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EX-23.1 - AUDITORS CONSENT - ABEONA THERAPEUTICS INC. | ex-23_1.htm |
As
filed with the Securities and Exchange Commission on April 12, 2010
Registration
Number 333-162687
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
POST-EFFECTIVE
AMENDMENT NO. 1 TO
FORM
S-1
REGISTRATION
STATEMENT
UNDER THE
SECURITIES ACT OF 1933
ACCESS PHARMACEUTICALS,
INC.
(Exact
Name of Registrant as Specified in its Charter)
Delaware
(State
or other jurisdiction of
incorporation
or organization)
|
3841
(Primary
Standard Industrial
Classification
Code Number)
|
83-0221517
(I.R.S.
Employer
Identification
No.)
|
||
2600
Stemmons Freeway, Suite 176
Dallas,
Texas 75207
(214)
905-5100
(Address,
Including Zip Code, and Telephone Number, Including Area Code, of
Registrant’s Principal Executive Offices)
|
||||
Stephen
B. Thompson
Chief
Financial Officer
Access
Pharmaceuticals, Inc.
2600
Stemmons Freeway, Suite 176
Dallas,
Texas 75207
(214)
905-5100
(Name,
Address, Including Zip Code, and Telephone Number, Including Area Code, of
Agent for Service)
|
with
a copy to:
|
John
J. Concannon III, Esq.
Bingham
McCutchen LLP
One
Federal Street
Boston,
MA 02110
(617)
951-8000
|
Approximate
date of commencement of proposed sale to public: As soon as practicable after
the effective date hereof.
If any of
the securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act, check the
following box. þ
If this
Form is filed to register additional securities for an offering pursuant to
Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering.
If this
Form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
number of the earlier effective registration statement for the same offering.
If this
Form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration
number of the earlier effective registration statement for the same offering.
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):
Larger
accelerated filer ¨ Accelerated
filer ¨
Non-accelerated
filer ¨ Smaller
reporting company x
CALCULATION
OF REGISTRATION FEE
Title
of each class of securities to be registered
|
Proposed
maximum
aggregate offering price
|
Amount
of
registration
fee(1)
|
|||||
Common
Stock
|
$
|
2,551,505.95(1)
|
$
|
181.92
|
(2)
|
||
Total
|
$
|
2,551,505.95
|
$
|
181.92
|
(2)
|
(1) Represents
1,041,431 shares of common stock that may be issued upon exercise of certain
common stock purchase warrants. All of the shares are offered by the
Selling Stockholders. Accordingly, this registration statement includes an
indeterminate number of additional shares of common stock issuable for no
additional consideration pursuant to any stock dividend, stock split,
recapitalization or other similar transaction effected without the receipt of
consideration, which results in an increase in the number of outstanding shares
of our common stock. In the event of a stock split, stock dividend or similar
transaction involving our common stock, in order to prevent dilution, the number
of shares registered shall be automatically increased to cover the additional
shares in accordance with Rule 416(a) under the Securities Act of
1933.
(2) Estimated
solely for the purpose of calculating the registration fee pursuant to Rule
457(c) under the Securities Act of 1933. For the purposes of this table, we have
used the average of the high and low prices as reported on the OTC Bulletin
Board on April 9, 2010.
THE REGISTRANT HEREBY AMENDS THIS
REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS
EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH
SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME
EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL
THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE
COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
EXPLANATORY
NOTE
This
Post-Effective Amendment No. 1 to Registration Statement on Form S-1
(333-162687) is being filed to include in the prospectus contained herein the
“Selling Stockholders” table and disclosure with respect to the resale
registration of 1,041,431 shares of our common stock underlying certain common
stock warrants. This amendment is also being filed to update certain
other disclosure in the prospectus to, among other things, include audited
financial statements for our fiscal year ended December 31, 2009 and to
reflect additional information disclosed in our Annual Report on Form 10-K (the
“Annual Report”) for our fiscal year ended December 31,
2009.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR
AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY
NOT BE SOLD UNTIL THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL AND IS NOT A SOLICITATION OF AN
OFFER TO BUY IN ANY STATE IN WHICH AN OFFER, SOLICITATION, OR SALE IS NOT
PERMITTED.
|
SUBJECT
TO COMPLETION, DATED APRIL 12, 2010
PROSPECTUS
2,082,870
UNITS, EACH CONSISTING OF
2,082,870
SHARES OF COMMON STOCK AND
1,041,431
WARRANTS
We
previously issued and sold 2,082,870 units, each unit consisting of 1.0 share of
our common stock and warrants to purchase an additional 0.5 share of our common
stock. Each warrant entitles its holder to purchase one share of our
common stock at an exercise price of $3.00 per share. The units will separate
immediately and the common stock and warrants will be issued separately and the
common stock will trade separately. The offering unit expired on January 26,
2010.
This
Prospectus relates to the offer and sale of up to 1,041,431 shares of our common
stock by certain of our stockholders, named under the “Selling Stockholders”
table on page 16. We are not selling any of these shares of common stock, which
shares represent the shares of common stock to be issued upon the exercise of
certain common stock warrants which were issued as part of the units and
described in this Prospectus. And as a result, we will not receive any proceeds
from any offering of common stock by the “Selling Stockholders”. We
will pay all costs associated with this registration statement.
Our
common stock is presently listed on the Over-the-counter Bulletin Board under
the symbol “ACCP”. We do not intend to apply for listing of the warrants on any
securities exchange. On April 9, 2010, the last reported sale price of our
common stock on the OTC BB was $2.50 per share.
INVESTING
IN THE OFFERED SECURITIES INVOLVES RISKS, INCLUDING THOSE SET FORTH IN THE “RISK
FACTORS” SECTION OF THIS PROSPECTUS BEGINNING ON PAGE 6.
Neither
the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or passed upon the adequacy or
accuracy of this prospectus. Any representation to the contrary is a criminal
offense.
Brokers
or dealers effecting transactions in these shares should confirm that the shares
are registered under the applicable state law or that an exemption from
registration is available.
No
underwriter or person has been engaged to facilitate the sale of shares of
common stock in this offering. None of the proceeds from the sale of stock by
the selling stockholders will be placed in escrow, trust or any similar
account.
These
securities are speculative and involve a high degree of risk.
You
should purchase securities only if you can afford a complete loss of your
investment.
See
“Risk factors” beginning on page 6.
THE DATE
OF THIS PROSPECTUS IS APRIL __, 2010.
TABLE
OF CONTENTS
|
|
Page
|
|
PROSPECTUS
SUMMARY
|
1
|
ABOUT
THIS PROSPECTUS
|
1
|
ABOUT
ACCESS
|
1
|
SUMMARY
OF THE OFFERING
|
4 |
SUMMARY
CONDENSED CONSOLIDATED FINANCIAL INFORMATION
|
5
|
RISK
FACTORS
|
6
|
FORWARD-LOOKING
STATEMENTS
|
15
|
SELLING STOCKHOLDERS | 16 |
USE
OF PROCEEDS
|
19
|
PRICE
RANGE OF OUR COMMON STOCK
|
20
|
DIVIDEND
POLICY
|
22
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
|
|
RESULTS
OF OPERATIONS
|
23
|
DESCRIPTION
OF BUSINESS
|
31
|
DESCRIPTION
OF PROPERTY
|
45
|
DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
|
46
|
LEGAL
PROCEEDINGS
|
53
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
|
53
|
TRANSACTIONS
WITH RELATED PERSONS, PROMOTERS AND CERTAIN CONTROL
PERSONS
|
55
|
DESCRIPTION
OF SECURITIES
|
56
|
PLAN
OF DISTRIBUTION
|
60
|
EXPERTS
|
62
|
LEGAL
MATTERS
|
62
|
WHERE
YOU CAN FIND MORE INFORMATION
|
62
|
FINANCIAL
STATEMENTS
|
F-1
|
i
PROSPECTUS
SUMMARY
ACCESS PHARMACEUTICALS, INC.
1,041,431
SHARES OF COMMON STOCK
ABOUT
THIS PROSPECTUS
This
summary highlights certain information appearing elsewhere in this
prospectus. For a more complete understanding of this offering, you
should read the entire prospectus carefully, including the risk factors and the
financial statements. References in this prospectus to “we,” “us,” “our,”
“Company” and “Access” refer to Access Pharmaceuticals, Inc. You
should read both this prospectus and any prospectus supplement together with
additional information described below under the heading "Where You Can Find
More Information".
ABOUT
ACCESS
Company
Overview
Access
Pharmaceuticals, Inc. (together with our subsidiaries, “We”, “Access” or the
“Company”) is a Delaware corporation. We are an emerging biopharmaceutical
company focused on developing a range of pharmaceutical products primarily based
upon our nanopolymer chemistry technologies and other drug delivery
technologies. We currently have one approved product, two products at Phase 2 of
clinical development and several products in pre-clinical development. Low
priority clinical and pre-clinical programs will be dependent on our ability to
enter into collaborative arrangements. Certain of our development programs are
dependent upon our ability to secure approved funding for such projects. Our
description of our business, including our list of products and patents, takes
into consideration our acquisition of MacroChem Corporation which closed
February 25, 2009.
·
|
MuGard™
is our approved product for the management of oral mucositis, a frequent
side-effect of cancer therapy for which there is no established treatment.
The market for mucositis treatment is estimated to be in excess of $1
billion world-wide. MuGard, a proprietary nanopolymer formulation, has
received marketing allowance in the U.S. from the Food & Drug
Administration (FDA). MuGard has been launched in Germany, Italy, UK,
Greece and the Nordic countries by our European commercial partner,
SpePharm. Our manufacturing of MuGard is underway as we expect to launch
MuGard in North America during the second quarter of 2010. We are working
with our partners in Korea and China for
marketing.
|
·
|
Our
lead development candidate for the treatment of cancer is ProLindac™, a
nanopolymer DACH-platinum prodrug. We recently completed a Phase 2
clinical trial on ProLindac in the EU in patients with recurrent ovarian
cancer. The clinical study had positive safety and efficacy results. On
January 7, 2010, we announced that we are initiating a study of ProLindac
combined with Paclitaxel in second line treatment of platinum pretreated
advanced ovarian cancer patients. This multi-center study of up to 25
evaluable patients will be conducted in Europe. We are also currently
planning a number of combination trials, looking at combining ProLindac
with other cancer agents in solid tumor indications including colorectal
and ovarian cancer. The DACH-platinum incorporated in ProLindac is the
same active moiety as that in oxaliplatin (Eloxatin; Sanofi-Aventis),
which has sales in excess of $2.0
billion.
|
·
|
Thiarabine,
or 4-thio Ara-C, is a next generation nucleoside analog licensed from
Southern Research Institute. Previously named SR9025 and OSI-7836, the
compound has been in two Phase 1/2 solid tumor human clinical trials and
was shown to have anti-tumor activity. We are working with leukemia and
lymphoma specialists at MD Anderson Cancer Center in Houston and intend to
initiate additional Phase 2 clinical trials in adult AML, ALL and other
indications.
|
·
|
Cobalamin™
is our proprietary preclinical nanopolymer oral drug delivery technology
based on the natural vitamin B12 oral uptake mechanism. We are currently
developing a product for the oral delivery of insulin, and have conducted
sponsored development of a product for oral delivery of human growth
hormone. We are in discussion with several companies regarding the
sponsored development of Cobalamin oral drug delivery formulations of
proprietary and non-proprietary
actives.
|
1
·
|
Cobalamin-mediated
cancer targeted delivery is a preclinical technology which makes use of
the fact that cell surface receptors for vitamins such as B12 are often
overexpressed by cancer cells. This technology uses nanopolymer constructs
to deliver more anti-cancer drug to tumors while protecting normal
tissues.
|
Products
and Product Candidates
We use
our drug delivery technologies to develop the following products and product
candidates:
Access
Drug Portfolio
Compound
|
Originator
|
Technology
|
Indication
|
Clinical
Stage (1)
|
||||
MuGard™
|
Access
|
Mucoadhesive
liquid
|
Mucositis
|
(510k)
Marketing clearance received
|
||||
ProLindacTM
(Polymer
Platinate,
AP5346) (2)
|
Access
/
Univ
of
London
|
Synthetic
polymer
|
Cancer
|
Phase
2
|
||||
Thiarabine
(4-thio Ara-C) (3)
|
Southern
Research
Institute
|
Small
molecule
|
Cancer
|
Phase
1/2
|
||||
Oral
Insulin
|
Access
|
Cobalamin
|
Diabetes
|
Pre-clinical
|
||||
Oral
Delivery System
|
Access
|
Cobalamin
|
Various
|
Pre-clinical
|
||||
Cobalamin™-Targeted
Therapeutics
|
Access
|
Cobalamin
|
Anti-tumor
|
Pre-clinical
|
(1)
|
For
more information, see “Government Regulation” for description of clinical
stages.
|
(2)
|
Licensed
from the School of Pharmacy, The University of
London.
|
(3)
|
Licensed
from Southern Research Institute of Birmingham,
Alabama.
|
Other
Key Developments
On
January 22, 2010, we announced the sale of approximately 2.10 million shares of
our common stock and warrants to purchase approximately 1.05 million shares of
our common stock for gross proceeds of approximately $6.3 million. We sold these
shares and warrants as a combined unit for $3.00 per unit (each unit consisting
of one share and a warrant to purchase 0.5 shares of common stock). The exercise
price of the warrants is $3.00 per share.
On
January 7, 2010, we announced that we completed enrollment and evaluation of the
last additional cohort of patients in the ongoing clinical study of ProLindac as
a monotherapy in ovarian cancer patients who received at least two prior
platinum based treatment regimens. The additional cohort of 8 patients received
the ProLindac batch made by an improved scalable process, which will be used on
a larger scale for future clinical and commercial supplies. None of the 8
patients experienced any acute significant adverse events, while treatment had
the same beneficial pharmacodynamic effect seen in the first 26 patients treated
with the former ProLindac production batch; clinically relevant sustained
biomarker decrease (responses by Rustin's criteria) and disease stabilization
were seen in several patients. The overall results of our Phase 1/2 exploratory
single agent ProLindac study have helped define multiple safe dosing regimens,
while the level of patient cohort accrued in the study antitumor activity was as
expected in this very heavily pretreated patient cohort.
On
December 15, 2009, we announced the appointment of Frank Jacobucci to the
position of Vice President, Sales and Marketing. Mr. Jacobucci will be primarily
responsible for our marketing launch of MuGard.
On
October 6, 2009, we announced that we signed an agreement with iMedicor for the
North American launch of MuGard. iMedicor’s highly targeted Alerts System
application would introduce MuGard by the end 2009 to the 216,000 selected
physicians in the Unites States.
On
September 11, 2009, we announced the appointment of Accupac, Inc. as our U.S.
manufacturer for MuGard.
2
On August
3, 2009, we announced that we commenced a new clinical study of ProLindac in
France. The study examined dose levels and regimens of ProLindac monotherapy in
cancer patients, provided additional data to support design of combinations
studies, and extend the safety database.
On July
29, 2009, we announced that we are evaluating strategic options for the
commercialization of MuGard in North America.
On July
23, 2009, we announced that our European partner, SpePharm, is collecting data
from a post approval study of MuGard in head and neck cancer patients undergoing
radiation treatment in the UK showing prevention of oral mucositis. In a
multi-center study expected to enroll a total of 280 patients, patients are
being provided with seven weeks of MuGard therapy, and begin using MuGard one
week prior to radiation treatment and then throughout the subsequent six weeks
of planned therapy. The first 140 patients being treated in this assessment
study have been enrolled and treated, and as of the time of the update, none of
these patients experienced any oral mucositis.
On July
7, 2009, we announced new preclinical data demonstrating that thiarabine shows
remarkable efficacy in the prevention and treatment of rheumatoid arthritis
(RA). In a well-established animal model for RA, an exceptional restoration of
joint structure was observed in the studies, which were conducted at Wayne State
University School of Medicine and at Southern Research Institute.
On June
17, 2009, we announced that we signed evaluation agreements with two
biopharmaceutical companies for our Cobalamin™ Oral Drug Delivery Technology.
Under the terms of the agreements, both companies plan to evaluate our oral
insulin product in preclinical models as a prerequisite to entering licensing
discussions.
On
February 25, 2009, we closed our previously announced acquisition of MacroChem
Corporation.
Corporate
Information
We were
incorporated in Wyoming in 1974 as Chemex Corporation, and in 1983 we changed
our name to Chemex Pharmaceuticals, Inc. We changed our state of incorporation
from Wyoming to Delaware on June 30, 1989. In 1996 we merged with Access
Pharmaceuticals, Inc., a private Texas corporation, and changed our name to
Access Pharmaceuticals, Inc. Our principal executive office is located at 2600
Stemmons Freeway, Suite 176, Dallas, Texas 75207; our telephone number is (214)
905-5100.
3
SUMMARY
OF THE OFFERING
Securities
offered:
|
1,041,432
shares of common stock issuable upon the exercise of certain common stock
purchase warrants issued to the selling
stockholders.
|
Offering
Price:
|
To
be determined by the prevailing market price for the shares at the time of
the sale or in negotiated
transactions.
|
Description
of Warrants:
|
The
warrants have an exercise price of $3.00 per
share.
|
Common
stock outstanding as of April 9, 2010:
|
15,382,755
shares.
|
Use
of proceeds:
|
We
will not receive proceeds from the resale of shares by the selling
shareholders.
|
OTC
BB Symbol:
|
ACCP.OB
|
Risk
Factors:
|
See
“Risk Factors” beginning on page 6 and the other information in this
prospectus for a discussion of the factors you should consider before you
decide to invest in the units.
|
The total
number of shares of our common stock outstanding is 15,382,755 and excludes the
following:
·
|
1,737,971
shares of common stock reserved for future issuance under our equity
incentive plans. As of April 9, 2010, there were options to
purchase 1,610,617 shares of our common stock outstanding under our equity
incentive plans with a weighted average exercise price of $2.58 per
share;
|
·
|
9,800,025
shares of common stock issuable upon exercise of outstanding warrants as
of April 9, 2010 with exercise prices ranging from $1.32 per share to
$69.57 per share; and
|
·
|
1,166,540
shares of common stock that will be issued upon exercise of warrants at an
exercise price of $3.00-3.75 per share sold as part of the units in this
offering.
|
·
|
9,951,198
shares of our common stock initially issuable upon conversion of Series A
Cumulative Convertible Preferred Stock, subject to adjustment;
and
|
·
|
the
conversion of our currently outstanding Convertible
Note.
|
All
information in this prospectus assumes the placement agent does not sell any
units contained in the over-allotment option.
4
SUMMARY
CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The
following summary selected condensed consolidated financial information as of
and for the years ended December 31, 2009 and 2008, have been derived from
our audited financial statements. The condensed consolidated financial
information set forth below should be read in conjunction with “Management's
Discussion and Analysis of Financial Condition and Results of Operations” and
the financial statements and notes thereto included elsewhere in this
prospectus.
On
February 25, 2009, we closed our acquisition of MacroChem Corporation through
the issuance of an aggregate of approximately 2.5 million shares of our common
stock. The acquisition was recorded similar to the pooling-of-interest method
and the financial information for all periods presented reflects the financial
statements of the combined companies in accordance with Financial Accounting
Standards Board standards on business combinations for entities under common
control.
(in
thousands, except per share amounts)
|
For
the Year
Ended
December 31,
|
|||||||
2009
|
2008
|
|||||||
Consolidated
Statements of Operations:
|
||||||||
Total
revenues
|
$ | 352 | $ | 291 | ||||
Loss
from operations
|
(9,676 | ) | (30,731 | ) | ||||
Interest
and miscellaneous income
|
29 | 211 | ||||||
Interest
and other expense
|
(539 | ) | (911 | ) | ||||
Loss
on change in fair value of derivative
|
(7,154 | ) | - | |||||
Net
loss
|
(17,340 | ) | (31,431 | ) | ||||
Preferred
stock dividends
|
(1,886 | ) | (3,358 | ) | ||||
Net
loss allocable to common stockholders
|
$ | (19,226 | ) | $ | (34,789 | ) | ||
Common
Stock Data:
|
||||||||
Net
loss per basic and
diluted
common share
|
$ | (1.63 | ) | $ | (4.16 | ) | ||
Weighted
average basic and
diluted
common shares outstanding
|
11,819 | 8,354 | ||||||
December 31,
|
||||||||
2009 | 2008 | |||||||
Consolidated
Balance Sheet Data:
|
||||||||
Cash
and cash equivalents
|
$ | 607 | $ | 2,677 | ||||
Total
assets
|
1,583 | 4,171 | ||||||
Deferred
revenue
|
5,077 | 2,409 | ||||||
Notes
payable
|
- | 825 | ||||||
Derivative
liability
|
9,708 | - | ||||||
Convertible
notes
|
5,500 | 5,500 | ||||||
Total
liabilities
|
28,572 | 15,357 | ||||||
Total
stockholders' deficit
|
(26,989 | ) | (11,186 | ) |
5
RISK
FACTORS
Any
investment in our securities involves a high degree of risk. You should
carefully consider the risks described below, which we believe represent certain
of the material risks to our business, together with the information contained
elsewhere in this Prospectus, before you make a decision to invest in our
units. If any of the following events occur, our business, financial
condition and operating results may be materially adversely
affected. In that event, the trading price of our securities could
decline and you could lose all or part of your investment.
Risks
relating to our business and industry
Without
obtaining adequate capital funding, we may not be able to continue as a going
concern.
The
report of our independent registered public accounting firm for the fiscal year
ended December 31, 2009, contained a fourth explanatory paragraph to reflect its
significant doubt about our ability to continue as a going concern as a result
of our history of losses and our liquidity position. If we are unable to obtain
adequate capital funding in the future, we may not be able to continue as a
going concern, which would have an adverse effect on our business and
operations, and investors’ investment in us may decline.
We
have experienced a history of losses, we expect to incur future losses and
Access may be unable to obtain necessary additional capital to fund operations
in the future.
We have
recorded minimal revenue to date and have incurred an accumulated deficit of
approximately $241.8 million through December 31, 2009. Net losses allocable to
common stockholders for the years ended 2009 and 2008 were $19.2 million and
$34.8 million, respectively. Our losses have resulted principally from costs
incurred in research and development activities related to our efforts to
develop clinical drug candidates and from the associated administrative costs.
We expect to incur additional operating losses over the next several years. We
also expect cumulative losses to increase if we expand research and development
efforts and preclinical and clinical trials. Our net cash burn rate for the year
ended December 31, 2009 was approximately $172,000 per month. We project our net
cash burn rate from operations for the next twelve months to be approximately
$450,000 per month. Capital expenditures are forecasted to be minor for the next
twelve months.
We
require substantial capital for our development programs and operating expenses,
to pursue regulatory clearances and to prosecute and defend our intellectual
property rights. We believe that our existing capital resources, interest
income, product sales, royalties and revenue from possible licensing agreements
and collaborative agreements will be sufficient to fund our currently expected
operating expenses and capital requirements into the first quarter of 2011. We
will need to raise substantial additional capital to support our ongoing
operations.
If we
raise additional funds by issuing equity securities, further dilution to
existing stockholders will result and future investors may be granted rights
superior to those of existing stockholders. If adequate funds are not available
to us through additional equity offerings, we may be required to delay, reduce
the scope of or eliminate one or more of our research and development programs
or to obtain funds by entering into arrangements with collaborative partners or
others that require us to issue additional equity securities or to relinquish
rights to certain technologies or drug candidates that we would not otherwise
issue or relinquish in order to continue independent operations.
We
do not have significant operating revenue and may never attain
profitability.
To date,
we have had funded our operations primarily through private sales of common
stock, preferred stock and convertible notes. Contract research payments and
licensing fees from corporate alliances and mergers have also provided funding
for our operations. Our ability to achieve significant revenue or profitability
depends upon our ability to successfully market MuGard in North America or to
complete the development of drug candidates, to develop and obtain patent
protection and regulatory approvals for our drug candidates and to manufacture
and commercialize the resulting drugs. We are not expecting any significant
revenues in the short-term from our products or product candidates. Furthermore,
we may not be able to ever successfully identify, develop, commercialize,
patent, manufacture, obtain required regulatory approvals and market any
additional products. Moreover, even if we do identify, develop, commercialize,
patent, manufacture, and obtain required regulatory approvals to market
additional products, we may not generate revenues or royalties from commercial
sales of these products for a significant number of years, if at all. Therefore,
our proposed operations are subject to all the risks inherent in the
establishment of a new business enterprise. In the next few years,
our revenues may be limited to minimal product sales and royalties, any amounts
that we receive under strategic partnerships and research or drug development
collaborations that we may establish and, as a result, we may be unable to
achieve or maintain profitability in the future or to achieve significant
revenues in order to fund our operations.
6
Although
we expect that the acquisitions of MacroChem and Somanta will result in benefits
to us, we may not realize those benefits because of integration and other
challenges.
Our
ability to realize the anticipated benefits of our prior acquisitions will
depend, in part, on our ability to integrate the businesses of MacroChem and
Somanta, respectively, with our business. The combination of three independent
companies is a complex, costly and time-consuming process. This process may
disrupt our business of any or all of the companies, and may not result in the
full benefits expected by us.
We
may not successfully commercialize our drug candidates.
Our drug
candidates are subject to the risks of failure inherent in the development of
pharmaceutical products based on new technologies, and our failure to develop
safe commercially viable drugs would severely limit our ability to become
profitable or to achieve significant revenues. We may be unable to successfully
commercialize our drug candidates because:
·
|
some
or all of our drug candidates may be found to be unsafe or ineffective or
otherwise fail to meet applicable regulatory standards or receive
necessary regulatory clearances;
|
·
|
our
drug candidates, if safe and effective, may be too difficult to develop
into commercially viable drugs;
|
·
|
it
may be difficult to manufacture or market our drug candidates on a large
scale;
|
·
|
proprietary
rights of third parties may preclude us from marketing our drug
candidates; and
|
·
|
third
parties may market superior or equivalent
drugs.
|
The
success of our research and development activities, upon which we primarily
focus, is uncertain.
Our
primary focus is on our research and development activities and the
commercialization of compounds covered by proprietary biopharmaceutical patents
and patent applications. Research and development activities, by their nature,
preclude definitive statements as to the time required and costs involved in
reaching certain objectives. Actual research and development costs, therefore,
could significantly exceed budgeted amounts and estimated time frames may
require significant extension. Cost overruns, unanticipated regulatory delays or
demands, unexpected adverse side effects or insufficient therapeutic efficacy
will prevent or substantially slow our research and development effort and our
business could ultimately suffer. We anticipate that we will remain principally
engaged in research and development activities for an indeterminate, but
substantial, period of time.
We
may be unable to successfully develop, market, or commercialize our products or
our product candidates without establishing new relationships and maintaining
current relationships.
Our
strategy for the research, development and commercialization of our potential
pharmaceutical products may require us to enter into various arrangements with
corporate and academic collaborators, licensors, licensees and others, in
addition to our existing relationships with other parties. Specifically, we may
seek to joint venture, sublicense or enter other marketing arrangements with
parties that have an established marketing capability or we may choose to pursue
the commercialization of such products on our own. We may, however, be unable to
establish such additional collaborative arrangements, license agreements, or
marketing agreements as we may deem necessary to develop, commercialize and
market our potential pharmaceutical products on acceptable terms. Furthermore,
if we maintain and establish arrangements or relationships with third parties,
our business may depend upon the successful performance by these third parties
of their responsibilities under those arrangements and
relationships.
Our
ability to successfully commercialize, and market our product candidates could
be limited if a number of these existing relationships are
terminated.
7
Furthermore,
our strategy with respect to our polymer platinate program is to enter into a
licensing agreement with a pharmaceutical company pursuant to which the further
costs of developing a product would be shared with our licensing partners.
Although we have had discussions with potential licensing partners with respect
to our polymer platinate program, to date we have not entered into any licensing
arrangement. We may be unable to execute our licensing strategy for polymer
platinate.
We
may be unable to successfully manufacture our products and our product
candidates in clinical quantities or for commercial purposes without the
assistance of contract manufacturers, which may be difficult for us to obtain
and maintain.
We have
limited experience in the manufacture of pharmaceutical products in clinical
quantities or for commercial purposes and we may not be able to manufacture any
new pharmaceutical products that we may develop. As a result, we have
established, and in the future intend to establish arrangements with contract
manufacturers to supply sufficient quantities of products to conduct clinical
trials and for the manufacture, packaging, labeling and distribution of finished
pharmaceutical products if any of our potential products are approved for
commercialization. If Access is unable to contract for a sufficient supply of
our potential pharmaceutical products on acceptable terms, our preclinical and
human clinical testing schedule may be delayed, resulting in the delay of our
clinical programs and submission of product candidates for regulatory approval,
which could cause our business to suffer. Our business could suffer if there are
delays or difficulties in establishing relationships with manufacturers to
produce, package, label and distribute our finished pharmaceutical or other
medical products, if any, market introduction and subsequent sales of such
products. Moreover, contract manufacturers that we may use must adhere to
current Good Manufacturing Practices, as required by the FDA. In this regard,
the FDA will not issue a pre-market approval or product and establishment
licenses, where applicable, to a manufacturing facility for the products until
the manufacturing facility passes a pre-approval plant inspection. If we are
unable to obtain or retain third party manufacturing on commercially acceptable
terms, we may not be able to commercialize our products as planned. Our
potential dependence upon third parties for the manufacture of our products may
adversely affect our ability to generate profits or acceptable profit margins
and our ability to develop and deliver such products on a timely and competitive
basis.
ProLindac™
is manufactured by third parties for our Phase 2 clinical trials. Manufacturing
is ongoing for the current clinical trials. Certain manufacturing steps are
conducted by the Company to enable significant cost savings to be
realized.
We
are subject to extensive governmental regulation which increases our cost of
doing business and may affect our ability to commercialize any new products that
we may develop.
The FDA
and comparable agencies in foreign countries impose substantial requirements
upon the introduction of pharmaceutical products through lengthy and detailed
laboratory, preclinical and clinical testing procedures and other costly and
time-consuming procedures to establish safety and efficacy. All of our drugs and
drug candidates require receipt and maintenance of governmental approvals for
commercialization. Preclinical and clinical trials and manufacturing of our drug
candidates will be subject to the rigorous testing and approval processes of the
FDA and corresponding foreign regulatory authorities. Satisfaction of these
requirements typically takes a significant number of years and can vary
substantially based upon the type, complexity and novelty of the
product.
Due to
the time consuming and uncertain nature of the drug candidate development
process and the governmental approval process described above, we cannot assure
you when we, independently or with our collaborative partners, might submit a
NDA, for FDA or other regulatory review. Further, our ability to commence and/or
complete development projects will be subject to our ability to raise
enough funds to pay for the development costs of these projects.
Government
regulation also affects the manufacturing and marketing of pharmaceutical
products. Government regulations may delay marketing of our potential drugs for
a considerable or indefinite period of time, impose costly procedural
requirements upon our activities and furnish a competitive advantage to larger
companies or companies more experienced in regulatory affairs. Delays in
obtaining governmental regulatory approval could adversely affect our marketing
as well as our ability to generate significant revenues from commercial sales.
Our drug candidates may not receive FDA or other regulatory approvals on a
timely basis or at all. Moreover, if regulatory approval of a drug candidate is
granted, such approval may impose limitations on the indicated use for which
such drug may be marketed. Even if we obtain initial regulatory approvals for
our drug candidates, our drugs and our manufacturing facilities would be subject
to continual review and periodic inspection, and later discovery of previously
unknown problems with a drug, manufacturer or facility may result in
restrictions on the marketing or manufacture of such drug, including withdrawal
of the drug from the market. The FDA and other regulatory authorities
stringently apply regulatory standards and failure to comply with regulatory
standards can, among other things, result in fines, denial or withdrawal of
regulatory approvals, product recalls or seizures, operating restrictions and
criminal prosecution.
8
The
uncertainty associated with preclinical and clinical testing may affect our
ability to successfully commercialize new products.
Before we
can obtain regulatory approvals for the commercial sale of any of our potential
drugs, the drug candidates will be subject to extensive preclinical and clinical
trials to demonstrate their safety and efficacy in
humans. Preclinical or clinical trials of future drug candidates may
not demonstrate the safety and efficacy to the extent necessary to obtain
regulatory approvals. In this regard, for example, adverse side effects can
occur during the clinical testing of a new drug on humans which may delay
ultimate FDA approval or even lead it to terminate our efforts to develop the
drug for commercial use. Companies in the biotechnology industry have suffered
significant setbacks in advanced clinical trials, even after demonstrating
promising results in earlier trials. In particular, polymer platinate has taken
longer to progress through clinical trials than originally
planned. The failure to adequately demonstrate the safety and
efficacy of a drug candidate under development could delay or prevent regulatory
approval of the drug candidate. A delay or failure to receive regulatory
approval for any of our drug candidates could prevent us from successfully
commercializing such candidates and we could incur substantial additional
expenses in our attempt to further develop such candidates and obtain future
regulatory approval.
We
may incur substantial product liability expenses due to the use or misuse of our
products for which we may be unable to obtain insurance coverage.
Our
business exposes us to potential liability risks that are inherent in the
testing, manufacturing and marketing of pharmaceutical products. These risks
will expand with respect to our drug candidates, if any, that receive regulatory
approval for commercial sale and we may face substantial liability for damages
in the event of adverse side effects or product defects identified with any of
our products that are used in clinical tests or marketed to the public. We
generally procure product liability insurance for drug candidates that are
undergoing human clinical trials. Product liability insurance for the
biotechnology industry is generally expensive, if available at all, and as a
result, we may be unable to obtain insurance coverage at acceptable costs or in
a sufficient amount in the future, if at all. We may be unable to satisfy any
claims for which we may be held liable as a result of the use or misuse of
products which we developed, manufactured or sold and any such product liability
claim could adversely affect our business, operating results or financial
condition.
We
may incur significant liabilities if we fail to comply with stringent
environmental regulations or if we did not comply with these regulations in the
past.
Our
research and development processes involve the controlled use of hazardous
materials. We are subject to a variety of federal, state and local governmental
laws and regulations related to the use, manufacture, storage, handling and
disposal of such material and certain waste products. In the event of an
accident, we could be held liable for any damages that result and any such
liability could exceed our resources.
Intense
competition may limit our ability to successfully develop and market commercial
products.
The
biotechnology and pharmaceutical industries are intensely competitive and
subject to rapid and significant technological change. Our competitors in the
United States and elsewhere are numerous and include, among others, major
multinational pharmaceutical and chemical companies, specialized biotechnology
firms and universities and other research institutions.
9
Many of
our competitors have and employ greater financial and other resources, including
larger research and development, marketing and manufacturing organizations. As a
result, our competitors may successfully develop technologies and drugs that are
more effective or less costly than any that we are developing or which would
render our technology and future products obsolete and
noncompetitive.
In
addition, some of our competitors have greater experience than we do in
conducting preclinical and clinical trials and obtaining FDA and other
regulatory approvals. Accordingly, our competitors may succeed in obtaining FDA
or other regulatory approvals for drug candidates more rapidly than we can.
Companies that complete clinical trials, obtain required regulatory agency
approvals and commence commercial sale of their drugs before their competitors
may achieve a significant competitive advantage. Drugs resulting from our
research and development efforts or from our joint efforts with collaborative
partners therefore may not be commercially competitive with our competitors'
existing products or products under development.
We depend
on licenses from third parties and the maintenance of our licenses are
necessary for our success.
As a
result of our acquisition of MacroChem Corporation and Somanta Pharmaceuticals,
Inc., we obtained rights to some product candidates through
license agreements with various third party licensors as follows:
•
|
License
Agreement, dated as of August 8, 2007, by and between Virium
Pharmaceuticals, Inc.(a predecessor in interest to Access) and Southern
Research Institute; and
|
|
•
|
Exclusive
Patent and Know-how Sub-license Agreement between Somanta and
Immunodex, Inc. dated August 18, 2005, as
amended.
|
We
are dependent upon these licenses for our rights to develop and
commercialize our product candidates. These licenses may be terminated or
converted to non-exclusive licenses by the licensor if we breach the terms
of the license. We cannot guarantee you that the licenses will not be
terminated or converted in the future.
Our
ability to successfully develop and commercialize our drug candidates will
substantially depend upon the availability of reimbursement funds for the costs
of the resulting drugs and related treatments.
The
successful commercialization of, and the interest of potential collaborative
partners to invest in the development of our drug candidates, may depend
substantially upon reimbursement of the costs of the resulting drugs and related
treatments at acceptable levels from government authorities, private health
insurers and other organizations, including health maintenance organizations, or
HMOs. Limited reimbursement for the cost of any drugs that we develop may reduce
the demand for, or price of such drugs, which would hamper our ability to obtain
collaborative partners to commercialize our drugs, or to obtain a sufficient
financial return on our own manufacturing and commercialization of any future
drugs.
The
market may not accept any pharmaceutical products that we develop.
The drugs
that we are attempting to develop may compete with a number of well-established
drugs manufactured and marketed by major pharmaceutical companies. The degree of
market acceptance of any drugs developed by us will depend on a number of
factors, including the establishment and demonstration of the clinical efficacy
and safety of our drug candidates, the potential advantage of our drug
candidates over existing therapies and the reimbursement policies of government
and third-party payers. Physicians, patients or the medical community in general
may not accept or use any drugs that we may develop independently or with our
collaborative partners and if they do not, our business could
suffer.
Trends
toward managed health care and downward price pressures on medical products and
services may limit our ability to profitably sell any drugs that we may
develop.
Lower
prices for pharmaceutical products may result from:
·
|
third-party
payers' increasing challenges to the prices charged for medical products
and services;
|
10
·
|
the
trend toward managed health care in the United States and the concurrent
growth of HMOs and similar organizations that can control or significantly
influence the purchase of healthcare services and products;
and
|
·
|
legislative
proposals to reform healthcare or reduce government insurance
programs.
|
The cost
containment measures that healthcare providers are instituting, including
practice protocols and guidelines and clinical pathways, and the effect of any
healthcare reform, could limit our ability to profitably sell any drugs that we
may successfully develop. Moreover, any future legislation or regulation, if
any, relating to the healthcare industry or third-party coverage and
reimbursement, may cause our business to suffer.
We
may not be successful in protecting our intellectual property and proprietary
rights.
Our
success depends, in part, on our ability to obtain U.S. and foreign patent
protection for our drug candidates and processes, preserve our trade secrets and
operate our business without infringing the proprietary rights of third parties.
Legal standards relating to the validity of patents covering pharmaceutical and
biotechnological inventions and the scope of claims made under such patents are
still developing and there is no consistent policy regarding the breadth of
claims allowed in biotechnology patents. The patent position of a biotechnology
firm is highly uncertain and involves complex legal and factual questions. We
cannot assure you that any existing or future patents issued to, or licensed by,
us will not subsequently be challenged, infringed upon, invalidated or
circumvented by others. We cannot assure you that any patents will be issued
from any of the patent applications owned by, or licensed to, us. Furthermore,
any rights that we may have under issued patents may not provide us with
significant protection against competitive products or otherwise be commercially
viable.
Patents
may have been granted to third parties or may be granted covering products or
processes that are necessary or useful to the development of our drug
candidates. If our drug candidates or processes are found to infringe upon the
patents or otherwise impermissibly utilize the intellectual property of others,
our development, manufacture and sale of such drug candidates could be severely
restricted or prohibited. In such event, we may be required to obtain licenses
from third parties to utilize the patents or proprietary rights of others. We
cannot assure you that we will be able to obtain such licenses on acceptable
terms, if at all. If we become involved in litigation regarding our intellectual
property rights or the intellectual property rights of others, the potential
cost of such litigation, regardless of the strength of our legal position, and
the potential damages that we could be required to pay could be
substantial.
Our
business could suffer if we lose the services of, or fail to attract, key
personnel.
We are
highly dependent upon the efforts of our senior management and scientific team,
including our President and Chief Executive Officer, Jeffrey B. Davis. The loss
of the services of one or more of these individuals could delay or prevent the
achievement of our research, development, marketing, or product
commercialization objectives. While we have employment agreements with Jeffrey
B. Davis, David P. Nowotnik, PhD our Senior Vice President Research and
Development and Frank A. Jacobucci, our Vice President Sales and Marketing ,
their employment may be terminated by them or us at any time. We do not have
employment contracts with our other key personnel. We do not maintain any
"key-man" insurance policies on any of our key employees and we do not intend to
obtain such insurance. In addition, due to the specialized scientific nature of
our business, we are highly dependent upon our ability to attract and retain
qualified scientific and technical personnel. In view of the stage of our
development and our research and development programs, we have restricted our
hiring to research scientists and a small administrative staff and we have made
only limited investments in manufacturing, production, sales or regulatory
compliance resources. There is intense competition among major pharmaceutical
and chemical companies, specialized biotechnology firms and universities and
other research institutions for qualified personnel in the areas of our
activities, however, and we may be unsuccessful in attracting and retaining
these personnel.
We
may be required to pay liquidated damages to certain investors if we do not
maintain an effective registration statement relating to common stock issuable
upon conversion of Series A Cumulative Convertible Preferred Stock, upon
exercise of certain warrants or the issuance of certain dividends.
11
Pursuant
to issuing Series A Cumulative Convertible Preferred Stock and warrants, we
entered into an Investor Rights Agreement with the purchasers of Series A
Cumulative Convertible Preferred Stock. The Investor Rights Agreement
requires, among other things, that we maintain an effective registration
statement for common stock issuable upon conversion of Series A Cumulative
Convertible Preferred Stock or upon exercise of certain warrants. We
have failed to maintain such an effective registration statement and, as a
result, we may be required to pay liquidated damages to certain holders of such
Series A Cumulative Convertible Preferred Stock and warrants for the period of
time in which an effective registration statement was not in place.
Provisions
of our charter documents could discourage an acquisition of our company that
would benefit our stockholders and may have the effect of
entrenching, and making it difficult to remove, management.
Provisions
of our Certificate of Incorporation, By-laws and Stockholders Rights Plan may
make it more difficult for a third party to acquire control of us, even if a
change in control would benefit our stockholders. In particular, shares of our
preferred stock may be issued in the future without further stockholder approval
and upon such terms and conditions, and having such rights, privileges and
preferences, as our Board of Directors may determine, including, for example,
rights to convert into our common stock. The rights of the holders of our common
stock will be subject to, and may be adversely affected by, the rights of the
holders of any of our preferred stock that may be issued in the future. The
issuance of our preferred stock, while providing desirable flexibility in
connection with possible acquisitions and other corporate purposes, could have
the effect of making it more difficult for a third party to acquire control of
us. This could limit the price that certain investors might be willing to pay in
the future for shares of our common stock and discourage these investors from
acquiring a majority of our common stock. Further, the existence of these
corporate governance provisions could have the effect of entrenching management
and making it more difficult to change our management.
Substantial
sales of our common stock could lower our stock price.
The
market price for our common stock could drop as a result of sales of a large
number of our presently outstanding shares or shares we may issue or be obligated to issue
in the future. Substantially all of the shares of our common stock that
were outstanding as of April 9, 2010, are unrestricted and freely tradable or
tradable pursuant to a resale registration statement or under Rule 144 of the
Securities Act or are covered by a registration rights agreement.
Failure
to achieve and maintain effective internal controls could have a material
adverse effect on our business.
Effective
internal controls are necessary for us to provide reliable financial reports. If
we cannot provide reliable financial reports, our operating results could be
harmed. All internal control systems, no matter how well designed, have inherent
limitations. Therefore, even those systems determined to be effective can
provide only reasonable assurance with respect to financial statement
preparation and presentation.
While we
continue to evaluate and improve our internal controls, we cannot be certain
that these measures will ensure that adequate controls over our financial
processes and reporting in the future. Any failure to implement required new or
improved controls, or difficulties encountered in their implementation, could
harm our operating results or cause us to fail to meet our reporting
obligations.
Failure
to achieve and maintain an effective internal control environment could cause
investors to lose confidence in our reported financial information, which could
have a material adverse effect on our stock price.
Risks
relating to this Offering
We
will have immediate and broad discretion over the use of the net proceeds from
this offering.
There is
no minimum offering amount required as a condition to closing this offering and
therefore net proceeds from this offering will be immediately available to us to
use at our discretion. We intend to use the net proceeds to further develop our
products and product candidates and for working capital and general corporate
purposes. Our judgment may not result in positive returns on your investment and
you will not have an opportunity to evaluate the economic, financial, or other
information upon which we base our decisions.
12
Future
sales by our stockholders may adversely affect our stock price and our ability
to raise funds in new stock offerings.
Sales of
our common stock in the public market following this offering could lower the
market price of our common stock. Sales may also make it more difficult for us
to sell equity securities or equity-related securities in the future at a time
and price that our management deems acceptable or at all. Of the 15,382,755
shares of common stock outstanding as of April 9, 2010, 15,382,755 shares are,
or will be, freely tradable without restriction, unless held by our
“affiliates.” Some of these shares may be resold under Rule 144. The sale of the
9,951,198 shares issuable upon conversion of our outstanding preferred stock and
10,966,565 shares issuable upon exercise of outstanding warrants could also
lower the market price of our common stock.
You will experience immediate and
substantial dilution as a result of this offering and may experience additional
dilution in the future.
You will
incur immediate and substantial dilution as a result of this
offering. After giving effect to the sale by us
of 2,082,870 units offered in this offering at a public offering
price of $3.00 per unit, and after deducting placement agent commissions and
estimated offering expenses payable by us, investors in this offering can expect
an immediate dilution of $2.53 per share, or 84.3%, at the public offering
price, assuming no exercise of the warrants. In addition, in the
past, we issued options and warrants to acquire shares of common
stock. To the extent these options are ultimately exercised, you will
sustain future dilution. We may also acquire or license other technologies or
finance strategic alliances by issuing equity, which may result in additional
dilution to our stockholders.
There
is no public market for the warrants to purchase common stock in this
offering.
There is
no established public trading market for the warrants being offered in this
offering, and we do not expect a market to develop. In addition, we do not
intend to apply for listing the warrants on any securities exchange. Without an
active market, the liquidity of the warrants will be limited.
If the
registration statement covering the shares issuable upon exercise of the
warrants contained in the units is no longer effective, the unit warrants will
be issued with restrictive legends unless such shares are eligible for sale
under Rule 144.
The
offering may not be fully subscribed and, even if the offering is fully
subscribed, we will need additional capital in the future. If
additional capital is not available, we may not be able to continue to operate
our business pursuant to our business plan or we may have to discontinue our
operations entirely.
The
placement agent in this offering will offer the units on a “best-efforts” basis,
meaning that we may raise substantially less than the total maximum offering
amounts. No refund will be made available to investors if less than all of the
units are sold. Based on our proposed use of proceeds, we will likely
need significant additional financing, which we may seek to raise through, among
other things, public and private equity offerings and debt
financing. Any equity financing will be dilutive to existing
stockholders, and any debt financings will likely involve covenants restricting
our business activities. Additional financing may not be available on
acceptable terms, or at all.
Risks
related to our common stock
We
have an unsecured convertible note outstanding in the principle amount of
$5,500,000 which is due on September 13, 2011 and which we may be unable to
repay at maturity.
We have a
convertible note outstanding to a high net worth individual in the principle
amount of $5.5 million which is due and payable by us on September 13,
2011. This convertible note accrues interest at the rate of 7.7% paid
annually. We may not have the funds to repay the holder of the
convertible note at maturity or to continue to pay the interest on the
convertible note in the ordinary course which would result in our defaulting
under the note. If this occurs, the holder of the note would have
rights senior to those of our common stockholders.
13
We
have issued and outstanding shares of Series A Cumulative Convertible Preferred
Stock with rights and preferences superior to those of our common
stock.
The
issued and outstanding shares of Series A Cumulative Convertible Preferred Stock
grants the holders of such preferred stock anti-dilution, dividend and
liquidations rights that are superior to those held by the holders of our common
stock.
If
we issue shares of our common stock or common stock equivalents at a price below
$3.00 per share, the conversion price of our Series A Cumulative Convertible
Preferred Stock will automatically be lowered to the common stock issue
price.
Our
Series A Cumulative Convertible Preferred Stock includes certain anti-dilution
provisions. As a result of the anti-dilution provisions, the conversion
price of the Series A Cumulative Convertible Preferred Stock is subject to a
price adjustment upon certain issuances of additional shares of common stock for
a price below $3.00 per share.
If
we issue shares of our common stock or common stock equivalents at a price below
$3.00 per share, the exercise price of certain of our outstanding warrants will
be automatically lowered to the common stock issue price.
Certain
of our warrants contain a price protection mechanisms in which the exercise
price of these the warrants will automatically be lowered in the event we issue
shares of our common stock for a price less than $3.00 per
share.
An
investment in our common stock may be less attractive because it is not traded
on a recognized public market.
Our
common stock has traded on the OTC Bulletin Board, or OTCBB since June 5, 2006.
The OTCBB and Pink Sheets are viewed by most investors as a less desirable, and
less liquid, marketplace. As a result, an investor may find it more difficult to
purchase, dispose of or obtain accurate quotations as to the value of our common
stock.
Our
common stock is subject to Rules 15g-1 through 15g-9 under the Exchange Act,
which imposes certain sales practice requirements on broker-dealers who sell our
common stock to persons other than established customers and "accredited
investors" (as defined in Rule 501(c) of the Securities Act). For transactions
covered by this rule, a broker-dealer must make a special suitability
determination for the purchaser and have received the purchaser's written
consent to the transaction prior to the sale. This rule adversely affects the
ability of broker-dealers to sell our common stock and purchasers of our common
stock to sell their shares of our common stock.
Additionally,
our common stock is subject to SEC regulations applicable to "penny stock."
Penny stock includes any non-NASDAQ equity security that has a market price of
less than $5.00 per share, subject to certain exceptions. The
regulations require that prior to any non-exempt buy/sell transaction in a penny
stock, a disclosure schedule proscribed by the SEC relating to the penny stock
market must be delivered by a broker-dealer to the purchaser of such penny
stock. This disclosure must include the amount of commissions payable
to both the broker-dealer and the registered representative and current price
quotations for our common stock. The regulations also require that
monthly statements be sent to holders of penny stock that disclose recent price
information for the penny stock and information of the limited market for penny
stocks. These requirements adversely affect the market liquidity of
our common stock.
Ownership
of our shares is concentrated in the hands of a few investors which could limit
the ability of our other stockholders to influence the direction of the
company.
As
calculated by SEC rules of beneficial ownership, SCO Capital Partners LLC and
affiliates, Larry N. Feinberg (Oracle Partners LP, Oracle Institutional Partners
LP and Oracle Investment Management Inc.), and Lake End Capital LLC each
beneficially owned approximately 52.9%, 10.3% and 7.1%, respectively, of our
common stock on an as converted basis as of April 9, 2010. Accordingly, they
collectively may have the ability to significantly influence or determine the
election of all of our directors or the outcome of most corporate actions
requiring stockholder approval. They may exercise this ability in a manner that
advances their best interests and not necessarily those of our other
stockholders.
14
FORWARD-LOOKING
STATEMENTS
This
Prospectus contains “forward-looking statements” within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of
the Securities Exchange Act of 1934, as amended, and that involve risks and
uncertainties. These statements include, without limitation, statements relating
to uncertainties associated with research and development activities, clinical
trials, our ability to raise capital, the timing of and our ability to achieve
regulatory approvals, dependence on others to market our licensed products,
collaborations, future cash flow, the timing and receipt of licensing and
milestone revenues, the future success of our marketed products and products in
development, our sales projections, and the sales projections of our licensing
partners, our ability to achieve licensing milestones, the size of the
prospective markets in which we may offer products, our ability to continue as a
going concern, anticipated product approvals and timing thereof, product
opportunities, clinical trials and U.S. Food and Drug Administration (“FDA”)
applications, as well as our drug development strategy, our clinical development
organization expectations regarding our rate of technological developments and
competition, our plan not to establish an internal marketing organization, our
expectations regarding minimizing development risk and developing and
introducing technology, the terms of future licensing arrangements, our ability
to secure additional financing for our operations, our ability to establish new
relationships and maintain current relationships, our ability to attract and
retain key personnel, our belief that we will not pay any cash dividends in the
foreseeable future, our belief that a failure to obtain necessary additional
capital in the future will result in our operations being jeopardized, our
belief that we will expend substantial funds to conduct research and development
programs, preclinical studies and clinical trials of potential products, our
belief that we will continue to invest available finds in certificates of
deposit, money market funds, government securities and investment grade
interest-bearing securities and that we will not invest in derivative financial
instruments, our belief that the market for a mucositis product is in excess of
$1 billion, our belief that we have a rich pipeline of products and product
candidates, our belief that we will continue to evaluate the most cost-effective
methods to advance our programs, and our expected cash burn rate.
These statements relate to future events or our future financial performance. In
some cases, you can identify forward-looking statements by terminology such as
“may,” “will,” “should,” “expects,” “plans,” “could,” “anticipates,” “believes,”
“estimates,” “predicts,” “potential” or “continue” or the negative of such terms
or other comparable terminology. We intend the forward-looking
statements to be covered by the safe harbor for forward-looking statements in
these sections. The forward-looking information is based on various factors and
was derived using numerous assumptions.
Forward-looking
statements necessarily involve risks and uncertainties, and our actual results
could differ materially from those anticipated in the forward-looking statements
due to a number of factors, including those set forth above under “Risk Factors”
and elsewhere in this Prospectus. The factors set forth above under “Risk
Factors” and other cautionary statements made in this Prospectus should be read
and understood as being applicable to all related forward-looking statements
wherever they appear in this Prospectus. The forward-looking statements
contained in this Prospectus represent our judgment as of the date of this
Prospectus. We caution readers not to place undue reliance on such statements.
Except as required by law, we undertake no obligation to update publicly any
forward-looking statements for any reason, even if new information becomes
available or other events occur in the future.
15
SELLING
STOCKHOLDERS
The
following table presents information regarding the selling stockholders. The
selling shareholders are the entities who have assisted in or provided financing
to us. A description of each selling shareholder's relationship to us and how
each selling shareholder acquired the shares to be sold in this offering is
detailed in the information immediately following this table. The shares listed
in the table do not include the shares of common stock that may be paid as a
dividend on outstanding shares of Series A Preferred Stock.
Selling
Stockholder
|
Shares
Beneficially
Owned
Before
Offering
(1)
|
Percentage
of
Outstanding
Shares
Beneficially
Owned
Before
Offering
|
Shares
to
be Sold in the
Offering
(26)
|
Percentage
of
Outstanding
Shares
Beneficially
Owned
After
Offering
|
Brio
Capital LP (2)
|
150,000
|
*
|
25,000
|
*
|
Bristol
Investment Fund, Ltd (3)
|
100,000
|
*
|
33,333
|
*
|
Carpe
Diem Partners LLC (4)
|
49,999
|
*
|
16,666
|
*
|
Chestnut
Ridge Partners, LP (5)
|
150,000
|
*
|
50,000
|
*
|
Cranshire
Capital, LP (6)
|
210,001
|
1.4%
|
41,667
|
1.1%
|
Del
Ray Management, LP (7)
|
75,000
|
*
|
25,000
|
*
|
EDJ
Limited (8)
|
61,861
|
*
|
20,620
|
*
|
GCA
Strategic Investment Fund Limited (9)
|
250,000
|
1.6%
|
83,334
|
1.1%
|
Kingsbridge
Capital Ltd (10)
|
124,999
|
*
|
41,666
|
*
|
John
C. Lipman (11)
|
19,999
|
*
|
6,666
|
*
|
Maletis
Partners LP (12)
|
24,999
|
*
|
8,333
|
*
|
Midsummer
Investment, Ltd (13)
|
760,000
|
4.8%
|
100,000
|
4.2%
|
Opus
Point Capital Preservation Fund, LP (14)
|
60,000
|
*
|
20,000
|
*
|
Opus
Point Healthcare Innovations Fund, LP (15)
|
37,500
|
*
|
12,500
|
*
|
Opus
Point Partners (Low Net) Fund, LP (16)
|
15,000
|
*
|
5,000
|
*
|
Opus
Point Partners Value Fund, LP (17)
|
30,000
|
*
|
10,000
|
*
|
Porter
Partners, LP (18)
|
247,444
|
1.6%
|
82,481
|
1.1%
|
Poseidon
Captial, LLC (19)
|
19,999
|
*
|
6,666
|
*
|
Ramius
Enterprise Master Fund Ltd (20)
|
225,000
|
1.5%
|
75,000
|
*
|
Ramius
Navigation Master Fund Ltd (21)
|
525,000
|
3.4%
|
175,000
|
2.3%
|
Rockmore
Investment Master Fund Ltd (22)
|
473,333
|
3.0%
|
100,000
|
2.4%
|
Warburg
Opportunity Trading Fund LP (23)
|
37,500
|
*
|
12,500
|
*
|
Warrant
Strategies Fund LLC (24)
|
145,000
|
*
|
48,333
|
*
|
Zanett
Opportuntiy Fund, Ltd (25)
|
124,999
|
*
|
41,666
|
*
|
Total:
|
3,917,633
|
22.8%
|
1,041,431
|
17.8%
|
--------------------
* - less
than 1%
(1)
|
Applicable
percentage of ownership is based on 15,382,755 shares of common stock
outstanding as of April 9, 2010, together with securities exercisable or
convertible into shares of common stock within 60 days of April 9, 2010,
for each stockholder. Beneficial ownership is determined in accordance
with Rule 13d-3(d) promulgated by the Commission under the Securities
and Exchange Act of 1934, as amended. Shares of common stock issuable
pursuant to options, warrants and convertible securities are treated as
outstanding for computing the percentage of the person holding such
securities but are not treated as outstanding for computing the percentage
of any other person. Unless otherwise noted, each person or group
identified possesses sole voting and investment power with respect to
shares, subject to community property laws where applicable. Shares not
outstanding but deemed beneficially owned by virtue of the right of a
person or group to acquire them within 60 days are treated as
outstanding only for purposes of determining the number of and percent
owned by such person or group.
|
(2)
|
Brio
Capital LP is known to beneficially own an aggregate of 50,000 shares of
our Common Stock, warrants to purchase an aggregate of 50,000 shares of
our Common Stock and Series A Preferred Stock which may be converted into
an aggregate of 50,000 shares of ourCommon
Stock.
|
16
(3)
|
Bristol
Investment Fund, Ltd is known to beneficially own an aggregate of 66,667
shares of our Common Stock and warrants to purchase an aggregate of 33,333
shares of our Common Stock.
|
(4)
|
Carpe
Diem Partners LLC is known to beneficially own an aggregate of 33,333
shares of our Common Stock and warrants to purchase an aggregate of 16,666
shares of our Common Stock.
|
(5)
|
Chestnut
Ridge Partners, LP is known to beneficially own an aggregate of 100,000
shares of our Common Stock and warrants to purchase an aggregate of 50,000
shares of our Common Stock
|
(6)
|
Cranshire
Capital, LP is known to beneficially own 83,334 shares of our Common
Stock, warrants to purchase an aggregate of 125,000 shares of our Common
Stock and Series A Preferred Stock which may be converted into an
aggregate of 1,667 shares of our Common Stock. Michael P. Koplin, the
president of Downsview Capital, Inc., the general partner of Cranshire
Capital, L.P., has sole voting control and investment discretion over
securities held by Cranshire Capital, L.P. Each of Michael P. Koplin and
Downsview Capital, Inc. disclaims beneficial ownership of shares held by
Cranshire Capital, L.P.
|
(7)
|
Del
Ray Management, LP is known to beneficially own an aggregate of 50,000
shares of our Common Stock and warrants to purchase an aggregate of 25,000
shares of our Common Stock.
|
(8)
|
EDJ
Limited is known to beneficially own an aggregate of 41,241 shares of our
Common Stock and warrants to purchase an aggregate of 20,620 shares of our
Common Stock.
|
(9)
|
GCA
Strategic Investment Fund Limited is known to beneficially own an
aggregate of 166,666 shares of our Common Stock and warrants to purchase
an aggregate of 83,334 shares of our Common
Stock.
|
(10)
|
Kingsbridge
Capital Ltd is known to beneficially own an aggregate of 83,333 shares of
our Common Stock and warrants to purchase an aggregate of 41,666 shares of
our Common Stock.
|
(11)
|
John
C. Lipman is known to beneficially own an aggregate of 13,333 shares of
our Common Stock and warrants to purchase an aggregate of 6,666 shares of
our Common Stock.
|
(12)
|
Maletis
Partners LP is known to beneficially own an aggregate of 16,666 shares of
our Common Stock and warrants to purchase an aggregate of 8,333 shares of
our Common Stock.
|
(13)
|
Midsummer
Investment, Ltd. is known to beneficially own 200,000 shares of our Common
Stock, warrants to purchase an aggregate of 350,000 shares of our Common
Stock and Series A Preferred Stock which may be converted into an
aggregate of 210,000 shares of Access’ Common
Stock.
|
(14)
|
Opus
Point Capital Preservation Fund, LP is known to beneficially own an
aggregate of 40,000 shares of our Common Stock and warrants to purchase an
aggregate of 20,000 shares of our Common
Stock.
|
(15)
|
Opus
Point Healthcare Innovations Fund, LP is known to beneficially own an
aggregate of 25,000 shares of our Common Stock and warrants to purchase an
aggregate of 12,500 shares of our Common
Stock.
|
(16)
|
Opus
Point Partners (Low Net) Fund, LP is known to beneficially own an
aggregate of 10,000 shares of our Common Stock and warrants to purchase an
aggregate of 5,000 shares of our Common
Stock.
|
(17)
|
Opus
Point Partners Value Fund, LP is known to beneficially own an aggregate of
20,000 shares of our Common Stock and warrants to purchase an aggregate of
10,000 shares of our Common Stock.
|
(18)
|
Porter
Partners, LP is known to beneficially own an aggregate of 164,963 shares
of our Common Stock and warrants to purchase an aggregate of 82,481 shares
of our Common Stock.
|
(19)
|
Poseidon
Capital, LLC is known to beneficially own an aggregate of 13,333 shares of
our Common Stock and warrants to purchase an aggregate of 6,666 shares of
our Common Stock.
|
(20)
|
Ramius
Enterprise Master Fund Ltd is known to beneficially own an aggregate of
150,000 shares of our Common Stock and warrants to purchase an aggregate
of 75,000 shares of our Common
Stock.
|
(21)
|
Ramius
Navigation Master Fund Ltd is known to beneficially own an aggregate of
350,000 shares of our Common Stock and warrants to purchase an aggregate
of 175,000 shares of our Common
Stock.
|
(22)
|
Rockmore
Investment Master Fund Ltd is known to beneficially own an aggreagate of
200,000 shares of our Common Stock, warrants to purchase an aggregate of
183,333 shares of our Common Stock and Series A Preferred Stock which may
be converted into an aggregate of 90,000 shares of our Common Stock.
Rockmore Capital, LLC (“Rockmore Capital”) and Rockmore Partners, LLC
(“Rockmore Partners”), each a limited liability company formed under the
laws of the State of Delaware, serve as the investment manager and general
partner, respectively, to Rockmore (US) LP, a Delaware limited
partnership, which invests all of its assets through Rockmore Investment
Master Fund Ltd., an exempted company formed under the laws of Bermuda
(“Rockmore Master Fund”). By reason of such relationships, Rockmore
Capital and Rockmore Partners may be deemed to share dispositive power
over shares of our common stock owned by Rockmore Master Fund. Rockmore
Capital and Rockmore Partners disclaim beneficial ownership of such shares
of our common stock. Rockmore Partners has delegated authority to Rockmore
Capital regarding portfolio management decisions with respect to the
shares of common stock owned by Rockmore Master Fund and, as of March 31,
2010, Mr. Bruce T. Bernstein and Mr. Brian Daly, as officers of Rockmore
Capital, are responsible for the portfolio management decisions of the
shares of common stock owned by Rockmore Master Fund. By reason of such
authority, Messsrs. Bernstein and Daly may be deemed to share dispositive
power over the shares of our common stock owned by Rockmore Master Fund.
Messrs. Bernstein and Daly disclaim beneficial ownership of such shares of
our common stock and neither of such persons has any legal right to
maintain such authority. No other person has sole or shared voting or
dispositive power with respect to the shares of our common stock as those
terms are used for purposes under Regulation 13D-G of the Securities
Exchange Act of 1934, as amended. No person or “group” (as that term is
used in Section 13(d) of the Securities Act of 1934, as amended, or the
SEC’s Regulation 13D-G) controls Rockmore Master
Fund.
|
17
(23)
|
Warburg
Opportunity Trading Fund LP is known to beneficially own an aggregate of
25,000 shares of our Common Stock and warrants to purchase an aggregate of
12,500 shares of our Common Stock.
|
(24)
|
Warrant
Strategies Fund LLC is known to beneficially own an aggregate of 96,667
shares of our Common Stock and warrants to purchase an aggregate of 48,333
shares of our Common Stock.
|
(25)
|
Zanett
Opportunity Fund, Ltd is known to beneficially own an aggregate of 83,333
shares of our Common Stock and warrants to purchase an aggregate of 41,666
shares of our Common Stock.
|
(26)
|
This
Post-Effective Amendment No. 1 to Registration Statement on Form S-1
(333-162687) is being filed to include in the prospectus contained herein
the “Selling Stockholders” table and disclosure with respect to the resale
registration of 1,041,431 shares of our common stock underlying certain
common stock warrants.
|
As of
April 9, 2010 we are not aware of any short positions in our stock held by the
Selling Stockholders.
18
USE
OF PROCEEDS
We will
not receive any proceeds from the sale of shares by the selling
stockholders.
19
PRICE
RANGE OF OUR COMMON STOCK
Market
Information
Our
common stock has traded on the OTC Bulletin Board, or OTCBB, under the trading
symbol ACCP since June 5, 2006.
The
following table sets forth, for the periods indicated, the high and low closing
prices as reported by OTCBB for our common stock for fiscal years 2009 and 2008.
The OTCBB quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commission and may not represent actual transactions.
Common
Stock
|
|||||||||
High
|
Low
|
||||||||
Fiscal Year 2010 Year-to
date
|
|||||||||
First
quarter
|
$ | 3.29 | $ | 2.44 | |||||
Second
quarter (through April 9, 2010)
|
2.50 | 2.31 | |||||||
Fiscal Year Ended December 31,
2009
|
|||||||||
First
quarter
|
$ | 1.85 | $ | 0.77 | |||||
Second
quarter
|
2.25 | 1.25 | |||||||
Third
quarter
|
4.70 | 1.84 | |||||||
Fourth
quarter
|
3.50 | 2.80 | |||||||
Fiscal Year Ended December 31,
2008
|
|||||||||
First
quarter
|
$ | 3.50 | $ | 1.35 | |||||
Second
quarter
|
3.30 | 1.40 | |||||||
Third
quarter
|
3.49 | 2.50 | |||||||
Fourth
quarter
|
2.75 | 0.80 |
We have
never declared or paid any cash dividends on our common stock and we do not
anticipate paying any cash dividends on our common stock in the foreseeable
future. The payment of dividends, if any, in the future is within the discretion
of our Board of Directors and will depend on our earnings, capital requirements
and financial condition and other relevant facts. We currently intend to retain
all future earnings, if any, to finance the development and growth of our
business.
We are
required, however, to pay dividends on our preferred stock at the rate of 6% per
year.
Holders
The
number of record holders of our common stock at April 9, 2010 was approximately
6,300. On April 9, 2010, the closing price for the common stock as quoted on the
OTCBB was $2.50. There were 15,382,755 shares of common stock outstanding at
April 9, 2010.
20
There
were 2,985.3617 shares of Series A Cumulative Convertible Preferred Stock
convertible into 9,951,198 shares of Common Stock at April 9, 2010.
Options
and Warrants
There are
10,966,565 outstanding warrants and 1,610,617 outstanding options to purchase
our common equity as of April 9, 2010.
Convertible
Notes
There is
$5.5 million of convertible notes outstanding and convertible into 200,000
shares of common stock as of April 9, 2010.
Equity Compensation Plan
Information
The
following table sets forth information as of December 31, 2009 about shares of
common stock outstanding and available for issuance under our existing equity
compensation plans.
Number
of securities
|
||||||||||||
remaining
available
|
||||||||||||
for
future issuance
|
||||||||||||
Number
of securities to
|
Weighted-average
|
under
equity
|
||||||||||
be
issued upon exercise
|
exercise
price of
|
compensation
plans
|
||||||||||
of
outstanding options
|
outstanding
options
|
(excluding
securities
|
||||||||||
Plan Category
|
warrants
and rights
|
warrants
and rights
|
reflected
in column (a))
|
|||||||||
(a)
|
(b)
|
(c)
|
||||||||||
Equity
compensation plans
|
||||||||||||
approved
by security
|
||||||||||||
holders:
|
||||||||||||
2005
Equity Incentive Plan
|
1,435,237 | $ | 1.99 | 1,408,851 | ||||||||
1995
Stock Awards Plan
|
103,000 | 15.89 | - | |||||||||
2001
Restricted Stock Plan
|
- | - | 52,818 | |||||||||
Equity
compensation plans
|
||||||||||||
not
approved by security
|
||||||||||||
holders:
|
||||||||||||
2007
Special Stock Option Plan
|
100,000 | 2.9 | 350,000 | |||||||||
Total
|
1,638,237 | $ | 2.92 | 1,811,669 |
The
2007 Special Stock Option Plan
The 2007
Special Stock Option Plan (Plan) was adopted by the Board in January 2007. The
Plan is not intended to be an incentive stock option plan within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (Code). The Plan
allows for the issuance of options to acquire up to 450,000 shares of our common
stock of which 100,000 have been issued. The purpose of the Plan is to encourage
ownership of common stock by employees, consultants, advisors and directors and
to provide additional incentive for them to promote the success of our business.
The Plan provides for the grant of non-qualified stock options to employees
(including officers, directors, advisors and consultants). The Plan will expire
in January 2017, unless earlier terminated by the Board. The options in the Plan
granted to date expired March 12, 2010.
For a
description of our equity incentive plans, see Footnote 11 to our Consolidated
Financial Statements for the fiscal year ended December 31, 2009.
21
DIVIDEND
POLICY
We have
never declared or paid any cash dividends on its common stock and we do not
anticipate paying any cash dividends in the foreseeable future on its common
stock. The payment of dividends on common stock, if any, in the future is within
the discretion of our Board of Directors and will depend on its earnings,
capital requirements and financial condition and other relevant facts. We
currently intends to retain all future earnings, if any, to finance the
development and growth of its business.
The
holders of Series A Cumulative Convertible Preferred Stock are entitled to
receive dividends of 6% per annum on their shares Series A Cumulative
Convertible Preferred Stock. The dividends are payable by us semi-annually and
may be paid by us either in cash, or if certain conditions are met, at our
option, in shares of our common stock. To be eligible to pay dividends in shares
of common stock, among other things, there must be in place a registration
statement pursuant to which the holders of the Series A Cumulative Convertible
Preferred Stock are permitted to utilize the prospectus thereunder to resell all
of the shares of common stock issuable in relation to the Series A Cumulative
Convertible Preferred Stock.
22
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The
following discussion should be read in conjunction with our consolidated
financial statements and related notes included in this Prospectus.
OVERVIEW
Access
Pharmaceuticals, Inc. (together with our subsidiaries, “We”, “Access” or the
“Company”) is a Delaware corporation. We are an emerging biopharmaceutical
company focused on developing a range of pharmaceutical products primarily based
upon our nanopolymer chemistry technologies and other drug delivery
technologies. We currently have one approved product, two products at Phase 2 of
clinical development and several products in pre-clinical development. Low
priority clinical and pre-clinical programs will be dependent on our ability to
enter into collaborative arrangements. Certain of our development programs are
dependent upon our ability to secure approved funding for such projects. Our
description of our business, including our list of products and patents, takes
into consideration our acquisition of MacroChem Corporation which closed
February 25, 2009.
·
|
MuGard™
is our approved product for the management of oral mucositis, a frequent
side-effect of cancer therapy for which there is no established treatment.
The market for mucositis treatment is estimated to be in excess of $1
billion world-wide. MuGard, a proprietary nanopolymer formulation, has
received marketing allowance in the U.S. from the Food & Drug
Administration (FDA). MuGard has been launched in Germany, Italy, UK,
Greece and the Nordic countries by our European commercial partner,
SpePharm. Our manufacturing of MuGard is underway as we expect to launch
MuGard in North America during the second quarter of 2010. We are working
with our partners in Korea and China for
marketing.
|
·
|
Our
lead development candidate for the treatment of cancer is ProLindac™, a
nanopolymer DACH-platinum prodrug. We recently completed a Phase 2
clinical trial on ProLindac in the EU in patients with recurrent ovarian
cancer. The clinical study had positive safety and efficacy results. On
January 7, 2010, we announced that we are initiating a study of ProLindac
combined with Paclitaxel in second line treatment of platinum pretreated
advanced ovarian cancer patients. This multi-center study of up to 25
evaluable patients will be conducted in Europe. We are also currently
planning a number of combination trials, looking at combining ProLindac
with other cancer agents in solid tumor indications including colorectal
and ovarian cancer. The DACH-platinum incorporated in ProLindac is the
same active moiety as that in oxaliplatin (Eloxatin; Sanofi-Aventis),
which has sales in excess of $2.0
billion.
|
·
|
Thiarabine,
or 4-thio Ara-C, is a next generation nucleoside analog licensed from
Southern Research Institute. Previously named SR9025 and OSI-7836, the
compound has been in two Phase 1/2 solid tumor human clinical trials and
was shown to have anti-tumor activity. We are working with leukemia and
lymphoma specialists at MD Anderson Cancer Center in Houston and intend to
initiate additional Phase 2 clinical trials in adult AML, ALL and other
indications.
|
·
|
Cobalamin™
is our proprietary preclinical nanopolymer oral drug delivery technology
based on the natural vitamin B12 oral uptake mechanism. We are currently
developing a product for the oral delivery of insulin, and have conducted
sponsored development of a product for oral delivery of human growth
hormone. We are in discussion with several companies regarding the
sponsored development of Cobalamin oral drug delivery formulations of
proprietary and non-proprietary
actives.
|
·
|
Cobalamin-mediated
cancer targeted delivery is a preclinical technology which makes use of
the fact that cell surface receptors for vitamins such as B12 are often
overexpressed by cancer cells. This technology uses nanopolymer constructs
to deliver more anti-cancer drug to tumors while protecting normal
tissues.
|
23
Products
and Product Candidates
We use
our drug delivery technologies to develop the following products and product
candidates:
Access
Drug Portfolio
Compound
|
Originator
|
Technology
|
Indication
|
Clinical
Stage (1)
|
||||
MuGard™
|
Access
|
Mucoadhesive
liquid
|
Mucositis
|
(510k)
Marketing clearance received
|
||||
ProLindacTM
(Polymer
Platinate,
AP5346) (2)
|
Access
/
Univ
of
London
|
Synthetic
polymer
|
Cancer
|
Phase
2
|
||||
Thiarabine
(4-thio Ara-C) (3)
|
Southern
Research
Institute
|
Small
molecule
|
Cancer
|
Phase
1/2
|
||||
Oral
Insulin
|
Access
|
Cobalamin
|
Diabetes
|
Pre-clinical
|
||||
Oral
Delivery System
|
Access
|
Cobalamin
|
Various
|
Pre-clinical
|
||||
Cobalamin™-Targeted
Therapeutics
|
Access
|
Cobalamin
|
Anti-tumor
|
Pre-clinical
|
(1)
|
For
more information, see “Government Regulation” for description of clinical
stages.
|
(2)
|
Licensed
from the School of Pharmacy, The University of
London.
|
(3)
|
Licensed
from Southern Research Institute of Birmingham,
Alabama.
|
Recent
Events
On
January 22, 2010, we announced the sale of approximately 2.10 million shares of
our common stock and warrants to purchase approximately 1.05 million shares of
our common stock for gross proceeds of approximately $6.3 million. We sold these
shares and warrants as a combined unit for $3.00 per unit (each unit consisting
of one share and a warrant to purchase 0.5 shares of common stock). The exercise
price of the warrants is $3.00 per share.
On
January 7, 2010, we announced that we completed enrollment and evaluation of the
last additional cohort of patients in the ongoing clinical study of ProLindac as
a monotherapy in ovarian cancer patients who received at least two prior
platinum based treatment regimens. The additional cohort of 8 patients received
the ProLindac batch made by an improved scalable process, which will be used on
a larger scale for future clinical and commercial supplies. None of the 8
patients experienced any acute significant adverse events, while treatment had
the same beneficial pharmacodynamic effect seen in the first 26 patients treated
with the former ProLindac production batch; clinically relevant sustained
biomarker decrease (responses by Rustin's criteria) and disease stabilization
were seen in several patients. The overall results of our Phase 1/2 exploratory
single agent ProLindac study have helped define multiple safe dosing regimens,
while the level of patient cohort accrued in the study antitumor activity was as
expected in this very heavily pretreated patient cohort.
On
December 15, 2009, we announced the appointment of Frank Jacobucci to the
position of Vice President, Sales and Marketing. Mr. Jacobucci will be primarily
responsible for our marketing launch of MuGard.
On
October 6, 2009, we announced that we signed an agreement with iMedicor for the
North American launch of MuGard. iMedicor’s highly targeted Alerts System
application would introduce MuGard by the end 2009 to the 216,000 selected
physicians in the Unites States.
On
September 11, 2009, we announced the appointment of Accupac, Inc. as our U.S.
manufacturer for MuGard.
On August
3, 2009, we announced that we commenced a new clinical study of ProLindac in
France. The study examined dose levels and regimens of ProLindac monotherapy in
cancer patients, provided additional data to support design of combinations
studies, and extend the safety database.
On July
29, 2009, we announced that we are evaluating strategic options for the
commercialization of MuGard in North America.
24
On July
23, 2009, we announced that our European partner, SpePharm, is collecting data
from a post approval study of MuGard in head and neck cancer patients undergoing
radiation treatment in the UK showing prevention of oral mucositis. In a
multi-center study expected to enroll a total of 280 patients, patients are
being provided with seven weeks of MuGard therapy, and begin using MuGard one
week prior to radiation treatment and then throughout the subsequent six weeks
of planned therapy. The first 140 patients being treated in this assessment
study have been enrolled and treated, and as of the time of the update, none of
these patients experienced any oral mucositis.
On July
7, 2009, we announced new preclinical data demonstrating that thiarabine shows
remarkable efficacy in the prevention and treatment of rheumatoid arthritis
(RA). In a well-established animal model for RA, an exceptional restoration of
joint structure was observed in the studies, which were conducted at Wayne State
University School of Medicine and at Southern Research Institute.
On June
17, 2009, we announced that we signed evaluation agreements with two
biopharmaceutical companies for our Cobalamin™ Oral Drug Delivery Technology.
Under the terms of the agreements, both companies plan to evaluate our oral
insulin product in preclinical models as a prerequisite to entering licensing
discussions.
On
February 25, 2009, we closed our previously announced acquisition of MacroChem
Corporation.
Results
of Operations
Comparison
of Years Ended December 31, 2009 and 2008
On
February 25, 2009, we closed our acquisition of MacroChem Corporation through
the issuance of an aggregate of approximately 2.5 million shares of our common
stock. Prior to our acquisition of MacroChem, SCO, an investment company, held a
majority of Access’ and MacroChem’s voting stock. Specifically, SCO
owned 53% of the voting stock of Access and 63% of the voting stock of
MacroChem. A non-controlling interest of 37% existed at the merger date of
MacroChem. In addition, certain members of SCO’s management serve on the board
of directors of both Access and MacroChem. Based on these facts, Access and
MacroChem were deemed under the common control of SCO. As the entities were
deemed under common control, the acquisition was recorded using the
pooling-of-interest method and the financial information for all periods
presented reflects the financial statements of the combined companies in
accordance with Financial Accounting Standards Board standards on business
combinations for entities under common control.
Our
licensing revenue for the year ended December 31, 2009 was $315,000 as compared
to $118,000 for the same period of 2008. We recognize licensing revenue over the
period of the performance obligation under our licensing agreements. We have
received upfront licensing payments from SpePharm Holding, B.V., RHEI, JCOM and
ASK.
We
recorded royalty revenue of $37,000 for the year ended December 31, 2009. There
were no royalties in the same year in 2008.
We had
sponsored research and development revenue of $173,000 for the year ended
December 31, 2008. The research and development agreement was completed in
2008.
25
Total
research and development spending for the year ended December 31, 2009 was
$2,657,000, as compared to $23,235,000 for the same period in 2008, a decrease
of $20,578,000. The decrease in expenses was primarily due to:
·
|
the
Somanta acquisition resulted in a one-time non-cash in-process research
and development expense in the first quarter of 2008
($8,879,000);
|
·
|
MacroChem’s
acquisition of Virium on April 18, 2008 which resulted in a one-time
non-cash in-process research and development expense
($9,657,000);
|
·
|
research
and development expenses incurred by MacroChem for the year ended December
31, 2008, which are no longer ongoing
($953,000);
|
·
|
lower
costs for product manufacturing due to the start of a new ProLindac
clinical trial ($753,000);
|
·
|
lower
salary and related expenses
($392,000);
|
·
|
lower
scientific consulting expenses
($266,000);
|
·
|
other
net decreases in research spending
($84,000);
|
·
|
offset
by higher expenses due to option grants ($303,000);
and
|
·
|
offset
by higher clinical costs due to the planned start of a new clinical trial
in 2010 ($103,000).
|
Total
general and administrative expenses were $7,112,000 for the year ended December
31, 2009, a decrease of $351,000 over 2008 expenses of $7,463,000. The decrease
in spending was due primarily to the following:
·
|
lower
general and administrative expenses incurred by MacroChem for the year
ended December 31, 2008 that are no longer ongoing
($2,943,000);
|
·
|
lower
accrual for liquidated damages
($493,000);
|
·
|
lower
director and officer insurance and lower director fees ($166,000) due to
lower insurance costs and directors taking options instead of fees in
2009;
|
·
|
lower
patent expenses ($117,000);
|
·
|
lower
legal and accounting expenses ($86,000);
and
|
·
|
other
net decreases in general and administrative expenses
($110,000);
|
·
|
offset
by higher shareholder consultant expenses ($2,348,000) to inform investors
about Access and to expand our shareholder
base;
|
·
|
higher
business professional expenses ($1,094,000);
and
|
·
|
higher
expenses due to the cost of option grants
($122,000).
|
Depreciation
and amortization was $259,000 for the year ended December 31, 2009 as compared
to $324,000 for the same period in 2008 reflecting a decrease of $65,000. The
decrease in depreciation and amortization was due to assets becoming fully
depreciated.
Total
operating expenses for year ended December 31, 2009 were $10,028,000 as compared
to total operating expenses of $31,022,000 for same period in 2008, a decrease
of $20,994,000 for the reasons listed above.
Increase
in fair value of derivative liability was $7,154,000 for the year ended December
31, 2009. There was no derivative expense for the year ended December 31, 2008.
The explanation of the derivative expense can be found in Note 9 in Notes to
Consolidated Financial Statements.
Interest
and miscellaneous income was $29,000 for the year ended December 31, 2009 as
compared to $211,000 for the same period of 2008, a decrease of $182,000. The
decrease in interest and miscellaneous income was due to lower average cash
balances during 2009 versus 2008.
Interest
and other expense was $539,000 for the year ended December 31, 2009 as compared
to $911,000 in 2008, a decrease of $372,000. The decrease in interest and other
expense was due to MacroChem notes payable that were exchanged and cancelled for
shares of our common stock in connection with our acquisition of MacroChem. The
notes payable were issued in the second quarter of 2008.
26
Preferred
stock dividends of $1,886,000 were accrued for the year ended December 31, 2009
and $3,358,000 for 2008, a decrease of $1,472,000. The decrease is due to
preferred shareholders converting their ownership to common stock in 2009 and
beneficial conversion feature in 2008 as discussed below, offset by a placement
of preferred stock that closed in February 4, 2008. Dividends are paid
semi-annually in either cash or common stock.
On
February 4, 2008, we issued 272.5 shares of our Series A Preferred Stock. The
shares are convertible into common stock at $3.00 per share. Based on the price
of our common stock on February 4, 2008 a new conversion price was calculated
for the Series A Preferred Stock and was considered to be “in the money” at the
time of the agreement to exchange the convertible notes for preferred stock.
This resulted in a beneficial conversion feature. The preferred stockholder has
the right at any time to convert all or any lesser portion of the Series A
Preferred Stock into common stock. This resulted in an intrinsic value of the
preferred stock. The difference between the implied value of the preferred stock
and the beneficial conversion feature was treated as preferred stock dividends
of $857,000.
An
additional $451,000 in preferred stock dividends was recorded in the first
quarter of 2008. The change was due to preferred stock dividends and the
beneficial conversion feature associated with the warrants issued in association
with the sale of preferred stock in November 2007.
Net loss
allocable to common stockholders for year ended December 31, 2009 was
$19,226,000, or a $1.63 basic and diluted loss per common share, compared with a
loss of $34,789,000, or a $4.16 basic and diluted loss per common share for the
same period in 2008, a decreased loss of $15,563,000.
Liquidity
and Capital Resources
We have
funded our operations primarily through private sales of common stock, preferred
stock, convertible notes and through licensing agreements. Our principal source
of liquidity is cash and cash equivalents. Licensing fees provided limited
funding for operations during the year ended December 31, 2009. As of April 9,
2010, our cash and cash equivalents were $4,231,000 and our net cash burn rate
for the year ended December 31, 2009, was approximately $172,000 per month. As
of December 31, 2009, our working capital deficit was $7,949,000. Our working
capital deficit at December 31, 2009 represented an increase of $3,336,000 as
compared to our working capital deficit as of December 31, 2008 of $4,613,000.
The increase in the working capital deficit at December 31, 2009 reflects an
increase in operating expenses which included manufacturing product scale-up for
our new ProLindac trial and MacroChem expenses offset by milestone payments from
our licensing agreements. As of December 31, 2009, we had one convertible note
outstanding in the principal amount of $5.5 million which is due September 13,
2011.
As of
April 9, 2010, the Company did not have enough capital to achieve our long-term
goals. If we raise additional funds by selling equity securities, the relative
equity ownership of our existing investors will be diluted and the new investors
could obtain terms more favorable than previous investors. A failure to obtain
necessary additional capital in the future could jeopardize our operations and
our ability to continue as a going concern.
We have
generally incurred negative cash flows from operations since inception, and have
expended, and expect to continue to expend in the future, substantial funds to
complete our planned product development efforts. Since inception, our expenses
have significantly exceeded revenues, resulting in an accumulated deficit as of
December 31, 2009 of $241,807,000. We expect that our capital resources will be
adequate to fund our current level of operations into the first quarter of 2011.
However, our ability to fund operations over this time could change
significantly depending upon changes to future operational funding obligations
or capital expenditures. As a result, we are required to seek additional
financing sources within the next twelve months. We cannot assure you that we
will ever be able to generate significant product revenue or achieve or sustain
profitability.
Since our
inception, we have devoted our resources primarily to fund our research and
development programs. We have been unprofitable since inception and to date have
received limited revenues from the sale of products. We cannot assure you that
we will be able to generate sufficient product revenues to attain profitability
on a sustained basis or at all. We expect to incur losses for the next several
years as we continue to invest in product research and development, preclinical
studies, clinical trials and regulatory compliance.
27
We plan
to expend substantial funds to conduct research and development programs,
preclinical studies and clinical trials of potential products, including
research and development with respect to our acquired and developed technology.
Our future capital requirements and adequacy of available funds will depend on
many factors, including:
·
|
the
successful development and commercialization of ProLindac™, MuGard™ and
our other product candidates;
|
·
|
the
ability to convert, repay or restructure our outstanding convertible note
and debentures;
|
·
|
the
ability to establish and maintain collaborative arrangements with
corporate partners for the research, development and commercialization of
products;
|
·
|
continued
scientific progress in our research and development
programs;
|
·
|
the
magnitude, scope and results of preclinical testing and clinical
trials;
|
·
|
the
costs involved in filing, prosecuting and enforcing patent
claims;
|
·
|
the
costs involved in conducting clinical
trials;
|
·
|
competing
technological developments;
|
·
|
the
cost of manufacturing and scale-up;
|
·
|
the
ability to establish and maintain effective commercialization arrangements
and activities; and
|
·
|
successful
regulatory filings.
|
We have
devoted substantially all of our efforts and resources to research and
development conducted on our own behalf. The following table summarizes research
and development spending by project category (in thousands), which spending
includes, but is not limited to, payroll and personnel expense, lab supplies,
preclinical expense, development cost, clinical trial expense, outside
manufacturing expense and consulting expense:
(in
thousands)
|
Twelve
Months ended
December 31,
|
Inception
To
Date (1)
|
||||||||||
Project
|
2009
|
2008
|
||||||||||
Polymer
Platinate
(ProLindac™)
|
$ | 2,507 | $ | 3,402 | $ | 28,126 | ||||||
Mucoadhesive
Liquid
Technology
(MLT)
|
107 | - | 1,618 | |||||||||
Others
(2)
|
43 | 332 | 5,437 | |||||||||
Total
|
$ | 2,657 | $ | 3,734 | $ | 35,181 | ||||||
(1)
|
Cumulative
spending from inception of the Company or project through December 31,
2009.
|
(2)
|
Includes: Vitamin
Mediated Targeted Delivery, carbohydrate targeting and other
projects.
|
Due to
uncertainties and certain of the risk factors described above, including those
relating to our ability to successfully commercialize our drug candidates, our
ability to obtain necessary additional capital to fund operations in the future,
our ability to successfully manufacture our products and our product candidates
in clinical quantities or for commercial purposes, government regulation to
which we are subject, the uncertainty associated with preclinical and clinical
testing, intense competition that we face, market acceptance of our products and
protection of our intellectual property, it is not possible to reliably predict
future spending or time to completion by project or product category or the
period in which material net cash inflows from significant projects are expected
to commence. If we are unable to timely complete a particular
project, our research and development efforts could be delayed or reduced, our
business could suffer depending on the significance of the project and we might
need to raise additional capital to fund operations, as discussed in the risk
factors above, including without limitation those relating to the uncertainty of
the success of our research and development activities and our ability to obtain
necessary additional capital to fund operations in the future. As
discussed in such risk factors, delays in our research and development efforts
and any inability to raise additional funds could cause us to eliminate one or
more of our research and development programs.
28
We plan
to continue our policy of investing any available funds in certificates of
deposit, money market funds, government securities and investment-grade
interest-bearing securities. We do not invest in derivative financial
instruments.
We do not
believe inflation or changing prices have had a material impact on our revenue
or operating income.
Climate
Change
We do not
believe there is anything unique to our business which would result in climate
change regulations having a disproportional affect on us as compared to U.S.
industry overall.
Critical
Accounting Policies and Estimates
The
preparation of our consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America
requires us to make estimates and assumptions that affect the reported amounts
of assets and liabilities, disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amount of revenues and
expenses during the reported period. In applying our accounting principles, we
must often make individual estimates and assumptions regarding expected outcomes
or uncertainties. As you might expect, the actual results or outcomes are often
different than the estimated or assumed amounts. These differences are usually
minor and are included in our consolidated financial statements as soon as they
are known. Our estimates, judgments and assumptions are continually evaluated
based on available information and experience. Because of the use of estimates
inherent in the financial reporting process, actual results could differ from
those estimates.
Asset
Impairment
Our
intangible assets at December 31, 2009 consisted primarily of patents
acquired in acquisitions and licenses which were recorded at fair value on the
acquisition date. We perform an impairment test on at least an annual basis or
when indications of impairment exist. At December 31, 2009 and for the year then
ended, Management believes no impairment of our intangible assets
exists.
Revenues
Our
revenues are generated from licensing and research and development agreements.
We recognize revenue in accordance with SEC Staff Accounting Bulletin No. 104
(SAB 104), Revenue
Recognition. License revenue is recognized over the remaining life of the
underlying patent. Research and development revenues are recognized as services
are performed.
Stock
Based Compensation Expense
We
account for stock based compensation expense in accordance with FASB ASC 718,
Stock Based
Compensation. We have several stock-based compensation plans under which
incentive and non-incentive qualified stock options and restricted shares may be
granted to employees, directors and consultants. We measure the cost of the
employee/director/consultant services received in exchange for an award of
equity instruments based on the grant date fair value of the award.
29
Stock-based
compensation expense recognized for the years ended December 31, 2009 and
2008 was approximately $811,000 and $922,000, respectively.
Recent
Accounting Pronouncements
In June
2009, the Financial Accounting Standards Board (FASB) established the FASB
Accounting Standards Codification (ASC) as the source of authoritative
accounting principles recognized by the FASB to be applied in preparation of
financial statements in conformity with U.S. GAAP. As the issuance of ASC does
not change U.S. GAAP and our adoption did not have any impact on our 2009
Financial Statements.
In June
2009, the FASB issued accounting guidance that eliminates the exemption from
consolidation for qualifying special-purpose entities, effective for financial
asset transfers occurring after the beginning of an entity’s first fiscal year
that begins after November 15, 2009. We currently do not have any of these
entities.
In June
2009, the FASB issued accounting guidance that assists in determining whether an
enterprise has a controlling financial interest in a variable interest entity.
This guidance is effective as of the beginning of the first fiscal year that
begins after November 15, 2009. We currently do not have any such
arrangements.
In
October 2009, the FASB issued new accounting guidance related to revenue
arrangements with multiple deliverables that provides principles for allocation
of consideration among an arrangement’s multiple-elements, allowing more
flexibility in identifying and accounting for separate deliverables. The
guidance introduces an estimated selling price method for valuing the elements
of a bundled arrangement if vendor-specific objective evidence or third-party
evidence of selling price is not available, and significantly expands related
disclosure requirements. This guidance is effective on a prospective basis for
revenue arrangements entered into or materially modified in fiscal years
beginning on or after June 15, 2010. Alternatively, adoption may be on a
retrospective basis, and early application is permitted. We are currently
evaluating the impact of adopting this guidance on our financial
statements.
Off-Balance
Sheet Transactions
None
30
DESCRIPTION
OF BUSINESS
Business
Access
Pharmaceuticals, Inc. (together with our subsidiaries, “We”, “Access” or the
“Company”) is a Delaware corporation. We are an emerging biopharmaceutical
company focused on developing a range of pharmaceutical products primarily based
upon our nanopolymer chemistry technologies and other drug delivery
technologies. We currently have one approved product, two products at Phase 2 of
clinical development and several products in pre-clinical development. Low
priority clinical and pre-clinical programs will be dependent on our ability to
enter into collaborative arrangements. Certain of our development programs are
dependent upon our ability to secure approved funding for such projects. Our
description of our business, including our list of products and patents, takes
into consideration our acquisition of MacroChem Corporation which closed
February 25, 2009.
·
|
MuGard™
is our approved product for the management of oral mucositis, a frequent
side-effect of cancer therapy for which there is no established treatment.
The market for mucositis treatment is estimated to be in excess of $1
billion world-wide. MuGard, a proprietary nanopolymer formulation, has
received marketing allowance in the U.S. from the Food & Drug
Administration (FDA). MuGard has been launched in Germany, Italy, UK,
Greece and the Nordic countries by our European commercial partner,
SpePharm. Our manufacturing of MuGard is underway as we expect to launch
MuGard in North America during the second quarter of 2010. We are working
with our partners in Korea and China for
marketing.
|
·
|
Our
lead development candidate for the treatment of cancer is ProLindac™, a
nanopolymer DACH-platinum prodrug. We recently completed a Phase 2
clinical trial on ProLindac in the EU in patients with recurrent ovarian
cancer. The clinical study had positive safety and efficacy results. On
January 7, 2010, we announced that we are initiating a study of ProLindac
combined with Paclitaxel in second line treatment of platinum pretreated
advanced ovarian cancer patients. This multi-center study of up to 25
evaluable patients will be conducted in Europe. We are also currently
planning a number of combination trials, looking at combining ProLindac
with other cancer agents in solid tumor indications including colorectal
and ovarian cancer. The DACH-platinum incorporated in ProLindac is the
same active moiety as that in oxaliplatin (Eloxatin; Sanofi-Aventis),
which has sales in excess of $2.0
billion.
|
·
|
Thiarabine,
or 4-thio Ara-C, is a next generation nucleoside analog licensed from
Southern Research Institute. Previously named SR9025 and OSI-7836, the
compound has been in two Phase 1/2 solid tumor human clinical trials and
was shown to have anti-tumor activity. We are working with leukemia and
lymphoma specialists at MD Anderson Cancer Center in Houston and intend to
initiate additional Phase 2 clinical trials in adult AML, ALL and other
indications.
|
·
|
Cobalamin™
is our proprietary preclinical nanopolymer oral drug delivery technology
based on the natural vitamin B12 oral uptake mechanism. We are currently
developing a product for the oral delivery of insulin, and have conducted
sponsored development of a product for oral delivery of human growth
hormone. We are in discussion with several companies regarding the
sponsored development of Cobalamin oral drug delivery formulations of
proprietary and non-proprietary
actives.
|
·
|
Cobalamin-mediated
cancer targeted delivery is a preclinical technology which makes use of
the fact that cell surface receptors for vitamins such as B12 are often
overexpressed by cancer cells. This technology uses nanopolymer constructs
to deliver more anti-cancer drug to tumors while protecting normal
tissues.
|
Products
We use
our drug delivery technologies to develop the following products and product
candidates:
31
Access
Drug Portfolio
Compound
|
Originator
|
Technology
|
Indication
|
Clinical
Stage (1)
|
||||
MuGard™
|
Access
|
Mucoadhesive
liquid
|
Mucositis
|
(510k)
Marketing clearance received
|
||||
ProLindacTM
(Polymer
Platinate,
AP5346) (2)
|
Access
/
Univ
of
London
|
Synthetic
polymer
|
Cancer
|
Phase
2
|
||||
Thiarabine
(4-thio Ara-C) (3)
|
Southern
Research
Institute
|
Small
molecule
|
Cancer
|
Phase
1/2
|
||||
Oral
Insulin
|
Access
|
Cobalamin
|
Diabetes
|
Pre-clinical
|
||||
Oral
Delivery System
|
Access
|
Cobalamin
|
Various
|
Pre-clinical
|
||||
Cobalamin™-Targeted
Therapeutics
|
Access
|
Cobalamin
|
Anti-tumor
|
Pre-clinical
|
(1)
|
For
more information, see “Government Regulation” for description of clinical
stages.
|
(2)
|
Licensed
from the School of Pharmacy, The University of
London.
|
(3)
|
Licensed
from Southern Research Institute of Birmingham,
Alabama.
|
Approved
Product
MuGard™ - Mucoadhesive
Liquid Technology (MLT)
Mucositis
is a debilitating condition involving extensive ulceration of the oral cavity
that affects annually an estimated 400,000 cancer patients in the United States
undergoing chemotherapy and radiation treatment. We believe that any treatment
that would accelerate healing and/or diminish the rate of appearance of
mucositis would have a significant beneficial impact on the quality of life of
these patients and may allow for more aggressive chemotherapy. We believe the
potential addressable market for a mucositis product could be over $1 billion
world-wide.
Our
MuGard is a viscous polymer solution which provides a coating for the oral
cavity. MuGard is dispensed in a ready to use form. A multi-site, randomized
clinical study was performed in the United States testing MuGard and MuGard
containing an anti-inflammatory drug to determine the effect of these products
on the prevention and treatment of mucositis. The data from this trial indicated
that the patients using MuGard displayed a lower incidence of mucositis than is
typically seen in the studied population with no additional benefit from the
drug.
The data
were retrospectively compared with two historical patient databases to evaluate
the potential advantages MuGard may provide in the prevention, treatment and
management of mucositis. The patient evaluation was conducted using the oral
mucositis assessment scale (OMAS), which qualifies the disease severity on a
scale of 0-5. Key highlights of the comparison with the historical patient
databases are as follows:
•
the average severity of the disease was reduced by approximately
40%;
•
the maximum intensity of the mucositis was approximately 35% lower;
and
•
the median peak intensity was approximately 50% lower.
These
data confirmed the fact that MuGard could represent an important advancement in
the management and prevention of mucositis. On December 13, 2006, we
announced our receipt of marketing clearance for MuGard from the FDA for the
indication of the management of oral wounds including mucositis, aphthous ulcers
and traumatic ulcers.
In August
2007 we signed a definitive licensing agreement with SpePharm Holding, B.V.
under which SpePharm will market MuGard in Europe. MuGard sales started in
Europe in the second quarter of 2009. In January 2008, we signed a definitive
licensing agreement with RHEI Pharmaceuticals, Inc. under which RHEI will market
MuGard in China and other Southeast Asian countries.
32
On July
29, 2009, we took control of the North American rights to MuGard from a previous
partner which had not received required funding to launch the product in the
U.S. In addition, we announced that we are evaluating strategic
options for the commercialization of MuGard in North America. Also on July 29,
2009, we announced that Mr. Frank Jacobucci, formerly President & COO of
Milestone Biosciences, joined Access as a consultant, and will assist with
ongoing reimbursement, manufacturing and commercial launch activities at Access,
while discussions with potential licensee and co-promotion partners is ongoing.
Subsequent to joining Access as a consultant, Mr. Jacobucci joined Access as a
full time employee on December 1, 2009, as Vice President, Sales and
Marketing.
On
September 11, 2009, we announced the appointment of Accupac, Inc. as our U.S.
manufacturer for MuGard. Our manufacturing of MuGard is underway and we expect
to launch MuGard in North America during the second quarter of 2010. We are
currently executing on numerous strategies including the implementation of a
dedicated sales force and marketing strategies, the clinical advancement program
for MuGard involving some of the foremost thought leaders in the oral mucositis
arena as well as the advancement of the other uniquely differentiated products
within our pipeline.
Products
in Development
ProLindac™ (Polymer
Platinate, AP5346) DACH Platinum
Chemotherapy,
surgery and radiation are the major components in the clinical management of
cancer patients. Chemotherapy serves as the primary therapy for some solid
tumors and their metastases, and is increasingly used as an adjunct to radiation
and surgery to improve their effectiveness. For chemotherapeutic agents to be
effective in treating cancer patients, however, the agent must reach the target
cells in effective quantities with minimal toxicity in normal
tissues.
The
current optimal strategy for chemotherapy involves exposing patients to the most
intensive cytotoxic regimens they can tolerate. Clinicians will often use a
combination of chemotherapeutic drugs, a dosing schedule and a method of
administration designed to increase the probability that cancerous cells will be
destroyed while minimizing the harm to healthy cells. Notwithstanding
clinicians’ efforts, most current chemotherapeutic drugs have significant
shortcomings that limit the efficacy of chemotherapy. For example, certain
cancers are inherently unresponsive to chemotherapeutic agents. Alternatively,
other cancers may initially respond, but subgroups of cancer cells acquire
resistance to the drug during the course of therapy and the resistant cells may
survive and cause a relapse. Serious toxicity, including bone marrow
suppression, renal toxicity, neuropathy, or irreversible cardiotoxicity, are
some of the limitations of current anti-cancer drugs that can prevent their
administration in curative doses.
Oxaliplatin,
a compound of DACH platinum, is a chemotherapeutic which was initially approved
in Europe in 1999 for the treatment of colorectal cancer. It is now also being
marketed worldwide and has generated sales in excess of $2 billion in 2008.
Carboplatin and Cisplatin, two other approved platinum chemotherapy drugs, are
not indicated for the treatment of metastatic colorectal cancer. Oxaliplatin, in
combination with 5-flurouracil and folinic acid (known as the FOLFOX regime) is
indicated for the first-line treatment of metastatic colorectal cancer in Europe
and the U.S. The colorectal cancer market is a significant opportunity as there
are over 940,000 reported new cases annually worldwide, increasing at a rate of
approximately three percent per year, and 500,000 deaths.
Currently,
platinum compounds are one of the largest selling categories of chemotherapeutic
agents, with annual sales in excess of $2.7 billion in 2006. As is the case with
all chemotherapeutic drugs, the use of such compounds is associated with serious
systemic side effects. The drug development goal therefore is to enhance
delivery of the active drug to the tumor and minimize the amount of active drug
affecting normal organs in the body.
33
Utilizing
a biocompatible water-soluble polymer (HPMA) as a drug carrier, our drug
candidate ProLindac, links DACH platinum to a polymer in a manner which permits
the selective release of the active drug to the tumor by several mechanisms. The
main release mechanism takes advantage of the differential pH in tumor tissue
compared to healthy tissue. The polymer also capitalizes on the biological
differences in the permeability of blood vessels at tumor sites versus normal
tissue. In this way, tumor selective delivery and platinum release is achieved.
The ability of ProLindac to inhibit tumor growth has been evaluated in more than
ten preclinical models. Compared with the marketed product oxaliplatin,
ProLindac was superior, and in several cases markedly superior in most of these
models. Preclinical studies of the delivery of platinum to tumors in an animal
model have shown that, compared with oxaliplatin at equitoxic doses, ProLindac
delivers in excess of 16 times more platinum to the tumor. An analysis of tumor
DNA, which is the main target for anti-cancer platinum agents, has shown that
ProLindac delivers
approximately 14 times more platinum to tumor DNA than oxaliplatin. Results from
preclinical efficacy studies conducted in the B16 melanoma and other tumor
models have also shown that ProLindac is superior to oxaliplatin in inhibiting
the growth of tumors. An extensive preclinical package has been developed
supporting the development of ProLindac.
In 2005,
we completed a Phase 1 multi-center clinical study conducted in Europe, which
enrolled 26 patients. The study was reported in a journal publication, Cancer
Chemotherapy and Pharmacology, 60(4): 523-533 in 2007. The European trial
was designed to identify the maximum tolerated dose, dose limiting toxicities,
the pharmacokinetics of the platinum in plasma and the possible anti-tumor
activity of ProLindac. The open-label, non-randomized, dose-escalation Phase 1
study was performed at two European centers.
Of the 26
patients, 10 were not evaluable for tumor response, principally due to
withdrawal from the study prior to completing the required number of cycles. Of
the 16 evaluable patients, 2 demonstrated a partial response, 1 experienced a
partial response based on a biomarker and 4 experienced stable disease. One of
the patients who attained a partial response had a melanoma with lung
metastasis; a CT scan revealed a tumor decrease of greater than 50%. The other
patient who responded had ovarian cancer; she had a reduction in lymph node
metastasis and remission of a liver metastasis. The patient who experienced a
partial response based on a biomarker was an ovarian cancer patient for whom
Ca125 levels returned to normal. Also of note, a patient with cisplatin
resistant cervical cancer showed a short lasting significant reduction in lung
metastasis after 3 doses. However, due to toxicity, the patient could not be
retreated to determine whether the partial response could be
maintained.
Enrollment
in a Phase 2 clinical trial of ProLindac was completed late in 2008 in ovarian
cancer patients who relapsed after first line platinum therapy and second line
therapies. The primary aim of the study was to determine the response rate of
ProLindac monotherapy in this patient population. The response rates for other
platinum compounds in this indication are reported, and were used for
comparison. Patients were dosed either once every 2 weeks or once every three
weeks. As the Phase 1 study involved weekly dosing, the initial phase of the
ovarian cancer monotherapy study involved some dose escalation to determine
recommended doses using these dosing regimens.
This 26
patient Phase 2 study explored 3 different dose levels and 2 dosing regimens of
ProLindac as a monotherapy treatment for advanced ovarian cancer, to provide
data on the monotherapy anticancer activity and safety of ProLindac. Of patients
eligible for evaluation according to standard RECIST criteria,
clinically-meaningful disease stabilization was achieved in 42% of all patients,
and 66% of all patients in the higher dose groups. Sustained and significant
reductions in Ca125, the established specific serum marker for ovarian cancer,
were also observed in several patients.
We
reported positive safety and efficacy results from this Phase 2 monotherapy
clinical study of ProLindacTM in
late-stage, heavily pretreated ovarian cancer patients. No patient in any dose
group exhibited any signs of acute neurotoxicity, which is a major adverse
side-effect of the approved DACH platinum, Eloxatin, and ProLindac was well
tolerated overall. The maximum tolerated dose of ProLindac was established as
well as the recommended dose levels for future combination studies.
34
ProLindac
was well tolerated in an absolute sense and relative to commercially-available
platinum therapies. We saw significant DACH platinum activity and efficacy in
patients at the highest dose levels which we believe is very encouraging given
that this study involved monotherapy in a heavily pretreated patient population
that typically only respond to aggressive drug combinations. The DACH platinum
activity level seen benchmarked favorably with published studies of monotherapy
oxaliplatin in similar but less heavily pre-treated patient
populations.
On August
3, 2009, we announced that we commenced a new clinical study of ProLindac in
France. The study examined dose levels and regimens of ProLindac monotherapy in
cancer patients, provided additional data to support design of combinations
studies, and extended the safety database. Eight ovarian cancer patients were
enrolled in the study at the end of 2009 and none experienced any acute adverse
events.
On
January 7, 2009, based on the results of the trial with eight patients we
announced, the initiation of a study of ProLindac combined with Paclitaxel in
second line treatment of platinum pretreated advanced ovarian cancer patients.
This study is the first to look at the safety and efficacy of ProLindac in
combination with other oncology agents. The efficacy of Diamino Cyclohexane
Platinum, the active principle in ProLindac, is evidenced mainly through their
synergic association with multiple anticancer agents. The choice of Paclitaxel
and ovarian cancer as the potential first NDA strategic choice to be explored is
based on the results of the Paclitaxel/Oxaliplatin combination in the same
clinical setting. This multi-center study of up to 25 evaluable patients will be
conducted in Europe. The efficacy endpoint goal is to achieve a minimum of 63%
response rate in the total of 25 evaluable patients the study is planning to
accrue on a two step design.
We
previously submitted an IND application to the US Food and Drug Administration,
and received clearance from the agency to proceed with a Phase 1 clinical study
of ProLindac in combination with fluorouracil and leucovorin. The study is
designed to evaluate the safety of ProLindac in combination with two standard
drugs used to treat colorectal cancer and to establish a safe dose for Phase 2
clinical studies of this combination in colorectal cancer. We are
currently evaluating various options for combination trials to be conducted, in
the US or other countries.
Thiarabine (4-thio
Ara-C)
Our
product candidate Thiarabine (SR-9025 or
4'-thio-beta-D-arabinofuranosylcytosine) is a new generation nucleoside analogue
which was invented by Southern Research Institute of Birmingham, Alabama. This
compound is within a certain class of anti-cancer drugs generally characterized
as cytotoxic agents with proven success in solid tumors and certain blood-borne
cancers.
Thiarabine
exhibited significant activity, including regressions or cures, in six tested
leukemia or lymphoma cell lines. The compound produced better activity than
ara-C or a fatty acid-modified ara-C (depot) analog in four of six tested
models. Thiarabine also performed as well or better than clofarabine and
gemcitabine in each of the models.
Unlike
ara-C, thiarabine was found to be active in a wide variety of solid tumor
xenograft models (14 different cell lines), including colorectal, lung, renal,
prostate, breast and pancreatic tumors, mainly via intraperitoneal
administration (one model was done iv). Thiarabine produced regressions or
tumor-free survivors in about half of the models and exhibited better activity
than gemcitabine or clofarabine in many models. Thiarabine activity was also
better than that of paclitaxel or cisplatin in certain lung models. An increase
in regression or cure rate over either compound alone was observed with
combinations of thiarabine and cisplatin in lung tumors, thiarabine and
irinotecan or clofarabine in colorectal tumors, and thiarabine plus clofarabine
in a leukemia model.
Two phase
1 studies were conducted of thiarabine monotherapy in patients with solid
tumors.
In the
first phase 1 study, 26 patients with incurable advanced and/or metastatic solid
tumors were enrolled. Out of 21 evaluable patients, 9 experienced stable disease
(median duration 4.3 months, range 1.8-6.4 months).
35
Dose-limiting
toxicities (DLTs) were observed at 400-600 mg/m2.
Unlike previous observations with gemcitabine and ara-C (where the DLT is
myelosupression; leucopenia and thrombocytopenia), there were no grade four
toxicities and no hematological toxicities other than reversible lymphopenia.
Investigators concluded that the (Grade 3) dose-limiting toxicities were
fatigue, rash, fever, seizure and lymphopenia.
A second
solid tumor phase 1 trial was carried out to explore other schedules. Of the 27
evaluable patients, 7 patients (including bladder cancer and mesothelioma)
achieved disease stabilization (median 3.7 months, range 1.9-5.4). The main
toxicity was fatigue, which appeared to be schedule independent.
We
believe the results seen for thiarabine in leukemia and lymphoma preclinical
models and the lymphopenia observed in clinical studies provides a strong
rationale for further investigation of thiarabine in leukemia and lymphoma
patients. We plan to initiate further thiarabine clinical studies in at least
one of these patient populations subject to funding or partnering.
Drug
Development Strategy
With the
acquisition of Somanta Ltd. in 2008 and MacroChem Corporation in 2009, Access
has a rich pipeline of products and product candidates ranging from preclinical
development candidates to one approved product. To maximize return on this
portfolio, we elected to sell or return the rights to some products so that we
can focus our efforts on the development of the remaining products. Products
potentially being sold or returned to licensors include Angiolix, Pexiganan,
EcoNail and Phenylbutyrate. Products and technologies that we plan to develop
in-house and with collaborators are MuGard, ProLindac, Thiarabine and
Cobalamin.
A part of
our integrated drug development strategy is to form alliances with centers of
excellence in order to obtain alternative lead compounds while minimizing the
overall cost of research. We do not spend significant resources on fundamental
biological research but rather focus on our chemistry expertise and clinical
development. For example, certain of our polymer platinate technology has
resulted in part from a research collaboration with The School of Pharmacy,
University of London.
Our
strategy is to focus on our polymer therapeutic program for the treatment of
cancer while continuing to develop technologies such as Cobalamin-mediated oral
drug delivery and Cobalamin-mediated tumor targeting which could provide us with
a revenue stream in the short term through commercialization or outlicensing to
fund our longer-term polymer and oncology drug development programs such as
ProLindac and Thiarabine. To reduce financial risk and financing requirements,
we are directing our resources to the preclinical and early clinical phases of
development. We plan to co-develop with or to outlicense to marketing partners
our therapeutic product candidates where the size of the necessary clinical
studies and cost associated with the later clinical development phases are
significant. By forming strategic alliances with pharmaceutical and/or biotech
companies, we believe that our technology can be more rapidly developed and
successfully introduced into the marketplace.
We will
continue to evaluate the most cost-effective methods to advance our programs. We
plan to contract certain research and development, manufacturing and
manufacturing scaleup, certain preclinical testing and product production to
research organizations, contract manufacturers and strategic partners as
appropriate to achieve cost savings and accelerate our development programs. We
also plan to expand our internal core capabilities and infrastructure in the
areas of chemistry, formulation, analytical methods development, clinical
development, biology and project management to maximize product opportunities in
a timely manner.
Process
We
generally begin the product development effort by screening and formulating
potential product candidates, selecting an optimal active component, developing
a formulation, and developing the processes and analytical methods. Pilot
stability, toxicity and efficacy testing are conducted prior to advancing the
product candidate into formal preclinical development. Specialized skills
are required to produce these product candidates utilizing our technology. We
have a limited core internal development capability with significant experience
in developing these formulations, but also depend upon the skills and expertise
of our contractors.
36
Once the
product candidate has been successfully screened in pilot testing, our
scientists, together with external consultants, assist in designing and
performing the necessary preclinical efficacy, pharmacokinetic and toxicology
studies required for IND submission. External investigators and scaleup
manufacturing facilities are selected in conjunction with our consultants. The
initial Phase 1 and Phase 2 studies are conducted by institutions and
investigators supervised and monitored by our employees and contract research
organizations. We do not plan to have an extensive clinical development
organization as we plan to have the advance phases of this process conducted by
a development partner. We expect to engage a contract research organization to
perform Phase 3 clinical studies.
We
contract with third party contract research organizations to complete our large
clinical trials and for data management of all of our clinical trials.
Currently, we are preparing for two Phase 2 ProLindac trials to be completed by
our licensees in China and Korea. Our licensees are funding these trials. We are
also conducting an additional Phase 2 clinical study in France. Our licensees
for MuGard are planning additional clinical studies to strengthen marketing
claims
With all
of our product development candidates, we cannot assure you that the results of
the in vitro or animal studies are or will be indicative of the results that
will be obtained if and when these product candidates are tested in humans. We
cannot assure you that any of these projects will be successfully completed or
that regulatory approval of any product will be obtained.
We
expended approximately $2,657,000 and $23,235,000 on research and development
during the years 2009 and 2008, respectively.
Scientific
Background
We
possess a broad range of technologies and intellectual property in the areas of
drug delivery and oncology. Our core technologies rely on the use of
nanopolymers for use in the management of oral conditions such as mucositis, and
in drug delivery. In addition, we have small molecule and monoclonal antibody
programs which also embody the principals of drug delivery and drug
targeting.
In our
drug delivery programs for oncology, we believe the ultimate criteria for
effective drug delivery is to control and optimize the localized release of the
drug at the target site and rapidly clear the non-targeted fraction.
Conventional oncology drug delivery systems such as controlled release,
sustained release, transdermal systems and others are designed for delivering
active product into the systemic circulation over time with the objective of
improving patient compliance and extending tumor exposure to drug. These systems
do not address the biologically relevant issues such as site targeting,
localized release and clearance of drug. The major factors that impact the
achievement of this ultimate drug delivery goal are the physical characteristics
of the drug and the delivery system, and the biological characteristics of the
disease target sites. The physical characteristics of the drug affect solubility
in biological systems, its biodistribution throughout the body, and its
interactions with the intended pharmacological target sites and undesired areas
of toxicity. The biological characteristics of the diseased area impact the
ability of the drug to selectively interact with the intended target site to
allow the drug to express the desired pharmacological activity.
We
believe our drug delivery technologies are differentiated from conventional drug
delivery systems in that they seek to apply a disease-specific approach to
improve the drug delivery process with formulations to significantly enhance the
therapeutic efficacy and reduce toxicity of a broad spectrum of
products.
Our
Cobalamin oral drug delivery technology seeks to deliver drugs orally to both
systemic circulation and to diseased cells. The main use of this technology will
be to deliver drugs orally that otherwise could only be administered by
injection because of poor natural oral absorption and/or degradation in the
gastrointestinal tract. While other oral drug delivery technologies have been
reported, the majority rely on permeation enhancement. Permeation enhancement
temporarily increase the gaps between the cells which line the gastrointestinal
tract to allow more drug to pass through. But this technique also allows many
other materials, many potentially toxic, to enter the body more readily.
Additionally, permeation enhancers only permit a small increase in oral uptake.
The Cobalamin technology relies upon a natural receptor-mediated uptake
mechanism which can facilitate uptake of larger quantities of drug. Our
nanopolymer technology is used to encapsulate the drug, protecting it in the
harsh environment of the gastrointestinal tract, and permits slow drug release
once transported into systemic circulation.
37
Core
Drug Delivery Technology Platforms and Technologies
Our
current drug delivery technology platforms for use in cancer chemotherapy
are:
·
|
Synthetic
Polymer Targeted Drug Delivery
Technology;
|
·
|
Cobalamin™-Mediated
Oral Delivery Technology; and
|
·
|
Cobalamin™-Mediated
Targeted Delivery Technology.
|
Each
of these platforms is discussed below:
Synthetic
Polymer Targeted Drug Delivery Technology
In
collaboration with The School of Pharmacy, University of London, we have
developed a synthetic polymer technology, which utilizes a
hydroxypropylmethacrylamide (HPMA) polymer with platinum, designed to exploit
enhanced permeability and retention effect, or EPR, at tumor sites to
selectively accumulate drug and control drug release. This technology is
employed in our lead clinical program, ProLindac. Many solid tumors possess
vasculature that is hyperpermeable, or leaky, to macromolecules. In addition to
this enhanced permeability, tumors usually lack effective lymphatic and/or
capillary drainage. Consequently, tumors selectively accumulate circulating
macromolecules, including, for example, up to 10% of an intravenous dose in
mice. The increased tumor uptake of macromolecules and decreased clearance are
the main elements of EPR, and is thought to constitute the mechanism of action
of styrene-maleic/anhydride-neocarzinostatin, or SMANCS, a polymer therapeutic
which is in regular clinical use in Japan for the treatment of hepatoma. These
polymers take advantage of endothelial permeability as the drug carrying
polymers are trapped in tumors and then taken up by tumor cells. Linkages
between the polymer and drug can be designed to be cleaved extracellularly or
intracellularly. Utilizing the principles of prodrugs, the drug is essentially
inert while attached to the polymer, but is released inside the tumor mass while
polymer/drug not delivered to tumors is cleared from the body via the kidneys.
For example, ProLindac is attached to a pH-sensitive linker which releases the
platinum cytotoxic agent much faster in the low pH environments found typically
outside of hypoxic tumor cells and within specific compartments inside of tumor
cells. Data generated in animal studies have shown that the polymer/drug
complexes are far less toxic than free drug alone and that greater efficacy can
be achieved. Thus, these polymer complexes have demonstrated significant
improvement in the therapeutic index of anti-cancer drugs, including, for
example, platinum.
Cobalamin™-Mediated
Oral Delivery Technology
Oral
delivery is the preferred method of administration of drugs where either
long-term or daily use (or both) is required. However, many therapeutics,
including peptide and protein drugs, are poorly absorbed when given orally. With
more peptide and protein based biopharmaceuticals entering the market, there is
an increasing need to develop an effective oral delivery system for them, as
well as for long-standing injected drugs such as insulin.
The
difficulty in administering proteins orally is their susceptibility to
degradation by digestive enzymes, their inability to cross the intestinal wall
and their rapid excretion by the body. Over the years, many different
methodologies for making protein drugs available orally have been attempted.
Most of the oral protein delivery technologies involve protecting the protein
degradation in the intestine. More recently, strategies have been developed that
involve coadministering the protein or peptide with permeation enhancers, which
assist in passive transit through the gut wall or by attaching the protein or
peptide to a molecule that transports the protein across the gut wall. However,
the field of oral drug delivery of proteins and peptides has yet to achieve
successful commercialization of a product (although positive results have been
achieved in early clinical trials for some products under
development).
38
Many
pharmaceutically active compounds such as proteins, peptides and cytotoxic
agents cannot be administered orally due to their instability in the
gastrointestinal tract or their inability to be absorbed and transferred to the
bloodstream. A technology that would allow many of these actives to be taken
orally would greatly enhance their acceptance and value. Several technologies
for the protection of sensitive actives in the gastro-intestinal tract and/or
enhancement of gastro-intestinal absorption have been explored and many have
failed.
Our
proprietary technology for oral drug delivery utilizes the body’s natural
vitamin B12 (VB12) transport system in the gut. The absorption of VB12 in the
intestine occurs by way of a receptor-mediated endocytosis. Initially, VB12
binds to naturally-produced intrinsic factor (IF) in the small intestine, and
the VB12-IF complex then binds to the IF receptor on the surface of the
intestine. Receptor-mediated endocytosis then allows the transport of VB12
across the gut wall. After binding to another VB12-binding protein,
transcobalamin II (TcII), VB12 is transferred to the bloodstream.
Our
scientists discovered that Cobalamin (analogs of VB12) will still be transported
by this process even when drugs, macromolecules, or nanoparticles are coupled to
the Cobalamin. Thus Cobalamin serves as a carrier to transfer these
materials from the intestinal lumen to the bloodstream. For drugs and
macromolecules that are stable in the gastro-intestinal tract, the drug or
macromolecule can be coupled directly (or via a linker) to Cobalamin. If the
capacity of the Cobalamin transport system is inadequate to provide an effective
blood concentration of the active, transport can be amplified by attaching many
molecules of the drug to a polymer, to which Cobalamin is also attached. A
further option, especially for drugs and macromolecules that are unstable in the
intestine, is to formulate the drug in a nanoparticle which is then coated with
Cobalamin. Once in the bloodstream, the active is released by diffusion and/or
erosion of the nanoparticle. Utilization of nanoparticles also serves to
‘amplify’ delivery by transporting many molecules at one time due to the
inherently large nanoparticle volume compared with the size of the
drug.
Our
proprietary position in this technology involves the conjugation of Cobalamin or
its analogs to a polymer to which is also attached the drug to be delivered, or
attached to a nanoparticle in which the drug is incorporated. Since many
molecules of the drug are attached to a single polymer strand, or are
incorporated in a single nanoparticle, oral uptake is amplified compared to
simpler conjugates involving one molecule of the vitamin with one drug molecule.
However, in situations when such a simple conjugate might be preferred, our
patents also encompass these vitamin-drug conjugates.
Cobalamin™-Mediated
Targeted Delivery Technology
Most
drugs are effective only when they reach a certain minimum concentration in the
region of disease, yet are well distributed throughout the body following
delivery to the bloodstream contributing to undesirable side effects. It is
therefore advantageous to alter the natural biodistribution of a drug to have it
more localized where it is needed. Our Cobalamin-mediated targeted delivery
technology utilizes the fact that in many diseases where there is rapid growth
and/or cell division, the demand for certain vitamins increases. By coupling the
drug to a vitamin analog, the analog serves as a carrier to increase the amount
of drug at the disease site relative to its normal distribution.
One
application of this technology is in tumor targeting. The use of cytotoxic drugs
is one of the most common methods for treating a variety of malignancies
including solid and non-solid tumors. The drawbacks of chemotherapeutic
treatments, which include tumor resistance, cancer relapse and toxicity from
severe damage to healthy tissues, has fuelled a scientific quest for novel
treatments that are specifically targeted to malignant cells thus reducing
damage to collateral tissues.
The
design of targeted therapies involves exploitation of the difference between the
structure and function of normal cells compared with malignant cells.
Differences include the increased levels of surface receptors on cancer cells,
which makes them more sensitive to treatment regimes that target these cell
surface receptors and differences in blood supply within and around tumor cells
compared with normal cells.
39
Two basic
types of targeting approaches are utilized, passive tumor targeting and active
tumor targeting.
●
|
passive
tumor targeting involves transporting anti-cancer agents through the
bloodstream to tumor cells using a “carrier” molecule. Many different
carrier molecules, which can take a variety of forms (micelles,
nanoparticles, liposomes and polymers), are being investigated as each
provides advantages such as specificity and protection of the anti-cancer
drug from degradation due to their structure, size (molecular weights) and
particular interactions with tumor cells. Our ProLindac program uses a
passive tumor targeting technology.
|
●
|
active
tumor targeting involves attaching an additional fragment to the
anticancer drug and the carrier molecule to create a new “targeted” agent
that will actively seek a complementary surface receptor to which it binds
(preferentially located on the exterior of the tumor cells). The theory is
that the targeting of the anti-cancer agent through active binding to the
affected cells should allow more of the anti-cancer drug to enter the
tumor cell, thus amplifying the response to the treatment and reducing the
toxic effect on bystander, normal
tissue.
|
Examples
of active targeting fragments include antibodies, growth factors and vitamins.
Our scientists have specifically focused on using Cobalamin compounds (analogs
of vitamin B12), but we have also used and have certain intellectual property
protection for the use of folate and biotin which may more
effectively target anti-cancer drugs to certain solid tumors.
It has
been known for some time that vitamin B12 and folic acid are essential for tumor
growth, and as a result, receptors for these vitamins are up-regulated in
certain tumors. Vitamin B12 receptor over-expression occurs in breast, lung,
leukemic cells, lymphoma cells, bone, thyroid, colon, prostate and brain cancers
and some other tumor lines, while folate receptor over-expression occurs in
breast, lung, ovarian, endometrial, renal, colon, brain and cancers of myeloid
hemotopoietic cells and methotrexate-sensitive tumors.
Other
Key Developments
On
January 22, 2010, we announced the sale of approximately 2.10 million shares of
our common stock and warrants to purchase approximately 1.05 million shares of
our common stock for gross proceeds of approximately $6.3 million. We sold these
shares and warrants as a combined unit for $3.00 per unit (each unit consisting
of one share and a warrant to purchase 0.5 shares of common stock). The exercise
price of the warrants is $3.00 per share.
On
January 7, 2010, we announced that we completed enrollment and evaluation of the
last additional cohort of patients in the ongoing clinical study of ProLindac as
a monotherapy in ovarian cancer patients who received at least two prior
platinum based treatment regimens. The additional cohort of 8 patients received
the ProLindac batch made by an improved scalable process, which will be used on
a larger scale for future clinical and commercial supplies. None of the 8
patients experienced any acute significant adverse events, while treatment had
the same beneficial pharmacodynamic effect seen in the first 26 patients treated
with the former ProLindac production batch; clinically relevant sustained
biomarker decrease (responses by Rustin's criteria) and disease stabilization
were seen in several patients. The overall results of our Phase 1/2 exploratory
single agent ProLindac study have helped define multiple safe dosing regimens,
while the level of patient cohort accrued in the study antitumor activity was as
expected in this very heavily pretreated patient cohort.
On
December 15, 2009, we announced the appointment of Frank Jacobucci to the
position of Vice President, Sales and Marketing. Mr. Jacobucci will be primarily
responsible for our marketing launch of MuGard.
On
October 6, 2009, we announced that we signed an agreement with iMedicor for the
North American launch of MuGard. iMedicor’s highly targeted Alerts System
application would introduce MuGard by the end 2009 to the 216,000 selected
physicians in the Unites States.
40
On
September 11, 2009, we announced the appointment of Accupac, Inc. as our U.S.
manufacturer for MuGard.
On August
3, 2009, we announced that we commenced a new clinical study of ProLindac in
France. The study examined dose levels and regimens of ProLindac monotherapy in
cancer patients, provided additional data to support design of combinations
studies, and extend the safety database.
On July
29, 2009, we announced that we are evaluating strategic options for the
commercialization of MuGard in North America.
On July
23, 2009, we announced that our European partner, SpePharm, is collecting data
from a post approval study of MuGard in head and neck cancer patients undergoing
radiation treatment in the UK showing prevention of oral mucositis. In a
multi-center study expected to enroll a total of 280 patients, patients are
being provided with seven weeks of MuGard therapy, and begin using MuGard one
week prior to radiation treatment and then throughout the subsequent six weeks
of planned therapy. The first 140 patients being treated in this assessment
study have been enrolled and treated, and as of the time of the update, none of
these patients experienced any oral mucositis.
On July
7, 2009, we announced new preclinical data demonstrating that thiarabine shows
remarkable efficacy in the prevention and treatment of rheumatoid arthritis
(RA). In a well-established animal model for RA, an exceptional restoration of
joint structure was observed in the studies, which were conducted at Wayne State
University School of Medicine and at Southern Research Institute.
On June
17, 2009, we announced that we signed evaluation agreements with two
biopharmaceutical companies for our Cobalamin™ Oral Drug Delivery Technology.
Under the terms of the agreements, both companies plan to evaluate our oral
insulin product in preclinical models as a prerequisite to entering licensing
discussions.
On
February 25, 2009, we closed our previously announced acquisition of MacroChem
Corporation.
We were
incorporated in Wyoming in 1974 as Chemex Corporation, and in 1983 we changed
our name to Chemex Pharmaceuticals, Inc. We changed our state of incorporation
from Wyoming to Delaware on June 30, 1989. In 1996 we merged with Access
Pharmaceuticals, Inc., a private Texas corporation, and changed our name to
Access Pharmaceuticals, Inc. Our principal executive office is located at 2600
Stemmons Freeway, Suite 176, Dallas, Texas 75207; our telephone number is (214)
905-5100.
Patents
We
believe that the value of technology both to us and to our potential corporate
partners is established and enhanced by our broad intellectual property
positions. Consequently, we have already been issued and seek to obtain
additional U.S. and foreign patent protection for products under development and
for new discoveries. Patent applications are filed with the U.S. Patent and
Trademark Office and, when appropriate, with the Paris Convention's Patent
Cooperation Treaty (PCT) Countries (most major countries in Western Europe and
the Far East) for our inventions and prospective products.
Two U.S.
patents have issued and two European patent applications are under review for
our mucoadhesive liquid technology. Our patent applications cover a range of
products utilizing our mucoadhesive liquid technology for the management of the
various phases of mucositis.
Three
U.S. patents and two European patents were issued and one U.S. patent and two
European patent applications are pending for polymer platinum compounds. The two
patents and patent applications are the result in part of our collaboration with
The School of Pharmacy, University of London, from which the technology has been
licensed and include a synthetic polymer, hydroxypropylmethacrylamide
incorporating platinates, that can be used to exploit enhanced permeability and
retention in tumors and control drug release. The patents and patent
applications include a pharmaceutical composition for use in tumor treatment
comprising a polymer-platinum compound through linkages that are designed to be
cleaved under selected conditions to yield a platinum which is selectively
released at a tumor site. The patents and patent applications also include
methods for improving the pharmaceutical properties of platinum
compounds.
41
Thiarabine
is subject to two process patents that expire in 2018, one use patent that
expires in 2019, as well as patent applications that provide additional
protection to the manufacturing process and use.
We have
two patented Cobalamin-mediated targeted therapeutic technologies:
-
|
the
use of vitamin B12 to target the transcobalamin II receptor which is
upregulated in numerous diseases including cancer, rheumatoid arthritis,
certain neurological and autoimmune disorders with two U.S. patents and
three U.S. and four European patent applications;
and
|
-
|
oral
delivery of a wide variety of molecules which cannot otherwise be orally
administered, utilizing the active transport mechanism which transports
vitamin B12 into the systemic circulation with six U.S. patents and two
European patents and one U.S. and one European patent
application.
|
We also
have intellectual property in connection with the use of another B vitamin,
folic acid, for targeting of polymer therapeutics. Enhanced tumor delivery is
achieved by targeting folate receptors, which are upregulated in certain tumor
types. We have two U.S. and two European patent applications related to folate
polymer therapeutics.
Our
patents for the following technologies expire in the years and during the date
ranges indicated below:
·
|
Mucoadhesive
technology in 2021,
|
·
|
ProLindac™
in 2021,
|
·
|
Thiarabine
in 2018, and
|
·
|
Cobalamin
mediated technology between 2010 and
2019
|
In
addition to issued patents, we have a number of pending patent applications. If
issued, the patents underlying theses applications could extend the patent life
of our technologies beyond the dates listed above.
We have a
strategy of maintaining an ongoing line of patent continuation applications for
each major category of patentable carrier and delivery technology. By this
approach, we are extending the intellectual property protection of our basic
targeting technology and initial agents to cover additional specific carriers
and agents, some of which are anticipated to carry the priority dates of the
original applications.
Government
Regulation
We are
subject to extensive regulation by the federal government, principally by the
FDA, and, to a lesser extent, by other federal and state agencies as well as
comparable agencies in foreign countries where registration of products will be
pursued. Although a number of our formulations incorporate extensively tested
drug substances, because the resulting formulations make claims of enhanced
efficacy and/or improved side effect profiles, they are expected to be
classified as new drugs by the FDA.
The
Federal Food, Drug and Cosmetic Act and other federal, state and foreign
statutes and regulations govern the testing, manufacturing, safety, labeling,
storage, shipping and record keeping of our products. The FDA has the authority
to approve or not approve new drug applications and inspect research, clinical
and manufacturing records and facilities.
42
Among the
requirements for drug approval and testing is that the prospective
manufacturer's facilities and methods conform to the FDA's Code of Good
Manufacturing Practices regulations, which establishes the minimum requirements
for methods to be used in, and the facilities or controls to be used during, the
production process. Such facilities are subject to ongoing FDA inspection to
insure compliance.
The steps
required before a pharmaceutical product may be produced and marketed in the
U.S. include preclinical tests, the filing of an IND with the FDA, which must
become effective pursuant to FDA regulations before human clinical trials may
commence, numerous phases of clinical testing and the FDA approval of a New Drug
Application (NDA) prior to commercial sale.
Preclinical
tests are conducted in the laboratory, usually involving animals, to evaluate
the safety and efficacy of the potential product. The results of preclinical
tests are submitted as part of the IND application and are fully reviewed by the
FDA prior to granting the sponsor permission to commence clinical trials in
humans. All trials are conducted under International Conference on Harmonization
(ICH), good clinical practice guidelines. All investigator sites and sponsor
facilities are subject to FDA inspection to insure compliance. Clinical trials
typically involve a three-phase process. Phase 1 the initial clinical
evaluations, consists of administering the drug and testing for safety and
tolerated dosages and in some indications such as cancer and HIV, as preliminary
evidence of efficacy in humans. Phase 2 involves a study to evaluate the
effectiveness of the drug for a particular indication and to determine optimal
dosage and dose interval and to identify possible adverse side effects and risks
in a larger patient group. When a product is found safe, an initial efficacy is
established in Phase 2, it is then evaluated in Phase 3 clinical trials. Phase 3
trials consist of expanded multi-location testing for efficacy and safety to
evaluate the overall benefit to risk index of the investigational drug in
relationship to the disease treated. The results of preclinical and human
clinical testing are submitted to the FDA in the form of an NDA for approval to
commence commercial sales.
The
process of forming the requisite testing, data collection, analysis and
compilation of an IND and an NDA is labor intensive and costly and may take a
protracted time period. In some cases, tests may have to be redone or new tests
instituted to comply with FDA requests. Review by the FDA may also take
considerable time and there is no guarantee that an NDA will be approved.
Therefore, we cannot estimate with any certainty the length of the approval
cycle.
We are
also governed by other federal, state and local laws of general applicability,
such as laws regulating working conditions, employment practices, as well as
environmental protection.
Competition
The
pharmaceutical and biotechnology industry is characterized by intense
competition, rapid product development and technological change. Competition is
intense among manufacturers of prescription pharmaceuticals and other product
areas where we may develop and market products in the future. Most of our
potential competitors are large, well established pharmaceutical, chemical or
healthcare companies with considerably greater financial, marketing, sales and
technical resources than are available to us. Additionally, many of our
potential competitors have research and development capabilities that may allow
such competitors to develop new or improved products that may compete with our
product lines. Our potential products could be rendered obsolete or made
uneconomical by the development of new products to treat the conditions to be
addressed by our developments, technological advances affecting the cost of
production, or marketing or pricing actions by one or more of our potential
competitors. Our business, financial condition and results of operation could be
materially adversely affected by any one or more of such developments. We cannot
assure you that we will be able to compete successfully against current or
future competitors or that competition will not have a material adverse effect
on our business, financial condition and results of operations. Academic
institutions, governmental agencies and other public and private research
organizations are also conducting research activities and seeking patent
protection and may commercialize products on their own or with the assistance of
major health care companies in areas where we are developing product candidates.
We are aware of certain development projects for products to treat or prevent
certain diseases targeted by us, the existence of these potential products or
other products or treatments of which we are not aware, or products or
treatments that may be developed in the future, may adversely affect the
marketability of products developed by us.
43
In the
area of advanced drug delivery, which is the focus of our early stage research
and development activities, a number of companies are developing or evaluating
enhanced drug delivery systems. We expect that technological developments will
occur at a rapid rate and that competition is likely to intensify as various
alternative delivery system technologies achieve similar if not identical
advantages.
Even if
our products are fully developed and receive required regulatory approval, of
which there can be no assurance, we believe that our products can only compete
successfully if marketed by a company having expertise and a strong presence in
the therapeutic area. Consequently, we do not currently plan to establish an
internal marketing organization. By forming strategic alliances with major and
regional pharmaceutical companies, management believes that our development
risks should be minimized and that the technology potentially could be more
rapidly developed and successfully introduced into the marketplace.
Amgen
Inc., Carrington Laboratories Inc., CuraGen Corporation, Cytogen Corporation,
Endo Pharmaceuticals, MGI Pharma Inc., Nuvelo, Inc. and OSI Pharmaceuticals Inc.
are developing products to treat mucositis that may compete with our
mucoadhesive liquid technology.
The
following products may compete with polymer platinate:
•
Cisplatin, marketed by Bristol-Myers Squibb, the originator of the drug, and
several generic manufacturers;
•
Carboplatin, marketed by Bristol-Myers Squibb in the US; and several generic
manufacturers, and
•
Oxaliplatin, marketed exclusively by Sanofi-Aventis.
The
following companies are working on therapies and formulations that may be
competitive with our polymer platinate:
• Antigenics
and Regulon are developing liposomal platinum formulations;
• Poniard
Pharmaceuticals and Cell Therapeutics are developing both i.v. and oral platinum
formulations;
• Nanocarrier
and Debio are developing micellar nanoparticle platinum formulations;
and
• American
Pharmaceutical Partners, Cell Therapeutics, Daiichi, SynDevRx, and Enzon are
developing alternate drugs in combination with polymers and other drug
delivery systems.
Thiarabine’s
competitors are Eli Lilly and Company, Bayer Healthcare, Cyclacel, Ltd.,
SciClone Pharmaceuticals and Genzyme.
Companies
working on therapies and formulations that may be competitive with our vitamin
mediated drug delivery system are Bristol-Myers Squibb, Centocor (acquired by
Johnson & Johnson), Endocyte, GlaxoSmithKline, Imclone and Xoma which are
developing targeted monoclonal antibody therapy.
BioDelivery
Sciences International, Biocon Limited, Biodel, Inc. Biovail Corporation, ,
Diasome Pharmaceuticals, , Depomed Inc., Emisphere Technologies, Inc., Eurand,
Flamel Technologies, Merrion Pharmaceuticals, OraMed and Xenoport are
developing products which compete with our oral drug delivery
system.
Many of
these competitors have greater financial and other resources, including larger
research and development, marketing and manufacturing organizations. As a
result, our competitors may successfully develop technologies and drugs that are
more effective or less costly than any that we are developing or which would
render our technology and future products obsolete and
noncompetitive.
In
addition, some of our competitors have greater experience than we do in
conducting preclinical and clinical trials and obtaining FDA and other
regulatory approvals. Accordingly, our competitors may succeed in obtaining FDA
or other regulatory approvals for drug candidates more rapidly than we do.
Companies that complete clinical trials, obtain required regulatory agency
approvals and commence commercial sale of their drugs before their competitors
may achieve a significant competitive advantage. Drugs resulting from our
research and development efforts or from our joint efforts with collaborative
partners therefore may not be commercially competitive with our competitors'
existing products or products under development.
44
Suppliers
Some
materials used by us are specialized. We obtain materials from several suppliers
based in different countries around the world. If materials are unavailable from
one supplier we generally have alternate suppliers available.
Employees
As of
April 9, 2010, we had eleven full time employees, four of whom have advanced
scientific degrees. We have never experienced employment-related work stoppages
and consider that we maintain good relations with our personnel. In addition, to
complement our internal expertise, we have contracts with scientific
consultants, contract research organizations and university research
laboratories that specialize in various aspects of drug development including
clinical development, regulatory affairs, toxicology, process scale-up and
preclinical testing.
Web
Availability
We make
available free of charge through our website, www.accesspharma.com, our annual
reports on Form 10-K and other reports that we file with the Securities and
Exchange Commission as well as certain of our corporate governance policies,
including the charters for the Board of Directors’ audit, compensation and
nominating and corporate governance committees and our code of ethics, corporate
governance guidelines and whistleblower policy. We will also provide to any
person without charge, upon request, a copy of any of the foregoing materials.
Any such request must be made in writing to us at: Access Pharmaceuticals, Inc.,
2600 Stemmons Freeway, Suite 176, Dallas, TX 75207 attn: Investor
Relations.
DESCRIPTION
OF PROPERTY
We
maintain one facility of approximately 9,000 square feet for administrative
offices and laboratories in Dallas, Texas. We have a lease agreement for the
facility, which terminates in December 2010. Adjacent space may be available for
expansion which we believe would accommodate growth for the foreseeable
future.
We believe that our existing properties are suitable for
the conduct of our business and adequate to meet our present needs.
45
DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The
following table sets forth the Directors, Executive Officers, and Key Employees
of Access along with their respective ages and positions and is as
follows:
Name
|
Age
|
Title
|
||
Steven
H. Rouhandeh
|
53
|
Chairman
of the Board*
|
||
Jeffrey
B. Davis
|
47
|
Chief
Executive Officer, Director*
|
||
Esteban
Cvitkovic, M.D.
|
60
|
Vice
Chairman – Europe
|
||
Mark
J. Ahn, Ph.D.
|
47
|
Director
|
||
Mark
J. Alvino
|
41
|
Director
|
||
Stephen
B. Howell, M.D.
|
65
|
Director
|
||
David
P. Nowotnik, Ph.D.
|
61
|
Senior
Vice President Research & Development
|
||
Frank
A. Jacobucci
|
48
|
Vice
President, Sales and Marketing
|
||
Phillip
S. Wise
|
51
|
Vice
President, Business Development & Strategy
|
||
Stephen
B. Thompson
|
56
|
Vice
President, Chief Financial Officer, Treasurer,
|
||
Secretary
|
|
*
|
Appointed
to the board of directors by SCO Capital Partners LLC (“SCO”) pursuant to
a Director Designation Agreement between SCO and
Access.
|
None of
our directors, officers, affiliates or promoters has, within the past five
years, filed any bankruptcy petition, been convicted in or been the subject of
any pending criminal proceedings, or is any such person the subject or any
order, judgment or decree involving the violation of any state or federal
securities laws.
The
following is a brief account of the business experience during the past five
years of each of our directors and executive officers, including principal
occupations and employment during that period and the name and principal
business of any corporation or other organization in which such occupation and
employment were carried on.
Mr. Steven H. Rouhandeh
became a director and Chairman of the Board on March 4, 2008. He is a Chief Investment Officer
of SCO Capital Partners, L.P., a New York based life sciences fund. Mr.
Rouhandeh also is a founder of SCO Financial Group LLC, a highly successful
value-oriented healthcare group with an 12-year track record in this sector
(advisory, research, banking and investing). He possesses a diverse
background in financial services that includes experience in asset management,
corporate finance, investment banking and law. He has been active
throughout recent years as an executive in venture capital and as a founder of
several companies in the biotech field. His experience also includes
positions as Managing Director of a private equity group at Metzler Bank, a
private European investment firm and Vice President, Investment Banking at
Deutsche Morgan Grenfell. Mr. Rouhandeh was also a corporate attorney at
New York City-based Cravath, Swaine & Moore. Mr. Rouhandeh holds a J.D.,
from Harvard Law School, Harvard University and B.A. Government, Economics, from
Southern Illinois University.
Mr. Jeffrey B. Davis became a
director in March 2006. Mr. Davis became our Chief Executive Officer on December
26, 2007. Previously, Mr. Davis was Chairman of the Board and Chairman of the
Compensation Committee of the Board. Mr. Davis currently serves as President of
SCO Financial Group LLC and has been employed by SCO since 1997. Previously, Mr.
Davis served in senior management at a publicly traded healthcare technology
company. Prior to that, Mr. Davis was an investment banker with various Deutsche
Bank banking organizations, both in the U.S. and Europe. Mr. Davis also served
in senior marketing and product management positions at AT&T Bell
Laboratories, where he was also a member of the technical staff, and at Philips
Medical Systems North America. Mr. Davis is currently on the board of
Uluru, Inc., a public biotechnology company. Mr. Davis holds a B.S. in
biomedical engineering from Boston University and an M.B.A. degree from the
Wharton School, University of Pennsylvania.
46
Dr. Esteban Cvitkovic became
our director in February 2007 as Vice Chairman (Europe) and is also a consultant
to us as Senior Director, Oncology Clinical Research & Development.
Recently, Dr. Cvitkovic co-founded the new contract research organization (CRO),
Oncology Therapeutic Development. The oncology-focused CRO, Cvitkovic &
Associés Consultants (CAC), founded by Dr. Cvitkovic 11 years ago and which he
developed from a small oncology consultancy to a full-service CRO, was sold to
AAIPharma to become AAIOncology in 2007. In addition, he maintains a part-time
academic practice including teaching at the hospitals Beaujon and St. Louis in
Paris. Dr. Cvitkovic is Scientific President of the FNAB, a foundation devoted
to the furthering of personalized cancer treatments. Together with a small
number of collaborators, he has recently co-founded Oncoethix, a biotech company
focused on licensing and co-development of anti-cancer molecules. Dr. Cvitkovic
has authored more than 200 peer-reviewed articles and 600 abstracts focused on
therapeutic oncology development. His international career includes staff and
academic appointments at Memorial Sloan Kettering Cancer Center (New York),
Columbia Presbyterian (New York), Instituto Mario Negri (Milan), Institut
Gustave Roussy (Villejuif), Hôpital Paul Brousse (Villejuif) and Hôpital St.
Louis (Paris).
Mark J. Ahn, Ph. D. became a
director in September 2006 and is chairman of the Compensation Committee. Dr.
Ahn is also a member of the Audit and Finance Committee and the Nominating &
Corporate Governance Committee. Dr. Ahn is Principal at Pukana Partners, Ltd.
since 2009. Dr. Ahn was Professor and Chair, Science & Technology Faculties
of Commerce & Administration Science at Victoria University of Wellington,
New Zealand from 2007 to 2009. Dr. Ahn was President and Chief Executive Officer
and a member of the board of directors of Hana Biosciences, Inc. from 2003 to
2007. Prior to joining Hana, from 2001 to 2003, he served as Vice President,
Hematology and corporate officer at Genentech, Inc. where he was responsible for
commercial and clinical development of the Hematology franchise. From 1991 to
2001, Dr. Ahn was employed by Amgen and Bristol-Myers Squibb Company holding a
series of positions of increasing responsibility in strategy, general
management, sales & marketing, business development, and finance. He has
also served as an officer in the U.S. Army. Dr. Ahn is a Henry Crown Fellow at
the Aspen Institute, founder of the Center for Non-Profit Leadership, a director
of TransMolecular, Inc., a privately held biotechnology company focused on
neuroncology, and a member of the Board of Trustees for the MEDUNSA (Medical
University of South Africa) Trust. Dr. Ahn received a B.A. in History and an
M.B.A. in Finance from Chaminade University. He was a graduate fellow in
Economics at Essex University, and has a Ph.D. in Business Administration from
the University of South Australia.
Mr. Mark J. Alvino became a
director in March 2006 initially as a designee of SCO Capital Partners LLC and
is chairman of the Audit and Finance Committee. Mr. Alvino is also a member of
the Nominating and Corporate Governance Committee. Mr. Alvino is currently
Managing Director for Griffin Securities and has been in this position since
2007. Mr. Alvino was Managing Director for SCO Financial Group LLC from 2002 to
2007. Mr. Alvino was a member of the board of directors of MacroChem Corporation
from 2007 until February 2009. He previously worked at Feinstein Kean
Healthcare, an Ogilvy Public Relations Worldwide Company. There he was Senior
Vice President, responsible for managing both investor and corporate
communications programs for many private and public companies and acted as
senior counsel throughout the agency's network of offices. Prior to working at
FKH, Mr. Alvino served as Vice President of Investor Relations and managed the
New York Office of Allen & Caron, Inc., an investor relations agency. His
base of clients included medical devices, biotechnology, and e-healthcare
companies. Mr. Alvino also spent several years working with Wall Street
brokerages including Ladenburg, Thallman & Co. and Martin Simpson &
Co.
Stephen B. Howell, M.D. has
served as our director since 1996. Dr. Howell is a member of the Compensation
Committee of the Board. Dr. Howell is a Professor of Medicine at the University
of California, San Diego, and director of the Cancer Pharmacology Program of the
UCSD Cancer Center. Dr. Howell is a recipient of the Milken Foundation prize for
his contributions to the field of cancer chemotherapy. He has served on the
National Research Council of the American Cancer Society and is on the editorial
boards of multiple medical journals. Dr. Howell founded DepoTech, Inc. and
served as a member of its board of directors from 1989 to 1999. Dr. Howell
served on the board of directors of Matrix Pharmaceuticals from 2000 to 2002.
Dr. Howell received his A.B. at the University of Chicago and his M.D. from
Harvard Medical School.
47
David P. Nowotnik, Ph.D. has
been Senior Vice President Research and Development since January 2003 and was
Vice President Research and Development from 1998. From 1994 until 1998, Dr.
Nowotnik had been with Guilford Pharmaceuticals, Inc. in the position of Senior
Director, Product Development and was responsible for a team of scientists
developing polymeric controlled-release drug delivery systems. From 1988 to 1994
he was with Bristol-Myers Squibb researching and developing technetium
radiopharmaceuticals and MRI contrast agents. From 1977 to 1988 he was with
Amersham International leading the project which resulted in the discovery and
development of Ceretec.
Mr. Frank A. Jacobucci has
been our Vice President Sales and Marketing since December 2009. Mr. Jacobucci
was President and COO of Milestone Biosciences, LLC from 2007 to 2009. He was
Vice President Sales/Marketing of Claims Resolution Center Oncology Services in
2007, Area Sales Manager-Eastern Seaboard of Precision Therapeutics, Inc. from
2006-2007 and Sales Trainer/Field Sales Advisor/Senior Sales Executive of MGI
Pharma from 2003 to 2006. Mr. Jacobucci has had manager positions with
increasing responsibilities from 1990 to 2003 with various other pharmaceutical
and other companies. He holds a B.S. degree from University of Nevada , Las
Vegas.
Mr. Phillip S. Wise has been
Access’ Vice President Business Development since June 2006. Mr. Wise was Vice
President of Commercial and Business Development for Enhance Pharmaceuticals,
Inc. and Ardent Pharmaceuticals, Inc. from 2000 until 2006. Prior to that time
he was with Glaxo Wellcome, from 1990 to 2000 in various
capacities.
Mr. Stephen B. Thompson has
been our Vice President since 2000 and our Chief Financial Officer since 1996.
From 1990 to 1996, he was Controller and Administration Manager of Access
Pharmaceuticals, Inc., a private Texas corporation. Previously, from 1989 to
1990, Mr. Thompson was Controller of Robert E. Woolley, Inc., a hotel real
estate company where he was responsible for accounting, finances and investor
relations. From 1985 to 1989, he was Controller of OKC Limited Partnership, an
oil and gas company, where he was responsible for accounting, finances and SEC
reporting. Between 1975 and 1985 he held various accounting and finance
positions with Santa Fe International Corporation.
Committees
of the Board of Directors
Our Board
established an Audit and Finance Committee, a Compensation Committee and a
Nominating and Corporate Governance Committee. Each of the committees of the
Board acts pursuant to a separate written charter adopted by the
Board.
The Audit
and Finance Committee is currently comprised of Mr. Mark J. Alvino (chairman)
and Dr. Mark J. Ahn. The Board has determined that Mr. Alvino, the chairman of
the Audit and Finance Committee, and Dr. Ahn are “audit committee financial
experts,” under applicable SEC rules and regulations. David P. Luci, a former
director, was chairman of the Audit and Finance Committee during 2009. The Audit
and Finance Committee’s responsibilities and duties are among other things to
engage the independent auditors, review the audit fees, supervise matters
relating to audit functions and review and set internal policies and procedure
regarding audits, accounting and other financial controls.
The
Compensation Committee is currently comprised of Dr. Mark J. Ahn (chairman) and
Dr. Stephen B. Howell. Dr. Ahn and Dr. Howell are non-employee directors under
applicable SEC rules, and are “outside” directors under Internal Revenue Code
Section 162(m). Dr. Ahn and Dr. Howell are independent under applicable NYSE
Amex rules and regulations. Mr. Luci and Dr. Howell were members of the
Compensation Committee during 2009.
The
Nominating and Corporate Governance Committee is currently comprised of Dr. Mark
J. Ahn and Mark J. Alvino. All committee members are independent under
applicable NYSE Amex rules and regulations. The Nominating and Corporate
Governance Committee is responsible for, among other things, considering
potential Board members, making recommendations to the full Board as to nominees
for election to the Board, assessing the effectiveness of the Board and
implementing our corporate governance guidelines.
Code
of Business Conduct and Ethics
48
In
October 2004, Access adopted a written Code of Business Conduct and Ethics for
Employees, Executive Officers and Directors, applicable to all employees,
management, and directors, designed to deter wrongdoing and promote honest and
ethical conduct, full, fair and accurate disclosure, compliance with laws,
prompt internal reporting and accountability to adherence to the Code of
Business Conduct and Ethics.
EXECUTIVE
COMPENSATION
The
following table sets forth the aggregate compensation paid to our CEO and our
next two most highly paid executive officers whose aggregate salary and bonus
exceeded $100,000 for services rendered in all capacities for the fiscal years
ended December 31, 2009 and 2008.
Summary
Compensation Table
Name and Principal Position
|
Year
|
Salary ($)
(1)
|
Option
Awards ($)
(2)
|
All Other
Compensation (3)
|
Total ($)
|
|||||||||||||||
Jeffrey
B. Davis
Chief
Executive Officer
|
2009
2008
|
$
|
170,000
266,076
|
$
|
-
-
|
$
|
-
-
|
$
|
170,000 266,076 | |||||||||||
David
P. Nowotnik, Ph.D.
Senior
Vice President Research
and
Development
|
2009
2008
|
$
|
175,675
253,620
|
$
|
87,117
136,977
|
$
|
6,307
12,225
|
$
|
269,099 402,822 | |||||||||||
Phillip
S. Wise
Vice
President, Business
Development
|
2009
2008
|
$
|
200,000
200,000
|
$
|
-
136,977
|
$
|
5,209
9,876
|
$
|
205,209
346,853
|
|||||||||||
____________________
(1)
|
Includes
amounts deferred under our 401(k)
Plan.
|
(2)
|
The
value listed in the above table represents the fair value of the options
granted in prior years that was recognized in 2009 and 2008 under ASC 718.
Fair value is calculated as of the grant date using a Black-Scholes
option-pricing model. The determination of the fair value of share-based
payment awards made on the date of grant is affected by our stock price as
well as assumptions regarding a number of complex and subjective
variables. Our assumptions in determining fair value are described in note
11 to our audited financial statements for the year ended December 31,
2009, included in our Annual Report on Form
10-K.
|
(3)
|
Amounts
reported for fiscal years 2009 and 2008 consist of: (i) amounts we
contributed to our 401(k) Plan with respect to each named individual, and
(ii) amounts we paid for group term life insurance for each named
individual.
|
Outstanding
Equity Awards at Fiscal Year-End
The
following table summarizes the aggregate number of option awards held by our
named executive officers at December 31, 2009. There were no outstanding stock
awards held by any such officers at December 31, 2009:
Name
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
Equity
Incentive
Plan
Awards:
Number
of
Securities
Underlying
Unexercised
Unearned
Options
(#)
|
Option
Exercise
Price
($)(1)
|
Option
Expiration
Date
|
Jeffrey
B. Davis (2)
|
25,000
|
-
|
-
|
0.63
|
08/17/16
|
49
David
P. Nowotnik, Ph.D. (3)
|
75,000
19,791
100,000
8,000
5,000
7,000
10,000
|
-
30,209
-
-
-
-
-
|
-
|
1.38
3.00
0.63
11.60
29.25
10.10
18.65
|
05/27/19
05/21/18
08/17/16
05/23/15
01/23/14
01/30/13
03/22/12
|
Phillip
S. Wise (4)
|
19,791
100,000
|
30,209
-
|
-
|
3.00
0.63
|
05/21/18
08/17/16
|
____________________
(1)
|
On
December 31, 2009, the closing price of our Common Stock as quoted on the
OTC Bulletin Board was $3.29.
|
(2)
|
Jeffrey
B. Davis’ employment agreement started January 4, 2008. The options
included in this table were granted to him as a director before he became
CEO. Mr. Davis does not have any stock options granted to him as
CEO.
|
(3)
|
Dr.
Nowotnik’s options to purchase 50,000 shares of common stock will be fully
vested in April 2012.
|
(4)
|
Mr.
Wise’s options to purchase 50,000 shares of common stock will be fully
vested in April 2012.
|
Compensation
Pursuant to Agreements and Plans
Employment
Agreements
President and Chief
Executive Officer
We are a
party to an employment agreement, with Jeffrey B. Davis, who was named by the
Board as our Chief Executive Officer, effective as of December 26, 2007. Mr.
Davis’ employment agreement, dated January 4, 2008, was amended April 9, 2008.
Pursuant to the terms of his employment agreement, Mr. Davis was paid an annual
salary of $335,000 from January 4, 2008, through March 31, 2008, and is
currently paid an annual salary of $240,000. From June 1, 2009 through December
31, 2009, Mr. Davis was paid an annual salary of $120,000, with the unpaid
amount deferred. Mr. Davis does not currently have any stock options resulting
from his employment with us. Mr. Davis was previously awarded stock options to
purchase 600,000 shares of our Common Stock. However, as of January 4, 2008, and
pursuant to the amended employment agreement, Mr. Davis agreed to forgo any
stock options awarded under the terms of the original employment agreement. Mr.
Davis is entitled to similar employee benefits as Access’ other executive
officers.
Senior Vice
President
We entered into to an employment
agreement with David P. Nowotnik, Ph.D., our Senior Vice President,
Research and Development, on February 1, 2010. Under this agreement, Dr.
Nowotnik is entitled to receive an annual base salary of $290,000, subject to
adjustment by the Board. Dr. Nowotnik is also entitled to receive:
·
|
a
bonus payable in cash related to the attainment of reasonable performance
goals specified by the Board;
|
·
|
options
to purchase 200,000 shares of our Common Stock at an exercise price of
$2.79 per share, with one third options vesting on February 1, 2011 and
the remaining two thirds options vesting ratably on February 1, 2012 and
February 1, 2013;
|
·
|
stock
options issued from time to time at the discretion of the
Board;
|
·
|
disability
benefits up to six months; and
|
·
|
medical
insurance, term life insurance of $250,000 and long-term disability
insurance.
|
Our
agreement with Dr. Nowotnik allows for severance pay to be paid on Dr.
Nowtonik’s termination for change of control, significant adverse change in the
nature or scope of his duties, a merger, consolidation or reorganization. Dr.
Nowotnik would receive one and a half times his salary for a period of six
months and healthcare coverage for twelve months.
50
We were a
party to an employment agreement with Dr. Nowotnik, until May 31, 2009. Under
this agreement, Dr. Nowotnik was entitled to receive an annual base salary of
$253,620, subject to adjustment by the Board. Dr. Nowotnik was eligible to
participate in all of our employee benefit programs available to executives. Dr.
Nowotnik was also eligible to receive:
·
|
a
bonus payable in cash and Common Stock related to the attainment of
reasonable performance goals specified by the
Board;
|
·
|
stock
options at the discretion of the
Board;
|
·
|
long-term
disability insurance to provide compensation equal to at least $60,000
annually; and
|
·
|
term
life insurance coverage of $254,000.
|
On May
31, 2009 and until February 1, 2010, Dr. Nowotnik was a party in a Transition
Service Agreement with us pursuant to which his current salary was $10,000 per
month. He was also granted options to purchase 75,000 shares of common stock at
$1.38, of which all options are now vested. The transition services agreement
continued a provision for Dr. Nowotnik’s healthcare coverage.
Compensation
of Directors
Director
Compensation Table - 2009
The table
below represents the compensation paid to our outside directors during the year
ended December 31, 2009:
Name
|
Fees
earned or
Paid
in Cash ($)
|
Stock
Awards ($)
|
Option
Awards
($)(1)
|
All
Other
Compensation
($)
|
Total
($)
|
Mark
J. Ahn, PhD (2)
|
-
|
-
|
40,000
|
-
|
40,000
|
Mark
J. Alvino (3)
|
-
|
-
|
40,000
|
-
|
40,000
|
Esteban
Cvitkovic, MD (4)
|
-
|
-
|
115,000
|
132,000
|
247,000
|
Jeffrey
B. Davis (5)
|
-
|
-
|
-
|
-
|
-
|
Stephen
B. Howell, MD (6)
|
-
|
-
|
40,000
|
-
|
40,000
|
David
P. Luci (7)
|
-
|
265,000
|
52,000
|
83,000
|
400,000
|
Steven
H. Rouhandeh (8)
|
-
|
-
|
-
|
-
|
-
|
__________________
|
(1)
|
|
The
value listed represents the fair value of the options recognized as
expense under ASC 718 during 2009, including unvested options granted
before 2009 and those granted in 2009. Fair value is calculated as of the
grant date using a Black-Scholes (“Black-Scholes”) option-pricing model.
The determination of the fair value of share-based payment awards made on
the date of grant is affected by our stock price as well as assumptions
regarding a number of complex and subjective variables. Our assumptions in
determining fair value are described in note 11 to our audited financial
statements for the year ended December 31, 2009, included in our Annual
Report on Form 10-K.
|
(2)
|
Represents
expense recognized in 2009 in respect of options to purchase 35,000 shares
of our Common Stock based on a grant date fair value of $40,000. Dr. Ahn
has options to purchase 66,000 shares of our Common Stock at December 31,
2009.
|
||
(3)
|
Represents
expense recognized in 2009 in respect of options to purchase 35,000 shares
of our Common Stock based on a grant date fair value of $40,000. Mr.
Alvino has options to purchase 66,000 shares of our Common Stock at
December 31, 2009.
|
||
(4)
|
Represents
expense recognized in 2009 in respect of options to purchase 100,000
shares of our Common Stock based on a grant date fair value of $115,000.
Includes $132,000 Dr. Cvitkovic received for scientific consulting
services in 2009. Dr. Cvitkovic has options to purchase 156,000 shares of
our Common Stock and warrants to purchase 200,000 of our Common Stock at
December 31, 2009.
|
||
(5)
|
Mr.
Davis served as our CEO during 2009 and did not receive any compensation
for his services as our director. Mr. Davis’ salary and employment
agreement are discussed in the Summary Compensation Table and Compensation
Pursuant to Agreements and Plans – Employment Agreements – President and
Chief Executive Officer.
|
51
(6)
|
Represents
expense recognized in 2009 in respect of options to purchase 35,000 shares
of our Common Stock based on a grant date fair value of $40,000. Dr.
Howell has options to purchase 79,700 shares of our Common Stock at
December 31, 2009.
|
||
(7)
|
Represents
$265,000 of expense recognized in 2009 for stock awards: (a) in respect to
66,667 shares of Common Stock received on June 1, 2009 based on a fair
value of $181,000 per Mr. Luci’s consulting agreement and (b) in respect
to 60,000 shares of Common Stock received due to the termination of his
employment agreement with MacroChem Corporation based on a fair value of
$84,000. Represents expense recognized in 2009 in respect of options to
purchase 45,000 shares of our Common Stock based on a grant date fair
value of $52,000. Represents $83,000 of expense Mr. Luci received for
business consulting services in 2009. Mr. Luci has options to purchase
76,000 shares of our Common Stock at December 31, 2009. He also has
warrants to purchase 4,167 shares of our Common Stock at December 31,
2009. Mr. Luci resigned as director February 12, 2009.
|
||
(8)
|
Mr.
Rouhandeh does not have any options or warrants outstanding at December
31, 2009. See also the Security Ownership of Certain Beneficial Owners and
Management.
|
Compensation of
Directors
Each
director who is not also an Access employee receives a quarterly fee of $3,000
and also receives $1,000 per quarter in aggregate for all the committees in
which he/she is a member. The Chairman of the Board is paid an additional $1,000
per quarter and the Chairman of each of the Audit and Finance and Compensation
Committee is paid an additional $500 per quarter. Each director will have $2,000
deducted from his or her fee if the director misses more than one Board meeting,
and $1,000 deducted per committee meeting not attended. In addition, Access
reimbursed each director, whether an employee or not, the expenses of attending
Board and committee meetings. Each non-employee director is also entitled to
receive options to purchase 2,500 shares of Common Stock on the date of each
annual meeting of stockholders and options to purchase 25,000 shares of Common
Stock when he/she is first appointed as a director. The Board granted options to
purchase 6,000 shares to each outside director for 2009 instead of the options
to purchase 2,500 shares as has been granted historically.
During
2009 director elected to receive options to purchase 25,000 shares of Common
Stock for their quarterly fees and annual stock grant. For each committee that a
director was a member, he received options to purchase 10,000 shares of Common
Stock.
52
LEGAL
PROCEEDINGS
The
Company is not currently subject to any material pending legal
proceedings.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security
Ownership of Certain Beneficial Owners and Management
Based
solely upon information made available to us, the following table sets forth
certain information with respect to the beneficial ownership of our common stock
and preferred stock as of April 9, 2010 by (i) each person who is known by us to
beneficially own more than five percent of any class of our capital stock; (ii)
each of our directors; (iii) each of our named executive officers; and (iv) all
our executive officers and directors as a group. Beneficial ownership as
reported in the following table has been determined in accordance with Rule
13d-3 under the Securities Exchange Act of 1934, as amended. The address of each
holder listed below, except as otherwise indicated, is c/o Access
Pharmaceuticals, Inc., 2600 Stemmons Freeway, Suite 176, Dallas, Texas
75207.
Name
and Address of Beneficial Owner
|
Amount
and Nature of Beneficial Ownership
Common
Stock
(1)
|
Percent
of
Class
|
Amount
and Nature of Beneficial Ownership
Preferred
Stock
|
Percent
of
Class
|
Amount
and Nature of Beneficial Ownership
All
Classes
of
Stock
|
Percent
of
Class
|
|||
Steven
H. Rouhandeh(2)
|
-
|
*
|
-
|
*
|
-
|
*
|
|||
Jeffery
B. Davis (3)
|
36,000
|
*
|
-
|
*
|
36,000
|
*
|
|||
Mark
J. Ahn, Ph. D. (4)
|
66,000
|
*
|
-
|
*
|
66,000
|
*
|
|||
Mark
J. Alvino (5)
|
66,000
|
*
|
-
|
*
|
66,000
|
*
|
|||
Esteban
Cvitkovic, M.D. (6)
|
356,000
|
2.3%
|
-
|
*
|
356,000
|
1.4%
|
|||
Stephen
B. Howell, M.D. (7)
|
89,422
|
*
|
-
|
*
|
89,422
|
*
|
|||
David
P. Nowotnik, Ph.D. (8)
|
245,436
|
1.6%
|
-
|
*
|
245,436
|
*
|
|||
Phillip
S. Wise (9)
|
119,794
|
*
|
-
|
*
|
119,794
|
*
|
|||
SCO
Capital Partners LLC, SCO Capital Partners LP, and Beach Capital LLC (10)
|
9,535,087
|
44.5%
|
7,077,100
|
71.1%
|
16,612,187
|
52.9%
|
|||
Larry
N. Feinberg (11)
|
1,222,443
|
7.6%
|
1,457,699
|
14.7%
|
2,680,142
|
10.3%
|
|||
Lake
End Capital LLC (12)
|
1,059,601
|
6.6%
|
793,067
|
8.0%
|
1,852,668
|
7.1%
|
|||
All
Directors and Executive
Officers
as a group
(consisting
of 8 persons) (13)
|
978,652
|
6.0%
|
-
|
*
|
978,652
|
3.7%
|
* - Less
than 1%
(1)
|
Includes
our outstanding shares of Common Stock held plus all shares of Common
Stock issuable upon exercise of options, warrants and other rights
exercisable within 60 days of April 9,
2010.
|
(2)
|
Steven
H. Rouhandeh is Chairman of SCO Securities LLC, a wholly-owned subsidiary
of SCO Financial Group LLC. His address is c/o SCO Capital Partners LLC,
1325 Avenue of the Americas, 27th Floor, New York, NY 10019. SCO
Securities LLC and affiliates (SCO Capital Partners LP and Beach Capital
LLC) are known to beneficially own an aggregate of 3,481,800 shares of our
Common Stock, warrants to purchase an aggregate of 6,053,287 shares of our
Common Stock and 7,077,100 shares of Common Stock issuable upon conversion
of Series A Cumulative Convertible Preferred Stock. Mr. Rouhandeh
disclaims beneficial ownership of all such shares except to the extent of
his pecuniary interest therein.
|
(3)
|
Mr.
Davis is known to beneficially own an aggregate of 7,333 shares of our
Common Stock, presently exercisable options for the purchase of 25,000
shares of our Common Stock pursuant to the 2005 Equity Incentive Plan and
3,667 shares of Common Stock underlying warrants held by Mr. Davis. Mr.
Davis is President of SCO Securities LLC, a wholly-owned subsidiary of SCO
Financial Group LLC. His address is c/o SCO Capital Partners LLC, 1325
Avenue of the Americas, 27th Floor, New York, NY 10019. SCO Securities LLC
and affiliates (SCO Capital Partners LP and Beach Capital LLC) are known
to beneficially own 3,481,800 shares of our Common Stock, warrants to
purchase an aggregate of 6,053,287 shares of our Common Stock and
7,077,100 shares of Common Stock issuable upon conversion of Series A
Cumulative Convertible Preferred Stock. Mr. Davis disclaims beneficial
ownership of all such shares except to the extent of his pecuniary
interest therein.
|
(4)
|
Includes
presently exercisable options for the purchase of 66,000 shares of our
Common Stock pursuant to the 2005 Equity Incentive
Plan.
|
53
(5)
|
Includes
presently exercisable options for the purchase of 66,000 shares of our
Common Stock pursuant to the 2005 Equity Incentive Plan. Mr. Alvino is
Managing Director of Griffin Securities LLC. His address is c/o Griffin
Securities LLC, 17 State St., 3rd
Floor, New York, NY 10004. SCO Securities LLC and affiliates (SCO Capital
Partners LP and Beach Capital LLC) are known to beneficially own 3,481,800
shares of our Common Stock, warrants to purchase an aggregate of 6,053,287
shares of our Common Stock and 7,077,100 shares of Common Stock issuable
upon conversion of Series A Cumulative Convertible Preferred Stock. Mr.
Alvino disclaims beneficial ownership of all such shares except to the
extent of his pecuniary interest
therein.
|
(6)
|
Includes
presently exercisable options for the purchase of 156,000 shares of our
Common Stock pursuant to the 2005 Equity Incentive Plan and a warrant to
purchase 200,000 shares of our Common Stock at an exercise price of $3.15
per share.
|
(7)
|
Dr.
Howell is known to beneficially own an aggregate of 9,722 shares of our
Common Stock, presently exercisable options for the purchase of 67,200
shares of our Common Stock pursuant to the 2005 Equity Incentive Plan and
12,500 shares of our Common Stock pursuant to the 1995 Stock Option
Plan.
|
(8)
|
Dr.
Nowotnik is known to beneficially own an aggregate of 17,516 shares of our
Common Stock, presently exercisable options for the purchase of 197,920
shares of our Common Stock pursuant to the 2005 Equity Incentive Plan and
30,000 shares of our Common Stock pursuant to the 1995 Stock Option
Plan.
|
(9)
|
Includes
presently exercisable options for the purchase of 119,794 shares of our
Common Stock pursuant to the 2005 Equity Incentive
Plan.
|
(10)
|
SCO
Capital Partners LLC, SCO Capital Partner LP, Beach Capital LLC and SCO
Financial Group's address is 1325 Avenue of the Americas, 27th
Floor, New York, NY 10019. SCO Capital Partners LLC and affiliates (SCO
Capital Partners LP, Beach Capital LLC and SCO Financial Group) are known
to beneficially own an aggregate of 3,481,800 shares of our Common Stock,
warrants to purchase an aggregate of 6,053,287 shares of our Common Stock
and 7,077,100 shares of Common Stock issuable upon conversion of Series A
Cumulative Convertible Preferred Stock. Each of Mr. Rouhandeh, Mr. Davis
and Mr. Alvino, directors of Access and Mr. Rouhandeh and Mr. Davis are
executives of SCO Capital Partners LLC and disclaim beneficial ownership
of such shares except to the extent of their pecuniary interest
therein.
|
(11)
|
Larry
N. Feinberg is a partner in Oracle Partners, L.P. His address is c/o
Oracle Partners, L.P., 200 Greenwich Avenue, 3rd
Floor, Greenwich, CT 06830. Oracle Partners, L.P. and affiliates (Oracle
Institutional Partners, L.P., Oracle Investment Management, Inc., Sam
Oracle Fund, Inc. and Mr. Feinberg) are known to beneficially own an
aggregate of 493,593 shares of our Common Stock, warrants to purchase an
aggregate of 728,850 shares of our Common Stock and Series A Cumulative
Convertible Preferred Stock which may be converted into an aggregate of
1,457,699 shares of our Common
Stock.
|
(12)
|
Lake
End Capital LLC’s address is 1325 Avenue of the Americas, 27th
Floor, New York, NY 10019. Lake End Capital LLC is known to beneficially
own an aggregate of 335,575 shares of our Common Stock, warrants to
purchase an aggregate of 724,026 shares of our Common Stock and 793,067
shares of Common Stock issuable to them upon conversion of Series A
Cumulative Convertible Preferred
Stock.
|
(13)
|
Does
not include shares held by SCO Securities LLC and
affiliates.
|
54
TRANSACTIONS
WITH RELATED PERSONS, PROMOTERS AND CERTAIN CONTROL PERSONS
On
occasion we may engage in certain related party transactions. Our policy is that
all related party transactions are reviewed and approved by the Board of
Directors or Audit Committee prior to the Company entering into any related
party transactions.
Dr.
Esteban Cvitkovic, a Director, has served as a consultant and Senior Director,
Oncology Clinical Research & Development, since August 2007. Dr. Cvitkovic
receives payments for consulting expenses, office expenses and reimbursement of
direct expenses. Dr. Cvitkovic also has received the following warrants and
options for his consulting. In May 2009, Dr. Cvitkovic received options to
purchase 75,000 shares of our Common Stock at $1.38 with all options currently
vested and can be exercised until January 4, 2012. In January 2008, Dr.
Cvitkovic received warrants to purchase 200,000 shares of our Common Stock at
$3.15 per share that can be exercised until January 4, 2012. The warrants vest
over two years in 50,000 share blocks with vesting on July 4, 2008, January 4,
2009, July 4, 2009, and the remaining warrants on January 4, 2010. All of the
warrants are currently vested. Dr. Cvitkovic’s payments for consulting services
and expense reimbursements are as follows:
|
Fair
Value
|
|||||||||||||||
of
exercisable
|
||||||||||||||||
Consulting
|
Office
|
Expense
|
Options
/
|
|||||||||||||
Year
|
Fees
|
Expenses
|
Reimbursement
|
Warrants
|
||||||||||||
2009
|
$ | 132,000 | $ | 18,000 | $ | 10,000 | $ | 86,000 |
Mr.
Alvino is a principal of Griffin Securities which maintains a banking
relationship with the Company.
55
Access’
certificate of incorporation authorizes the issuance of 100,000,000 shares of
its common stock, $.01 par value per share, and 2,000,000 shares of preferred
stock, $.01 par value per share, which may be issued in one or more series.
Currently, 4,000 shares of preferred stock are designated as Series A Cumulative
Convertible Preferred Stock and 300,000 are designated as Series A Junior
Participating Preferred Stock. As of April 9, 2010 there were 15,382,755 shares
of Access’ common stock outstanding and held of record by approximately 6,300
stockholders, and there were 2,985.3617 shares of its Series A Cumulative
Convertible Preferred Stock outstanding convertible into 9,951,198 shares of
common stock.
Common
Stock
Holders
of Access’ common stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders and have the right to vote
cumulatively for the election of directors. This means that in the voting at
Access’ annual meeting, each stockholder or his proxy, may multiply the number
of his shares by the number of directors to be elected then cast the resulting
total number of votes for a single nominee, or distribute such votes on the
ballot among the nominees as desired. Holders of Access’ common stock are
entitled to receive ratably such dividends, if any, as may be declared by
Access’ Board of Directors out of funds legally available therefor, subject to
any preferential dividend rights for Access’ outstanding preferred stock. Upon
Access’ liquidation, dissolution or winding up, the holders of Access’ common
stock are entitled to receive ratably Access’ net assets available after the
payment of all debts and other liabilities and subject to the prior rights of
any of Access’ outstanding preferred stock. Holders of Access’ common stock have
no preemptive, subscription, redemption or conversion rights. The
rights, preferences and privileges of holders of Access’ common stock are
subject to, and may be adversely affected by, the rights of the holders of
shares of any series of Access’ preferred stock which Access may designate and
issue in the future.
Preferred
Stock
Access’
Board of Directors is authorized, subject to certain limitations prescribed by
law, without further stockholder approval, to issue from time to time up to an
aggregate of 2,000,000 shares of preferred stock in one or more series and to
fix or alter the designations, preferences, rights and any qualifications,
limitations or restrictions of the shares of each such series thereof, including
the dividend rights, dividend rates, conversion rights, voting rights and terms
of redemption of shares constituting any series or designations of such series.
The issuance of preferred stock may have the effect of delaying, deferring or
preventing a change of control. The fact that Access’ board of
directors has the right to issue preferred stock without stockholder approval
allowed Access to institute a “poison pill” that would work to dilute the stock
ownership of a potential hostile acquirer, effectively preventing acquisitions
that have not been approved by Access’ board of directors.
Access’
Board of Directors has designated 4,000 shares of preferred stock as Series A
Cumulative Convertible Preferred Stock. The shares of Series A
Cumulative Convertible Preferred are convertible at the option of the holder
into shares of our common stock at a conversion price of $3.00 per share of
common stock.
The
Series A Cumulative Convertible Preferred Stock is entitled to a liquidation
preference equal to $10,000 per share and is entitled to a dividend of 6% per
annum, payable semi-annually in cash or if certain conditions are met, in common
stock, at the option of the Company at time of payment. Our ability
to pay dividends in shares of common stock is limited by among other things a
requirement that (i) there is an effective registration statement on the shares
of common stock, issuable to the holders of Series A Cumulative Convertible
Preferred Stock, in the 20 day period immediately prior to such dividend or (ii)
that such shares of common stock referred to in (i) may be sold without
restriction pursuant to Rule 144(k) during the 20 day period immediately
prior to such dividend.
56
The
Company has the right, but not the obligation, to force conversion of all, and
not less than all, of the outstanding Series A Cumulative Convertible Preferred
Stock into common stock (i) as long as the closing price of our common stock
exceeds $7.00 for at least 20 of the 30 consecutive trading days immediately
prior to the conversion and the average daily trading volume is greater than
100,000 shares per day for at least 20 of the 30 consecutive trading days
immediately prior to such conversion, in each case, immediately prior to the
date on which we gives notice of such conversion or (ii) if we close a sale of
common stock in which the aggregate proceeds are equal to or greater than
$10,000,000. Our ability to cause a mandatory conversion is subject
to certain other conditions, including that a registration statement covering
the common stock issuable upon such mandatory conversion is in effect and able
to be used.
The
conversion price of the Series A Cumulative Convertible Preferred Stock is
subject to a price adjustment upon the issuance of additional shares of common
stock for a price below $3.00 per share and equitable adjustment for stock
splits, dividends, combinations, reorganizations and the like.
The
Series A Cumulative Convertible Preferred Stock will vote together with the
common stock on an as-if-converted basis.
Holders
of Series A Cumulative Convertible Preferred Stock are entitled to purchase
their pro rata share of additional stock issuances in certain future
financings.
We are a
party to a Rights Agreement pursuant to which we agree to provide holders of our
common stock with the right to buy shares of preferred stock should a party
acquire or beneficially own more than 15% of our common stock without first
being exempted by us. Such shares of preferred stock will entitle to
the holder to certain voting, dividend and liquidation preferences and is
designed to discourage take-over attempts not previously approved by our Board
of Directors.
Warrants
As of
April 9, 2010, warrants for the issuance of 10,966,565 shares of our common
stock were outstanding, all of which are exercisable at a weighted average
exercise price of $2.85 per share, all of which are exercisable through various
dates expiring between June 9, 2010 and January 26, 2015. Outstanding warrants
to acquire 3,895,047 shares of our common stock include a price protection
mechanisms in which the exercise price of these the warrants will automatically
be lowered in the event we issue shares of our common stock for a price less
than $3.00 per share.
The
descriptions of the warrants are only a summary and are qualified in their
entirety by the provisions of the forms of the warrant.
57
Transfer
Agent and Registrar
The
transfer agent and registrar of our common stock is American Stock Transfer
& Trust Company, New York, New York.
Delaware
Law and Certain Charter and By-Law Provisions
Certain
anti-takeover provisions.
We are
subject to the provisions of Section 203 of the General Corporation Law of
Delaware. Section 203 prohibits certain publicly held Delaware corporations from
engaging in a "business combination" with an "interested stockholder," for a
period of three years after the date of the transaction in which the person
became an "interested stockholder", unless the business combination is approved
in a prescribed manner. A "business combination" includes mergers, asset sales
and other transactions resulting in a financial benefit to the interested
stockholder. Subject to certain exceptions, an "interested stockholder" is a
person or entity who, together with affiliates and associates, owns (or within
the preceding three years, did own) 15% or more of the corporation's voting
stock. The statute contains provisions enabling a corporation to avoid the
statute's restrictions if the stockholders holding a majority of the
corporation's voting stock approve our Certificate of Incorporation provides
that our directors shall be divided into three classes, with the terms of each
class to expire on different years.
In
addition, our Certificate of Incorporation, in order to combat "greenmail,"
provides in general that any direct or indirect purchase by us of any of our
voting stock or rights to acquire voting stock known to be beneficially owned by
any person or group which holds more than five percent of a class of our voting
stock and which has owned the securities being purchased for less than two years
must be approved by the affirmative vote of at least two-thirds of the votes
entitled to be cast by the holders of voting stock, subject to certain
exceptions. The prohibition of "greenmail" may tend to discourage or foreclose
certain acquisitions of our securities which might temporarily increase the
price of our securities. Discouraging the acquisition of a large block of our
securities by an outside party may also have a potential negative effect on
takeovers. Parties seeking control of us through large acquisitions of its
securities will not be able to resort to "greenmail" should their bid fail, thus
making such a bid less attractive to persons seeking to initiate a takeover
effort.
We are a
party to a Rights Agreement pursuant to which we agree to provide holders of our
common stock with the right to buy shares of preferred stock should a party
acquire or beneficially own more than 15% of our common stock without first
being exempted by us. Such shares of preferred stock will entitle to
the holder to certain voting, dividend and liquidation preferences and is
designed to discourage take-over attempts not previously approved by our Board
of Directors.
Elimination
of Monetary Liability for Officers and Directors
Our
Certificate of Incorporation incorporates certain provisions permitted under the
General Corporation Law of Delaware relating to the liability of directors. The
provisions eliminate a director's liability for monetary damages for a breach of
fiduciary duty, including gross negligence, except in circumstances involving
certain wrongful acts, such as the breach of director's duty of loyalty or acts
or omissions, which involve intentional misconduct or a knowing violation of
law. These provisions do not eliminate a director's duty of care. Moreover,
these provisions do not apply to claims against a Director for certain
violations of law, including knowing violations of federal securities law. Our
Certificate of Incorporation also contains provisions to indemnify the
directors, officers, employees or other agents to the fullest extent permitted
by the General Corporation Law of Delaware. We believe that these provisions
will assist us in attracting and retaining qualified individual to serve as
directors.
Indemnification
of Officers and Directors
58
Our
Certificate of Incorporation also contains provisions to indemnify the
directors, officers, employees or other agents to the fullest extent permitted
by the General Corporation Law of Delaware. These provisions may have the
practical effect in certain cases of eliminating the ability of shareholders to
collect monetary damages from directors. We believe that these provisions will
assist us in attracting or retaining qualified individuals to serve as our
directors.
Disclosure
of Commission Position on Indemnification For Securities Act
Liabilities
Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may
be permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, the Registrant has been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
59
PLAN
OF DISTRIBUTION
We
are registering the shares of common stock on behalf of the selling security
holders. Sales of shares may be made by selling security holders, including
their respective donees, transferees, pledgees or other successors-in-interest
directly to purchasers or to or through underwriters, broker-dealers or through
agents. Sales may be made from time to time on the OTC Bulletin Board, any other
exchange or market upon which our shares may trade in the future, in the
over-the-counter market or otherwise, at market prices prevailing at the time of
sale, at prices related to market prices, or at negotiated or fixed prices. The
shares may be sold by one or more of, or a combination of, the
following:
-
|
a
block trade in which the broker-dealer so engaged will attempt to sell the
shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction (including crosses in which the
same broker acts as agent for both sides of the
transaction);
|
-
|
purchases
by a broker-dealer as principal and resale by such broker-dealer,
including resales for its account, pursuant to this
prospectus;
|
-
|
ordinary
brokerage transactions and transactions in which the broker solicits
purchases;
|
-
|
through
options, swaps or derivatives;
|
-
|
in
privately negotiated transactions;
|
-
|
in
making short sales or in transactions to cover short sales;
and
|
-
|
put
or call option transactions relating to the
shares.
|
-
|
through
the writing or settlement of options or other hedging transactions,
whether through an options exchange or
otherwise;
|
-
|
a
combination of any such methods of sale;
or
|
-
|
any
other method permitted pursuant to applicable
law.
|
The
selling security holders may effect these transactions by selling shares
directly to purchasers or to or through broker-dealers, which may act as agents
or principals. These broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the selling security holders and/or
the purchasers of shares for whom such broker-dealers may act as agents or to
whom they sell as principals, or both (which compensation as to a particular
broker-dealer might be in excess of customary commissions). The selling security
holders have advised us that they have not entered into any agreements,
understandings or arrangements with any underwriters or broker-dealers regarding
the sale of their securities.
The
selling security holders may enter into hedging transactions with broker-dealers
or other financial institutions. In connection with those transactions, the
broker-dealers or other financial institutions may engage in short sales of the
shares or of securities convertible into or exchangeable for the shares in the
course of hedging positions they assume with the selling security holders. The
selling security holders may also enter into options or other transactions with
broker-dealers or other financial institutions which require the delivery of
shares offered by this prospectus to those broker-dealers or other financial
institutions. The broker-dealer or other financial institution may then resell
the shares pursuant to this prospectus (as amended or supplemented, if required
by applicable law, to reflect those transactions).
60
The
selling security holders and any broker-dealers that act in connection with the
sale of shares may be deemed to be “underwriters” within the meaning of Section
2(11) of the Securities Act of 1933, and any commissions received by
broker-dealers or any profit on the resale of the shares sold by them while
acting as principals may be deemed to be underwriting discounts or commissions
under the Securities Act. The selling security holders may agree to indemnify
any agent, dealer or broker-dealer that participates in transactions involving
sales of the shares against liabilities, including liabilities arising under the
Securities Act. We have agreed to indemnify each of the selling security holders
and each selling security holder has agreed, severally and not jointly, to
indemnify us against some liabilities in connection with the offering of the
shares, including liabilities arising under the Securities Act.
The
selling security holders will be subject to the prospectus delivery requirements
of the Securities Act. We have informed the selling security holders that the
anti-manipulative provisions of Regulation M promulgated under the Securities
Exchange Act of 1934 may apply to their sales in the market.
Selling
security holders also may resell all or a portion of the shares in open market
transactions in reliance upon Rule 144 under the Securities Act, provided they
meet the criteria and conform to the requirements of Rule 144.
Upon
being notified by a selling security holder that a material arrangement has been
entered into with a broker-dealer for the sale of shares through a block trade,
special offering, exchange distribution or secondary distribution or a purchase
by a broker or dealer, we will file a supplement to this prospectus, if required
pursuant to Rule 424(b) under the Securities Act, disclosing:
-
|
the
name of each such selling security holder and of the participating
broker-dealer(s);
|
-
|
the
number of shares involved;
|
-
|
the
initial price at which the shares were
sold;
|
-
|
the
commissions paid or discounts or concessions allowed to the
broker-dealer(s), where applicable;
|
-
|
that
such broker-dealer(s) did not conduct any investigation to verify the
information set out or incorporated by reference in this prospectus;
and
|
-
|
other
facts material to the transactions.
|
In
addition, if required under applicable law or the rules or regulations of the
Commission, we will file a supplement to this prospectus when a selling security
holder notifies us that a donee or pledgee intends to sell more than 500 shares
of common stock.
We are
paying all expenses and fees customarily paid by the issuer in connection with
the registration of the shares. The selling security holders will bear all
brokerage or underwriting discounts or commissions paid to broker-dealers in
connection with the sale of the shares.
61
EXPERTS
The
consolidated financial statements of Access for the years ended December 31,
2009 and 2008 included in this prospectus, and included in the Registration
Statement, were audited by Whitley Penn LLP, an independent registered public
accounting firm, as stated in their report appearing with the consolidated
financial statements herein and incorporated in this Registration Statement, and
are included in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
The
independent registered public accounting firm named above has no interest in the
prospectus.
LEGAL
MATTERS
Bingham
McCutchen LLP has passed upon the validity of the securities offered
hereby. Several partners and attorneys of Bingham McCutchen LLP are
also shareholders of Access.
WHERE
YOU CAN FIND MORE INFORMATION
We have
filed with the Securities and Exchange Commission, Washington, D.C. 20549, under
the Securities Act of 1933, a registration statement on Form S-1 relating to the
shares of common stock offered hereby. This Prospectus does not contain all of
the information set forth in the registration statement and the exhibits and
schedules thereto. For further information with respect to our company and the
shares we are offering by this Prospectus you should refer to the registration
statement, including the exhibits and schedules thereto. You may inspect a copy
of the registration statement without charge at the Public Reference Section of
the Securities and Exchange Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549. The public may obtain information on the operation of
the Public Reference Room by calling the Securities and Exchange Commission. The
Securities and Exchange Commission also maintains an Internet site that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Securities and Exchange
Commission. The Securities and Exchange Commission's World Wide Web address is
http://www.sec.gov.
We file
periodic reports, proxy statements and other information with the Securities and
Exchange Commission in accordance with requirements of the Exchange Act. These
periodic reports, proxy statements and other information are available for
inspection and copying at the regional offices, public reference facilities and
Internet site of the Securities and Exchange Commission referred to above. In
addition, you may request a copy of any of our periodic reports filed with the
Securities and Exchange Commission at no cost, by writing or telephoning us at
the following address:
Investor
Relations
Access
Pharmaceuticals, Inc.
2600
Stemmons Freeway, Suite 176
Dallas,
Texas 75207
(214)
905-5100
Information
contained on our website is not a prospectus and does not constitute a part of
this Prospectus.
You
should rely only on the information contained in or incorporated by reference or
provided in this Prospectus. We have not authorized anyone else to provide you
with different information. We are not making an offer of these securities in
any state where the offer is not permitted. You should not assume the
information in this Prospectus is accurate as of any date other than the date on
the front of this Prospectus.
62
FINANCIAL
STATEMENTS
ACCESS
PHARMACEUTICALS, INC.
PAGE
|
|
Report
of Independent Registered Public Accounting Firm
|
F-2
|
Consolidated
Balance Sheets at December 31, 2009 and 2008
|
F-3
|
Consolidated
Statements of Operations for 2009 and 2008
|
F-4
|
Consolidated
Statements of Stockholders' Equity (Deficit) for 2009 and 2008
|
F-5
|
Consolidated
Statements of Cash Flows for 2009 and 2008
|
F-6
|
Notes
to Consolidated Financial Statements (Two years ended December 31,
2009)
|
F-7
|
F-1
Report
of Independent Registered Public Accounting Firm
To the
Board of Directors and Stockholders of
Access
Pharmaceuticals, Inc.
We have
audited the accompanying consolidated balance sheets of Access Pharmaceuticals,
Inc. and subsidiaries, as of December 31, 2009 and 2008, and the related
consolidated statements of operations, changes in stockholders’ equity
(deficit), and cash flows for the years then ended. These financial
statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. An audit includes 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 Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Access
Pharmaceuticals, Inc. and subsidiaries as of December 31, 2009 and 2008, and the
consolidated results of their operations and their cash flows for the years then
ended in conformity with accounting principles generally accepted in the United
States of America.
As
described in Note 12 to the consolidated financial statements, the Company and
MacroChem Corporation were deemed entities under common control related to the
acquisition of MacroChem Corporation by the Company on February 25, 2009. The
consolidated financial statements as of and for the years ended December 31,
2009 and 2008 have been retroactively restated on a combined basis to reflect
the transaction as if it had occurred on January 1, 2008.
As
described in Note 9 to the consolidated financial statements, the Company
adopted Emerging Issues Task Force Issue No. 07-5, Determining Whether an Instrument
(or Embedded Feature) Is Indexed to an Entity’s Own Stock (Accounting
Standards Codification Topic 815, Derivatives and Hedging)
effective as of January 1, 2009.
The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company has had recurring losses from
operations, negative cash flows from operating activities and has an accumulated
deficit. Management’s plans in regard to these matters are also described in
Note 2. These conditions raise substantial doubt about the Company’s ability to
continue as a going concern. These consolidated financial statements do not
include any adjustments to reflect the possible future effects on the
recoverability and classification of assets or the amounts and classification of
liabilities that may result from the outcome of this uncertainty.
/s/
WHITLEY PENN LLP
Dallas,
Texas
March 22,
2010
F-2
Access
Pharmaceuticals, Inc. and Subsidiaries
CONSOLIDATED
BALANCE SHEETS
ASSETS
|
December 31, 2009
|
December 31, 2008
|
|
(See Note 12) | |||
Current
assets
Cash and cash
equivalents
Receivables
Prepaid expenses and other
current assets
|
$ 607,000
36,000
42,000
|
$ 2,677,000
147,000
175,000
|
|
Total current assets |
685,000
|
2,999,000
|
|
Property
and equipment, net
|
50,000
|
95,000
|
|
Patents,
net
|
787,000
|
999,000
|
|
Other
assets
|
61,000
|
78,000
|
|
Total
assets
|
$ 1,583,000
|
$ 4,171,000
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY (DEFICIT)
|
|||
Current
liabilities
Accounts
payable
Accrued
expenses
Dividends
payable
Accrued
interest payable
Notes
payable
Current
portion of deferred revenue
|
$ 4,094,000
857,000
2,773,000
563,000
-
347,000
|
$ 3,287,000
1,295,000
1,896,000
145,000
825,000
164,000
|
|
Total current liabilities |
8,634,000
|
7,612,000
|
|
Derivative
liability
Long-term
deferred revenue
Long-term
convertible debt
|
9,708,000
4,730,000
5,500,000
|
-
2,245,000
5,500,000
|
|
Total
liabilities
|
28,572,000
|
15,357,000
|
|
Commitments
and contingencies
|
|||
Stockholders'
deficit
Convertible
preferred stock - $.01 par value; authorized 2,000,000
shares;
2,992.3617
issued at December 31, 2009; 3,242.8617 issued at
December
31, 2008
Common
stock - $.01 par value; authorized 100,000,000 shares;
issued,
13,171,545 at December 31, 2009; issued 9,467,474
at
December 31, 2008
Additional
paid-in capital
Notes
receivable from stockholders
Treasury
stock, at cost – 163 shares
|
-
132,000
215,735,000
(1,045,000)
(4,000)
|
-
95,000
225,753,000
(1,045,000)
(4,000)
|
|
Accumulated deficit | (241,807,000) | (235,985,000) | |
Total stockholders' deficit | (26,989,000) |
(11,186,000)
|
|
Total
liabilities and stockholders' deficit
|
$ 1,583,000
|
$ 4,171,000
|
The
accompanying notes are an integral part of these consolidated
statements.
F-3
Access
Pharmaceuticals, Inc. and Subsidiaries
CONSOLIDATED
STATEMENTS OF OPERATIONS
December
31,
|
||||||||
2009
|
2008
|
|||||||
(See
Note 12)
|
||||||||
Revenues
|
||||||||
License
revenues
|
$ | 315,000 | $ | 118,000 | ||||
Royalties
|
37,000 | - | ||||||
Sponsored research and
development
|
- | 173,000 | ||||||
Total revenues
|
352,000 | 291,000 | ||||||
Expenses
|
||||||||
Research and
development
|
2,657,000 | 23,235,000 | ||||||
General and
administrative
|
7,112,000 | 7,463,000 | ||||||
Depreciation and
amortization
|
259,000 | 324,000 | ||||||
Total expenses
|
10,028,000 | 31,022,000 | ||||||
Loss
from operations
|
(9,676,000 | ) | (30,731,000 | ) | ||||
Interest
and miscellaneous income
|
29,000 | 211,000 | ||||||
Interest
and other expense
|
(539,000 | ) | (911,000 | ) | ||||
Loss
on change in fair value of derivative
|
(7,154,000 | ) | - | |||||
(7,664,000 | ) | (700,000 | ) | |||||
Net
loss
|
(17,340,000 | ) | (31,431,000 | ) | ||||
Less
preferred stock dividends
|
(1,886,000 | ) | (3,358,000 | ) | ||||
Net
loss allocable to common stockholders
|
$ | (19,226,000 | ) | $ | (34,789,000 | ) | ||
Basic
and diluted loss per common share
|
||||||||
Net
loss allocable to common stockholders
|
$ | (1.63 | ) | $ | (4.16 | ) | ||
Weighted
average basic and diluted common shares
outstanding
|
11,818,530 | 8,354,031 | ||||||
The
accompanying notes are an integral part of these consolidated
statements.
F-4
Access
Pharmaceuticals, Inc. and Subsidiaries
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(See Note
12)
Common
Stock
|
Preferred
Stock
|
Notes | ||||||||||||||||||||||||||||||
Additional | receivable from | |||||||||||||||||||||||||||||||
Shares |
Amount
|
Shares
|
Amount
|
paid-in | stockholders | Treasury | Accumulated | |||||||||||||||||||||||||
capital
|
stock |
deficit
|
||||||||||||||||||||||||||||||
Access-MacroChem
as if
combined
at January
1,
2008
|
6,085,000 | $ | 61,000 | 3,227.3617 | $ | - | $ | 213,782,000 | $ | (1,045,000 | ) | $ | (4,000 | ) | $ | (199,892,000 | ) | |||||||||||||||
Common
stock issued for
services
|
10,000 | - | - | - | 27,000 | - | - | - | ||||||||||||||||||||||||
Warrants
issued for
services
|
- | - | - | - | 350,000 | - | - | - | ||||||||||||||||||||||||
Common
stock
issued
for cash exercise
of
options
|
25,000 | - | - | - | 15,000 | - | - | - | ||||||||||||||||||||||||
Stock
option
compensation
expense
|
- | - | - | - | 922,000 | - | - | - | ||||||||||||||||||||||||
Preferred
stock issuances
|
- | - | 272.5000 | - | 1,687,000 | - | - | - | ||||||||||||||||||||||||
Warrants
issued with
preferred
stock
|
- | - | - | - | 1,142,000 | - | - | - | ||||||||||||||||||||||||
Costs
of stock issuances
|
- | - | - | - | (385,000 | ) | - | - | - | |||||||||||||||||||||||
Preferred
stock dividend
beneficial
conversion
feature
|
- | - | - | - | 1,308,000 | - | - | (1,308,000 | ) | |||||||||||||||||||||||
Common
stock and
warrants
issued to
Somanta
shareholders
|
1,500,000 | 15,000 | - | - | 4,916,000 | - | - | - | ||||||||||||||||||||||||
Common
stock and
warrants
issued to
Somanta
creditors
|
538,000 | 5,000 | - | - | 1,571,000 | - | - | - | ||||||||||||||||||||||||
Preferred
stock converted
into
common stock
|
857,000 | 9,000 | (257.0000 | ) | - | (9,000 | ) | - | - | - | ||||||||||||||||||||||
Common
stock issued for
preferred
dividends
|
452,000 | 5,000 | - | - | 427,000 | - | - | - | ||||||||||||||||||||||||
Preferred
dividends
|
- | - | - | - | - | - | - | (3,358,000 | ) | |||||||||||||||||||||||
Net
loss
|
- | - | - | - | - | - | - | (31,427,000 | ) |
Balance,
December 31,
2008
|
9,467,000 | 95,000 | 3,242.8617 | - | 225,753,000 | (1,045,000 | ) | (4,000 | ) | (235,985,000 | ) | |||||||||||||||||||||
Cumulative
effect of a
change
in accounting
principle
(See Note 9)
|
- | - | - | - | (15,957,000 | ) | - | - | 13,404,000 | |||||||||||||||||||||||
Restricted
common stock
issued
for services
|
687,000 | 8,000 | - | - | 2,199,000 | - | - | - | ||||||||||||||||||||||||
Warrants
issued for
services
|
- | - | - | - | 796,000 | - | - | - | ||||||||||||||||||||||||
Common
stock issued
for
cash exercise
of
options
|
250,000 | 2,000 | - | - | 177,000 | - | - | - | ||||||||||||||||||||||||
Common
stock issued
for
cashless warrant
exercises
|
33,000 | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Preferred
stock converted
into
common stock
|
836,000 | 9,000 | (250.5000 | ) | - | (9,000 | ) | - | - | - | ||||||||||||||||||||||
Common
stock issued
for
preferred dividends
|
915,000 | 9,000 | - | - | 918,000 | - | - | - | ||||||||||||||||||||||||
Stock
option
compensation
expense
|
- | - | - | - | 811,000 | - | - | - | ||||||||||||||||||||||||
Common
stock issued to
MacroChem
noteholders
for
notes and accrued
interest
|
859,000 | 8,000 | - | - | 851,000 | - | - | - | ||||||||||||||||||||||||
Common
stock issued to
former
MacroChem
executives
|
125,000 | 1,000 | - | - | 196,000 | - | - | - | ||||||||||||||||||||||||
Preferred
dividends
|
- | - | - | - | - | - | - | (1,886,000 | ) | |||||||||||||||||||||||
Net
loss
|
- | - | - | - | - | - | - | (17,340,000 | ) |
Balance,
December 31,
2009
|
13,172,000 | $ | 132,000 | 2,992.3617 | $ | - | $ | 215,735,000 | $ | (1,045,000 | ) | $ | (4,000 | ) | $ | (241,807,000 | ) |
The
accompanying notes are an integral part of these consolidated
statements.
F-5
Access
Pharmaceuticals, Inc. and Subsidiaries
CONSOLIDATED
STATEMENTS OF CASH FLOWS
Year
ended December 31,
|
||||||||
2009
|
2008
|
|||||||
(See
Note 12)
|
||||||||
Cash
flows from operating activities:
|
||||||||
Net
loss
|
$ | (17,340,000 | ) | $ | (31,431,000 | ) | ||
Adjustments
to reconcile net loss to net cash used
|
||||||||
in
operating activities:
|
||||||||
Stock
option compensation expense
|
811,000 | 922,000 | ||||||
Stock
and warrants issued for services
|
3,200,000 | 533,000 | ||||||
Acquired
in-process research & development
|
- | 18,540,000 | ||||||
Amortization
of debt discount and beneficial conversion feature
|
- | 263,000 | ||||||
Loss
on change in fair value of derivative
|
7,154,000 | - | ||||||
Depreciation
and amortization
|
259,000 | 317,000 | ||||||
Change
in operating assets and liabilities:
|
||||||||
Receivables
|
111,000 | (112,000 | ) | |||||
Prepaid
expenses and other current assets
|
133,000 | (19,000 | ) | |||||
Other
assets
|
17,000 | (66,000 | ) | |||||
Accounts
payable and accrued expenses
|
369,000 | 260,000 | ||||||
Dividends
payable
|
(82,000 | ) | 19,000 | |||||
Accrued
interest payable
|
452,000 | 15,000 | ||||||
Deferred
revenue
|
2,668,000 | 1,435,000 | ||||||
Net
cash used in operating activities
|
(2,248,000 | ) | (9,324,000 | ) | ||||
Cash
flows from investing activities:
|
||||||||
Capital
expenditures
|
(2,000 | ) | (31,000 | ) | ||||
Proceeds
from sale of asset
|
1,000 | 13,000 | ||||||
Redemption
of short-term investments and certificate
|
||||||||
of
deposits
|
- | 759,000 | ||||||
Virium
acquisition by MacroChem, net of cash acquired
|
- | (240,000 | ) | |||||
Somanta
acquisition, net of cash acquired
|
- | (65,000 | ) | |||||
Net
cash provided by (used in) investing activities
|
(1,000 | ) | 436,000 | |||||
Cash
flows from financing activities:
|
||||||||
Proceeds
from debt issuance
|
- | 400,000 | ||||||
Payments
of notes payable
|
- | (639,000 | ) | |||||
Proceeds
from exercise of stock options
|
179,000 | 15,000 | ||||||
Proceeds
from preferred stock issuances, net of costs
|
- | 2,444,000 | ||||||
Net
cash provided by financing activities
|
179,000 | 2,220,000 | ||||||
Net
decrease in cash and cash equivalents
|
(2,070,000 | ) | (6,668,000 | ) | ||||
Cash
and cash equivalents at beginning of year
|
2,677,000 | 9,345,000 | ||||||
Cash
and cash equivalents at end of year
|
$ | 607,000 | $ | 2,677,000 | ||||
Supplemental
cash flow information:
|
||||||||
Cash
paid for interest
|
$ | 1,000 | $ | 568,000 | ||||
Supplemental
disclosure of noncash transactions
|
||||||||
Shares
issued for payables, notes payable and accrued interest
|
859,000 | 1,576,000 | ||||||
Shares
issued for dividends on preferred stock
|
927,000 | 432,000 | ||||||
Warrants
issued for placement agent fees
|
- | 104,000 | ||||||
Preferred
stock dividends in dividends payable
|
1,886,000 | 3,358,000 | ||||||
Beneficial
conversion feature -
|
||||||||
February
2008 preferred stock dividends
|
- | 857,000 | ||||||
November
2007 preferred stock dividends
|
- | 451,000 | ||||||
Preferred
stock issuance costs paid in cash
|
- | 281,000 | ||||||
Debt
discount related to MacroChem convertible debt issuance
|
- | 93,000 |
The
accompanying notes are an integral part of these consolidated
statements.
F-6
Access
Pharmaceuticals, Inc. and Subsidiaries
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
Two years
ended December 31, 2009
NOTE
1 - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
|
Nature of
Operations
Access
Pharmaceuticals, Inc. is an emerging pharmaceutical company engaged in the
development of novel therapeutics for the treatment of cancer and supportive
care of cancer patients. This development work is based primarily on the
adaptation of existing therapeutic agents using the Company’s proprietary drug
delivery technology. Our efforts have been principally devoted to research and
development, resulting in significant losses since inception on February 24,
1988.
The
consolidated balance sheet as of December 31, 2008, contains financial
information taken from the audited Access financial statements as of that date
and is combined with the audited financial data from MacroChem, as discussed
further in Note 12.
On
February 25, 2009, we closed our acquisition of MacroChem Corporation through
the issuance of an aggregate of approximately 2.5 million shares of our common
stock. Prior to our acquisition of MacroChem, SCO, an investment company, held a
majority of Access’ and MacroChem’s voting stock. Specifically, SCO
owned 53% of the voting stock of Access and 63% of the voting stock of
MacroChem. A non-controlling interest of 37% existed at the merger date of
MacroChem. In addition, certain members of SCO’s management serve on the board
of directors of both Access and MacroChem. Based on these facts, Access and
MacroChem were deemed under the common control of SCO. As the entities were
deemed under common control, the acquisition was recorded using the
pooling-of-interest method and the financial information for all periods
presented reflects the financial statements of the combined companies in
accordance with Financial Accounting Standards Board standards on business
combinations for entities under common control. See also Note 12.
A summary
of the significant accounting policies applied in the preparation of the
accompanying consolidated financial statements follows.
Principles of
Consolidation
The
consolidated financial statements include the financial statements of Access
Pharmaceuticals, Inc. and our wholly-owned subsidiaries. All intercompany
balances and transactions have been eliminated in consolidation.
Reclassifications
Certain
reclassifications to the consolidated financial statements for all prior periods
presented have been made to conform to the 2009 presentation.
Use of
Estimates
The
preparation of consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amount of
assets and disclosure of contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts of revenue and
expenses during the reported period. Our significant estimates include primarily
those required in the valuation of impairment analysis of intangible assets,
fair value of financila instruments, property and equipment, revenue
recognition, allowances for doubtful accounts, stock-based compensation and
valuation of other equity instruments, valuation allowances for deferred tax
assets and tax accruals. Although we believe that adequate accruals have been
made for unsettled issues, additional gains or losses could occur in future
years from resolutions of outstanding matters. Actual results could differ
materially from original estimates.
F-7
Segments
The
Company operates in a single segment.
Cash and Cash
Equivalents
We
consider all highly liquid investments with a maturity of three months or less
when purchased to be cash equivalents. At December 31, 2009 and 2008, we
had no such investments. We maintain deposits primarily in two financial
institutions, which may at times exceed amounts covered by insurance provided by
the U.S. Federal Deposit Insurance Corporation (FDIC). We have not
experienced any losses related to amounts in excess of FDIC
limits.
Property and
Equipment
Property
and equipment are recorded at cost. Depreciation is provided using the
straight-line method over estimated useful lives ranging from three to seven
years. Expenditures for major renewals and betterments that extend the useful
lives are capitalized. Expenditures for normal maintenance and repairs are
expensed as incurred. The cost of assets sold or abandoned and the related
accumulated depreciation are eliminated from the accounts and any gains or
losses are recognized in the accompanying consolidated statements of operations
of the respective period.
Research and Development
Expenses
Research
and development costs are expensed as incurred. Research and development
expenses include, but are not limited to, payroll and personnel expense, lab
supplies, preclinical, development cost, clinical trial expense, outside
manufacturing and consulting. The cost of materials and equipment or facilities
that are acquired for research and development activities and that have
alternative future uses are capitalized when acquired.
Fair Value of Financial
Instruments
The
carrying value of cash, cash equivalents, receivables, accounts payable and
accruals approximate fair value due to the short maturity of these items. The
carrying value of the convertible long-term debt is at book value which
approximates the fair value as the interest rate is at market
value.
We
consider the conversion options and warrants related to its Series A Cumulative
Convertible Preferred Stock to be derivatives, and we record the fair value of
the derivative liabilities in our consolidated balance sheets. Changes in fair
value of the derivative liabilities are included in loss on change in fair value
of derivative in the consolidated statements of operations.
Income
Taxes
Income
taxes are accounted for under the asset and liability method. Deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and operating
loss and tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date. A valuation allowance is provided for deferred tax assets to the
extent their realization is in doubt.
We
account for income taxes in accordance with FASB ASC 740, Income Taxes. Interest
costs and penalties related to income taxes are classified as interest expense
and general and administrative costs, respectively, in our consolidated
financial statements. For the years ended December 31, 2009 and 2008, we did not
recognize any interest or penalty expense related to income taxes. It is
determined not to be reasonably likely for the amounts of unrecognized tax
benefits to significantly increase or decrease within the next 12 months. We are
currently subject to a three year statute of limitations by major tax
jurisdictions. We and our subsidiaries file income tax returns in the U.S.
federal jurisdiction.
F-8
Loss Per
Share
We have
presented basic loss per share, computed on the basis of the weighted average
number of common shares outstanding during the year, and diluted loss per share,
computed on the basis of the weighted average number of common shares and all
dilutive potential common shares outstanding during the year. Potential common
shares result from stock options, vesting of restricted stock grants,
convertible notes, preferred stock and warrants. However, for all years
presented, all outstanding stock options, restricted stock grants, convertible
notes and warrants are anti-dilutive due to the losses for the years.
Anti-dilutive common stock equivalents of 21,658,171 and 22,051,685 were
excluded from the loss per share computation for 2009 and 2008,
respectively.
Patents
We
expense internal patent and application costs as incurred because, even though
we believe the patents and underlying processes have continuing value, the
amount of future benefits to be derived therefrom are uncertain. Purchased
patents are capitalized and amortized over the life of the patent.
|
Intangible
assets consist of the following (in
thousands):
|
December 31, 2009
|
December 31, 2008
|
|||||||||||||||
Gross
carrying
value
|
Accumulated
amortization
|
Gross
carrying
value
|
Accumulated
amortization
|
|||||||||||||
Amortizable
intangible
assets
- Patents
|
$ | 2,624 | $ | 1,837 | $ | 2,624 | $ | 1,625 |
Amortization
expense related to intangible assets totaled $212,000 and $229,000 for the years
ended December 31, 2009 and 2008, respectively. The aggregate estimated
amortization expense for intangible assets remaining as of December 31, 2009 is
as follows (in thousands):
2010
|
$ | 212 | ||
2011
|
212 | |||
2012
|
82 | |||
2013
|
44 | |||
2014
|
44 | |||
Thereafter
|
193 | |||
Total
|
$ | 787 |
Revenues
Our
revenues are generated from licensing and research and development agreements.
We recognize revenue in accordance with SEC Staff Accounting Bulletin No. 104
(SAB 104), Revenue
Recognition. License revenue is recognized over the remaining life of the
underlying patent. Research and development revenues are recognized as services
are performed.
Stock-Based
Compensation
We
account for stock based compensation expense in accordance with FASB ASC 718,
Stock Based
Compensation. We have several stock-based compensation plans under which
incentive and non-incentive qualified stock options and restricted shares may be
granted to employees, directors and consultants. We measure the cost of the
employee/director/consultant services received in exchange for an award of
equity instruments based on the grant date fair value of the award. We use the
Black-Sholes option pricing model to value our options.
During
2009 and 2008, 565,000 stock options and 305,000 stock options, respectively,
were granted under the 2005 Equity Incentive Plan. Assumptions for 2009 and 2008
are:
F-9
2009
|
2008
|
|||
Expected
volatility assumption was based upon a combination of historical stock
price volatility measured on a weekly basis and is considered a reasonable
indicator of expected volatility.
|
115%
|
133%
|
||
Risk-free
interest rate assumption is based upon U.S. Treasury bond interest rates
appropriate for the term of the our employee stock options.
|
2.37%
|
2.97%
|
||
Dividend
yield assumption is based on our history and expectation of dividend
payments.
|
None
|
None
|
||
Estimated
expected term (average of number years) is based on the simplified method
as prescribed by SAB 107/110 as we do not have sufficient information to
calculate an expected term.
|
5.5
years
|
6.2
years
|
At
December 31, 2009, the balance of unearned stock-based compensation to be
expensed in future periods related to unvested share-based awards, as adjusted
for expected forfeitures, is approximately $632,000. The weighted-average period
over which the unearned stock-based compensation is expected to be recognized is
approximately three years. We anticipate that we will grant additional
share-based awards to employees in the future, which will increase our
stock-based compensation expense by the additional unearned compensation
resulting from these grants. The fair value of these grants is not included in
the amount above, because the impact of these grants cannot be predicted at this
time due to the dependence on the number of share-based payments
granted.
The
weighted-average fair value of options existing under all plans during 2009 was
$2.92 at December 31, 2009.
The
following table summarizes stock-based compensation for the years ended December
31, 2009 and 2008 which was allocated as follows (in thousands):
Year
ended
December 31, 2009
|
Year
ended
December 31, 2008
|
|||||||
Research
and development
|
$ | 381 | $ | 108 | ||||
General
and administrative
|
430 | 814 | ||||||
Stock-based
compensation expense included in
operating
expense
|
811 | 922 | ||||||
Total
stock-based compensation expense
|
811 | 922 | ||||||
Tax
benefit
|
- | - | ||||||
Stock-based
compensation expense, net of tax
|
$ | 811 | $ | 922 | ||||
Recent Accounting
Pronouncements
In June
2009, the Financial Accounting Standards Board (FASB) established the FASB
Accounting Standards Codification (ASC) as the source of authoritative
accounting principles recognized by the FASB to be applied in preparation of
financial statements in conformity with U.S. GAAP. As the issuance of ASC does
not change U.S. GAAP, its adoption did not have any impact on our 2009 Financial
Statements.
In June
2009, the FASB issued accounting guidance that eliminates the exemption from
consolidation for qualifying special-purpose entities, effective for financial
asset transfers occurring after the beginning of an entity's first fiscal year
that begins after November 15, 2009. We currently do not have any of these
entities.
F-10
In June
2009, the FASB issued accounting guidance that assists in determining whether an
enterprise has a controlling financial interest in a variable interest entity.
This guidance is effective as of the beginning of the first fiscal year that
begins after November 15, 2009. We currently do not have any such
arrangements.
In
October 2009, the FASB issued new accounting guidance related to revenue
arrangements with multiple deliverables that provides principles for allocation
of consideration among an arrangement's multiple-elements, allowing more
flexibility in identifying and accounting for separate deliverables. The
guidance introduces an estimated selling price method for valuing the elements
of a bundled arrangement if vendor-specific objective evidence or third-party
evidence of selling price is not available, and significantly expands related
disclosure requirements. This guidance is effective on a prospective basis for
revenue arrangements entered into or materially modified in fiscal years
beginning on or after June 15, 2010. Alternatively, adoption may be on a
retrospective basis, and early application is permitted. We are currently
evaluating the impact of adopting this guidance on our financial
statements.
NOTE
2 – LIQUIDITY
The
accompanying consolidated financial statements have been prepared assuming that
we are a going concern. We incurred a net loss in the years ended December 31,
2009 and 2008.
Management
believes that our current cash and expected license fees should fund our
expected burn rate into the first quarter of 2011. We will require additional
funds to continue operations. These funds are expected to come from the future
sales of equity and/or license agreements.
NOTE
3 - RELATED PARTY TRANSACTIONS
On
February 12, 2008, our Board of Directors elected Steven H. Rouhandeh
as director and Chairman of the Board effective as of March 4, 2008. Mr.
Rouhandeh is Chief Investment Officer of SCO Capital Partners, L.P.
In the
event SCO Capital Partners LLC (SCO) and its affiliates were to convert all of
their shares of Series A Preferred Stock and exercise all of their warrants,
they would own approximately 56.7% of the voting securities of Access. During
2008 SCO and affiliates were paid $191,000 in placement agent fees relating to
the issuance of preferred stock and were issued warrants to purchase our 39,667
shares of our common stock. SCO and affiliates also were paid $300,000 in
investor relations fees in 2009 and $232,000 in investor relations fees in
2008.
In
connection with the sale and issuance of Series A Preferred Stock and warrants,
we entered into a Director Designation Agreement whereby we agreed to continue
SCO’s right to designate two individuals to serve on the Board of Directors of
Access.
Dr.
Esteban Cvitkovic, a Director, has served as a consultant and Senior Director,
Oncology Clinical Research & Development, since August 2007. Dr. Cvitkovic
receives payments for consulting expenses, office expenses and reimbursement of
direct expenses. Dr. Cvitkovic also has received the following warrants and
options for his consulting. In May 2009, Dr. Cvitkovic received options to
purchase 75,000 shares of our Common Stock at $1.38 with all options currently
vested and can be exercised until January 4, 2012. In January 2008, Dr.
Cvitkovic received warrants to purchase 200,000 shares of our Common Stock at
$3.15 per share that can be exercised until January 4, 2012. The warrants vest
over two years in 50,000 share blocks with vesting on July 4, 2008, January 4,
2009, July 4, 2009, and the remaining warrants on January 4, 2010. All of the
warrants are currently vested. Dr. Cvitkovic’s payments for consulting services
and expense reimbursements are as follows:
F-11
Fair
Value
|
|||||||||||||||||
of
exercisable
|
|||||||||||||||||
Consulting
|
Office
|
Expense
|
Options
/
|
||||||||||||||
Year
|
Fees
|
Expenses
|
Reimbursement
|
Warrants
|
|||||||||||||
2009
|
$ | 132,000 | $ | 18,000 | $ | 10,000 | $ | 86,000 | |||||||||
2008
|
$ | 320,000 | $ | 30,000 | $ | 71,000 | $ | 164,000 |
Stephen
B. Howell, M.D., a Director, received payments for consulting services and
reimbursement of direct expenses. His consulting agreement expired in March 1,
2008. Dr. Howell’s payments for consulting services and expense reimbursements
are as follows:
Consulting
|
Expense
|
||||||||
Year
|
Fees
|
Reimbursement
|
|||||||
2008
|
$ | 31,000 | $ | 3,000 |
See Note 10 for a discussion of our
Restricted Stock Purchase Program.
NOTE
4 - PROPERTY AND EQUIPMENT
Property
and equipment consists of the following:
|
December
31,
|
|||||||
2009
|
2008
|
|||||||
Laboratory
equipment
|
$ | 786,000 | $ | 831,000 | ||||
Laboratory
and building improvements
|
58,000 | 58,000 | ||||||
Furniture
and equipment
|
567,000 | 568,000 | ||||||
1,411,000 | 1,457,000 | |||||||
Less
accumulated depreciation and amortization
|
1,361,000 | 1,362,000 | ||||||
Net
property and equipment
|
$ | 50,000 | $ | 95,000 |
Depreciation
and amortization on property and equipment was $47,000 and $96,000 for the years
ended December 31, 2009 and 2008, respectively.
NOTE
5 – 401(k) PLAN
We have a
tax-qualified employee savings and retirement plan (the 401(k) Plan) covering
all our employees. Pursuant to the 401(k) Plan, employees may elect to reduce
their current compensation by up to the statutorily prescribed annual limit
($15,500 in 2009 and 2008) and to have the amount of such reduction contributed
to the 401(k) Plan. We had a 401(k) matching program whereby we contributed for
each dollar a participant contributes a like amount, with a maximum contribution
of 4% of a participant’s earnings in the first five months of 2009 and all
twelve months in 2008. The Company suspended matching on June 1, 2009. The
401(k) Plan is intended to qualify under Section 401 of the Internal Revenue
Code so that contributions by employees or by us to the 401(k) Plan, and income
earned on 401(k) Plan contributions, are not taxable to employees until
withdrawn from the 401(k) Plan, and so that contributions by us, if any, will be
deductible by us when made. At the direction of each participant, we invest the
assets of the 401(k) Plan in any of 62 investment options. Company contributions
under the 401(k) Plan were approximately $16,000 in 2009 and $39,000 in
2008.
NOTE
6 – DEBT
$5,500,000 due on September
13, 2011. The unsecured convertible note bears interest at 7.7% per annum
with $423,500 of interest due annually on September 13th.
During 2009, this investor delayed his interest payments which were due in 2009
until February 1, 2010 or earlier if the Company raised funds in an offering. We
raised $6.2 million in the January 2010 offering and paid the investor interest
of $440,000. At December 31, 2009 in addition to the note of $5,500,000 an
additional $436,000 of interest was due. This note has a fixed conversion price
of $27.50 per share of common stock and may be converted by the note holder or
us under certain circumstances as defined in the note. If the notes are not
converted we will have to repay the notes on the due dates.
F-12
NOTE
7 – COMMITMENTS AND CONTINGENCIES
Future
maturities of the note payable and other obligations are as
follows:
Future
|
|
|
Maturities
|
Debt
|
|
2011
|
5,500,000
|
Operating
Leases
At
December 31, 2009, we had commitments under non-cancelable operating leases for
office and research and development facilities until December 31, 2010 totaling
$77,000. Rent expense for the years ended December 31, 2009 and 2008 was
$111,000 and $107,000, respectively. We also have one non-cancelable operating
lease – for a copier with future obligations totaling approximately $19,000
ending in 2011 (with $9,600 expensed each year).
Legal
We are
not currently subject to any material pending legal proceedings.
NOTE
8 - FAIR VALUE MEASUREMENTS
The
carrying value of cash, cash equivalents, receivables, accounts payable and
accruals approximate fair value due to the short maturity of these items. The
carrying value of the convertible long-term debt is at book value which
approximates the fair value as the interest rate is at market
value.
Effective
January 1, 2008, we adopted fair value measurement guidance issued by the FASB
related to financial assets and liabilities which define fair value as the
exchange price that would be received for an asset or paid to transfer a
liability (an exit price) in the principal or most advantageous market for the
asset or liability in an orderly transaction between market participants at the
measurement date. This guidance establishes a three-level fair value hierarchy
that prioritizes the inputs used to measure fair value. The hierarchy requires
entities to maximize the use of observable inputs and minimize the use of
unobservable inputs. The three levels of inputs used to measure fair value are
as follows:
·
|
Level
1 – Quoted prices in active markets for identical assets or
liabilities.
|
·
|
Level
2 – Observable inputs other than quoted prices included in Level 1, such
as quoted prices for similar assets and liabilities in active markets;
quoted prices for identical or similar assets and liabilities in markets
that are not active; or other inputs that are observable or can be
corroborated by observable market
data.
|
·
|
Level
3 – Unobservable inputs that are supported by little or no market activity
and that are significant to the fair value of the assets and liabilities.
This includes certain pricing models, discounted cash flow methodologies
and similar valuation techniques that use significant unobservable
inputs.
|
The
guidance requires an entity to maximize the use of observable inputs and
minimize the use of unobservable inputs when measuring fair value.
We have
segregated all financial assets and liabilities that are measured at fair value
on a recurring basis (at least annually) into the most appropriate level within
the fair value hierarchy based on the inputs used to determine the fair value at
the measurement date in the table below.
Financial
assets and liabilities measured at fair value on a recurring basis as of
December 31, 2009 and December 31, 2008 are summarized below:
F-13
(in
thousands)
|
December
31, 2009
|
December
31, 2008
|
||||||||||||||||||||||
Level
1
|
Level
2
|
Total
|
Level
1
|
Level
2
|
Total
|
|||||||||||||||||||
Assets:
|
||||||||||||||||||||||||
Cash
|
$ | 607 | $ | - | $ | 607 | $ | 2,677 | $ | - | $ | 2,677 | ||||||||||||
Liabilities:
|
||||||||||||||||||||||||
Derivative
liability
|
$ | - | $ | 9,708 | $ | 9,708 | $ | - | $ | - | $ | - |
The
adoption of this guidance related to financial assets and liabilities on January
1, 2008 and non-financial assets and liabilities on January 1, 2009 did not have
a material impact on our consolidated financial statements.
NOTE
9 – PREFERRED STOCK
On
November 7, 2007, and February 4, 2008, we entered into securities purchase
agreements (the Purchase Agreements) with accredited investors to sell shares of
a newly created series of our preferred stock, designated “Series A Cumulative
Convertible Preferred Stock”, par value $0.01 per share, for an issue price of
$10,000 per share, (the Series A Preferred Stock) and agreed to issue warrants
to purchase shares of our common stock at an exercise price of $3.50 per share.
The shares of Series A Preferred Stock are convertible into common stock at the
initial conversion price of $3.00 per share.
As a
condition to closing, we entered into an Investor Rights Agreement with each of
the investors purchasing shares of Series A Preferred Stock, and our Board of
Directors approved with respect to the shareholder rights plan any action
necessary under our shareholder rights plan to accommodate the issuance of the
Series A Preferred Stock and warrants without triggering the applicability of
the shareholder rights plan.
In
connection with the sale and issuance of Series A Preferred Stock and warrants,
we entered into a Director Designation Agreement whereby we agreed to continue
SCO’s right to designate two individuals to serve on the Board of Directors of
Access.
The
issued and outstanding shares of Series A Preferred Stock grants the holders of
such preferred stock anti-dilution, dividend and liquidations rights that are
superior to those held by the holders of our common stock. Under these
terms, should Access issue additional shares of common stock, in certain
circumstances, for a price below $3.00 per share, the conversion price of the
Series A Preferred Stock will be lowered to the lowest subsequent issue price
below $3.00 per share until the shares are converted or redeemed. This will have
the effect of diluting the holders of our common stock. Under the terms of the
Purchase Agreement, should Access issue additional shares of common stock, in
certain circumstances, for a price below $3.50 per share, the exercise price of
the warrants will be lowered to the lowest subsequent issue price below $3.50
per share until the warrants are exercised or expire. Additionally, as discussed
below, if we are unable to maintain an effective registration statement related
to the Series A Preferred Stock, we would be required to pay liquidating
damages.
November 7, 2007 Preferred
Stock
On
November 7, 2007, we entered into the Purchase Agreements with accredited
investors whereby we agreed to sell 954.0001 shares of a newly created series of
our Series A Preferred Stock and agreed to issue warrants to purchase 1,589,999
shares of our common stock at an exercise price of $3.50 per share, for an
aggregate purchase price for the Series A Preferred Stock and Warrants of
$9,540,001. The shares of Series A Preferred Stock are convertible into common
stock at the initial conversion price of $3.00 per share.
As a
condition to closing, SCO Capital Partners LLC and affiliates, along with the
other holders of an aggregate of $6,000,000 Secured Convertible Notes, also
exchanged their notes and accrued interest for an additional 1,836.0512 shares
of Series A Preferred Stock and were issued warrants to purchase 1,122,031
shares of our common stock at an exercise price of $3.50 per share, and Oracle
Partners LP and affiliates, along with the other holders of an aggregate of
$4,015,000 Convertible Notes also exchanged their notes and accrued interest for
437.3104 shares of the Series A Preferred Stock and were issued warrants to
purchase 728,850 shares of our common stock at an exercise price of $3.50 per
share. In connection with the exchange of the notes, all security interests
and liens relating thereto were terminated.
F-14
The
conversion of debt into equity resulted in a loss on extinguishment of debt of
$11,628,000. This represented the difference between the fair value of the
equity interest granted, based on recent sales of identical equity instruments,
and the carrying amount of the debt and interest settled.
In
connection with the preferred stock offering, we issued warrants for placement
agent fees, to purchase a total of 209,000 shares of common stock. All of the
warrants are exercisable immediately and expire six years from date of issue.
The fair value of the warrants was $2.59 per share on the date of the grant
using the Black-Scholes pricing model with the following assumptions: expected
dividend yield 0.0%, risk-free interest rate 3.84%, expected volatility 110% and
a term of 6 years.
February 4, 2008 Preferred
Stock
On
February 4, 2008, we entered into Purchase Agreements with accredited investors
whereby we agreed to sell 272.50 shares of our Series A Preferred Stock and
agreed to issue warrants to purchase 454,167 shares of our common stock at an
exercise price of $3.50 per share, for an aggregate purchase price for the
Series A Preferred Stock and Warrants of $2,725,000. Proceeds, net of cash
issuance costs from the sale were $2,444,000. The shares of Series A Preferred
Stock are convertible into common stock at the initial conversion price of $3.00
per share.
The
shares of Series A Preferred Stock are initially convertible into common stock
at $3.00 per share. Based on the price of our common stock on February 4, 2008
and the fair value attributed to the attached warrants, a new conversion price
was calculated for accounting purposes. As a result of the change in conversion
price for accounting purposes the preferred stock was considered to be “in the
money”. This resulted in a beneficial conversion feature. The preferred
stockholder has the right at any time to convert all or any lesser portion of
the Series A Preferred Stock into common stock. This resulted in an intrinsic
value of the preferred stock. The difference between the implied value of the
preferred stock and the beneficial conversion option was treated as preferred
stock dividends of $857,000.
An
additional $451,000 in preferred stock dividends was recorded in the first
quarter of 2008 as a result of a prior year correction. The change was due to
preferred stock dividends and the beneficial conversion features associated with
the warrants issued in connection with the November 2007 preferred stock
agreement. We determined that the adjustment would have an immaterial effect to
our consolidated financial statements for the years ended December 31, 2008,
based on management’s qualitative and quantitative analysis relative to its
materiality consistent with the applicable accounting guidance.
In
connection with the preferred stock offering, we issued warrants for placement
agent fees to purchase a total of 45,417 shares of common stock. All of the
warrants are exercisable immediately and expire six years from the date of
issue. The fair value of the warrants was $2.29 per share on the date
of grant using the Black-Scholes option pricing model with the following
assumptions: expected dividend yield 0.0%, risk-free interest rate 2.75%,
expected volatility 110% and an expected term of 6 years.
Change in Accounting
Principle
Effective
January 1, 2009, we adopted the provisions of FASB ASC 815, “Derivatives and Hedging” (FASB ASC 815)
(previously EITF 07-5, “Determining Whether an
Instrument (or an Embeded Feature) is Indexed to an Entity’s Own Stock”).
As a result of adopting FASB ASC 815, warrants to purchase 3,895,047 of our
common stock previously treated as equity pursuant to the derivative treatment
exemption were no longer afforded equity treatment. These warrants have an
exercise price of $3.50 and expire on November 10, 2013 and February 24, 2014.
Effective January 1, 2009, we reclassified the fair value of these common stock
warrants, from equity to liability status, as if these warrants were treated as
a derivative liability since origination.
F-15
We
determined that the anti-dilution provision built into the preferred shares and
warrants issued should be considered for derivative accounting. FASB ASC
815 requires freestanding contracts that are settled in a company’s own stock to
be designated as an equity instrument, assets or liability. Under the provisions
of FASB ASC 815, a contract designated as an asset or liability must be
initially recorded and carried at fair value until the contract meets the
requirements for classification as equity, until the contract is exercised or
until the contract expires. We determined that the anti-dilution provision
associated with the November 2007 and February 2008 preferred shares and
warrants no longer met the criteria for equity accounting through the revised
criteria in FASB ASC 815. FASB ASC 815 provides for transition guidance whereby
a cumulative effect of a change in accounting principle should be recognized as
an adjustment to retained earnings and other impacted balance sheet items as of
January 1, 2009. The cumulative-effect adjustment is the difference between the
amounts recognized prior to adoption and amounts recognized at adoption assuming
this guidance had been applied from the issuance date of the preferred stock and
warrants.
Accordingly,
at January 1, 2009, we determined that the warrants and the preferred stock
conversion feature should be accounted for as derivative liabilities. The
preferred stock conversion feature was determined to have no fair market value
at both issuance dates as well as each reporting period since management
asserts that the likelihood of issuing any new equity at a price that would
trigger the anti-dilution effect to be nil. We will reevaluate this in future
reporting periods to determine if a derivative liability should be
recorded. The warrants were valued at issuance and each reporting
period since using the Black-Scholes model. Both of these derivatives
will continue to be marked to market in accordance with FASB ASC
815.
On
January 1, 2009 we reclassified the fair value of the warrants from equity to
liability as if these warrants were treated as a derivative liability since
their issue date. Additionally, we reclassified $15,957,000 of
previously recorded beneficial conversion features recorded under the previous
accounting that related to the preferred stock and warrants. The impact of
adoption was a decrease in Additional paid-in capital of $15,957,000, a decrease
in accumulated deficit of $13,404,000 and an increase in derivative liability of
$2,553,000.
The
resulting accounting leads to derivative liability of $2,553,000 as of January
1, 2009 and $9,708,000 as of December 31, 2009. We recorded derivative expense
of $7,154,000 for the year ended December 31, 2009.
The fair
value of the derivative liability was calculated using the Black-Scholes option
pricing model. The assumptions that were used to calculate fair value were as
follows.
January 1, 2009
|
December 31, 2009
|
|||||
Risk-free
interest rate
|
1.55 | % | 2.69 | % | ||
Expected
volatility
|
116.31 | % | 117.43 | % | ||
Expected
life (in years)
|
4.88 | 3.88 | ||||
Dividend
yield
|
0.00 | % | 0.00 | % | ||
As noted
above, we were required to adopt this guidance effective January 1, 2009,
however we did not apply this guidance to its 2009 Form 10-Q’s as required and
instead recorded the adoption impact and current year activity in the fourth
quarter. The impact, if recorded in the appropriate quarterly period would have
been an increase in expense and derivative liability of $2,104,000, $2,036,000
and $1,929,000 for the three months ended March 31, June 30, and September 30,
2009, respectively. Additionally, our Form 10-Q’s for 2009 do not reflect the
cumulative impact of the change in accounting principle which resulted in a
decrease in additional paid-in capital of $15,957,000, a decrease in accumulated
deficit of $13,404,000 and an increase in derivative liability of $2,553,000 on
January 1, 2009.
F-16
Liquidated
Damages
Pursuant
to the terms of an Investor Rights Agreement with the Purchasers of Series A
Preferred Stock, we are required to maintain an effective registration
statement. The Securities and Exchange Commission declared the registration
statement effective November 13, 2008 relating to a portion of such securities,
and as a result, we accrued $857,000 in potential liquidated damages as of
December 31, 2009 and $675,000 in potential liquidated damages as of December
31, 2008. Potential liquidated damages are capped at 10% of each holder's
investment. However, pursuant to the terms of the Investor Rights
Agreement, we may not be required to pay such liquidated damages if such shares
are saleable without restriction pursuant to Rule 144 of the Securities Act of
1933.
Preferred Stock
Dividends
Preferred
stock dividends of $2,773,000 were accrued through December 31, 2009, plus
interest. Dividends are required to be paid semi-annually in either cash or
common stock.
NOTE
10 – STOCKHOLDERS’ EQUITY
Restricted Stock Purchase
Program
On
October 12, 2000, the Board of Directors authorized a Restricted Stock Purchase
Program. Under the Program, the Company’s executive officers and corporate
secretary were given the opportunity to purchase shares of common stock in an
individually designated amount per participant determined by the Compensation
Committee of the Board of Directors. A total of 38,000 shares were purchased
under the Program by four eligible
participants at $27.50 per share, the fair market value of the common stock on
October 12, 2000, for an aggregate consideration of $1,045,000. The purchase
price was paid through the participants’ delivery of a 50%-recourse promissory
note payable to the Company for three executive officer participants and a
full-recourse promissory note payable to the Company for one participant. Each
note bears interest at 5.87% compounded semi-annually and has a maximum term of
ten years. The notes are secured by a pledge of the purchased shares to the
Company. The Company recorded the notes receivable from participants in this
Program of $1,045,000 as a reduction of equity in the Consolidated Balance
Sheets. Interest on the notes is neither being collected nor accrued. The stock
granted under the Program is fully vested.
Warrants
There
were warrants to purchase a total of 9,835,479 shares of common stock
outstanding at December 31, 2009. All warrants were exercisable at December 31,
2009, except for warrants to acquire 155,000 shares of common stock. The
warrants had various exercise prices and terms as follows:
Warrants
|
Exercise
|
Expiration
|
|||||||
Summary
of Warrants
|
Outstanding
|
Price
|
Date
|
||||||
2009
investor relations advisor (a)
|
30,000 | $ | 3.45 |
9/15/12
|
|||||
2009
business consultant (b)
|
150,000 | 2.07 |
7/23/14
|
||||||
2009
investor relations advisor (c)
|
50,000 | 6.00 |
8/27/12
|
||||||
2009
investor relations advisor (d)
|
60,000 | 1.85 |
7/14/12
|
||||||
2008
preferred stock offering (e)
|
499,584 | 3.50 |
2/24/14
|
||||||
2008
Somanta accounts payable (f)
|
246,753 | 3.50 |
1/04/14
|
||||||
2008
warrants assumed on acquisition (g)
|
191,991 | 18.55-69.57 |
6/9/10-1/31/12
|
||||||
2008
investor relations advisor (h)
|
50,000 | 3.15 |
1/3/13
|
||||||
2008
investor relations advisor (i)
|
40,000 | 3.00 |
9/1/13
|
||||||
2008
scientific consultant (j)
|
200,000 | 3.15 |
1/4/12
|
||||||
2007
preferred stock offering (k)
|
3,649,880 | 3.50 |
11/10/13
|
||||||
2006
convertible note (l)
|
3,853,634 | 1.32 |
2/16/12
|
||||||
2006
convertible note (l)
|
386,364 | 1.32 |
10/24/12
|
||||||
2006
convertible note (l)
|
377,273 | 1.32 |
12/06/12
|
||||||
2006
investor relations advisor (m)
|
50,000 | 2.70 |
12/27/11
|
||||||
Total
|
9,835,479 |
F-17
a)
|
During
2009, an investor relations advisor received warrants to purchase 30,000
shares of common stock at an exercise price of $3.45 per share at any time
until September 15, 2012, for investor relations consulting services
rendered from October 2009 through March 2010. 15,000 of the warrants were
exercisable on December 31, 2009 and 15,000 of the warrants will be
exercisable – 5,000 on January 31, 2010, 5,000 on February 28, 2010 and
5,000 on March 31, 2010. The fair value of the warrants was $1.55 per
share on the date of the grant using the Black-Scholes pricing model with
the following assumptions: expected dividend yield 0.0%, risk-free
interest rate 1.43%, expected volatility 0.87% and a term of 3 years. The
expense recorded for the year ended December 31, 2009 was
$24,000.
|
b)
|
During
2009, a business consultant received warrants to purchase 150,000 shares
of common stock at an exercise price of $2.07 per share at any time until
July 23, 2014, for business consulting services rendered in 2009. 60,000
of the warrants were exercisable on December 31, 2009. The remaining
90,000 warrants may vest in 30,000 share increments with our stock price
reaching specified trading prices. The remaining warrants will expire July
23, 2010 if our stock does not reach these specified trading prices. The
expense recorded for the year ended December 31, 2009 was
$238,000.
|
c)
|
During
2009, an investor relations advisor received warrants to purchase 50,000
shares of common stock at an exercise price of $6.00 per share at any time
until August 27, 2012, for investor relations consulting services rendered
in 2009. All 50,000 of the warrants were exercisable at December 31, 2009.
The fair value of the warrants was $2.04 per share on the date of the
grant using the Black-Scholes pricing model with the following
assumptions: expected dividend yield 0.0%, risk-free interest rate 1.58%,
expected volatility 119% and a term of 3 years. The expense recorded for
the year ended December 31, 2009 was
$102,000.
|
d)
|
During
2009, an investor relations advisor received warrants to purchase 60,000
shares of common stock at an exercise price of $1.85 per share at any time
until July 14, 2012, for investor relations consulting services rendered
in 2009. All 60,000 of the warrants were exercisable on December 31, 2009.
The expense recorded for the year ended December 31, 2009 was
$233,000.
|
e)
|
In
connection with the preferred stock offering in February 2008, warrants to
purchase a total of 499,584 shares of common stock were issued. All of the
warrants are exercisable immediately and expire six years from date of
issue. The fair value of the warrants was $2.29 per share on the date of
the grant using the Black-Scholes pricing model with the following
assumptions: expected dividend yield 0.0%, risk-free interest rate 2.75%,
expected volatility 110% and a term of 6
years.
|
f)
|
In
connection with our acquisition of Somanta Pharmaceuticals, Inc. (Somanta)
we exchanged for $1,576,000 due to Somanta vendors, 538,508 shares of our
common stock and warrants to purchase 246,753 shares of common stock at
$3.50. The warrants expire January 4,
2014.
|
g)
|
We
assumed three warrants in the Somanta
acquisition:
|
-
|
Warrant#1
– 323 shares of our common stock at $69.57 per share and expires June 9,
2010.
|
-
|
Warrant
#2 – 31,943 shares of our common stock at $18.55 per share and expires
January 31, 2012.
|
-
|
Warrant
#3 – 159,725 shares of our common stock at $23.19 per share and expires
January 31, 2012.
|
h)
|
During
2008, an investor relations advisor received warrants to purchase 50,000
shares of common stock at an exercise price of $3.15 per share at any time
until January 3, 2013, for investor relations consulting services rendered
in 2008. 25,000 of the warrants were exercisable on July 3, 2008 and
25,000 of the warrants will be exercisable January 3, 2009. The fair value
of the warrants was $2.24 per share on the date of the grant using the
Black-Scholes pricing model with the following assumptions: expected
dividend yield 0.0%, risk-free interest rate 3.13%, expected volatility
127% and a term of 5 years.
|
F-18
i)
|
During
2008, an investor relations advisor received warrants to purchase 40,000
shares of common stock at an exercise price of $3.00 per share at any time
until September 1, 2013, for investor relations consulting services. All
of the warrants are exercisable. The fair value of the warrants was $2.61
per share on the date of the grant using the Black-Scholes pricing model
with the following assumptions: expected dividend yield 0.0%, risk-free
interest rate 2.37%, expected volatility 132% and a term of 5
years.
|
j)
|
During
2008, a director who is also a scientific advisor received warrants to
purchase 200,000 shares of common stock at an exercise price of $3.15 per
share at any time until January 4, 2012, for scientific consulting
services rendered in 2008. The warrants vest over two years in 50,000
share blocks with vesting on July 4, 2008, January 4, 2009, July 4, 2009
and the remaining shares on January 4, 2010. The fair value of the
warrants was $1.78 per share on the date of the grant using the
Black-Scholes pricing model with the following assumptions: expected
dividend yield 0.0%, risk-free interest rate 2.01%, expected volatility
92% and a term of 4 years.
|
k)
|
In
connection with the preferred stock offering in November 2007, warrants to
purchase a total of 3,649,880 shares of common stock were issued. All of
the warrants are exercisable immediately and expire six years from date of
issue. The fair value of the warrants was $2.50 per share on the date of
the grant using the Black-Scholes pricing model with the following
assumptions: expected dividend yield 0.0%, risk-free interest rate 3.84%,
expected volatility 114% and a term of 6
years.
|
l)
|
In
connection with the convertible note offerings in 2006, warrants to
purchase a total of 4,617,271 shares of common stock were issued. All of
the warrants are exercisable immediately and expire six years from date of
issue.
|
m)
|
During
2006, an investor relations advisor received warrants to purchase 50,000
shares of common stock at an exercise price of $2.70 per share at any time
from December 27, 2006 until December 27, 2011, for investor relations
consulting services rendered in 2007. All of the warrants are
exercisable.
|
Also,
during 2009, an investor relations advisor received warrants for investor
relations consulting services rendered in 2009. All of the warrants were
exercised into 20,415 shares of common stock. The warrants were exercisable at
$1.85 per share and would have expired July 14, 2012. The expense recorded for
the year ended December 31, 2009 was $36,000.
2001 Restricted Stock
Plan
We have a
restricted stock plan, the 2001 Restricted Stock Plan, as amended, under which
80,000 shares of our authorized but unissued common stock were reserved for
issuance to certain employees, directors, consultants and advisors. The
restricted stock granted under the plan generally vests, 25% two years after the
grant date with additional 25% vesting every anniversary date. All stock is
vested after five years. At December 31, 2009 there were 27,182 shares issued
and 52,818 shares available for grant under the 2001 Restricted Stock Plan. All
the issued shares are vested.
NOTE
11 - STOCK OPTION PLANS
We
account for stock based compensation expense in accordance with FASB ASC 718,
Stock Based
Compensation. We have several stock-based compensation plans under which
incentive and non-incentive qualified stock options and restricted shares may be
granted to employees, directors and consultants. We measure the cost of the
employee/director/consultant services received in exchange for an award of
equity instruments based on the grant date fair value of the award.
Our various stock-based employee
compensation plans described below:
F-19
2005 Equity Incentive
Plan
We have a
stock awards plan, (the 2005 Equity Incentive Plan), under which 3,150,000
shares of our authorized but unissued common stock were reserved for issuance to
employees, consultants, or to non-employee members of the Board or to any board
of directors (or similar governing authority) of any affiliate of the Company.
The 2005 Equity Incentive Plan replaced the previously approved stock option
plan (the 1995 Stock Awards Plan).
For the
2005 Equity Incentive Plan, the fair value of options was estimated at the date
of grant using the Black-Scholes option pricing model with the following
weighted average assumptions used for grants in fiscal 2009: dividend yield of
0%; volatility of 115%; risk-free interest rate of 2.37%; and expected lives of
5.5 years. The weighted average fair value of options granted was $1.38 per
share during 2009. The assumptions for grants in fiscal 2008 were: dividend
yield of 0%; volatility of 133%; risk-free interest rate of 2.97%; and expected
lives of 6.2 years. The weighted average fair value of options granted was $2.73
per share during 2008.
Summarized
information for the 2005 Equity Incentive Plan is as follows:
Weighted-
|
||||||||
average
|
||||||||
exercise
|
||||||||
Options
|
price
|
|||||||
Outstanding
options at January 1, 2008
|
926,386 | $ | 1.59 | |||||
Granted,
fair value of $ 2.73 per share
|
305,000 | 3.00 | ||||||
Exercised
|
(25,250 | ) | 0.63 | |||||
Expired
|
(69,316 | ) | 3.17 | |||||
Outstanding
options at December 31, 2008
|
1,136,820 | 1.90 | ||||||
Granted,
fair value of $ 1.38 per share
|
565,000 | 1.38 | ||||||
Exercised
|
(249,916 | ) | 0.73 | |||||
Expired
|
(16,667 | ) | 3.00 | |||||
Outstanding
options at December 31, 2009
|
1,435,237 | 1.99 | ||||||
Exercisable at December 31, 2009 | 1,215,238 | 1.80 |
The
intrinsic value of options under this plan related to the outstanding and
exercisable options were $2,112,000 and $2,050,000 at December 31, 2009,
respectively. The intrinsic value of options under this plan related to the
outstanding and exercisable options were $229,000 at December 31,
2008.
The total
intrinsic value of options exercised during 2009 was $642,000 and during 2008
was $60,000.
Further
information regarding options outstanding under the 2005 Equity Incentive Plan
at December 31, 2009 is summarized below:
Number
of
|
Weighted
average
|
Number
of
|
Weighted-average
|
|||
options
|
Remaining
|
Exercise
|
options
|
Remaining
|
Exercise
|
|
Range
of exercise prices
|
outstanding
|
life in years
|
price
|
exercisable
|
life in years
|
price
|
$0.63
- 0.85
|
412,500
|
7.0
|
$0.64
|
412,500
|
7.0
|
$0.64
|
$1.38
|
460,000
|
10.0
|
$1.38
|
460,000
|
10.0
|
$1.38
|
$2.90
- 7.23
|
562,737
|
8.7
|
$3.47
|
342,738
|
8.2
|
$3.75
|
1,435,237
|
1,215,238
|
F-20
2007 Special Stock Option
Plan
In
January 2007 we adopted the 2007 Special Stock Option Plan and Agreement (the
Plan). The Plan provides for the award of options to purchase 450,000 shares of
the authorized but unissued shares of common stock of the Company. At December
31, 2009, there were 350,000 additional shares available for grant under the
Plan.
Under the
2007 Special Stock Option Plan, 450,000 options were issued in 2007 and 350,000
were forfeited. 100,000 options were outstanding at December 31, 2009 and 2008.
100,000 options in the 2007 Special Stock Option Plan were exercisable at
December 31, 2009 and 2008. All of the options had an exercise price of $2.90
per share and expire March 12, 2010.
1995 Stock Awards
Plan
Under the
1995 Stock Awards Plan, as amended, 500,000 shares of our authorized but
unissued common stock were reserved for issuance to optionees including
officers, employees, and other individuals performing services for us. At
December 31, 2009, there were no additional shares available for grant under the
1995 Stock Awards Plan. A total of 103,000 options were outstanding under this
plan at December 31, 2009.
Options
granted under all the plans generally vest ratably over a four to five year
period and are generally exercisable over a ten-year period from the date of
grant. Stock options were generally granted with an exercise price equal to the
market value at the date of grant.
Summarized
information for the 1995 Stock Awards Plan is as follows:
Weighted-
|
||||||||
average
|
||||||||
exercise
|
||||||||
Options
|
price
|
|||||||
Outstanding
options at January 1, 2008
|
162,417 | $ | 15.53 | |||||
Expired
|
(44,417 | ) | 16.57 | |||||
Outstanding
options at December 31, 2008
|
118,000 | 15.14 | ||||||
Expired
|
(15,000 | ) | 10.00 | |||||
Outstanding
options at December 31, 2009
|
103,000 | 15.89 | ||||||
Exercisable
at December 31, 2009
|
103,000 | 15.89 |
There was
no intrinsic value related to outstanding or exercisable options under this plan
at December 31, 2009 or 2008.
Further
information regarding options outstanding under the 1995 Stock Awards Plan at
December 31, 2009 is summarized below:
Number
of
|
Weighted
average
|
Number
of
|
Weighted-average
|
|||
options
|
Remaining
|
Exercise
|
options
|
Remaining
|
Exercise
|
|
Range
of exercise prices
|
outstanding
|
life in years
|
price
|
exercisable
|
life in years
|
price
|
$10.10
- 12.50
|
60,640
|
3.8
|
$11.74
|
60,640
|
3.8
|
$11.74
|
$14.05
- 18.65
|
22,800
|
2.8
|
$16.82
|
22,800
|
2.8
|
$16.82
|
$20.25
– 29.25
|
19,560
|
4.1
|
$26.58
|
19,560
|
4.1
|
$26.58
|
103,000
|
103,000
|
Two
directors, who retired from our board of directors May 21, 2008, were granted
two years until May 21, 2010 to exercise their vested stock options. This
modification resulted in $100,000 in stock option expense that was recognized in
year ended December 31, 2008.
F-21
NOTE
12 – MACROCHEM, SOMANTA AND VIRIUM ACQUISITIONS
MacroChem Corporation
Acquisition
On
February 25, 2009, the Company issued approximately 2,500,000 shares of its
common stock in exchange for 100% of the outstanding stock and warrants of
MacroChem Corporation (MacroChem). MacroChem’s principal activities were to
develop and seek to commercialize pharmaceutical products using its proprietary
drug delivery technologies. Its portfolio of proprietary product candidates was
based on its drug delivery technologies: Soft Enhancement of Percutaneous
Absorption (SEPA), MacroDerm and DermaPass. Its SEPA topical drug delivery
technology enhances the efficiency and rate of diffusion of drugs into and
through the skin. MacroChem had two clinical stage investigational new drugs:
EcoNail, for the treatment of fungal infections of the nails and Pexiganan, for
the treatment of mild diabetic foot infection (DFI).
Prior to
our acquisition of MacroChem, SCO, an investment company, held a majority of
Access’ and MacroChem’s voting stock. Specifically, SCO owned 53% of
the voting stock of Access and 63% of the voting stock of MacroChem. A
non-controlling interest of 37% existed at the merger date of MacroChem. In
addition, certain members of SCO’s management serve on the board of directors of
both Access and MacroChem. Based on these facts, Access and MacroChem were
deemed under the common control of SCO. As the entities were deemed under common
control, the acquisition was recorded similar to the pooling-of-interest method
and the financial information for all periods presented reflects the financial
statements of the combined companies in accordance with Financial Accounting
Standards Board standards on business combinations for entities under common
control.
Upon
acquisition, all outstanding warrants and any other dilutive instruments in
MacroChem’s stock were cancelled. The in-the-money warrants were converted with
the common stock. In addition to the merger, the noteholders of MacroChem agreed
to exchange their notes and interest due on the notes in the total amount of
$859,000 for 859,000 restricted shares of the Access’ common stock. The value of
the shares issued was determined based on the carrying value of the debt, which
was established to be the more readily determinable fair value.
In
addition, we issued 125,000 shares of Access common stock to former executives
of MacroChem for the settlement of employment agreements.
In
connection with the exchange of equity interests, $106,000 in merger costs were
expensed.
The
income statement for all periods presented reflects the combined carrying amount
of revenue and expenses. Below is a reconciliation of summary financial data for
the year ended December 31, 2009 and the combined MacroChem financial data for
the year ended December 31, 2008. The balance sheet as of December 31, 2008 also
reflects the combined entities.
Following
is a summary balance sheet at December 31, 2008:
Access
Pharmaceuticals
|
MacroChem
Corporation
|
Combined
|
||||||||||
Current
assets
|
$ | 3,550,000 | $ | 84,000 | $ | 2,999,000 | ||||||
Total
assets
|
4,257,000 | 549,000 | 4,171,000 | |||||||||
Current
liabilities
|
4,906,000 | 3,346,000 | 7,612,000 | |||||||||
Long-term
deferred revenue
|
2,245,000 | 24,000 | 2,245,000 | |||||||||
Long-term
debt
|
5,500,000 | - | 5,500,000 | |||||||||
Stockholders’
deficit
|
(8,394,000 | ) | (2,925,000 | ) | (11,186,000 | ) |
Intercompany
receivables/payables of $635,000 and intercompany deferred revenue of $29,000
were eliminated.
Following
is a summary statement of combined operations for the year ended December 31,
2009 and December 31, 2008:
F-22
For the year ended December 31,
2009
|
For the year ended December 31,
2008
|
|||||||||||||||||||||||
Access
Pharmaceuticals
|
MacroChem
Corporation
|
Combined
|
Access
Pharmaceuticals
|
MacroChem
Corporation
|
Combined
|
|||||||||||||||||||
Total
revenues
|
$ | 352,000 | $ | - | $ | 352,000 | $ | 291,000 | $ | - | $ | 291,000 | ||||||||||||
Expenses
|
||||||||||||||||||||||||
Research
and development
|
2,645,000 | 12,000 | 2,657,000 | 12,613,000 | 10,622,000 | 23,235,000 | ||||||||||||||||||
General
and administrative
|
6,932,000 | 180,000 | 7,112,000 | 4,340,000 | 3,123,000 | 7,463,000 | ||||||||||||||||||
Depreciation
and
amortization
|
207,000 | 52,000 | 259,000 | 253,000 | 71,000 | 324,000 | ||||||||||||||||||
Total
expenses
|
9,784,000 | 244,000 | 10,028,000 | 17,206,000 | 13,816,000 | 31,022,000 | ||||||||||||||||||
Loss
from operations
|
(9,432,000 | ) | (244,000 | ) | (9,676,000 | ) | (16,915,000 | ) | (13,816,000 | ) | (30,731,000 | ) | ||||||||||||
Interest
and miscellaneous
Income
|
29,000 | - | 29,000 | 178,000 | 33,000 | 211,000 | ||||||||||||||||||
Interest
and other expense
|
(513,000 | ) | (26,000 | ) | (539,000 | ) | ||||||||||||||||||
Change
in fair value of
derivative
|
(7,154,000 | ) | - | (7,154,000 | ) | (478,000 | ) | (433,000 | ) | (911,000 | ) | |||||||||||||
|
(7,638,000 | ) | (26,000 | ) | (7,664,000 | ) | (300,000 | ) | (400,000 | ) | (700,000 | ) | ||||||||||||
Loss
from operations
|
(17,070,000 | ) | (270,000 | ) | (17,340,000 | ) | (17,215,000 | ) | (14,216,000 | ) | (31,431,000 | ) | ||||||||||||
Less
preferred stock
Dividends
|
(1,886,000 | ) | - | (1,886,000 | ) | (3,358,000 | ) | - | (3,358,000 | ) | ||||||||||||||
Net
loss allocable to
common
stockholders
|
$ | (18,956,000 | ) | $ | (270,000 | ) | $ | (19,226,000 | ) | $ | (20,573,000 | ) | $ | (14,216,000 | ) | $ | (34,789,000 | ) | ||||||
Basic
and diluted loss per
common
share
|
||||||||||||||||||||||||
Net
loss allocable to
common
stockholders
|
- | - | $ | (1.63 | ) | - | - | $ | (4.16 | ) | ||||||||||||||
Weighted
average basic
and
diluted common
shares
outstanding
|
- | - | 11,818,530 | - | - | 8,354,031 |
Somanta Pharmaceuticals,
Inc. Acquisition
On
January 4, 2008, we acquired all the outstanding shares of Somanta
Pharmaceuticals, Inc (“Somanta”). Somanta was engaged in the pharmaceutical
development business. We anticipate that the acquisition will add additional
product pipelines and complement our existing product pipelines. Total
consideration paid in connection with the acquisition included:
·
|
Approximately
1.5 million shares of Access common stock were issued to the common and
preferred shareholders of Somanta as consideration having a value of
approximately $4,650,000 (the value was calculated using Access’ stock
price on January 4, 2008, times the number of shares
issued);
|
·
|
exchange
of all outstanding warrants for Somanta common stock for warrants to
purchase 191,991 shares of Access common stock at exercise prices ranging
between $18.55 and $69.57 per share. The warrants were valued at
approximately $281,000. All of the warrants are exercisable immediately
and expire approximately four years from date of issue. The weighted
average fair value of the warrants was $1.46 per share on the date of the
grant using the Black-Scholes pricing model with the following
assumptions: expected dividend yield 0.0%, risk-free interest rate 3.26%,
expected volatility 114% and an expected term of approximately 4
years;
|
·
|
paid
an aggregate of $475,000 in direct transaction costs;
and
|
·
|
cancelled
receivable from Somanta of
$931,000.
|
The
following table summarizes the fair values of the assets acquired and
liabilities assumed at the date of the acquisition (in thousands) based on a
valuation.
Cash
|
$ | 1 | ||
Prepaid
expenses
|
25 | |||
Office
equipment
|
14 | |||
Accounts
payable
|
(2,582 | ) | ||
In-process
research & development
|
8,879 | |||
$ | 6,337 |
F-23
Approximately
$8,879,000 of the purchase price represents the estimated fair value of the
acquired in-process research and development projects that have no alternative
future use. Accordingly this amount was immediately expensed as
research and development in the consolidated statement of operations upon the
acquisition date.
Operating
results of Somanta have been included in our consolidated financial statements
since January 4, 2008.
The
following unaudited pro forma information presents the 2008 results of the
Company as if the acquisition had occurred on January 1, 2008. The unaudited pro
forma results are not necessarily indicative of results that would have occurred
had the acquisition been in effect for the periods presented, nor are they
necessarily indicative of future results. No significant operations occurred
after October 31, 2007 until the acquisition on January 4, 2008. Amounts are
shown in thousands.
Twelve
months ended
December
31, 2008
|
||||
Net
loss allocable to common stockholders
|
$ | (20,573 | ) | |
Net
loss per common shares (basic and diluted)
|
$ | (3.51 | ) | |
Weighted
average common shares outstanding
(basic and diluted)
|
5,854 |
Virium Pharmaceuticals, Inc.
Acquisition by MacroChem Corporation
On
April 18, 2008, the MacroChem acquired Virium Pharmaceuticals Inc.
(“Virium”), a privately held biotechnology company focused primarily on oncology
based technology, pursuant to the terms of an Agreement and Plan of Merger (the
Merger Agreement) dated as of April 18, 2008 by and among the Company, VRM
Acquisition, LLC, a Delaware limited liability company and a direct wholly-owned
subsidiary of the Company (VRM Acquisition), Virium and Virium
Holdings, Inc., a non-public Delaware corporation (Holdings) and the parent
of Virium. On the Effective Date, VRM Acquisition merged with and into
Virium with Virium continuing as the surviving company and a wholly-owned
subsidiary of the Company (the Merger). Pursuant to the Merger Agreement, each
share of Virium common stock outstanding at the Effective Time was converted
into the right to receive 0.89387756 shares of MacroChem’s common stock (the
Merger Consideration) resulting in an aggregate of 22,898,386 shares of
MacroChem common stock being issued in the Merger. The fair value of the
shares issued on the closing date to the stockholders of Virium was
$6,870,000.
Virium
had a pipeline of oncology products that target a variety of niche cancer
indications. Virium’s product pipeline included a next generation
nucleoside analogue (small molecule) which it had licensed from the Southern
Research Institute in August 2007. This class of compounds has
demonstrated proven efficacy in certain hematological cancer
indications.
As
described in more detail below, MacroChem assumed convertible notes of
Virium.
On
April 23, 2008, MacroChem assumed all obligations under the convertible
promissory note in the aggregate principal amount of $500,000 issued to
Strategic Capital Resources, Inc. by Virium on May 30, 2007 (the First
Convertible Note). The First Convertible Note was due to mature on
April 25, 2008. The First Convertible Note had a 12% annual interest
rate until November 30, 2007, which increased to 15%
thereafter. MacroChem paid to Strategic Capital Resources, Inc.
$45,000 in cash which represents all accrued and unpaid interest on such note
through the date of consummation of the Merger plus $10,000. MacroChem made
this payment in consideration of Strategic Capital Resources, Inc.’s prior
agreement with Virium to extend the maturity date on its note from
March 26, 2008 to April 25, 2008.
F-24
On
June 6, 2008, MacroChem repaid a principal amount of $400,000 to the holder
of the First Convertible Note together with accrued and unpaid interest thereon.
Further, on June 23, 2008, the Company repaid the unpaid principal balance
of $100,000 together with accrued and unpaid interest thereon to the remaining
holder of the First Convertible Note. Additionally, the First Convertible
Note was repaid, in part, with funds from new holders of convertible promissory
notes whose notes mature on December 6, 2008. The new promissory notes have
a principal amount of $400,000 and a warrant to purchase 100,000 shares of
common stock at $.01. The fair value of the warrants issued of $24,000 is
recorded as debt discount and is being amortized to interest expense over the
term of the debt. The notes have a 12% interest rate with accrued interest due
on or prior to the 5th day of each calendar month. These notes are due to mature
on the earlier of 1) closing of the next financing by MacroChem or 2)
December 6, 2008. The default status of these notes triggered the
convertibility of 50% of the principal at a rate of $0.018, which is 50% of the
average market price for five days preceding the triggering event. This resulted
in a beneficial conversion feature with a value of $188,000 recorded to interest
expense and additional paid-in capital. The principal amount of $400,000 in
notes was outstanding at December 31, 2008 and continued to accrue interest
until February 25, 2009, the date of the acquisition by Access.
MacroChem
also assumed on the Effective Date all obligations under convertible promissory
notes in the aggregate principal amount of $500,000 issued by Virium on
December 12, 2007 (the Second Convertible Notes). The Second
Convertible Notes were to mature on the earlier of (a) the closing of any
equity financing by MacroChem or (b) June 12, 2008. The
Second Convertible Notes have a 12% annual interest rate with all accrued
interest due at maturity. Upon written consent to the borrower,
simultaneously with the next round of financing, the holders have the ability to
convert the entire outstanding principal and all accrued interest into shares.
The conversion price will be equal to 50% of the qualified offering
price.
In
June 2008, a principal amount of $425,000 of the Second Convertible Notes
were extended to a maturity of December 31, 2008, subject to certain
conditions and the Company repaid holders of the Second Convertible Notes a
principal amount of $75,000 and accrued interest of $5,000. To induce the
holders to extend the maturity, MacroChem issued 212,500 warrants to purchase
common stock at $.01. The fair value of the warrants issued of $51,053 is
recorded as debt discount and will be amortized to interest expense over the
term of the debt. The principal amount of $425,000 in notes was outstanding at
December 31, 2008 and continued to accrue interest until February 25, 2009, the
date of the acquisition by Access.
The
acquisition of Virium on April 18, 2008 was accounted for by MacroChem
under the purchase method of accounting in accordance with SFAS No. 141
“Business
Combinations”. Under the purchase method, assets acquired and liabilities
assumed by MacroChem were recorded at their estimated fair values at the date of
acquisition and the results of operations of the acquired company were
consolidated with those of MacroChem from the date of acquisition. Virium is
included in the Statement of Operations from the acquisition date on April 18,
2008.
The total
purchase price of $9,661,000, has been primarily allocated to be in-process
research and development and is comprised of $6,870,000 related to the
calculated value of MacroChem’s common stock issued of $0.30 per share,
$2,404,000 of liabilities MacroChem assumed in addition to $147,000 of warrants
issued to certain debt holders. Additionally, MacroChem incurred $240,000 in
professional fees.
The
components of the purchase price, which we have allocated to in-process research
and development, are summarized as follows:
Common
stock issued
|
6,870,000
|
||
Liabilities
assumed
|
2,404,000
|
||
Warrants
related to debt assumed
|
147,000
|
||
Transaction
costs
|
240,000
|
||
Total
purchase price
|
9,661,000
|
F-25
The
following unaudited pro forma information presents the 2008 results of MacroChem
as if the acquisition had occurred on January 1, 2008. The unaudited pro forma
results are not necessarily indicative of results that would have occurred had
the acquisition been in effect for the periods presented, nor are they
necessarily indicative of future results.
2008
|
||
(unaudited)
|
||
Net
income (loss)
|
(10,564,000)
|
|
Net
income (loss) per common share (basic and diluted)
|
(0.23)
|
|
Weighted
average common shares outstanding (basic and diluted)
|
45,754,492
|
NOTE
13 - INCOME TAXES
Income
tax expense differs from the statutory amounts as follows:
2009
|
2008
|
|||||||
Income
taxes at U.S. statutory rate
|
$ | (6,537,000 | ) | $ | (10,477,000 | ) | ||
Change
in valuation allowance
|
5,182,000 | 6,987,000 | ||||||
Benefit
of foreign losses not recognized
|
57,000 | 59,000 | ||||||
Expenses
not deductible
|
623,000 | 2,874,000 | ||||||
Expiration
of net operating loss and general
|
||||||||
business
credit carryforwards, net of revisions
|
675,000 | 557,000 | ||||||
Total
tax expense
|
$ | - | $ | - |
Deferred
taxes are provided for the temporary differences between the financial reporting
bases and the tax bases of our assets and liabilities. The temporary differences
that give rise to deferred tax assets were as follows:
December
31,
|
||||||||
2009
|
2008
|
|||||||
Deferred
tax assets
|
||||||||
Net
operating loss carryforwards
|
$ | 62,358,000 | $ | 59,939,000 | ||||
General
business credit carryforwards
|
2,371,000 | 2,472,000 | ||||||
State credits | 3,126,000 | 3,138,000 | ||||||
Property,
equipment and goodwill
|
51,000 | 54,000 | ||||||
Stock options | 773,000 | 497,000 | ||||||
Derivatives | 2,432,000 | - | ||||||
Deferred
revenue
|
748,000 | 324,000 | ||||||
Intangible assets | 383,000 | 383,000 | ||||||
Accrued interest | - | 253,000 | ||||||
Other
|
270,000 | 270,000 | ||||||
Gross
deferred tax assets
|
72,512,000 | 67,330,000 | ||||||
Valuation
allowance
|
(72,512,000 | ) | (67,330,000 | ) | ||||
Net
deferred taxes
|
$ | - | $ | - | ||||
At
December 31, 2009, we had approximately $183,404,000 of net operating loss
carryforwards and approximately $2,371,000 of general business credit
carryforwards. These carryforwards expire as follows:
F-26
Net
operating
|
General
business
|
|||||||
loss
carryforwards
|
credit
carryforwards
|
|||||||
2010
|
$ | 2,171,000 | $ | 140,000 | ||||
2011
|
4,488,000 | 13,000 | ||||||
2012
|
4,212,000 | 77,000 | ||||||
2013
|
3,324,000 | 112,000 | ||||||
2014
|
3,306,000 | 95,000 | ||||||
Thereafter
|
165,903,000 | 1,934,000 | ||||||
$ | 183,404,000 | $ | 2,371,000 |
As a
result of a merger on January 25, 1996, a change in control occurred for federal
income tax purposes, which limits the utilization of pre-merger net operating
loss carryforwards of approximately $3,100,000 to approximately $530,000 per
year.
Additionally,
we acquired MacroChem Corporation on February 25, 2009 and Somanta
Pharmaceuticals, Inc. on January 4, 2008. Both corporations were loss companies
at the time of the acquisition. Therefore, the net operating losses
related to those acquisitions may be subject to annual limitations as provided
by IRC Sec. 382.
We
account for income taxes in accordance with FASB ASC 740, Income Taxes. Interest
costs and penalties related to income taxes are classified as interest expense
and general and administrative costs, respectively, in our consolidated
financial statements. For the years ended December 31, 2009 and 2008, we did not
recognize any interest or penalty expense related to income taxes. It is
determined not to be reasonably likely for the amounts of unrecognized tax
benefits to significantly increase or decrease within the next 12 months. We are
currently subject to a three year statute of limitations by major tax
jurisdictions. We and our subsidiaries file income tax returns in the U.S.
federal jurisdiction.
NOTE
14 – SUBSEQUENT EVENTS (UNAUDITED)
On
January 22, 2010, we announced the sale of approximately 2.10 million shares of
our common stock and warrants to purchase approximately 1.05 million shares of
our common stock for gross proceeds of approximately $6.3 million. We sold the
shares and warrants for $3.00 per unit (each unit consisting of one share of
common stock and a warrant to purchase 0.5 shares of common stock). The exercise
price of the warrants is $3.00 per share.
F-27
No
dealer, salesperson or other person has been authorized to give any information
or to make any representations other than those contained in this Prospectus in
connection with the offering made by this Prospectus, and, if given or made,
such information or representations must not be relied upon as having been
authorized by the Company or the selling stockholders. This
Prospectus does not constitute an offer to sell or a solicitation of an offer to
buy any securities other than those specifically offered hereby or an offer to
sell or a solicitation of an offer to buy any of these securities in any
jurisdiction to any person to whom it is unlawful to make such offer or
solicitation. Except where otherwise indicated, this Prospectus
speaks as of the effective date of the Registration
Statement. Neither the delivery of this Prospectus nor any sale
hereunder shall under any circumstances create any implication that there has
been no change in the affairs of the Company since the date hereof.
1,041,431
Shares of Common Stock
ACCESS
PHARMCEUTICALS, INC.
PROSPECTUS
April ,
2010
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
Item
13. Other Expenses of Issuance and Distribution
Expenses
of the Registrant in connection with the issuance and distribution of the
securities being registered, are estimated as follows:
SEC
Registration Fee
|
$
|
1,395
|
|
Printing
and Engraving Expenses
|
$
|
1,000
|
|
Legal
Fees and Expenses
|
$
|
15,000
|
|
Accountants'
Fees and Expenses
|
$
|
10,000
|
|
Miscellaneous
Costs
|
$
|
10,000
|
|
Total
|
$
|
37,395
|
Item
14. Indemnification of Directors and Officers
Section 145
of the Delaware General Corporation law empowers a Delaware corporation to
indemnify its officers and directors and certain other persons to the extent and
under the circumstances set forth therein.
The our
Certificate of Incorporation, as amended, and By-laws, as amended, provide for
indemnification of our officers and directors and certain other persons against
liabilities and expenses incurred by any of them in certain stated proceedings
and under certain stated conditions.
The above
discussion of the Registrant's Certificate of Incorporation, as amended,
By-laws, as amended, and Section 145 of the Delaware General Corporation
Law is not intended to be exhaustive and is qualified in its entirety by such
Certificate of Incorporation, By-Laws and statute.
Item
15: Recent Sales of Unregistered Securities
In
January 2010 thru March 2010, we issued 6,249 shares of our common stock to an
employee for their employment agreement. The issuance of shares of our common
stock in settlement of these accounts was made pursuant to Section 4(2) and Rule
506 of the Securities Act of 1933, as amended.
In
January 2010, we issued 66,667 shares of our common stock to a consultant for
his consulting expenses. The issuance of shares of our common stock in
settlement of these accounts was made pursuant to Section 4(2) and Rule 506 of
the Securities Act of 1933, as amended
In
December 2009, we issued 20,000 shares of our common stock to an individual as
payment for his expenses due to a settlement of his investor agreement and
25,000 shares of our common stock to a new employee for their employment
agreement. The issuance of shares of our common stock in settlement of these
accounts was made pursuant to Section 4(2) and Rule 506 of the Securities Act of
1933, as amended.
In
September 2009, we issued 275,500 shares of our common stock to several
consultants as payment for their consulting expenses. The issuance of shares of
our common stock in settlement of these accounts was made pursuant to Section
4(2) and Rule 506 of the Securities Act of 1933, as amended.
In August
2009, we issued 170,000 shares of our common stock to several consultants as
payment for their consulting expenses. The issuance of shares of our common
stock in settlement of these accounts was made pursuant to Section 4(2) and Rule
506 of the Securities Act of 1933, as amended.
In July
2009, we issued 70,000 shares of our common stock to several consultants as
payment for their consulting expenses. The issuance of shares of our common
stock in settlement of these accounts was made pursuant to Section 4(2) and Rule
506 of the Securities Act of 1933, as amended.
II-1
On June
9, 2009, we issued 30,000 shares of our common stock to a former executive of
MacroChem for the settlement of his employment agreement. The settlement
agreements specify that a portion of the settlement be paid in common stock. The
issuance of shares of our common stock in settlement of these accounts was made
pursuant to Section 4(2) and Rule 506 of the Securities Act of 1933, as
amended.
In June
2009, we issued 126,667 shares of our common stock to several consultants as
payment for their consulting expenses. The issuance of shares of our common
stock in settlement of these accounts was made pursuant to Section 4(2) and Rule
506 of the Securities Act of 1933, as amended.
On
February 25, 2009, we issued 859,172 shares of our common stock to cancel
approximately $859,000 of notes and accrued interest due to holders of MacroChem
notes. The value of the shares issued was determined based on the carrying value
of the debt, which was established to be the more readily determinable fair
value. The issuance of shares of our common stock in settlement of these
accounts was made pursuant to Section 4(2) and Rule 506 of the Securities Act of
1933, as amended.
In
addition, we issued 95,000 shares of our common stock to former executives of
MacroChem for the settlement of employment agreements. The settlement agreements
specify that a portion of the settlement be paid in common stock. The issuance
of shares of our common stock in settlement of these accounts was made pursuant
to Section 4(2) and Rule 506 of the Securities Act of 1933, as
amended.
On
February 4, 2008, we entered into securities purchase agreements (the “Purchase
Agreements”) with accredited investors whereby we agreed to sell 272.50 shares
of our “Series A Cumulative Convertible Preferred Stock”, par value $0.01 per
share, for an issue price of $10,000 per share, (the “Series A Cumulative
Convertible Preferred Stock”) and agreed to issue warrants to purchase 499,584
shares of our common stock at an exercise price of $3.50 per share, for an
aggregate purchase price for the Series A Cumulative Convertible Preferred Stock
and Warrants of $2,725,000. Proceeds, net of issuance costs from the sale were
$2,444,000. The shares of Series A Cumulative Convertible Preferred Stock are
convertible into common stock at the initial conversion price of $3.00 per share
subject to adjustment.
In
addition, $1,576,000 of Somanta Pharmaceuticals’ acquired accounts payable were
settled by issuing 538,508 shares of Access common stock and warrants to
purchase 246,753 shares of our common stock at an exercise price of $3.50 per
share. The value of the shares and warrants issued was determined based on the
fair value of the accounts payable. The issuance of shares of our common stock
in settlement of these accounts was made pursuant to Section 4(2) and Rule 506
of the Securities Act of 1933, as amended.
On
November 7, 2007, we entered into securities purchase agreements (the “Purchase
Agreements”) with accredited investors whereby we agreed to sell 954.0001 shares
of a newly created series of our preferred stock, designated “Series A
Cumulative Convertible Preferred Stock”, par value $0.01 per share, for an issue
price of $10,000 per share, (the “Series A Cumulative Convertible Preferred
Stock”) and agreed to issue warrants to purchase 1,589,999 shares of our common
stock at an exercise price of $3.50 per share, subject to adjustment, for an
aggregate purchase price for the Series A Cumulative Convertible Preferred Stock
and Warrants of $9,540,001. The shares of Series A Cumulative Convertible
Preferred Stock are convertible into common stock at the initial conversion
price of $3.00 per share subject to adjustment.
All of
the above-described issuances were exempt from registration pursuant to
Section 4(2) of the Securities Act or Rule 506 of Regulation D
promulgated thereunder, as transactions not involving a public
offering.
Item
16. Exhibits
The
following is a list of exhibits filed as a part of this registration
statement:
II-2
Exhibit
Number
|
Description of
Document
|
2.1
|
Amended
and Restated Agreement of Merger and Plan of Reorganization between the
Registrant and Chemex Pharmaceuticals, Inc., dated as of October 31, 1995
(Incorporated by reference to Exhibit A of our Registration
Statement on Form S-4 dated December 20, 1995, Commission File No.
33-64031)
|
2.2
|
Agreement
and Plan of Merger, by and among the Registrant, Somanta Acquisition
Corporation, Somanta Pharmaceuticals, Inc., Somanta Incorporated and
Somanta Limited, dated April 19, 2007 (Incorporated by reference to
Exhibit 2.1 to our Form 8-K dated April 18,
2007)
|
2.3
|
Agreement and Plan of Merger, by and among the
Registrant, MACM Acquisition Corporation and MacroChem
Corporation, dated July 9, 2008 (Incorporated by reference to
Exhibit 2.3 of our Form 10-Q for the quarter ended June 30,
2008)
|
3.1
|
Certificate
of Incorporation (Incorporated by reference to Exhibit 3(a) of our Form
8-K dated July 12, 1989, Commission File Number
9-9134)
|
3.2
|
Certificate
of Amendment of Certificate of Incorporation filed August 13, 1992
(Incorporated by reference to Exhibit 3.3 of our Form 10-K for year ended
December 31, 1995)
|
3.3
|
Certificate
of Merger filed January 25, 1996 (Incorporated by reference to Exhibit E
of our Registration Statement on Form S-4 dated December 20, 1995,
Commission File No. 33-64031)
|
3.4
|
Certificate
of Amendment of Certificate of Incorporation filed January 25, 1996
(Incorporated by reference to Exhibit E of our Registration Statement on
Form S-4 dated December 20, 1995, Commission File No.
33-64031)
|
3.5
|
Certificate
of Amendment of Certificate of Incorporation filed July 18, 1996
(Incorporated by reference to Exhibit 3.7 of our Form 10-K for the year
ended December 31, 1996)
|
3.6
|
Certificate
of Amendment of Certificate of Incorporation filed June 18, 1998.
(Incorporated by reference to Exhibit 3.8 of our Form 10-Q for the quarter
ended June 30, 1998)
|
3.7
|
Certificate
of Amendment of Certificate of Incorporation filed July 31, 2000
(Incorporated by reference to Exhibit 3.8 of our Form 10-Q for the quarter
ended March 31, 2001)
|
3.8
|
Certificate
of Designations of Series A Junior Participating Preferred Stock filed
November 7, 2001 (Incorporated by reference to Exhibit 4.1.H of our
Registration Statement on Form S-8 dated December 14, 2001, Commission
File No. 333-75136)
|
3.9
|
Amended
and Restated Bylaws (Incorporated by reference to Exhibit 2.1 of our Form
10-Q for the quarter ended June 30,
1996)
|
3.10
|
Certificate
of Designation, Rights and Preferences of Series A Cumulative Convertible
Preferred Stock filed November 9, 2007 (Incorporated by reference to
Exhibit 3.10 to our Form SB-2 filed on December 10,
2007.
|
3.11
|
Certificate
of Amendment to Certificate of Designations, Rights and Preferences of
Series A Cumulative Convertible Preferred Stock filed June 11, 2008
(Incorporated by reference to Exhibit 3.11 of our Form 10-Q for the
quarter ended June 30, 2008)
|
5.1
|
Opinion
of Bingham McCutchen LLP (Incorporated by reference to Exhibit 5.1 of our
Form S-1/A filed on January 21,
2010)
|
10.1*
|
1995
Stock Option Plan (Incorporated by reference to Exhibit F of our
Registration Statement on Form S-4 dated December 20, 1995, Commission
File No. 33-64031)
|
10.2*
|
Amendment
to 1995 Stock Option Plan (Incorporated by reference to Exhibit 10.25 of
our Form 10-K for the year ended December 31,
2001)
|
10.3
|
Lease
Agreement between Pollock Realty Corporation and the Registrant dated July
25, 1996 (Incorporated by reference to Exhibit 10.19 of our Form 10-Q for
the quarter ended September 30,
1996)
|
10.4
|
Platinate
HPMA Copolymer Royalty Agreement between The School of Pharmacy,
University of London and the Registrant dated November 19, 1996
(Incorporated by reference to Exhibit 10.9 of our Form 10-K for the year
ended December 31, 1996)
|
10.5*
|
401(k)
Plan (Incorporated by reference to Exhibit 10.20 of our Form 10-K for the
year ended December 31, 1999)
|
10.6
|
Form
of Convertible Note (Incorporated by reference to Exhibit 25 of our Form
10-Q for the quarter ended September 30,
2000)
|
10.7
|
Rights
Agreement dated as of October 31, 2001 between the Registrant and American
Stock Transfer & Trust Company, as Rights Agent (Incorporated by
reference to Exhibit 99.1 of our Current Report on Form 8-K dated November
7, 2001)
|
II-3
10.8
|
Amendment
to Rights Agreement dated as of February 16, 2006 between the Registrant
and American Stock Transfer & Trust Company, as Rights Agent
(Incorporated by reference to Exhibit 10.33 of our Form 10-Q for the
quarter ended March 31, 2006)
|
10.9
|
Amendment
to Rights Agreement dated as of November 9, 2007 between the Registrant
and American Stock Transfer & Trust Company as Rights Agent
(incorporated by reference to Exhibit 10.9 of our Form 10-K for the year
ended December 31, 2009)
|
10.10*
|
2001
Restricted Stock Plan (Incorporated by reference to Exhibit 1 of our Proxy
Statement filed on April 16, 2001)
|
10.11*
|
2005
Equity Incentive Plan (Incorporated by reference to Exhibit 1 of our Proxy
Statement filed on April 18, 2005)
|
10.12
|
Asset
Sale Agreement dated as of October 12, 2005, between the Registrant and
Uluru, Inc. (Incorporated by reference to Exhibit 10.25 of our 10-K for
the year ended December 31, 2005)
|
10.13
|
Amendment
to Asset Sale Agreement dated as of December 8, 2006, between the
Registrant and Uluru, Inc. (Incorporated by reference to Exhibit 10.16 of
our Form 10-KSB filed on April 2,
2007)
|
10.14
|
License
Agreement dated as of October 12, 2005, between the Registrant and Uluru,
Inc. (Incorporated by reference to Exhibit 10.26 of our 10-K for the year
ended December 31, 2005)
|
10.15
|
Form
of Warrant dated February 16, 2006, issued by the Registrant to certain
Purchasers (Incorporated by reference to Exhibit 10.31 of our Form 10-Q
for the quarter ended March 31,
2006)
|
10.16
|
Form
of Warrant dated October 24, 2006, issued by the Registrant to certain
Purchasers (Incorporated by reference to Exhibit 10.27 of our Form 10-KSB
filed on April 2, 2007)
|
10.17
|
Form
of Warrant December 6, 2006, issued by the Registrant to certain
Purchasers (Incorporated by reference to Exhibit 10.32 of our Form 10-KSB
filed on April 2, 2007)
|
10.18*
|
2007
Special Stock Option Plan and Agreement dated January 4, 2007, by and
between the Registrant and Stephen R. Seiler, President and Chief
Executive Officer (Incorporated by reference to Exhibit 10.35 of our Form
10-QSB filed on May 15, 2007)
|
10.19
|
Note
Purchase Agreement dated April 26, 2007, between the Registrant and
Somanta Pharmaceuticals, Inc. (Incorporated by reference to Exhibit 10.42
of our Form 10-Q filed on August 14,
2007)
|
10.20
|
Preferred
Stock and Warrant Purchase Agreement, dated November 7, 2007, between the
Registrant and certain Purchasers (Incorporated by reference to Exhibit
10.23 of our Form S-1 filed on March 11,
2008)
|
10.21
|
Investor
Rights Agreement dated November 10, 2007, between the Registrant and
certain Purchasers (Incorporated by reference to Exhibit 10.24 of our Form
S-1 filed on March 11, 2008)
|
10.22
|
Form
of Warrant Agreement dated November 10, 2007, between the Registrant and
certain Purchasers (Incorporated by reference to Exhibit 10.25 of our Form
S-1 filed on March 11, 2008)
|
10.23
|
Board
Designation Agreement dated November 15, 2007, between the Registrant and
SCO Capital Partners LLC (Incorporated by reference to Exhibit 10.26 of
our Form S-1 filed on March 11,
2008)
|
10.24
|
Amendment
and Restated Purchase Agreement, dated February 4, 2008 between the
Registrant and certain Purchasers (Incorporated by reference to Exhibit
10.27 of our Form S-1 filed on March 11,
2008)
|
10.25
|
Amended
and Restated Investor Rights Agreement, dated February 4, 2008, between
the Registrant and certain Purchasers (Incorporated by reference to
Exhibit 10.28 of our Form S-1 filed on March 11,
2008)
|
10.26*
|
Employment
Agreement dated January 4, 2008, between the Registrant and Jeffrey B.
Davis (Incorporated by reference to Exhibit 10.29 of our Form S-1 filed on
March 11, 2008)
|
10.27
|
Form
of Securities Purchase Agreement (Incorporated by reference to Exhibit
10.29 of our Form S-1 filed on January 15,
2010)
|
10.28
|
Form
of Warrant (Incorporated by reference to Exhibit 10.30 of our Form S-1
filed on January 15, 2010)
|
10.29*
|
Employment
Agreement of David P. Nowotnik, PhD (Incorporated by reference to Exhibit
10.31 of our Form 8-K February 8,
2010)
|
23.1
Consent of Whitley Penn LLP
23.2 Consent
of Bingham McCutchen LLP (included in Exhibit 5.1)
*
Management contract or compensatory plan required to be filed as an Exhibit to
this Form pursuant to Item 15c of the report.
II-4
Item
17. Undertakings
The
undersigned registrant hereby undertakes:
(1)
|
To
file, during any period in which offers or sales are being made, a
post-effective amendment to this registration
statement:
|
(i) To
include any prospectus required by Section 10(a)(3) of the Securities
Act;
|
(ii)
|
To
reflect in the prospectus any facts or events arising after the effective
date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration
statement;
|
|
(iii)
|
To
include any material information with respect to the plan of distribution
not previously disclosed in the registration statement or any material
change to such information in the registration
statement;
|
provided,
however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
registration statement is on Form S-3 or Form S-8, and the information required
to be included in a post-effective amendment by those paragraphs is contained in
periodic reports filed by the registrant pursuant to Section 13 or Section 15(d)
of the Exchange Act that are incorporated by reference in the registration
statement.
(2)
|
That,
for the purpose of determining any liability under the Securities Act,
each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
|
(3)
|
To
remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.
|
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
Each
prospectus filed pursuant to Rule 424(b) as part of a registration statement
relating to an offering, other than registration statements relying on Rule 430B
or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be
part of and included in the registration statement as of the date it is first
used after effectiveness. Provided, however, that no statement made in a
registration statement or prospectus that is part of the registration statement
or made in a document incorporated or deemed incorporated by reference into the
registration statement or prospectus that is part of the registration statement
will, as to a purchaser with a time of contract of sale prior to such first use,
supersede or modify any statement that was made in the registration statement or
prospectus that was part of the registration statement or made in any such
document immediately prior to such date of first use.
II-5
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, as amended, the Registrant
has duly caused this Registration Statement on Form S-1/A to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Dallas,
State of Texas, on this 12th day of April, 2010.
ACCESS PHARMACEUTICALS, INC. | ||||
Date
April 12, 2010
|
By:
|
/s/
Jeffrey B. Davis
|
||
Jeffrey
B. Davis
|
||||
Chief
Executive Officer
|
||||
(Principal
Executive Officer)
|
||||
Date
April 12, 2010
|
By:
|
/s/
Stephen B. Thompson
|
||
Stephen
B. Thompson
|
||||
Vice
President, Chief Financial
|
||||
Officer
and Treasurer
|
||||
(Principal
Accounting Officer)
|
We, the undersigned directors of Access Pharmaceuticals, Inc., hereby severally constitute and appoint Jeffrey B. Davis and Stephen B. Thompson, and both or either one of them, our true and lawful attorneys-in-fact and agents, with full power of substitution and re-substitution in for him and in his name, place and stead, and in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and any subsequent registration statements pursuant to Rule 462 of the Securities Act, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that each of said attorneys-in-fact or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant
to the requirements of the Securities Act of 1933, this registration statement
has been signed by the following persons in the capacities and on the dates
indicated.
Date
|
April
12, 2010
|
By:
|
/s/
Jeffrey B. Davis
|
|||||
Jeffrey
B. Davis, Director,
|
||||||||
Chief
Executive Officer
|
||||||||
Date
|
April
12, 2010
|
By:
|
* | |||||
Mark
J. Ahn, Director
|
||||||||
Date
|
April
12, 2010
|
By:
|
* | |||||
Mark
J. Alvino, Director
|
||||||||
Date
|
April
12, 2010
|
By:
|
* | |||||
Esteban
Cvitkovic, Director
|
||||||||
Date
|
April
12, 2010
|
By:
|
||||||
Stephen
B. Howell, Director
|
||||||||
Date
|
April
12, 2010
|
By:
|
* | |||||
Steven
H. Rouhandeh,
|
||||||||
Chairman
of the board
|
||||||||
Date
|
April
12, 2010
|
By:
|
/s/ Stephen B. Thompson
|
|||||
Stephen
B. Thompson
|
||||||||
Attorney-in-fact
|
* -
Executed April 12, 2010 by Stephen B. Thompson as attorney-in-fact under power
of attorney granted in Registration Statement previously filed on October 26,
2008.
II-6
Exhibit
Number
|
Description of
Document
|
2.1
|
Amended
and Restated Agreement of Merger and Plan of Reorganization between the
Registrant and Chemex Pharmaceuticals, Inc., dated as of October 31, 1995
(Incorporated by reference to Exhibit A of our Registration
Statement on Form S-4 dated December 20, 1995, Commission File No.
33-64031)
|
2.2
|
Agreement
and Plan of Merger, by and among the Registrant, Somanta Acquisition
Corporation, Somanta Pharmaceuticals, Inc., Somanta Incorporated and
Somanta Limited, dated April 19, 2007 (Incorporated by reference to
Exhibit 2.1 to our Form 8-K dated April 18,
2007)
|
2.3
|
Agreement and Plan of Merger, by and among the
Registrant, MACM Acquisition Corporation and MacroChem
Corporation, dated July 9, 2008 (Incorporated by reference to
Exhibit 2.3 of our Form 10-Q for the quarter ended June 30,
2008)
|
3.1
|
Certificate
of Incorporation (Incorporated by reference to Exhibit 3(a) of our Form
8-K dated July 12, 1989, Commission File Number
9-9134)
|
3.2
|
Certificate
of Amendment of Certificate of Incorporation filed August 13, 1992
(Incorporated by reference to Exhibit 3.3 of our Form 10-K for year ended
December 31, 1995)
|
3.3
|
Certificate
of Merger filed January 25, 1996 (Incorporated by reference to Exhibit E
of our Registration Statement on Form S-4 dated December 20, 1995,
Commission File No. 33-64031)
|
3.4
|
Certificate
of Amendment of Certificate of Incorporation filed January 25, 1996
(Incorporated by reference to Exhibit E of our Registration Statement on
Form S-4 dated December 20, 1995, Commission File No.
33-64031)
|
3.5
|
Certificate
of Amendment of Certificate of Incorporation filed July 18, 1996
(Incorporated by reference to Exhibit 3.7 of our Form 10-K for the year
ended December 31, 1996)
|
3.6
|
Certificate
of Amendment of Certificate of Incorporation filed June 18, 1998.
(Incorporated by reference to Exhibit 3.8 of our Form 10-Q for the quarter
ended June 30, 1998)
|
3.7
|
Certificate
of Amendment of Certificate of Incorporation filed July 31, 2000
(Incorporated by reference to Exhibit 3.8 of our Form 10-Q for the quarter
ended March 31, 2001)
|
3.8
|
Certificate
of Designations of Series A Junior Participating Preferred Stock filed
November 7, 2001 (Incorporated by reference to Exhibit 4.1.H of our
Registration Statement on Form S-8 dated December 14, 2001, Commission
File No. 333-75136)
|
3.9
|
Amended
and Restated Bylaws (Incorporated by reference to Exhibit 2.1 of our Form
10-Q for the quarter ended June 30,
1996)
|
3.10
|
Certificate
of Designation, Rights and Preferences of Series A Cumulative Convertible
Preferred Stock filed November 9, 2007 (Incorporated by reference to
Exhibit 3.10 to our Form SB-2 filed on December 10,
2007.
|
3.11
|
Certificate
of Amendment to Certificate of Designations, Rights and Preferences of
Series A Cumulative Convertible Preferred Stock filed June 11, 2008
(Incorporated by reference to Exhibit 3.11 of our Form 10-Q for the
quarter ended June 30, 2008)
|
5.1
|
Opinion
of Bingham McCutchen LLP (Incorporated by reference to Exhibit 5.1 of our
Form S-1/A filed on January 21,
2010)
|
10.1*
|
1995
Stock Option Plan (Incorporated by reference to Exhibit F of our
Registration Statement on Form S-4 dated December 20, 1995, Commission
File No. 33-64031)
|
10.2*
|
Amendment
to 1995 Stock Option Plan (Incorporated by reference to Exhibit 10.25 of
our Form 10-K for the year ended December 31,
2001)
|
10.3
|
Lease
Agreement between Pollock Realty Corporation and the Registrant dated July
25, 1996 (Incorporated by reference to Exhibit 10.19 of our Form 10-Q for
the quarter ended September 30,
1996)
|
10.4
|
Platinate
HPMA Copolymer Royalty Agreement between The School of Pharmacy,
University of London and the Registrant dated November 19, 1996
(Incorporated by reference to Exhibit 10.9 of our Form 10-K for the year
ended December 31, 1996)
|
II-7
10.5*
|
401(k)
Plan (Incorporated by reference to Exhibit 10.20 of our Form 10-K for the
year ended December 31, 1999)
|
10.6
|
Form
of Convertible Note (Incorporated by reference to Exhibit 25 of our Form
10-Q for the quarter ended September 30,
2000)
|
10.7
|
Rights
Agreement dated as of October 31, 2001 between the Registrant and American
Stock Transfer & Trust Company, as Rights Agent (Incorporated by
reference to Exhibit 99.1 of our Current Report on Form 8-K dated November
7, 2001)
|
10.8
|
Amendment
to Rights Agreement dated as of February 16, 2006 between the Registrant
and American Stock Transfer & Trust Company, as Rights Agent
(Incorporated by reference to Exhibit 10.33 of our Form 10-Q for the
quarter ended March 31, 2006)
|
10.9
|
Amendment
to Rights Agreement dated as of November 9, 2007 between the Registrant
and American Stock Transfer & Trust Company as Rights
Agent (incorporated by reference to Exhibit 10.9 of our Form
10-K for the year ended December 31,
2009)
|
10.10*
|
2001
Restricted Stock Plan (Incorporated by reference to Exhibit 1 of our Proxy
Statement filed on April 16, 2001)
|
10.11*
|
2005
Equity Incentive Plan (Incorporated by reference to Exhibit 1 of our Proxy
Statement filed on April 18, 2005)
|
10.12
|
Asset
Sale Agreement dated as of October 12, 2005, between the Registrant and
Uluru, Inc. (Incorporated by reference to Exhibit 10.25 of our 10-K for
the year ended December 31, 2005)
|
10.13
|
Amendment
to Asset Sale Agreement dated as of December 8, 2006, between the
Registrant and Uluru, Inc. (Incorporated by reference to Exhibit 10.16 of
our Form 10-KSB filed on April 2,
2007)
|
10.14
|
License
Agreement dated as of October 12, 2005, between the Registrant and Uluru,
Inc. (Incorporated by reference to Exhibit 10.26 of our 10-K for the year
ended December 31, 2005)
|
10.15
|
Form
of Warrant dated February 16, 2006, issued by the Registrant to certain
Purchasers (Incorporated by reference to Exhibit 10.31 of our Form 10-Q
for the quarter ended March 31,
2006)
|
10.16
|
Form
of Warrant dated October 24, 2006, issued by the Registrant to certain
Purchasers (Incorporated by reference to Exhibit 10.27 of our Form 10-KSB
filed on April 2, 2007)
|
10.17
|
Form
of Warrant December 6, 2006, issued by the Registrant to certain
Purchasers (Incorporated by reference to Exhibit 10.32 of our Form 10-KSB
filed on April 2, 2007)
|
10.18*
|
2007
Special Stock Option Plan and Agreement dated January 4, 2007, by and
between the Registrant and Stephen R. Seiler, President and Chief
Executive Officer (Incorporated by reference to Exhibit 10.35 of our Form
10-QSB filed on May 15, 2007)
|
10.19
|
Note
Purchase Agreement dated April 26, 2007, between the Registrant and
Somanta Pharmaceuticals, Inc. (Incorporated by reference to Exhibit 10.42
of our Form 10-Q filed on August 14,
2007)
|
10.20
|
Preferred
Stock and Warrant Purchase Agreement, dated November 7, 2007, between the
Registrant and certain Purchasers (Incorporated by reference to Exhibit
10.23 of our Form S-1 filed on March 11,
2008)
|
10.21
|
Investor
Rights Agreement dated November 10, 2007, between the Registrant and
certain Purchasers (Incorporated by reference to Exhibit 10.24 of our Form
S-1 filed on March 11, 2008)
|
10.22
|
Form
of Warrant Agreement dated November 10, 2007, between the Registrant and
certain Purchasers (Incorporated by reference to Exhibit 10.25 of our Form
S-1 filed on March 11, 2008)
|
10.23
|
Board
Designation Agreement dated November 15, 2007, between the Registrant and
SCO Capital Partners LLC (Incorporated by reference to Exhibit 10.26 of
our Form S-1 filed on March 11,
2008)
|
10.24
|
Amendment
and Restated Purchase Agreement, dated February 4, 2008 between the
Registrant and certain Purchasers (Incorporated by reference to Exhibit
10.27 of our Form S-1 filed on March 11,
2008)
|
10.25
|
Amended
and Restated Investor Rights Agreement, dated February 4, 2008, between
the Registrant and certain Purchasers (Incorporated by reference to
Exhibit 10.28 of our Form S-1 filed on March 11,
2008)
|
10.26*
|
Employment
Agreement dated January 4, 2008, between the Registrant and Jeffrey B.
Davis (Incorporated by reference to Exhibit 10.29 of our Form S-1 filed on
March 11, 2008)
|
10.27
|
Form
of Securities Purchase Agreement (Incorporated by reference to Exhibit
10.29 of our Form S-1 filed on January 15,
2010)
|
10.28
|
Form
of Warrant (Incorporated by reference to Exhibit 10.30 of our Form S-1
filed on January 15, 2010)
|
10.29*
|
Employment
Agreement of David P. Nowotnik, PhD (Incorporated by reference to Exhibit
10.31 of our Form 8-K February 8,
2010)
|
23.1 Consent
of Whitley Penn LLP
23.2
|
Consent
of Bingham McCutchen (included in Exhibit
5.1)
|
*
Management contract or compensatory plan required to be filed as an Exhibit to
this Form pursuant to Item 15c of the report.