Attached files
file | filename |
---|---|
EX-5.1 - REPROS THERAPEUTICS INC. | v209412_ex5-1.htm |
EX-1.1 - REPROS THERAPEUTICS INC. | v209412_ex1-1.htm |
EX-4.12 - REPROS THERAPEUTICS INC. | v209412_ex4-12.htm |
EX-23.1 - REPROS THERAPEUTICS INC. | v209412_ex23-1.htm |
EX-4.13 - REPROS THERAPEUTICS INC. | v209412_ex4-13.htm |
EX-4.11 - REPROS THERAPEUTICS INC. | v209412_ex4-11.htm |
EX-4.10 - REPROS THERAPEUTICS INC. | v209412_ex4-10.htm |
As
filed with the Securities and Exchange Commission on February 1,
2011
Registration
Statement File No. 333-171196
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
Amendment
No. 1
to
FORM
S-1
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
REPROS
THERAPEUTICS INC.
(Exact
name of registrant as specified in its charter)
Delaware
|
2834
|
76-0233274
|
||
(State
or other jurisdiction of
|
(Primary
Standard Industrial
|
(I.R.S.
Employer Identification
|
||
incorporation
or organization)
|
Classification
Code Number)
|
Number)
|
2408
Timberloch Place, Suite B-7
The
Woodlands, Texas 77380
(281)
719-3400
(Address,
including zip code, and telephone number, including area code,
of
registrant's principal executive offices)
Joseph
S. Podolski
President
and Chief Executive Officer
Repros
Therapeutics Inc.
2408
Timberloch Place, Suite B-7
The
Woodlands, Texas 77380
(281)
719-3400
(Name,
address, including zip code, and telephone number,
including
area code, of agent for service)
Copies
to:
Jeffrey
R. Harder, Esq.
|
Michael
R. Littenberg, Esq.
|
Winstead
PC
|
Schulte
Roth & Zabel LLP
|
24
Waterway Ave, Suite 500
|
919
Third Avenue
|
The
Woodlands, Texas 77380
|
New
York, NY 10022
|
APPROXIMATE DATE OF COMMENCEMENT OF
PROPOSED SALE TO THE PUBLIC: As soon as practicable after this
Registration Statement becomes effective.
If any of
the securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, check
the following box. x
If this
Form is filed to register additional securities for an offering pursuant to Rule
462(b) under the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. ¨
If this
Form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. ¨
If this
Form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. ¨
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 definitions of "large accelerated filer," "accelerated
filer," and "smaller reporting company" in Rule 12b-2 of the Exchange
Act.
Large
accelerated filer
|
¨
|
Accelerated
filer
|
¨
|
Non-accelerated
filer
|
¨
|
Smaller
reporting company
|
x
|
CALCULATION OF REGISTRATION FEE
|
||||||||||||||||
Title of Each Class of Securities to be Registered
|
Amount to
be
Registered
|
Proposed
Maximum
Offering
Price Per
Security(1)
|
Proposed
Maximum
Aggregate
Offering
Price(1)
|
Amount of
Registration
Fee
|
||||||||||||
Units,
each unit consisting of four shares of Common Stock, par value $.001 per
share, three Series A Warrants to purchase Common Stock and 2.45 Series B
Warrants to purchase Common Stock(2)
|
690,000 | $ | 18.41 | $ | 12,702,900 | $ | 1,475 | |||||||||
Common
Stock, par value $.001 per share, included in Units
|
2,760,000 | — | — | (3) | ||||||||||||
Series
A Warrants to purchase Common Stock, included in Units
|
2,070,000 | — | — | (3) | ||||||||||||
Series
B Warrants to purchase Common Stock, included in Units
|
1,690,500 | — | — | (3) | ||||||||||||
Common
Stock issuable upon exercise of Series A Warrants included in
Units(4)
|
2,070,000 | $ | 3.29 | $ | 6,810,300 | $ | 791 | |||||||||
Common
Stock issuable upon exercise of Series B Warrants included in
Units(4)
|
1,690,500 | $ | 3.29 | $ | 5,561,745 | $ | 646 | |||||||||
Total
|
— | — | $ | 25,074,945 | $ | 2,912 | (5) |
(1)
|
Estimated
solely for the purpose of calculating the registration fee pursuant to
Rule 457(o) under the Securities Act of 1933, as amended (the “Securities
Act”).
|
(2)
|
Includes
90,000 additional units that may be issued upon exercise of a 45-day
option granted to the underwriters to cover over-allotments, if
any.
|
(3)
|
No
fee is required pursuant to Rule 457(g) under the Securities
Act.
|
(4)
|
Pursuant
to Rule 416 under the Securities Act, the shares of common stock
registered hereby also include an indeterminate number of additional
shares of common stock as may from time to time become issuable by reason
of stock splits, stock dividends, recapitalizations or other similar
transactions.
|
(5)
|
$656
of this fee was previously paid in connection with the initial filing of
this Registration Statement on Form S-1 (File No. 333-171196), which was
filed by the registrant on December 15,
2010.
|
The
Registrant hereby amends this Registration Statement on such date or dates as
may be necessary to delay its effective date until the Registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until the Registration Statement shall
become effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
The
information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and is not soliciting an offer to buy these
securities in any jurisdiction where the offer or sale of these securities is
not permitted.
Subject
to Completion, Dated February 1, 2011
PROSPECTUS
600,000
UNITS, CONSISTING OF
2,400,000
SHARES OF COMMON STOCK,
SERIES
A WARRANTS TO PURCHASE 1,800,000 SHARES OF COMMON STOCK AND
SERIES
B WARRANTS TO PURCHASE 1,470,000 SHARES OF COMMON STOCK
This
prospectus relates to the offer and sale of 600,000 units, consisting of
2,400,000 shares of common stock, par value $.001 per share, of Repros
Therapeutics Inc. (the “Company” or “Repros” or “we,” “us” or “our”), Series A
Warrants (“Series A Warrants”) to purchase 1,800,000 shares of common stock of
the Company and Series B Warrants (“Series B Warrants”) to purchase 1,470,000
shares of common stock of the Company. Each unit will consist of four
shares of common stock, Series A Warrants exercisable for three shares of our
common stock at an exercise price of $ per share
and Series B Warrants exercisable for 2.45 shares of our common stock at an
exercise price of $ per
share. Each unit will be sold at a price of
$ per unit. Units will not
be issued or certificated. The shares of common stock and warrants
are immediately separable and will be issued separately. Each of the
Series A Warrants and Series B Warrants is exercisable immediately upon issuance
and expires five years from the date of issuance. For a more detailed
description of our common stock and warrants, see the section titled
“Description of Securities” beginning on page 43 of this
prospectus.
Our
common stock is quoted on the Nasdaq Capital Market under the trading symbol
“RPRX.” On January 28, 2011, the last reported sale price of our
common stock on the Nasdaq Capital Market was $2.63 per
share. Upon the closing of this offering, the Series A Warrants and
Series B Warrants will be listed on the Nasdaq Capital Market under the symbols
“RPRXW” and “RPRXZ,” respectively. We do not intend to list the units
on any securities exchange.
Per
Unit(1)
|
Total
|
|||||||
Price
to the public
|
$ | $ | ||||||
Underwriting
discounts and commissions(2)
|
$ | $ | ||||||
Proceeds,
before expenses, to Repros Therapeutics Inc.
|
$ | $ |
(1) The
underwriter also may purchase up to an additional 90,000 units from us at the
public offering price, less the underwriting discount, within 45 days after the
date of this prospectus to cover over-allotments.
(2)
In addition to the underwriting discount, we have agreed to pay up to
$50,000 of the fees and expenses of the underwriter in connection with this
offering. See “Underwriting.”
INVESTING
IN OUR COMMON STOCK AND WARRANTS INVOLVES SUBSTANTIAL RISKS. SEE THE
SECTION TITLED "RISK FACTORS" BEGINNING ON PAGE 5 OF THIS PROSPECTUS TO READ
ABOUT FACTORS YOU SHOULD CONSIDER BEFORE BUYING SHARES OF OUR COMMON STOCK AND
WARRANTS.
NEITHER
THE SECURITIES AND EXCHANGE COMMISSION (“SEC”) NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The
underwriter expects to deliver the securities to purchasers
on ,
2011
Ladenburg
Thalmann & Co. Inc.
The date
of this prospectus
is ,
2011
TABLE OF
CONTENTS
PROSPECTUS
SUMMARY
|
1 | |||
RISK
FACTORS
|
5 | |||
FORWARD-LOOKING
STATEMENTS
|
17 | |||
USE
OF PROCEEDS
|
18 | |||
CAPITALIZATION
|
19 | |||
MARKET
PRICE AND DIVIDEND INFORMATION
|
20 | |||
DILUTION
|
21 | |||
DESCRIPTION
OF BUSINESS
|
22 | |||
EXECUTIVE
COMPENSATION
|
31 | |||
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
|
42 | |||
DESCRIPTION
OF SECURITIES
|
43 | |||
UNDERWRITING
|
47 | |||
LEGAL
MATTERS
|
48 | |||
EXPERTS
|
48 | |||
WHERE
YOU CAN FIND MORE INFORMATION
|
48 | |||
INCORPORATION
OF CERTAIN INFORMATION BY REFERENCE
|
48 | |||
INDEX
TO FINANCIAL STATEMENTS
|
F-1 |
You
should rely only on the information contained in this prospectus or any related
prospectus supplement, including the content of all documents incorporated by
reference into the registration statement of which this prospectus forms a
part. We have not authorized anyone to provide you with different
information. If anyone provides you with different or inconsistent
information, you should not rely on it. The information contained in
this prospectus or incorporated by reference herein is accurate only on the date
of this prospectus. Our business, financial condition, results of
operations and prospects may have changed since such date. Other than
as required under the federal securities laws, we undertake no obligation to
publicly update or revise such information, whether as a result of new
information, future events or any other reason.
Until ,
2011, all dealers that effect transactions in these securities, whether or not
participating in this offering, may be required to deliver a prospectus. This is
in addition to the dealers' obligation to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or
subscriptions.
i
PROSPECTUS
SUMMARY
This
summary highlights information contained elsewhere in this
prospectus. This summary does not contain all of the information that
you should consider before making an investment decision with respect to our
securities. You should read this entire prospectus, including all
documents incorporated by reference, carefully, especially the "Risk Factors"
section beginning on page 5 of this prospectus and our financial statements and
related notes contained in this prospectus before making an investment decision
with respect to our securities. Please see the section titled, "Where
You Can Find More Information," beginning on page 48 of this
prospectus. Unless the context indicates otherwise, references to
"the Company" or "Repros” or "we," "us" or "our" refers to Repros Therapeutics
Inc.
About
Repros Therapeutics Inc.
Repros
Therapeutics Inc. ("the Company" or “Repros” or "we," "us" or "our") was
organized on August 20, 1987. We are a development stage
biopharmaceutical company focused on the development of new drugs to treat
hormonal and reproductive system disorders.
We are
developing Androxal®, an oral therapy that normalizes testicular function, for
the treatment of low testosterone due to secondary hypogonadism. Secondary
hypogonadism is the leading cause of low testosterone in men and is commonly
associated with aging. It is estimated that 13 million men in the U.S.
experience low levels of testosterone, and the condition is becoming recognized
with more frequency. In 2009, for the first time, sales of
testosterone preparations for the treatment of low testosterone exceeded $1
billion worldwide and first tier pharmaceutical companies entered the low
testosterone marketplace as evidenced by the acquisition of Solvay
Pharmaceuticals and the subsequent active marketing of its AndroGel® product by
Abbott Laboratories. Eli Lilly and Company also recently entered into
a licensing agreement with a third party for a late stage topical testosterone
treatment.
We
believe Androxal® is highly differentiated from currently marketed testosterone
treatments or those treatments in late stage development because it treats the
cause of low testosterone in men with secondary hypogonadism, which is
inadequate pituitary hormones. Androxal® is an oral therapy and also has the
potential to maintain fertility and potentially improve overall metabolic
profiles, which we believe may improve the condition of men suffering from type
2 diabetes, a condition present in about 20% of men with secondary hypogonadism.
Retrospective analysis of completed Androxal® studies showed that Androxal®
improved fasting plasma glucose levels in hypogonadal men with Type 2 diabetes,
an improvement not seen in similar subjects using a topical testosterone or
placebo. The Company is currently conducting a Phase 2 study under an
Investigational New Drug Application (“IND”) filed with the Division of
Metabolic and Endocrine Products at the Food and Drug Administration (“FDA”) for
the use of Androxal® in the treatment of Type 2 diabetes in hypogonadal
men.
The
Company held a Type B meeting with the FDA on November 8, 2010 to discuss
protocols for Phase 3 studies for Androxal® in the treatment of
secondary hypogonadal men wishing to preserve their testicular function
(reproductive status). Though the FDA noted that the Company may proceed to
Phase 3 in the meeting, the FDA recommended that a Phase 2B study in men with
secondary hypogonadism, but naïve to testosterone treatment, be conducted if the
Company desired the FDA to review the Phase 3 protocols under a Special Protocol
Assessment. On January 3, 2011, we announced that we have
received Institutional Review Board (“IRB”) approval to commence the Phase 2B
study of Androxal® in men with secondary hypogonadism, and we have begun
enrolling patients. Depending on the rate of subject enrollment, we
hope to have the study completed before the end of 2011.
We are
also developing Proellex®, an orally administered selective blocker of the
progesterone receptor in women, for the treatment of uterine fibroids and
endometriosis. Uterine fibroids and endometriosis affect millions of women of
reproductive age. We believe an effective treatment for these underserved
conditions could result in sales of a safe and effective drug easily exceeding
$1 billion in sales in the U.S. Proellex® had shown significant
success in Phase 2 studies for both endometriosis and uterine
fibroids. The Company has commenced a Phase 2B study with doses from
1 to 12 mg under a partial clinical hold by the FDA, which is intended to
determine both signals of efficacy and safety for low oral doses of the
drug. A full clinical hold was previously imposed as a result of
certain serious adverse events relating to liver toxicity observed in patients
receiving the 50 mg dose of Proellex® in our prior studies in uterine fibroids;
however, the FDA has reduced such hold to a partial clinical hold to allow us to
proceed with the current low dose Phase 2B study. In addition to the
low dose study, the Company has commenced two related preclinical programs:
vaginal delivery of Proellex® to avoid first pass liver effects and second
generation molecules that do not possess the structures Repros believes resulted
in the liver toxicity observed.
Both of
our product candidates have exhibited strong efficacy results in every study
completed to date, and Repros believes the studies presently underway or
scheduled to start shortly will place both programs on a clear late stage
clinical development path and a solid position for
licensing.
As of
September 30, 2010, we had accumulated losses of $178.1 million, approximately
$4.2 million in cash and cash equivalents, and our accounts payable and accrued
expenses were approximately $1.4 million. The amount of cash on hand
is not sufficient to fund each of the current clinical trials for our two drug
candidates, Proellex® and Androxal®. Assuming successful completion
of this offering, we will have sufficient funding to complete all of the Phase 2
and 2B clinical trials currently planned or underway; however, significant
additional capital will be required for us to complete development of either of
our product candidates. We continue to explore potential additional financing
alternatives (including corporate partnering opportunities) that would provide
sufficient funds to enable us to continue to develop our two product candidates
through completion of the outlined clinical trials; however, there can be no
assurance that we will be successful in raising any such additional funds on a
timely basis or at all. The foregoing and other matters raise
substantial doubt about our ability to continue as a going
concern.
1
Our
Research and Development Program
Our
product development pipeline is summarized in the table below:
Product Candidate (Indication)
Androxal®
|
Status
|
Next Expected Milestone(s)
|
||
Secondary
Hypogonadism
|
Phase
2B
|
Commence
Phase 2B study (Q1 2011)
Report
top line Phase 2B results (Q1 2012) (pending enrollment
timing)
|
||
Type
2 diabetes
|
Phase
2
|
Report
interim results (Q2 2011) (pending enrollment
timing)
|
||
Proellex®
|
||||
Uterine
Fibroids/Endometriosis
|
Phase
2
|
Complete
low dose study (late 2011)
Commence
Phase 3 studies (2012)
|
||
Vaginal
Administration
|
Preclinical
|
Open
new IND (mid 2011) (pending outcome of animal studies)
Commence
Phase 3 studies (late 2012)
|
||
Second
Generation Compounds
|
Preclinical
|
Complete
preclinical screen (Q3 2011)
|
Recent
Developments
On
October 14, 2010, the Company effected a 1-for-4 reverse split of its common
stock. The split-adjusted shares of the Company’s common stock began trading on
the Nasdaq Capital Market on October 15, 2010. The 1-for-4 reverse stock split
converted all shares of the Company’s common stock issued and outstanding, plus
all outstanding stock options and the number of shares of common stock available
for issuance under the Company’s approved stock plans. The number of authorized
shares of common stock was not affected by the reverse split. The reverse split
enabled the Company to meet the continued listing rules of the Nasdaq Capital
Market. All share and per share amounts described in this prospectus
are presented on a post-reverse stock split basis, except with respect to
materials incorporated by reference herein which were filed by us prior to the
effective date of the reverse stock split.
Corporate
Information
We were
organized as a Delaware corporation in August 1987. Our principal
executive offices are located at 2408 Timberloch Place, Suite B-7, The
Woodlands, Texas 77380, and our telephone number is (281) 719-3400. We maintain
an Internet website at www.reprosrx.com. The information on our
website or any other website is not incorporated by reference into this
prospectus and does not constitute a part of this prospectus.
2
The
Offering
|
||
Securities
offered by the Company
|
Up
to 600,000 units. Each unit will consist of four shares of
common stock, three Series A Warrants and 2.45 Series B
Warrants. The common stock and warrants comprising the units
will be issued separately.
|
|
Offering
price
|
$ per
unit.
|
|
Description
of Series A Warrants
|
Each
Series A Warrant will be exercisable for one share of our common stock at
an exercise price of $ per
share. The Series A Warrants are exercisable immediately upon
issuance and expire five years from the date of issuance.
The
number of shares of common stock issuable to a holder upon any exercise of
Series A Warrants shall be limited to the extent necessary to ensure that,
following such exercise, the total number of shares of common stock
then-beneficially owned by such holder does not exceed 9.999% of the total
number of outstanding shares our common stock. This restriction may
be waived by such holder upon not less than 61 days' prior notice to us,
except to the extent such waiver would cause such holder to beneficially
own 20% or more of our common stock.
|
|
Description
of Series B Warrants
|
Each
Series B Warrant will be exercisable for one share of our common stock at
an exercise price of $ per share; however,
issuances resulting in fractional warrants will be rounded
down. The Series B Warrants are exercisable immediately upon
issuance and expire five years from the date of issuance.
The
number of shares of common stock issuable to a holder upon any exercise of
Series B Warrants shall be limited to the extent necessary to ensure that,
following such exercise, the total number of shares of common stock
then-beneficially owned by such holder does not exceed 9.999% of the total
number of outstanding shares our common stock. This restriction may
be waived by such holder upon not less than 61 days' prior notice to us.
In no event, however, may a holder exercise warrants if, following such
exercise, such holder would beneficially own 20% or more of our
outstanding common stock.
We
may require the exercise of all of the Series B Warrants if our common
stock trades at or above
$ per share for a
period of at least 20 trading days of 30 consecutive trading days, subject
to certain limitations. See the section titled “Description of
Securities” beginning on page 43 of this
prospectus.
|
|
Common
stock outstanding prior to this offering
|
8,930,022
shares.
|
|
Common
stock to be outstanding after this offering
|
11,330,022
shares.
|
|
Over-allotment
option
|
Up
to an additional 90,000 units.
|
|
Use
of proceeds
|
We
intend to use the net proceeds from this offering for general corporate
purposes, including continuing our clinical trials for Androxal® and
Proellex®. See “Use of Proceeds” for additional
information.
|
|
Nasdaq
Capital Market symbols:
Common
Stock
Series
A Warrants
Series
B Warrants
|
“RPRX”
“RPRXW
”
“RPRXZ”
|
The
number of shares of common stock outstanding immediately prior to and to be
outstanding immediately after this offering is based on the number of shares
outstanding as of September 30, 2010, and does not include:
|
·
|
538,582
shares of common stock issuable upon the exercise of outstanding options
at a weighted average exercise price of $14.10 per
share;
|
|
·
|
288,421
shares of common stock available for future issuance under our stock
option plans;
|
|
·
|
3,270,000 shares
of common stock issuable upon exercise of warrants included in the units
in this offering;
|
|
·
|
shares
of common stock and warrants issuable upon exercise of the underwriter’s
over-allotment option; and
|
|
·
|
286,187
shares of common stock sold by us since September 30,
2010.
|
3
Selected
Financial Data
The
following tables summarize our financial data for the periods presented. The
summary statements of operations data for the years ended December 31, 2009,
2008 and 2007, and the balance sheet data as of December 31, 2009 and 2008, have
been derived from our audited financial statements, which are incorporated by
reference into this prospectus. The summary statements of operations data for
the years ended December 31, 2006 and 2005, and the balance sheet data as of
December 31, 2007, 2006 and 2005, have been derived from our audited financial
statements, which are not incorporated by reference into this prospectus. The
summary statements of operations data for the nine months ended September 30,
2010 and 2009, and the balance sheet data as of September 30, 2010, have been
derived from our unaudited financial statements, which are included elsewhere in
this prospectus. The historical results are not necessarily indicative of the
results to be expected for any future periods. You should read this data
together with the financial statements and related notes incorporated by
reference into this prospectus or included elsewhere in this prospectus, as well
as “Management's Discussion and Analysis of Financial Condition and Results of
Operations” and the other financial information incorporated by reference into
this prospectus.
STATEMENTS OF OPERATIONS DATA:
|
||||||||||||||||||||||||||||
Year Ended December 31,
|
Nine Months Ended
September 30,
|
|||||||||||||||||||||||||||
2009
|
2008
|
2007
|
2006
|
2005
|
2010
|
2009
|
||||||||||||||||||||||
(In
thousands, except per share data)
|
||||||||||||||||||||||||||||
Revenues
and Other Income
|
||||||||||||||||||||||||||||
Interest
income
|
$ | 4 | $ | 433 | $ | 1,508 | $ | 596 | $ | 630 | $ | — | $ | 4 | ||||||||||||||
Research
and development grants
|
— | — | — | — | 4 | — | — | |||||||||||||||||||||
Other
income
|
547 | — | — | — | — | 138 | — | |||||||||||||||||||||
Total
revenues
|
551 | 433 | 1,508 | 596 | 634 | 138 | 4 | |||||||||||||||||||||
Expenses:
|
||||||||||||||||||||||||||||
Research
and development
|
23,062 | 22,575 | 12,420 | 11,912 | 6,101 | 1,950 | 21,765 | |||||||||||||||||||||
General
and administrative
|
4,723 | 3,060 | 2,788 | 2,879 | 1,924 | 1,772 | 4,126 | |||||||||||||||||||||
Total
expenses
|
27,785 | 25,635 | 15,208 | 14,791 | 8,025 | 3,722 | 25,891 | |||||||||||||||||||||
Net
loss
|
$ | (27,234 | ) | $ | (25,202 | ) | $ | (13,700 | ) | $ | (14,195 | ) | $ | (7,391 | ) | $ | (3,584 | ) | $ | (25,887 | ) | |||||||
Net
loss per share – basic and diluted (1)(2)
|
$ | (6.28 | ) | $ | (7.54 | ) | $ | (4.38 | ) | $ | (5.60 | ) | $ | (3.06 | ) | $ | (0.46 | ) | $ | (6.77 | ) | |||||||
Shares
used in loss per share calculation(2)
|
4,336 | 3,343 | 3,131 | 2,537 | 2,412 | 7,763 | 3,821 | |||||||||||||||||||||
(1)
|
See
"Note 2. Summary of Significant Accounting Policies" of Notes to our
Consolidated Financial Statements incorporated by reference into this
prospectus for a description of the computation of loss per
share.
|
(2)
|
The
basic and diluted net loss per share and shares used in loss per share
calculation have been adjusted to reflect the one-for-four reverse stock
split that was effected on October 14,
2010.
|
BALANCE SHEET DATA:
|
||||||||||||||||||||||||
As of December 31,
|
As of
September 30,
|
|||||||||||||||||||||||
2009
|
2008
|
2007
|
2006
|
2005
|
2010
|
|||||||||||||||||||
Cash,
cash equivalents and marketable securities
|
$ | 1,886 | $ | 19,470 | $ | 25,903 | $ | 6,736 | $ | 16,832 | $ | 4,216 | ||||||||||||
Total
assets
|
2,960 | 22,603 | 27,599 | 7,849 | 17,682 | 5,567 | ||||||||||||||||||
Deficit
accumulated during the development stage
|
(174,476 | ) | (147,242 | ) | (122,040 | ) | (108,340 | ) | (94,145 | ) | (178,060 | ) | ||||||||||||
Total
stockholders' equity
|
$ | 562 | $ | 15,614 | $ | 24,060 | $ | 3,790 | $ | 16,955 | $ | 4,213 |
4
RISK
FACTORS
An
investment in our securities involves a high degree of risk. Before you decide
to invest in our securities, you should consider carefully all of the
information in this prospectus, including the risks described
below. Any of these risks could have a material adverse effect on our
business, prospects, financial condition and results of operations. In any such
case, the trading price of our common stock or warrants could decline and you
could lose all or part of your investment. You should also refer to
the other information contained in this prospectus, or incorporated herein by
reference, including our financial statements and the notes to those statements,
and the information set forth under the caption "Forward Looking
Statements." The risks described below and contained in our other
periodic reports are not the only ones that we face. Additional risks
not presently known to us or that we currently deem immaterial may also
adversely affect our business operations.
Risks
Relating to Our Business
Assuming
completion of this offering, our ability to continue as a going concern may
require that we raise additional funds by the end of the second quarter of 2012,
without which we may need to cease our business operations and begin liquidation
proceedings.
Assuming
completion of this offering, our ability to continue as a going concern is
dependent upon our ability to obtain additional financing by the end of the
second quarter of 2012 based upon our current expense and revenue
assumptions. If our expenses are greater than expected or our
revenues are less than expected, we may be required to raise additional funds
prior to that time. We will continue to explore various financing
alternatives to address our liquidity needs. No assurance can be
given that we will be successful in obtaining additional financing after this
offering on acceptable terms or at all. We anticipate that if we are
able to secure additional financing, that such financing will result in
significant dilution of the ownership interests of our stockholders and may
provide certain rights to the new investors senior to the rights of purchasers
of securities in this offering, including but not limited to, voting rights and
rights to proceeds in the event of a sale or liquidation of the
Company. The current FDA partial clinical hold of our clinical trials
for Proellex® will make it more difficult for us to obtain additional
financing. In addition, the class action lawsuits filed against us
will make our ability to raise funds even more difficult. We expect
to continue to incur significant losses for the foreseeable future, and we may
never achieve or sustain profitability. In the event that we are
unable to obtain adequate financing to conduct operations, we may need to cease
our business operations and begin liquidation proceedings. If we need
to liquidate our assets, we would likely realize significantly less from them
than the values at which they are carried on our financial statements. The funds
resulting from the liquidation of our assets would be used first to pay off the
debt owed to any secured and unsecured creditors before any funds would be
available to pay our stockholders, and any shortfall in the proceeds would
directly reduce the amounts available for distribution, if any, to our creditors
and to our stockholders. In the event we were required to liquidate, it is
highly unlikely that stockholders would receive any value for their
shares.
The
Company and certain of its officers and directors were named as a party in
several class action lawsuits which could result in a material adverse affect on
our business and financial condition.
The
Company and certain of its officers were named as parties in several shareholder
class action lawsuits alleging, among other things, that the Company and such
officers violated certain provisions of the Exchange Act by issuing materially
false and misleading press releases regarding the results of clinical trials for
its drug Proellex®. Our bylaws require us to indemnify our officers
in certain proceedings, subject to certain limited exceptions. In addition, each
of our directors has an indemnification agreement with the Company providing for
certain additional indemnification benefits for such persons in the event of a
lawsuit. As a result of the class action lawsuits, we are obligated
to pay for certain costs and expenses of our officers and directors and may be
liable for substantial damages, costs and expenses if such class action is
successful. Such litigation could also divert the attention of our
management and our resources in general from day-to-day
operations. Further, it is possible that additional claims beyond
those that have already been filed will be brought by the current plaintiffs or
by others in an effort to seek monetary relief from us.
Additionally,
such class action lawsuits are covered by the Company's director and officer
insurance policy. In the event there are adverse judgments against
the Company in such lawsuits, the Company's insurance coverage may not be
adequate to cover such judgments and the Company's cash position may not be
sufficient to satisfy such judgment. Such adverse judgments could have a
material and adverse affect on the Company.
If
we fail to obtain the capital necessary to fund our operations, we may have to
delay, reduce or eliminate our research and development programs or
commercialization efforts, dispose of assets or liquidate.
We
expect to make additional capital outlays and to increase operating expenditures
over the next several years to support our preclinical development and clinical
trial activities, particularly with respect to clinical trials for Androxal® and
Proellex®. Assuming completion of this offering and based on our
current and planned clinical programs, we expect to need to raise additional
capital by the end of the second quarter of 2012 or earlier if our expenses are
greater than anticipated. We will continue to seek additional funding
through public or private financings, including equity or debt financings,
and/or through other means, including collaborations and license
agreements. We do not know whether additional financing will be
available when needed, or that, if available, we will obtain financing on terms
favorable to our stockholders or us. If adequate funds are not
available to us, we may be required to:
5
|
·
|
delay,
reduce the scope of or eliminate one or more of our development
programs;
|
|
·
|
relinquish,
license or otherwise dispose of rights to technologies, product candidate
or products that we would otherwise seek to develop or commercialize
ourselves at an earlier stage or on terms that are less favorable than
might otherwise be available; or
|
|
·
|
liquidate
and dissolve our company.
|
Our
future capital requirements will depend upon a number of factors,
including:
|
·
|
the
size, complexity, results and timing of our clinical
programs;
|
|
·
|
the
cost to obtain sufficient supply of the compounds necessary for our
product candidates at a reasonable
cost;
|
|
·
|
the
time and cost involved in obtaining regulatory
approvals;
|
|
·
|
the
costs involved in preparing, filing, prosecuting, maintaining, defending
and enforcing patent claims; and
|
|
·
|
competing
technological and market
developments.
|
These
factors could result in variations from our currently projected operating and
liquidity requirements.
Because
the data from our preclinical studies and early clinical trials for our product
candidates are not necessarily predictive of future results, we can provide no
assurances that any of them will have favorable results in clinical trials or
receive regulatory approval.
Before we
can obtain regulatory approval for the commercial sale of any product candidate
that we develop, we are required to complete preclinical development and
extensive clinical trials in humans to demonstrate its safety and
efficacy. To date, long-term safety and efficacy have not been
demonstrated in clinical trials for any of our product candidates and in fact,
our product candidate Proellex® is currently on partial clinical hold with the
FDA due to safety issues experienced in our Phase 2 and Phase 3 clinical trials
for endometriosis and uterine fibroids, respectively.
In
addition, previous clinical trials for Androxal® have been conducted only in
limited numbers of patients that may not fully represent the diversity present
in larger populations. In addition, these studies have not been
subjected to the exacting design requirements typically required by FDA for
pivotal trials. Thus the limited data we have obtained may not
predict results from studies in larger numbers of patients drawn from more
diverse populations, and may not predict the ability of Androxal® to treat type
2 diabetes. Furthermore, the only data that we obtained to date
relating to Androxal® is to treat testosterone deficiency. We will be
required to demonstrate through larger-scale clinical trials that these product
candidates are safe and effective for use in a diverse population before we can
seek regulatory approvals for their commercial sale.
Favorable
results in our early studies or trials may not be repeated in later studies or
trials, including continuing preclinical studies and large-scale clinical trials
analyzed with more rigorous statistical methods, and our drug candidates in
later-stage trials may fail to show desired safety and efficacy despite having
progressed through earlier-stage trials. Unfavorable results from
ongoing preclinical studies or clinical trials could result in delays,
modifications or abandonment of ongoing or future clinical trials. Clinical
results are frequently susceptible to varying interpretations that may delay,
limit or prevent regulatory approvals. Negative or inconclusive
results or adverse medical events during a clinical trial could cause a clinical
trial to be delayed, repeated or terminated. In addition, we may report top-line
data from time to time, which is based on a preliminary analysis of key efficacy
and safety data; such data may be subject to change following a more
comprehensive review of the data related to the applicable clinical
trial. If Androxal®, Proellex®, or any other potential future product
candidate fails to demonstrate sufficient safety and efficacy in any clinical
trial, we would experience potentially significant delays in, or be required to
abandon, development of that product candidate. If we delay or
abandon our development efforts related to Androxal® or Proellex®, we may not be
able to generate sufficient revenues to continue operations or become
profitable.
We
have a history of operating losses, and we expect to incur increasing net losses
and may not achieve or maintain profitability for some time or at
all.
We have
experienced significant operating losses in each fiscal year since our
inception. As of September 30, 2010, we had accumulated losses of
$178.1 million, approximately $4.2 million in cash and cash equivalents, and our
accounts payable and accrued expenses were approximately $1.4
million. We expect to continue incurring net losses and we may not
achieve or maintain profitability for some time if at all. As we
increase expenditures for the clinical development of our products, we expect
our total operating losses to increase for at least the next few
years. Our ability to achieve profitability will depend on, among
other things, successfully completing the development of our products, obtaining
regulatory approvals, establishing marketing, sales and manufacturing
capabilities or collaborative arrangements with others that possess such
capabilities, and raising sufficient funds to finance our
activities. There can be no assurance that we will be able to achieve
profitability or that profitability, if achieved, can be
sustained. The uncertainties relating to the foregoing matters raise
substantial doubt about our ability to continue as a going
concern.
6
Raising
additional funds by issuing securities or through collaboration and licensing
arrangements may cause dilution to our stockholders, restrict our operations or
require us to relinquish proprietary rights.
We may
raise additional funds through public or private equity offerings, debt
financings or potential corporate collaborations and licensing
arrangements. We cannot be certain that additional funding will be
available on acceptable terms, or at all. To the extent that we raise
additional capital by issuing equity securities, our stockholders’ ownership
will be diluted. Any debt financing we enter into may involve
covenants that restrict our operations. These restrictive covenants
may include limitations on borrowing and specific restrictions on the use of our
assets, as well as prohibitions on our ability to create liens, pay dividends,
redeem capital stock or make investments. In addition, if we raise
additional funds through collaboration and licensing arrangements, it may be
necessary to relinquish potentially valuable rights to our potential products or
proprietary technologies, or grant licenses on terms that are not favorable to
us. For example, we might be forced to relinquish all or a portion of
our sales and marketing rights with respect to Androxal®, Proellex®, or other
potential products or license intellectual property that enables licensees to
develop competing products.
Our
stock price could decline significantly based on the results and timing of
clinical trials of, and decisions affecting, our product
candidates.
Results
of clinical trials and preclinical studies of our current and potential product
candidates may not be viewed favorably by us or third parties, including the FDA
or other regulatory authorities, investors, analysts and potential
collaborators. The same may be true of how we design the clinical
trials of our product candidates and regulatory decisions affecting those
clinical trials. Biopharmaceutical company stock prices have declined
significantly when such results and decisions were unfavorable or perceived
negatively or when a product candidate did not otherwise meet
expectations. The final results from our clinical development
programs may be negative, may not meet expectations or may be perceived
negatively. The designs of our clinical trials (which may change
significantly and be more expensive than currently anticipated depending on our
clinical results and regulatory decisions) may also be viewed negatively by
third parties. We may not be successful in completing these clinical
trials on our projected timetable, if at all.
Failure
to initiate additional clinical trials or delays in existing clinical trials of
Androxal® and Proellex® and failure of the FDA to lift the partial clinical hold
on Proellex® or any of our other current or future product candidates, or
unfavorable results or decisions or negative perceptions regarding any of such
clinical trials, could cause our stock price to decline
significantly.
We
are thinly staffed and highly dependent on a limited number of management
persons and key personnel, and if we lose these members of our team or are
unable to attract and retain additional qualified personnel, our future growth
and ability to compete would suffer.
The
competition for qualified personnel in the biopharmaceutical field is intense,
and our future success depends upon our ability to attract, retain and motivate
highly skilled scientific, technical and managerial employees. We
have only 6 full-time employees at the present time, including Joseph S.
Podolski. We are highly dependent on our professional staff for the
management of our company and the development of our
technologies. Mr. Podolski has an employment agreement with
us. There can be no assurance that any of these employees will remain
with us through development of our current product candidates. The
loss of the services of any of our employees could delay or curtail our research
and product development efforts.
Our
plan to use collaborations to leverage our capabilities may not be
successful.
As part
of our business strategy, we intend to enter into collaboration arrangements
with strategic partners to develop and commercialize our product
candidates. For our collaboration efforts to be successful, we must
identify partners whose competencies complement ours. We must also
successfully enter into collaboration agreements with them on terms attractive
to us and integrate and coordinate their resources and capabilities with our
own. We may be unsuccessful in entering into collaboration agreements
with acceptable partners or negotiating favorable terms in these
agreements. In addition, we may face a disadvantage in seeking to
enter into or negotiating collaborations with potential partners because other
potential collaborators may have greater management and financial resources than
we do. Also, we may be unsuccessful in integrating the resources or
capabilities of these collaborators. In addition, our collaborators
may prove difficult to work with or less skilled than we originally
expected. If we are unsuccessful in our collaborative efforts, our
ability to develop and market product candidates could be severely
limited.
Our
rights agreement and certain provisions in our charter documents and Delaware
law could delay or prevent a change in management or a takeover attempt that you
may consider to be in your best interest.
We have
adopted certain anti-takeover provisions, including a rights
agreement. The rights agreement will cause substantial dilution to
any person who attempts to acquire us in a manner or on terms not approved by
our board of directors.
7
The
rights agreement and certain provisions in our certificate of incorporation and
bylaws and under Delaware law could delay or prevent the removal of directors
and other management and could make more difficult a merger, tender offer or
proxy contest involving us that you may consider to be in your best
interest. For example, these provisions:
|
·
|
allow
our board of directors to issue preferred stock without stockholder
approval;
|
|
·
|
limit
who can call a special meeting of stockholders;
and
|
|
·
|
establish
advance notice requirements for nomination for election to the board of
directors or for proposing matters to be acted upon at stockholder
meetings.
|
Risks
Relating to Our Product Development Efforts
Delays
in the commencement of preclinical studies and clinical trials testing of our
current and potential product candidates could result in increased costs to us
and delay our ability to generate revenues.
Our
product candidates will require continued preclinical studies and extensive
clinical trials prior to the submission of a regulatory application for
commercial sales. Because of the nature of clinical trials and our
lack of sufficient capital, we do not know whether future planned clinical
trials will begin on time, if at all. Delays in the commencement of
preclinical studies and clinical trials could significantly increase our product
development costs and delay any product commercialization. In
addition, many of the factors that may cause, or lead to, a delay in the
commencement of clinical trials may also ultimately lead to denial of regulatory
approval of a product candidate.
The
commencement of clinical trials can be delayed for a variety of reasons,
including delays in:
|
·
|
demonstrating
sufficient safety and efficacy in past clinical trials to obtain
regulatory approval to commence a further clinical
trial;
|
|
·
|
convincing
the FDA that we have selected valid endpoints for use in proposed clinical
trials;
|
|
·
|
reaching
agreements on acceptable terms with prospective contract manufacturers for
manufacturing sufficient quantities of a product candidate;
and
|
|
·
|
obtaining
institutional review board approval to conduct a clinical trial at a
prospective site.
|
In
addition, the commencement of clinical trials may be delayed due to insufficient
patient enrollment, which is a function of many factors, including the size of
the patient population, the nature of the protocol, the proximity of patients to
clinical sites, the availability of effective treatments for the relevant
disease, and the eligibility criteria for the clinical trial.
Delays
in the completion of, or the termination of, clinical testing of our current and
potential product candidates could result in increased costs to us, and could
delay or prevent us from generating revenues.
Once a
clinical trial has begun, it may be delayed, suspended or terminated by us or
the FDA or other regulatory authorities due to a number of factors,
including:
|
·
|
lack
of adequate funding to continue clinical
trials;
|
|
·
|
lack
of effectiveness of any product candidate during clinical
trials;
|
|
·
|
side
effects experienced by trial participants or other safety
issues;
|
|
·
|
slower
than expected rates of patient recruitment and enrollment or lower than
expected patient retention rates;
|
|
·
|
delays
or inability to manufacture or obtain sufficient quantities of materials
for use in clinical trials;
|
|
·
|
inadequacy
of or changes in our manufacturing process or compound
formulation;
|
|
·
|
delays
in obtaining regulatory approvals to commence a trial, or “clinical holds”
or delays requiring suspension or termination of a trial by a regulatory
agency, such as the FDA, after a trial is
commenced;
|
|
·
|
changes
in applicable regulatory policies and
regulations;
|
|
·
|
delays
in identifying and reaching agreement on acceptable terms with prospective
clinical trial sites;
|
8
|
·
|
uncertainty
regarding proper dosing;
|
|
·
|
unfavorable
results from on-going clinical trials and preclinical
studies;
|
|
·
|
failure
of our clinical research organizations to comply with all regulatory and
contractual requirements or otherwise fail to perform their services in a
timely or acceptable manner;
|
|
·
|
scheduling
conflicts with participating clinicians and clinical
institutions;
|
|
·
|
failure
to construct appropriate clinical trial
protocols;
|
|
·
|
insufficient
data to support regulatory
approval;
|
|
·
|
inability
or unwillingness of medical investigators to follow our clinical
protocols;
|
|
·
|
difficulty
in maintaining contact with subjects during or after treatment, which may
result in incomplete data;
|
|
·
|
ongoing
discussions with the FDA or other regulatory authorities regarding the
scope or design of our clinical trials;
and
|
|
·
|
acceptability
to the FDA of data obtained from clinical studies conducted in Europe or
other non-United States
jurisdictions.
|
Many of
these factors that may lead to a delay, suspension or termination of clinical
testing of a current or potential product candidate may also ultimately lead to
denial of regulatory approval of a current or potential product
candidate.
If we
experience delays in the completion of, or termination of, clinical testing of
any product candidates in the future, our financial results and the commercial
prospects for our product candidates will be harmed, and our ability to generate
product revenues will be delayed.
Even
if we successfully complete clinical trials for Androxal® and Proellex®, there
are no assurances that we will be able to submit, or obtain FDA approval of, a
new drug application.
There can
be no assurance that, if our clinical trials for Androxal® and Proellex® are
successfully completed, we will be able to submit a new drug application, or
NDA, to the FDA or that any NDA we submit will be approved by the FDA in a
timely manner, if at all. After completing clinical trials for a
product candidate in humans, a drug dossier is prepared and submitted to the FDA
as an NDA, and includes all preclinical studies and clinical trial data relevant
to the safety and effectiveness of the product at the suggested dose and
duration of use for the proposed indication, in order to allow the FDA to review
such drug dossier and to consider a product candidate for approval for
commercialization in the United States. If we are unable to submit an
NDA with respect to Androxal® or Proellex®, or if any NDA we submit is not
approved by the FDA, we will be unable to commercialize that
product. The FDA can and does reject NDAs and requires additional
clinical trials, even when drug candidates achieve favorable results in
large-scale Phase 3 clinical trials. If we fail to commercialize
Androxal® or Proellex®, we may be unable to generate sufficient revenues to
continue operations or attain profitability and our reputation in the industry
and in the investment community would likely be damaged.
We
rely on third parties to conduct clinical trials for our product candidates, and
their failure to timely and properly perform their obligations may result in
costs and delays that prevent us from obtaining regulatory approval or
successfully commercializing our product candidates.
We rely
on independent contractors, including researchers at clinical research
organizations, or CROs, and universities, in certain areas that are particularly
relevant to our research and product development plans, such as the conduct of
clinical trials. The competition for these relationships is intense,
and we may not be able to maintain our relationships with them on acceptable
terms. Independent contractors generally may terminate their
engagements at any time, subject to notice. As a result, we can
control their activities only within certain limits, and they will devote only a
certain amount of their time conducting research on and trials of our product
candidates and assisting in developing them. If they do not
successfully carry out their duties under their agreements with us, fail to
inform us if these trials fail to comply with clinical trial protocols, or fail
to meet expected deadlines, our clinical trials may need to be extended, delayed
or terminated. We may not be able to enter into replacement
arrangements without undue delays or excessive expenditures. If there
are delays in testing or regulatory approvals as a result of the failure to
perform by our independent contractors or other outside parties, our drug
development costs will increase and we may not be able to attain regulatory
approval for or successfully commercialize our product
candidates.
9
In
addition, we have no control over the financial health of our independent
contractors. Several of our independent contractors are in possession
of valuable and sensitive information relating to the safety and efficacy of our
product candidates, and several others provide services to a significant
percentage of the patients enrolled in the respective clinical trials in which
such independent contractors participate. Should one or more of these
independent contractors become insolvent, or otherwise are not able to continue
to provide services to us, as a result of the current economic downturn or
otherwise, the clinical trial in which such contractor participates could become
significantly delayed and we may be adversely affected as a result of the delays
and additional expenses associated with such event.
Risks
Relating to Manufacturing Our Products
We
currently rely on third-party manufacturers and other third parties for
production of our product candidates, and our dependence on these manufacturers
may impair the development of our product candidates.
Currently,
we do not have the ability internally to manufacture the product candidates that
we need to conduct our clinical trials. We terminated our supply agreement with
Gedeon Richter for the manufacturing of Proellex® due to the clinical hold
imposed by the FDA in August 2009; however, we have a large supply of Proellex®
currently available for our current and planned clinical trial
efforts. In the event we require an additional supply of Proellex®,
we believe that we have maintained a good relationship with Gedeon Richter and
that an agreement could be reached with Gedeon Richter to provide such supply
when and if needed, but we cannot assure you this will be the case.
We
have a five year supply agreement with Diagnostic Chemical Limited, doing
business as BioVectra, for the supply of the bulk active pharmaceutical
ingredient used in Androxal®. This agreement runs through July of
2012, subject to automatic one year renewals and the ability of either party to
terminate upon 12 months prior notice. We have obtained all of our
supply of Androxal® to date from BioVectra. We have not faced any
material problems with BioVectra in supplying us with our necessary quantities
of Androxal® for our clinical trials and anticipate utilizing them for
commercial production if Androxal® is approved. The Company believes
that should an issue with BioVectra arise an alternative supplier could be
identified, but we cannot assure you this will be the case.
For the
foreseeable future, we expect to continue to rely on third-party manufacturers
and other third parties to produce, package and store sufficient quantities of
Androxal®, Proellex®, and any future product candidates for use in our clinical
trials. These product candidates are complicated and expensive to
manufacture. If our third-party manufacturers fail to deliver our
product candidates for clinical use on a timely basis, with sufficient quality,
and at commercially reasonable prices, we may be required to delay or suspend
clinical trials or otherwise discontinue development and production of our
product candidates. While we may be able to identify replacement
third-party manufacturers or develop our own manufacturing capabilities for
these product candidates, this process would likely cause a delay in the
availability of our product candidates and an increase in costs. In
addition, third-party manufacturers may have a limited number of facilities in
which our product candidates can be produced, and any interruption of the
operation of those facilities due to events such as equipment malfunction or
failure or damage to the facility by natural disasters could result in the
cancellation of shipments, loss of product in the manufacturing process or a
shortfall in available product candidates.
Our
product candidates have only been manufactured in small quantities to date, and
we may face delays or complications in manufacturing quantities of our product
candidates in sufficient quantities to meet the demands of late stage clinical
trials and marketing.
We cannot
assure that we will be able to successfully increase the manufacturing capacity
or scale-up manufacturing volume per batch, whether on our own or in reliance on
third-party manufacturers, for any of our product candidates in a timely or
economical manner, or at all. To date our product candidates have
been manufactured exclusively by third parties in small quantities for
preclinical studies and clinical trials. Future clinical trials of
our product candidates, if any, will require increased quantities for future
commercial sale in the event that such product candidates are approved by the
FDA or foreign regulatory bodies. Significant scale-up of
manufacturing requires certain additional developmental work, which the FDA must
review and approve to assure product comparability. If we or our
third-party manufacturers are unable to successfully increase the manufacturing
capacity for a product candidate, the regulatory approval or commercial launch
of that product candidate may be delayed or there may be a shortage in supply of
that product candidate.
Our
product candidates require precise, high-quality manufacturing which may not be
available at acceptable costs.
Androxal®
and Proellex® are novel compounds that have never been produced in large
scale. As in the development of any new compound, there are
underlying risks associated with their manufacture. These risks
include, but are not limited to, cost, process scale-up, process
reproducibility, construction of a suitable process plant, timely availability
of raw materials, as well as regulatory issues associated with the manufacture
of an active pharmaceutical agent. Any of these risks may prevent us
from successfully developing Androxal® or Proellex®. Our failure, or
the failure of our third-party manufacturers to achieve and maintain these high
manufacturing standards, including the incidence of manufacturing errors and
reliable product packaging for diverse environmental conditions, could result in
patient injury or death, product recalls or withdrawals, delays or failures in
product testing or delivery, cost overruns or other problems that could
seriously hurt our business.
10
We
may experience delays in the development of our product candidates if the
third-party manufacturers of our product candidates cannot meet FDA requirements
relating to Good Manufacturing Practices.
Our
third-party manufacturers are required to produce our product candidates under
FDA current Good Manufacturing Practices in order to meet acceptable standards
for our clinical trials. If such standards change, the ability of
third-party manufacturers to produce our product candidates on the schedule we
require for our clinical trials may be affected. In addition,
third-party manufacturers may not perform their obligations under their
agreements with us or may discontinue their business before the time required by
us to gain approval for or commercialize our product candidates. Any
difficulties or delays in the manufacturing and supply of our product candidates
could increase our costs or cause us to lose revenue or postpone or cancel
clinical trials.
The FDA
also requires that we demonstrate structural and functional comparability
between the same drug product produced by different third-party
manufacturers. Because we may use multiple sources to manufacture
Androxal® and Proellex®, we may need to conduct comparability studies to assess
whether manufacturing changes have affected the product safety, identity, purity
or potency of any commercial product candidate compared to the product candidate
used in clinical trials. If we are unable to demonstrate
comparability, the FDA could require us to conduct additional clinical trials,
which would be expensive and significantly delay commercialization of our
product candidates.
Risks
Relating to Product Commercialization
If
commercialized, our product candidates may not be approved for sufficient
governmental or third-party reimbursements, which would adversely affect our
ability to market our product candidates.
In the
United States and elsewhere, sales of pharmaceutical products depend in
significant part on the availability of reimbursement to the consumer from
third-party payers, such as government and private insurance
plans. Third-party payers are increasingly challenging the prices
charged for medical products and services. It will be time consuming
and expensive for us to go through the process of seeking reimbursement from
Medicaid, Medicare and private payers for Proellex® and
Androxal®. Our products may not be considered cost effective, and
coverage and reimbursement may not be available or sufficient to allow us to
sell our products on a competitive and profitable basis. The passage
of the Medicare Prescription Drug and Modernization Act of 2003 imposes
requirements for the distribution and pricing of prescription drugs which may
negatively affect the marketing of our potential products.
If
we successfully develop products but those products do not achieve and maintain
market acceptance, our business will not be profitable.
Even if
our product candidates are approved for commercial sale by the FDA or other
regulatory authorities, the degree of market acceptance of any approved product
by physicians, healthcare professionals and third-party payers and our
profitability and growth will depend on a number of factors,
including:
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relative
convenience and ease of
administration;
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the
prevalence and severity of any adverse side
effects;
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availability,
effectiveness and cost of alternative
treatments;
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pricing
and cost effectiveness of our
drugs;
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effectiveness
of our or collaborators’ sales and marketing strategies;
and
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our
ability to obtain sufficient third-party insurance coverage or
reimbursement.
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If
Androxal® does not provide a treatment regime that is more beneficial than
AndroGel®, the current standard of care for the treatment of testosterone
deficiency, or otherwise provide patient benefit, it likely will not be accepted
favorably by the market. If any products we may develop do not achieve market
acceptance, then we will not generate sufficient revenue to achieve or maintain
profitability.
In
addition, even if our products achieve market acceptance, we may not be able to
maintain that market acceptance over time if:
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new
products or technologies are introduced that are more favorably received
than our products, are more cost effective or render our products
obsolete;
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unforeseen
complications arise with respect to use of our products;
or
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sufficient
third-party insurance coverage or reimbursement does not remain
available.
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11
Our
liability insurance may neither provide adequate coverage nor may it always be
available on favorable terms or at all.
Neither
Androxal® nor Proellex® has been approved for commercial
sale. However, the current and future use of our product candidates
by us and potential corporate collaborators in clinical trials, and the sale of
any approved products in the future, may expose us to liability
claims. These claims might be made directly by consumers or
healthcare providers or indirectly by pharmaceutical companies, potential
corporate collaborators or others selling such products. We may
experience financial losses in the future due to product liability
claims. We have obtained limited general commercial liability
insurance coverage for our clinical trials. We intend to expand our
insurance coverage to include the sale of commercial products if we obtain
marketing approval for any of our product candidates. However, we may
not be able to maintain insurance coverage at a reasonable cost or in sufficient
amounts to protect us against losses. If a successful product
liability claim or series of claims is brought against us for uninsured
liabilities or for liabilities in excess of our insurance limits, our assets may
not be sufficient to cover such claims and our business operations could be
impaired.
We
face significant competition from many companies with substantially greater
resources than we have and other possible advantages.
We are
engaged in biopharmaceutical product development, an industry that is
characterized by extensive research efforts and rapid technological
progress. The biopharmaceutical industry is also highly
competitive. Our success will depend on our ability to acquire,
develop and commercialize products and our ability to establish and maintain
markets for any products for which we receive marketing
approval. Potential competitors in North America, Europe and
elsewhere include major pharmaceutical companies, specialty pharmaceutical
companies and biotechnology firms, universities and other research institutions
and government agencies. Many of our competitors have substantially greater
research and development and regulatory capabilities and experience, and
substantially greater management, manufacturing, distribution, marketing and
financial resources, than we do. Accordingly, our competitors
may:
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develop
or license products or other novel technologies that are more effective,
safer or less costly than the product candidates that we are
developing;
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obtain
regulatory approval for products before we do;
or
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commit
more resources than we can to developing, marketing and selling competing
products.
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Our main
competitors for the treatment of testosterone deficiency are the testosterone
replacement therapies currently being marketed. The current standard
of care is AndroGel®, a topical gel for the replacement of testosterone
developed by Solvay Pharmaceuticals (which was acquired by Abbott
Laboratories). Abbott is a much larger company than we are, with
greater resources and marketing ability. Androxal® would also compete
with other forms of testosterone replacement therapies such as oral treatments,
patches, injectables and a tablet applied to the upper gum. There is
another topical gel currently marketed by Auxilium Pharmaceuticals called
Testim®, and a transdermal patch marketed by Watson Pharmaceuticals called
AndroDerm®. There can be no assurance that our product candidates
will be more successful than competitive products. In addition, other
potential competitors may be developing testosterone therapies similar to
ours.
The
main therapeutic products competitive with Proellex® for the treatment of
uterine fibroids and endometriosis are GnRH agonists, including Lupron® and the
use of approved progestin-based contraceptives for the treatment of
endometriosis. In addition, surgical treatment of both uterine
fibroids and endometriosis would compete with Proellex®, if approved, by
removing uterine fibroids and by removing misplaced tissue in women with
endometriosis. Furthermore, Abbott has recently licensed a Phase
3–ready molecule from Neurocrine Biosciences Inc. for the treatment of
endometriosis.
Risks
Relating to Our Intellectual Property
There
is a third party individual patent holder that claims priority over our patent
application for Androxal®.
A
third party individual holds two issued patents related to the use of an
anti-estrogen such as clomiphene citrate and others for use in the treatment of
androgen deficiency and disorders related thereto. In our prior
filings with the SEC, we have described our request to the U.S. Patent and
Trademark Office, or PTO, for re-examination of one of these patents based on
prior art. The third party amended the claims in the re-examination
proceedings, which led the PTO to determine that the amended claims are
patentable in view of those publications under consideration and a
re-examination certificate was issued. However, we believe that the
amended claims are invalid based on additional prior art publications, and we
filed a second request for re-examination by the PTO in light of a number of
these additional publications and other publications cited by the
PTO. The request was granted and all of the claims were finally
rejected by the PTO in the re-examination. The patent holder appealed
the rejections to the PTO Board of Patent Appeals and Interferences (“the
Board”) which affirmed the rejection of all of the claims. The patent
holder subsequently filed a request for rehearing, which led the Board to
reverse the rejections of several dependent claims in view of those publications
under consideration. The patent holder has filed a Notice of Appeal
to the United States Court of Appeals for the Federal Circuit contesting the
rejections maintained by the Board. We also believe that the second
of these two patents is invalid in view of published prior art not considered by
the PTO. Nevertheless, there is no assurance that either patent will
ultimately be found invalid over the prior art. If such patents are not
invalidated by the PTO we may be required to obtain a license from the holder of
such patents in order to develop Androxal® further or attempts may be made to
undertake further legal action to invalidate such patents. If such
licenses were not available on acceptable terms, or at all, we may not be able
to successfully commercialize or out-license Androxal®.
12
We
licensed our rights to Proellex® from NIH and our inability to fulfill our
commitments and obligations under such license may result in forfeiture of our
rights.
Our
rights to Proellex® are licensed exclusively to us from NIH under a license
agreement. This license agreement contains numerous detailed
performance obligations, with time sensitive dates for compliance, relating to
clinical development and commercialization activities required by us or our
designated third-party providers, as well as additional financial milestones and
royalties. Failure to achieve the benchmarks specified in the
commercial development plan attached to the license agreement or meet payment
obligations could result in termination of the license agreement and the loss of
our rights to develop and commercialize Proellex®. We periodically
update the commercial development plan as such plans evolve. There
can be no assurance that we will be able to meet any or all of the performance
objectives in the future on a timely basis or at all, or that, if we fail to
meet any of such objectives, NIH will agree to revised
objectives. NIH has the ability to terminate the agreement for an
uncured material breach of the agreement, if we made a false statement or
willful omission in our license application, if we do not keep Proellex®
reasonably available to the public after commercial launch, if we cannot
reasonably satisfy unmet health and safety needs, or if we cannot reasonably
justify a failure to comply with the domestic production requirement unless such
requirement has been waived.
We
cannot assure that our manufacture, use or sale of our product candidates will
not infringe on the patent rights of others.
There can
be no assurance that the manufacture, use or sale of any of our product
candidates will not infringe the patent rights of others. We may be
unable to avoid infringement of the patent rights of others and may be required
to seek a license, defend an infringement action or challenge the validity of
the patents in court. There can be no assurance that a license to the
allegedly infringed patents will be available to us on terms and conditions
acceptable to us, if at all, or that we will prevail in any patent
litigation. Patent litigation is extremely costly and time-consuming,
and there can be no assurance that we will have sufficient resources to defend
any possible litigation related to such infringement. If we do not
obtain a license on acceptable terms under such patents, or are found liable for
infringement, or are not able to have such patents declared invalid, we may be
liable for significant money damages, may encounter significant delays in
bringing our product candidates to market, or may be precluded from
participating in the manufacture, use or sale of any such product candidates,
any of which would materially and adversely affect our business.
A
dispute regarding the infringement or misappropriation of our proprietary rights
or the proprietary rights of others could be costly and result in delays in our
research and development activities.
Our
commercial success depends upon our ability to develop and manufacture our
product candidates and market and sell drugs, if any, and conduct our research
and development activities without infringing or misappropriating the
proprietary rights of others. We may be exposed to future litigation
by others based on claims that our product candidates, technologies or
activities infringe the intellectual property rights of others. Numerous United
States and foreign issued patents and pending patent applications owned by
others also exist in the therapeutic areas in, and for the therapeutic targets
for, which we are developing drugs. These could materially affect our
ability to develop our product candidates or sell drugs, and our activities, or
those of our licensor or future collaborators, could be determined to infringe
these patents. Because patent applications can take many years to
issue, there may be currently pending applications, unknown to us, which may
later result in issued patents that our drug candidates or technologies may
infringe. There also may be existing patents, of which we are not
aware, that our product candidates or technologies may infringe. Further, there
may be issued patents and pending patent applications in fields relevant to our
business, of which we are or may become aware, that we believe we do not
infringe or that we believe are invalid or relate to immaterial portions of our
overall drug discovery and development efforts. We cannot assure you
that others holding any of these patents or patent applications will not assert
infringement claims against us for damages or seeking to enjoin our
activities. We also cannot assure you that, in the event of
litigation, we will be able to successfully assert any belief we may have as to
non-infringement, invalidity or immateriality, or that any infringement claims
will be resolved in our favor.
In
addition, others may infringe or misappropriate our proprietary rights, and we
may have to institute costly legal action to protect our intellectual property
rights. We may not be able to afford the costs of enforcing or
defending our intellectual property rights against others. There
could also be significant litigation and other administrative proceedings in our
industry that affect us regarding patent and other intellectual property
rights. Any legal action or administrative action against us, or our
collaborators, claiming damages or seeking to enjoin commercial activities
relating to our drug discovery and development programs could:
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require
us, or potential collaborators, to obtain a license to continue to use,
manufacture or market the affected drugs, methods or processes, which may
not be available on commercially reasonable terms, if at
all;
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prevent
us from importing, making, using, selling or offering to sell the subject
matter claimed in patents held by others and subject to potential
liability for damages; or
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consume
a substantial portion of our managerial, scientific and financial
resources; or be costly, regardless of the
outcome.
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13
Furthermore,
because of the substantial amount of pre-trial documents and witness discovery
required in connection with intellectual property litigation, there is risk that
some of our confidential information could be compromised by disclosure during
this type of litigation. In addition, during the course of this kind
of litigation, there could be public announcements of the results of hearings,
motions or other interim proceedings or developments. If securities
analysts or investors perceive these results to be negative, it could have a
substantial adverse effect on the trading price of our common stock or
warrants.
We
face substantial uncertainty in our ability to protect our patents and
proprietary technology.
Our
ability to commercialize our products will depend, in part, on our or our
licensor’s ability to obtain patents, to enforce those patents and preserve
trade secrets, and to operate without infringing on the proprietary rights of
others. The patent positions of biopharmaceutical companies are
highly uncertain and involve complex legal and factual
questions. There can be no assurance that:
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Patent
applications for and relating to our products candidates, Androxal® and
Proellex®, will result in issued
patents;
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Patent
protection will be secured for any particular
technology;
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Any
patents that have been or may be issued to us, such as our issued patents
and/or pending patent applications relating to Proellex® or Androxal®, or
any patents that have been or may be issued to our licensor, such as the
patent(s) and application(s) underlying our Proellex® compound, when
issued, will be valid and
enforceable;
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any
patents will provide meaningful protection to
us;
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others
will not be able to design around the patents;
or
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our
patents will provide a competitive advantage or have commercial
application.
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The
failure to obtain and maintain adequate patent protection would have a material
adverse effect on us and may adversely affect our ability to enter into, or
affect the terms of, any arrangement for the marketing of any
product.
We
cannot assure that our patents will not be challenged by others.
There can
be no assurance that patents owned by or licensed to us will not be challenged
by others. We could incur substantial costs in proceedings, including
interference proceedings before the PTO and comparable proceedings before
similar agencies in other countries in connection with any claims that may arise
in the future. These proceedings could result in adverse decisions
about the patentability of our or our licensor’s inventions and products, as
well as about the enforceability, validity or scope of protection afforded by
the patents. Any adverse decisions about the patentability of our
product candidates could cause us to either lose rights to develop and
commercialize our product candidates or to license such rights at substantial
cost to us. In addition, even if we were successful in such
proceedings, the cost and delay of such proceedings would most likely have a
material adverse effect on our business.
Confidentiality
agreements with employees and others may not adequately prevent disclosure of
trade secrets and other proprietary information, may not adequately protect our
intellectual property, and will not prevent third parties from independently
discovering technology similar to or in competition with our intellectual
property.
We rely
on trade secrets and other unpatented proprietary information in our product
development activities. To the extent we rely on trade secrets and
unpatented know-how to maintain our competitive technological position, there
can be no assurance that others may not independently develop the same or
similar technologies. We seek to protect trade secrets and
proprietary knowledge, in part, through confidentiality agreements with our
employees, consultants, advisors, collaborators and
contractors. Nevertheless, these agreements may not effectively
prevent disclosure of our confidential information and may not provide us with
an adequate remedy in the event of unauthorized disclosure of such
information. If our employees, scientific consultants, advisors,
collaborators or contractors develop inventions or processes independently that
may be applicable to our technologies, product candidates or products, disputes
may arise about ownership of proprietary rights to those inventions and
processes. Such inventions and processes will not necessarily become
our property, but may remain the property of those persons or their
employers. Protracted and costly litigation could be necessary to
enforce and determine the scope of our proprietary rights. If we fail
to obtain or maintain trade secret protection for any reason, the competition we
face could increase, reducing our potential revenues and adversely affecting our
ability to attain or maintain profitability.
We
cannot protect our intellectual property rights throughout the
world.
Filing,
prosecuting, and defending patents on all of our drug discovery technologies and
all of our potential drug candidates throughout the world would be prohibitively
expensive. Competitors may use our technologies to develop their own
drugs in jurisdictions where we have not obtained patent
protection. These drugs may compete with our drugs, if any, and may
not be covered by any of our patent claims or other intellectual property
rights. The laws of some foreign countries do not protect
intellectual property rights to the same extent as the laws of the United
States, and many companies have encountered significant problems in protecting
and defending such rights in foreign jurisdictions. Many countries,
including certain countries in Europe, have compulsory licensing laws under
which a patent owner may be compelled to grant licenses to third parties (for
example, the patent owner has failed to “work” the invention in that country or
the third party has patented improvements). In addition, many
countries limit the enforceability of patents against government agencies or
government contractors. In these countries, the patent owner may have
limited remedies, which could materially diminish the value of the
patent. Compulsory licensing of life-saving drugs is also becoming
increasingly popular in developing countries either through direct legislation
or international initiatives. Such compulsory licenses could be
extended to include some of our drug candidates, which could limit our potential
revenue opportunities. Moreover, the legal systems of certain
countries, particularly certain developing countries, do not favor the
aggressive enforcement of patents and other intellectual property protection,
particularly those relating to biotechnology and/or pharmaceuticals, which makes
it difficult for us to stop the infringement of our
patents. Proceedings to enforce our patent rights in foreign
jurisdictions could result in substantial cost and divert our efforts and
attention from other aspects of our business.
14
Risks
Related to this Offering and our Common Stock and Warrants
We
will have broad discretion as to the use of the proceeds from this offering, and
we may not use the proceeds effectively.
We will
have broad discretion in the application of the net proceeds from this offering
and could allocate the net proceeds in ways that do not improve our results of
operations or enhance the value of our common stock or warrants. Our
failure to apply these funds effectively could have a material adverse effect on
our business, delay the development of our product candidates and cause the
price of our common stock or warrants to decline.
Purchasers
in this offering will experience immediate and substantial
dilution.
As of
September 30, 2010, we had a net tangible book value of $3.1 million which
yields a net tangible book value of approximately $0.35 per share of common
stock, assuming no exercise of any warrants or options. The net
tangible book value per share is less than the current market price per
share. If you pay more than the net tangible book value per share for
common stock in this offering, you will experience immediate
dilution. See the section titled “Dilution” on page 21 of this
prospectus. The exercise of outstanding options and the warrants
issued in connection with this offering will result in further dilution in your
investment. In addition, if we issue additional equity securities in
the future, the newly issued securities may further dilute your ownership
interest.
The
trading price of our common stock has been volatile and is likely to be volatile
in the future.
The
trading price of our common stock has been highly volatile. Since January 1,
2008 through January 28, 2011, the sale price of our stock price has fluctuated
from a low of $1.11 to a high of $55.76. The market price for our common stock
and warrants will be affected by a number of factors,
including:
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the
denial or delay of regulatory clearances or approvals of our drug
candidates or receipt of regulatory approval of competing
products;
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our
ability to accomplish clinical, regulatory and other product development
milestones;
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the
ability of our product candidates, if they receive regulatory approval, to
achieve market success;
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the
performance of third-party manufacturers and
suppliers;
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actual
or anticipated variations in our results of operations or those of our
competitors;
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developments
with respect to patents and other intellectual property
rights;
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sales
of common stock or other securities by us or our stockholders in the
future;
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additions
or departures of key scientific or management
personnel;
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disputes
or other developments relating to proprietary rights, including patents,
litigation matters and our ability to obtain patent protection for our
products;
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trading
volume of our common stock and
warrants;
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investor
perceptions about us and our
industry;
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public
reaction to our press releases, other public announcements and SEC and
other filings;
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the
failure of analysts to cover our common stock, or changes in analysts’
estimates or recommendations;
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the
failure by us or our competitors to meet analysts’ projections or
guidance;
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general
market conditions and other factors unrelated to our operating performance
or the operating performance of our competitors;
and
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the
other factors described elsewhere in these “Risk
Factors.”
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The stock
prices of many companies in the biotechnology industry have experienced wide
fluctuations that have often been unrelated to the operating performance of
these companies. Following periods of volatility in the market price of a
company’s securities, securities class action litigation often has been
initiated against a company. If any additional class action
litigation is initiated against us, we may incur substantial costs and our
management’s attention may be diverted from our operations, which could
significantly harm our business.
15
Our
inability to comply with the listing requirements of the Nasdaq Capital Market
could result in our common stock and/or warrants being delisted, which could
affect their market price and liquidity and reduce our ability to raise
capital.
We are
required to meet certain qualitative and financial tests (including a minimum
closing bid price of $1.00 per share for our common stock) to maintain the
listing of our common stock and/or warrants on the Nasdaq Capital Market. If we
do not maintain compliance with the continued listing requirements for the
Nasdaq Capital Market within specified periods and subject to permitted
extensions, our common stock and/or warrants may be recommended for delisting
(subject to any appeal we would file). If our common stock or warrants were
delisted, it could be more difficult to buy or sell our common stock or warrants
and to obtain accurate quotations, and the price of our common stock or warrants
could suffer a material decline. Delisting would also impair our ability to
raise capital.
The
market price of our common stock may fall below the exercise price of the
warrants issued in connection with this offering.
The
warrants being issued in connection with this offering will be exercisable
immediately upon issuance and will expire five years from the date of issuance.
The market price of our common stock may fall below the exercise price for the
warrants prior to their expiration. Any warrants not exercised by their date of
expiration will expire worthless and we will be under no further obligation to
the holders of such warrants.
16
FORWARD-LOOKING
STATEMENTS
Some of
the statements contained (i) in this prospectus and any accompanying prospectus
supplement or (ii) incorporated by reference into this prospectus are
forward-looking statements within the meaning of 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”), and are
subject to the safe harbor created by the Securities Litigation Reform Act of
1995. Examples of these forward-looking statements include, but are not limited
to:
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our
ability to continue as a going concern and to raise additional capital, as
necessary, on acceptable terms or at
all;
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having
available funding for the continued development of Proellex® and
Androxal®;
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our
ability to successfully defend the class action
lawsuits;
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the
removal of the current partial clinical hold on further clinical trials
for Proellex® by the FDA and the reestablishment of safe dosing in
clinical trials for Proellex®;
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uncertainty
related to our ability to obtain approval of our products by the FDA and
regulatory bodies in other
jurisdictions;
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uncertainty
relating to our patent portfolio;
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market
acceptance of our products and the estimated potential size of these
markets;
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dependence
on third parties for clinical development and
manufacturing;
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dependence
on a limited number of key
employees;
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competition
and risk of competitive new
products;
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volatility
in the value of our common stock;
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volatility
in the financial markets generally;
and
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any
other risks and uncertainties described under “Risk Factors” or elsewhere
in this prospectus.
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While
these forward-looking statements made by us are based on our current intent,
beliefs and judgments, they are subject to risks and uncertainties that could
cause actual results to vary from the projections in the forward-looking
statements. You should consider the risks above carefully in addition to other
information contained in this prospectus before engaging in any transaction
involving our securities. If any of these risks occur, they could seriously harm
our business, financial condition or results of operations. In such case, the
trading price of our common stock could decline, and you may lose all or part of
your investment.
In
addition, in this prospectus, any prospectus supplement and the documents
incorporated by reference into this prospectus, the words “believe,” “should,”
“predict,” “future,” “may,” “will,” “estimate,” “continue,” “anticipate,”
“intend,” “plan,” “expect,” “potential,” “continue,” or “opportunity,” or other
words and terms of similar meaning, as they relate to us, our business, future
financial or operating performance or our management, are intended to identify
forward-looking statements. Any forward-looking statement speaks only as of the
date on which it is made, and we undertake no obligation to update or revise any
forward-looking statement to reflect events or circumstances after the date on
which the statement is made or to reflect the occurrence of unanticipated
events. New factors emerge from time to time, and it is not possible for us to
predict which factors will arise. In addition, we cannot assess the impact of
each factor on our business or the extent to which any factor, or combination of
factors, may cause actual results to differ materially from those contained in
any forward-looking statements. Past financial or operating performance is not
necessarily a reliable indicator of future performance and you should not use
our historical performance to anticipate results or future period
trends.
17
USE
OF PROCEEDS
We
expect to receive approximately
$ million in net proceeds from the sale
of the 600,000 units offered by us in this offering based on the
offering price of $ per unit, or
approximately $ if the underwriter exercises
its over-allotment in full based on the offering price of
$ per unit. “Net proceeds” is what we
expect to receive after paying the expenses of this offering, including the
underwriting discounts and commissions as described in “Underwriting” and other
estimated offering expenses payable by us, which include legal, accounting and
printing fees; however, it does not include proceeds that we may receive upon
exercise of warrants.
We intend
to use the net proceeds from this offering for general corporate purposes,
including continuing our clinical trials for Androxal® and
Proellex®. We have not yet determined with certainty the manner in
which we will allocate the net proceeds; however, we currently anticipate
using:
|
§
|
approximately
$1.6 million to conduct our Phase 2B secondary hypogonadism trial for
Androxal®;
|
|
§
|
approximately
$1.6 million to complete our current Phase 2 type 2 diabetes trial for
Androxal®; and
|
|
§
|
approximately
$1.0 million to complete our current escalating low dose study for
Proellex®.
|
The
amounts described above are only an estimate of the expenses we currently
anticipate will be necessary to complete each trial. Our management
will have broad discretion in the application of the net proceeds, and investors
will be relying on the judgment of our management regarding the application of
the proceeds of this offering.
Until we
use the net proceeds of this offering, we intend to invest the funds in
short-term, investment grade, interest-bearing securities.
18
CAPITALIZATION
The
following table presents a summary of our cash and cash equivalents and
capitalization as of September 30, 2010:
|
§
|
on
an actual basis; and
|
|
§
|
on
an as adjusted basis, giving effect to the sale of 600,000 units to be
sold in this offering at a public offering price of
$ per unit, after deducting estimated
underwriting discounts and commissions and offering expenses, and the
application of the net proceeds of this offering as described in “Use of
Proceeds.”
|
You
should read the following table in conjunction with “Management’s Discussion and
Analysis of Financial Condition and Results of Operation” and the historical
consolidated financial statements and the related notes thereto incorporated by
reference into this prospectus.
As
of September 30, 2010
(in
thousands except share and
per
share amounts)
|
||||||||
Actual
|
As
Adjusted
|
|||||||
Cash
and cash equivalents
|
$ | 4,216 | $ | |||||
Stockholders’
equity
|
||||||||
Undesignated
preferred stock, $.001 par value: 5,000,000 shares authorized; none issued
and outstanding
|
||||||||
Common
stock ((i) Actual: 75,000,000 shares authorized, par value $0.001;
9,042,407 shares issued and 8,930,057 shares outstanding and (ii) As
Adjusted: 75,000,000 shares authorized, par value
$0.001; shares
issued and outstanding)
|
$ | 9 | $ | |||||
Additional
paid-in capital/warrants
|
183,644 | |||||||
Cost
of treasury stock, 112,350 shares
|
(1,380 | ) | ||||||
Deficit
accumulated during the development stage
|
(178,060 | ) | ||||||
Total
stockholders’ equity
|
$ | 4,213 | $ | |||||
Total
capitalization
|
$ | 4,213 | $ | |||||
The
number of shares in the table above excludes as of September 30,
2010:
|
§
|
538,582
shares of common stock issuable upon the exercise of outstanding options
at a weighted average exercise price of $14.10 per
share;
|
|
§
|
288,421
shares of common stock available for future issuance under our stock
option plans;
|
|
§
|
3,270,000 shares
of common stock issuable upon exercise of warrants included in the units
in this offering;
|
|
§
|
shares
of common stock and warrants issuable upon exercise of the underwriter’s
over-allotment option; and
|
|
§
|
286,187
shares of common stock sold by us since September 30,
2010.
|
19
MARKET
PRICE AND DIVIDEND INFORMATION
Our
common stock is quoted on the Nasdaq Capital Market under the symbol “RPRX”. The
following table shows the high and low sale prices per share of our common stock
as reported by the Nasdaq Stock Market during the periods
presented. Prices per share of our common stock have been adjusted to
reflect the 1-for-4 reverse split of our common stock that was effected on
October 14, 2010.
Price Range
|
||||||||
High
|
Low
|
|||||||
2008
|
||||||||
First
Quarter
|
$ | 40.80 | $ | 32.44 | ||||
Second
Quarter
|
44.36 | 32.84 | ||||||
Third
Quarter
|
40.00 | 21.24 | ||||||
Fourth
Quarter
|
45.00 | 22.72 | ||||||
2009
|
||||||||
First
Quarter
|
$ | 55.76 | $ | 23.36 | ||||
Second
Quarter
|
33.20 | 22.80 | ||||||
Third
Quarter
|
24.04 | 2.60 | ||||||
Fourth
Quarter
|
9.92 | 2.56 | ||||||
2010
|
||||||||
First
Quarter
|
$ | 4.88 | $ | 2.52 | ||||
Second
Quarter
|
4.52 | 1.44 | ||||||
Third
Quarter
|
2.68 | 1.12 | ||||||
Fourth
Quarter
|
4.56 | 1.11 | ||||||
2011
|
||||||||
First
Quarter (January 1st
through January 28th)
|
$ | 3.36 | $ | 2.61 | ||||
All of
the foregoing prices reflect interdealer quotations, without retail mark-up,
markdowns or commissions and may not necessarily represent actual transactions
in the common stock.
On
January 28, 2011, the last sale price of our common stock, as reported by the
Nasdaq Capital Market, was $2.63 per share. On December 31, 2010,
there were approximately 170 holders of record and approximately 3,525
beneficial holders of our common stock.
Dividend
Policy
General
We have
never declared or paid cash dividends on our capital stock. We
currently intend to retain our future earnings, if any, for use in our business
and therefore do not anticipate paying cash dividends in the foreseeable
future. Payment of future dividends, if any, will be at the
discretion of our board of directors after taking into account various factors,
including our financial condition, operating results, current and anticipated
cash needs.
Rights
Plan
We are
party to a rights agreement, as amended, pursuant to which a dividend consisting
of one preferred stock purchase right was distributed for each share of our
common stock held as of the close of business on September 13, 1999, and to each
share of common stock issued thereafter until the earlier of (i) the
distribution date which is defined in the rights plan, (ii) the redemption date
which is defined in the rights plan or (iii) September 13, 2015. The
rights plan is designed to deter coercive takeover tactics and to prevent an
acquirer from gaining control of us without offering fair value to our
stockholders. The rights will expire on September 13, 2015, subject to earlier
redemption or exchange as provided in the rights plan. Each right entitles its
holder to purchase from us one one-hundredth of a share of a new series of
Series One Junior Participating Preferred Stock at a price of $20.00 per one
one-hundredth of a share, subject to adjustment. The rights are generally
exercisable only if a person acquires beneficial ownership of 20% or more of our
outstanding common stock.
A
complete description of the rights, the rights plan with Computershare Trust
Company, N.A., as rights agent, and the Series One Junior Participating
Preferred Stock is hereby incorporated by reference from the information
appearing under the caption "Item 1. Description of the Registrant's Securities
to be Registered" contained in the Registration Statement on Form 8-A filed on
September 3, 1999, and as amended by amendments to such Registration Statement
on Form 8-A/A filed on September 11, 2002, October 31, 2002, June 30, 2005,
January 10, 2008, October 10, 2008 and September 9, 2010.
20
DILUTION
Our
unaudited net tangible book value as of September 30, 2010 was approximately
$3.1 million, or approximately $0.35 per share of common stock. Net
tangible book value per share represents total assets minus capitalized patent
costs and total liabilities, divided by the number of shares of common stock
outstanding. Dilution in net tangible book value per share represents
the difference between the amount per unit paid by purchasers of common stock in
this offering and the net tangible book value per share of our common stock
immediately after the offering.
After
giving effect to the sale of 600,000 units to be sold in this
offering at the offering price of
$ per unit, and after deduction
of estimated underwriting discounts and commissions and offering expenses
payable by us, our pro forma net tangible book value as of September 30, 2010
would have been approximately
$ million, or
$ per share. The
adjustments made to determine pro forma net tangible book value per share are
the following:
|
§
|
An
increase in total assets to reflect the net proceeds of the offering as
described under “Use of Proceeds”;
and
|
|
§
|
The
addition of the number of shares of common stock included in the units
offered under this prospectus to the number of shares
outstanding.
|
The
following table illustrates the pro forma increase in net tangible book value
attributable to existing stockholders of
$ per share and the dilution (the
difference between the offering price per share and net tangible book value per
share) to new investors:
Offering
price per unit
|
$ | |||
Increase
in net tangible book value attributable to this
offering
|
||||
Pro
forma net tangible book value per share as of September 30, 2010, after
giving effect to this offering
|
||||
Dilution
per share to new investors of this offering
|
$ | |||
The
number of shares in the table above excludes as of September 30,
2010:
|
§
|
538,582
shares of common stock issuable upon the exercise of outstanding options
at a weighted average exercise price of $14.10 per
share;
|
|
§
|
288,421
shares of common stock available for future issuance under our stock
option plans;
|
|
§
|
3,270,000 shares
of common stock issuable upon exercise of warrants included in the units
in this offering;
|
|
§
|
shares
of common stock and warrants issuable upon exercise of the underwriter’s
over-allotment option; and
|
|
§
|
286,187
shares of common stock sold by us since September 30,
2010.
|
21
DESCRIPTION
OF BUSINESS
Overview
Repros
Therapeutics was organized on August 20, 1987. We are a development
stage biopharmaceutical company focused on the development of new drugs to treat
hormonal and reproductive system disorders.
We are
developing Androxal®, an oral therapy that normalizes testicular function, for
the treatment of low testosterone due to secondary hypogonadism. Secondary
hypogonadism is associated with aging and we believe it is the most common cause
of low testosterone in men. It is estimated that 13 million men in the U.S.
experience low levels of testosterone, and the condition is becoming recognized
with more frequency. In 2009, for the first time, sales of
testosterone preparations for the treatment of low testosterone exceeded $1
billion worldwide and first tier pharmaceutical companies entered the low
testosterone marketplace as evidenced by the acquisition of Solvay
Pharmaceuticals and the subsequent active marketing of its AndroGel® product by
Abbott Laboratories. Eli Lilly and Company also recently entered into
a licensing agreement with a third party for a late stage topical testosterone
treatment.
The Company believes Androxal® is
highly differentiated from currently marketed testosterone treatments or those
treatments in late stage development because it is an oral therapy and it treats
the cause of secondary hypogonadism, which is inadequate pituitary
hormones. We believe that by treating the cause of secondary
hypogonadism it also has the potential to maintain reproductive status and
potentially improve overall metabolic profiles, which we believe may improve the
condition of men suffering from type 2 diabetes. The Company held a
Type B meeting with the FDA on November 8, 2010 to discuss the FDA’s willingness
to review Phase 3 protocols under a Special Protocol Assessment (“SPA”).
Although the FDA advised the Company that it may proceed with Phase 3 studies,
the FDA recommended that a Phase 2B study in men with secondary hypogonadism,
but naïve to testosterone treatment, be conducted if the Company desired the
protocols to be reviewed under an SPA. On January 3, 2011, we
announced that we have received IRB approval to commence the Phase 2B study of
Androxal® in men with secondary hypogonadism, and we have begun enrolling
patients. Depending on the rate of subject enrollment, we hope to
have the study completed before the end of 2011.
The
Company is also currently conducting a Phase 2 study of the use of Androxal® in
the treatment of Type 2 diabetes in hypogonadal men. Retrospective
analysis of completed Androxal® studies showed that Androxal® improved fasting
plasma glucose levels in men with Type 2 diabetes, an improvement not seen in
similar subjects using a topical testosterone or placebo. The Company believes
this effect is directly related to Androxal®’s ability to normalize the
hypothalamic-pituitary-testes pathway and organ function.
We are
also developing Proellex®, an orally administered selective blocker of the
progesterone receptor in women, for the treatment of uterine fibroids and
endometriosis. Uterine fibroids and endometriosis affect millions of women of
reproductive age. We believe an effective treatment for these underserved
conditions could result in sales of a safe and effective drug easily exceeding
$1 billion in sales in the U.S. Proellex® had shown statistically
significant results in Phase 2 studies for both endometriosis and uterine
fibroids. The Company has recently commenced a low dose escalating
study as permitted by the FDA, which is intended to determine both signals of
efficacy and safety for low oral doses of the drug.
Both of
our product candidates have exhibited strong efficacy results in every study
completed to date, and Repros believes the studies presently underway or
scheduled to start shortly will place both programs on a clear late stage
clinical development path and a solid position for
licensing.
As of
September 30, 2010, we had accumulated losses of $178.1 million, approximately
$4.2 million in cash and cash equivalents, and our accounts payable and accrued
expenses were approximately $1.4 million. The amount of cash on hand
is not sufficient to fund each of the current clinical trials for our two drug
candidates, Proellex® and Androxal®. Assuming successful completion
of this offering, we will have sufficient funding to complete all of the Phase 2
and 2B clinical trials currently planned or underway; however, significant
additional capital will be required for us to complete development of either of
our product candidates. We continue to explore potential additional financing
alternatives (including corporate partnering opportunities) that would provide
sufficient funds to enable us to continue to develop our two product candidates
through completion of the outlined clinical trials; however, there can be no
assurance that we will be successful in raising any such additional funds on a
timely basis or at all. The foregoing and other matters raise
substantial doubt about our ability to continue as a going concern.
Androxal®
Product
Overview
Our
primary product candidate, Androxal®, is a single isomer of clomiphene citrate
and is an orally active proprietary small molecule compound. We are developing
Androxal® for men of reproductive age with low testosterone
levels. Androxal® treats the underlying mechanism that causes
secondary hypogonadism and restores normal testicular function. Unlike
testosterone replacement which suppresses testicular function, Androxal® does
not impair the reproductive status of men being treated for low testosterone. In
addition, we are conducting a Phase 2 clinical trial of Androxal® as a potential
treatment for type 2 diabetes.
22
Testosterone
is an important male hormone. Testosterone deficiency in men is linked to
several negative physical and mental conditions, including loss of muscle tone,
reduced sexual desire, and deterioration of memory and certain other cognitive
functions. Testosterone production normally decreases as men age, sometimes
leading to testosterone deficiency. The leading therapy for low testosterone is
AndroGel®, a commercially available testosterone replacement cream marketed by
Abbott Laboratories for the treatment of low testosterone, which we believe has
had and continues to have significant sales in North America.
Based on
our own clinical trial screening data, we believe over 70% of men that have low
testosterone suffer from secondary hypogonadism, a pituitary defect which is
characterized by suboptimal levels of LH (luteinizing hormone) and FSH (follicle
stimulating hormone). LH and FSH are the pituitary hormones that stimulate
testicular testosterone and sperm production, respectively. Men with secondary
hypogonadism can be readily distinguished from those that have primary
testicular failure via assessment of the levels of secretions of pituitary
hormones, as men with primary testicular failure experience elevated secretions
of pituitary hormones. In secondary hypogonadism, the low levels of LH and FSH
fail to provide adequate hormone signaling to the testes, causing testosterone
levels to drop to a level where we believe pituitary secretions fall under the
influence of estrogen, thus further suppressing the testicular stimulation from
the pituitary.
Androxal®
acts centrally to restore testicular function and hence normal testosterone in
the body. The administration of exogenous testosterone can restore
serum testosterone levels, but does not restore testicular function and thereby
generally leads to the cessation of or significant reduction in sperm
production. Androxal®, by contrast, restores levels of both LH and FSH, which
stimulate testicular testosterone and sperm production,
respectively.
We also
believe there may be an association between the restoration of normal pituitary
function and improvement of metabolic conditions such as type 2 diabetes.
Research has been published which demonstrates that increased insulin
resistance, a characteristic implicated in Type 2 diabetes, is associated with
the onset of secondary hypogoandism. Based on our own
clinical trial screening data, we have found hypogonadism and Type 2 diabetes to
be comorbid conditions in a significant number of men. A retrospective analysis
of the clinical trial data from our completed Androxal® studies showed that
Androxal® improved fasting plasma glucose levels in men with Type 2 diabetes,
suggesting that Androxal® modifies the endocrinologic profile in terms of both
hormones and certain metabolic measures. This improvement was not seen in
similar subjects using a topical testosterone or placebo. In a large trial
conducted by Solvay Pharmaceuticals, AndroGel® was found to have no positive
effect on glycemic control in hypogonadal men who were also Type 2 diabetic
regardless of how much the exogenous testosterone concentration
increased. Contrary to the results seen with exogenous testosterone,
Androxal® did exhibit positive effects on glycemic control, and we believe these
effects are directly related to Androxal®’s ability to normalize the
hypothalamic-pituitary-testes pathway and organ function.
We tested
Androxal® in two studies designed to show that Androxal® improved testosterone
levels as well as AndroGel® in men with secondary hypogonadism. These
studies indicated that Androxal® had a superior ability to improve testosterone
levels when compared to AndroGel®, and that the improvement was statistically
significant. In a meeting held with the FDA in the fourth quarter of
2007, however, the FDA determined that improved testosterone levels alone were
not sufficient to grant approval for the drug. In the meeting held on
November 8, 2010, the FDA changed its position and determined that improved
testosterone levels would be sufficient to grant approval for the
drug.
Androxal®
will be required to undergo the full regulatory approval process, including the
current Phase 2 trial, pivotal Phase 3 trial and long-term Open Label Safety
Studies as well as other requirements. Androxal® is closely related
chemically to the drug, Clomid®, which is approved for use in women to treat
certain infertility disorders. Clomid® contains both the trans and cis isomers
of clomiphene citrate; Androxal® contains only the trans isomer. The
FDA has indicated that testicular tumors, gynecomastia and adverse
ophthalmologic events, which have been reported in males taking Clomid®, are
potential risks that should be included in informed consent forms for our
Androxal® clinical trials. We do not believe that Androxal® will present with
the same adverse events given its reduced half-life in the human body as
compared to Clomid®. In our preclinical studies and our clinical trials to date,
we have observed no evidence of any of these events except for certain
ophthalmologic events in our preclinical dog study at doses significantly higher
than those administered in the clinical trials.
All
clinical trial results are subject to review by the FDA, and the FDA may
disagree with our conclusions about safety and efficacy. We caution that the
results discussed herein are based on data from non-pivotal trials and that our
current Phase 2 trials, pivotal Phase 3 and long-term Open Label Safety Trial
data may not agree with these results which will be based upon significantly
larger and more diverse patient populations treated for longer periods of
time.
Treatment
for Secondary Hypogonadism in Men Wishing to Preserve Testicular Function
(Reproductive Status)
On
November 8, 2010, we held a Type B meeting with the FDA to discuss whether the
FDA would review our protocols for a Phase 3 trial of Androxal® in men with
secondary hypogonadism under an SPA. In the meeting, the FDA
recommended that a Phase 2B study in men with secondary hypogonadism but naïve
to testosterone treatment be conducted before the FDA would be willing to review
Phase 3 protocols under an SPA. The FDA further opined that such
Phase 2B study would provide for a more solid data base for design of Phase 3
studies and eventual approval of such studies under an SPA. In our
24-patient Phase 2b proof-of-concept clinical trial which was initiated in the
second quarter of 2008, we monitored the effects of Androxal® on male fertility
and testicular function in patients being treated for low testosterone as
compared to Testim®, a popular marketed topical testosterone medication. This
trial showed that Androxal® was able to maintain sperm counts in men being
treated for their low testosterone levels, whereas Testim® resulted in
suppressed sperm levels. The FDA noted that the Company could proceed to Phase
3; however, the FDA recommended that a Phase 2B study in men with secondary
hypogonadism, but naïve to testosterone treatment, be conducted if the Company
desired the protocols to be reviewed under an SPA.
23
The
Company’s Phase 2B trial, which has begun enrolling patients, will consist of
four arms; placebo, two doses of Androxal® and topical
testosterone. At baseline the men should exhibit morning testosterone
less than 250 ng/dl. The primary endpoint will consist of total
testosterone at the end of the three month study compared to
baseline. Impact on reproductive status (sperm counts) will be
assessed as a safety endpoint. In a study previously completed by Repros a
subset of men with morning testosterone less than 250 ng/dl was analyzed in
which we found a statistically significant improvement in morning testosterone
and no deterioration of FSH in Androxal®-treated men. However, in the
men on topical testosterone, 26 out of the 41 men that completed three months of
dosing exhibited FSH levels below the reference limits for the hormone, with 17
below the lower limit of detection.
Unlike
testosterone replacement therapies, Androxal® maintains the normal daily rhythm
of testosterone peaks and valleys. We previously conducted three
studies in which 24 hour testosterone levels were obtained and, unlike topical
testosterone, morning testosterone was the maximum concentration observed,
consistent with the normal circadian rhythm in men. We combined the three
studies into one analysis, which has been submitted for FDA
review. This analysis provides evidence that one assessment of
testosterone between 8 a.m. and 10 a.m. correlates to the maximum value of
testosterone for a given subject on a given day. We have committed to
conduct one additional 24 hour study to show that Androxal®’s action in
maintaining the normal rhythm is both predictable and
dose-dependent.
We
believe the advantages of oral delivery, maintenance of testicular function and
additional metabolic benefits will be important differentiating factors for
Androxal®, should it be approved. There can be no assurance, however,
that we will be successful in implementing this strategy or that the FDA will
approve our drug for commercial use.
Type
2 Diabetes
Our
findings from a retrospective review of the clinical data from our 200 patient
non-pivotal Phase 2 clinical trial showed that Androxal® therapy resulted in a
significant reduction in mean fasting plasma glucose levels in men with glucose
levels greater than 104 mg/dL at the outset of the trial, an outcome not seen in
the placebo or AndroGel® arms of this study. Based on these results,
in April 2008, we submitted a White Paper to the Division of Reproductive and
Urology Products. The data demonstrated that among subjects with a serum glucose
of greater than or equal to 105 mg/dL, there was a higher response rate to
treatment in the Androxal® group than the placebo or AndroGel® groups, and the
reduction in fasting serum glucose in this group was statistically significant.
In November 2008, after the FDA reviewed this paper we received guidance from
them suggesting that we open a new IND with the Division of Metabolic and
Endocrine Products, or DMEP, for the investigation of Androxal® as a potential
treatment for type 2 diabetes mellitus. In December 2009, we submitted a new IND
to DMEP for the investigation of Androxal® for such purpose. On February 1,
2010, we received confirmation from DMEP that our new IND was accepted and, as a
result, we have initiated our Phase 2 trial. This trial will enroll 135 men with
morning testosterone levels under 300 ng/dl who also have a fasting glucose
level between 125 mg and 240 mg per deciliter and glycated hemoglobin, or HbA1c,
levels between 7% and 9.5%-levels indicative of poor glucose
control. Enrolled patients also will have been on a stable dose of an
oral hypoglycemic agent for at least 2 months. We will split the men
into three arms, one placebo and two doses of Androxal®, at 12.5 and 25
mg. We will look at changes in fasting glucose and HbA1C levels from
baseline, along with changes in testosterone level. As of
November 30, 2010, six men are enrolled in our Phase 2 trial and we anticipate
that we will attain full enrollment by the end of the second quarter of
2011. The Company believes it has sufficient cash to complete an
interim analysis of the study around the end of the first quarter of 2011,
pending enrollment rates; however, completion of this study will be dependent
upon the completion of this offering.
Proellex®
Product
Overview
Proellex®,
our product candidate for female reproductive health, is a new chemical entity
that acts as a selective blocker of the progesterone receptor and is being
developed for the treatment of symptoms associated with uterine fibroids and
endometriosis. There are currently no FDA-approved orally administered drug
treatments for the long-term treatment of either uterine fibroids or
endometriosis. The National Uterine Fibroids Foundation estimates that 80% of
all women in the U.S. have uterine fibroids, and one in four of these women have
symptoms severe enough to require treatment. According to the Endometriosis
Association, endometriosis affects 6.3 million women in the U.S. and Canada and
millions more worldwide.
The
current standards of care for uterine fibroids and endometriosis consist of
surgery or short-term treatment with goanadotropin-releasing hormone (GnRH)
agonists drugs, such as Lupron®. GnRH agonists induce a low estrogen,
menopausal-like state and promote bone loss and are not recommended for use for
more than six months.
We have
conducted numerous studies with Proellex® enrolling over 750 women, roughly 700
of whom were dosed with the drug. All Proellex® studies completed to
date exhibited strong efficacy signals, whether in uterine fibroids or
endometriosis. In a 120 patient study of Proellex® as a treatment of uterine
fibroids conducted in the United States (roughly 40 subjects per arm), both a
12.5 and 25 mg dose of Proellex® were compared to placebo. In this study each of
the 12.5 and 25 mg doses achieved highly statistically significant results when
compared to placebo when menstrual bleeding was assessed (p< 0.0001). The two
doses also achieved highly statistically significant improvement in quality of
life measures using the Uterine Fibroid Symptom Quality of Life questionnaire
developed and validated by Georgetown University and used in the development of
device like treatments of uterine fibroids such as uterine artery embolization.
There was no statistical difference in efficacy measures between the two doses.
Importantly, in the Phase 2 U.S. trial a significant percentage of women stopped
menstruating. Proellex® resulted in the induction of amenorrhea (cessation of
menses), which we believe is a strong surrogate signal of efficacy. Over 80% of
women on both the 12.5 and 25 mg doses exhibited no menses during the three
month trial, whereas all women on placebo exhibited at least one
menses.
24
Up until
the summer of 2009, all side effects exhibited in the studies were considered
manageable and the benefit of Proellex® far outweighed the risk. However, in
Phase 3 efficacy and larger Phase 3 safety studies in diverse populations, a
small number of subjects exhibited serious adverse effects associated with
elevated liver enzymes. As a result of these findings, we elected to stop the
trials and the FDA subsequently placed Proellex® on full clinical
hold. All women that experienced elevated liver enzymes and returned
for follow-up visits returned to baseline conditions with no overnight
hospitalization necessary. An analysis of all the subjects that experienced such
serious adverse effects showed that the effect only occurred in subjects that
were exposed to the 50 mg dose of the drug for any period of time. Based on
these findings, the Company petitioned the FDA to allow it to conduct a low dose
study to demonstrate both safety and signals of efficacy in low oral doses of
Proellex®, up to 12 mg administered per day. The FDA upgraded the full clinical
hold to a partial hold to allow the low dose study to be conducted, which we
have since commenced. In addition, the Company has undertaken two related
initiatives presently at the preclinical stage. The first is the exploration of
vaginal delivery as an alternative administrative route to bypass first-pass
liver effects and reduce systemic exposure. The second is the screening of
second generation molecules that do not possess the specific structures the
Company believes induced the liver toxicity exhibited at higher doses of
Proellex®.
Low
Dose Study
Pursuant
to the terms of the partial clinical hold currently in place as a result of the
liver toxicity exhibited by Proellex®, the FDA is allowing us to run a single
study to test low doses of Proellex® for signals of safety and
efficacy. The new study will test 5 different doses of Proellex® (1,
3, 6, 9 and 12 mg), with 1 mg being the first dose tested. Each dose will be
compared to placebo with weekly assessments of liver function during both the
placebo and drug period. Higher doses will not be studied until we are confident
that it is safe to proceed to the next dose and have reported the safety
findings to the FDA. Subjects will be dosed with the active drug for 10 weeks,
which will allow for adequate time to determine the impact of a given dose on
trends in liver function. Each dose will be tested in up to 12 different
subjects and assessment of pharmacokinetic parameters will be obtained at the
start of dosing and the end of the dosing period to determine overall and
maximum drug exposure for a given dose. We will also monitor changes in
menstrual bleeding patterns and ovulation as well as changes in endometrial
thickness. The FDA requires that an independent Drug Safety Monitoring Board be
established and that the informed consent clearly state the liver toxicity
previously experienced with Proellex®.
We have
manufactured the various doses of Proellex® capsules and have begun dosing
subjects. We believe we can complete the trial approximately 18
months after first dose (approximately by the end of the first quarter of 2012).
Presuming a safe and effective dose is identified and the FDA is in agreement,
we anticipate that we will be able to proceed with large efficacy trials for
both uterine fibroids and endometriosis, subject to available funds, or
out-license the product to a major pharmaceutical company. We believe that the
evaluation of ovulation and menstrual bleeding patterns in the low dose trial
will provide strong evidence for efficacy warranting further
development.
Vaginal
Administration
We are
assessing vaginal administration of Proellex® to avoid first pass liver effects
and achieve higher reproductive tract concentrations of the drug while
minimizing systemic exposure. We reported results from two in vivo animal
studies which confirmed reduced maximum circulating concentrations of the drug
when administered vaginally, as well as efficacy signals at substantially lower
doses than oral administration. Pending the outcome
of dose optimization and vaginal irritation studies, we intend to
open an IND for both uterine fibroids and endometriosis. We believe we will be
able to leverage the experience we have gained with the oral dose in the
preparation of this IND, and after a single Phase 1/2 study we will be able to
test the vaginal product in a pivotal Phase 3 study. We plan on completing our
preclinical proof-of-concept work around by the end of the first quarter of
2011, and will then submit a new IND if warranted.
Second
Generation Compound
We
believe we understand the cause of the liver toxicity observed at high doses in
the prior Phase 3 Proellex® studies. Our hypothesis is that liver adverse events
are associated with a specific part of the chemical structure of Proellex®. To
that end we have synthesized new but related molecules that are devoid of the
specific toxicity-causing part of the chemical structure of Proellex® and
initial preclinical screening has begun. If we are successful in identifying
such a molecule, we believe we will be able to achieve high oral doses and
systemic exposure, opening the path to aggressive anti progestin therapy for
conditions such as breast cancer. We expect to have completed our screen of the
new molecules during the third quarter of 2011.
Other
Products
We
continue limited out-licensing efforts for our phentolamine-based product
candidates, including VASOMAX®, which had previously been approved for marketing
in several countries in Latin America for the treatment of male erectile
dysfunction under the brand name, Z-Max. VASOMAX® has been on partial
clinical hold in the U.S. since 1998, and no further development activities are
planned.
Business
Strategy
We plan
to focus our clinical program on the (i) new escalating low dose study for
Proellex® permitted by the FDA, (ii) Phase 2B fertility trial for Androxal®,
(iii) type 2 diabetes trial for Androxal®, (iv) preclinical
assessment of vaginal delivery of Proellex® and (v) complete initial
identification of potential second generation Proellex® molecules. We
anticipate that our current liquidity along with the proceeds from this offering
will be sufficient to complete all of these objectives; however, significant
additional capital will be required for us to complete development of either of
our product candidates. We will continue to explore corporate partnering
opportunities for assistance in the clinical development funding and
commercialization of our products, as appropriate; however, there can be no
assurance that an acceptable corporate partnering opportunity will be
successfully completed.
Research
and Development
We have
limited resources and utilize consultants and outside entities to perform
clinical development and limited research activities in connection with
preclinical studies and clinical trials. Our primary research and development,
or R&D, expenses for 2009 and thus far in 2010 were for the payment and
contract research organizations and consultants in connection with our clinical
trials of Proellex® for the treatment of uterine fibroids, endometriosis and for
Androxal® for testosterone deficiency. We believe that these expenses will
continue to be our primary R&D expenses in the near future.
25
Proellex®
License Agreement with National Institutes of Health
In 1999,
we licensed rights to Proellex® from the National Institutes of Health, or NIH,
under an exclusive, worldwide license in the field of treatment of human
endocrinologic pathologies or conditions in steroid-sensitive tissues which
expires upon the expiration of the last licensed patent, currently 2017. Under
the terms of the agreement, we are obligated to meet certain developmental
milestones as outlined in a commercial development plan, which has been amended
and revised from time to time as circumstances warrant. We have
recently amended the agreement to provide us with rights to certain second
generation compounds under certain circumstances.
We
provide annual updates to the NIH on the progress of our development of
Proellex®. Based on our interaction with the NIH to date, we believe our license
and relationship with NIH are in good standing. The NIH has the ability to
terminate the agreement for lack of payment or if we are not meeting milestones
as outlined in the commercial development plan and for other reasons as outlined
in the agreement. Although we believe that we have a good working relationship
with the NIH, there can be no assurance that all of the objectives and
conditions in the commercial development plan will be met on a timely basis or
at all, or that, if we fail to meet any of such objectives, the NIH will again
agree to amend this agreement to our satisfaction. Failure to comply with the
material terms contained in the license agreement could result in termination of
such agreement, which would prohibit us from further development of Proellex®
and severely harm our business prospects. The NIH retains, on behalf of the
government, a nonexclusive, nontransferable, worldwide license to practice the
inventions licensed under the licensed patents by or on behalf of the
government. For the purpose of encouraging basic research, the NIH retains the
right to grant nonexclusive research licenses to third parties. Due to the work
that was done on Proellex® at the NIH prior to our license agreement, the
government also has certain rights to use the product in the event of a national
emergency pursuant to the Patent and Trademark Laws Amendments Act of 1980, as
amended.
Manufacturing
We
have a five year supply agreement with Diagnostic Chemical Limited, doing
business as BioVectra, for the supply of the bulk active pharmaceutical
ingredient used in Androxal®. This agreement runs through July of 2012, subject
to automatic one year renewals and the ability of either party to terminate upon
12 months prior notice. We have obtained all of our supply of
Androxal® to date from BioVectra. We have not faced any material problems with
BioVectra in supplying us with necessary quantities of Androxal® for our
clinical trials and anticipate utilizing them for the remainder of our clinical
supply and for commercial production if Androxal® is approved for sale. Though
our relationship with BioVectra remains good, we believe that alternate
manufacturers capable of manufacturing Androxal® could be identified if
necessary.
Gedeon
Richter was our third-party manufacturer of the active pharmaceutical ingredient
for Proellex® under a contract. Due to the clinical hold, we
cancelled our development and supply contract with Gedeon Richter; however, we
have a large supply of Proellex® currently available for our current and planned
clinical trial efforts. In the event we require an additional supply
of Proellex®, we believe that we have maintained a good relationship with Gedeon
Richter and that an agreement could be reached with Gedeon Richter to provide
such supply when and if needed.
For the
foreseeable future, we expect to continue to rely on third-party manufacturers
and other third parties to produce, package and store sufficient quantities of
Androxal® and Proellex®. These product candidates are complicated and expensive
to manufacture. If our third-party manufacturers fail to deliver our product
candidates for clinical use on a timely basis, with sufficient quality, and at
commercially reasonable prices, we may be required to delay or suspend clinical
trials or otherwise discontinue development and production of our product
candidates. While we may be able to identify replacement third-party
manufacturers or develop our own manufacturing capabilities for these product
candidates, this process would likely cause a delay in the availability of our
product candidates and an increase in costs. In addition, third-party
manufacturers may have a limited number of facilities in which our product
candidates can be produced, and any interruption of the operation of those
facilities due to events such as equipment malfunction or failure or damage to
the facility could result in the cancellation of shipments, loss of product in
the manufacturing process or a shortfall in available product
candidates.
Sales
and Marketing
We have
no experience in the sales, marketing and distribution of pharmaceutical
products. We anticipate that we will outsource such activities to larger
pharmaceutical companies, who may also conduct later stage pivotal trials of our
product candidates. These companies are more capable of distributing
the products to the market place. In the normal course of business we continue
to explore possible partnerships with various pharmaceutical companies. If in
the future we fail to reach or elect not to enter into an arrangement with a
collaborative partner with respect to the sales and marketing of any of our
future potential product candidates, we would need to develop a sales and
marketing organization with supporting distribution capability in order to
market such products directly. Significant additional expenditures would be
required for us to develop such a sales and marketing organization.
Patents
and Proprietary Information
Our
ability to compete effectively with other companies is materially dependent on
the proprietary nature of our patents and technologies. We actively seek patent
protection for our proprietary technology in the United States and
abroad.
Under
a license agreement with the National Institutes of Health, we have exclusive
rights to four issued U.S. patents, which expire in 2017, two pending U.S.
patent applications, and several foreign patents and pending applications made
by the NIH regarding Proellex®. We also have five pending U.S. patent
applications, four foreign PCT applications and 45 foreign pending patent
applications that cover various formulations of Proellex® and methods for using
Proellex®.
26
Therapeutic
uses of our Androxal® product candidate are covered in the United States by four
issued U.S. patents and four pending patent applications. Foreign coverage of
therapeutic uses of our Androxal® product candidate includes 44 issued foreign
patents and 67 foreign pending patent applications. The issued patents and
pending applications relate to methods for treating certain conditions including
the treatment of testosterone deficiency in men, the treatment of metabolic
syndrome and conditions associated therewith, and the treatment of infertility
in hypogonadal men. Androxal® (the trans-isomer of clomiphene) is purified from
clomiphene citrate. A third party individual holds two issued patents related to
the use of an anti-estrogen such as clomiphene citrate and others for use in the
treatment of androgen deficiency and disorders related thereto. In our prior
filings with the SEC, we have described our request to the U.S. Patent and
Trademark Office, or PTO, for re-examination of one of these patents based on
prior art. The third party amended the claims in the re-examination proceedings,
which led the PTO to determine that the amended claims are patentable in view of
those publications under consideration and a re-examination certificate was
issued. However, we believe that the amended claims are invalid based on
additional prior art publications, and we filed a second request for
re-examination by the PTO in light of a number of these additional publications
and other publications cited by the PTO. The request was granted and all of the
claims were finally rejected by the PTO in the re-examination. The patent holder
appealed the rejections to the PTO Board of Patent Appeals and Interferences
(“the Board”) which affirmed the rejection of all of the claims. The patent
holder subsequently filed a request for rehearing, which led the Board to
reverse the rejections of several dependent claims in view of those publications
under consideration. The patent holder has filed a Notice of Appeal to the
United States Court of Appeals for the Federal Circuit contesting the rejections
maintained by the Board. We also believe that the second of these two patents is
invalid in view of published prior art not considered by the PTO. Nevertheless,
there is no assurance that either patent will ultimately be found invalid over
the prior art. If such patents are not invalidated by the PTO we may be required
to obtain a license from the holder of such patents in order to develop
Androxal® further or attempts may be made to undertake further legal action to
invalidate such patents. If such licenses were not available on acceptable
terms, or at all, we may not be able to successfully commercialize or
out-license Androxal®.
All of
our employees and consultants have signed assignment of invention and
confidentiality agreements, and each corporate partner we enter into discussions
with or engage to assist in our clinical trials or manufacturing process is also
required to execute appropriate confidentiality and assignment agreements
protecting our intellectual property.
Competition
We are
engaged in pharmaceutical product development, an industry that is characterized
by extensive research efforts and rapid technological progress. Many established
pharmaceutical and biotechnology companies, universities and other research
institutions with financial, scientific and other resources significantly
greater than ours are marketing or may develop products that directly compete
with any products we may develop. These entities may succeed in developing
products that are safer, more effective or less costly than products we may
develop. Even if we can develop products which should prove to be more effective
than those developed by other companies, other companies may be more successful
than us because of greater financial resources, greater experience in conducting
preclinical studies and clinical trials and in obtaining regulatory approval,
stronger sales and marketing efforts, earlier receipt of approval for competing
products and other factors. If we commence significant commercial sales of any
products, we or our collaborators may compete in areas in which we have no
experience, such as manufacturing and marketing. There can be no assurance that
our products, if commercialized, will be accepted and prescribed by healthcare
professionals.
Our
main competitors for the treatment of testosterone deficiency are the
testosterone replacement therapies currently being marketed. The current
standard of care is AndroGel®, a topical gel for the replacement of
testosterone. AndroGel® is marketed by Abbott Laboratories. There is another
topical gel, Testim®, currently marketed by Auxilium Pharmaceuticals, and a
transdermal patch, AndroDerm®, marketed by Watson Pharmaceuticals. Eli Lilly and
Company also recently entered into a licensing agreement with a third party for
a late stage topical testosterone treatment. In addition, other companies such
as QTRX Pharmaceuticals and Clarus Therapeutics, Inc. are developing other
products that would compete with Androxal®. We believe we can compete with
AndroGel® and the other replacement therapies because we believe that Androxal®,
besides being the only late stage oral therapy, is the only drug in development
that normalizes testicular function and may provide additional metabolic
benefits. Based on our clinical trial supply cost to date, we currently expect
that Androxal®, if approved, can compete favorably on a cost basis with current
testosterone replacement therapies.
Our main
competitors for the treatment of uterine fibroids and endometriosis are GnRH
agonists, especially Lupron®, the current therapeutic standard of care for
uterine fibroids. Lupron® is marketed by Abbott, which has far greater resources
and marketing capabilities than we have. Recently Abbott has licensed a Phase
3-ready molecule from Neurocrine Biosciences for the treatment of endometriosis.
In addition, surgical treatment of both uterine fibroids and endometriosis
competes with Proellex® by removing uterine fibroids and by removing misplaced
tissue in women with endometriosis. We believe we can potentially compete with
Lupron® and other GnRH agonists because we believe that Proellex® will not
present the same side effect of a decrease in bone mineral density given its
specific focus on progesterone inhibition, which differentiates it from GnRH
agonists that create a low estrogen state. There are additional companies
developing similar progesterone-blocking technology.
Government
Regulation
Our
research and development activities, preclinical studies and clinical trials,
and the manufacturing, marketing and labeling of any products we may develop,
are subject to extensive regulation by the FDA and other regulatory authorities
in the United States and other countries. The U.S. Federal Food, Drug, and
Cosmetic Act and the regulations promulgated thereunder and other federal and
state statutes and regulations govern, among other things, the testing,
manufacture, storage, record keeping, labeling, advertising, promotion,
marketing and distribution of any products we may develop. Preclinical study and
clinical trial requirements and the regulatory approval process take many years
and require the expenditure of substantial resources. Additional government
regulation may be established that could prevent or delay regulatory approval of
our product candidates. Delays in obtaining or rejections of regulatory
approvals would adversely affect our ability to commercialize any product
candidate we develop and our ability to receive product revenues or to receive
milestone payments or royalties from any product rights we might license to
others. If regulatory approval of a product candidate is granted, the approval
may include significant limitations on the indicated uses for which the product
may be marketed or may be conditioned on the conduct of post-marketing
surveillance studies.
The
standard process required by the FDA before a pharmaceutical agent may be
marketed in the United States includes: (1) preclinical tests; (2) submission to
the FDA of an IND application which must become effective before human clinical
trials may commence; (3) adequate and well-controlled human clinical trials to
establish the safety and efficacy of the drug for its intended application; (4)
submission of a new drug application, or NDA, to the FDA; and (5) FDA approval
of the NDA prior to any commercial sale or shipment of the
drug.
27
Clinical
trials typically are conducted in three sequential phases, but the phases may
overlap. Phase 1 typically involves the initial introduction of the drug into
human subjects. In Phase 1, the drug is tested for safety and, as appropriate,
for absorption, metabolism, distribution, excretion, pharmacodynamics and
pharmacokinetics. Phase 2 usually involves studies in a limited patient
population to evaluate preliminarily the efficacy of the drug for specific
targeted indications, determine dosage tolerance and optimal dosage and identify
possible adverse effects and safety risks.
Phase
3 clinical trials are undertaken to further evaluate clinical efficacy and to
test further for safety within an expanded patient population at geographically
dispersed clinical study sites. Phase 1, Phase 2 or Phase 3 testing may not be
completed successfully within any specific time period, if at all, with respect
to any products being tested by a sponsor. Furthermore, the FDA or the
Investigational Review Board, or IRB, may suspend clinical trials at any time on
various grounds, including a finding that the healthy volunteers or patients are
being exposed to an unacceptable health risk. This was evidenced when Proellex®,
our product candidate for uterine fibroids and endometriosis, was placed on
clinical hold by the FDA in summer 2009 due to liver toxicity data resulting
from our clinical trials. Though the full clinical hold has been upgraded to a
partial clinical hold, there can be no assurance that the partial hold will be
lifted at any time.
Even if
regulatory approvals for any products we may develop are obtained, we, our
potential collaborators, our products, and the facilities manufacturing our
products would be subject to continual review and periodic inspection. The FDA
will require post-marketing reporting to monitor the safety of our products.
Each drug-manufacturing establishment supplying the United States must be
registered with the FDA. Manufacturing establishments are subject to periodic
inspections by the FDA and must comply with the FDA’s requirements regarding
current Good Manufacturing Practices, or GMP. In complying with current GMP,
manufacturers must expend funds, time and effort in the area of production and
quality control to ensure full technical compliance. We do not have any drug
manufacturing capabilities and must rely on outside firms for this capability.
The FDA stringently applies regulatory standards for manufacturing.
Identification of previously unknown problems with respect to a product,
manufacturer or facility may result in restrictions on the product, manufacturer
or facility, including warning letters, suspensions of regulatory approvals,
operating restrictions, delays in obtaining new product approvals, withdrawal of
the product from the market, product recalls, fines, injunctions and criminal
prosecution.
Before
any products we may develop could be marketed outside of the United States, they
would be subject to regulatory approval similar to FDA requirements in the
United States, although the requirements governing the conduct of clinical
trials, product licensing, pricing, and reimbursement vary widely from country
to country. No action can be taken to market any drug product in a country until
the regulatory authorities in that country have approved an appropriate
application. FDA approval does not assure approval by other regulatory
authorities. The current approval process varies from country to country, and
the time spent in gaining approval varies from that required for FDA approval.
In some countries, the sale price of a drug product must also be approved. The
pricing review period often begins after market approval is granted. Even if a
foreign regulatory authority approves any products we may develop, no assurance
can be given that it will approve satisfactory prices for the
products.
Our
research and development involves the controlled use of hazardous materials and
chemicals. Although we believe that our procedures for handling and disposing of
those materials comply with state and federal regulations, the risk of
accidental contamination or injury from these materials cannot be eliminated. If
such an accident occurs, we could be held liable for resulting damages, which
could be material to our financial condition and business. We are also subject
to numerous environmental, health and workplace safety laws and regulations,
including those governing laboratory procedures, exposure to blood-borne
pathogens, and the handling of biohazardous materials. Additional federal, state
and local laws and regulations affecting us may be adopted in the future. Any
violation of, and the cost of compliance with, these laws and regulations could
materially and adversely affect us.
Third-Party
Reimbursement and Pricing Controls
In the
United States and elsewhere, sales of pharmaceutical products depend in
significant part on the availability of reimbursement to the consumer from
third-party payers, such as government and private insurance plans. Third-party
payers are increasingly challenging the prices charged for medical products and
services. Should any of our product candidates be approved for any commercial
sales, it will be time consuming and expensive for us to go through the process
of seeking reimbursement from Medicaid, Medicare and private
payers.
Our
products may not be considered cost effective, and coverage and reimbursement
may not be available or sufficient to allow us to sell our products on a
competitive and profitable basis. The passage of the Medicare Prescription Drug
and Modernization Act of 2003 imposes requirements for the distribution and
pricing of prescription drugs which may affect the marketing of our
products.
In many
foreign markets, including the countries in the European Union, pricing of
pharmaceutical products is subject to governmental control. In the United
States, there have been, and we expect that there will continue to be, a number
of federal and state proposals to implement similar governmental pricing
control. While we cannot predict whether such legislative or regulatory
proposals will be adopted, the adoption of such proposals could have a material
adverse effect on our profitability.
The
Hatch-Waxman Act
Under the
U.S. Drug Price Competition and Patent Term Restoration Act of 1984, known as
the Hatch-Waxman Act, newly approved drugs and indications benefit from a
statutory period of non-patent marketing exclusivity. The Hatch-Waxman Act
provides five year marketing exclusivity to the first applicant to gain approval
of an NDA for a new chemical entity, or NCE, meaning that the FDA has not
previously approved any other new drug containing the same active ingredient.
Both of our current product candidates are considered NCEs. The Hatch-Waxman Act
prohibits approval of an abbreviated new drug application, or ANDA, for a
generic version of the drug during the five-year exclusivity period. Protection
under the Hatch-Waxman Act will not prevent the filing or approval of another
full NDA, however, the applicant would be required to conduct its own adequate
and well-controlled clinical trials to demonstrate safety and effectiveness. The
Hatch-Waxman Act also provides three years of marketing exclusivity for the
approval of new NDAs with new clinical trials for previously approved drugs and
supplemental NDAs, for example, for new indications, dosages, or strengths of an
existing drug, if new clinical investigations are essential to the approval.
This three year exclusivity covers only the new changes associated with the
supplemental NDA and does not prohibit the FDA from approving ANDAs for drugs
containing the original active ingredient or indications.
28
The
Hatch-Waxman Act also permits a patent extension term of up to five years as
compensation for patent term lost during product development and the FDA
regulatory review process. However, patent extension cannot extend the remaining
term of a patent beyond a total of 14 years. The patent term restoration period
is generally one-half the time between the effective date of an IND and the
submission date of an NDA, plus time of active FDA review between the submission
date of an NDA and the approval of that application. Only one patent applicable
to an approved drug is eligible for the extension and it must be applied for
prior to expiration of the patent and within 60 days of the approval of the NDA.
The PTO, in consultation with the FDA, reviews and approves or rejects the
application for patent term extension.
Employees
and Consultants
Employees
At
December 31, 2010, we had 6 full-time employees. We also utilize consultants as
well as contract research organizations and other outside specialty firms for
various services such as preclinical and clinical trial support, manufacturing,
regulatory approval advice and accounting and human resource management. We
believe our relationship with our employees is good.
Scientific
Advisors and Consultants
We
benefit from consultation with prominent scientists active in fields related to
our technology. For this purpose, we have part-time consulting relationships
with a number of scientific advisors. At our request, these advisors review the
feasibility of product development programs under consideration, provide advice
about advances in areas related to our technology, and aid in recruiting
personnel. All of the advisors are employed by academic institutions or other
entities and may have commitments to or advisory agreements with other entities
that limit their availability to us. Our advisors are required to sign an
agreement providing that, if appropriate, they are to disclose and assign to us
any ideas, discoveries and inventions they develop in the course of providing
consulting services. We also use consultants for various administrative needs.
None of our advisors are otherwise affiliated with us.
In
addition to the advisors described above, we continue to engage U.S. contract
research organizations to conduct our clinical trials. Under our arrangements
with these contract research organizations, we design the protocols for the
clinical trials and direct the contract research organizations in their efforts.
We own all of the data associated with the clinical trials.
Properties
We lease
our current property under a lease agreement that expires in June
2015. This lease is for approximately 7,100 square feet of our
laboratory and office space located in The Woodlands, Texas. We do not own or
lease any other property and believe that our current facilities are sufficient
for our needs for the foreseeable future.
Legal
Proceedings
Between
August 7, 2009 and September 25, 2009, three class action lawsuits were filed
naming the Company, Joseph Podolski, Paul Lammers, and Louis Ploth, Jr. as
defendants. The lawsuits alleged that the defendants made certain
misleading statements related to the Company’s Proellex® drug. Among
other claims, the lawsuits contended that the defendants misrepresented the side
effects of the drug related to liver function, and the risk that these side
effects could cause a suspension of clinical trials of Proellex®. The lawsuits
asserted causes of action under the Securities Exchange Act of
1934. On October 21, 2009, the lawsuits were consolidated, and
lead plaintiffs appointed. On January 27, 2010, the lead plaintiffs
filed a Consolidated Class Action Complaint styled In re Repros Therapeutics,
Inc. Securities Litigation, Civil Action No. 09 Civ. 2530 (VDG). The
lawsuit names Repros Therapeutics, Inc., Joseph Podolski, Paul Lammers, and
Louis Ploth, Jr. as defendants. The allegations in the Consolidated
Class Action Complaint are substantially the same as those contained in the
prior complaints, and focus on the claim that the defendants deliberately
withheld information concerning the negative side-effects of Proellex® related
to liver function. Plaintiffs seek to establish a class action for
all persons who “purchased or otherwise acquired Repros common stock between
July 1, 2009, and August 2, 2009.” No discovery has yet occurred in
the matter. Defendants filed a motion to dismiss the Consolidated
Class Action Complaint on March 15, 2010. On November 17, 2010,
Magistrate Judge Mary Milloy entered a Memorandum and Recommendation on
Defendants’ Motion To Dismiss (“the Magistrate’s Memorandum”). The Magistrate’s
Memorandum concluded that the Consolidated Class Action Complaint failed to
allege with sufficient particularity that any statements by the defendants were
false when made, and that it failed to allege facts sufficient to create a
strong inference that the defendants acted with scienter. For both of those
reasons, the Magistrate’s Memorandum recommended that the District Court grant
the Defendants’ Motion To Dismiss. On December 1, 2010, plaintiffs filed
objections to the Magistrate’s Memorandum. On January 19, 2011, the District
Court granted the Defendants’ Motion To Dismiss for the reasons stated in the
Magistrate’s Memorandum.
On March
1, 2010, we were served with a lawsuit where we were named as a co-defendant
along with one of our clinical regulatory service providers (“CRO”) relating to
the Proellex® clinical trial study. The lawsuit was filed in the
State of Tennessee, 30th Judicial District Chancery Court at Memphis by an
investigator and claims that the CRO did not pay it amounts owing to it relating
to the Proellex® study. We did not engage the investigator and under
our agreement with the CRO, we believe the CRO is responsible for any such costs
or damages regarding such lawsuit. Pursuant to a Settlement Agreement
and Mutual Release entered into in October 2009, such CRO, on behalf of itself
and its agents, released us from all claims which could be asserted by them
against us. We believe such release covers the claims set forth in
this lawsuit. The CRO failed to respond to the lawsuit, and a default
judgment was entered against it in the amount of $172,901.29. We
intend to vigorously defend any and all claims asserted by the
investigator. We have filed a motion for summary judgment requesting
the Court to enter a take nothing judgment in favor of the
Company. This motion is pending and is expected to be heard by the
Court during the first quarter of 2011. An estimate of the possible
costs or expenses to defend ourselves in this matter or risk of exposure under
the litigation cannot be made at this time.
29
See
“—Patents and Proprietary Information” for a description of judicial and
regulatory proceedings involving patent matters.
Recent
Developments
On
October 14, 2010, the Company effected a one-for-four reverse split of its
common stock. The split-adjusted shares of the Company’s common stock began
trading on the Nasdaq Capital Market on October 15, 2010. The one-for-four
reverse stock split converted all shares of the Company’s common stock issued
and outstanding, plus all outstanding stock options and the number of shares of
common stock available for issuance under the Company’s approved stock plans.
The number of authorized shares of common stock was not affected by the reverse
split. The reverse split enabled the Company to meet the continued listing rules
of the Nasdaq Capital Market. All share and per share amounts
described in this prospectus are presented on a post-reverse stock split basis,
except with respect to materials incorporated by reference herein which were
filed by us prior to the effective date of the reverse stock
split.
30
EXECUTIVE
COMPENSATION
Compensation
Discussion and Analysis
Philosophy
We
have designed our compensation programs to attract and retain key employees,
motivate all of our employees to be productive and reward our employees,
officers and directors for exceptional performance. We have
implemented different types of compensation programs to motivate performance
both in the short-term and in the long-term, with the ultimate goal of long-term
increased value for our stockholders.
We
believe that our executive compensation programs are essential to our ultimate
success and also impact the environment of compensation for all
employees. Executive compensation programs set the general level of
expectations for our company and also demonstrate the types of goals we expect
all employees to reach.
In
setting executive compensation, we first determine the goals that will
ultimately make our company successful. Generally, for the past three
years, our success has been dependent upon two key factors:
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the
successful continued clinical development of our two products, Proellex®
and Androxal®; and
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our
ability to raise capital to allow us to continue such
development.
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Because
these are goals that are best measured over the long term, we believe that the
most effective means of motivating our executives is by providing compensation
that will reward long-term success with competitive short-term compensation
being used to retain our key executives. We have utilized traditional
long-term compensation programs, namely, stock option programs, to effectuate
these goals.
Overview
of Compensation and Process
Our
compensation programs consist of the following:
|
·
|
Base
cash salary;
|
|
·
|
Cash
bonuses;
|
|
·
|
Equity
incentives;
|
|
·
|
General
employee benefits available to all employees (simple IRA matching program
and health insurance); and
|
|
·
|
Limited
perquisites (car allowance).
|
The
compensation and option committee is responsible for evaluating the performance
of senior management, determining the compensation for our senior executive
officer (Mr. Podolski) and for administering our incentive plans under which
grants may be made to our employees. Base salaries for our senior
executive officers are usually determined at the meeting of the compensation and
option committee held following the end of a fiscal year. At this
meeting, the committee usually determines how any potential bonuses will be paid
and reviews the base salary compensation, bonus payments and level of equity
compensation for all such senior officers. The committee also reviews
on an annual basis the equity compensation levels of all of our other
officers.
In
determining the level and composition of compensation of each of our senior
executive officers, the compensation and option committee takes into account
various qualitative and quantitative indicators of corporate and individual
performance. For years prior to 2009, the committee has relied on the level of
compensation at peer group companies to assist in determining the level of
compensation for them. The committee considered its peer group to be
companies in the biotechnology industries that are of a similar market
capitalization and size, including number of employees, number of developmental
products, stage of development of pipeline, commercial potential of pipeline
products and geographic location. This peer group, for calendar year
2008, consisted of the following companies: Adolor Corporation,
Advanced Magnetics, Inc., Alexion Pharmaceuticals, Inc., Alexza Pharmaceuticals,
Inc., Antigenics Inc., ARIAD Pharmaceuticals, Inc., BioMimeticTherapeutics,
Inc., Cadence Pharmaceuticals, Inc., Cell Genesys,Inc., Cypress Bioscience,
Inc., Discovery Laboratories, Inc., DyaxCorp., EntreMed, Inc., Pharmacyclics,
Inc., Geron Corporation, Medivation, Inc., Immunomedics, Inc., Penwest
Pharmaceuticals, Pharmacopeia Drug Discovery, Inc., POZEN Inc., Telik, Inc.,
VIVUS, Inc. and XenoPort, Inc.
As
stated before, because we are developing technologies and have no current
approved drugs, the use of certain traditional performance standards (e.g.,
profitability and return on equity) is not appropriate in evaluating the
performance of our executive officers. In addition, the committee
recognizes performance and achievements that are more difficult to quantify,
such as the successful supervision of major corporate projects and demonstrated
leadership ability. The chief executive officer usually establishes
the level of compensation of the other officers in the Company, such as Dr.
Wiehle and Ms. Anderson, and the compensation and option committee customarily
meets with our senior executive officer concerning their compensation, and makes
its final determination of the appropriate compensation amounts for each of
them.
31
Section
162(m) of the Internal Revenue Code of 1986, or the Code, places a $1 million
annual cap on the deductible compensation that can be paid to certain executives
of publicly-traded corporations. Amounts that qualify as “performance
based” compensation under Section 162(m)(4)(c) of the Code are exempt from the
cap and do not count toward the $1 million limit. Generally, stock
options will qualify as performance based compensation. The committee
has discussed and considered and will continue to evaluate the potential impact
of Section 162(m) on us in making compensation determinations, but has not
established a set policy with respect to future compensation
determinations.
32
SUMMARY
COMPENSATION TABLE
The
following table presents summary information, for the year ended December 31,
2010, regarding the compensation of each of our current officers: Joseph S.
Podolski, our Chief Executive Officer, Ronald Wiehle, Ph.D., our Vice President,
Research and Development, and Katherine A. Anderson, our Chief Accounting
Officer and Secretary. We have entered into a consulting agreement
with Ms. Anderson and an employment agreement with Mr. Podolski. The
material terms of those agreements are described below.
Based
on the summary compensation information provided below, “Salary” accounted for
approximately 55% of the total compensation paid to the named executive officers
for 2010.
Name and
Principal
Position
|
Year
|
Salary
|
Bonus
|
Stock
Awards
|
Option
Awards (2)
|
Non-Equity
Incentive Plan
Compensation
|
Change in Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
|
All Other
Compensation
|
Total
|
|||||||||||||||||||||||||
Joseph
S. Podolski
|
2010
|
$
|
217,651
|
—
|
—
|
$
|
222,205
|
—
|
—
|
$
|
16,697
|
(3)
|
$
|
456,553
|
||||||||||||||||||||
CEO
and Director
|
2009
|
$
|
353,682
|
—
|
—
|
$
|
251,947
|
—
|
—
|
$
|
29,995
|
(4)
|
$
|
635,624
|
||||||||||||||||||||
2008
|
$
|
424,684
|
$
|
84,087
|
(1)
|
—
|
$
|
157,832
|
—
|
—
|
$
|
36,936
|
(5)
|
$
|
703,539
|
|||||||||||||||||||
Ronald
Wiehle, Ph.D.
|
2010
|
$
|
110,000
|
—
|
—
|
$
|
92,064
|
—
|
—
|
$
|
19,795
|
(6)
|
$
|
221,859
|
||||||||||||||||||||
VP,
R&D
|
2009
|
$
|
134,063
|
—
|
—
|
$
|
116,444
|
—
|
—
|
$
|
21,718
|
(7)
|
$
|
272,225
|
||||||||||||||||||||
2008
|
$
|
158,750
|
—
|
—
|
$
|
93,294
|
—
|
—
|
$
|
23,195
|
(8)
|
$
|
275,239
|
|||||||||||||||||||||
Katherine
A. Anderson
|
2010
|
$
|
112,875
|
—
|
—
|
$
|
6,121
|
—
|
—
|
—
|
$
|
118,996
|
||||||||||||||||||||||
Chief
Accounting Officer
|
2009
|
$
|
111,370
|
—
|
—
|
—
|
—
|
—
|
—
|
$
|
111,370
|
|||||||||||||||||||||||
and
Secretary
|
(1)
|
Paid
in 2009 for services performed in
2008.
|
(2)
|
Based
on the assumptions set forth in Note 2 to our Notes to Condensed
Consolidated Financial Statements set forth in our annual report on Form
10-K for the year ended December 31, 2009 related to calculation of value
of stock based compensation.
|
(3)
|
This
amount is comprised of $14,521 paid by us on behalf of Mr. Podolski for
health benefits, $2,176 in contributions made by us on behalf of Mr.
Podolski in a simple IRA.
|
(4)
|
This
amount is comprised of $16,909 paid by us on behalf of Mr. Podolski for
health benefits, $9,336 in contributions made by us on behalf of Mr.
Podolski in a simple IRA and $3,750 for a car
allowance.
|
(5)
|
This
amount is comprised of $18,432 paid by us on behalf of Mr. Podolski for
health benefits, $12,504 in contributions made by us on behalf of Mr.
Podolski in a simple IRA and $6,000 for a car
allowance.
|
(6)
|
This
amount is comprised of $18,850 paid by us on behalf of Dr. Wiehle for
health benefits and $945 in contributions made by us on behalf of Dr.
Wiehle in a simple IRA.
|
(7)
|
This
amount is comprised of $18,384 paid by us on behalf of Dr. Wiehle for
health benefits and $3,334 in contributions made by us on behalf of Dr.
Wiehle in a simple IRA.
|
(8)
|
This
amount is comprised of $18,432 paid by us on behalf of Dr. Wiehle for
health benefits and $4,763 in contributions made by us on behalf of Dr.
Wiehle in a simple IRA.
|
33
Base
Salary
Salaries
are provided to employees as compensation for basic services to the Company and
to meet the objective of attracting and retaining talent. The board
of directors initially approves the hiring and promotion of any of our executive
officers, including their compensation and option
package. Compensation for Mr. Podolski is normally reviewed on an
annual basis by the compensation and option committee. The
compensation for Dr. Wiehle and Ms. Anderson will be determined by our chief
executive officer, Mr. Podolski. We have an employment agreement with
Mr. Podolski and a consulting agreement for Ms. Anderson, which provide for
current annual salaries of
$435,301 and
$126,000, respectively. The current annual salary for
Dr. Wiehle has been set at $165,000. The employment agreement for Mr.
Podolski provides that we will pay an annual incentive bonus as may be approved
by the board of directors (which has been delegated to the compensation and
option committee) in an amount not in excess of 35% of base
salary. Each of our executive officers is entitled to participate in
all employee benefit plans that we sponsor. All of our employment
agreements provide that base compensation is subject to review or
reconsideration at least annually.
Commencing
in August 2009, all of the Company's salaried employees, including all executive
officers, agreed to a temporary 50% reduction in their salary, in order to
conserve the Company's cash position and provide more working capital to apply
toward the Company's creditors. Subsequently, in an effort to retain
our current employees, the board of directors approved issuing stock options to
each affected employee in an amount equal to the amount of salary waived,
divided by the price of the Company's common stock on the date of approval by
the board. Such options vest over a twelve month period, based on
continuing employment, and are exercisable at the closing price of the Company's
common stock on the date of board approval. Options to purchase a total of
184,372 shares of common stock have been awarded in 2010 at an average exercise
price of $1.99. This salary reduction program was revised for all employees
other than Mr. Podolski to a 25% reduction in salary in May 2010, when the
Company successfully raised additional funding. All employees other than Mr.
Podolski will return to their normal full salary when the Company raises a total
of $10,000,000 and Mr. Podolski’s salary will be revised to a 25%
reduction.
When
establishing or reviewing base compensation levels for Mr. Podolski, the
compensation and option committee, in accordance with its general compensation
policy, considers or considered, as applicable, numerous factors,
including:
|
·
|
the
responsibilities relevant to the
position;
|
|
·
|
the
qualifications of the executive and the relevant experience of the
particular individual;
|
|
·
|
strategic
goals for which the executive has responsibility;
and
|
|
·
|
compensation
levels of peer group companies (as discussed under "Compensation
Discussion and Analysis – Overview of Compensation and Process" above) who
compete with us for business, scientific and executive
talents.
|
No
pre-determined weights are given to any one of such factors.
Bonus
The
Company awards bonuses in order to align employees' goals with the Company's
objectives. In 2010, Mr. Podolski was eligible to receive, upon the
decision of the compensation and option committee, a cash bonus and grant awards
under our incentive plans depending on the extent to which certain defined
personal and corporate performance goals were achieved. Mr. Podolski
has a maximum bonus target percentage specified in his employment contract (35%
of base salary). Each year, the compensation and option committee
meets with Mr. Podolski to establish suitable incentive milestones for him
according to our needs and his particular job responsibilities. For calendar
year 2009, the compensation and option committee established applicable value
weights or percentages for each particular milestone, for purposes of earning
their bonus target. The compensation and option committee usually meets promptly
after the end of the calendar year to review the performance of Mr. Podolski and
make a recommendation as to the achievement of such milestone
targets.
The
compensation and option committee has determined that the Company will not award
bonuses for 2010.
Perquisites
We
generally do not grant perquisites as compensation to our officers or
employees. However, we have traditionally provided $6,000 per year to
our chief executive officer as a car allowance, and we had continued this
practice through August 15, 2009, at which time the policy was
suspended. We match employee contributions to a simple IRA on a
dollar for dollar basis up to 1% of salary and bonus. These
contributions are available to all employees. Prior to August 15,
2009, we provided health, dental, vision, life and disability insurance benefits
to all of our employees. We currently provide health, dental and life
insurance benefits to all of our employees. These benefits are
provided to attract and retain talent.
Stock
Option and Equity Compensation
All of
our employees, including executive officers, are eligible to receive long-term
stock-based incentive awards under our 2004 Stock Option Plan as a means of
providing such individuals with a continuing proprietary interest. We
believe that such grants further the mutuality of interest between our employees
and our stockholders by providing significant incentives for such employees to
achieve and maintain high levels of performance. Our stock option
plan enhances our ability to attract and retain the services of qualified
individuals. We consider this plan to be the primary means of
providing equity long-term compensation to our employees and
officers. The compensation and option committee, which acts as
administrator of this plan, considers several factors in determining whether
such awards are granted to an executive officer, including the
following:
34
|
·
|
the
executive officer's position and his or her performance and
responsibilities;
|
|
·
|
the
amount of stock options, if any, currently held by the
officer;
|
|
·
|
the
vesting schedules of any such
options;
|
|
·
|
the
executive officer’s other compensation;
and
|
|
·
|
similar
equity percentages of peer
companies.
|
While
the compensation and option committee does not adhere to any firmly established
formulas or schedules for the issuance of awards such as options or restricted
stock, the committee will generally tailor the terms of any such grant to
achieve its goal as a long-term incentive award by providing for a vesting
schedule encompassing several years or tying vesting to particular corporate or
personal milestones, particularly milestones related to the two key factors
mentioned under "Compensation Discussion and Analysis – Philosophy" above: drug
development and fund raising.
During
2010, we granted options to purchase 199,372 shares to all of our employees and
officers, which represented 2.2% of our outstanding common stock and, of such
amount, we granted options to purchase 162,351 shares to our executive officers,
representing 81% of the total number of shares granted to our employees and
officers.
35
GRANTS
OF PLAN-BASED AWARDS
The
following table presents each grant of stock options in 2010 to the individuals
named in the summary compensation table. There were no estimated
future payouts to report under either non-equity or equity incentive plan
awards:
Name<
/div>
|
Grant
Date<
/div>
|
All Other Stock<
/font>
Awards: No. of
Shares of Stock<
/font>
or Units
|
All Other</fon
t>
Option
Awards: No.</f
ont>
of Securities<
/font>
Underlying
Options</fon
t>
|
Exercise</fo
nt>
or Base
Price of
Option
Awards
|
Closing</fon
t>
Price of
Stock on
Grant <
/font>
Date<
/div>
|
Grant Date</fo
nt>
Fair Value</fo
nt>
of Option</fon
t>
Awards(1)
|
||||||||||||||||
Joseph
S. Podolski, President & CEO
|
2/4/10
|
—
|
16,589
|
$
|
3.28
|
$
|
3.28
|
$
|
38,487
|
|||||||||||||
5/3/10
|
—
|
11,479
|
$
|
3.16
|
$
|
3.16
|
$
|
25,254
|
||||||||||||||
7/2/10
|
—
|
26,673
|
$
|
1.36
|
$
|
1.36
|
$
|
25,606
|
||||||||||||||
8/25/10
|
—
|
15,115
|
$
|
2.40
|
$
|
2.40
|
$
|
25,392
|
||||||||||||||
10/28/10
|
—
|
6,818
|
$
|
5.32
|
$
|
5.32
|
$
|
25,638
|
||||||||||||||
12/20/10
|
—
|
6,620
|
$
|
5.48
|
$
|
5.48
|
$
|
25,948
|
||||||||||||||
Ronald
Wiehle, Ph.D., VP R&D
|
2/4/10
|
—
|
6,288
|
$
|
3.28
|
$
|
3.28
|
$
|
14,588
|
|||||||||||||
5/3/10
|
—
|
4,351
|
$
|
3.16
|
$
|
3.16
|
$
|
9,573
|
||||||||||||||
7/2/10
|
—
|
5,055
|
$
|
1.36
|
$
|
1.36
|
$
|
4,853
|
||||||||||||||
8/25/10
|
—
|
2,865
|
$
|
2.40
|
$
|
2.40
|
$
|
4,812
|
||||||||||||||
10/28/10
|
—
|
1,292
|
$
|
5.32
|
$
|
5.32
|
$
|
4,859
|
||||||||||||||
12/20/10
|
—
|
1,255
|
$
|
5.48
|
$
|
5.48
|
$
|
4,918
|
||||||||||||||
Katherine
A. Anderson
|
||||||||||||||||||||||
Chief
Accounting Officer
|
3/15/10
|
—
|
10,000
|
$
|
3.12
|
$
|
3.12
|
$
|
23,200
|
(1)
|
Based
on the assumptions set forth in Note 2 to our Notes to Condensed
Consolidated Financial Statements set forth in our annual report on Form
10-K for the year ended December 31, 2009 related to calculation of value
of stock-based compensation.
|
36
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END
The
following table presents information about unexercised options that were held by
each of the individuals listed in the summary compensation table as of December
31, 2010. None of the individuals listed in the summary compensation
table hold any stock awards.
Number of
Securities
Underlying
Unexercised
Options
Exercisable
|
Number of Securities
Underlying
Unexercised Options
Unexercisable
|
Equity
Incentive
Plan
Awards: No.
of Securities
Underlying
Unexercised
Unearned
Options
|
Option
Exercise
Price
|
Option
Expiration
Date
|
||||||||||||||||
Joseph
S. Podolski,
|
6,250
|
—
|
—
|
$
|
12.60
|
09/20/11
|
||||||||||||||
President
& CEO
|
12,500
|
—
|
—
|
$
|
17.36
|
03/20/12
|
||||||||||||||
—
|
56,250
|
(1)
|
—
|
$
|
17.36
|
03/20/12
|
||||||||||||||
53,576
|
—
|
—
|
$
|
10.88
|
03/29/14
|
|||||||||||||||
11,712
|
(2)
|
—
|
—
|
$
|
10.88
|
03/29/14
|
||||||||||||||
12,500
|
—
|
—
|
$
|
49.04
|
01/08/17
|
|||||||||||||||
7,294
|
5,206
|
(3)
|
—
|
$
|
35.20
|
02/18/19
|
||||||||||||||
21,740
|
—
|
—
|
$
|
2.92
|
12/02/19
|
|||||||||||||||
12,441
|
4,148
|
(4)
|
—
|
$
|
3.28
|
02/04/20
|
||||||||||||||
5,740
|
5,739
|
(5)
|
—
|
$
|
3.16
|
05/03/20
|
||||||||||||||
6,668
|
20,004
|
(6)
|
—
|
$
|
1.36
|
07/02/20
|
||||||||||||||
3,779
|
11,335
|
(7)
|
—
|
$
|
2.40
|
08/25/20
|
||||||||||||||
—
|
27,274
|
(8)
|
—
|
$
|
1.33
|
10/28/20
|
||||||||||||||
—
|
26,478
|
(9)
|
—
|
$
|
1.37
|
12/20/20
|
||||||||||||||
Ronald
Wiehle, Ph.D.,
|
250
|
—
|
—
|
$
|
72.76
|
02/01/11
|
||||||||||||||
VP,
R&D
|
1,000
|
—
|
—
|
$
|
133.00
|
02/01/11
|
||||||||||||||
6,250
|
—
|
—
|
$
|
12.60
|
09/20/11
|
|||||||||||||||
32,620
|
—
|
—
|
$
|
10.88
|
03/29/14
|
|||||||||||||||
5,000
|
—
|
—
|
$
|
48.96
|
01/04/17
|
|||||||||||||||
4,170
|
830
|
(10)
|
—
|
$
|
42.60
|
06/06/18
|
||||||||||||||
8,240
|
—
|
$
|
2.92
|
12/02/19
|
||||||||||||||||
4,716
|
1,572
|
(11)
|
—
|
$
|
3.28
|
02/04/20
|
||||||||||||||
2,176
|
2,175
|
(12)
|
—
|
$
|
3.16
|
05/03/20
|
||||||||||||||
1,264
|
3,791
|
(13)
|
—
|
$
|
1.36
|
07/02/20
|
||||||||||||||
716
|
2,148
|
(14)
|
—
|
$
|
2.40
|
08/25/20
|
||||||||||||||
—
|
5,169
|
(15)
|
—
|
$
|
1.33
|
10/28/20
|
||||||||||||||
—
|
5,018
|
(16)
|
—
|
$
|
1.37
|
12/20/20
|
||||||||||||||
Katherine
A. Anderson
|
2,499
|
7,501
|
(17)
|
—
|
$
|
3.12
|
03/15/20
|
|||||||||||||
Chief
Accounting Officer
|
||||||||||||||||||||
and
Secretary
|
||||||||||||||||||||
(1)
|
All
of the shares under this option will vest in March 2012 or upon a change
of control.
|
(2)
|
Pursuant
to these performance-based option awards, Mr. Podolski was originally
awarded options to purchase 14,640 shares of our common
stock. As a result of earning some but not all of the
milestones under these awards, Mr. Podolski vested in 11,712 shares and
the remainder under each award
expired.
|
(3)
|
The
shares underlying this option vest in equal quarterly installments over a
three year period. The first installment of 1,042 shares vested
on May 18, 2009 and the remainder vests quarterly
thereafter.
|
37
(4)
|
The
shares underlying this option vest in equal quarterly installments over a
one year period. The first installment of 4,147 shares vested
on May 4, 2010 and the remainder vests quarterly
thereafter.
|
(5)
|
The
shares underlying this option vest in equal quarterly installments over a
one year period. The first installment of 2,870 shares vested
on August 3, 2010 and the remainder vests quarterly
thereafter.
|
(6)
|
The
shares underlying this option vest in equal quarterly installments over a
one year period. The first installment of 6,668 shares vested
on October 2, 2010 and the remainder vests quarterly
thereafter.
|
(7)
|
The
shares underlying this option vest in equal quarterly installments over a
one year period. The first installment of 3,779 shares vested
on November 25, 2010 and the remainder vests quarterly
thereafter.
|
(8)
|
The
shares underlying this option vest in equal quarterly installments over a
one year period. The first installment of 6,819 shares will
vest on January 28, 2011 and the remainder vests quarterly
thereafter.
|
(9)
|
The
shares underlying this option vest in equal quarterly installments over a
one year period. The first installment of 6,620 shares will
vest on March 20, 2011 and the remainder vests quarterly
thereafter.
|
(10)
|
The
shares underlying this option vest in equal quarterly installments over a
three year period. The first installment of 417
shares vested on September 6, 2008 and the remainder
vests quarterly thereafter.
|
(11)
|
The
shares underlying this option vest in equal quarterly installments over a
one year period. The first installment of 1,572 shares vested
on May 4, 2010 and the remainder vests quarterly
thereafter.
|
(12)
|
The
shares underlying this option vest in equal quarterly installments over a
one year period. The first installment of 1,088
shares vested on August 3, 2010 and the remainder vests
quarterly thereafter.
|
(13)
|
The
shares underlying this option vest in equal quarterly installments over a
one year period. The first installment of 1,264 shares vested
on October 2, 2010 and the remainder vests quarterly
thereafter.
|
(14)
|
The
shares underlying this option vest in equal quarterly installments over a
one year period. The first installment of 716 shares vested on
November 25, 2010 and the remainder vests quarterly
thereafter.
|
(15)
|
The
shares underlying this option vest in equal quarterly installments over a
one year period. The first installment of 1,292 shares will
vest on January 28, 2011 and the remainder vests quarterly
thereafter.
|
(16)
|
The
shares underlying this option vest in equal quarterly installments over a
one year period. The first installment of 1,255 shares will
vest on March 20, 2011 and the remainder vests quarterly
thereafter.
|
(17)
|
The
shares underlying this option vest in equal quarterly installments over a
three year period. The first installment of 833
shares vested on June 15, 2010 and the remainder vests
quarterly thereafter.
|
Options
Exercised and Stock Vested
None
of our named executive officers exercised any of their exercisable options
during fiscal 2010 nor did any of our named executive officers receive or vest
in any stock awards during fiscal 2010.
Post-Employment
Compensation
Mr.
Podolski’s employment agreement provides for a fixed term of employment until
May 31, 2012, with the result that his compensation and benefits will be paid
through such date if he is terminated without cause prior thereto. Any unvested
options held by Mr. Podolski will also become fully exercisable in the event he
is terminated without cause, and he will be entitled to a 2 year period post
termination of employment in which to exercise all options regardless of the
reason from termination (unless due to cause).
38
In
addition, Mr. Podolski’s employment agreement provides that he is entitled to
severance payments in the event he is terminated without cause or resigns for
good reason within 12 months following a change of control. The
specific amount of these payments has been revised during March of 2010, when
the Fourth Amendment to Mr. Podolski’s employment agreement was
adopted. Under his amended agreement, Mr. Podolski is entitled to a
cash lump sum payment equal to the present value of the aggregate amount of
payments set forth below, in which the present value is determined as of the
closing date of the change of control transaction (as if he was terminated or
had resigned on such date and without reduction for any salary waiver then in
effect). Mr. Podolski has agreed to defer payment of such amount, and
in lieu of such lump sum payment, he will receive the payments listed in the
following table. All of the payments listed below, other than the
first payment made at the closing of a change of control, would be made out of
an irrevocable Rabbi Trust which would be funded by us immediately prior to the
closing of a change of control transaction:
Amount of payment
|
Payment due date
|
|
Current
annual base salary
|
On
the closing of the change of control transaction
|
|
50%
of base salary
|
1st
anniversary after closing
|
|
50%
of base salary
|
2nd
anniversary after closing
|
|
50%
of base salary
|
3rd
anniversary after closing
|
|
50%
of base salary
|
4th
anniversary after closing
|
|
50%
of base salary
|
5th
anniversary after closing
|
|
35%
of base salary
|
6th
anniversary after
closing
|
For
purposes of the previous description, the term "cause" means: (i) the
conviction of such officer by a court of competent jurisdiction of a crime
involving moral turpitude; (ii) the commission, or attempted commission, on
us by such officer of an act of fraud; (iii) the misappropriation, or
attempted misappropriation, by such officer of any of our funds or property;
(iv) the continued and unreasonable failure by such officer to perform in
any material respect his obligations under the terms of his employment
agreement; (v) the knowing engagement by such officer, without the written
approval of the board of directors, in any direct, material conflict of interest
without compliance with our conflict of interest policy; (vi) the knowing
engagement by such officer, without the written approval of the board of
directors, in any activity which competes with our business or which would
result in a material injury to us; or (vii) the knowing engagement by such
officer in any activity that would constitute a material violation of the
provisions of our insider trading policy or business ethics policy then in
effect. The term "good reason" as used hereunder means a material
diminution in the title, powers, duties, responsibilities or functions of such
officer within one year following the occurrence of a change of
control.
39
DIRECTOR
COMPENSATION
The
following table presents summary information for the year ended December 31,
2010 regarding the compensation of the non-employee members of our board of
directors.
Name
|
Fees
Earned or
Paid in
Cash(1)
|
Stock
Awards
|
Option
Awards(2)
|
Non-Equity
Incentive Plan
Compensation
|
Change in
Pension Value
and Nonqualified
Deferred
Compensation
Earnings
|
All Other
Compensation
|
Total
|
|||||||||||||||||||||
Daniel
F. Cain
|
$
|
34,500
|
—
|
$
|
2,450
|
—
|
—
|
—
|
$
|
36,950
|
||||||||||||||||||
Jaye
Thompson
|
$
|
30,500
|
—
|
$
|
2,450
|
-
|
—
|
—
|
$
|
32,950
|
||||||||||||||||||
Jean
L. Fourcroy
|
$
|
20,500
|
—
|
$
|
2,450
|
—
|
—
|
—
|
$
|
22,950
|
||||||||||||||||||
Nola
Masterson
|
$
|
56,496
|
—
|
$
|
6,510
|
—
|
—
|
—
|
$
|
63,006
|
(1)
|
Except
as otherwise indicated, all of the amounts in this column reflect cash
fees paid to or earned by our non-employee directors for attending board
or committee meetings during fiscal
2010.
|
(2)
|
The
amounts set forth in this column reflect the value attributed to the
option awards granted to our non-employee directors during
2010. In February 2010, Ms. Masterson, Dr. Fourcroy and Mr.
Cain were granted options to purchase 25,000 shares, each, in lieu of
additional fees accrued and unpaid in 2009 in the amount of $20,000,
$14,000 and $20,000, respectively, for attendance at special meetings of
the board during the second half of 2009, it having been decided that each
of these directors would receive equal compensation for work done during
this period of special meetings notwithstanding varying attendance at
these meetings. On May 17, 2010 all of our non-employee
directors, which includes Mr. Cain, Dr. Fourcroy, Ms. Masterson, and Dr.
Thompson received an annual grant of an option to purchase 1,250 shares of
our common stock at our annual meeting held on May 17,
2010. Additionally, Ms. Masterson was awarded an option in
February 2010 to purchase an additional 1,750 shares of common stock in
consideration of her assuming the role of chair in 2009. The
following table reflects the aggregate number of outstanding options
(including unexercisable options) held by our current non-employee
directors as of December 31,
2010:
|
Director
|
Number of shares underlying outstanding options
|
|||
Daniel
F. Cain
|
25,000
|
|||
Jaye
Thompson
|
11,250
|
|||
Jean
L. Fourcroy
|
25,000
|
|||
Nola
Masterson
|
25,500
|
Overview
of Compensation and Procedures
We
periodically review the level of compensation paid to our non-employee
directors. In determining the level of compensation for our
non-employee directors, we have historically obtained data from a number of
different sources, including:
|
·
|
Publicly
available peer group information;
and
|
|
·
|
Independent
private surveys of non-executive director compensation in the
biotechnology community.
|
40
Employee
directors do not receive additional compensation for service on the board of
directors or its committees. We reimburse each non-employee director
for travel expenses incurred in connection with attendance at board
meetings. Each non-employee director is paid a $10,000 annual
retainer for service on the board, payable quarterly in advance. For
regular board and committee meetings attended in person or telephonically,
non-employee directors currently receive $2,000 per meeting in
cash. Chairs of committees receive $3,000 per
meeting. Non-regular meetings are compensated at the rate of $250 per
hour with a minimum compensation of two hours per meeting. Employee
directors are eligible to participate in the 2004 Stock Option
Plan. Non-employee directors are entitled to participate in the 2000
Non-Employee Directors’ Stock Option Plan and the 2004 Stock Option
Plan.
Under
the director plan, (i) each non-employee director who is first elected to the
board is entitled to receive an option to purchase 40,000 shares of common stock
on the date on which he or she first becomes a non-employee director, vesting
quarterly over three (3) years, and (ii) each non-employee director in office
immediately after each subsequent annual meeting of stockholders will receive an
option to purchase 1,250 shares of common stock, vesting over twelve (12)
months, effective on such date. Additionally under the director plan, the chair
of the board (if a non-employee) who is first elected to the board is entitled
to receive an option to purchase 2,500 shares of common stock on the date on
which he or she first becomes chair, and the chair (if a non-employee) in office
immediately after each subsequent annual meeting of stockholders will receive an
option to purchase 2,500 shares of common stock effective on such date or, at
the election of the chair, an annual $25,000 stipend paid
monthly. Nola Masterson currently serves as the chair of the board of
directors and received an option for 1,750 shares to compensate her for her
additional duties following the resignation of our former chair of the board of
directors in November, 2009. Under our director plan, directors may
elect to receive $2,000 of their cash fee for payment in shares of our common
stock or an option to purchase shares of our common stock.
During
2010, we paid an aggregate of $141,996 to our non-employee
directors. We granted options to purchase an aggregate of 5,000
shares of common stock to non-employee directors during 2010 pursuant to
automatic grants under the director plan and, in February 2010, we granted
additional options to purchase 20,500 shares of common stock to non-employee
directors in lieu of cash for attendance at special board meetings and for
service as chair during 2009.
41
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table presents certain information regarding the beneficial ownership
of our common stock as of December 31, 2010 by:
|
§
|
each
person who is known by us to own beneficially more than 5% of the
outstanding shares of common stock;
|
|
§
|
each
director;
|
|
§
|
each
named executive officer; and
|
|
§
|
all
directors and executive officers as a
group.
|
Name of Beneficial Owner
|
Amount and
Nature of
Beneficial
Ownership of
Common Stock(1)
|
Percentage
Owned Before
Offering(2)
|
Percentage
Owned After
Offering(2)
|
||||||||
Katherine
A. Anderson, C.P.A.
|
2,874 |
(3)
|
* | * | |||||||
Daniel
F. Cain
|
24,250 |
(4)
|
* | * | |||||||
Jean
L. Fourcroy, M.D., Ph.D., M.P.H.
|
23,900 |
(4)
|
* | * | |||||||
Nola
E. Masterson
|
27,000 |
(5)
|
* | * | |||||||
Joseph
S. Podolski
|
230,470 |
(6)
|
2.5 | % | 2.0 | % | |||||
Jaye
Thompson, Ph.D.
|
4,165 |
(7)
|
* | * | |||||||
Ronald
Wiehle, Ph.D.
|
77,838 |
(8)
|
* | * | |||||||
All
directors and executive officers as a group (7
persons)
|
390,497 |
(3)-(8)
|
4.2 | % | 3.3 | % | |||||
*
|
Does
not exceed 1%.
|
(1)
|
Unless
otherwise noted, we believe that all persons named in the table have sole
voting and investment power with respect to all shares of common stock
beneficially owned by such persons.
|
(2)
|
In
accordance with SEC rules, each beneficial owner’s percentage ownership
assumes the exercise of all options and warrants held by such person that
are exercisable within 60 days after December 31,
2010.
|
(3)
|
Includes
2,499 shares of common stock issuable upon exercise of
options.
|
(4)
|
Includes
23,750 shares of common stock issuable upon exercise of
options.
|
(5)
|
Includes
(i) 24,250 shares of common stock issuable upon exercise of options and
(ii) 2,750 shares of common stock held by Science Futures
LLC. As the managing director of Science Futures LLC, Ms.
Masterson may be deemed to beneficially own such
shares.
|
(6)
|
Includes
(i) 750 shares of common stock which are held by certain of Mr. Podolski’s
family members and (ii) 179,525 shares of common stock issuable upon the
exercise of options. Mr. Podolski disclaims beneficial
ownership of the shares owned by his family
members.
|
(7)
|
Includes
4,165 shares of common stock issuable upon exercise of
options.
|
(8)
|
Includes
72,334 shares of common stock issuable upon exercise of
options.
|
42
DESCRIPTION
OF SECURITIES
Our
authorized capital stock consists of 75,000,000 shares of common stock, par
value $0.001 per share, and 5,000,000 shares of preferred stock, par value
$0.001 per share.
As of
December 31, 2010, we had 8,930,022 outstanding shares of common stock and no
outstanding shares of preferred stock. Our Quarterly Report on Form
10-Q for the quarter ended September 30, 2010 reflected that we had 8,930,057
shares of common stock outstanding as of November 4, 2010. This 35
share discrepancy was due to our uncertainty at such time of the specific number
of fractional shares resulting from the one-for-four reverse split of our common
stock on October 14, 2010.
As of
December 31, 2010, we had outstanding stock options to purchase 613,869 shares
of common stock at prices ranging from $1.33 to $133.00. As of
December 31, 2010, we had no warrants outstanding.
Common
Stock
Subject
to any special voting rights of any series of preferred stock that we may issue
in the future, each share of common stock has one vote on all matters voted on
by our stockholders, including the election of our directors. Because holders of
common stock do not have cumulative voting rights, the holders of a majority of
the shares of common stock can elect all of the members of the board of
directors standing for election, subject to the rights, powers and preferences
of any outstanding series of preferred stock.
No share
of common stock affords any preemptive rights or is convertible, redeemable,
assessable or entitled to the benefits of any sinking or repurchase fund.
Holders of common stock will be entitled to dividends in the amounts and at the
times declared by our board of directors in its discretion out of funds legally
available for the payment of dividends.
Holders
of common stock will share equally in our assets on liquidation after payment or
provision for all liabilities and any preferential liquidation rights of any
preferred stock then outstanding. All outstanding shares of common stock are
fully paid and non-assessable.
Preferred
Stock
Our
certificate of incorporation provides that shares of preferred stock may be
issued from time to time in one or more series. Our board of directors has
authority to issue up to 5,000,000 shares of preferred stock and to determine
the price, rights, preferences, privileges and restrictions, including voting
rights, of those shares without any further vote or action by our stockholders.
The rights of holders of our common stock may be subject to, and adversely
affected by, the rights of the holders of any preferred stock that may be issued
in the future. The issuance of preferred stock may have the effect of delaying,
deferring or preventing a change of control and may adversely affect the voting
and other rights of holders of our common stock. We have no present plans to
issue any shares of preferred stock after this offering.
Warrants
to be Issued in Offering
In
connection with this offering, we will sell common stock and warrants in units,
with each unit consisting of four shares of common stock, three Series A
Warrants and 2.45 Series B Warrants. The shares of common stock and
warrants are immediately separable and will be issued and trade
separately.
Series
A Warrants
Each
Series A Warrant will be exercisable for one share of our common stock at an
exercise price of $ per
share. The exercise price and number of shares issuable upon exercise
of the Series A Warrants are subject to appropriate adjustment in the event of
stock dividends and distributions, stock splits, stock combinations,
reclassifications or similar events affecting our common stock.
The
Series A Warrants are exercisable immediately upon issuance and expire five
years from the date of issuance. Except as indicated below, the
Series A Warrants will be exercisable, at the option of each holder, in whole or
in part, by delivering to us a duly executed exercise notice accompanied by
payment in full for the number of shares of our common stock purchased upon such
exercise. If such shares of common stock are not delivered to such
holder within three trading days following such exercise, we have agreed to pay
to such holder, in cash, as liquidated damages, an amount equal to (A) the
difference between (i) the closing price of our common stock on such third
trading day and (ii) the closing price of our common stock on the date such
shares of common stock are actually delivered multiplied by (B) the number of
shares of common stock purchased upon such exercise.
If, at
any time during the Series A Warrant exercisability period, the fair market
value of our common stock exceeds the exercise price of the Series A Warrants,
the holder may elect to effect a cashless exercise of the Series A Warrants, in
whole or in part, by surrendering the Series A Warrants to us, together with
delivery to us of a duly executed exercise notice, and canceling a portion of
the relevant Series A Warrant in payment of the purchase price payable in
respect of the number of shares of our common stock purchased upon such
exercise.
The
number of shares of common stock that may be acquired by the registered holder
upon any exercise of Series A Warrants shall be limited to the extent necessary
to ensure that, following such exercise, the total number of shares of common
stock then beneficially owned by such holder and any other persons whose
beneficial ownership of common stock would be aggregated with the holder’s for
purposes of Section 13(d) of the Exchange Act does not exceed 9.999% of the
total number of issued and outstanding shares of our common stock (including for
such purpose the shares of common stock issuable upon such exercise). This
restriction may be waived by such holder upon not less than 61 days’ prior
notice to us. In no event, however, may a holder exercise warrants if, following
such exercise, such holder would beneficially own 20% or more of our outstanding
common stock.
43
If, at
any time while the Series A Warrants are outstanding, we effect (i) any
reclassification of our common stock or any compulsory share exchange pursuant
to which our common stock is effectively converted into or exchanged for other
securities, cash or property, (ii) any consolidation, merger or combination
with or into another corporation as a result of which holders of our common
stock shall be entitled to receive stock, securities or other property or assets
(including cash) with respect to or in exchange for such common stock, or
(iii) any sale or conveyance of our property or assets as, or substantially
as, an entirety to any other entity as a result of which holders of our common
stock shall be entitled to receive stock, securities or other property or assets
(including cash) with respect to or in exchange for such common stock (in any
such case, a “Fundamental Transaction”), then we, or such successor corporation
or transferee, as the case may be, will make appropriate provision by amendment
of the warrant agreement or by the successor corporation or transferee executing
with the warrant agent an agreement so that the holders of the Series A Warrants
then outstanding shall have the right at any time thereafter, upon exercise of
such warrants to receive the kind and amount of securities, cash and other
property receivable upon such Fundamental Transaction as would be received by a
holder of the number of shares of our common stock issuable upon exercise of
such holder’s Series A Warrants immediately prior to such Fundamental
Transaction.
Upon
the closing of this offering, the Series A Warrants will be listed on the Nasdaq
Capital Market under the symbol “RPRXW.”
Except
by virtue of such holder’s ownership of shares of our common stock, the holders
of the Series A Warrants do not have the rights or privileges of holders of our
common stock, including any voting rights, until they exercise their Series A
Warrants.
No
fractional warrants will be issued and no fractional shares will be issued
upon exercise of the Series A Warrants, but rather we will round such fraction
down to the nearest whole warrant or share, as the case may be.
The
terms of the Series A Warrants may not be amended without consent of holders of
Series A Warrants entitled, upon exercise thereof, to receive not less than 66
2/3% of shares of our common stock issuable thereunder.
Series
B Warrants
Each
Series B Warrant will be exercisable for one share of our common stock at an
exercise price of $ per
share. The exercise price and number of shares issuable upon exercise
of the Series B Warrants are subject to appropriate adjustment in the event of
stock dividends and distributions, stock splits, stock combinations,
reclassifications or similar events affecting our common stock.
The
Series B Warrants are exercisable immediately upon issuance and expire five
years from the date of issuance. Except as indicated below, the
Series B Warrants will be exercisable, at the option of each holder, in whole or
in part, by delivering to us a duly executed exercise notice accompanied by
payment in full for the number of shares of our common stock purchased upon such
exercise. If such shares of common stock are not delivered to such
holder within three trading days following such exercise, we have agreed to pay
to such holder, in cash, as liquidated damages, an amount equal to (A) the
difference between (i) the closing price of our common stock on such third
trading day and (ii) the closing price of our common stock on the date such
shares of common stock are actually delivered multiplied by (B) the number of
shares of common stock purchased upon such exercise.
If, at
any time during the Series B Warrant exercisability period, the fair market
value of our common stock exceeds the exercise price of the Series B Warrants,
the holder may elect to effect a cashless exercise of the Series B Warrants, in
whole or in part, by surrendering the Series B Warrants to us, together with
delivery to us of a duly executed exercise notice, and canceling a portion of
the relevant Series B Warrant in payment of the purchase price payable in
respect of the number of shares of our common stock purchased upon such
exercise.
The
number of shares of common stock that may be acquired by the registered holder
upon any exercise of Series B Warrants shall be limited to the extent necessary
to ensure that, following such exercise, the total number of shares of common
stock then beneficially owned by such holder and any other persons whose
beneficial ownership of common stock would be aggregated with the holder’s for
purposes of Section 13(d) of the Exchange Act does not exceed 9.999% of the
total number of issued and outstanding shares of common stock (including for
such purpose the shares of common stock issuable upon such exercise) of the
Company. This restriction may be waived by such holder upon not less than 61
days’ prior notice to us. In no event, however, may a holder exercise warrants
if, following such exercise, such holder would beneficially own 20% or more of
our outstanding common stock.
In the
event that our common stock trades at or above
$ per share for a period of at
least 20 trading days over a period of 30 consecutive trading days, we will have
the option to require holders of Series B Warrants to exercise the Series B
Warrants for the number of shares of our common stock which such holder is able
to sell to maintain such holder’s beneficial ownership below 10% of the total
number of issued and outstanding shares of our common stock. In the
event we exercise this option, holders of Series B Warrants will be required to
use commercially reasonable efforts to sell their shares of our common stock to
the extent necessary to exercise all of their Series B Warrants. We
are obligated to provide at least 60 days notice prior to the date by which such
exercise is required by such holder.
44
If, at
any time while the Series B Warrants are outstanding, we effect a Fundamental
Transaction, then we, or such successor corporation or transferee, as the case
may be, will make appropriate provision by amendment of the warrant agreement or
by the successor corporation or transferee executing with the warrant agent an
agreement so that the holders of the Series B Warrants then outstanding shall
have the right at any time thereafter, upon exercise of such warrants to receive
the kind and amount of securities, cash and other property receivable upon such
Fundamental Transaction as would be received by a holder of the number of shares
of our common stock issuable upon exercise of such holder’s Series B Warrants
immediately prior to such Fundamental Transaction.
Upon
the closing of this offering, the Series B Warrants will be listed on the Nasdaq
Capital Market under the symbol “RPRXZ.”
Except
by virtue of such holder’s ownership of shares of our common stock, the holders
of the Series B Warrants do not have the rights or privileges of holders of our
common stock, including any voting rights, until they exercise their Series B
Warrants.
No
fractional warrants will be issued and no fractional shares will be issued
upon exercise of the Series B Warrants, but rather we will round such fraction
down to the nearest whole warrant or share, as the case may be.
The
terms of the Series B Warrants may not be amended without consent of holders of
Series B Warrants entitled, upon exercise thereof, to receive not less than 66
2/3% of shares of our common stock issuable thereunder.
Rights
Agreement
Pursuant
to our rights agreement we entered into in September 1999, as amended, each
share of our common stock, including those being issued in this offering,
has four preferred stock purchase rights attached to it. Each right
entitles the holder to purchase from us one one-hundredth of a share of Series
One Junior Participating Preferred Stock at a price of $20.00, subject to
adjustment.
The
rights will separate from our common stock and a distribution date will occur
upon the earlier of (i) 10 days following the date of public announcement that a
person or group of persons has become an acquiring person (defined below) or
(ii) 10 business days (or such later date as may be determined by action of the
board of directors prior to the time a person becomes an acquiring person)
following the commencement of, or the announcement of an intention to make, a
tender offer or exchange offer upon consummation of which the offeror would, if
successful, become an acquiring person (the earlier of such dates being called
the distribution date). The term “acquiring person” means any person who or
which, together with all of its affiliates and associates, shall be the
beneficial owner of 20% or more of our outstanding common stock.
The
rights are not exercisable until the distribution date. The rights will expire
on September 13, 2015.
In the
event that following the date of public announcement that an acquiring person
has become such, we are acquired in a merger or other business combination
transaction or more than 50% of our consolidated assets or earning power are
sold, proper provision will be made so that each holder of a right will
thereafter have the right to receive, upon the exercise thereof at the then
current exercise price of the right, that number of shares of common stock of
the acquiring company which at the time of such transaction will have a market
value of two times the exercise price of the right. This is known as a flip-over
right.
In the
event that a person who is not exempt becomes an acquiring person, proper
provision shall be made so that each holder of a right (other than the acquiring
person and its affiliates and associates) will thereafter have the right to
receive upon exercise that number of shares of our common stock (or, under
certain circumstances, cash, other equity securities or property) having a
market value equal to two times the purchase price of the rights. This is known
as a flip-in right. Upon the occurrence of the foregoing event giving rise to
the exercisability of the rights, any rights that are or were at any time owned
by an acquiring person shall become void.
We may
redeem the rights in whole, but not in part, at a price of $0.01 per right prior
to the earlier of the expiration of the rights or their triggering; provided,
that (i) if the board authorizes redemption on or after the time a person
becomes an acquiring person, then such authorization must be with the approval
of a majority of our directors and (ii) the period for redemption may, upon
approval of a majority of our directors, be extended by amending the rights
agreement.
The terms
of the rights may be amended by the board without the consent of the holders of
the rights at any time and from time to time provided that such amendment does
not adversely affect the interests of the holders of the rights. In addition,
during any time that the rights are subject to redemption, the terms of the
rights may be amended by approval of a majority of our directors, including an
amendment that adversely affects the interests of the holders of the rights,
without the consent of the holders of rights.
A
complete description of the rights, the rights agreement with Computershare
Trust Company, N.A., as rights agent, and the Series One Junior Participating
Preferred Stock is hereby incorporated by reference from the information
appearing under the caption "Item 1. Description of the Registrant's Securities
to be Registered" contained in the Registration Statement on Form 8-A filed on
September 3, 1999, and as amended by amendments to such Registration Statement
on Form 8-A/A filed on September 11, 2002, October 31, 2002, June 30, 2005,
January 10, 2008, October 10, 2008 and September 9, 2010.
Transfer
Agent and Warrant Agent
The
transfer agent for our common stock and warrant agent for our warrants is
Computershare Trust Company, N.A.
Anti-Takeover
Effects of Certificate, Bylaws, Stockholder Rights Plan and Delaware
Law
General
Our
certificate of incorporation, bylaws and stockholder rights plan contain
provisions that are designed in part to make it more difficult and
time-consuming for a person to obtain control of our company. The provisions of
our certificate of incorporation, bylaws and stockholder rights plan reduce the
vulnerability of our company to an unsolicited takeover proposal. These
provisions may also have an adverse effect on the ability of stockholders to
influence the governance of our company and may result in entrenchment of
management. This may adversely affect the liquidity and price of our common
stock in certain situations. We have summarized the material terms of our
certificate of incorporation and bylaws below and the terms of our stockholder
rights plan above. You may read our certificate of incorporation, bylaws and
stockholder rights plan in their entirety for the full terms of the rights of
holders of our common stock.
Delaware
Business Combination Statute
Section 203
of the Delaware General Corporation Law provides that, subject to specified
exceptions, an “interested stockholder” of a Delaware corporation may not engage
in any “business combination,” including general mergers or consolidations or
acquisitions of additional shares of the corporation, with the corporation for a
three-year period following the time that such stockholder becomes an interested
stockholder unless:
•
|
before
such time, the board of directors of the corporation approved either the
business combination or the transaction which resulted in the stockholder
becoming an interested stockholder;
|
|
•
|
upon
consummation of the transaction which resulted in the stockholder becoming
an “interested stockholder,” the interested stockholder owned at least 85%
of the voting stock of the corporation outstanding at the time the
transaction commenced, excluding specified
shares; or
|
|
•
|
on
or after such time, the business combination is approved by the board of
directors of the corporation and authorized not by written consent, but at
an annual or special meeting of stockholders, by the affirmative vote of
at least 66 2/3% of the outstanding voting stock not owned by the
interested stockholder.
|
Under
Section 203, the restrictions described above also do not apply to
specified business combinations proposed by an interested stockholder following
the announcement or notification of a transaction specified in Section 203
and involving the corporation and a person who:
•
|
had
not been an interested stockholder during the previous three
years; or
|
|
•
|
became
an interested stockholder with the approval of a majority of the
corporation’s directors,
|
|
if
such transaction is approved or not opposed by a majority of the directors who
were directors prior to any person becoming an interested stockholder during the
previous three years or were recommended for election or elected to succeed such
directors by a majority of such directors.
Except
as otherwise specified in Section 203, an “interested stockholder” is
defined to include:
•
|
any
person that is the owner of 15% or more of the outstanding voting stock of
the corporation, or is an affiliate or associate of the corporation and
was the owner of 15% or more of the outstanding voting stock of the
corporation at any time within three years immediately before the date of
determination; and
|
|
•
|
the
affiliates and associates of any such person.
|
|
Under
some circumstances, Section 203 makes it more difficult for an interested
stockholder to effect various business combinations with a corporation for a
three-year period.
45
Advance Notice Requirements for
Director Nominations and Other Stockholder
Proposals
In
order to nominate a director at an annual meeting, our bylaws require that a
stockholder follow certain procedures. In order to recommend a nominee for
director, a stockholder must be a stockholder of record at the time the
stockholder gives notice of its recommendation and the stockholder must be
entitled to vote for the election of directors at the meeting at which such
nominee will be considered. Stockholder recommendations must be made pursuant to
written notice delivered to our principal executive offices no less than
50 days nor more than 75 days prior to the date of the annual or
special meeting at which directors are to be elected; provided, that if less
than 65 days' notice or prior public disclosure of the date of the meeting is
given or made to the stockholders, notice by the stockholder must be received at
our principal executive offices not later than the close of business on the 15th
day following the day on which such notice of the date of the meeting was mailed
or such public disclosure was made.
The
stockholder notice must set forth the following:
1. As to each person the stockholder proposes to nominate for
election as a director, all information relating to such person that would
be required to be disclosed in solicitations of proxies for the election
of such nominees as directors pursuant to rules promulgated under the
Exchange Act;
|
|
2. The written consent to serve as a director if elected by each
person nominated;
|
|
3. Name and address of the stockholder as they appear on our books;
and
|
|
4. The class and number of shares of our common stock beneficially
owned by such stockholder.
|
In
addition to complying with the foregoing procedures, any stockholder nominating
a director must also comply with all applicable requirements of the Exchange Act
and the rules and regulations thereunder.
Additionally,
with respect to other stockholder proposals, notice of the proposal must be
received no less than 50 nor more than 75 days prior to the annual meeting
at which such proposal is to be considered; provided, that if less than 65 days'
notice or prior public disclosure of the date of the meeting is given or made to
the stockholders, notice by the stockholder must be received at our principal
executive offices not later than the close of business on the 15th day following
the day on which such notice of the date of the annual meeting was mailed or
such public disclosure was made.
Authorized
But Unissued Shares
Our
authorized but unissued shares of common stock and preferred stock are available
for future issuances without stockholder approval and could be utilized for a
variety of corporate purposes, including future offerings to raise additional
capital, corporate acquisitions and employee benefit plans. The existence of
authorized but unissued and unreserved common stock and preferred stock could
render more difficult or discourage an attempt to obtain control of us by means
of a proxy contest, tender offer, merger or otherwise.
46
UNDERWRITING
In
accordance with the terms and conditions contained in the underwriting
agreement, we have agreed to sell to Ladenburg Thalmann & Co. Inc., which we
refer to as the “underwriter,” and the underwriter has agreed to purchase from
us on a firm commitment basis, the number of units offered in this offering set
forth opposite its name below:
Underwriter
|
Number of Units
|
|||
Ladenburg
Thalmann & Co. Inc.
|
600,000
|
|||
Total
|
600,000
|
A copy of
the underwriting agreement will be filed as an exhibit to the registration
statement of which this prospectus forms a part.
We
have been advised by the underwriter that it proposes to offer units directly to
the public at the public offering price set forth on the cover page of this
prospectus. Any units sold by the underwriter to securities dealers will be sold
at the public offering price less a selling concession not in excess of
$ per unit. The underwriter may allow, and
these selected dealers may re-allow, a concession of not more than
$ per unit to other brokers and
dealers.
The
underwriting agreement provides that the underwriter’s obligation to purchase
units is subject to conditions contained in the underwriting agreement. The
underwriter is obligated to purchase and pay for all of the units offered by
this prospectus other than those covered by the over-allotment option, if any of
these securities are purchased.
No action
has been taken by us or the underwriter that would permit a public offering of
the units, common stock or warrants included in this offering in any
jurisdiction where action for that purpose is required. None of our securities
included in this offering may be offered or sold, directly or indirectly, nor
may this prospectus or any other offering material or advertisements in
connection with the offer and sales of any of our units, common stock or
warrants be distributed or published in any jurisdiction, except under
circumstances that will result in compliance with the applicable rules and
regulations of that jurisdiction. Persons who receive this prospectus are
advised to inform themselves about and to observe any restrictions relating to
this offering of the units, common stock and warrants and the distribution of
this prospectus. This prospectus is neither an offer to sell nor a solicitation
of any offer to buy units, common stock or warrants in any jurisdiction where
that would not be permitted or legal.
The
underwriter has advised us that it does not intend to confirm sales to any
accounts over which it exercises discretionary authority.
Underwriting
discount and expenses
The
following table summarizes the underwriting discount to be paid to the
underwriter by us.
|
Total, without
over-allotment
|
Total, with
over-allotment
|
||||||
Underwriting
discount to be paid to the underwriter by us for the units ( %
of gross proceeds)
|
$
|
|
$
|
|
We
also have agreed to reimburse the out-of-pocket expenses incurred by the
underwriter in connection with the underwriting, including reasonable attorneys
fees and expenses of the underwriter’s counsel retained for this purpose by the
underwriter, in an amount of up to $50,000. The underwriter does not have any
right of first refusal or any similar rights with respect to the provision of
services to us in the future.
The
underwriter has performed investment banking services for us for which it has
received customary fees and expenses. The underwriter may, from time to time,
engage in transactions with or perform services for us in the ordinary course of
its business.
Over-allotment
option
We
have granted to the underwriter an option, exercisable not later than 45 days
after the date of this prospectus, to purchase up to 90,000 units at the
public offering price, less the underwriting discount, set forth on the cover
page of this prospectus. The underwriter may exercise the option solely to cover
over-allotments, if any, made in connection with this offering. If any
additional units are purchased pursuant to the over-allotment option, the
underwriter will offer these additional units on the same terms as those on
which the other units are being offered hereby.
Determination of offering
price
The
public offering price of the units and the exercise price and other terms of the
warrants were negotiated between us and the underwriter, based on the trading of
our common stock prior to the offering, among other things. Other factors
considered in determining the public offering price of the units and the
exercise price and other terms of the warrants include the history and prospects
of the Company, the stage of development of our business, our business plans for
the future and the extent to which they have been implemented, an assessment of
our management, general conditions of the securities markets at the time of the
offering and such other factors as were deemed relevant.
47
Stabilization,
short positions and penalty bids
The
underwriter may engage in over-allotment, syndicate covering transactions,
stabilizing transactions and penalty bids or purchases for the purpose of
pegging, fixing or maintaining the price of our common stock or
warrants:
|
·
|
Over-allotment
involves sales by the underwriter of units in excess of the number of
units the underwriter is obligated to purchase, which creates a syndicate
short position. The short position may be either a covered short position
or a naked short position. In a covered short position, the number of
units over-allotted by the underwriter is not greater than the number of
units that it may purchase in the over-allotment option. In a naked short
position, the number of units involved is greater than the number of units
in the over-allotment option. The underwriter may close out any short
position by exercising its over-allotment option, in whole or in part, or
purchasing shares and warrants in the open
market.
|
|
·
|
Syndicate
covering transactions involve purchases of securities in the open market
after the distribution has been completed in order to cover syndicate
short positions. In determining the source of securities needed to close
out the short position, the underwriter will consider, among other things,
the price of the securities available for purchase in the open market as
compared to the price at which it may purchase the securities through the
over-allotment option. If the underwriter sells more securities than could
be covered by the over-allotment option, a naked short position, the
position can only be closed out by buying securities in the open market. A
naked short position is more likely to be created if the underwriter is
concerned that there could be downward pressure on the price of the
securities in the open market after pricing that could adversely affect
investors who purchase in the
offering.
|
|
·
|
Stabilizing
transactions permit bids to purchase the underlying security so long as
the stabilizing bids do not exceed a specific
maximum.
|
|
·
|
Penalty
bids permit the underwriter to reclaim a selling concession from a
syndicate member when the securities originally sold by the syndicate
member are purchased in a stabilizing or syndicate covering transaction to
cover syndicate short positions.
|
These
syndicate covering transactions, stabilizing transactions and penalty bids may
have the effect of raising or maintaining the market prices of our securities or
preventing or retarding a decline in the market prices of our securities. As a
result, the price of our common stock and warrants may be higher than the price
that might otherwise exist in the open market. These transactions may be
effected on the Nasdaq Capital Market, in the over-the-counter market or on any
other trading market and, if commenced, may be discontinued at any
time.
In
connection with this offering, the underwriter also may engage in passive market
making transactions in our common stock on the Nasdaq Capital Market in
accordance with Regulation M during a period before the commencement of offers
or sales of shares of our common stock in this offering and extending through
the completion of the distribution. In general, a passive market
maker must display its bid at a price not in excess of the highest independent
bid for that security. However, if all independent bids are lowered
below the passive market maker’s bid, that bid must then be lowered when
specific purchase limits are exceeded. Passive market making may
stabilize the market price of the securities at a level above that which might
otherwise prevail in the open market and, if commenced, may be discontinued at
any time.
Neither
we nor the underwriter make any representation or prediction as to the direction
or magnitude of any effect that the transactions described above may have on the
prices of our securities. In addition, neither we nor the underwriter make any
representation that the underwriter will engage in these transactions or that
any transactions, once commenced, will not be discontinued without
notice.
Indemnification
We have
agreed to indemnify the underwriter against certain liabilities, including
liabilities under the Securities Act of 1933, or to contribute to payments the
underwriter may be required to make with respect to any of these
liabilities.
48
LEGAL
MATTERS
The
validity of the securities being offered hereby will be passed upon by Winstead
PC, The Woodlands, Texas. Jeffrey R. Harder, a member of the law firm Winstead
PC, beneficially owned as of December 31, 2010, an aggregate of 11,874 shares of
our common stock. Mr. Harder also holds options to purchase 13,125 shares of our
common stock. Certain legal matters will be passed upon for the
underwriter by Schulte Roth & Zabel LLP, New York, New
York.
EXPERTS
The
consolidated financial statements and management’s assessment of the
effectiveness of internal control over financial reporting (which is included in
Management’s Report on Internal Control over Financial Reporting) incorporated
in this prospectus by reference to the Annual Report on Form 10-K for the year
ended December 31, 2009 have been so incorporated in reliance on the report
(which contains an explanatory paragraph relating to the Company's ability to
continue as a going concern as described in Note 1 to the consolidated financial
statements) of PricewaterhouseCoopers LLP, an independent registered
public accounting firm, given on the authority of said firm as experts in
auditing and accounting.
The
consolidated statements of stockholders' equity for each of the eight years in
the period ended December 31, 2001 were audited by Arthur Andersen
LLP. Arthur Andersen LLP has not consented to the incorporation of
their reports on the consolidated statements of stockholders' equity for each of
the eight years in the period ended December 31, 2001 incorporated in this
prospectus by reference to the Annual Report on Form 10-K for the year ended
December 31, 2009, and we have dispensed with the requirement to file their
consent in reliance upon Rule 437a of the Securities Act. Because
Arthur Andersen LLP has not consented to the incorporation of their reports in
this prospectus, you will not be able to recover against Arthur Andersen LLP
under Section 11 of the Securities Act for any untrue statements of a material
fact contained in the financial statements audited by Arthur Andersen LLP or any
omissions to state a material fact required to be stated therein.
WHERE
YOU CAN FIND MORE INFORMATION
We have
filed with the SEC a registration statement on Form S-1 relating to the
securities covered by this prospectus. This prospectus is a part of the
registration statement and does not contain all the information in the
registration statement. For further information with respect to us and the
securities we are offering under this prospectus, we refer you to the
registration statement and the exhibits and schedules filed as a part of the
registration statement. We also file annual, quarterly and current reports,
proxy statements and other information with the SEC. You may read and copy the
registration statement, as well as any other material we file with the SEC, at
the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C.
20549. Please call the SEC at 1-800-SEC-0330 for more information on
the Public Reference Room. The SEC maintains an Internet site that
contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC, including Repros. The
SEC’s Internet site can be found at http://www.sec.gov.
INCORPORATION
OF CERTAIN INFORMATION BY REFERENCE
The SEC
allows us to "incorporate by reference" the information we file with it, which
means that we can disclose important information to you by referring you to
another document that we have filed separately with the SEC. You should read the
information incorporated by reference because it is an important part of this
prospectus. Any information incorporated by reference into this prospectus is
considered to be part of this prospectus from the date we file that document. We
incorporate by reference the following information or documents that we have
filed with the SEC which shall not include, in each case, documents, or
information deemed to have been furnished and not filed in accordance with SEC
rules:
|
§
|
Annual
Report of Form 10-K for the fiscal year ended December 31,
2009;
|
|
§
|
Quarterly
Report on Form 10-Q for the quarters ended March 31, 2010, June 30, 2010
and September 30, 2010;
|
|
§
|
Proxy
Statement on Schedule 14A filed with the SEC on April 6,
2010;
|
|
§
|
Current
Reports on Form 8-K filed with the SEC on January 11, 2010, January 19,
2010, January 26, 2010, January 27, 2010, February 2, 2010, February 8,
2010, February 19, 2010, March 3, 2010, March 4, 2010, March 11, 2010,
March 16, 2010, March 31, 2010, April 5, 2010, April 15, 2010, April 28,
2010, April 30, 2010, May 10, 2010, May 13, 2010, May 18, 2010, June 11,
2010, June 17, 2010, June 21, 2010, July 23, 2010, August 3, 2010, August
10, 2010, August 12, 2010, August 16, 2010, August 18, 2010, September 10,
2010, September 29, 2010, September 30, 2010, October 15, 2010, October
25, 2010, November 1, 2010, November 10, 2010, December 17, 2010, December
23, 2010, December 30, 2010 and January 3,
2011;
|
|
§
|
the
description of our Rights Agreement contained in our registration
statement on Form 8-A filed on September 3, 1999, as amended on September
6, 2002, October 30, 2002, June 30, 2005, January 10, 2008, October 10,
2008 and September 9, 2010, including any amendments or reports filed for
the purposes of updating this description;
and
|
49
§
|
the
description of our common stock contained in our registration statement on
Form 8-A filed with the SEC on February 2, 1993, including all amendments
and reports filed for the purpose of updating such
information.
|
Information
furnished to the SEC under Item 2.02 or Item 7.01 in Current Reports on Form
8-K, and any exhibit relating to such information, filed prior to, on or
subsequent to the date of this prospectus is not incorporated by reference into
this prospectus.
Any
statement contained in any document incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this prospectus to the
extent that a statement contained in this prospectus or any prospectus
supplement modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this prospectus.
We will
provide to each person, including any beneficial owner, to whom a prospectus is
delivered, without charge upon written or oral request, a copy of any or all of
the reports or documents that are incorporated by reference into this prospectus
but not delivered with the prospectus, including exhibits which are specifically
incorporated by reference into such documents. If you would like to request
documents from us, please send a request in writing or by telephone to us at the
following address:
Repros
Therapeutics Inc.
2408
Timberloch Place, Suite B-7
The
Woodlands, Texas 77380
(281)
719-3400
Attn:
Secretary
These
documents are posted on our Web site at www.reprosrx.com; select the “Investors
& Media” link and then the “SEC Filings” link. Any other
information contained on, or accessible through, our website does not constitute
a part of this prospectus.
50
INDEX
TO FINANCIAL STATEMENTS
Page
|
|
Repros
Therapeutics Inc. Unaudited Financial Statements
|
|
Unaudited
Condensed Consolidated Balance Sheets as of September 30, 2010 and
December 31, 2009
|
F-2
|
Unaudited
Condensed Consolidated Statements of Operations for the three months and
nine months ended September 30, 2010 and 2009 and from Inception (August
20, 1987) through September 30, 2010
|
F-3
|
Unaudited
Condensed Consolidated Statements of Stockholders' Equity for the nine
months ended September 30, 2010
|
F-4
|
Unaudited
Condensed Consolidated Statements of Cash Flows for the nine months ended
September 30, 2010 and 2009 and from Inception (August 20, 1987) through
September 30, 2010
|
F-5
|
Notes
to Unaudited Condensed Consolidated Financial
Statements
|
F-6
|
F-1
REPROS
THERAPEUTICS INC. AND SUBSIDIARY
(A
development stage company)
CONDENSED
CONSOLIDATED BALANCE SHEETS
(unaudited
and in thousands except share and per share amounts)
September 30,
2010
|
December 31,
2009
|
|||||||
ASSETS
|
||||||||
Current
Assets
|
||||||||
Cash
and cash equivalents
|
$ | 4,216 | $ | 1,886 | ||||
Prepaid
expenses and other current assets
|
211 | 177 | ||||||
Total
current assets
|
4,427 | 2,063 | ||||||
Fixed assets,
net
|
9 | 12 | ||||||
Other assets,
net
|
1,131 | 885 | ||||||
Total
assets
|
$ | 5,567 | $ | 2,960 | ||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||
Current
Liabilities
|
||||||||
Accounts
payable
|
$ | 1,172 | $ | 2,043 | ||||
Accrued
expenses
|
182 | 355 | ||||||
Total
current liabilities
|
1,354 | 2,398 | ||||||
Commitments
and contingencies (note 5)
|
||||||||
Stockholders'
Equity
|
||||||||
Undesignated
Preferred Stock, $.001 par value, 5,000,000 shares authorized, none issued
and outstanding
|
— | — | ||||||
Common
Stock, $.001 par value, 75,000,000 shares authorized, 9,042,407 and
6,496,999 shares issued, respectively and 8,930,057 and 6,384,649 shares
outstanding, respectively
|
9 | 6 | ||||||
Additional
paid-in capital
|
183,644 | 176,412 | ||||||
Cost
of treasury stock, 112,350 shares
|
(1,380 | ) | (1,380 | ) | ||||
Deficit
accumulated during the development stage
|
(178,060 | ) | (174,476 | ) | ||||
Total
stockholders' equity
|
4,213 | 562 | ||||||
Total
liabilities and stockholders' equity
|
$ | 5,567 | $ | 2,960 | ||||
The
accompanying notes are an integral part of these condensed consolidated
financial statements.
F-2
REPROS
THERAPEUTICS INC. AND SUBSIDIARY
(A
development stage company)
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited
and in thousands except per share amounts)
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
From Inception
(August 20, 1987)
through
September 30,
|
||||||||||||||||||
2010
|
2009
|
2010
|
2009
|
2010
|
||||||||||||||||
Revenues
|
||||||||||||||||||||
Licensing
fees
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
28,755
|
||||||||||
Product
royalties
|
—
|
—
|
—
|
—
|
627
|
|||||||||||||||
Research
and development grants
|
—
|
—
|
—
|
—
|
1,219
|
|||||||||||||||
Interest
income
|
—
|
—
|
—
|
—
|
16,297
|
|||||||||||||||
Gain
on disposal of fixed assets
|
—
|
—
|
—
|
4
|
102
|
|||||||||||||||
Other
Income
|
85
|
—
|
138
|
—
|
720
|
|||||||||||||||
Total
revenues and other income
|
85
|
—
|
138
|
4
|
47,720
|
|||||||||||||||
Expenses
|
||||||||||||||||||||
Research
and development
|
736
|
8,282
|
1,950
|
21,765
|
172,280
|
|||||||||||||||
General
and administrative
|
533
|
1,962
|
1,772
|
4,126
|
43,769
|
|||||||||||||||
Interest
expense and amortization of intangibles
|
—
|
—
|
—
|
—
|
388
|
|||||||||||||||
Total
expenses
|
1,269
|
10,244
|
3,722
|
25,891
|
216,437
|
|||||||||||||||
Loss
from continuing operations
|
(1,184
|
)
|
(10,244
|
)
|
(3,584
|
)
|
(25,887
|
)
|
(168,717
|
)
|
||||||||||
Loss
from discontinued operations
|
—
|
—
|
—
|
—
|
(1,828
|
)
|
||||||||||||||
Gain
on disposal of discontinued operation
|
—
|
—
|
—
|
—
|
939
|
|||||||||||||||
Net
loss before cumulative effect of change in accounting
principle
|
(1,184
|
)
|
(10,244
|
)
|
(3,584
|
)
|
(25,887
|
)
|
(169,606
|
)
|
||||||||||
Cumulative
effect of change in accounting principle
|
—
|
—
|
—
|
—
|
(8,454
|
)
|
||||||||||||||
Net
loss
|
$
|
(1,184
|
)
|
$
|
(10,244
|
)
|
$
|
(3,584
|
)
|
$
|
(25,887
|
)
|
(178,060
|
)
|
||||||
Loss
per share - basic and diluted:
|
$
|
(0.13
|
)
|
$
|
(2.64
|
)
|
$
|
(0.46
|
)
|
$
|
(6.77
|
)
|
||||||||
Weighted
average shares used in loss per share calculation:
|
||||||||||||||||||||
Basic
|
8,875
|
3,876
|
7,763
|
3,821
|
||||||||||||||||
Diluted
|
8,875
|
3,876
|
7,763
|
3,821
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-3
REPROS
THERAPEUTICS INC. AND SUBSIDIARY
(A
development stage company)
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY
(unaudited
and in thousands except share and per share amounts)
Common Stock
|
Additional
Paid-in
|
Treasury Stock
|
Deficit
Accumulated
During the
Development
|
Total
Stockholders'
|
||||||||||||||||||||||||
Shares
|
Amount
|
Capital
|
Shares
|
Amount
|
Stage
|
Equity
|
||||||||||||||||||||||
Balance
at December 31, 2009
|
6,496,999
|
$
|
6
|
$
|
176,412
|
112,350
|
$
|
(1,380
|
)
|
$
|
(176,476
|
)
|
$
|
562
|
||||||||||||||
Stock
based option compensation
|
—
|
—
|
471
|
—
|
—
|
—
|
471
|
|||||||||||||||||||||
Issuance
of 96,836 shares of common stock at $2.88 to $4.40 per share, as
settlement with trade creditors
|
96,836
|
—
|
370
|
—
|
—
|
—
|
370
|
|||||||||||||||||||||
Issuance
of 2,448,572 shares of common stock at a weighted average share price of
$2.77, net of offering costs of $381
|
2,448,572
|
3
|
6,391
|
—
|
—
|
—
|
6,394
|
|||||||||||||||||||||
Net
loss
|
—
|
—
|
—
|
—
|
—
|
(3,584
|
)
|
(3,584
|
)
|
|||||||||||||||||||
Balance
at September 30, 2010
|
9,042,407
|
$
|
9
|
$
|
183,644
|
112,350
|
$
|
(1,380
|
)
|
$
|
(178,060
|
)
|
$
|
4,213
|
The
accompanying notes are an integral part of these consolidated financial
statements.
F-4
REPROS
THERAPEUTICS INC. AND SUBSIDIARY
(A
development stage company)
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited
and in thousands)
Nine Months Ended September 30,
|
From Inception
(August 20, 1987)
through
September 30,
|
|||||||||||
2010
|
2009
|
2010
|
||||||||||
Cash
Flows from Operating Activities
|
||||||||||||
Net
loss
|
$ | (3,584 | ) | $ | (25,887 | ) | $ | (178,060 | ) | |||
Gain
on disposal of discontinued operations
|
— | — | (939 | ) | ||||||||
Gain
on disposal of fixed assets
|
— | — | (102 | ) | ||||||||
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||||||
Noncash
financing costs
|
— | — | 316 | |||||||||
Noncash
inventory impairment
|
— | — | 4,417 | |||||||||
Noncash
patent impairment
|
— | 989 | 2,614 | |||||||||
Noncash
other income
|
(138 | ) | — | (685 | ) | |||||||
Noncash
decrease in accounts payable
|
— | — | (1,308 | ) | ||||||||
Depreciation
and amortization
|
60 | 51 | 4,014 | |||||||||
Noncash
stock-based compensation
|
471 | 1,110 | 7,112 | |||||||||
Common
stock issued for agreement not to compete
|
— | — | 200 | |||||||||
Series
B Preferred Stock issued for consulting services
|
— | — | 18 | |||||||||
Changes
in operating assets and liabilities (net effects of purchase of businesses
in 1988 and 1994):
|
||||||||||||
Increase
in receivables
|
— | — | (199 | ) | ||||||||
Increase
in inventory
|
— | — | (4,447 | ) | ||||||||
(Increase)
decrease in prepaid expenses and other current assets
|
(34 | ) | 1,114 | 91 | ||||||||
Increase
(decrease) in accounts payable and accrued expenses
|
(536 | ) | 5,246 | 9,502 | ||||||||
Net
cash used in operating activities
|
(3,761 | ) | (17,377 | ) | (157,456 | ) | ||||||
Cash
Flows from Investing Activities
|
||||||||||||
Change
in trading marketable securities
|
— | — | (191 | ) | ||||||||
Capital
expenditures
|
(6 | ) | — | (2,377 | ) | |||||||
Purchase
of technology rights and other assets
|
(297 | ) | (424 | ) | (4,569 | ) | ||||||
Proceeds
from sale of PP&E
|
— | — | 225 | |||||||||
Cash
acquired in purchase of FTI
|
— | — | 3 | |||||||||
Proceeds
from sale of subsidiary, less $12,345 for operating losses during 1990
phase-out period
|
— | — | 138 | |||||||||
Proceeds
from sale of the assets of FTI
|
— | — | 2,250 | |||||||||
Increase
in net assets held for disposal
|
— | — | (213 | ) | ||||||||
Net
cash used in investing activities
|
(303 | ) | (424 | ) | (4,734 | ) | ||||||
Cash
Flows from Financing Activities
|
||||||||||||
Proceeds
from issuance of common stock, net of offering costs
|
6,394 | 869 | 162,399 | |||||||||
Exercise
of stock options
|
— | 9 | 372 | |||||||||
Proceeds
from a shareholder transaction
|
— | — | 327 | |||||||||
Proceeds
from issuance of preferred stock
|
— | — | 23,688 | |||||||||
Purchase
of treasury stock
|
— | — | (21,487 | ) | ||||||||
Proceeds
from issuance of notes payable
|
— | — | 2,839 | |||||||||
Principal
payments on notes payable
|
— | — | (1,732 | ) | ||||||||
Net
cash provided by financing activities
|
6,394 | 878 | 166,406 | |||||||||
Net
increase (decrease) in cash and cash equivalents
|
2,330 | (16,923 | ) | 4,216 | ||||||||
Cash
and cash equivalents at beginning of period
|
1,886 | 19,470 | — | |||||||||
Cash
and cash equivalents at end of period
|
$ | 4,216 | $ | 2,547 | $ | 4,216 | ||||||
The
accompanying notes are an integral part of these condensed consolidated
financial statements.
F-5
REPROS
THERAPEUTICS INC. AND SUBSIDIARY
(A
development stage company)
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September
30, 2010
(Unaudited)
NOTE
1 — Organization, Operations and Liquidity
The
accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information and the rules and
regulations of the Securities and Exchange Commission for interim financial
reporting. Accordingly, they do not include all of the information and footnotes
required by accounting principles generally accepted in the United States of
America for complete financial statements. In the opinion of management, all
adjustments (which include only normal recurring adjustments) considered
necessary for a fair statement of the interim periods presented have been
included. The year-end balance sheet data was derived from audited financial
statements, but does not include all the disclosures required by accounting
principles generally accepted in the United States of America. Operating results
for the three month and nine month periods ended September 30, 2010 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 2010. For further information, refer to the financial statements
and footnotes thereto included in the Repros Therapeutics Inc. ("the Company",
"Repros," or "we," "us" or "our") Annual Report on Form 10-K for the year ended
December 31, 2009.
The
Company was organized on August 20, 1987. We are a development stage
biopharmaceutical company focused on the development of oral small molecule
drugs for major unmet medical needs that treat male and female reproductive
disorders.
Our
portfolio of products includes:
Androxal®
|
§
|
As
a treatment for men of reproductive age with low testosterone levels that
spares fertility, unlike testosterone replacement therapy;
and
|
|
§
|
As
a treatment for type 2 diabetes
|
Proellex®
|
§
|
As
a treatment of symptoms associated with uterine fibroids and
endometriosis, subject to the current FDA partial clinical hold on the
Proellex® clinical trials; however, the FDA has allowed us to run a single
study to explore both safety and signals of efficacy in an escalating dose
fashion. The new study will test 5 different doses of Proellex® (1, 3, 6,
9 and 12 mg) with 1 mg being the first dose
tested.
|
As of
September 30, 2010, we had accumulated losses of $178.1 million, approximately
$4.2 million in cash and cash equivalents, and our accounts payable and accrued
expenses were approximately $1.4 million. The amount of cash on hand is not
sufficient to fund the (i) escalating dose study for Proellex® permitted by the
FDA, (ii) Phase 2B and upcoming Phase 3 hypogonadism trials for Androxal®,
(iii) type 2 diabetes trial for Androxal®, (iv) preclinical
assessment of vaginal delivery of Proellex® and (v) second generation Proellex®
molecules. Based on these current and planned clinical trials, we will need to
raise additional capital no later than the first quarter of 2011. We continue to
explore potential additional financing and capital raising alternatives to
provide additional funds to enable us to continue to develop our two product
candidates through completion of clinical trials; however, there can be no
assurance that we will be successful in raising any such additional funds on a
timely basis or at all. Significant additional funding will be required for us
to continue development of either of our product candidates. Additionally, as
discussed in Note 5, we have various pending legal proceedings that could
adversely impact us. The foregoing and other matters raise substantial doubt
about our ability to continue as a going concern.
On
October 14, 2010, the Company effected a one-for-four reverse stock split of its
common stock. The split-adjusted shares of the Company’s common stock began
trading on the Nasdaq Capital Market on October 15, 2010. The one-for-four
reverse stock split converted all shares of the Company’s common stock issued
and outstanding, plus all outstanding stock options and the number of shares of
common stock available for issuance under the Company’s approved stock plans.
The number of authorized shares of common stock was not affected by the reverse
split. The reverse split enabled the Company to meet the continued listing rules
of the Nasdaq Capital Market as evidenced by the Compliance Letter received from
Nasdaq on October 29, 2010. All share and per share amounts have been
retroactively adjusted to reflect the reverse stock split for all periods
presented.
We also
continue to maintain our patent portfolio of our phentolamine-based products for
the treatment of sexual dysfunction and in order to create value from these
assets in various ways which includes product out-licensing.
F-6
NOTE
2 — Patents and Patent Applications
As of
September 30, 2010, the Company had approximately $1.1 million in capitalized
patent and patent application costs reflected on its balance sheet. This entire
amount relates to patent and patent application costs for
Androxal®.
Should
the Company not continue development of Androxal® or should the Company not
continue as a going concern, the remaining capitalized patent and patent
application costs may not be recoverable, which would result in charges to
operating results in future periods.
NOTE
3 — Accrued Expenses
Accrued
expenses consist of the following (in thousands):
September 30, 2010
|
December 31, 2009
|
|||||||
Personnel
related costs
|
$ | 103 | $ | 181 | ||||
Other
|
69 | 159 | ||||||
Patent
costs
|
10 | 15 | ||||||
Total
|
$ | 182 | $ | 355 | ||||
NOTE
4 — Loss Per Share
Basic
loss per share is computed by dividing net loss by the weighted average number
of shares of common stock outstanding during the period. Diluted loss per share
is computed using the average share price for the period and applying the
treasury stock method to potentially dilutive outstanding options. In all
applicable periods, all potential common stock equivalents were antidilutive
and, accordingly, were not included in the computation of diluted loss per
share. Additionally, on October 14, 2010, the Company effected a one-for-four
reverse stock split of its common stock. The split-adjusted shares of the
Company’s common stock began trading on the Nasdaq Capital Market on October 15,
2010. All share and per share amounts have been retroactively adjusted to
reflect the reverse stock split for all periods presented.
The
following table presents information necessary to calculate loss per share for
the three month and nine month periods ended September 30, 2010 and 2009 (in
thousands, except per share amounts):
Three Months Ended Sept. 30,
|
Nine Months Ended Sept. 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Net
Loss
|
$ | (1,184 | ) | $ | (10,244 | ) | $ | (3,584 | ) | $ | (25,887 | ) | ||||
Average
common shares outstanding
|
8,875 | 3,876 | 7,763 | 3,821 | ||||||||||||
Basic
and diluted loss per share
|
$ | (0.13 | ) | (2.64 | ) | (0.46 | ) | (6.77 | ) | |||||||
Other
potential common stock of 538,582 and 552,402 common shares underlying stock
options for the periods ended September 30, 2010 and 2009, respectively, were
excluded from the above calculation of diluted loss per share because they were
not dilutive.
NOTE
5 — Commitments and Contingencies
Therapeutic
uses of our Androxal® product candidate are covered in the United States by four
issued U.S. patents and four pending patent applications. Foreign coverage of
therapeutic uses of our Androxal® product candidate includes 40 issued foreign
patents and 75 foreign pending patent applications. The issued patents and
pending applications relate to methods for treating certain conditions including
the treatment of testosterone deficiency in men, the treatment of metabolic
syndrome and conditions associated therewith, and the treatment of infertility
in hypogonadal men. Androxal® (the trans-isomer of clomiphene) is purified from
clomiphene citrate. A third party individual holds two issued patents related to
the use of an anti-estrogen such as clomiphene citrate and others for use in the
treatment of androgen deficiency and disorders related thereto. In our prior
filings with the SEC, we have described our request to the U.S. Patent and
Trademark Office, or PTO, for re-examination of one of these patents based on
prior art. The third party amended the claims in the re-examination proceedings,
which led the PTO to determine that the amended claims are patentable in view of
those publications under consideration and a re-examination certificate was
issued. However, we believe that the amended claims are invalid based on
additional prior art publications, and we filed a second request for
re-examination by the PTO in light of a number of these additional publications
and other publications cited by the PTO. The request was granted and all of the
claims were finally rejected by the PTO in the re-examination. The patent holder
appealed the rejections to the PTO Board of Patent Appeals and Interferences
(“the Board”) which affirmed the rejection of all of the claims. The
patent holder subsequently filed a request for rehearing, which led the Board to
reverse the rejections of several dependent claims in view of those publications
under consideration. The patent holder has filed a Notice of Appeal to the
Federal Circuit contesting the rejections maintained by the Board. We also
believe that the second of these two patents is invalid in view of published
prior art not considered by the PTO. Nevertheless, there is no assurance that
either patent will ultimately be found invalid over the prior art. If such
patents are not invalidated by the PTO we may be required to obtain a license
from the holder of such patents in order to develop Androxal® further or
attempts may be made to undertake further legal action to invalidate such
patents. If such licenses were not available on acceptable terms, or at all, we
may not be able to successfully commercialize or out-license
Androxal®.
F-7
On August
7, 2009, R.M. Berry filed a putative class action lawsuit naming the Company,
Joseph Podolski, Paul Lammers, and Louis Ploth, Jr. as
defendants. The lawsuit is pending in the United States District
Court for the Southern District of Texas, Houston Division. The
lawsuit, styled R.M. Berry, on Behalf of Himself and all Others Similarly
Situated v. Repros Therapeutics, Inc., Joseph Podolski, Paul Lammers, and Louis
Ploth, Jr., alleges that the defendants made certain misleading statements
related to the Company’s Proellex® drug. Among other claims, the
lawsuit contends that the defendants misrepresented the side effects of the drug
related to liver function, and the risk that these side effects could cause a
suspension of clinical trials of Proellex®. The lawsuit seeks to establish a
class of shareholders allegedly harmed by the misleading statements, and asserts
causes of action under the Securities Exchange Act of 1934. On August
14, 2009, a lawsuit making similar allegations and naming the same defendants
was also filed in the United States District Court for the Southern District of
Texas. This suit is styled Josephine Medina, Individually and On
Behalf of all Others Similarly Situated v. Repros Therapeutics, Inc., Joseph
Podolski, Paul Lammers, and Louis Ploth, Jr. On September 25, 2009, a
lawsuit also making allegations similar to those in the Berry action, and naming
the same defendants, was filed in the United States District Court for the
Southern District of Texas. That lawsuit is styled Shane Simpson,
Paul Frank and Clayton Scobie, on Behalf of Themselves and all Others Similarly
Situated v. Repros Therapeutics, Inc., Joseph Podolski, Paul Lammers, and Louis
Ploth, Jr. The lawsuits have now been consolidated, and
lead plaintiffs appointed. On January 27, 2010, the lead plaintiffs filed a
Consolidated Class Action Complaint styled In re Repros Therapeutics, Inc.
Securities Litigation, Civil Action No. 09 Civ. 2530 (VDG). The lawsuit names
Repros Therapeutics, Inc., Joseph Podolski, Paul Lammers, and Louis Ploth, Jr.
as defendants. The allegations in the Consolidated Class Action Complaint are
substantially the same as those contained in the prior complaints, and focus on
the claim that the defendants deliberately withheld information concerning the
negative side-effects of Proellex® related to liver function. Plaintiffs seek to
establish a class action for all persons who “purchased or otherwise acquired
Repros common stock between July 1, 2009, and August 2, 2009.” No discovery has
yet occurred in the matter. Defendants filed a motion to dismiss the
Consolidated Class Action Complaint on March 15, 2010. Briefing has been
completed on that motion, but the court has not yet ruled on it. An estimate of
the possible loss or range of losses in connection with the lawsuits cannot be
made at this time.
On March
1, 2010, we were served with a lawsuit where we were named as a co-defendant
along with one of our clinical regulatory service providers (“CRO”) relating to
the Proellex® clinical trial study. The lawsuit was filed in the
State of Tennessee, 30th Judicial District Chancery Court at Memphis by an
investigator and claims that the CRO did not pay it amounts owing to it relating
to the Proellex® study. We did not engage the investigator and under
our agreement with the CRO, we believe the CRO is responsible for any such costs
or damages regarding such lawsuit. Pursuant to a Settlement Agreement
and Mutual Release entered into in October 2009, such CRO, on behalf of itself
and its agents, released us from all claims which could be asserted by them
against us. We believe such release covers the claims set forth in
this lawsuit. The CRO failed to respond to the lawsuit, and a default judgment
was entered against it in the amount of $172,901.29. We intend to vigorously
defend any and all claims asserted by the investigator. An estimate of the
possible costs or expenses to defend ourselves in this matter or risk of
exposure under the litigation cannot be made at this time.
NOTE
6 — Other Recent Events, Including Subsequent Events
Between
November 30, 2009 and March 31, 2010, we entered into settlement agreements and
mutual releases (the “Prior Settlement Agreements”) with certain of our
creditors, pursuant to which we issued an aggregate of 352,459 shares of common
stock and paid an aggregate of $140,572 in cash as payment in full for our
then-outstanding liabilities to such creditors. On April 8,
2010, we entered into an additional settlement agreement and mutual release
(together with the Prior Settlement Agreements, the “Settlement Agreements”)
with a creditor, pursuant to which we issued 34,885 shares of common stock
(together with the shares issued under the Prior Settlement Agreements, the
“Settlement Shares”) and paid $8,721 in cash as payment in full for our
then-outstanding liability to such creditor. The Settlement Shares were issued
by the Company pursuant to Section 4(2) and /or Rule 506 of Regulation D
promulgated under the Securities Act of 1933, as amended. Pursuant to the
Settlement Agreements, we filed a registration statement to register the
Settlement Shares on June 9, 2010, which was declared effective by the SEC on
June 25, 2010, and we agreed to use our best efforts to maintain such
registration statement until all such Settlement Shares registered thereunder to
such creditors have been sold or for a period of one year, whichever comes
first.
In
addition to the Settlement Agreements, we settled with several of our creditors
during the second and third quarter of 2010, in an amount less than our
then-outstanding liabilities to such creditors. These settlements resulted in
recognition of $85,000 and $138,000 in other income for the three and nine month
periods ended September 30, 2010, respectively, on the Condensed Consolidated
Statement of Operations.
F-8
On
February 12, 2010, we entered into an Equity Distribution Agreement (the “Equity
Distribution Agreement”) with Ladenburg Thalmann & Co. Inc. (“Ladenburg”),
pursuant to which we may issue and sell from time to time through Ladenburg, as
sales agent and/or principal, shares of our common stock having an aggregate
offering price of up to $10 million (the “ATM Shares”). Ladenburg is not
required to sell on our behalf any specific number or dollar amount of the ATM
Shares, but Ladenburg, upon acceptance of written instructions from us, agreed
to use its commercially reasonable efforts consistent with its customary trading
and sales practices, to sell the ATM Shares up to the amount specified, and
otherwise in accordance with the terms of a placement notice delivered to
Ladenburg. We have no obligation to sell any ATM Shares under the Equity
Distribution Agreement, and may at any time suspend sales under the Equity
Distribution Agreement, provided that such suspension shall not affect either
party’s obligations with respect to the ATM Shares sold prior to the receipt of
notice of such suspension. Ladenburg receives a commission of 4% of the gross
sales price of all ATM Shares sold through it under the Equity Distribution
Agreement. The ATM Shares are issued pursuant to our shelf registration
statement on Form S-3, as amended (File No. 333-163648). Between July 1, 2010
and September 30, 2010, we have sold an aggregate of 277,164 ATM Shares at a
weighted average share price of $1.51, for proceeds of approximately $401,000,
net of expenses. Cumulative through September 30, 2010, we have sold 2,448,572
ATM Shares at a weighted average share price of $2.77, for proceeds of
approximately $6.4 million, net of expenses. Pursuant to General Instruction
I.B.6. of Form S-3, we may not sell more than one-third of the aggregate market
value of our common stock held by non-affiliates during a period of 12 calendar
months immediately prior to, and including, the date of such sale of such common
stock. Due to this limitation, we announced on August 3, 2010 that we have
suspended this ATM offering of Company securities.
On
November 1, 2010, we were notified by The Department of the Treasury that our
application submitted requesting certification for qualified investment in a
qualifying therapeutic discovery project under section 48D of the Internal
Revenue Code was accepted. As a result, we have been awarded a grant in the
amount of $244,479. It is anticipated that proceeds from this grant will be
received late in November 2010.
On
November 8, 2010, we had a Type B meeting with the FDA. In that meeting the FDA
recommended that we conduct a Phase 2B study in men with secondary hypogonadism
but naïve to testosterone treatment before moving into Phase 3. The
FDA opined further that such a Phase 2B study would provide for a more solid
data base for design of Phase 3 studies and eventual approval of such studies
under a Special Protocol Assessment (“SPA”). The FDA did note “the Division
agrees in general with the outline of your program for the development of
enclomiphene” (Androxal®).
F-9
600,000
UNITS, CONSISTING OF
2,400,000
SHARES OF COMMON STOCK,
SERIES
A WARRANTS TO PURCHASE 1,800,000 SHARES OF COMMON STOCK AND
SERIES
B WARRANTS TO PURCHASE 1,470,000 SHARES OF COMMON STOCK
PROSPECTUS
,
2011
Ladenburg
Thalmann & Co. Inc.
II-1
Part
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
Item
13.
|
Other
Expenses of Issuance and
Distribution
|
The
following table lists the costs and expenses payable by the Company in
connection with the sale of the common stock and warrants covered by this
prospectus other than any sales commissions or discounts. All amounts
shown are estimates except for the SEC registration fee, and all of the fees and
expenses will be borne by the Company.
SEC
registration fee
|
$ | 2,912 | ||
Nasdaq
listing fees
|
50,000 | |||
FINRA
fee
|
1,420 | |||
Legal
fees and expenses
|
150,000 | |||
Accounting
fees and expenses
|
50,000 | |||
Printing,
transfer agent and miscellaneous expenses
|
15,000 | |||
Total
|
$ | 269,332 |
Item 14.
|
Indemnification
of Directors and Officers
|
Section
145 of the Delaware General Corporation Law, or Delaware law, inter alia,
empowers a Delaware corporation to indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding (other than an action by or in the right of the corporation)
by reason of the fact that such person is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation or
other enterprise, against expenses (including attorneys’ fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and in
a manner he reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. Similar indemnity is
authorized for such persons against expenses (including attorneys’ fees)
actually and reasonably incurred in connection with the defense or settlement of
any such threatened, pending or completed action or suit if such person acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation, and provided further that (unless a court of
competent jurisdiction otherwise provides) such person shall not have been
adjudged liable to the corporation. Any such indemnification may be made only as
authorized in each specific case upon a determination by the stockholders or
disinterested directors or by independent legal counsel in a written opinion
that indemnification is proper because the indemnitee has met the applicable
standard of conduct.
Section
145 further authorizes a corporation to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or enterprise,
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the corporation
would otherwise have the power to indemnify him under Section 145. We maintain
policies insuring our officers and directors against certain liabilities for
actions taken in such capacities, including liabilities under the Securities
Act.
Our
Restated Certificate of Incorporation and Restated Bylaws require us to
indemnify our directors to the fullest extent permitted under Delaware law or
any other applicable law in effect, but if such statute or law is amended, we
may change the standard of indemnification only to the extent that such amended
statute or law permits us to provide broader indemnification rights to our
directors. We must indemnify such officers and employees in the same manner and
to the same extent that we are required to indemnify our directors under our
Restated Certificate of Incorporation and Restated Bylaws. Our Restated
Certificate of Incorporation limits the personal liability of a director to us
or our stockholders to damages for breach of the director’s fiduciary duty.
Pursuant to indemnification agreements we entered into with each of our
directors, we are further required to indemnify our directors to the fullest
extent permitted under Delaware law and our Restated Bylaws; provided that each
such director shall enjoy the greater of (i) the advancement and indemnification
rights permitted under our Restated Certificate and Restated Bylaws for
directors and officers as of the date of such indemnification agreement or (ii)
the benefits so afforded by amendments thereto.
Item 15.
|
Recent
Sales of Unregistered Securities
|
Between
November 30, 2009 and March 31, 2010, we entered into settlement agreements and
mutual releases (the “Prior Settlement Agreements”) with certain of our
creditors, pursuant to which we issued an aggregate of 352,459 shares of common
stock and paid an aggregate of $140,572 in cash as payment in full for our
then-outstanding liabilities to such creditors. On April 8, 2010, we entered
into an additional settlement agreement and mutual release (together with the
Prior Settlement Agreements, the “2010 Settlement Agreements”) with a creditor,
pursuant to which we issued 34,885 shares of common stock (together with the
shares issued under the Prior Settlement Agreements, the “2010 Settlement
Shares”) and paid $8,721 in cash as payment in full for our then-outstanding
liability to such creditor. The 2010 Settlement Shares were issued by the
Company pursuant to Section 4(2) and /or Rule 506 of Regulation D promulgated
under the Securities Act of 1933, as amended. Pursuant to the 2010 Settlement
Agreements, we filed a registration statement to register the 2010 Settlement
Shares on June 9, 2010, which was declared effective by the SEC on June 25,
2010, and we agreed to use our best efforts to maintain such registration
statement until all such 2010 Settlement Shares registered thereunder to such
creditors have been sold or for a period of one year, whichever comes
first.
II-2
On
October 29, 2009, we entered into a Master Settlement Agreement and Releases
(the “October Settlement Agreement”) with certain trade creditors, pursuant to
which we issued 5,361,194 shares of our common stock, at $1.10 per share, and
paid approximately $2.77 million in cash to such creditors as payment in full
for our then-outstanding liabilities of approximately $8.7 million and for the
release of the claims held by and the dismissal of the litigation commenced by
such creditors against the Company. Pursuant to the October Settlement
Agreements, we filed a registration statement to register the such shares on
December 4, 2010, which was declared effective by the SEC on January 7, 2010,
and we agreed to use our best efforts to maintain such registration statement
until all such shares registered thereunder to such creditors have been sold or
for a period of one year, whichever comes first.
Item 16.
|
Exhibits
and Financial Statement Schedules
|
The
following exhibits are filed as part of, or incorporated by reference into this
registration statement:
Exhibit
Number
|
Identification
Of Exhibit
|
|
1.1*
|
Form
of Underwriting Agreement
|
|
3.1(a)
|
Restated
Certificate of Incorporation. Exhibit 3.3 to the Company's Registration
Statement on Form SB-2 (No. 33-57728-FW), as amended ("Registration
Statement"), is incorporated herein by reference.
|
|
3.1(b)
|
Certificate
of Amendment to the Company's Restated Certificate of Incorporation, dated
as of May 2, 2006. Exhibit 3.1 to the Company's Current Report on Form 8-K
as filed with the Commission on May 2, 2006 is incorporated herein by
reference.
|
|
3.1(c)
|
Certificate
of Designation of Series One Junior Participating Preferred Stock dated
September 2, 1999. Exhibit A to Exhibit 4.1 to the Company's Registration
Statement on Form 8-A as filed with the Commission on September 3, 1999
(the "Rights Plan Registration Statement"), is incorporated herein by
reference.
|
|
3.1(d)
|
Certificate
of Amendment to Restated Certificate of Incorporation, dated as of
December 16, 2008. Exhibit 3.1(d) to the Company’s Current Report on Form
8-K as filed with the Commission on December 23, 2008 is incorporated
herein by reference.
|
|
3.1(e)
|
Certificate
of Amendment to Restated Certificate of Incorporation, dated as of
November 18, 2009. Exhibit 3.1(e) to the Company’s Current Report on Form
8-K dated November 19, 2009 is incorporated herein by
reference.
|
|
3.1(f)
|
Certificate
of Amendment to Restated Certificate of Incorporation, dated October 14,
2010. Exhibit 3.1(f) to the Company’s Current Report on Form 8-K dated
October 14, 2010 is incorporated herein by reference.
|
|
3.2
|
Restated
Bylaws of the Company. Exhibit 3.4 to the Registration Statement is
incorporated herein by reference.
|
|
4.1
|
Specimen
Certificate of Common Stock, $.001 par value, of the Company. Exhibit 4.1
to the Registration Statement is incorporated herein by
reference.
|
|
4.2
|
Rights
Agreement dated September 1, 1999 between the Company and Computershare
Investor Services LLC (as successor in interest to Harris Trust &
Savings Bank), as Rights Agent. Exhibit 4.1 to the Rights Plan
Registration Statement is incorporated herein by
reference.
|
|
4.3
|
First
Amendment to Rights Agreement, dated as of September 6, 2002, between the
Company, Harris Trust & Savings Bank and Computershare Investor
Services LLC. Exhibit 4.3 to Amendment No. 1 to the Rights Plan
Registration Statement on Form 8-A/A as filed with the Commission on
September 11, 2002 is incorporated herein by reference.
|
|
4.4
|
Second
Amendment to Rights Agreement, dated as of October 30, 2002, between the
Company and Computershare Investor Services LLC. Exhibit 4.4 to Amendment
No. 2 to the Rights Plan Registration Statement on Form 8-A/A as filed
with the Commission on October 31, 2002 is incorporated herein by
reference.
|
|
4.5
|
Third
Amendment to Rights Agreement, dated as of June 30, 2005, between the
Company and Computershare Trust Company, Inc. (as successor in interest to
Computershare Investor Services, LLC). Exhibit 4.4 to the Company's
Current Report on Form 8-K as filed with the Commission on June 30, 2005
is incorporated herein by reference.
|
|
4.6
|
Fourth
Amendment to Rights Agreement, dated as of January 9, 2008, between the
Company and Computershare Trust Company, Inc. (as successor in interest to
Computershare Investor Services, LLC). Exhibit 4.5 to the Company's
Current Report on Form 8-K as filed with the Commission on January 10,
2008 is incorporated herein by
reference.
|
II-3
4.7
|
Fifth
Amendment to Rights Agreement, dated as of October 10, 2008, between the
Company and Computershare Trust Company, Inc. (as successor in interest to
Computershare Investor Services, LLC). Exhibit 4.6 to the
Company’s Current Report on Form 8-K as filed with the Commission on
January 10, 2008 is incorporated herein by reference.
|
|
4.8
|
Sixth
Amendment to Rights Agreement, dated as of September 9, 2010, between the
Company and Computershare Trust Company, Inc. (as successor in interest to
Computershare Investor Services, LLC). Exhibit 4.7 to the
Company’s Current Report on Form 8-K as filed with the Commission on
September 10, 2010 is incorporated herein by reference.
|
|
4.9
|
Form
of Rights Certificate. Exhibit B to Exhibit 4.1 to the Rights Plan
Registration Statement is incorporated herein by
reference.
|
|
4.10*
|
Form
of Series A Warrant Certificate
|
|
4.11*
|
Form
of Series B Warrant Certificate
|
|
4.12*
|
Series
A Warrant Agreement between the Company and Warrant
Agent
|
|
4.13*
|
Series
B Warrant Agreement between the Company and Warrant
Agent
|
|
5.1*
|
Opinion
of Winstead PC
|
|
10.1+
|
Amended
and Restated 1993 Employee and Consultant Stock Option Plan. Exhibit 10.3
to the Registration Statement is incorporated herein by
reference.
|
|
10.2+
|
First
Amendment to the Repros Therapeutics Inc. Amended and Restated 1993 Stock
Option Plan. Exhibit 10.22 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1999 is incorporated herein by
reference.
|
|
10.3+
|
1994
Employee and Consultant Stock Option Plan. Exhibit 4.2 to the Company's
Registration Statement on Form S-8 (File No. 033-83406) as filed with the
Commission on August 29, 1994 is incorporated herein by
reference.
|
|
10.4+
|
2000
Non-Employee Directors' Stock Option Plan. Appendix B to the Company's
Definitive Proxy Statement filed on April 26, 2000 is incorporated herein
by reference.
|
|
10.5+
|
First
Amendment to the Repros Therapeutics Inc. 2000 Non-Employee Directors'
Stock Option Plan. Exhibit 10.21 to the 2000 Form 10-K is incorporated
herein by reference.
|
|
10.6+
|
Second
Amendment to 2000 Non-Employee Directors' Stock Option Plan. Exhibit 10.6
to the Company's Annual Report on Form 10-K for the year ended December
31, 2002 (the "2002 Form 10-K") is incorporated herein by
reference.
|
|
10.7+
|
Repros
Therapeutics Inc. 2004 Stock Option Plan. Exhibit 10.17 to the
Company's Registration Statement on Form S-1 (No. 333-119861), as amended,
is incorporated herein by reference.
|
|
10.8+
|
Employment
Agreement between the Company and Joseph S. Podolski. Exhibit 10.5 to the
Registration Statement is incorporated herein by
reference.
|
|
10.9+
|
First
Amendment to Employment Agreement between the Company and Joseph S.
Podolski. Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for
the fiscal quarter ended March 31, 2001 is incorporated herein by
reference.
|
|
10.10+
|
Second
Amendment to Employment Agreement between the Company and Joseph S.
Podolski. Exhibit 10.17 to the 2002 Form 10-K is incorporated herein by
reference.
|
|
10.11+
|
Third
Amendment to Employment Agreement dated effective March 11, 2009, between
the Company and Joseph S. Podolski. Exhibit 10.1 to the
Company’s Current Report on Form 8-K as filed with the Commission on March
17, 2009 is incorporated herein by reference.
|
|
10.12+
|
Fourth
Amendment to Employment Agreement effective March 10, 2010 between the
Company and Joseph S. Podolski. Exhibit 10.1 to the Company’s
Current Report on Form 8-K as filed with the Commission on March 11, 2010
is incorporated herein by
reference.
|
II-4
10.13+
|
Consulting
Agreement dated October 29, 2009 by and between the Company and Katherine
Anderson. Exhibit 10.2 to the Company’s Current Report on Form 8-K as
filed with the Commission on November 3, 2009 is incorporated herein by
reference.
|
|
10.14
|
Lease
Agreement dated May 11, 2004 between the Company and Sealy Woodlands, L.P.
Exhibit 10.14 to the Company's Annual Report on Form 10-K for the year
ended December 31, 2004 is incorporated herein by
reference.
|
|
10.15
|
Amendment
to Lease Agreement between the Company and Sealy Woodlands, L.P., dated
May 17, 2006. Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q
for the fiscal quarter ended March 31, 2006 is incorporated herein by
reference.
|
|
10.16
|
Second
Amendment to Lease, effective as of July 1, 2010, between the Company and
Columbia Texas 2408 Timberloch Industrial, L.P. Exhibit 10.1 to the
Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 2010 is incorporated herein by
reference.
|
|
10.17++
|
Letter
Agreement dated July 15, 2002 between the Company, Schering Plough Ltd.
and Schering-Plough Corporation. Exhibit 10.1 to the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended June 30, 2002 is
incorporated herein by reference.
|
|
10.18++
|
PHS
Patent License Agreement dated April 16, 1999 between the Company and
certain agencies of the United States Public Health Service within the
Department of Health and Human Services, with amendments. Exhibit 10.1 to
the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 2003 is incorporated herein by
reference.
|
|
10.19
|
Waiver
to PHS Patent License Agreement, as amended, dated March 8, 2007 between
the Company and certain agencies of the United States Public Health
Service within the Department of Health and Human Services. Exhibit 10.2
to the Company’s Current Report on Form 8-K as filed with the Commission
on March 19, 2007 is incorporated herein by
reference.
|
|
10.20++
|
Sixth
Amendment to PHS Patent License Agreement, as amended, dated July 7, 2009
between the Company and certain agencies of the United States Public
Health Service within the Department of Health and Human Services. Exhibit
10.1 to the Company’s Current Report on Form 8-K/A as filed with the
Commission on December 22, 2009 is incorporated herein by
reference.
|
|
10.21++
|
Seventh
Amendment to PHS Patent License Agreement, as amended, dated October 28,
2009 between the Company and certain agencies of the United States Public
Health Service within the Department of Health and Human Services. Exhibit
10.21 to the Company’s Annual Report on Form 10-K as filed with the
Commission on March 15, 2010 is incorporated herein by
reference.
|
|
10.22
|
Master
Settlement Agreement and Releases dated October 29, 2009 by and among the
Company and its creditors signatory thereto. Exhibit 10.1 to the Company’s
Current Report on Form 8-K as filed with the Commission on November 3,
2009 is incorporated herein by reference.
|
|
10.23
|
Securities
Purchase Agreement dated October 7, 2009, among the Company and the
purchasers identified on the signature pages thereto. Exhibit 10.1 to the
Company’s Current Report on Form 8-K as filed with the Commission on
October 14, 2009 is incorporated herein by
reference.
|
|
10.24
|
Securities
Purchase Agreement between the Company and Enable Growth Partners LP dated
September 8, 2009. Exhibit 10.1 to the Company’s Current Report on Form
8-K as filed with the Commission on September 10, 2009 is incorporated
herein by reference.
|
|
10.25
|
Form
of Indemnification Agreement entered into between the Company and each of
its directors. Exhibit 10.1 to the Company’s Current Report on Form 8-K as
filed with the Commission on May 20, 2009 is incorporated herein by
reference.
|
|
10.26
|
Equity
Distribution Agreement dated February 12, 2010 between the Company and
Ladenburg Thalmann & Co. Inc. Exhibit 10.1 to the Company’s Current
Report on Form 8-K as filed with the Commission on February 19, 2010 is
incorporated herein by reference.
|
|
23.1*
|
Consent
of PricewaterhouseCoopers LLP
|
|
23.2*
|
Consent
of Winstead PC (included in Exhibit
5.1)
|
II-5
24.1
|
Power
of Attorney (incorporated by reference to Exhibit 24.1 to the Company’s
registration statement on Form S-1 filed on December 15,
2010)
|
*
|
Filed
herewith.
|
+
|
Management
contract or compensatory plan.
|
++
|
Portions
of this exhibit have been omitted based on a request for confidential
treatment pursuant to Rule 24b-2 of the Exchange Act. Such omitted
portions have been filed separately with the
Commission.
|
Item 17
|
Undertakings
|
(a) The
undersigned registrant hereby undertakes:
(1) To
file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) to
include any prospectus required by Section 10(a)(3) of the Securities
Act;
(ii) to
reflect in the prospectus any facts or events arising after the effective date
of the registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of securities offered
would not exceed that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflected in the form of
a prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate,
the change in volume and price represents no more than a 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration
statement;
(iii) to
include any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change to
such information in the registration statement.
(2) That,
for the purpose of determining any liability under the Securities Act, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at the time shall be deemed to be the initial bona fide offering
thereof.
(3) To
remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.
(4) That,
for the purpose of determining liability under the Securities Act to any
purchaser, each prospectus filed pursuant to Rule 424(b) as part of a
registration statement relating to an offering, other than registration
statements relying on 430B or other than prospectuses filed in reliance on Rule
430A shall be deemed to be part of and included in the registration statement as
of the date it is first used after effectiveness. Provided, however, that no
statement made in a registration statement or prospectus that is part of the
registration statement or made in a document incorporated or deemed incorporated
by reference into the registration statement or prospectus that is part of the
registration statement will, as to a purchaser with a time of contract of sale
prior to such first use, supersede or modify any statement that was made in the
registration statement or prospectus that was part of the registration statement
or made in any such document immediately prior to such date of first
use.
II-6
(5) That,
for the purpose of determining liability of the undersigned registrant under the
Securities Act to any purchaser in the initial distribution of the securities,
the undersigned registrant undertakes that in a primary offering of securities
of the undersigned registrant pursuant to this registration statement,
regardless of the underwriting method used to sell the securities to the
purchaser, if the securities are offered or sold to such purchaser by means of
any of the following communications, the undersigned registrant will be a seller
to the purchaser and will be considered to offer or sell such securities to such
purchaser:
(i) Any
preliminary prospectus or prospectus of the undersigned registrant relating to
the offering required to be filed pursuant to Rule 424 under the Securities
Act;
(ii) Any
free writing prospectus relating to the offering prepared by or on behalf of the
undersigned registrant or used or referred to by the undersigned
registrant;
(iii) The
portion of any other free writing prospectus relating to the offering containing
material information about the undersigned registrant or its securities provided
by or on behalf of the undersigned registrant; and
(iv) Any
other communication that is an offer in the offering made by the undersigned
registrant to the purchaser.
(b) The
undersigned registrant hereby undertakes to deliver or cause to be delivered
with the prospectus, to each person to whom the prospectus is sent or given, the
latest annual report to security holders that is incorporated by reference in
the prospectus and furnished pursuant to and meeting the requirements of Rule
14a-3 or Rule 14c-3 under the Exchange Act; and, where interim financial
information required to be presented by Article 3 of Regulation S-X are not set
forth in the prospectus, to deliver, or cause to be delivered to each person to
whom the prospectus is sent or given, the latest quarterly report that is
specifically incorporated by reference in the prospectus to provide such interim
financial information.
(c) The
undersigned registrant hereby undertakes that:
(i) For
purposes of determining any liability under the Securities Act of 1933, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(ii) For
the purpose of determining any liability under the Securities Act of 1933, each
post-effective amendment that contains a form of prospectus shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(d) Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers, and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the SEC such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer, or controlling person of the registrant in the successful defense of
any action, suit, or proceeding) is asserted by such director, officer, or
controlling person connected with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
II-7
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized in The Woodlands, Montgomery County,
State of Texas, on February 1, 2011.
REPROS
THERAPEUTICS INC.
|
||
By:
|
/s/ Joseph S. Podolski
|
|
Joseph
S. Podolski
|
||
President
and Chief Executive Officer
|
||
By:
|
/s/ Katherine A.
Anderson
|
|
Katherine
A. Anderson
|
||
Chief
Accounting Officer, Principal
|
||
Financial
Officer and Principal
|
||
Accounting
Officer
|
Pursuant
to the requirements of the Securities Act of 1933, this registration statement
has been signed below by the following persons in the capacities and on the
dates indicated.
Signatures
|
Title
|
Date
|
|||
/s/
Joseph S. Podolski
|
President,
Chief Executive Officer
|
February
1, 2011
|
|||
Joseph S.
Podolski
|
and
Director
|
||||
/s/ Katherine
A. Anderson
|
Chief
Accounting Officer, Principal Financial
|
February
1, 2011
|
|||
Katherine A.
Anderson
|
Officer
and Principal Accounting Officer
|
||||
*
|
Chairman
of the Board
|
February
1, 2011
|
|||
Nola
Masterson
|
|||||
*
|
Director
|
February
1, 2011
|
|||
Daniel F.
Cain
|
|||||
*
|
Director
|
February
1, 2011
|
|||
Jean L. Fourcroy, M.D., Ph.D.,
M.P.H.
|
|||||
*
|
Director
|
February
1, 2011
|
|||
Jaye Thompson,
Ph.D
|
|||||
By:
|
/s/ Joseph
S. Podolski
|
February
1, 2011
|
|||
Attorney-In-Fact
|
|||||
S-1
EXHIBIT
INDEX
The
following exhibits are filed as part of, or incorporated by reference into this
registration statement:
Exhibit
Number
|
Identification
Of Exhibit
|
|
1.1*
|
Form
of Underwriting Agreement
|
|
3.1(a)
|
Restated
Certificate of Incorporation. Exhibit 3.3 to the Company's Registration
Statement on Form SB-2 (No. 33-57728-FW), as amended ("Registration
Statement"), is incorporated herein by reference.
|
|
3.1(b)
|
Certificate
of Amendment to the Company's Restated Certificate of Incorporation, dated
as of May 2, 2006. Exhibit 3.1 to the Company's Current Report
on Form 8-K as filed with the Commission on May 2, 2006 is incorporated
herein by reference.
|
|
3.1(c)
|
Certificate
of Designation of Series One Junior Participating Preferred Stock dated
September 2, 1999. Exhibit A to Exhibit 4.1 to the Company's Registration
Statement on Form 8-A as filed with the Commission on September 3, 1999
(the "Rights Plan Registration Statement"), is incorporated herein by
reference.
|
|
3.1(d)
|
Certificate
of Amendment to Restated Certificate of Incorporation, dated as of
December 16, 2008. Exhibit 3.1(d) to the Company’s Current
Report on Form 8-K as filed with the Commission on December 23, 2008 is
incorporated herein by reference.
|
|
3.1(e)
|
Certificate
of Amendment to Restated Certificate of Incorporation, dated as of
November 18, 2009. Exhibit 3.1(e) to the Company’s Current Report on Form
8-K dated November 19, 2009 is incorporated herein by
reference.
|
|
3.1(f)
|
Certificate
of Amendment to Restated Certificate of Incorporation, dated October 14,
2010. Exhibit 3.1(f) to the Company’s Current Report on Form 8-K dated
October 14, 2010 is incorporated herein by
reference.
|
|
3.2
|
Restated
Bylaws of the Company. Exhibit 3.4 to the Registration Statement is
incorporated herein by reference.
|
|
4.1
|
Specimen
Certificate of Common Stock, $.001 par value, of the Company. Exhibit 4.1
to the Registration Statement is incorporated herein by
reference.
|
|
4.2
|
Rights
Agreement dated September 1, 1999 between the Company and Computershare
Investor Services LLC (as successor in interest to Harris Trust &
Savings Bank), as Rights Agent. Exhibit 4.1 to the Rights Plan
Registration Statement is incorporated herein by
reference.
|
|
4.3
|
First
Amendment to Rights Agreement, dated as of September 6, 2002, between the
Company, Harris Trust & Savings Bank and Computershare Investor
Services LLC. Exhibit 4.3 to Amendment No. 1 to the Rights Plan
Registration Statement on Form 8-A/A as filed with the Commission on
September 11, 2002 is incorporated herein by
reference.
|
|
4.4
|
Second
Amendment to Rights Agreement, dated as of October 30, 2002, between the
Company and Computershare Investor Services LLC. Exhibit 4.4 to Amendment
No. 2 to the Rights Plan Registration Statement on Form 8-A/A as filed
with the Commission on October 31, 2002 is incorporated herein by
reference.
|
|
4.5
|
Third
Amendment to Rights Agreement, dated as of June 30, 2005, between the
Company and Computershare Trust Company, Inc. (as successor in interest to
Computershare Investor Services, LLC). Exhibit 4.4 to the
Company's Current Report on Form 8-K as filed with the Commission on June
30, 2005 is incorporated herein by reference.
|
|
4.6
|
Fourth
Amendment to Rights Agreement, dated as of January 9, 2008, between the
Company and Computershare Trust Company, Inc. (as successor in interest to
Computershare Investor Services, LLC). Exhibit 4.5 to the
Company's Current Report on Form 8-K as filed with the Commission on
January 10, 2008 is incorporated herein by
reference.
|
|
4.7
|
Fifth
Amendment to Rights Agreement, dated as of October 10, 2008, between the
Company and Computershare Trust Company, Inc. (as successor in interest to
Computershare Investor Services, LLC). Exhibit 4.6 to the
Company’s Current Report on Form 8-K as filed with the Commission on
January 10, 2008 is incorporated herein by
reference.
|
|
4.8
|
Sixth
Amendment to Rights Agreement, dated as of September 9, 2010, between the
Company and Computershare Trust Company, Inc. (as successor in interest to
Computershare Investor Services, LLC). Exhibit 4.7 to the
Company’s Current Report on Form 8-K as filed with the Commission on
September 10, 2010 is incorporated herein by
reference.
|
4.9
|
Form
of Rights Certificate. Exhibit B to Exhibit 4.1 to the Rights Plan
Registration Statement is incorporated herein by
reference.
|
|
4.10*
|
Form
of Series A Warrant Certificate
|
|
4.11*
|
Form
of Series B Warrant Certificate
|
|
4.12*
|
Series
A Warrant Agreement between the Company and Warrant
Agent
|
|
4.13*
|
Series
B Warrant Agreement between the Company and Warrant
Agent
|
|
5.1*
|
Opinion
of Winstead PC
|
|
10.1+
|
Amended
and Restated 1993 Employee and Consultant Stock Option Plan. Exhibit 10.3
to the Registration Statement is incorporated herein by
reference.
|
|
10.2+
|
First
Amendment to the Repros Therapeutics Inc. Amended and Restated 1993 Stock
Option Plan. Exhibit 10.22 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1999 is incorporated herein by
reference.
|
|
10.3+
|
1994
Employee and Consultant Stock Option Plan. Exhibit 4.2 to the Company's
Registration Statement on Form S-8 (File No. 033-83406) as filed with the
Commission on August 29, 1994 is incorporated herein by
reference.
|
|
10.4+
|
2000
Non-Employee Directors' Stock Option Plan. Appendix B to the Company's
Definitive Proxy Statement filed on April 26, 2000 is incorporated herein
by reference.
|
|
10.5+
|
First
Amendment to the Repros Therapeutics Inc. 2000 Non-Employee Directors'
Stock Option Plan. Exhibit 10.21 to the 2000 Form 10-K is incorporated
herein by reference.
|
|
10.6+
|
Second
Amendment to 2000 Non-Employee Directors' Stock Option Plan. Exhibit 10.6
to the Company's Annual Report on Form 10-K for the year ended December
31, 2002 (the "2002 Form 10-K") is incorporated herein by
reference.
|
|
10.7+
|
Repros
Therapeutics Inc. 2004 Stock Option Plan. Exhibit 10.17 to the
Company's Registration Statement on Form S-1 (No. 333-119861), as amended,
is incorporated herein by reference.
|
|
10.8+
|
Employment
Agreement between the Company and Joseph S. Podolski. Exhibit 10.5 to the
Registration Statement is incorporated herein by
reference.
|
|
10.9+
|
First
Amendment to Employment Agreement between the Company and Joseph S.
Podolski. Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for
the fiscal quarter ended March 31, 2001 is incorporated herein by
reference.
|
|
10.10+
|
Second
Amendment to Employment Agreement between the Company and Joseph S.
Podolski. Exhibit 10.17 to the 2002 Form 10-K is incorporated herein by
reference.
|
|
10.11+
|
Third
Amendment to Employment Agreement dated effective March 11, 2009, between
the Company and Joseph S. Podolski. Exhibit 10.1 to the
Company’s Current Report on Form 8-K as filed with the Commission on March
17, 2009 is incorporated herein by reference.
|
|
10.12+
|
Fourth
Amendment to Employment Agreement effective March 10, 2010 between the
Company and Joseph S. Podolski. Exhibit 10.1 to the Company’s
Current Report on Form 8-K as filed with the Commission on March 11, 2010
is incorporated herein by reference.
|
|
10.13+
|
Consulting
Agreement dated October 29, 2009 by and between the Company and Katherine
Anderson. Exhibit 10.2 to the Company’s Current Report on Form
8-K as filed with the Commission on November 3, 2009 is incorporated
herein by reference.
|
|
10.14
|
Lease
Agreement dated May 11, 2004 between the Company and Sealy Woodlands,
L.P. Exhibit 10.14 to the Company's Annual Report on Form 10-K
for the year ended December 31, 2004 is incorporated herein by
reference.
|
10.15
|
Amendment
to Lease Agreement between the Company and Sealy Woodlands, L.P., dated
May 17, 2006. Exhibit 10.1 to the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended March 31, 2006 is incorporated
herein by reference.
|
|
10.16
|
Second
Amendment to Lease, effective as of July 1, 2010, between the Company and
Columbia Texas 2408 Timberloch Industrial, L.P. Exhibit 10.1 to
the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 2010 is incorporated herein by reference.
|
|
10.17++
|
Letter
Agreement dated July 15, 2002 between the Company, Schering Plough Ltd.
and Schering-Plough Corporation. Exhibit 10.1 to the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended June 30, 2002 is
incorporated herein by reference.
|
|
10.18++
|
PHS
Patent License Agreement dated April 16, 1999 between the Company and
certain agencies of the United States Public Health Service within the
Department of Health and Human Services, with amendments. Exhibit 10.1 to
the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 2003 is incorporated herein by reference.
|
|
10.19
|
Waiver
to PHS Patent License Agreement, as amended, dated March 8, 2007 between
the Company and certain agencies of the United States Public Health
Service within the Department of Health and Human
Services. Exhibit 10.2 to the Company’s Current Report on Form
8-K as filed with the Commission on March 19, 2007 is incorporated herein
by reference.
|
|
10.20++
|
Sixth
Amendment to PHS Patent License Agreement, as amended, dated July 7, 2009
between the Company and certain agencies of the United States Public
Health Service within the Department of Health and Human
Services. Exhibit 10.1 to the Company’s Current Report on Form
8-K/A as filed with the Commission on December 22, 2009 is incorporated
herein by reference.
|
|
10.21++
|
Seventh
Amendment to PHS Patent License Agreement, as amended, dated October 28,
2009 between the Company and certain agencies of the United States Public
Health Service within the Department of Health and Human
Services. Exhibit 10.21 to the Company’s Annual Report on Form
10-K as filed with the Commission on March 15, 2010 is incorporated herein
by reference.
|
|
10.22
|
Master
Settlement Agreement and Releases dated October 29, 2009 by and among the
Company and its creditors signatory thereto. Exhibit 10.1 to
the Company’s Current Report on Form 8-K as filed with the Commission on
November 3, 2009 is incorporated herein by reference.
|
|
10.23
|
Securities
Purchase Agreement dated October 7, 2009, among the Company and the
purchasers identified on the signature pages thereto. Exhibit
10.1 to the Company’s Current Report on Form 8-K as filed with the
Commission on October 14, 2009 is incorporated herein by
reference.
|
|
10.24
|
Securities
Purchase Agreement between the Company and Enable Growth Partners LP dated
September 8, 2009. Exhibit 10.1 to the Company’s Current Report
on Form 8-K as filed with the Commission on September 10, 2009 is
incorporated herein by reference.
|
|
10.25
|
Form
of Indemnification Agreement entered into between the Company and each of
its directors. Exhibit 10.1 to the Company’s Current Report on
Form 8-K as filed with the Commission on May 20, 2009 is incorporated
herein by reference.
|
|
10.26
|
Equity
Distribution Agreement dated February 12, 2010 between the Company and
Ladenburg Thalmann & Co. Inc. Exhibit 10.1 to the Company’s
Current Report on Form 8-K as filed with the Commission on February 19,
2010 is incorporated herein by reference.
|
|
23.1*
|
Consent
of PricewaterhouseCoopers LLP
|
|
23.2*
|
Consent
of Winstead PC (included in Exhibit 5.1)
|
|
24.1
|
Power
of Attorney (incorporated by reference to Exhibit 24.1 to the Company’s
registration statement on Form S-1 filed on December 15,
2010)
|
*
|
Filed
herewith.
|
+
|
Management
contract or compensatory plan.
|
++
|
Portions
of this exhibit have been omitted based on a request for confidential
treatment pursuant to Rule 24b-2 of the Exchange Act. Such omitted
portions have been filed separately with the
Commission.
|