on annual utilization due to past
changes in ownership. These limitations could significantly
reduce the amount of the NOL carry forwards available in the
future. The utilization of the carry forwards is dependent upon
the timing and extent of the Companys future
profitability. The annual limitations combined with the
expiration dates of the carry forwards may prevent the
utilization of all of the NOL and R&D tax credit carry
forwards if the Company does not attain sufficient profitability
by the expiration dates of the carry forwards.
The Company has no uncertain tax positions. As of
December 31, 2009 and 2008, the Company has no unrecognized
tax benefits. The Company will recognize accrued interest and
penalties related to unrecognized tax benefits in income tax
expense if and when incurred. The Company has no interest or
penalties related to unrecognized tax benefits accrued as of
December 31, 2009. The Company does not anticipate that
unrecognized benefits will be incurred within the next
12 months. Since the Company has tax net operating losses
since its inception, all tax years remain open under federal and
state statute of limitations.
The Companys income tax expense was $0 for years ended
December 31, 2009 and 2008. The primary factors causing
income tax expense to be different than the federal statutory
rates are as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Income tax benefit at statutory rate
|
|
$
|
(5,980,600
|
)
|
|
$
|
(4,474,823
|
)
|
State income tax benefit, net of federal tax benefit
|
|
|
(644,536
|
)
|
|
|
(548,995
|
)
|
IPR&D expense
|
|
|
|
|
|
|
(43,945
|
)
|
General business credit
|
|
|
(456,792
|
)
|
|
|
(425,273
|
)
|
Other
|
|
|
446,713
|
|
|
|
(194,829
|
)
|
Valuation allowance
|
|
|
6,635,215
|
|
|
|
5,687,865
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
67
INHIBITEX,
INC. (Continued)
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts
used for income tax purposes. Significant components of the
Companys deferred tax asset are as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Net operating loss carry forwards
|
|
$
|
73,770,008
|
|
|
$
|
67,294,096
|
|
Research and development tax credit carry forwards
|
|
|
4,062,559
|
|
|
|
3,605,767
|
|
Depreciation and amortization
|
|
|
1,826,603
|
|
|
|
1,809,081
|
|
Accruals and reserves
|
|
|
405,314
|
|
|
|
138,765
|
|
Compensation accruals
|
|
|
929,661
|
|
|
|
1,133,880
|
|
Deferred revenue
|
|
|
105,972
|
|
|
|
257,812
|
|
Other, net
|
|
|
(32,981
|
)
|
|
|
192,520
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
81,067,136
|
|
|
|
74,431,921
|
|
Less valuation allowance
|
|
|
(81,067,136
|
)
|
|
|
(74,431,921
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
For financial reporting purposes, a valuation allowance is
recorded to reduce the balance of deferred income tax assets if
it is more likely than not that some portion or all of the
deferred income tax assets will not be realized in the future.
The Company has established a full valuation allowance equal to
the amount of its deferred tax assets due to uncertainties with
respect to the Companys ability to generate sufficient
taxable income in the future. The valuation allowance increased
by $6,635,215 and $8,931,986 in 2009 and 2008, respectively, as
follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Deferred tax valuation allowance at beginning of year
|
|
$
|
74,431,921
|
|
|
$
|
65,499,935
|
|
Change in cumulative tax due to FermaVir acquisition
|
|
|
|
|
|
|
3,244,121
|
|
Change in cumulative tax differences
|
|
|
6,635,215
|
|
|
|
5,687,865
|
|
|
|
|
|
|
|
|
|
|
Deferred tax valuation allowance at end of year
|
|
$
|
81,067,136
|
|
|
$
|
74,431,921
|
|
|
|
|
|
|
|
|
|
|
Common Stock. In June 2009, the Companys
stockholders approved an amendment to the Companys Eighth
Amended and Restated Certificate of Incorporation to increase
the Companys authorized common stock, $0.001 par
value per share, from 75,000,000 shares to
150,000,000 shares. As of December 31, 2009 and 2008,
the Company was authorized to issue 150,000,000 and
75,000,000 shares of common stock, respectively. Each
holder of common stock is entitled to one vote for each share of
common stock held of record on all matters on which stockholders
generally are entitled to vote.
Private Placement. On October 28, 2009,
the Company completed a private placement (offering)
in which it raised $22,999,996 in gross proceeds through the
sale of units, at a price of $1.28 per unit. Each unit consisted
of one share of common stock and a warrant to purchase 0.45 of a
share of common stock. In connection with the offering, the
Company incurred financing costs of $1,531,081 resulting in net
proceeds of $21,468,915, exclusive of any proceeds that might be
received upon exercise of the warrants. Pursuant to the
offering, the Company issued an aggregate of
17,968,747 shares of its common stock and warrants to
purchase an aggregate of 8,085,932 shares of its common
stock. The warrants expire on October 28, 2013 and have an
exercise price of $1.46 per share.
68
INHIBITEX,
INC. (Continued)
Pursuant to the terms of the offering, the Company filed a
registration statement with the Securities Exchange Commission.
If the Company fails to keep the registration statement
effective for three years by not filing periodic reports with
the Securities Exchange Commission it has agreed to pay the
offering investors liquidated damages equal to 1% (up to a
maximum of 10%) of the aggregate purchase price paid for each
30 day period the registration statement ceases to be
effective.
Employee Stock Purchase Plan. The
Companys Board of Directors adopted, and its stockholders
approved as of February 20, 2004, its 2004 Employee Stock
Purchase Plan, or the Purchase Plan. The purpose of the Purchase
Plan is to provide an opportunity for the Companys
employees to purchase a proprietary interest in the Company. The
Purchase Plan is administered by the Companys Compensation
Committee. A total of 210,084 shares of common stock are
authorized for issuance under the Purchase Plan as of
December 31, 2009. Employees who are employed for more than
20 hours per week and for more than five months in any
calendar year and have been so employed for a six-month period
are eligible to participate in the Purchase Plan. Employees who
would own 5% or more of the total combined voting power or value
of all classes of the Companys stock immediately after the
grant may not participate in the Purchase Plan. The Purchase
Plan is intended to qualify under Section 423 of the
Internal Revenue Code and provides for quarterly purchase
periods. The Purchase Plan permits participants to purchase
common stock through payroll deductions of up to 25% of their
eligible base salary. For any calendar year, a participant may
not be granted rights to purchase shares to the extent the fair
market value of such shares exceeds $25,000. Amounts deducted
and accumulated by the participant are used to purchase shares
of common stock at the end of each quarterly purchase period.
The purchase price per share is 85% of the lower of the fair
market value of the Companys common stock at the beginning
of a purchase period or at the end of a purchase period. An
employees participation ends automatically upon
termination of employment with the Company. A participant may
not transfer rights to purchase the Companys common stock
under the Purchase Plan other than by will or the laws of
descent and distribution. In the event of a change of control,
no further shares shall be available under the Purchase Plan,
but all payroll deductions scheduled for collection in that
purchase period will be immediately applied to purchase whole
shares of common stock. The Board of Directors has the authority
to amend or terminate the Purchase Plan, except that, subject to
certain exceptions described in the Purchase Plan, no such
action may adversely affect any outstanding rights to purchase
stock under the Purchase Plan and the Board of Directors may not
increase the number of shares available under the Purchase Plan,
or amend the requirements as to the eligible class of employees,
without stockholder approval. As of December 31, 2009, the
Company had 2,824 shares committed to be released to
employees and had granted 94,704 shares out of the plan.
The Company recorded $2,873 of share-based compensation expense
on all discounts to the fair market value during the purchase
period of 2009.
Common Stock Warrants. In 2009, a total of
2,055,477 warrants expired with a weighted average exercise
price of $8.81. The total Black-Scholes value of those warrants
was $5,548,103 and such amount was reclassified from warrants to
additional paid-in capital. Additionally in 2009, the Company
issued a total of 8,085,932 warrants with an exercise price of
$1.46 and a total Black-Scholes value of $3,938,689 in
connection with the private placement.
As of December 31, 2009 and 2008, there were 14,053,318 and
8,022,863 warrants outstanding, respectively. As of
December 31, 2009, all of the outstanding warrants are
exercisable and expire from January 18, 2010 to
September 26, 2018. The weighted average strike price as of
December 31, 2009 and 2008 was $1.19 and $2.87,
respectively.
Share-Based
Award Plans
The Company has two active share-based award plans as described
below. For the twelve months ended December 31, 2009 and
2008, the Company recorded share-based compensation expense
related to grants from these plans of $515,386 and $1,491,119,
or $0.01 and $0.03 per share, respectively. No income tax
benefit was recognized in the income statement and no
share-based compensation expense was capitalized as part of any
assets for the twelve months ended December 31, 2009 and
2008.
69
INHIBITEX,
INC. (Continued)
1998 Equity Ownership Plan. In May 1998, the
Board of Directors approved the 1998 Equity Ownership Plan (the
Plan), which provided for the grant of stock options
to directors, officers, employees and consultants. Under the
Plan, both incentive stock options and non-qualified stock
options, among other equity related awards, could be granted.
The Board of Directors determined the term and vesting dates of
all options at their grant date, provided that such price shall
not be less than the fair market value of the Companys
stock on the date of grant. Under the Plan, the maximum term for
an option grant is ten years from the grant date, and options
generally vest ratably over a period of four years from the
grant date. As discussed below, upon the adoption of the 2002
Stock Incentive Plan (2002 Plan), no additional
grants of stock option grants or equity awards were authorized
under the 1998 Equity Ownership Plan. All options outstanding
under the Plan remain in full force and effect until they expire
or are exercised. However, future forfeitures of any stock
options granted under the 1998 Equity Ownership Plan are added
to the number of shares available under the 2002 Plan.
2004 Stock Incentive Plan. In February 2002,
the Board of Directors approved the 2002 Plan, which provided
for the grant of incentive stock options, non-qualified stock
options, restricted stock, and other share-based awards to
employees, contractors and consultants of the Company. At that
time, the Company also adopted the 2002 Non-Employee Directors
Stock Option Plan (the Director Plan) which provided
for the grant of non-qualified stock options and other
share-based awards to non-employee members of the Board of
Directors. On February 20, 2004, the Board of Directors
amended the 2002 Plan and the Director Plan, whereby the 2002
Plan was renamed the 2004 Stock Incentive Plan (the 2004
Plan). The 2004 Plan was further modified to provide for
grants to non-employee directors and 1,420,180 share-based
awards of common stock were added to the number of reserved
shares. Upon the adoption of the 2004 Plan, no further options
were authorized to be granted under the Director Plan. In May
2005, pursuant to a stockholder vote, the 2004 Plan was further
modified by adding 1,500,000 shares of share-based awards
of common stock to the number of reserved awards available for
grant. On April 9, 2007, the Board of Directors approved
the Amended and Restated 2004 Plan which provided for an
increase of 2,800,000 in the number of shares of common stock
available for awards to be granted under the Incentive Plan.
The 2004 Plan is administered by the Compensation Committee of
the Board of Directors, which has the authority to select the
individuals to whom awards are to be granted, the number of
awards granted, and the vesting schedule. Under the 2004 Plan
the maximum term for an award is ten years from the grant date.
As of December 2009, an aggregate of 8,718,428 shares of
common stock were reserved for issuance under the 2004 Plan. As
of December 31, 2009, there were 5,740,908 outstanding
option awards to purchase the Companys common stock, with
628,890 shares available for grant under the 2004 Plan.
The following is a summary of all share-based activity and
related information about the Companys share-based award
plans for 2009 and 2008.
Stock Options. The fair value of each
time-based stock award was estimated at the date of grant using
the Black-Scholes method in 2009 and 2008 with the following
assumptions:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
2009
|
|
2008
|
|
Risk-free interest rate
|
|
|
1.51
|
%
|
|
|
2.72
|
%
|
Expected life
|
|
|
3.1 years
|
|
|
|
4 years
|
|
Weighted average fair value of options granted
|
|
$
|
.44
|
|
|
$
|
.43
|
|
Volatility
|
|
|
.71
|
|
|
|
.68
|
|
The risk-free interest rate is based on the expected life of the
option and the corresponding U.S. Treasury bond. The
expected life of stock options granted is derived from actual
and forecasted option exercise patterns and represents the
period of time that options granted are expected to be
outstanding. The Company uses
70
INHIBITEX,
INC. (Continued)
historical data to estimate option exercise patterns and future
employee terminations to determine expected life and
forfeitures. Expected volatility is based on historical
volatilities from the Companys publicly traded stock.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-Average
|
|
|
Weighted-Average
|
|
|
|
|
|
|
Number of
|
|
|
Exercise Price
|
|
|
Remaining Contractual
|
|
|
Aggregate Intrinsic
|
|
|
|
Options
|
|
|
per Option
|
|
|
Term
|
|
|
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
($000)
|
|
|
Balance at December 31, 2008
|
|
|
4,820,459
|
|
|
$
|
2.33
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
1,530,500
|
(1)
|
|
$
|
0.97
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(35,349
|
)
|
|
$
|
0.68
|
|
|
|
|
|
|
|
|
|
Forfeited or expired
|
|
|
(574,702
|
)
|
|
$
|
2.62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009
|
|
|
5,740,908
|
(1)
|
|
$
|
1.95
|
|
|
|
5.02
|
|
|
$
|
88
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested or expect to vest at December 31, 2009
|
|
|
5,591,512
|
|
|
$
|
1.97
|
|
|
|
5.02
|
|
|
$
|
87
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2009
|
|
|
3,154,042
|
|
|
$
|
2.61
|
|
|
|
4.65
|
|
|
$
|
38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes performance-based options of 910,000, subject to
specific performance conditions. |
Time-based stock options granted during the twelve month period
ended December 31, 2009 were 620,500 with a
weighted-average exercise price of $0.92. The weighted-average
grant date fair value of time-based stock options granted during
the twelve month period ended December 31, 2009 was $0.44,
using the assumptions in the above table. As of
December 31, 2009, there was $985,924 of total unrecognized
share-based compensation expense related to unvested stock
option awards (excluding performance-based options as discussed
below), not discounted for future forfeitures. This unrecognized
expense is expected to be recognized over a weighted-average
period of 1.7 years.
Performance-based stock options granted during the twelve month
period ending December 31, 2009 were 910,000 with an
exercise price of $1.00 with total unrecognized share-based
compensation expense of $377,650. Vesting is contingent upon
meeting specific performance goals with respect to FV-100 and
INX-189. As of December 31, 2009, no share-based
compensation expense related to performance-based options has
been recognized as it is not probable that the performance
condition will be achieved. The Company will evaluate the
probability of achieving these performance goals quarterly, and
if the Company determines that it is probable that a performance
goal will occur, the effect of the change in estimate will be
accounted in the period of change by recording a cumulative
catch-up
adjustment to retroactively apply the new estimate. As of
December 31, 2009, all performance-based options are
unvested and expire five-years from the grant date or will be
forfeited upon not achieving performance goals.
The total intrinsic value of stock options exercised during the
twelve month period ended December 31, 2009 was $32,121,
from which the Company received cash proceeds of $24,037. No
actual tax benefits were realized as the Company currently
records a full valuation allowance for all tax benefits due to
uncertainties with respect to the Companys ability to
generate sufficient taxable income in the future.
71
INHIBITEX,
INC. (Continued)
The following tables summarize information relating to
outstanding and exercisable options as of December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009
|
|
|
|
Outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
|
|
|
|
|
|
Exercisable
|
|
|
|
Number of
|
|
|
Remaining
|
|
|
Weighted Average
|
|
|
Number of
|
|
|
Weighted Average
|
|
Exercise Prices
|
|
Shares
|
|
|
Contractual Life
|
|
|
Exercise Price
|
|
|
Shares
|
|
|
Exercise Price
|
|
|
|
|
|
|
(In Years)
|
|
|
|
|
|
|
|
|
|
|
|
$0.29 $0.97
|
|
|
357,062
|
|
|
|
5.41
|
|
|
$
|
0.66
|
|
|
|
200,812
|
|
|
$
|
0.72
|
|
$1.00
|
|
|
1,460,000
|
|
|
|
4.35
|
|
|
|
1.00
|
|
|
|
|
|
|
|
|
|
$1.22 $1.36
|
|
|
592,500
|
|
|
|
5.11
|
|
|
|
1.36
|
|
|
|
585,000
|
|
|
|
1.36
|
|
$1.45
|
|
|
1,912,900
|
|
|
|
6.93
|
|
|
|
1.45
|
|
|
|
958,950
|
|
|
|
1.45
|
|
$1.62 $2.27
|
|
|
891,234
|
|
|
|
3.67
|
|
|
|
2.05
|
|
|
|
891,234
|
|
|
|
2.05
|
|
$2.91 $9.38
|
|
|
526,687
|
|
|
|
1.88
|
|
|
|
7.80
|
|
|
|
517,521
|
|
|
|
7.87
|
|
$9.69
|
|
|
525
|
|
|
|
.03
|
|
|
|
9.69
|
|
|
|
525
|
|
|
|
9.69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,740,908
|
|
|
|
5.02
|
|
|
$
|
1.95
|
|
|
|
3,154,042
|
|
|
$
|
2.61
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock Awards. A summary of the
Companys restricted stock as of December 31, 2009 is
presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-Average
|
|
|
|
|
|
|
Grant Date
|
|
Restricted Stock
|
|
Shares
|
|
|
Fair Value
|
|
|
Outstanding at December 31, 2008
|
|
|
140,000
|
|
|
$
|
1.76
|
|
Granted
|
|
|
|
|
|
|
|
|
Released
|
|
|
(140,000
|
)
|
|
$
|
1.76
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2009
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
The Company had reserved shares of common stock for equity
issuance as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Common stock options
|
|
|
5,740,908
|
|
|
|
4,820,459
|
|
Restricted common stock
|
|
|
|
|
|
|
140,000
|
|
Common stock warrants
|
|
|
14,053,318
|
|
|
|
8,022,863
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
19,794,226
|
|
|
|
12,983,322
|
|
|
|
|
|
|
|
|
|
|
The components of comprehensive loss for the twelve months ended
December 31, 2009 and 2008 are as follows:
|
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended
|
|
|
|
December 31
|
|
|
|
2009
|
|
|
2008
|
|
|
Net loss
|
|
$
|
(17,590,001
|
)
|
|
$
|
(13,161,243
|
)
|
Change in net unrealized gains (losses) on investments
|
|
|
(102,473
|
)
|
|
|
4,970
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
$
|
(17,692,474
|
)
|
|
$
|
(13,156,273
|
)
|
|
|
|
|
|
|
|
|
|
72
INHIBITEX,
INC. (Continued)
|
|
14.
|
Research
and License Agreements
|
In-licensing
Agreements
The following agreements are associated with intellectual
property the Company has in-licensed.
Cardiff University. In September 2007, the
Company completed the acquisition of FermaVir. As part of the
acquisition, the Company acquired the rights to a worldwide
royalty bearing license from Cardiff University in Wales, United
Kingdom, which includes FV-100, a nucleoside analogue for the
treatment of VZV infections and a series of preclinical
nucleoside analogue compounds for the treatment of CMV. The
agreement calls for the Company to make certain contingent
milestone payments and a royalty on the sale of any products
that utilize the underlying intellectual property.
Cardiff University and Katholieke
Universiteit. In November 2007, the Company
entered into an exclusive royalty-bearing worldwide license
agreement with Cardiff University in Wales, United Kingdom and
Katholieke Universiteit in Leuven, Belgium for intellectual
property covering a series of highly potent HCV nucleoside
polymerase inhibitors in exchange for an upfront license fee,
future milestone payments and royalties on future net sales. The
Company has an obligation to pay a minimum payment of $15,000
annually until the license agreement expires or is terminated.
The agreement calls for the Company to make certain milestone
payments and pay a royalty on the sale of any products that
utilize the underlying intellectual property.
In October 2009, the Company entered into a second exclusive
royalty-bearing worldwide license agreement with Cardiff
University in Wales, United Kingdom, for intellectual property
for a HCV nucleoside polymerase inhibitor in exchange for future
milestone payments and royalties on future net sales. The
agreement calls for the Company to make certain milestone
payments and pay a royalty on the sale of any products that
utilize the intellectual property. The Company has an obligation
to pay a minimum payment of $7,500 annually until the license
agreement expires or is terminated. Pursuant to the agreements,
the Company entered into a series of cooperative research
agreements with Cardiff University for annual sponsored research
payments.
Texas A&M University Health Science
Center. The Company has licensed, on an exclusive
basis, from the Texas A&M University System (Texas
AM) a number of issued U.S. patents, their related
pending U.S. divisional applications and corresponding
international filings with claims to MSCRAMM nucleic acids,
proteins, antibodies, and vaccines. BioResearch Ireland/Trinity
College Dublin is a co-owner of certain issued patents and
patent applications. Texas A&M may terminate the license if
the Company fails to use commercially reasonable efforts to
bring product candidates to market. Inhibitex may terminate the
license without cause upon 60 days written notice. The
Company has an obligation to pay a minimum payment of $25,000
annually until the license agreement expires or is terminated.
BioResearch Ireland. The Company obtained an
exclusive royalty-bearing license from BioResearch Ireland
(BRI) under two issued U.S. patents and a
pending U.S. patent application directed to the ClfA
nucleic acid, protein, and antibodies. The Company may terminate
the license agreement as to any patent or patent application
upon 90 days notice. We have agreed to pay BRI a royalty
based on net sales for any product sold utilizing these licenses.
University of Georgia Research Foundation. In
September 2007, the Company obtained an exclusive royalty
bearing worldwide license from UGARF for intellectual property
covering a series of HIV integrase inhibitors and other
antiviral compounds in exchange for an upfront license fee and
future milestone payments and royalties on future net sales. In
addition, the Company entered into a cooperative research
agreement with UGARF for annual sponsored research payments that
expired on August 31, 2009. The Company terminated the
license agreement effective August 31, 2009.
73
INHIBITEX,
INC. (Continued)
Out-licensing
Agreements
Pfizer (Wyeth). In August 2001, the Company
entered into an exclusive worldwide license and development
collaboration agreement with Wyeth Pharmaceuticals, Inc.,
(Wyeth), which has since been acquired by Pfizer,
Inc. (Pfizer) for the development of staphylococcal
vaccines for humans. Under the terms of this agreement, the
Company granted Pfizer an exclusive worldwide license to its
MSCRAMM protein intellectual property with respect to human
vaccines against staphylococcal organisms. The development,
manufacture and sale of any products resulting from the
collaboration are the responsibility of Pfizer. The Company must
commit two full-time equivalent employees to the collaboration.
The Company may terminate the agreement if Pfizer fails to use
reasonable commercial efforts to bring related products to
market. Pfizer may terminate the agreement, without cause, upon
six months notice. Otherwise, this agreement will terminate upon
the expiration of all of the licensed patents. Currently, the
latest to expire of the issued patents under the license
agreement expires in 2019.
Pursuant to this agreement, the Company has received $7,250,000
in an upfront license fee and annual research support payments
from Pfizer as of December 31, 2009. The Company is
entitled to receive minimum research support payments of
$1,000,000 per year until the reaching a target sales threshold
of any product developed under this agreement. The Company is
also entitled to receive milestones upon the commencement of a
Phase I trial, Phase II and Phase III clinical trials,
the filing of a BLA, and FDA approval of a licensed product. If
all such milestones are achieved relative to one licensed
product, the Company would be entitled to receive a minimum of
$10,000,000 in additional milestone payments from Pfizer. The
maximum milestone payments the Company could receive with
respect to all licensed products are $15,500,000. Finally, the
Company is also entitled to royalties on net sales of licensed
products manufactured, sold or distributed by Pfizer.
3M Company. In January 2007, the Company
entered into an exclusive worldwide license and
commercialization agreement with 3M Company (3M) for
the development of various diagnostic products using its MSCRAMM
protein platform. Under the terms of the agreement, the Company
granted 3M exclusive global licenses to use MSCRAMM protein
intellectual property in the development of diagnostic products
in exchange for license fees, future milestone payments,
financial support of future research and development activities
and royalty payments on net product sales. In December 2008, 3M
notified the Company of its termination of the agreement. In
March 2009, all MSCRAMM related intellectual property
sublicensed to 3M for the development of infectious disease
diagnostics reverted back to the Company. Pursuant to this
agreement, the Company received a total of $4,000,000 in an
upfront license fee and annual research support payments from 3M
as of December 31, 2009.
|
|
15.
|
Employee
Benefit Plans
|
The Company sponsors a 401(k) plan for the benefit of its
employees that is a defined contribution plan intended to
qualify under Section 401(a) of the Internal Revenue Code
of 1986, as amended. Eligible employees may make pre-tax
contributions to the 401(k) plan of up to 20% of their eligible
earnings, subject to the statutorily prescribed annual limit.
The 401(k) plan permits the Company to make discretionary
matching and profit sharing contributions. The Companys
contributions to the plan were approximately $127,000 and
$124,000 in 2009 and 2008, respectively. Under the 401(k) plan,
each employee is fully vested in his or her deferred salary
contributions. The Companys contributions vest over a
three-year period.
The Company has employment agreements with its current executive
officers that allow for certain termination post-employments
benefits upon termination. These benefits cannot be reasonably
estimated and no measurable event has occurred as of
December 31, 2009.
74
INHIBITEX,
INC. (Continued)
|
|
16.
|
Quarterly
Financial Data (Unaudited)
|
The following table presents unaudited quarterly financial data
of the Company. The Companys quarterly results of
operations for these periods are not necessarily indicative of
future results.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable
|
|
|
|
|
|
|
|
|
|
|
|
|
To Common
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
per Share -
|
|
|
|
|
|
|
Loss from
|
|
|
|
|
|
Basic and
|
|
|
|
Revenue
|
|
|
Operations
|
|
|
Net Loss
|
|
|
Diluted
|
|
|
Year Ended December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
287,500
|
|
|
$
|
(4,281,050
|
)
|
|
$
|
(4,195,683
|
)
|
|
$
|
(0.10
|
)
|
Second Quarter
|
|
|
287,500
|
|
|
|
(4,330,402
|
)
|
|
|
(4,229,258
|
)
|
|
|
(0.10
|
)
|
Third Quarter
|
|
|
287,500
|
|
|
|
(4,489,228
|
)
|
|
|
(4,471,737
|
)
|
|
|
(0.10
|
)
|
Fourth Quarter
|
|
|
287,500
|
|
|
|
(4,694,068
|
)
|
|
|
(4,693,323
|
)
|
|
|
(0.08
|
)
|
Year Ended December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
787,500
|
|
|
$
|
(3,960,115
|
)
|
|
$
|
(3,447,799
|
)
|
|
$
|
(0.08
|
)
|
Second Quarter
|
|
|
787,500
|
|
|
|
(2,542,941
|
)
|
|
|
(2,208,875
|
)
|
|
|
(0.05
|
)
|
Third Quarter
|
|
|
787,500
|
|
|
|
(4,199,889
|
)
|
|
|
(3,955,532
|
)
|
|
|
(0.09
|
)
|
Fourth Quarter
|
|
|
787,500
|
|
|
|
(3,770,533
|
)
|
|
|
(3,549,037
|
)
|
|
|
(0.08
|
)
|
On January 11, 2010, the Company announced that Pfizer had
initiated a Phase I trial of a staphylococcal vaccine that
contained an antigen licensed by Pfizer from the Companys
MSCRAMM intellectual property. The Company received a milestone
payment of $666,667 from Pfizer.
75
|
|
ITEM 9.
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
|
None.
|
|
ITEM 9AT.
|
CONTROLS
AND PROCEDURES
|
Evaluation
of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed
to ensure that information required to be disclosed in the
reports that we file or submit pursuant to the Securities
Exchange Act of 1934, as amended is recorded, processed,
summarized and reported within the time periods specified in the
SECs rules and forms and that such information is
accumulated and communicated to our management, including our
Chief Executive Officer and Chief Financial Officer, to allow
timely decisions regarding required disclosure. Our management,
under the supervision of the Chief Executive Officer and Chief
Financial Officer carried out an evaluation of the effectiveness
of the design and operation of our disclosure controls and
procedures as of the end of the period covered by this report.
Based on the evaluation of these disclosure controls and
procedures, the Chief Executive Officer and Chief Financial
Officer concluded that our disclosure controls and procedures
were effective. It should be noted that any system of controls,
however well designed and operated, can provide only reasonable,
and not absolute, assurance that the objectives of the system
are met. In addition, the design of any control system is based
in part upon certain assumptions about the likelihood of future
events. Because of these and other inherent limitations of
control systems, there can be no assurance that any design will
succeed in achieving its stated goals under all potential future
conditions, regardless of how remote.
Managements
Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining
adequate internal control over financial reporting (as defined
in
Rules 13a-15(f)
under the Exchange Act). Our management assessed the
effectiveness of our internal control over financial reporting
as of December 31, 2009. In making this assessment,
management used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission
(COSO) in Internal Control Integrated
Framework. Management has concluded that, as of
December 31, 2009, its internal control over financial
reporting is effective based on these criteria.
Our management, including our Chief Executive Officer and Chief
Financial Officer, does not expect that our disclosure controls
and procedures or our internal control over financial reporting
will prevent all error and all fraud. A control system, no
matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of the
control system are met. Further, the design of a control system
must reflect the fact that there are resource constraints, and
the benefits of controls must be considered relative to their
costs. Because of the inherent limitations in all control
systems, no evaluation of controls can provide absolute
assurance that all control issues and instances of fraud, if
any, within our company have been detected.
This Annual Report on
Form 10-K
does not include an attestation report of the Companys
registered public accounting firm regarding internal control
over financial reporting. Managements report was not
subject to attestation by the Companys registered public
accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permit the Company to provide only
managements report in this Annual Report.
March 26, 2010
Changes
in Internal Control over Financial Reporting
There were no changes in our internal control over financial
reporting during the fourth quarter of 2009 that have materially
affected, or are reasonably likely to materially affect, our
internal control over financial reporting.
76
|
|
ITEM 9B.
|
OTHER
INFORMATION
|
None.
PART III
|
|
ITEM 10.
|
DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
The information required by this item is incorporated by
reference from our definitive proxy statement or a subsequent
amendment to this Report to be filed with the Securities and
Exchange Commission.
|
|
ITEM 11.
|
EXECUTIVE
COMPENSATION
|
The information required by this item is incorporated by
reference from our definitive proxy statement or a subsequent
amendment to this Report to be filed with the Securities and
Exchange Commission.
|
|
ITEM 12.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT, AND
RELATED STOCKHOLDER MATTERS
|
The information required by this item is incorporated by
reference from our definitive proxy statement or a subsequent
amendment to this Report to be filed with the Securities and
Exchange Commission.
|
|
ITEM 13.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
|
The information required by this item is incorporated by
reference from our definitive proxy statement or a subsequent
amendment to this Report to be filed with the Securities and
Exchange Commission.
|
|
ITEM 14.
|
PRINCIPAL
ACCOUNTING FEES AND SERVICES
|
The information required by this item is incorporated by
reference from our definitive proxy statement or a subsequent
amendment to this Report to be filed with the Securities and
Exchange Commission.
77
PART IV
|
|
ITEM 15.
|
EXHIBITS AND
FINANCIAL STATEMENT SCHEDULES
|
|
|
(a)
|
Financial
Statements and Schedules
|
The financial statements are set forth under Item 8 of this
Annual report on
Form 10-K.
Financial statement schedules have been omitted since they are
not required, not applicable or the information is otherwise
included.
|
|
|
|
|
Exhibit No.
|
|
Description
|
|
|
3
|
.1
|
|
Eighth Amended and Restated Certificate of Incorporation, as
amended through June 9, 2009 (incorporated by reference to
Exhibit 3.4 of the Quarterly Report on Form 10Q filed
with the Securities and Exchange Commission on August 12,
2009).
|
|
3
|
.2
|
|
Amended and Restated Bylaws (incorporated by reference to
Exhibit 99.1 of the Current Report on
Form 8-K
filed with the Securities and Exchange Commission on
December 10, 2007).
|
|
4
|
.1
|
|
Specimen certificate evidencing the common stock (incorporated
by reference to Exhibit 4.1 of Amendment No. 2 to the
Registration Statement on
Form S-1
filed with the Securities and Exchange Commission on May 6,
2004 ( Amendment No. 2)).
|
|
10
|
.1
|
|
Amended and Restated 2004 Stock Incentive Plan (incorporated by
reference to Exhibit 4.1 of the Registration Statement
filed on
Form S-8
filed with the Securities and Exchange Commission on
November 13, 2007).
|
|
10
|
.2.2
|
|
Non-Employee Directors Stock Option Agreement (incorporated by
reference to Exhibit 99.2 of the February 2006
8-K).
|
|
10
|
.2.3
|
|
Employee Stock Option Agreement (incorporated by reference to
Exhibit 10.51 of the Quarterly Report on
Form 10-Q
field with the Securities and Exchange Commission on
November 9, 2007).
|
|
10
|
.3
|
|
2002 Non-Employee Directors Stock Option Plan and related form
of option agreement (incorporated by reference to
Exhibit 10.3 of the Registration Statement on
Form S-1
Securities and Exchange filed with the Commission on
March 3, 2004 (the March 2004
S-1).
|
|
10
|
.4
|
|
2004 Employee Stock Purchase Plan (incorporated by reference to
Exhibit 10.4 of the March 2004
S-1).
|
|
10
|
.10
|
|
Amended and Restated Master Rights Agreement, dated
December 19, 2003, by and among the registrant and holders
of the registrants capital stock (incorporated by
reference to Exhibit 10.10 of the March 2004
S-1).
|
|
10
|
.11
|
|
Amendment No. 1 to Amended and Restated Master Rights
Agreement dated February 20, 2004 (incorporated by
reference to Exhibit 10.11 of the March 2004
S-1).
|
|
10
|
.11.1
|
|
Amendment No. 2 to Amended and Restated Master Rights
Agreement dated May 27, 2004 (incorporated by reference to
Exhibit 10.1 of the Quarterly Report on
Form 10-Q
filed with the Securities and Exchange Commission on
August 16, 2004).
|
|
10
|
.12
|
|
Form of Indemnity Agreement (incorporated by reference to
Exhibit 10.12 of the March 2004
S-1).
|
|
10
|
.18
|
|
License and Development Collaboration Agreement, dated
August 2, 2001, by and between the registrant and American
Home Products Corporation, acting through its Wyeth-Ayerst
Laboratories Division (incorporated by reference to
Exhibit 10.18 of Amendment No. 3 the Registration
Statement on
Form S-1
filed with the Securities and Exchange Commission on
May 25, 2004 (Amendment No. 3).
|
|
10
|
.19
|
|
License Agreement, dated February 4, 2000, between the
registrant and The Texas A&M University System
(incorporated by reference to Exhibit 10.19 of Amendment
No. 3).
|
|
10
|
.20
|
|
Amendment No. 1 to License Agreement, dated April 29,
2002, between the registrant and The Texas A&M University
System (incorporated by reference to Exhibit 10.20 of
Amendment No. 3).
|
78
|
|
|
|
|
Exhibit No.
|
|
Description
|
|
|
10
|
.21
|
|
Amendment No. 2 to License Agreement, dated April 29,
2002, between the registrant and The Texas A&M University
System (incorporated by reference to Exhibit 10.21 of the
March 2004
S-1).
|
|
10
|
.22
|
|
Exclusive License Agreement, dated April 8, 1999, between
the registrant and Enterprise Ireland, trading as BioResearch
Ireland (incorporated by reference to Exhibit 10.22 of the
March 2004
S-1).
|
|
10
|
.23
|
|
License Agreement, dated December 23, 2002, between the
registrant and Lonza Biologics PLC (incorporated by reference to
Exhibit 10.23 of Amendment No. 3).
|
|
10
|
.24
|
|
Non-Exclusive Cabilly License Agreement, dated June 30,
2003, between the registrant and Genentech, Inc (incorporated by
reference to Exhibit 10.24 of the March 2004
S-1).
|
|
10
|
.35
|
|
Lease Agreement, dated December 31, 2003, between the
registrant and Cousins Properties Incorporated (incorporated by
reference to Exhibit 10.35 of the March 2004
S-1).
|
|
10
|
.37
|
|
Agreement, dated March 14, 2002, between the registrant and
Avid Bioservices, Inc. (incorporated by reference to
Exhibit 10.31 of Amendment No. 2).
|
|
10
|
.39
|
|
Agreement, dated November 5, 2004, between the registrant
and Lonza Biologics PLC (incorporated by reference to
Exhibit 10.39 of Amendment No. 1 to the Registration
Statement on
Form S-1
filed with the Securities and Exchange Commission on
January 19, 2005).
|
|
10
|
.40
|
|
Loan agreement, dated December 28, 2004 between the
registrant and Development Authority of Fulton County
(incorporated by reference to Exhibit 10.40 of the Annual
Report on
Form 10-K
field with the Securities and Exchange Commission on
March 28, 2005).
|
|
10
|
.41
|
|
Form of Securities Purchase Agreement dated August 17, 2005
between the registrant and each of the investors signatory
thereto (incorporated by reference to Exhibit 10.1 of the
Current Report on
Form 8-K
filed with the Securities and Exchange Commission on
August 17, 2005).
|
|
10
|
.42
|
|
License and Development Collaboration Agreement, dated
January 3, 2007, by and between the registrant and 3M
Company and 3M Innovative Products Company (incorporated by
reference to Exhibit 10.42 of the Annual Report on
Form 10-K
filed with the Securities and Exchange Commission on
March 16, 2007).
|
|
10
|
.48
|
|
Employment Agreement, dated December 29, 2006, by and
between the registrant and Russell H. Plumb (incorporated by
reference to Exhibit 10.48 of the Annual Report on
Form 10-K
filed with the Securities and Exchange Commission on
March 16, 2007).
|
|
10
|
.49
|
|
License Agreement, dated September 11, 2007, by and between
registrant and University of Georgia Research Foundation, Inc.
(incorporated by reference to Exhibit 10.49 of the
Quarterly Report on
Form 10-Q
field with the Securities and Exchange Commission on
November 9, 2007).
|
|
10
|
.50
|
|
Employment Agreement, dated September 20, 2007, by and
between registrant and Geoff Henson (incorporated by reference
to Exhibit 10.50 of the Quarterly Report on
Form 10-Q
field with the Securities and Exchange Commission on
November 9, 2007).
|
|
10
|
.51
|
|
Employment Agreement, dated February 26, 2007, by and
between registrant and Joseph M. Patti (incorporated by
reference to Exhibit 10.49 of the Current Report on
Form 8-K/A
field with the Securities and Exchange Commission on
March 30, 2007).
|
|
10
|
.52
|
|
License Agreement, dated November 9, 2007, by and between
registrant and University College Cardiff Consultants Limited
and Katholieke Universiteit Leuven (incorporated by reference to
Exhibit 10.52 of the Annual Report on
Form 10-K
filed the Securities and Exchange Commission on November on
March 14, 2008).
|
|
10
|
.53
|
|
Form of Stock and Warrant Purchase Agreement dated
October 22, 2009 between the registrant and each of the
investors signatory thereto (incorporated by reference to
Exhibit 10.53 of the Current Report on
Form 8-K
filed with the Securities and Exchange Commission on
October 28, 2009).
|
|
10
|
.54
|
|
Form of Warrant pursuant to Securities Purchase Agreement dated
October 22, 2009 between the registrant and each of the
investors signatory thereto (incorporated by reference to
Exhibit 10.54 of the Current Report on
Form 8-K
filed with the Securities and Exchange Commission on
October 28, 2009).
|
79
|
|
|
|
|
Exhibit No.
|
|
Description
|
|
|
10
|
.55*
|
|
License Agreement, dated October 1, 2009, by and between
registrant and University College Cardiff Consultants Limited.
|
|
21
|
.1
|
|
Subsidiaries of the Company (incorporated by reference to
Exhibit 21.1 of the Annual Report on
Form 10-K
filed the Securities and Exchange Commission on November on
March 14, 2008).
|
|
23
|
.1
|
|
Consent of Independent Registered Public Accounting Firm.
|
|
31
|
.1
|
|
Certification of the Chief Executive Officer and Chief Financial
Officer pursuant to
Rule 13a-14(a)
or
Rule 15d-14(a)
under the Securities Exchange Act of 1934.
|
|
32
|
.1
|
|
Certifications of the Chief Executive Officer and the Chief
Financial Officer pursuant to
Rule 13a-14(b)
or
Rule 15d-14(b)
under the Securities Exchange Act of 1934.
|
|
|
|
|
|
We have been granted confidential treatment with respect to the
omitted portions of this exhibit and such information has been
filed separately with the Securities and Exchange Commission. |
|
* |
|
Confidential treatment has been requested with respect to the
omitted portions of this exhibit and such information has been
filed separately with the Securities and Exchange Commission. |
80
SIGNATURES
Pursuant to the requirements of the Section 13 or 15(d) of
the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of
Alpharetta, Georgia on this 26th day of March, 2010.
Inhibitex, Inc.
Russell H. Plumb
President, Chief Executive Officer,
Chief Financial Officer, Secretary and Treasurer
Pursuant to the requirements the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the
dates indicated.
|
|
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
/s/ Russell
H. Plumb
Russell
H. Plumb
|
|
President, Chief Executive Officer, Chief Financial Officer and
Director (Principal Executive Officer and Principal Financial
and Accounting Officer)
|
|
March 26, 2010
|
|
|
|
|
|
/s/ Michael
A. Henos
Michael
A. Henos
|
|
Chairman of the Board of Directors
|
|
March 26, 2010
|
|
|
|
|
|
/s/ M.
James Barrett, Ph.D.
M.
James Barrett, Ph.D.
|
|
Director
|
|
March 26, 2010
|
|
|
|
|
|
/s/ Chris
McGuigan, M.Sc., Ph.D.
Chris
McGuigan
|
|
Director
|
|
March 26, 2010
|
|
|
|
|
|
/s/ A.
Keith Willard.
A.
Keith Willard.
|
|
Director
|
|
March 26, 2010
|
|
|
|
|
|
/s/ Russell
M. Medford, M.D., Ph.D.
Russell
M. Medford, M.D., Ph.D.
|
|
Director
|
|
March 26, 2010
|
|
|
|
|
|
/s/ Marc
L. Preminger
Marc
L. Preminger
|
|
Director
|
|
March 26, 2010
|
|
|
|
|
|
/s/ Gabriele
M. Cerrone.
Gabriele
M. Cerrone
|
|
Director
|
|
March 26, 2010
|
81