Attached files
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EX-31.2 - BIOMIMETIC THERAPEUTICS, INC. | v200816_ex31-2.htm |
EX-32.2 - BIOMIMETIC THERAPEUTICS, INC. | v200816_ex32-2.htm |
EX-31.1 - BIOMIMETIC THERAPEUTICS, INC. | v200816_ex31-1.htm |
EX-32.1 - BIOMIMETIC THERAPEUTICS, INC. | v200816_ex32-1.htm |
UNITED STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
(Mark
One)
x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the quarterly period ended September 30, 2010
¨
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the transition period from ____ to
____
Commission
File Number 000-51934
BioMimetic
Therapeutics, Inc.
(Exact
name of registrant as specified in its charter)
Delaware
|
62-1786244
|
(State
or other jurisdiction of
incorporation
or organization)
|
(I.R.S.
Employer
Identification
No.)
|
389
Nichol Mill Lane
Franklin,
TN
|
37067
|
(Address
of principal executive offices)
|
(Zip
Code)
|
(615)
844-1280
(Registrant's
telephone number, including area code)
Not
Applicable
(Former
name, former address and former fiscal year, if changed
since
last report)
Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. x Yes ¨ No
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such
files). ¨ Yes ¨ No
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
definition of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act (Check one):
Large
accelerated filer ¨
|
Accelerated
filer x
|
|
Non-accelerated
filer ¨
(Do
not check if a smaller reporting company)
|
Smaller
reporting company ¨
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
¨ Yes x No
As of
November 1, 2010, there were issued and outstanding 27,815,348 shares of the
registrant's common stock
BioMimetic
Therapeutics, Inc.
Table
of Contents
Page
|
||
PART
I — FINANCIAL INFORMATION
|
||
Item
1.
|
Condensed
Consolidated Financial Statements (Unaudited)
|
1
|
Condensed
Consolidated Balance Sheets as of September 30, 2010 and December
31, 2009
|
1
|
|
Condensed
Consolidated Statements of Operations for the three and nine months ended
September 30, 2010 and 2009
|
2
|
|
Condensed
Consolidated Statements of Cash Flows for the nine months ended September
30, 2010 and 2009
|
3
|
|
Notes
to Condensed Consolidated Financial Statements
|
4
|
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
14
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
24
|
Item
4.
|
Controls
and Procedures
|
25
|
PART
II — OTHER INFORMATION
|
||
Item
1.
|
Legal
Proceedings
|
26
|
Item
1A.
|
Risk
Factors
|
26
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
26
|
Item
3.
|
Defaults
Upon Senior Securities
|
26
|
Item
4.
|
(Removed
and Reserved)
|
26
|
Item
5.
|
Other
Information
|
26
|
Item
6.
|
Exhibits
|
27
|
i
Special
Note Regarding Forward-Looking Statements
This
Quarterly Report on Form 10-Q, including but not limited to the notes to the
condensed consolidated financial statements and the sections titled “Risk
Factors” and “Management’s Discussion and Analysis of Financial Condition and
Results of Operations,” contains “forward-looking statements” within the meaning
of the Private Securities Litigation Reform Act of 1995, Section 27A of the
Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of
the Securities Exchange Act of 1934, as amended (the “Exchange
Act”). Statements in this Quarterly Report that are not historical
facts are hereby identified as “forward-looking statements” for the purpose of
the safe harbor provided by Section 27A of the Securities Act and Section 21E of
the Exchange Act. Forward-looking statements convey our current
expectations and forecasts of future events. Forward-looking
statements include statements regarding our future results of operations and
financial position, business strategy, budgets, projected costs, plans and
objectives of management for future operations that are not historical
facts. The words “may,” “continue,” “estimate,” “intend,” “plan,”
“will,” “believe,” “project,” “expect,” “anticipate” and similar expressions may
identify forward-looking statements, but the absence of these words does not
necessarily mean that a statement is not forward-looking.
These
forward-looking statements include, among other things, statements
about:
§
|
success,
advancement and timing of clinical trials and studies and eventual
regulatory approval of our product candidates or other new product
introductions;
|
•
|
market
acceptance of and demand for Augment TM
Bone Graft (“Augment”) in Canada and for our product candidates
generally;
|
•
|
actions
by regulatory authorities;
|
•
|
our
regulatory strategy and decisions regarding the classification of a
product as a device or a
drug;
|
•
|
our
intellectual property portfolio and licensing
strategy;
|
•
|
our
marketing and manufacturing capacity and
strategy;
|
•
|
estimates
regarding our capital requirements, and anticipated timing of the need for
additional funds;
|
•
|
product
liability claims;
|
•
|
economic
conditions that could adversely affect the level of demand for Augment in
Canada or our product
candidates;
|
•
|
financial
markets, including the market for various investment
securities;
|
•
|
the
competitive environment; and
|
•
|
the
current economic uncertainty.
|
Any or
all of our forward-looking statements may turn out to be
inaccurate. We have based these forward-looking statements largely on
our current expectations and projections about future events and financial
trends that we believe may affect our financial condition, results of
operations, business strategy and financial needs. Forward-looking
statements may be affected by inaccurate assumptions we might make or by known
or unknown risks and uncertainties, including the risks, uncertainties and
assumptions described in “Risk Factors” in our Annual Report on Form 10-K, as
amended, for the year ended December 31, 2009, Section 1A, under the heading
“Risk Factors,” in our Quarterly Reports on Form 10-Q for the three months ended
March 31, 2010, as amended, and for the three and six months ended June 30,
2010, Section 1A, under the heading “Risk Factors,” in Section 1A of this
Quarterly Report and in the reports we file, from time to time, with the
Securities and Exchange Commission (the “SEC”). In light of these
risks, uncertainties and assumptions, the forward-looking events and
circumstances contained in this Quarterly Report may not occur as contemplated
and actual results could differ materially from those anticipated or implied by
the forward-looking statements.
ii
You
should read this Quarterly Report with the understanding that our actual future
results may be materially different from what we expect. We qualify
all of the forward-looking statements in this Quarterly Report by these
cautionary statements.
You
should not unduly rely on these forward-looking statements, which speak only as
of the date of this Quarterly Report. Unless required by law, we
undertake no obligation to publicly update or revise any forward-looking
statements to reflect new information or future events or otherwise and we don’t
have a policy of doing so. You should, however, review the factors
and risks we describe in our Annual Report on Form 10-K, as amended, for the
year ended December 31, 2009, Section 1A, under the heading “Risk Factors,” in
our Quarterly Reports on Form 10-Q for the three months ended March 31, 2010, as
amended, and for the three and six months ended June 30, 2010, Section 1A, under
the heading “Risk Factors,” in Section 1A of this Quarterly Report and in any
future filings we may make from time to time, with the SEC.
iii
PART
I - FINANCIAL INFORMATION
|
||||||||
Item
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
||||||||
BIOMIMETIC
THERAPEUTICS, INC.
|
||||||||
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
||||||||
(Unaudited)
|
||||||||
September 30,
|
December 31,
|
|||||||
2010
|
2009
|
|||||||
ASSETS
|
||||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$ | 16,040,180 | $ | 21,543,347 | ||||
Investments
- short term
|
66,395,995 | 47,001,504 | ||||||
Receivables
- trade
|
- | 78,000 | ||||||
Receivables
- other
|
519,468 | 612,020 | ||||||
Inventory
|
1,219,275 | 1,044,305 | ||||||
Prepaid
expenses
|
633,987 | 647,156 | ||||||
Total
current assets
|
84,808,905 | 70,926,332 | ||||||
Investments
- long term
|
17,005,385 | 6,513,975 | ||||||
Prepaid
expenses - long term
|
8,129 | 5,418 | ||||||
Property
and equipment, net
|
7,569,786 | 8,156,842 | ||||||
Capitalized
patent license fees, net
|
1,704,382 | 2,924,614 | ||||||
Deposits
|
385,000 | 385,000 | ||||||
Total
assets
|
$ | 111,481,587 | $ | 88,912,181 | ||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable
|
$ | 1,187,868 | $ | 2,255,748 | ||||
Accrued
payroll, employee benefits and payroll taxes
|
2,061,517 | 2,299,237 | ||||||
Other
accrued expenses
|
339,151 | 135,070 | ||||||
Current
portion of capital lease obligations
|
40,890 | 56,520 | ||||||
Deferred
revenue
|
971,188 | 971,188 | ||||||
Total
current liabilities
|
4,600,614 | 5,717,763 | ||||||
Accrued
rent - related party
|
419,175 | 418,305 | ||||||
Capital
lease obligations
|
137,726 | 174,818 | ||||||
Deferred
revenue
|
14,823,282 | 15,549,678 | ||||||
Total
liabilities
|
19,980,797 | 21,860,564 | ||||||
Stockholders’
equity:
|
||||||||
Preferred
stock, $0.001 par value; 15,000,000 shares authorized;
|
||||||||
no
shares issued and outstanding as of September 30, 2010
|
||||||||
and
December 31, 2009
|
- | - | ||||||
Common
stock, $0.001 par value; 37,500,000 shares authorized;
|
||||||||
27,810,707
shares issued and outstanding as of September 30, 2010;
|
||||||||
21,825,028
shares issued and outstanding as of December 31, 2009
|
27,811 | 21,825 | ||||||
Additional
paid-in capital
|
208,910,449 | 160,532,625 | ||||||
Accumulated
other comprehensive income
|
11,436 | 17,387 | ||||||
Accumulated
deficit
|
(117,448,906 | ) | (93,520,220 | ) | ||||
Total
stockholders’ equity
|
91,500,790 | 67,051,617 | ||||||
Total
liabilities and stockholders’ equity
|
$ | 111,481,587 | $ | 88,912,181 |
See
accompanying notes.
1
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
||||||||||||||||
(Unaudited)
|
||||||||||||||||
Three
months ended
|
Nine
months ended
|
|||||||||||||||
September
30,
|
September
30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Revenues:
|
||||||||||||||||
Royalty
income
|
$ | 108,346 | $ | 129,749 | $ | 353,636 | $ | 400,111 | ||||||||
Sublicense
fee income
|
244,793 | 244,793 | 726,396 | 726,396 | ||||||||||||
Other
income
|
25,000 | - | 25,000 | - | ||||||||||||
Total
revenues
|
378,139 | 374,542 | 1,105,032 | 1,126,507 | ||||||||||||
Costs
and expenses:
|
||||||||||||||||
Research
and development (a)
|
4,431,993 | 5,191,513 | 12,549,876 | 15,538,084 | ||||||||||||
General
and administrative (b)
|
2,887,279 | 2,755,003 | 9,968,254 | 7,534,323 | ||||||||||||
Depreciation
and capital lease amortization
|
298,875 | 333,458 | 942,767 | 1,015,424 | ||||||||||||
Patent
license fee amortization
|
547,460 | 549,025 | 1,639,718 | 2,018,444 | ||||||||||||
Total
costs and expenses
|
8,165,607 | 8,828,999 | 25,100,615 | 26,106,275 | ||||||||||||
Loss
from operations
|
(7,787,468 | ) | (8,454,457 | ) | (23,995,583 | ) | (24,979,768 | ) | ||||||||
Interest
expense, net
|
(614 | ) | (103,919 | ) | (2,946 | ) | (264,299 | ) | ||||||||
Investment
income, net
|
36,722 | 642,243 | 97,523 | 2,991,654 | ||||||||||||
Loss
on disposal of equipment and other
|
- | - | (27,680 | ) | - | |||||||||||
Loss
before income taxes
|
(7,751,360 | ) | (7,916,133 | ) | (23,928,686 | ) | (22,252,413 | ) | ||||||||
Income
taxes
|
- | - | - | - | ||||||||||||
Net
loss
|
$ | (7,751,360 | ) | $ | (7,916,133 | ) | $ | (23,928,686 | ) | $ | (22,252,413 | ) | ||||
Net
loss per common share:
|
||||||||||||||||
Basic
|
$ | (0.29 | ) | $ | (0.36 | ) | $ | (1.02 | ) | $ | (1.11 | ) | ||||
Diluted
|
$ | (0.29 | ) | $ | (0.36 | ) | $ | (1.02 | ) | $ | (1.11 | ) | ||||
Weighted
average shares used to compute net
|
||||||||||||||||
loss
per common share:
|
||||||||||||||||
Basic
|
26,556,843 | 21,751,983 | 23,546,635 | 20,074,256 | ||||||||||||
Diluted
|
26,556,843 | 21,751,983 | 23,546,635 | 20,074,256 | ||||||||||||
Related
party disclosures:
|
||||||||||||||||
(a)
Research and development includes
|
||||||||||||||||
professional
fees to related parties
|
$ | 14,994 | $ | 9,025 | $ | 15,869 | $ | 9,025 | ||||||||
(b)
General and administrative includes rent and
|
||||||||||||||||
operating
expenses to related parties
|
$ | 505,561 | $ | 243,834 | $ | 1,388,237 | $ | 738,775 |
See
accompanying notes.
2
BIOMIMETIC
THERAPEUTICS, INC.
|
||||||||
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
||||||||
(Unaudited)
|
||||||||
Nine months ended September 30,
|
||||||||
2010
|
2009
|
|||||||
Cash
flows from operating activities
|
||||||||
Net
loss
|
$ | (23,928,686 | ) | $ | (22,252,413 | ) | ||
Adjustments
to reconcile net loss to net cash
|
||||||||
used
in operating activities:
|
||||||||
Depreciation
and capital lease amortization expense
|
942,767 | 1,015,424 | ||||||
Patent
license fee amortization
|
1,639,718 | 2,018,444 | ||||||
Gain
on sale of investments
|
- | (2,091,650 | ) | |||||
Non-cash
stock-based compensation expense
|
2,902,328 | 2,888,940 | ||||||
Non-cash
issuance of common stock
|
32,645 | 164,899 | ||||||
Non-cash
interest income from disposal of business
|
- | (186,618 | ) | |||||
Loss
on disposal of equipment
|
200 | - | ||||||
Changes
in operating assets and liabilities:
|
||||||||
Receivables
|
170,552 | 1,319,766 | ||||||
Inventory
|
(174,970 | ) | (99,347 | ) | ||||
Prepaid
expenses
|
(62,902 | ) | 21,851 | |||||
Accounts
payable, accrued payroll and other accrued expenses
|
(1,100,649 | ) | (4,267,044 | ) | ||||
Deferred
revenue
|
(726,396 | ) | (726,395 | ) | ||||
Net
cash used in operating activities
|
(20,305,393 | ) | (22,194,143 | ) | ||||
Cash
flows from investing activities
|
||||||||
Capitalized
patent license fees
|
(419,486 | ) | (364,421 | ) | ||||
Purchases
of property and equipment
|
(355,911 | ) | (271,949 | ) | ||||
Equipment
deposits
|
- | (19,669 | ) | |||||
Purchases
of investments
|
(107,941,851 | ) | (42,171,792 | ) | ||||
Sales
of investments
|
78,050,000 | 40,281,000 | ||||||
Net
proceeds from disposal of business
|
- | 6,000,000 | ||||||
Net
cash (used in) provided by investing activities
|
(30,667,248 | ) | 3,453,169 | |||||
Cash
flows from financing activities
|
||||||||
Payments
on capital lease obligations
|
(52,722 | ) | (13,560 | ) | ||||
Payments
on note payable
|
- | (9,310,000 | ) | |||||
Issuance
of common stock under compensation plans
|
519,789 | 358,785 | ||||||
Net
proceeds from issuance of common stock
|
45,002,407 | 24,507,319 | ||||||
Net
cash provided by financing activities
|
45,469,474 | 15,542,544 | ||||||
Net
decrease in cash and cash equivalents
|
(5,503,167 | ) | (3,198,430 | ) | ||||
Cash
and cash equivalents, beginning of period
|
21,543,347 | 17,534,963 | ||||||
Cash
and cash equivalents, end of period
|
$ | 16,040,180 | $ | 14,336,533 | ||||
Supplemental
disclosures of cash flow information
|
||||||||
Interest
paid
|
$ | 3,539 | $ | 453,622 |
See
accompanying notes.
3
BIOMIMETIC
THERAPEUTICS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1.
Nature of the Business and Basis of Presentation
Nature
of the Business
BioMimetic
Therapeutics, Inc. (the “Company” and formerly BioMimetic Pharmaceuticals, Inc.)
is a biotechnology company which develops and commercializes regenerative
protein therapeutic-device combination products primarily used for bone and
tissue regeneration for the repair and healing of musculoskeletal injuries and
conditions affecting bones, tendons, ligaments and cartilage within orthopedic,
spine and sports injury applications.
Basis
of Presentation and Principles of Consolidation
The
accompanying unaudited condensed consolidated financial statements reflect the
operations of the Company and its wholly-owned subsidiaries, BioMimetic
Therapeutics Limited in the United Kingdom, BioMimetic Therapeutics Pty Ltd. in
Australia, and BioMimetic Therapeutics Canada, Inc. Inter-company
balances and transactions are eliminated in consolidation. As of
September 30, 2010, the subsidiaries in the United Kingdom and Australia have no
employees and have no operating activities other than making and maintaining
regulatory submissions for the Company’s product candidates in the European
Union (“EU”) and Australia. Also as of September 30, 2010, the
subsidiary in Canada had one employee and had incurred certain operational
expenses.
The
accompanying unaudited condensed consolidated financial statements of the
Company have been prepared in accordance with U.S. generally accepted accounting
principles for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, these
financial statements do not include all the information and footnotes required
by U.S. generally accepted accounting principles for complete financial
statements. The financial information as of September 30, 2010 and
for the three and nine months ended September 30, 2010 and 2009 is unaudited;
however, in the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three and nine month periods
ended September 30, 2010 are not necessarily indicative of the results that may
be expected for any other interim period or for the year ending
December 31, 2010.
The
condensed consolidated balance sheet at December 31, 2009 has been derived
from the audited consolidated financial statements at that date but does not
include all of the information and footnotes required by U.S. generally accepted
accounting principles for complete financial statements.
For
further information and a summary of significant accounting policies, refer to
the consolidated financial statements and footnotes thereto included in the
Company’s Annual Report on Form 10-K, as amended, for the year ended
December 31, 2009. Please refer also to Note 2 regarding the
Company’s adoption of recent accounting pronouncements.
2.
Recent Accounting Pronouncements
Variable Interest
Entities
In June
2009, the Financial Accounting Standards Board (“FASB”) issued SFAS
No. 167, Amendments to
FASB Interpretation No. 46(R), as codified in Accounting Standards
Codification (“ASC”) 810-10 (“ASC 810-10”),which requires an enterprise to
perform an analysis to determine whether the enterprise’s variable interest or
interests give it a controlling financial interest in a variable interest
entity. ASC 810-10 became effective on January 1,
2010. Based on the Company’s evaluation of ASC 810-10, the adoption
of this statement did not have a material impact on the Company’s condensed
consolidated financial statements.
In
December 2009, the FASB issued Accounting Standards Update (“ASU”)
No. 2009-17, Improvements
to Financial Reporting by Enterprises Involved with Variable Interest
Entities (“ASU 2009-17”). The amendments in ASU 2009-17 are
the result of a clarification to ASC 810-10, which became effective on January
1, 2010. Based on the Company’s evaluation of ASU 2009-17, the
adoption of this statement did not have a material impact on the Company’s
condensed consolidated financial statements.
4
BIOMIMETIC
THERAPEUTICS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
2.
Recent Accounting Pronouncements (continued)
Fair Value Measurements and
Disclosures
In
January 2010, the FASB issued ASU 2010-06, Fair Value Measurements and
Disclosures - Topic 855 (“ASU 2010-06”). ASU 2010-06 provides
amendments to ASC 820-10, Fair
Value Measurements (“ASC 820-10”), which was originally issued as SFAS
No. 157, Fair Value
Measurements, and adopted by the Company as of January 1,
2008). ASC 820-10 defines fair value, establishes a framework for
measuring fair value hierarchy for assets and liabilities measured at fair
value, and requires expanded disclosures about fair value
measurements. The ASC 820-10 hierarchy ranks the quality and
reliability of inputs, or assumptions, used in the determination of fair value
and requires financial assets and liabilities carried at fair value to be
classified and disclosed in one of the three categories (level 1, level 2 or
level 3). ASU 2010-06 provides amendments to ASC 820-10 to require
new disclosures for transfers in and out of levels 1 and 2, as well as a
reconciliation of activity within level 3. Furthermore, ASU 2010-06
provides amendments that clarify existing disclosures regarding levels of
disaggregation and inputs and valuation techniques. The new
disclosures and clarifications of existing disclosures required by ASU 2010-06
are effective for interim and annual reporting periods beginning after December
31, 2009 (except for disclosures in the reconciliation of activity within level
3, which are effective for fiscal years beginning after December 15, 2010 and
for interim periods within those fiscal years). The Company adopted
ASU 2010-06 as of January 1, 2010, and the adoption did not have a material
impact on the Company’s condensed consolidated financial
statements. See Note 10.
Subsequent
Events
In
February 2010, the FASB issued ASU 2010-09, Subsequent Events (Topic 855):
Amendments to Certain Recognition and Disclosure Requirements (“ASU
2010-09”), to amend ASC 855, Subsequent Events (“ASC
855”). ASC 855, which was originally issued by the FASB in May 2009
(as SFAS No. 165, Subsequent
Events), provides guidance on events that occur after the balance sheet
date but prior to the issuance of the financial statements. ASC 855
distinguishes events requiring recognition in the financial statements and those
that may require disclosure in the financial statements. As a result
of ASU 2010-09, companies are not required to disclose the date through which
management evaluated subsequent events in the financial statements, either in
originally issued financial statements or reissued financial
statements. ASC 855 was effective for interim and annual periods
ending after June 15, 2009, and ASU 2010-09 is effective
immediately. The Company has evaluated subsequent events in
accordance with ASU 2010-09, and the evaluation did not have a material impact
on the Company’s condensed consolidated financial statements.
3.
Net Loss Per Share
The
Company calculates net loss per share in accordance with ASC 260, Earnings Per Share (formerly
SFAS No. 128, Earnings Per
Share) (“ASC 260”). Under the
provisions of ASC 260, basic net loss per share is computed by dividing the net
loss for the period by the weighted average number of shares of common stock
outstanding for the period. Diluted net loss per share is computed by
dividing the net loss for the period by the weighted average number of shares of
common stock and dilutive common stock equivalents then
outstanding. Common stock equivalents consist of shares of common
stock issuable upon the exercise of stock options.
The
Company had potentially dilutive common stock equivalents outstanding
representing 2,813,076 shares of common stock as of September 30, 2010 and
2,570,410 shares of common stock as of September 30, 2009. These
common stock equivalents consist of issued and outstanding common stock options,
and are not included in the above diluted net loss per common share historical
calculations as the effect of their inclusion is
anti-dilutive. Therefore, the diluted earnings per share is the same
as basic earnings per share.
4.
Royalty Income, Royalty Expense and Sublicense Fee Income
Royalty
Income
The
Company has certain agreements with Luitpold Pharmaceuticals, Inc. (“Luitpold”)
that cover an exclusive worldwide sublicense and license, trademark license,
concurrent use, supply and royalty income relationship. In 2003, the
Company entered into an exclusive sublicense agreement with Luitpold, pursuant
to which the Company licensed to Luitpold the rights to the exclusive worldwide
marketing, distribution and sales of GEM 21S
® Growth-factor Enhanced Matrix (“GEM 21S”). In
consideration for the license, Luitpold was obligated to pay royalties to the
Company based on Luitpold’s net sales of GEM 21S. Luitpold
was required to report its sales and remit royalties to the Company on a
quarterly basis.
In
January 2008, the Company sold its remaining orofacial therapeutic business
to Luitpold, including the rights to the downstream formulation, fill, finish,
manufacturing and kitting of GEM 21S. As a
result of this transaction, the Company expects to continue to receive ongoing
royalty payments based on net sales of GEM 21S by Luitpold at least
through 2026.
5
BIOMIMETIC
THERAPEUTICS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
4. Royalty
Income, Royalty Expense and Sublicense Fee Income (continued)
The
royalty income earned by the Company from Luitpold’s sales of GEM 21S is classified as
revenue on the Company’s condensed consolidated statements of operations in
accordance with the accounting guidance of FASB ASC 605, Revenue
Recognition.
Royalty
Expense
The
Company co-owns certain U.S. patents with Harvard University
(“Harvard”). In 2001, the Company entered into a license agreement
with Harvard that provides it with the exclusive worldwide license to these
patents, which are directed towards the use of recombinant platelet derived
growth factor (“rhPDGF”) and other growth factors for the healing and
restoration of bone and other tissue defects. Under the license
agreement, the Company is obligated to make certain royalty and milestone
payments to Harvard.
The
Company has licensed a number of U.S. patents and their foreign counterparts
from ZymoGenetics, Inc. (“ZymoGenetics”) covering various formulations of rhPDGF
or manufacturing processes for rhPDGF. As a part of the licensing
agreement relating to such patents, the Company agreed to pay royalties to
ZymoGenetics based on net sales of licensed products under the agreement on a
country-by-country basis during the term of the agreement.
The
royalty expense incurred by the Company is classified as a general and
administrative expense on the Company’s condensed consolidated statements of
operations in accordance with the accounting guidance of FASB ASC 605-45-45,
Principal Agent
Considerations, and FASB ASC 705, Cost of Sales and
Services.
Sublicense Fee
Income
Sublicense
fee revenue represents the current amortization of the milestone payments the
Company previously received from Luitpold. The U.S. Food and Drug
Administration (“FDA”) approved the marketing of GEM 21S on November 18,
2005. As a result, the Company received an initial milestone payment
of $15,000,000 pursuant to the terms of the Company’s 2003 sublicense agreement
with Luitpold. In December 2007, the Company received an additional
$5,000,000 milestone payment from Luitpold in connection with the second
anniversary of the GEM
21S approval. In accordance with the provisions of ASC 605-25,
Revenue Recognition,
Multiple-Element Arrangements (formerly EITF 00-21, Revenue Arrangements with Multiple
Deliverables), and the specific accounting guidance regarding
biotechnology license, research and development and contract manufacturing
agreements, the Company is amortizing the $15,000,000 and $5,000,000 proceeds
over the term of the amended and restated sublicense agreement with Luitpold,
which expires on December 31, 2026. Sublicense fee income represents
the current amortization of the $20,000,000 proceeds from these two
milestones.
5.
Inventory
Inventory
is summarized as follows:
September 30,
2010
|
December 31,
2009
|
|||||||
Raw
materials
|
$ | 951,303 | $ | 814,925 | ||||
Work
in progress
|
43,918 | — | ||||||
Finished
goods
|
224,054 | 229,380 | ||||||
$ | 1,219,275 | $ | 1,044,305 |
Raw
materials inventory consists of bulk drug substances, labeling materials, cup
trays, cup lids, and other packaging materials used in the manufacturing of the
Company’s orthopedic products. Work in progress inventory consists of
production runs of cups and vials that are not yet approved and finalized for
packaging. Finished goods inventory consists of finished cups and
vials ready for packaging, as well as packed kits of Augment TM Bone
Graft (“Augment”) ready for sale. Shipping and handling costs are
included in the cost of sales of the product. As of September 30,
2010 and December 31, 2009, no allowance has been recorded for obsolescence,
shrinkage and potential scrapping of product batches that may not be released
for sale.
6
BIOMIMETIC
THERAPEUTICS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
5.
Inventory (continued)
Cost of
sales is comprised of the following costs: raw materials used in the
production and manufacturing of vials and cups, testing fees for the vials and
cups, labeling materials for the finished kits, packaging materials for
inclusion in the finished kit, kit packing costs, freight and scrap incurred
during the production process. The cost of sales will vary in direct
correlation to the volume of product sales of Augment kits. Certain
raw materials were purchased during fiscal years that preceded the completion of
the Phase III clinical trials. As a result, the Company expensed the
pre-launch inventory. Therefore, the Company expects that the gross
profit margins will decrease as the Company continues to replenish its raw
materials and includes those production costs in the cost of sales.
6.
Property and Equipment
Property
and equipment is summarized as follows:
|
September 30,
2010
|
December 31,
2009
|
||||||
Equipment,
computers and purchased software
|
$ | 3,211,848 | $ | 3,061,623 | ||||
Equipment,
computers and purchased software, not placed in service
|
4,222,056 | 4,182,898 | ||||||
Furniture
and fixtures
|
722,920 | 722,920 | ||||||
Leased
equipment
|
190,208 | 188,963 | ||||||
Construction
in process
|
1,020,491 | 993,457 | ||||||
Leasehold
improvements
|
4,054,395 | 4,047,159 | ||||||
13,421,918 | 13,197,020 | |||||||
Less
accumulated depreciation and amortization
|
(5,852,132 | ) | (5,040,178 | ) | ||||
$ | 7,569,786 | $ | 8,156,842 |
In August
2007, the Company entered into a lease agreement for approximately 30,000 square
feet of space in a new building in Franklin, Tennessee intended to house certain
of its manufacturing operations. The new building shell was completed
in October 2009, and rent expense commenced at that time. The Company
intends to move certain of its manufacturing operations to the new facility when
completed. Construction in process consists of engineering design and
planning costs related to the new manufacturing facility that have been incurred
as of September 30, 2010 and December 31, 2009, respectively.
The
Company has purchased equipment, computers and purchased software which has not
yet been placed into service. These purchases include equipment that
the Company intends to use in the new manufacturing facility, which amounts to
$4,176,279 and $4,164,646 as of September 30, 2010 and December 31, 2009,
respectively. In addition, under agreements with various equipment
suppliers for the manufacture of the equipment for the new manufacturing
facility, as of September 30, 2010, the Company has estimated purchase
commitments of $690,775 remaining to be paid through the year
2012. See Note 13.
7.
Deposits
The
Company paid a refundable deposit of $10,000 related to its lease of office
space at its headquarters in Franklin, Tennessee. The Company also paid a
refundable deposit of $375,000 upon signing a lease agreement in
August 2007 for approximately 30,000 square feet of space in the new
manufacturing facility intended to house certain of its manufacturing
operations.
8.
Capitalized Patent License Fees
The
Company owns or co-owns approximately five non-expired U.S. patents,
approximately one U.S. patent which is a non-expired patent due to a patent term
extension, a number of non-expired foreign patents, and numerous pending U.S.
and foreign patent applications. The Company has exclusively licensed
approximately four non-expired U.S. patents and a number of non-expired foreign
patents.
The
Company has incurred, and continues to incur, costs related to patent license
fees and patent applications for Augment, Augment TM
Injectable Bone Graft (“Augment Injectable”) and the Company’s other product
candidates. These payments have been capitalized as patent license
fees and will be amortized over their remaining patent life. The
termination dates of the patents range from June 2025 to January 2026. The
Company has capitalized costs totaling $12,678,942 as of September 30, 2010
related to the acquisition of its patent licenses.
7
BIOMIMETIC
THERAPEUTICS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
9. Investments
As of
September 30, 2010, the Company had short-term investments in U.S. government
sponsored enterprise (“GSE”) securities totaling $66,395,995. The GSE
securities have maturity dates ranging from October 2010 through September 2011
and are classified as available-for-sale. In addition, as of
September 30, 2010, the Company had long-term investments of $17,005,385,
consisting of five GSE securities with maturity dates ranging from October 2011
to September 2012.
10. Fair Value
Measurements
As of
January 1, 2008, the Company adopted ASC 820-10, Fair Value Measurements
(originally issued as SFAS No. 157, Fair Value Measurements)
(“ASC 820-10”), which defines fair value, establishes a framework for measuring
fair value hierarchy for assets and liabilities measured at fair value, and
requires expanded disclosures about fair value measurements. The ASC
820-10 hierarchy ranks the quality and reliability of inputs, or assumptions,
used in the determination of fair value and requires financial assets and
liabilities carried at fair value to be classified and disclosed in one of the
following three categories:
Level 1 —
quoted prices in active markets for identical assets and
liabilities;
Level 2 —
inputs other than Level 1 quoted prices that are directly or indirectly
observable; and
Level 3 —
unobservable inputs that are not corroborated by market data.
As of
January 1, 2010, the Company adopted ASU 2010-06, Fair Value Measurements and
Disclosures - Topic 855 (“ASU 2010-06”). ASU 2010-06 provides
amendments to ASC 820-10 to require new disclosures for transfers in and out of
levels 1 and 2, as well as a reconciliation of activity within level
3. In addition, ASU 2010-06 provides amendments that clarify existing
disclosures regarding levels of disaggregation and inputs and valuation
techniques.
In
accordance with ASC 820-10, as amended by ASU 2010-06, the Company evaluates
assets and liabilities subject to fair value measurements on a recurring basis
to determine the appropriate level at which to classify them for each reporting
period. This determination requires significant judgments to be made by the
Company.
As of
September 30, 2010, financial assets and liabilities subject to fair value
measurements were as follows:
Assets
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||||||
Cash
and cash equivalents
|
$ | 16,040,180 | $ | — | $ | — | $ | 16,040,180 | ||||||||
Short-term
investments (GSE securities)
|
66,395,995 | — | — | 66,395,995 | ||||||||||||
Long-term
investments (GSE securities)
|
17,005,385 | — | — | 17,005,385 | ||||||||||||
Total
cash and investments
|
$ | 99,441,560 | $ | — | $ | — | $ | 99,441,560 |
Fair value
estimate
The
Company’s cash and cash equivalents include cash on hand, deposits in banks,
certificates of deposit and money market funds. Due to their
short-term nature, the carrying amounts reported in the condensed consolidated
balance sheets approximate the fair value of cash and cash
equivalents.
The
Company’s short-term investments consist of GSE securities classified as
available for sale. The Company’s long-term investments consist of
five GSE securities with maturity dates ranging from October 2011 to September
2012. The carrying amounts reported in the condensed consolidated
balance sheets approximate the fair value of the Company’s short-term and
long-term investments.
8
BIOMIMETIC
THERAPEUTICS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
11.
Other Accrued Expenses
Other
accrued expenses are summarized as follows:
September 30,
2010
|
December 31,
2009
|
|||||||
Royalties
payable
|
$ | 21,413 | $ | 89,954 | ||||
Professional
fees
|
127,468 | 5,000 | ||||||
Taxes
and licenses
|
37,469 | 30,817 | ||||||
Patents
|
67,399 | — | ||||||
Facilities
& utilities
|
70,901 | — | ||||||
Other
|
14,501 | 9,299 | ||||||
$ | 339,151 | $ | 135,070 |
12. Capital
Shares
Public
Offering of Common Stock
In July
2010, the Company sold 5,642,280 shares of common stock at a price of $8.50 per
share, resulting in net proceeds of approximately $45.0 million after deducting
underwriting discounts, commissions and estimated expenses. Of
the shares sold, 642,280 shares were sold in connection with the underwriters’
exercise, in part, of an over-allotment option.
13.
Commitments and Contingencies
Litigation
In the
ordinary course of business, the Company is subject to legal claims and
assessments. However, there are no such claims or assessments that
currently exist that in the opinion of management are expected to have a
material impact on the financial condition or operating results of the
Company.
Manufacturing
Equipment
The
Company has executed agreements with various equipment suppliers for the
manufacture of equipment that will be used in the new manufacturing
facility. As of September 30, 2010, the Company has paid a total of
$4,176,279 for the equipment, which is classified as equipment not placed in
service (see Note 6). In addition, under these agreements, the
Company has estimated remaining purchase commitments of $120,000 for 2010,
$487,775 for 2011 and $83,000 for 2012.
Employment
Agreements
The
Company has employment contracts with several individuals, which provide for
base salaries, potential annual cash bonuses and long-term equity incentives.
These contracts contain certain change of control, termination and severance
clauses that require the Company to make payments to these employees if certain
events occur as defined in their respective contracts.
Supply
Agreements
The
Company has executed supply agreements with Novartis Vaccines and Diagnostics
and with Cam Bioceramics BV. Under these agreements, the Company has
agreed to certain minimum purchase commitments and/or binding orders of which
there are commitments and binding orders of $1,532,200 remaining for 2010 and
estimated commitments and binding orders of $2,877,560 and $3,153,268 for 2011
and 2012, respectively.
9
BIOMIMETIC
THERAPEUTICS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
14. Stock-Based
Compensation
2001
Long-Term Stock Incentive Plan
During
2001, the Company’s board of directors approved the adoption of the 2001
Long-Term Stock Incentive Plan (the “option plan”). The option plan
provides that awards of stock options, other equity interests or equity-based
incentives in the Company may be granted to key personnel at an exercise price
determined by the Company’s Compensation Committee, at the time the award is
granted, taking into account the fair value of the common stock at the date of
grant. The maximum term of any award granted pursuant to the option
plan is 10 years from the date of grant.
The
employee stock options granted by the Company are structured to qualify as
“incentive stock options” (“ISOs”). Under current tax regulations,
the Company does not receive a tax deduction for the issuance, exercise or
disposition of ISOs if the grantee meets specific holding requirements. If the
grantee does not meet the holding requirements, a disqualifying disposition
occurs, at which time the Company will receive a tax deduction. The
Company does not record tax benefits related to ISOs unless and until a
disqualifying disposition occurs. Upon a disqualifying disposition,
the entire tax benefit is recorded as a reduction of income tax
expense. The Company has not recognized any income tax benefit for
the three and nine months ended September 30, 2010 and 2009 for share-based
compensation arrangements as the Company does not believe that it will recognize
any deferred tax assets from such compensation costs recognized in the current
period.
In
general, stock option awards granted under the option plan vest 25% per year
over a four-year period. The option plan currently provides that upon
a change in control all outstanding ISO awards held by a qualified employee may,
under certain circumstances, be accelerated and exercisable
immediately. Upon a change in control, the vesting percentage of an
employee’s ISO award depends upon the number of years of employment at the time
of the change in control as follows: 25% vested if employed less than one year,
50% vested if employed more than one year but less than two years, 75% vested if
employed more than two years but less than three years, and 100% vested if
employed three or more years.
As of
September 30, 2010, a total of 6,019,723 shares of common stock have been
authorized by the board of directors for issuance under the option
plan. In addition, as of September 30, 2010, a total of 2,813,076
options to purchase shares of common stock were issued and outstanding and a
total of 1,174,876 shares of common stock had been issued upon the exercise of
outstanding options, leaving a total of 2,031,771 shares of common stock
remaining available for future issuance in connection with the option
plan. The options vest over a period of not greater than five years
and remain exercisable for up to 10 years from the date of grant.
During
the three and nine months ended September 30, 2010, the Company granted stock
options to purchase an aggregate of 38,013 and 712,741 shares of its common
stock, respectively, to employees under the option plan at a weighted-average
exercise price of $9.78 and $11.80 per share, respectively. During
the three and nine months ended September 30, 2009, the Company granted stock
options to purchase an aggregate of 8,713 and 627,341 shares of its common
stock, respectively, to employees under the option plan at a weighted-average
exercise price of $10.90 and $8.70 per share, respectively.
There
were 33,794 and 328,365 shares of common stock issued upon option exercises
during the three and nine months ended September 30, 2010, respectively. There
were 49,839 and 95,354 shares of common stock issued upon option exercises
during the three and nine months ended September 30, 2009,
respectively.
Effective
January 1, 2006, the Company adopted ASC 505, Equity-Based Payments to
Non-Employees (“ASC 505”), and ASC 718, Compensation – Stock Compensation
(formerly SFAS No. 123(R), Share-Based Payment) (ASC
718”), using the modified prospective method of transition. Under
that transition method, compensation expense recognized in the three and nine
months ended September 30, 2010 and 2009 includes: (a) compensation costs for
all share-based payments granted prior to January 1, 2006, which are based on
the intrinsic value method proscribed by Accounting Principles Board Opinion
No. 25, Accounting for
Stock Issued to Employees, and (b) compensation costs for all share-based
payments granted subsequent to January 1, 2006, which are based on the grant
date fair value estimated in accordance with the provisions of ASC 505 and
ASC 718.
10
BIOMIMETIC
THERAPEUTICS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
14. Stock-Based
Compensation (continued)
In
accordance with ASC 505 and ASC 718, the fair value of each option award is
estimated on the date of grant using the Black-Scholes option pricing model
using weighted average assumptions amortized to expense over the options'
vesting periods for the three and nine months ended September 30, 2010 and 2009
as follows:
2010
|
2009
|
|||||||
Average
risk free interest rate
|
2.25 | % | 2.11 | % | ||||
Expected
dividend yield
|
— | — | ||||||
Volatility
factor of the expected market price
|
76% - 77 | % | 77% - 79 | % | ||||
Forfeiture
rate
|
6.3 | % | 6.6 | % | ||||
Weighted
average expected life of the option
|
4.3
- 9.4 years
|
4.2
- 8.5 years
|
Since
there is a limited trading history for the Company’s common stock, the expected
volatility and forfeiture rates are based on historical data from three
companies similar in size and value to the Company. The expected terms of
options granted represent the period of time that options granted are expected
to be outstanding and are derived from the contractual terms of the options
granted. The fair value of each option is amortized over each option's vesting
period. The risk-free rate for periods within the contractual life of
the option is based on the U.S. Treasury yield curve in effect at the time of
the grant.
The
Company’s net loss includes compensation costs related to its stock-based
compensation arrangements of $1,010,599 and $2,902,328 for the three and nine
months ended September 30, 2010, respectively, and $1,010,972 and $2,888,940 for
the three and nine months ended September 30, 2009, respectively. No income tax
benefit related to the Company’s stock-based compensation arrangements is
included in its net loss.
2005
Employee Stock Purchase Plan
In 2005,
the Company’s board of directors adopted the 2005 Employee Stock Purchase Plan
(the “purchase plan”). The purchase plan incorporates the provisions of
Section 423 of the Internal Revenue Code of 1986, as
amended. The Company has reserved 200,000 shares of common stock for
purchase by employees under the purchase plan. The purchase plan provides for
offer periods of three months to eligible employees. Under the purchase plan,
eligible employees can purchase shares of common stock through payroll
deductions up to 15% of their eligible base compensation, at a price equivalent
to 85% of the lower of the beginning or ending quarterly market
price.
Employees
became eligible to participate in the purchase plan beginning July 1,
2006. As of September 30, 2010, 116,823 shares of common stock remain
available for issuance under the purchase plan. In accordance with
the provisions of ASC 718,
the Company recorded stock-based compensation expense in connection with the
purchase plan of $12,633 and $32,645 during the three and nine months ended
September 30, 2010 respectively, and $7,127 and $25,739 during the three and
nine months ended September 30, 2009, respectively.
401(k)
Profit Sharing Plan & Trust
Effective
January 1, 2004, the Company began sponsoring the 401(k) Profit Sharing
Plan & Trust (the “401(k) plan”), which is a defined contribution retirement
plan covering substantially all the Company’s employees, subject to certain
minimum age and service requirements. Participation in the 401(k)
plan is optional. The Company provides matching contributions at the
discretion of the Company’s board of directors, and generally consists of
matching contributions in shares of the Company’s common stock valued at up to
4% of eligible employee compensation. Such matching contributions, if
approved, are generally awarded during the first quarter of each calendar year,
but cover the previous calendar year just ended resulting in compensation
expense recorded in that previous calendar year.
In
September 2010, the Company’s board of directors approved an amendment to the
401(k) plan that will make the Company’s match for the 2011 fiscal year
non-discretionary. In addition, the matching shares will vest
immediately. These changes were made in order to convert the Company’s
plan to a safe harbor plan, which will eliminate the need for annual
discrimination testing.
11
BIOMIMETIC
THERAPEUTICS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
14.
Stock-Based Compensation (continued)
As of
September 30, 2010, there were 59,659 shares remaining available for issuance
under the 401(k) plan. In accordance with the provisions of ASC 718,
the Company recorded stock-based compensation expense in connection with the
401(k) plan of $0 and $165,085 during the nine months ended September 30, 2010
and 2009, respectively.
15.
Income Taxes
At
September 30, 2010, the Company had federal net operating loss (“NOL”)
carryforwards of $84,959,373 that will begin to expire in 2022. State
NOL carryforwards at September 30, 2010 totaled $75,222,526 and will expire
between 2012 and 2030. The use of deferred tax assets, including
federal net operating losses, is limited to future taxable
earnings. Based on the required analysis of future taxable income
under the provisions of ASC 740, Income Taxes (formerly SFAS
No. 109), the Company’s management believes that there is not sufficient
evidence at September 30, 2010 indicating that the results of operations will
generate sufficient taxable income to realize the net deferred tax asset in
years beyond 2010. As a result, a valuation allowance was provided
for the entire net deferred tax asset related to future years, including loss
carryforwards.
The
Company’s ability to use its NOL carryforwards could be limited and subject to
annual limitations. In connection with future offerings, the Company
may realize a “more than 50% change in ownership” which could further limit its
ability to use its NOL carryforwards accumulated to date to reduce future
taxable income and tax liabilities. Additionally, because U.S. tax
laws limit the time during which NOL carryforwards may be applied against future
taxable income and tax liabilities, the Company may not be able to take
advantage of all or portions of its NOL carryforwards for federal income tax
purposes.
The
Company incurred net operating losses for the three and nine months ended
September 30, 2010 and 2009. As of September 30, 2010 and 2009, no
income tax expense has been recorded.
The
Company files income tax returns in the U.S. federal jurisdiction and various
state jurisdictions. With few exceptions, the Company is no longer subject to
U.S. federal examinations or state and local income tax examinations by tax
authorities for years before 2003.
16.
Comprehensive Loss
FASB ASC
220, Comprehensive
Income (formerly SFAS No. 130) (“ASC 220”), establishes standards for
reporting and display of comprehensive loss and its components in the condensed
consolidated financial statements. The Company’s comprehensive loss
as defined by ASC 220 is the total of net loss and all other changes in equity
resulting from non-owner sources including unrealized gains/losses on
investments.
The
components of the Company’s comprehensive loss for the three and nine months
ended September 30, 2010 and 2009 are as follows:
Three months
ended September 30,
|
||||||||
2010
|
2009
|
|||||||
Net
loss
|
$ | (7,751,360 | ) | $ | (7,916,133 | ) | ||
Other
comprehensive loss:
|
||||||||
Unrealized
(loss) gain on investments classified as available for
sale
|
(2,715 | ) | 12,085 | |||||
Comprehensive
loss
|
$ | (7,754,075 | ) | $ | (7,904,048 | ) |
Nine months
ended September 30,
|
||||||||
2010
|
2009
|
|||||||
Net
loss
|
$ | (23,928,686 | ) | $ | (22,252,413 | ) | ||
Other
comprehensive loss:
|
||||||||
Unrealized
(loss) gain on investments classified as available
for sale
|
(5,951 | ) | 2,469,529 | |||||
Comprehensive
loss
|
$ | (23,934,637 | ) | $ | (19,782,884 | ) |
12
BIOMIMETIC
THERAPEUTICS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
17. Subsequent
Events
Qualifying
Therapeutic Discovery Project Grant
In
November 2010, the Company was awarded two cash grants totaling $488,959 under
the U.S. government’s Qualifying Therapeutic Discovery Project (“QTDP”)
program. The QTDP program was created by the U.S. Congress as part of the
Patient Protection and Affordable Care Act of 2010, and provides a tax credit or
grant equal to eligible costs and expenses for tax years 2009 and 2010.
The QTDP program is aimed at creating and sustaining high-quality,
high-paying jobs in the United States, while advancing the nation’s
competitiveness in life, biological and medical sciences. The Company
submitted applications and received the awards based on its orthopedic and
sports medicine programs.
Logistical
Support Agreement
In
November 2010, the Company entered into a logistical support agreement with
Joint Solutions Alliance Corporation (“Joint Solutions”) wherein Joint Solutions
will warehouse the Company’s Augment product and ship the product to Canadian
end users, when and as directed by the Company. The Company will retain
ownership of all devices stored at Joint Solutions. Under the terms and
conditions of the logistical support agreement, Joint Solutions is entitled to a
fee equal to a certain percentage of the net sales price of Augment devices that
are shipped by Joint Solutions to third parties. The initial term of the
agreement is one year; after the initial term, either party may terminate the
agreement upon 60 days’ prior written notice to the other party.
13
Item
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
You should read the following
discussion and analysis of our financial condition and results of operations
together with our unaudited condensed consolidated financial statements and the
related notes appearing elsewhere in this report and our Quarterly Reports on
Form 10-Q for the quarters ended March 31, 2010 and June 30, 2010, and together
with our audited consolidated financial statements, related notes and
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations” as of and for the year ended December 31, 2009 included in our
Annual Report on Form
10-K, as amended, filed
with the Securities and Exchange Commission (“SEC”) on March 12,
2010.
Overview
We are a
biotechnology company which develops and commercializes innovative products to
help stimulate the body’s natural tissue regenerative process. Our
product and product candidates use purified recombinant human platelet derived
growth factor (“rhPDGF-BB”), one of the principal wound healing and tissue
repair stimulators in the body, in combination with tissue specific matrices as
our primary technology platform for promoting tissue healing and
regeneration. This platform regenerative technology may offer
physicians advanced biological solutions to actively stimulate tissue healing
and regeneration. We believe that our product candidates, if approved by the
appropriate regulatory authorities, may offer new, effective and less invasive
treatment options in orthopedic, spine and sports related injuries to improve
the quality of life for millions of patients suffering injuries or deterioration
of bones, ligaments, tendons and cartilage. Through the
commercialization of this technology, we seek to become the leading company in
the field of orthopedic regenerative medicine.
We have
already demonstrated that our technology is safe and effective in stimulating
bone regeneration with the U.S. and Canadian regulatory approvals of our
first periodontal product, GEM
21S
® Growth-factor Enhanced Matrix (“GEM 21S”), and with the
Canadian regulatory approval of our first orthopedic product, Augment TM Bone
Graft (“Augment”). Both GEM 21S and Augment are fully
synthetic and off-the-shelf bone growth factor products for the treatment of
bone defects and injuries. In 2008, we sold our orofacial therapeutic
business, including GEM21S, to Luitpold
Pharmaceuticals, Inc. (“Luitpold”), thereby enabling us to focus our expertise,
additional capital and future development efforts on our orthopedic and sports
medicine product candidates. Currently, our management is focused on
obtaining marketing approval for Augment in the United States, the European
Union (“EU”) and Australia, preparing for the anticipated commercial launch of
Augment in the United States, the EU and Australia, successfully developing our
other product candidates, improving the commercial adoption of Augment in
Canada, and managing our cash balance.
A key
priority requiring our management’s attention is the approval of Augment in the
United States. Augment is the subject of our North American pivotal (Phase III)
randomized controlled trial which compares Augment to autograft for use in
hindfoot and ankle fusion surgery. This trial will provide the
primary data set used to support regulatory approval in the United States, as
well as in the EU and Australia. Earlier this year, we submitted the
data from this trial to the U.S. Food and Drug Administration (“FDA”) as part of
our Pre-Marketing Approval (“PMA”) application for Augment, which has been
accepted by the FDA for review. We continue to have informal
discussions with the FDA regarding our PMA, and in September 2010, we announced
that we completed our 100-day PMA meeting with the FDA. To date, the
FDA has raised no unexpected issues that would impact the timing for an upcoming
Orthopedic Advisory Panel meeting or potential approval of
Augment. We anticipate that the panel meeting will be held in early
2011, and that approval of Augment in the United States will occur within six
months after the panel meeting if the panel recommends approval and if the FDA
finds the PMA information satisfactory.
In
addition to Augment, we are developing a number of other product candidates,
including Augment TM
Injectable Bone Graft (“Augment Injectable”). Our product candidates
have been the subject of numerous orthopedic clinical studies that have been
completed or are ongoing which seek to demonstrate the safety, clinical utility
and/or efficacy of the product candidates in our pipeline. Our
numerous clinical studies, including our Augment and Augment Injectable studies,
suggest that our platform technology may be effective in our target
applications. As a result, we have pre-clinical programs focused on
developing treatments for bone defects in the spine and various sports injury
applications, including those requiring ligament, tendon and cartilage
repair.
14
We also
remain focused on the commercialization of Augment in Canada, which was approved
by Health Canada in the fourth quarter of 2009. The success of our
commercial marketing in Canada depends upon the success of our efforts to place
Augment onto the list of approved products at key hospitals throughout Canada.
The purchasing department of a Canadian hospital must approve Augment separately
before it can be used in that hospital. We have not yet broadly
achieved hospital approval throughout Canada, and thus our Canadian sales of
Augment have not yet generated significant sales. We do not anticipate
significant revenues in 2010 from sales of Augment or otherwise. We
are continuing to work with hospitals and opinion leaders in Canada to obtain
hospital level approvals and promote the usage of Augment. In
addition, we are changing our distribution strategy in Canada, and are currently
transitioning from a single exclusive distributor to a network of independent
sales agents who will be more closely managed by us through a Canadian national
sales manager, which we recently hired.
For the
nine months ended September 30, 2010, we had a net loss of $23.9
million. Our revenues remain limited, which at $1.1 million for the
nine months ended September 30, 2010 consist only of royalty income, sublicense
fee income and a training grant. Although we received regulatory
approval for Augment in Canada in 2009, no product sales revenues have been
recorded for the nine months ended September 30, 2010. In December
2009, we shipped an order of Augment to an exclusive distributor and recognized
the appropriate revenues; however, additional sales of Augment in Canada are not
anticipated until the inventory purchased in 2009 by the distributor is
exhausted and/or our sales distribution channel transition is
completed. Our largest expenditures related to our research and
development activities, which were $12.5 million for the nine months ended
September 30, 2010 and are discussed in further detail in “Financial
Overview.” In view of our limited revenue at this time, we
continue to closely monitor our cash balance and manage expenses. The
continuing volatile business and economic environment, as well as the ensuing
market instability and uncertainty, may continue to impact our general business
strategy, which may be adversely affected if the current economic conditions do
not continue to improve. For example, the economy may impact the
demand for elective medical procedures that we are targeting with our product
candidates, or may impact the pricing that we may set for our products, if
approved. Accordingly, the impact of the economy on commercial
opportunities, such as our anticipated product launch in the United States for
Augment, remains uncertain.
We have
responded to the current economic conditions by raising capital through the sale
of common stock, by investing our cash and investments conservatively, and by
employing cost control measures to conserve cash and manage expenses, such as
scaling back growth in staff, eliminating unnecessary expenditures and
postponing certain program activities where appropriate. If the
economy continues to improve or as we near regulatory approval of Augment in the
United States, we anticipate that we will reassess certain of these measures and
potentially resume growth in staffing and certain program
activities.
Recent
Developments
Augment™
Bone Graft
Pre-Marketing Application
for Approval of Augment in the United States
In
September 2010, we announced that we completed our 100-day PMA meeting with the
FDA regarding the review of Augment for the treatment of foot and ankle fusions
in the United States. The FDA generally meets with the PMA sponsor
approximately 100 days after the filing of the PMA with the purpose of
discussing the status of the application. To date, the FDA has raised
no unexpected issues that would impact the timing for an upcoming Orthopedic
Advisory Panel meeting or potential approval of Augment. We
anticipate that the panel meeting will be held in early 2011, and that approval
of Augment in the United States will occur within six months after the panel
meeting if the panel recommends approval and if the FDA finds the PMA
information satisfactory.
Commercialization of
Augment
We continue to make progress in the
commercialization of Augment. During the third quarter of 2010, we
completed a detailed analysis of the commercialization infrastructure required
for the launch of Augment in the United States and began to implement the
necessary systems and capabilities.
In
Canada, 17 institutions have either used or have approved the use of Augment,
and we remain on track to meet our goal of having 20 to 25 unique institutions
that have approved the use of the product by year-end. Our Canadian
national sales manager is developing a new network of independent sales agencies
who will sell Augment throughout Canada. Currently, we anticipate
that we will have approximately 25 sales representatives, covering all of
Canada, in place by the end of 2010.
15
In
November 2010, we entered into a logistical support agreement with Joint
Solutions Alliance Corporation (“Joint Solutions”) wherein Joint Solutions will
warehouse our Augment product and ship the product to Canadian end users, when
and as directed by us. We will retain ownership of all devices stored at
Joint Solutions. Under the terms and conditions of the logistical support
agreement, Joint Solutions is entitled to a fee equal to a certain percentage of
the net sales price of Augment devices that are shipped by Joint Solutions to
third parties. The initial term of the agreement is one year; after the
initial term, either party may terminate the agreement upon 60 days’ prior
written notice to the other party.
Augment™
Injectable Bone Graft
We
previously announced that in June 2010 we filed a Request for Designation
(“RFD”) with the FDA regarding the use of Augment Injectable as a substitute for
autograft in foot and ankle fusion procedures. An RFD is a formal
request for the FDA to determine if a device/drug combination product will be
reviewed as a device or as a drug. This determination is based on whether the
device component or the drug component is deemed to be the primary mode of
action for the product.
In
September 2010, we announced that the FDA had completed its review of our RFD
for Augment Injectable. We received a determination letter from the
FDA’s Office of Combination Products (“OCP”) indicating that the Augment
Injectable review will follow a medical device pathway. Accordingly,
our previously filed Investigational Device Exemptions (“IDE”) for the use of
Augment Injectable in treating foot and ankle fusions has been assigned to the
FDA’s Center for Devices and Radiologic Health (“CDRH”) Division of Surgical,
Orthopedic and Restorative Devices for lead review. Therefore,
Augment Injectable will be reviewed as a device through the pre-market approval
process to confirm reasonable assurance of safety and
effectiveness. We expect to initiate patient enrollment in a U.S.
pivotal trial shortly after the IDE is approved by the FDA. We
anticipate that the IDE approval may occur around year-end 2010.
Sports
Medicine
We
currently have product candidates under clinical development for intra-tendon,
tendon-to-bone, and cartilage repair indications. We believe that
findings from our pre-clinical studies provide further support of the potential
of rhPDGF-BB in the sports medicine market.
Rotator Cuff Product
Candidate
We
previously announced that the FDA concluded that our rotator cuff product
candidate should be reviewed as a drug, and not as a device. We
continue to work with the FDA to seek reclassification of that product candidate
to be reviewed as a device. Although we continue to seek
reclassification of our rotator cuff product candidate, there can be no
assurance that the FDA will classify the product as anything other than a
drug.
Health
Canada, however, has determined that our rotator cuff product candidate will be
reviewed as a medical device, and we anticipate that we will begin a pilot
clinical study in Canada evaluating rotator cuff injuries around year-end
2010. We believe that we have designed the initial clinical trial
protocol to meet both the medical devices and drug requirements for early stage
clinical studies.
Orphan Drug Designation
Received for rhPDGF-BB Treatment of Osteochondritis
Dissecans
In August
2010, we announced that we received orphan drug designation from the FDA for
rhPDGF-BB to be used in conjunction with autograft and/or commercially available
osteochondral allograft for the treatment of osteochondritis dissecans (“OCD”)
of the knee, elbow or ankle. OCD is a joint condition in which
cartilage, along with a fragment of the bone beneath it (subchondral bone),
becomes detached from the end of a bone due to a loss of blood
supply. This orphan drug designation should facilitate the work in
our sports medicine product development program for cartilage
repair.
Orphan
drug status, designated to drugs that have the potential to treat rare diseases,
provides an accelerated path to FDA approval and may provide seven years of
market exclusivity. Orphan drug designation was designed by the FDA
to encourage the development of therapeutic products for clinical indications
that affect fewer than 200,000 individuals within the United States. In
addition to a possible seven years of marketing exclusivity from the date of
drug approval, drugs that receive orphan drug designation obtain tax credits for
clinical investigation costs, marketing application filing fee waivers and
assistance from the FDA in the drug development process. Orphan drug
designation does require clinical data to gain market approval authorization
through the Investigational New Drug (“IND”) process.
16
Patent
Updates
In
September 2010, we announced the expansion of our patent portfolio in both the
United States and Europe with the addition of two new patents. The
United States Patent and Trademark Office issued patent number 7,799,754
entitled “Compositions and Methods for Treating Bone.” This patent
will cover methods of treating impaired bone to facilitate strengthening and
healing of bone using novel compositions of rhPDGF-BB combined with matrix
materials having defined characteristics. Additionally, the European
Patent Office has issued patent No. 1812076 entitled “Platelet-Derived Growth
Factor Compositions and Methods of Use Thereof.” The European patent
covers compositions of rhPDGF-BB combined with matrix materials having defined
characteristics.
Both the
United States and the European patents will cover our recombinant protein-device
combination product candidates, including Augment and Augment Injectable, as
well as GEM21S® and
GEMESIS™, which
we previously sold to Luitpold Pharmaceuticals, Inc. and for which we continue
to receive royalties. The new U.S. patent now extends our
protection in the United States for Augment, Augment Injectable, and GEM21S until January 2026,
and the European patent will provide similar protection in the EU until October
2025. We believe that the new patents will limit the ability of third
parties to market similar or generic versions of Augment, Augment Injectable,
GEM21S and GEMESIS in both the United
States and all major EU markets, and will significantly enhance our
existing patent portfolio.
Qualifying
Therapeutic Discovery Project Grant
In
November 2010, we were awarded two cash grants totaling $0.5 million under the
U.S. government’s Qualifying Therapeutic Discovery Project (“QTDP”)
program. The QTDP program was created by the U.S. Congress as part of the
Patient Protection and Affordable Care Act of 2010, and provides a tax credit or
grant equal to eligible costs and expenses for tax years 2009 and 2010.
The QTDP program is aimed at creating and sustaining high-quality,
high-paying jobs in the United States, while advancing the nation’s
competitiveness in life, biological and medical sciences. We
submitted applications and received the awards based on our orthopedic and
sports medicine programs.
Financial
Overview
From our
inception in 1999 through September 30, 2010, we have funded our operations with
proceeds from the sale of capital stock, from the licensing and sale of our
orofacial therapeutic business, and from research and development agreements,
grants, product sales and royalties.
The
remaining proceeds of these activities are reflected in the balance of cash and
investments totaling $99.4 million as of September 30, 2010, which includes
$16.0 million in cash and cash equivalents and $83.4 million in short-term and
long-term investments in U.S. government sponsored enterprise (“GSE”) securities
that are classified as available-for-sale.
We
continue to incur research and development expenses due to the substantial
expansion of our internal research capabilities and the numbers of patients we
have enrolled and expect to enroll in the clinical trials of Augment Injectable
and our other product candidates. We will make determinations as to
which product candidates to advance and how much funding to direct to each on an
ongoing basis in response to their scientific and clinical
success. We expect that research and development expenses will
continue to increase as a result of new and ongoing clinical trials and
pre-clinical studies of our product candidates in the United States, Canada and
the European Union, as well as continuing expenses associated with regulatory
filings.
The
following table summarizes our research and development expenses for the three
and nine months ended September 30, 2010 and 2009. Direct external
costs represent significant expenses paid to third parties that specifically
relate to the clinical development of our product candidates, such as payments
to contract research organizations, clinical investigators, manufacture of
clinical material, consultants, contract manufacturing start-up costs,
manufacturing scale-up costs, milestone payments and insurance premiums for
clinical studies. In addition, employee costs (salaries, payroll
taxes, benefits, and travel) for employees of the manufacturing, regulatory
affairs, clinical affairs, quality assurance, quality control and research and
development are classified as research and development
costs. Research and development spending for past periods is not
indicative of spending in future periods.
17
Research and development expenses are summarized as follows:
Three months ended
September 30,
|
Nine months ended
September 30,
|
|||||||||||||||
Costs
|
2010
|
2009
|
2010
|
2009
|
||||||||||||
Direct
external:
|
||||||||||||||||
Periodontal
|
$ | 17,606 | $ | 10,923 | $ | 17,940 | $ | 170,191 | ||||||||
Orthopedic
|
1,183,575 | 1,881,270 | 3,345,036 | 5,541,508 | ||||||||||||
Sports
medicine
|
331,432 | 352,166 | 675,655 | 768,348 | ||||||||||||
1,532,613 | 2,244,359 | 4,038,631 | 6,480,047 | |||||||||||||
Internal:
|
||||||||||||||||
Periodontal
|
121,225 | 165,989 | 341,316 | 503,896 | ||||||||||||
Orthopedic
|
2,005,959 | 2,305,588 | 6,085,371 | 7,103,773 | ||||||||||||
Sports
medicine
|
772,196 | 475,577 | 2,084,558 | 1,450,368 | ||||||||||||
2,899,380 | 2,947,154 | 8,511,245 | 9,058,037 | |||||||||||||
Total
|
$ | 4,431,993 | $ | 5,191,513 | $ | 12,549,876 | $ | 15,538,084 |
We
anticipate that our general and administrative expenses will continue to
increase as we expand our operations, facilities and other administrative
activities related to our efforts to bring our product candidates into
commercialization.
Since
inception, we have incurred losses from operations each year. As of
September 30, 2010, we had an accumulated deficit of $117.4 million, which
includes a $39.3 million net gain on the January 2008 sale of our
orofacial therapeutic business. Although the size and timing of our
future operating losses are subject to significant uncertainty, we expect that
operating losses may continue over the next few years as we continue to fund our
research and development activities and clinical trials. In November
2009, Health Canada approved the use and marketing of Augment, and we are
currently working with several key institutions and opinion leaders in Canada to
obtain new product approvals and usage within hospital and other
institutions. Furthermore, while we currently do not have a product
approved by the FDA for commercialization in the United States, we are incurring
expenses in connection with the preparation of a future sales network to
represent our products upon anticipated commercialization.
The
successful development of Augment and our other product candidates is highly
uncertain. We cannot reasonably estimate the nature, timing and costs
of the efforts necessary to complete the development and approval of, or the
period in which material net cash flows are expected to commence from, any of
our product candidates due to the numerous risks and uncertainties associated
with developing product candidates, including the uncertainty of:
|
§
|
the
scope, rate of progress and cost of our clinical
trials;
|
|
§
|
future
clinical trial results;
|
|
§
|
the
cost and timing of regulatory
approvals;
|
|
§
|
the
establishment of marketing, sales and
distribution;
|
|
§
|
the
cost and timing associated with licensing, business relationships and
similar arrangements;
|
|
§
|
the
cost and timing of establishing clinical and commercial supplies of
Augment and our other product
candidates;
|
|
§
|
the
timing and results of our pre-clinical research
programs;
|
|
§
|
the
effects of competing technologies and market developments;
and
|
|
§
|
the
industry demand and patient wellness behavior as businesses and
individuals cope with the current economic volatility and
uncertainty.
|
Any
failure to complete the development of Augment or any of our other product
candidates in a timely manner, or any failure to successfully market and
commercialize Augment or any of our other product candidates, could have a
material adverse effect on our operations, financial position and
liquidity. A discussion of the risks and uncertainties associated
with completing our projects on schedule, or at all, and some of the
consequences of failing to do so, are set forth in our Annual Report on Form
10-K, as amended, for the year ended December 31, 2009, in Section 1A under the
heading “Risk Factors”, in our Quarterly Reports on Form10-Q for the three
months ended March 31, 2010, as amended, for the three and six months ended June
30, 2010, and in this Quarterly Report under “Part II, Item 1A — Risk
Factors.”
18
Results of
Operations
Three
Months Ended September 30, 2010 and 2009
Net loss
for the three months ended September 30, 2010 was $7.8 million, or $0.29
per diluted share, compared to net loss of $7.9 million, or $0.36 per
diluted share, for the same period in 2009.
Product Sales Revenue and
Cost of Sales
Our first
order of Augment was shipped to a Canadian distributor, Joint Solutions, in
December 2009 resulting in sales revenues of $78,000. However, no
additional product sales revenues for Augment in Canada have been recorded for
the three months ended September 30, 2010. As noted in “Recent
Developments,” we do not anticipate that our Canadian sales of Augment will
generate significant revenues in 2010.
Royalty Income and
Sublicense Fee Income
§
|
Royalty
income for the three months ended September 30, 2010 was
$0.1 million, which is comparable to $0.1 million for the same period
in 2009. As part of a 2008 agreement to sell our orofacial
therapeutic business, including GEM 21S, to Luitpold,
we expect to continue to receive ongoing royalty payments at least through
2026 based on Luitpold’s net sales of GEM 21S. In
the three months ended September 30, 2010 and 2009, Luitpold’s net sales
of GEM 21S were
$1.1 million and $1.3 million,
respectively.
|
§
|
Sublicense
fee income was $0.2 million for the three months ended September 30, 2010
and 2009. Sublicense fee income is based on the straight-line
amortization of certain milestone payments previously received from
Luitpold.
|
Research and Development
Expenses
Research
and development expenses relate to new and ongoing clinical trials of our
product candidates in the United States, Canada, Australia and the European
Union, as well as continuing expenses associated with pre-clinical studies and
regulatory filings. These expenses for the three months ended
September 30, 2010 were $4.4 million, compared to $5.2 million for the same
period in 2009. The $0.8 million decrease resulted primarily
from:
§
|
our
focus on controlling costs in 2010;
|
§
|
a
decrease of $0.7 million in professional services for clinical costs as
certain orthopedic clinical trials came to a close in 2009;
and
|
§
|
a
decrease of $0.1 million in salaries, benefits, payroll taxes and stock
compensation costs.
|
We expect
that research and development expenses will start to increase over the next few
quarters as a result of continuing costs associated with the Canadian Augment
Injectable trial, the initiation of patient enrollment in a U.S. pivotal trial
for Augment Injectable, which may occur in the fourth quarter of 2010, and the
initiation of a rotator cuff pilot clinical study in Canada, which may occur
around year-end.
General and Administrative
Expenses
General
and administrative expenses for the three months ended September 30, 2010 were
$2.9 million, compared to $2.8 million for the same period in
2009. The $0.1 million increase resulted primarily from:
§
|
an
increase of $0.2 million in salaries, benefits, payroll taxes and stock
compensation costs;
|
§
|
a
decrease of $0.5 million in professional fees, which is primarily due to a
reduction in legal fees incurred during the 2009 arbitration proceedings
related to our investments in auction rate
securities;
|
§
|
an
increase of $0.3 million in rent and utilities due to the late 2009
completion of a new building intended to house certain aspects of our
manufacturing operations; and
|
§
|
an
increase of $0.1 million in recruiting and relocation, and taxes and
licenses costs, and general G&A
activities.
|
19
Depreciation and Capital
Lease Amortization
Depreciation
and capital lease amortization for the three months ended September 30, 2010 was
comparable to the same period in 2009 at $0.3 million. For the three
months ended September 30, 2010, we purchased equipment, computers and software
totaling $0.1 million.
Patent License Fee
Amortization
Patent
license fee amortization for the three months ended September 30, 2010 was
comparable to the same period in 2009 at $0.5 million. Ongoing amortization
expense is attributable to the capitalization of patent license fees amounting
to a cumulative $12.7 million as of September 30, 2010.
Interest and Investment
Income
§
|
Total
net interest and investment income for the three months ended September
30, 2010 was approximately $36,000, compared to $0.5 million for the same
period in 2009.
|
§
|
The
net interest and investment income for 2009 included a net realized gain
of $0.3 million related to the July 2009 and September 2009 partial
redemptions of certain auction rate securities (“ARS”)
investments. Excluding this, total net interest and investment
income for the three months ended September 30, 2009 was $0.2
million.
|
§
|
Interest
expense on a note payable was $0.1 million for the three months ended
September 30, 2009. There was no such interest expense for the three
months ended September 30, 2010 because the note was paid in full as of
December 2009.
|
§
|
Interest
rates earned on our cash and cash equivalents averaged 0.01% during the
three months ended September 30, 2010, compared to same period in 2009
when interest rates ranged from 0.01% to
0.02%.
|
Nine
Months Ended September 30, 2010 and 2009
Net loss
for the nine months ended September 30, 2010 was $23.9 million, or $1.02
per diluted share, compared to net loss of $22.3 million, or $1.11 per
diluted share, for the same period in 2009. We anticipate that our
operating losses, which are only partially offset by sales, revenues from
royalty income, sublicense fee income and investment income, may continue over
the next few years as we continue to fund our research and development
activities and clinical trials and as we prepare for a future sales network to
represent our products.
Product Sales Revenue and
Cost of Sales
Our first
order of Augment was shipped to Joint Solutions in December 2009 resulting in
sales revenues of $78,000. However, no additional product sales
revenues for Augment in Canada have been recorded for the nine months ended
September 30, 2010. As noted in “Recent Developments,” we do not
anticipate that our Canadian sales of Augment will generate significant revenues
in 2010.
Royalty Income and
Sublicense Fee Income
§
|
Royalty
income for the nine months ended September 30, 2010 was $0.4 million,
which is comparable to $0.4 million for the same period in
2009. As part of a 2008 agreement to sell our orofacial
therapeutic business, including GEM 21S, to Luitpold,
we expect to continue to receive ongoing royalty payments at least through
2026 based on Luitpold’s net sales of GEM 21S. In
the nine months ended September 30, 2010 and 2009, Luitpold’s net sales
of GEM 21S were
$3.5 million and $3.9 million,
respectively.
|
§
|
Sublicense
fee income was $0.7 million for the nine months ended September 30, 2010
and 2009. Sublicense fee income is based on the straight-line
amortization of certain milestone payments previously received from
Luitpold.
|
Research and Development
Expenses
Research
and development expenses relate to new and ongoing clinical trials of our
product candidates in the United States, Canada, Australia and the European
Union, as well as continuing expenses associated with pre-clinical studies and
regulatory filings. These expenses for the nine months ended
September 30, 2010 were $12.5 million, compared to $15.5 million for the
same period in 2009.
20
The $3.0
million decrease resulted primarily from:
§
|
our
focus on controlling costs in 2010;
|
§
|
a
decrease of $1.8 million in professional services for clinical costs as
certain orthopedic clinical trials came to a close in
2009;
|
§
|
a
decrease of $0.7 million in professional services expenses for validation
consulting, regulatory and outside R&D costs;
and
|
§
|
a
decrease of $0.5 million in recruiting & relocation, freight, small
equipment and in general activities of the R&D
program.
|
We expect
that research and development expenses will start to increase over the next few
quarters as a result of continuing costs associated with the Canadian Augment
Injectable trial, the initiation of patient enrollment in a U.S. pivotal trial
for Augment Injectable, which may occur in the fourth quarter of 2010, and the
initiation of a rotator cuff pilot clinical study in Canada, which may occur
around year-end.
General and Administrative
Expenses
General
and administrative expenses for the nine months ended September 30, 2010 were
$10.0 million, compared to $7.5 million for the same period in
2009. The $2.5 million increase resulted primarily from:
§
|
an
increase of $0.5 million in salaries, benefits and payroll taxes and stock
compensation costs;
|
§
|
an
increase of $1.0 million in professional fees, primarily due to
approximately $0.9 million in fees paid in preparation for future
commercialization activities;
|
§
|
an
increase of $0.7 million in rent and utilities due to the late 2009
completion of a new building intended to house certain aspects of our
manufacturing operations; and
|
§
|
an
increase of $0.3 million in charitable contributions, taxes and licenses,
recruiting and relocation, and general G&A
activities.
|
Depreciation and Capital
Lease Amortization
Depreciation
and capital lease amortization for the nine months ended September 30, 2010 was
$0.9 million, compared to $1.0 million for the same period in
2009. For the nine months ended September 30, 2010, we purchased
equipment, computers and software totaling $0.4 million.
Patent License Fee
Amortization
Patent
license fee amortization for the nine months ended September 30, 2010 was
$1.6 million, compared to $2.0 million for the same period in 2009.
Ongoing amortization expense is attributable to the capitalization of patent
license fees amounting to a cumulative $12.7 million as of September 30,
2010.
Interest and Investment
Income
§
|
Total
net interest and investment income for the nine months ended September 30,
2010 was $0.1 million, compared to $2.7 million for the same period in
2009.
|
§
|
The
net interest and investment income for 2009 included a net realized gain
of $2.1 million related to the sales, redemptions and partial redemptions
certain ARS investments. Excluding this, total net interest and
investment income for the nine months ended September 30, 2009 was $0.6
million.
|
§
|
Interest
expense on a note payable was $0.5 million for the nine months ended
September 30, 2009. There was no such interest expense for the nine months
ended September 30, 2010 because the note was paid in full as of December
2009.
|
§
|
Interest
rates earned on our cash and cash equivalents ranged from 0.01% to 0.12%
during the nine months ended September 30, 2010, compared to same period
in 2009 when interest rates ranged from 0.00% to
0.80%.
|
21
Provision for Income
Taxes
At
September 30, 2010, we had federal net operating loss carryforwards of $85.0
million that will begin to expire in 2022. State net operating loss
carryforwards at September 30, 2010 totaled $75.2 million and will expire
between 2012 and 2030.
Our
ability to use our net operating loss carryforwards could be
limited. Our ability to use these net operating loss carryforwards to
reduce our future federal income tax liabilities could be subject to annual
limitations. Additionally, because U.S. tax laws limit the time
during which net operating loss carryforwards may be applied against future
taxable income and tax liabilities, we may not be able to take advantage of our
net operating loss for federal income tax purposes.
Liquidity
and Capital Resources
Cash
and Cash Equivalents and Investments
As of
September 30, 2010, the remaining net proceeds from our capital offerings and
sale of our orofacial therapeutic business, including GEM 21S (discussed above in
“Financial Overview”), have been invested conservatively in cash and cash
equivalents and in short-term and long-term investments in GSE
securities.
At
September 30, 2010, we had $16.0 million in cash and cash equivalents held in
three financial institutions. Our excess cash reserves are invested
in overnight sweep accounts, operating accounts, money market accounts and a
certificate of deposit. In addition to the balance of cash and cash
equivalents at September 30, 2010, we had $66.4 million in short-term
investments in GSE securities classified as available-for-sale. Also at
September 30, 2010, we had $17.0 million in long-term investments in GSE
securities. The GSE securities have maturity dates ranging from
October 2010 through September 2012.
Cash
Flows
For the
nine months ended September 30, 2010, net cash used in operating activities was
$20.3 million, primarily consisting of salaries, clinical trials, research and
development activities and general corporate operations. Net cash
used in investing activities was $30.7 million for the nine months ended
September 30, 2010 and consisted of net purchases of short-term and long-term
investments, purchases of property and equipment and capitalized patent
costs. Net cash provided by financing activities was $45.5 million
for the nine months ended September 30, 2010 and consisted of net proceeds from
issuance of common stock, including $45.0 million pursuant to a July 2010 public
stock offering.
In July
2010, we sold 5,642,280 shares of common stock at a price of $8.50 per share,
resulting in net proceeds of approximately $45.0 million after deducting
underwriting discounts, commissions and estimated expenses. We
believe that these additional proceeds, along with the September 30, 2010
balance of our cash and investments, will be sufficient to fund our business
operations through at least the second half of 2012.
We expect
to devote substantial resources to continue our research and development
efforts, including clinical trials. Clinical study costs are comprised of
payments for work performed by contract research organizations, universities and
hospitals.
Because
of the significant time it will take for Augment or our other product candidates
to complete the clinical trial process, obtain approval from regulatory
authorities and successfully commercialize our products, we may require
substantial additional capital resources. We may raise additional capital
through public or private equity offerings, debt financings, corporate
collaborations or other means. We may attempt to raise additional capital due to
favorable market conditions or other strategic considerations even if we have
sufficient funds for planned operations. To the extent that we raise additional
funds by issuance of equity securities, our stockholders will experience
dilution, and debt financings, if available, may involve restrictive covenants
or may otherwise constrain our financial flexibility. To the extent that we
raise additional funds through collaborative arrangements, it may be necessary
to relinquish some rights to our intellectual property or grant licenses on
terms that are not favorable to us. In addition, payments made by potential
collaborators or licensors generally will depend upon our achievement of
negotiated development and regulatory milestones. Failure to achieve these
milestones may harm our future capital position. Additional financing may not be
available on acceptable terms, if at all. Capital may become difficult or
impossible to obtain due to poor market or other conditions outside of our
control. If at any time sufficient capital is not available, either through
existing capital resources or through raising additional funds, we may be
required to delay, reduce the scope of, eliminate or divest one or more of our
research, pre-clinical or clinical programs.
22
Seasonality
We have
determined that the impact on seasonality on our results of operations is
minimal; however, fluctuations in product sales revenues are the result of our
evolving product commercialization efforts.
Segment
Information
We have
determined that we are principally engaged in one operating segment. Our product
development efforts are primarily in the treatment of musculoskeletal injuries
and diseases, including orthopedic, spine and sports injury applications for the
repair and regeneration of orthopedic tissues, including bone, cartilage,
ligaments and tendons.
Comprehensive
Loss
FASB ASC
220, Comprehensive
Income (formerly SFAS No. 130, Reporting Comprehensive
Income) (“ASC 220”), establishes standards for reporting and display of
comprehensive income (losses) and its components in the condensed consolidated
financial statements. Our comprehensive loss as defined by ASC 220 is
the total of net loss and all other changes in equity resulting from non-owner
sources including unrealized gains/losses on investments.
The
components of our comprehensive losses for the three and nine months ended
September 30, 2010 and 2009 are as follows:
Three months
ended September 30,
|
||||||||
2010
(in millions)
|
2009
(in millions)
|
|||||||
Net
loss
|
$ | (7.8 | ) | $ | (7.9 | ) | ||
Other
comprehensive loss:
|
||||||||
Unrealized
(loss) gain on investments classified as available for
sale
|
0.0 | — | ||||||
Comprehensive
loss
|
$ | (7.8 | ) | $ | (7.9 | ) |
Nine months
ended September 30,
|
||||||||
2010
(in millions)
|
2009
(in millions)
|
|||||||
Net
loss
|
$ | (23.9 | ) | $ | (22.3 | ) | ||
Other
comprehensive loss:
|
||||||||
Unrealized
(loss) gain on investments classified as available for
sale
|
0.0 | 2.5 | ||||||
Comprehensive
loss
|
$ | (23.9 | ) | $ | (19.8 | ) |
Recent
Accounting Pronouncements
Variable
Interest Entities
In June
2009, the Financial Accounting Standards Board (“FASB”) issued SFAS
No. 167, Amendments to
FASB Interpretation No. 46(R), as codified in Accounting Standards
Codification (“ASC”) 810-10 (“ASC 810-10”),which requires an enterprise to
perform an analysis to determine whether the enterprise’s variable interest or
interests give it a controlling financial interest in a variable interest
entity. ASC 810-10 is effective beginning January 1,
2010. Based on our evaluation of ASC 810-10, the adoption of this
statement did not have a material impact on our condensed consolidated financial
statements.
In
December 2009, the FASB issued Accounting Standards Update (“ASU”)
No. 2009-17, Improvements
to Financial Reporting by Enterprises Involved with Variable Interest
Entities (“ASU 2009-17”). The amendments in ASU 2009-17 are
the result of clarification to ASC 810-10, which is effective beginning January
1, 2010. Based on our evaluation of ASU 2009-17, the adoption of this
statement did not have a material impact on our condensed consolidated financial
statements.
23
Fair
Value Measurements and Disclosures
In
January 2010, the FASB issued ASU 2010-06, Fair Value Measurements and
Disclosures - Topic 855 (“ASU 2010-06”). ASU 2010-06 provides
amendments to ASC 820-10, Fair
Value Measurements (“ASC 820-10”), which was originally issued as SFAS
No. 157, Fair Value
Measurements, and adopted by us as of January 1, 2008). ASC
820-10 defines fair value, establishes a framework for measuring fair value
hierarchy for assets and liabilities measured at fair value, and requires
expanded disclosures about fair value measurements. The ASC 820-10
hierarchy ranks the quality and reliability of inputs, or assumptions, used in
the determination of fair value and requires financial assets and liabilities
carried at fair value to be classified and disclosed in one of the three
categories (level 1, level 2 or level 3). ASU 2010-06 provides
amendments to ASC 820-10 to require new disclosures for transfers in and out of
levels 1 and 2, as well as a reconciliation of activity within level
3. Furthermore, ASU 2010-06 provides amendments that clarify existing
disclosures regarding levels of disaggregation and inputs and valuation
techniques. The new disclosures and clarifications of existing
disclosures required by ASU 2010-06 are effective for interim and annual
reporting periods beginning after December 31, 2009 (except for disclosures in
the reconciliation of activity within level 3, which are effective for fiscal
years beginning after December 15, 2010 and for interim periods within those
fiscal years). We adopted ASU 2010-06 as of January 1, 2010, and the
adoption did not have a material impact on our condensed consolidated financial
statements.
Subsequent
Events
In
February 2010, the FASB issued ASU 2010-09, Subsequent Events (Topic 855):
Amendments to Certain Recognition and Disclosure Requirements (“ASU
2010-09”), to amend ASC 855, Subsequent Events (“ASC
855”). ASC 855, which was originally issued by the FASB in May 2009
(as SFAS No. 165, Subsequent
Events), provides guidance on events that occur after the balance sheet
date but prior to the issuance of the financial statements. ASC 855
distinguishes events requiring recognition in the financial statements and those
that may require disclosure in the financial statements. As a result
of ASU 2010-09, companies are not required to disclose the date through which
management evaluated subsequent events in the financial statements, either in
originally issued financial statements or reissued financial
statements. ASC 855 was effective for interim and annual periods
ending after June 15, 2009, and ASU 2010-09 is effective
immediately. We have evaluated subsequent events in accordance with
ASU 2010-09, and the evaluation did not have a material impact on our condensed
consolidated financial statements.
Off-Balance
Sheet Arrangements
Since
inception, we have not engaged in any off-balance sheet activities, including
the use of structured finance, special purpose entities or variable interest
entities.
Effects
of Inflation
Because
our assets are, to an extent, liquid in nature, they are not significantly
affected by inflation. However, the rate of inflation affects such
expenses as employee compensation, office space leasing costs and research and
development charges, which may not be readily recoverable during the period of
time that we are bringing the product candidates to market. To the
extent inflation results in rising interest rates and has other adverse effects
on the market, it may adversely affect our consolidated financial condition and
results of operations in certain businesses.
Item
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Our
exposure to market risk due to changes in interest rates relates primarily to
the increase or decrease in the amount of interest income we can earn on our
investment portfolio. We attempt to increase the safety and
preservation of our invested principal funds by limiting default risk, market
risk and reinvestment risk. We mitigate default risk by investing in investment
grade securities. Declines in interest rates over time will, however,
reduce our interest income while increases in interest rates over time will
increase our interest expense. Due to the short-term nature of our
cash and cash equivalents, we do not believe that we have any material exposure
to interest rate risk arising from our cash and cash equivalents. Our
cash accounts earned interest rates ranging from 0.01% to 0.12% during the nine
months ended September 30, 2010. We have not used derivative
financial instruments for speculation or trading purposes.
At
September 30, 2010, we had $16.0 million in cash and cash equivalents held in
three financial institutions. Our excess cash reserves are invested
in overnight sweep accounts, operating accounts, money market accounts and a
certificate of deposit. In addition to the balance of cash and cash
equivalents at September 30, 2010, we had $66.4 million in short-term
investments in GSE securities classified as available-for-sale. Also at
September 30, 2010, we had $17.0 million in long-term investments in GSE
securities. The GSE securities have maturity dates ranging from
October 2010 through September 2012.
24
Item
4. CONTROLS AND PROCEDURES
Evaluation
of Disclosure Controls and Procedures
We
maintain disclosure controls and procedures, as defined in Rule 13a-15(e)
promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”), that
are designed to provide reasonable assurance that information required to be
disclosed by us in the reports that we file or submit under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in the SEC's rules and forms. These controls and procedures are
designed to ensure that the required information is accumulated and communicated
to our management, including our Chief Executive Officer and Chief Financial
Officer, as appropriate, to allow timely decisions regarding required
disclosure. We carried out an evaluation under the supervision and
with the participation of our management, including our Chief Executive Officer
and Chief Financial Officer, of the effectiveness of the design and operation of
our disclosure controls and procedures, as of the end of the period covered by
this Quarterly Report on Form 10-Q. Based on this evaluation, our
Chief Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures were effective at a reasonable assurance
level.
Changes
in Internal Control over Financial Reporting
There
have been no changes in our internal control over financial reporting that
occurred during the period covered by this Quarterly Report on Form 10-Q that
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.
Inherent
Limitations on Effectiveness of Controls
Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect all errors, misstatements or fraud. A control system, no
matter how well designed and operated, can provide only reasonable, not
absolute, assurance that the control system’s objectives will be
met. The design of a control system must reflect the fact that there
are resource constraints, and the benefits of controls must be considered
relative to their costs. Further, because of the inherent limitations
in all control systems, no evaluation of controls can provide absolute assurance
that misstatements due to error or fraud will not occur or that all control
issues and instances of fraud, if any, within a company have been detected.
These inherent limitations include the realities that judgments in
decision-making can be faulty and that breakdowns can occur because of simple
error or mistake. Controls can also be circumvented by the individual
acts of some persons, by collusion of two or more people or by management
override of the controls. The design of any system of controls is
based in part on certain assumptions about the likelihood of future events, and
there can be no assurance that any design will succeed in achieving its stated
goals under all potential future conditions. Projections of any evaluation of
controls effectiveness to future periods are subject to risks. Over
time, controls may become inadequate because of changes in conditions or
deterioration in the degree of compliance with policies or
procedures.
25
PART
II — OTHER INFORMATION
Item
1. LEGAL PROCEEDINGS
None.
Item
1A. RISK FACTORS
In
addition to the other information set forth in this report, you should carefully
consider our risk factors as disclosed in “Part I, Item 1A. Risk Factors”
of our Annual Report on Form 10-K, as amended, for the year ended
December 31, 2009, and the risk factors as disclosed in “Part II, Item 1A.
Risk Factors” of our Quarterly Report on Form 10-Q, as amended, for the three
months ended March 31, 2010 and our Quarterly Report on Form 10-Q for the three
and six months ended June 30, 2010. The risks disclosed in those risk
factors could materially affect our business, financial condition and/or
operating results. The risks disclosed in our Annual Report on Form 10-K, our
Quarterly Reports on Form 10-Q and the risks described below may not be the only
risks we face. Additional risks and uncertainties not currently known
to us or that we currently deem to be immaterial also may materially and
adversely affect our business, financial condition and/or operating
results.
Regulatory
Risks
We
received orphan drug designation for rhPDGF-BB treatment of osteochondritis
dissecans, but there can be no assurance that the product will be able to obtain
orphan drug market exclusivity.
The FDA
has granted orphan drug designation for rhPDGF-BB to be used in conjunction with
autograft and/or commercially available osteochondral allograft for the
treatment of osteochondritis dissecans (“OCD”) of the knee, elbow or
ankle. Orphan drug status may be designated for a drug that has the
potential to treat a “rare disease or condition,” which generally is a disease
or condition that affects fewer than 200,000 individuals within the United
States. Orphan drug designation does not convey an advantage in, or
shorten the duration of, the review and approval process. If a product which has
orphan drug designation subsequently receives the first FDA approval for the
indication for which it has such designation, the product is entitled to orphan
exclusivity, meaning that the FDA may not approve any other application to
market the same drug for the same indication, except in very limited
circumstances, for a period of seven years. There can be no assurance
that a product candidate that receives orphan drug designation will receive
orphan drug marketing exclusivity. More than one
drug can have orphan designation for the same indication. If the FDA
grants orphan designation to more than one drug candidate for the same orphan
indication, and if one of those other drugs is approved before our product
candidate is approved for that indication, we would not receive orphan
exclusivity and would be blocked for seven years from having our product
candidate approved for that indication. In addition, neither orphan
drug designation nor orphan drug exclusivity prevents competitors from
developing or marketing different drugs for that indication. We may
seek to develop additional products that incorporate drugs that have received
orphan drug designations for specific indications. In each case,
there can be no assurance that our product candidate will be the first to be
approved by the FDA for a given indication or be granted orphan drug
exclusivity. In each case, if our product candidate is not the first
to be approved for a given indication, and another drug receives orphan drug
exclusivity, we may be unable to access the target market in United States,
which would have a material adverse effect on our company, our results of
operations and our financial condition.
Item
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
None.
Item
3. DEFAULTS UPON SENIOR SECURITIES
None.
Item
4. (RESERVED AND REMOVED)
Item
5. OTHER INFORMATION
On
November 3, 2010, the Company entered into a logistical support agreement (the
“Agreement”) with Joint Solutions Alliance Corporation (“Joint Solutions”)
wherein Joint Solutions will warehouse the Company’s Augment product and ship
the products to Canadian end users at the direction of the
Company. Previously, the parties had entered into a distribution
agreement wherein Joint Solutions purchased Augment products from the Company
and acted as the exclusive distributor of such products in Canada through sales
agents retained by Joint Solutions. Under the new Agreement, the Company
will retain ownership in its Augment products warehoused and shipped by Joint
Solutions and the Company will be responsible for all sales functions in
Canada.
Additionally,
under the terms of the Agreement, Joint Solutions is entitled to a fee equal to
a certain percentage of the net sales price of Augment products that are shipped
by Joint Solutions to end users. The initial term of the Agreement is one
year and will automatically renew thereafter for one year terms on an annual
basis. After the initial term, either party may terminate the Agreement
upon 60 days’ prior written notice to the other party. In addition, either
party may terminate the Agreement at any time upon the bankruptcy, default, or
failure to maintain required licensure of the other party.
A copy of
the Agreement will be filed as an exhibit to the Company’s Annual Report on Form
10-K for the year ended December 31, 2010.
26
Item
6. EXHIBITS
Exhibit
No.
|
Filed
|
Description
|
||
10.1*
|
(a)
|
Separation
Agreement and Release, dated September 29, 2010, between the registrant
and Steven Hirsch.
|
||
31.1
|
(b)
|
Rule
13a-14(a)/15d-14(a) Certification of the Chief Executive
Officer
|
||
31.2
|
(b)
|
Rule
13a-14(a)/15d-14(a) Certification of the Chief Financial
Officer
|
||
32.1
|
(b)
|
Section
1350 Certification of the Chief Executive Officer
|
||
32.2
|
|
(b)
|
|
Section
1350 Certification of the Chief Financial
Officer
|
|
*
|
Indicates
management contract or compensatory plan or
arrangement.
|
(a)
|
Incorporated
by reference to the registrant’s Form 8-K filed on September 30,
2010.
|
(b)
|
Filed
herewith.
|
27
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
Dated: November
3, 2010
BIOMIMETIC
THERAPEUTICS, INC.
|
||
By:
|
/s/ Samuel E. Lynch
|
|
Samuel
E. Lynch, D.M.D., D.M.Sc.
|
||
Chief
Executive Officer and President
|
||
By:
|
/s/ Larry Bullock
|
|
Larry
Bullock
|
||
Chief
Financial Officer
|
28