UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, DC
20549
Form 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the fiscal
year ended December 31,
2010
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the transition period
from to
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Commission File Number:
000-51820
Alexza Pharmaceuticals,
Inc.
(Exact name of Registrant as
specified in its charter)
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Delaware
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77-0567768
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(State or Other Jurisdiction
of
Incorporation or Organization)
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(I.R.S. Employer
Identification Number)
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2091 Stierlin Court
Mountain View, California 94043
(Address of Principal
Executive Offices including Zip Code)
Registrants
telephone number, including area code:
(650) 944-7000
Securities registered pursuant
to Section 12 (b) of the Act:
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Title of Each Class
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Name of Each Exchange on Which Registered
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Common Stock, par value $0.0001 per share
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Nasdaq Global Market
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Securities registered pursuant
to Section 12 (g) of the Act:
None
Indicate by check mark if the Registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes o No þ
Indicate by check mark if the Registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. Yes o No þ
Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
during the preceding 12 months (of for such shorter period
that the registrant was required to submit and post such
files). Yes o No o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of registrants knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of
Form 10-K
or any amendments to this
Form 10-K. þ
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2
of the Exchange Act. (Check one):
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Large accelerated
filer o
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Accelerated
filer þ
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Non-accelerated
filer o
(Do not check if a smaller
reporting company)
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Smaller reporting
company o
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Indicate by check mark whether the Registrant is a shell company
(as defined in
Rule 12b-2
of the
Act). Yes o No þ
The aggregate market value of the voting and non-voting stock
held by non-affiliates of the Registrant was $109,428,888 based
on the closing sale price of the Registrants common stock
on The NASDAQ Global Market on June 30, 2010. Shares of the
Registrants common stock beneficially owned by each
executive officer and director of the Registrant and by each
person known by the Registrant to beneficially own 10% or more
of its outstanding common stock have been excluded, in that such
persons may be deemed to be affiliates. This determination of
affiliate status is not necessarily a conclusive determination
for other purposes. The number of outstanding shares of the
Registrants common stock as of March 11, 2011 was
59,934,397.
DOCUMENTS INCORPORATED BY
REFERENCE
Portions of the registrants definitive Proxy Statement for
the 2011 Annual Meeting of Stockholders to be filed within
120 days after the end of the Registrants fiscal year
ended December 31, 2010 are incorporated by reference into
Part III of this Annual Report on
Form 10-K
to the extent stated therein.
ANNUAL
REPORT ON
FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2010
TABLE OF CONTENTS
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The names Alexza and Staccato are
trademarks of Alexza Pharmaceuticals, Inc. We have registered
the trademarks Alexza Pharmaceuticals,
Alexza and Staccato with the
U.S. Patent and Trademark Office. All other trademarks,
trade names and service marks appearing in this Annual Report on
Form 10-K
are the property of their respective owners.
PART I.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements under Business, Risk
Factors, Managements Discussion and Analysis
of Financial Condition and Results of Operations and
elsewhere in this Annual Report constitute forward-looking
statements. In some cases, you can identify forward-looking
statements by the following words: may,
will, could, would,
should, expect, intend,
plan, anticipate, believe,
estimate, predict, project,
potential, continue, ongoing
or the negative of these terms or other comparable terminology,
although not all forward-looking statements contain these words.
Examples of these statements include, but are not limited to,
statements regarding the following: the prospects of us
receiving approval to market AZ-004, our anticipated timing and
prospects for the resubmission of our New Drug Application for
AZ-004, the implications of interim or final results of our
clinical trials, the progress and timing of our research
programs, including clinical testing, the extent to which our
issued and pending patents may protect our products and
technology, the potential of our product candidates to lead to
the development of safe or effective therapies, our ability to
enter into collaborations, our future operating expenses, our
future losses, our future expenditures, and the sufficiency of
our cash resources. These statements involve known and unknown
risks, uncertainties and other factors that may cause our actual
results, levels of activity, performance or achievements to be
materially different from the information expressed or implied
by these forward-looking statements. While we believe that we
have a reasonable basis for each forward-looking statement
contained in this Annual Report, we caution you that these
statements are based on a combination of facts and factors
currently known by us and our projections of the future, about
which we cannot be certain.
In addition, you should refer to the Risk Factors
section of this Annual Report for a discussion of other
important factors that may cause our actual results to differ
materially from those expressed or implied by our
forward-looking statements. As a result of these factors, we
cannot assure you that the forward-looking statements in this
Annual Report will prove to be accurate. Furthermore, if our
forward-looking statements prove to be inaccurate, the
inaccuracy may be material. In light of the significant
uncertainties in these forward-looking statements, you should
not regard these statements as a representation or warranty by
us or any other person that we will achieve our objectives and
plans in any specified time frame, or at all.
We undertake no obligation to publicly update any
forward-looking statements, whether as a result of new
information, future events or otherwise. You are advised,
however, to consult any further disclosures we make on related
subjects in our Quarterly Reports on
Form 10-Q,
Current Reports on
Form 8-K,
and our website.
We are a pharmaceutical company focused on the research,
development, and commercialization of novel proprietary products
for the acute treatment of central nervous system, or CNS,
conditions. All of our product candidates are based on our
proprietary technology, the Staccato system. The
Staccato system vaporizes an excipient-free drug to form
a condensation aerosol that, when inhaled, allows for rapid
systemic drug delivery. Because of the particle size of the
aerosol, the drug is quickly absorbed through the deep lung into
the bloodstream, providing speed of therapeutic onset that is
comparable to intravenous, or IV, administration but with
greater ease, patient comfort and convenience.
Since our inception, we have screened more than 400 drug
compounds, identifying approximately 200 drug compounds that
demonstrate initial vaporization feasibility for delivery with
our technology. We believe that a number of these drug
compounds, when delivered by the Staccato system, would
have a desirable therapeutic profile for the treatment of
various acute and intermittent conditions. We are initially
focusing on developing proprietary products by combining our
Staccato system with small molecule drugs that have been
in use for many years and are well-characterized to create
Staccato-based aerosolized forms of these drugs. Since
2004, we have
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filed 6 investigational New Drug Applications, or INDs, and
dosed more than 2,400 subjects and patients in clinical trials.
In January 2009, we reduced the development of our product
candidates other than AZ-004 (Staccato loxapine), our
lead product candidate, in order to concentrate our efforts and
resources on the clinical, regulatory, manufacturing and
commercial development of AZ-004. In December 2009, we submitted
our New Drug Application, or NDA, for AZ-004. In early 2010, we
conducted a thorough review of our product pipeline, evaluating
current and potential new Staccato-based product
candidates. This review yielded three categories of
Staccato-based product candidates: (1) product
candidates where we believe we can add value through internal
development, (2) product candidates where we have developed
the product idea, but where a development partner is required,
and (3) product candidates based on new ideas, primarily
focused on new chemical entities, where the Staccato
technology can facilitate better or more effective delivery.
In July 2010, we announced that, in addition to AZ-004, AZ-007
(Staccato zaleplon) and Staccato nicotine would
remain in active development. Active development on the
remainder of our development pipeline is suspended. We are
continuing to seek partners to support development and
commercialization of our product candidates. We believe that our
financial position as of December 31, 2010 will be
sufficient to fund our operations, at our current cost levels,
into the third quarter of 2011. We are unable to assert that our
financial position is sufficient to fund operations beyond that
date, and as a result, there is substantial doubt about our
ability to continue as a going concern. We may not be able to
raise sufficient capital on acceptable terms, or at all, to
continue development of AZ-004 or our other programs or to
continue operations and we may not be able to execute any
strategic transaction.
Our product candidates in active development are:
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AZ-004 (Staccato loxapine). We are developing
AZ-004 for the rapid treatment of agitation in patients with
schizophrenia or bipolar disorder. In December 2009, we
submitted an NDA for AZ-004. The NDA was accepted for filing by
the U.S. Food and Drug Administration, or the FDA, in
February 2010. In October 2010, we received a Complete Response
Letter, or CRL, from the FDA regarding our NDA for AZ-004,
submitted as
Adasuvetm
Staccato®
(loxapine) inhalation aerosol, 5 mg and 10 mg. A CRL
is issued by the FDA indicating that the NDA review cycle is
complete and the application is not ready for approval in its
present form. In December 2010, we completed an
End-of-Review
meeting with the FDA to discuss the issues outlined in the
AZ-004 CRL. In January 2011, we received the official FDA
minutes of the meeting, and we anticipate resubmitting the
AZ-004 NDA in July 2011. We plan to seek commercial partners for
the worldwide development and commercialization of AZ-004.
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In the CRL, the FDA stated that its primary clinical safety
concern was related to data from the three Phase 1 pulmonary
safety studies with AZ-004. This concern was primarily based on
observed, dose-related post-dose decreases in forced expiratory
volume in one second, or
FEV1,
a standard measure of lung function, in healthy subjects and in
subjects with COPD and asthma. The FDA also noted that decreases
in
FEV1
were recorded in subjects who were administered device-only,
placebo versions of AZ-004. In the information package submitted
to the FDA in response to the CRL and in preparation for the
End-of-Review
meeting, we presented evidence that the placebo device is safe,
including a blinded expert review of the flow-volume loops data
from the healthy subject study as further evidence that there
appears to be no consistent pattern suggestive of airway
obstruction in these subjects. We also provided an analysis
showing that there is no meaningful temporal relationship
between placebo administration and decreases in
FEV1.
We believe this evidence and analysis confirm that the changes
seen were likely background events in the population studied,
where the repeated and extensive pulmonary function testing may
have contributed to some of the observations. Additionally, we
showed that the aerosol characterization does not indicate a
basis for concern. We agreed to reiterate these arguments in our
NDA resubmission.
In the information package, we also believe we showed that the
pulmonary safety program in subjects with asthma and chronic
obstructive pulmonary disease, or COPD, had identified patients
who may be susceptible to bronchospasm, the nature of this
adverse event, and how it can be managed. We stated we believe
the risk in these patients could be mitigated through labeling
and a Risk Evaluation and Mitigation Strategy, or REMS, program.
At the
End-of-Review
meeting, the FDA stated that it would be reasonable to propose a
REMS program for the use of Staccato loxapine, and
requested that as part of our
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resubmission, we provide a detailed REMS proposal including
labeling, a medication guide and a communication plan, to manage
the potential risks. In the resubmission, we must also show how
to identify patients at risk of developing pulmonary side
effects, as well as a way to decide who should and should not be
treated with Staccato loxapine when they present for
treatment. The FDA also informed us that it would likely present
the NDA to an advisory committee.
The CRL also raised issues relating to the suitability of our
stability studies and certain other Chemistry, Manufacturing,
and Controls, or CMC, concerns, including items relating to the
FDAs pre-approval manufacturing inspection. Because AZ-004
incorporates a novel delivery system, the CRL included input
from the FDAs Center for Devices and Radiological Health,
or the CDRH. In the CRL, the CDRH requested a human factors
study and related analysis to validate that the product can be
used effectively in the proposed clinical setting. We expect to
finalize the protocol with the FDA and complete this study in
the coming months. We are not currently required to conduct any
additional efficacy or safety clinical trials for AZ-004. The
CDRH also requested further bench testing of the product under
an additional worst-case manufacturing scenario. We
have completed this additional worst-case bench
testing of the product, submitted the data to the FDA and
believe that this issue has been adequately addressed.
In February 2010, we entered into a collaboration and license
agreement, or license agreement, and a manufacture and supply
agreement, collectively, the collaboration, with Biovail
Laboratories International SRL, or Biovail, for AZ-004 for the
treatment of psychiatric
and/or
neurological indications and the symptoms associated with these
indications, including the initial indication of treating
agitation in schizophrenia and bipolar disorder patients. On
September 27, 2010, Biovail and Valeant Pharmaceuticals
International, or Valeant, completed a merger. On
October 18, 2010, Biovail notified us of its intention to
terminate the collaboration. Upon the termination, we reacquired
the U.S. and Canadian rights to AZ-004 and have worldwide
rights. Neither Alexza nor Biovail incurred any early
termination penalties in connection with the termination of the
collaboration.
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AZ-007 (Staccato zaleplon). We have
completed Phase 1 testing for AZ-007. This product candidate is
being developed for the treatment of insomnia in patients who
have difficulty falling asleep, including patients who awake in
the middle of the night and have difficulty falling back asleep.
In the Phase 1 study, AZ-007 delivered an IV-like
pharmacokinetic profile with a median time to peak drug
concentration of 1.6 minutes. Pharmacodynamics, measured as
sedation assessed on a 100 mm visual-analog scale, showed onset
of effect as early as 2 minutes after dosing. We do not intend
to spend any external development resources on AZ-007 in the
first half of 2011, but are continuing internal work on the
technical product development of AZ-007.
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Staccato nicotine is designed to help smokers quit by
addressing both the chemical and behavioral components of
nicotine addiction by delivering nicotine replacement via
inhalation. On August 25, 2010, we entered into a license
and development agreement, or the Cypress Agreement, with
Cypress Bioscience, Inc., or Cypress, for Staccato
nicotine. According to the terms of the Cypress Agreement,
Cypress paid us a non-refundable upfront payment of
$5 million to acquire the worldwide license for the
Staccato nicotine technology. In addition, following the
completion of certain preclinical and clinical milestones
relating to the Staccato nicotine technology, if Cypress
elects to continue the development of Staccato nicotine,
Cypress is obligated to pay to us an additional technology
transfer payment of $1 million. We have a carried interest
of 10%, subject to adjustment in certain circumstances, in the
net proceeds of any sale or license by Cypress of the
Staccato nicotine assets and the carried interest will be
subject to put and call rights in certain circumstances. Under
the Cypress Agreement, Cypress has responsibility for
preclinical, clinical and regulatory aspects of the development
of Staccato nicotine, along with the commercialization of
the product. Cypress will pay us a total of $3.9 million
for our efforts to execute a defined development plan for
Cypress culminating with the delivery of clinical trial
materials for a Phase 1 study with Staccato nicotine. We
have received $2.9 million of this amount as of January
2011. In January 2011, Cypress was acquired by Ramius Value and
Opportunity Advisors LLC, Royalty Pharma, US Partner, LP,
Royalty Pharma US Partners 2008, LP and RP Investment Corp., or
collectively, Royalty Pharma. We do not know what, if any,
impact this will have on the partnership.
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Our product candidates not in active development are:
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AZ-104 (Staccato loxapine,
low-dose). AZ-104, a lower-dose version of
AZ-004, is being studied for the treatment of patients suffering
from acute migraine headaches. AZ-104 has completed a Phase 1
clinical trial in healthy subjects and two Phase 2 clinical
trials in patients with migraine headache.
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AZ-002 (Staccato alprazolam). AZ-002 has
completed a Phase 1 clinical trial in healthy subjects and a
Phase 2a
proof-of-concept
clinical trial in panic disorder patients for the treatment of
panic attacks, an indication we are not planning to pursue.
However, given the safety profile, the successful and
reproducible delivery of alprazolam, and the IV-like
pharmacological effect demonstrated to date, we are assessing
AZ-002 for other possible indications and renewed clinical
development.
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AZ-003 (Staccato fentanyl). We have
completed and announced positive results from a Phase 1 clinical
trial of AZ-003 in opioid-naïve healthy subjects. This
product candidate is intended for the treatment of patients with
acute pain, including patients with breakthrough cancer pain and
postoperative patients with acute pain episodes.
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Other than those licensed to Cypress, we currently retain all
rights to our product candidates and the Staccato system.
We intend to capitalize on our internal resources to develop
certain of our product candidates and identify routes to utilize
external resources to develop and commercialize other product
candidates.
Market
Opportunity for Acute and Intermittent Conditions
Acute and intermittent medical conditions are characterized by a
rapid onset of symptoms that are temporary and severe, and that
occur at irregular intervals, unlike the symptoms of chronic
medical conditions that continue at a relatively constant level
over time. Approved drugs for the treatment of many acute and
intermittent conditions, such as antipsychotics to treat
agitation, triptans to treat migraine headaches and
benzodiazepines to treat anxiety, are typically delivered either
in tablets or by injections. Traditional inhalation technologies
are also being developed to treat these conditions. These
delivery methods have the following advantages and disadvantages:
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Oral Tablets. Oral tablets or capsules are
convenient and cost effective, but they generally do not provide
rapid onset of action. Oral tablets may require at least one to
four hours to achieve peak plasma levels. Also, some drugs, if
administered as a tablet or capsule, do not achieve adequate or
consistent bioavailability due to the degradation of the drug by
the stomach or liver or inability to be absorbed into the
bloodstream.
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Injections. IV or intramuscular, or IM,
injections provide a more rapid onset of action than oral
tablets and can sometimes be used to titrate potent drugs with
very rapid changes in effect. Titration refers to the ability of
a patient or care giver to administer an initial dose of
medication and then determine if the medication is effective; if
the medication is effective no further dosing is required.
However, if the medication is not yet effective, another dose
can be administered repeating this process until the medication
has had an adequate effect. However, with a few exceptions,
injections generally are administered by trained medical
personnel in a medical care setting. Other forms of injections
result in an onset of action that is generally substantially
slower than IV injection, although often faster than oral
administration. All forms of injections are invasive, can be
painful to some patients and are often expensive. In addition,
many drugs are not water soluble and can be difficult to
formulate in an injectable form.
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Traditional Inhalation. Traditional dry powder
and aerosolized inhalation delivery systems have been designed
and used primarily for local delivery of drugs to the airways,
not to the deep lung for rapid systemic drug delivery. Certain
recent variants of these systems, however, can provide systemic
delivery of drugs, either for the purpose of rapid onset of
action or to enable noninvasive delivery of drugs that are not
orally bioavailable. Nevertheless, many of these systems have
difficulty in generating appropriate drug particle sizes or
consistent emitted doses for deep lung delivery. To achieve
appropriate drug particle sizes and consistent emitted doses,
most traditional inhalation systems require the use of
excipients and additives such as detergents, stabilizers and
solvents, which may potentially cause toxicity or allergic
reactions. Many traditional inhalation devices require patient
coordination to deliver the correct drug dose, leading to
potentially wide variations in the drug delivered to a patient.
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As a result of these limitations, we believe there is a
significant unmet medical and patient need for products for the
treatment of acute and intermittent conditions that can be
delivered in precise amounts, provide rapid therapeutic onset,
and are noninvasive and easy to use.
Our
Solution: Staccato System
Our Staccato system rapidly vaporizes an excipient-free
drug compound to form a proprietary condensation aerosol that is
inhaled and rapidly achieves systemic blood circulation via deep
lung absorption. The Staccato system consistently creates
aerosol particles averaging one to three and one-half microns in
size, which is the most appropriate size for deep lung
inhalation and absorption into the bloodstream.
We believe our Staccato system matches delivery
characteristics and product attributes to patient needs for
acute and intermittent conditions, with the following advantages:
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Rapid Onset. The aerosol produced with the
Staccato system is designed to be rapidly absorbed
through the deep lung with a speed of therapeutic onset
comparable to an IV injection, generally achieving peak
plasma levels of drug in two to five minutes.
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Ease of Use. The Staccato system is
breath actuated, and a patient simply inhales to administer the
drug dose. Unlike injections, the Staccato system is
noninvasive and does not require caregiver assistance. The
aerosol produced with the Staccato system is relatively
insensitive to patient inhalation rates. Unlike many other
inhalation technologies, the patient does not need to learn a
special breathing pattern. In addition, the Staccato
device is small and easily portable.
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Consistent Particle Size and Dose. The
Staccato system uses rapid heating of the drug film to
create consistent and appropriate particle sizes for deep lung
inhalation and absorption into the bloodstream. The Staccato
system also produces a consistent high emitted dose,
regardless of the patients breathing pattern.
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Broad Applicability. We have screened over 400
drugs, and approximately 200 have exhibited initial vaporization
feasibility using our Staccato system. The Staccato
system can deliver both water soluble and water insoluble
drugs and eliminates the need for excipient and additives such
as detergents, stabilizers and solvents, avoiding the side
effects that may be associated with the excipient or additives.
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Design Flexibility. The Staccato system
can incorporate multiple features, including lockout to
potentially enhance safety, the convenience of patient
titration, and a variety of dose administration regimens.
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Drug
Candidates Based on the Staccato System
We combine small molecule drugs with our Staccato system
to create proprietary product candidates. We believe that the
drugs we are currently using are no longer eligible for patent
protection as chemical entities or have their patent protection
expiring in the next several years. These drugs have been widely
used, and we believe their biological activity and safety are
well understood and characterized. We have received composition
of matter patent protection on the Staccato aerosolized
forms of these drugs. We also intend to collaborate with
pharmaceutical companies to develop new chemical entities,
including compounds that might otherwise not be suitable for
development because of limitations of traditional delivery
methods.
Staccato
System
Our product candidates employing Staccato system consist
of three core components: (1) a heat source that includes
an inert metal substrate; (2) a thin film of an
excipient-free drug compound, also known as an active
pharmaceutical ingredient, or API, coated on the substrate; and
(3) an airway through which the patient inhales. The center
panel of the illustration below depicts these core components
prior to patient inhalation.
The right panel of the illustration below depicts the
Staccato system during patient inhalation: (1) the
heated substrate has reached peak temperature in less than one
half second after the start of patient inhalation; (2) the
thin drug film has been vaporized; and (3) the drug vapor
has subsequently cooled and condensed into excipient-free drug
aerosol particles that are being drawn into the patients
lungs. The entire Staccato system actuation occurs in
less than one second.
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Four of our product candidates, AZ-004, AZ-007, AZ-104, and
AZ-002, use the same disposable, single-dose delivery device.
The single dose delivery device consists of a metal substrate
that is chemically heated through a battery-initiated reaction
of energetic materials. In the current design, the heat package
can be coated with up to 10 milligrams of API. The device is
portable and easy to carry, with dimensions of approximately
three inches in length, two inches in width, and one inch in
thickness. The device weighs approximately one ounce. A diagram
of the single dose delivery device is shown below:
AZ-003 and Staccato nicotine use a multiple dose delivery
device consisting of a reusable controller and a disposable dose
cartridge. We have designed the multiple dose delivery device to
meet the specific needs of each product candidate. The AZ-003
dose cartridge currently contains 25 separate metal substrates,
each coated with the API, which rapidly heat upon application of
electric current from the controller. In the current design, 25
micrograms of drug compound are coated on each metal substrate.
The device is portable and easy to carry, with dimensions of
approximately five inches in length, two and one-half inches in
width and one inch in thickness. The controller weighs
approximately four ounces, and the dose cartridge weighs
approximately one ounce. The Staccato nicotine dose
cartridge design and reusable controller design are still in
development.
We continue to undertake research and development efforts to
improve commercial manufacturability of our single dose device
and to develop future generations of the Staccato
technology.
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Our
Pipeline
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Alexza
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Commercial
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Product Candidate
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API
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Target Indication
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Development Status
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Rights
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AZ-004
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Loxapine
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Agitation in patients with schizophrenia or bipolar disorder
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NDA submitted December 2009, CRL received October 2010. End of
Review meeting held December 2010
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Worldwide
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AZ-007
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Zaleplon
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Insomnia
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Phase 1 completed
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Worldwide
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Staccato
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Nicotine
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Nicotine
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Smoking cessation
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Pre-Phase 1
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Licensed to Cypress Bioscience, Inc.
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AZ-104
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Loxapine (low-dose)
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Migraine headache
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Phase 2 (currently inactive)
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Worldwide
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AZ-002
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Alprazolam
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Panic attacks and other CNS conditions
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Phase 2 (currently inactive)
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Worldwide
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AZ-003
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Fentanyl
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Acute pain
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Phase 1 completed (currently inactive)
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Worldwide
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AGITATION
PROGRAM: AZ-004 (Staccato loxapine)
We are developing AZ-004 (Staccato loxapine) for the
rapid treatment of agitation in patients with schizophrenia or
bipolar disorder. Episodes of agitation afflict many people
suffering from major psychiatric disorders, including
schizophrenia, which affects approximately 2.4 million
adults in the United States, and bipolar disorder, which affects
approximately 5.7 million adults in the United States. More
than 90% of these patients will experience agitation in their
lifetimes.
Agitation generally escalates over time with patients initially
feeling uncomfortable, tense and restless. As the agitation
intensifies, their behavior appears more noticeable to others as
they become threatening and potentially violent, especially if
the agitation is not treated. While patients seek treatment at
different points along this agitation continuum, those with the
most severe symptoms generally require treatment with injectable
drugs in emergency medical settings, and currently are thought
to represent the agitation market. Alexza, however, believes the
therapeutic market for agitation is broader than only this
limited population of patients in severe crisis many
more are in need of treatment for an agitation episode.
Market
Opportunity
Our primary market research indicates that approximately 50% of
treated acute agitation episodes are treated in emergency
settings. Another approximately 35% of the treated agitation
episodes suffered by schizophrenic and bipolar disorder patients
are treated in an inpatient setting (hospital and long-term
residential settings), and approximately 15% are treated in a
physicians office. Our market research studies with
schizophrenia patient caregivers and bipolar disorder patients
indicate these patients currently experience an average of 11 to
12 episodes of agitation each year.
Agitation episodes treated with medication are currently treated
about 55% of the time with oral antipsychotics and about 45% of
the time with IM injections. Oral medications work relatively
slowly, but are easy to administer, painless and are less
threatening to patients. IM injections have a faster onset of
action and a higher predictability of drug effect, but because
they are invasive and can be frightening to patients, IM
injections are usually the treatment option of last resort.
Currently, no non-invasive therapies are available that work
faster than 30 minutes to help agitated patients in need of
treatment.
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AZ-004 is an anti-agitation therapeutic that combines
Alexzas proprietary Staccato system with loxapine,
a drug belonging to the class of compounds known generally as
antipsychotics. Loxapine is currently approved in oral and
injectable (IM only) formulations in the United States for the
management of the manifestations of schizophrenia. The
Staccato system used for AZ-004 is a hand-held,
chemically-heated, single-dose inhaler that delivers a pure drug
aerosol to the highly vascularized tissues of the deep lung.
As an easy-to-use, patient-controlled, and highly reliable
therapeutic that provides rapid relief (onset of effect was 10
minutes in two Phase 3 trials) we believe AZ-004 meets the three
key treatment attributes for acute agitation specified in the
American Association for Emergency Psychiatry Expert Consensus
Guidelines for the Treatment of Behavioral Emergencies: rapid
speed of onset, reliability of medication delivery and patient
preference.
We believe that AZ-004, if approved has the potential to change
the current treatment practices for rapidly treating agitation,
as the only product available to meet both patient desires for
comfort and control, and the clinician goals of rapid and
reliable control of an agitation episode.
Development
Status
The AZ-004 NDA we submitted to the FDA in December 2009
contained efficacy and safety data from more than
1,600 patients and subjects who have been studied in
thirteen different clinical trials.
In October 2010, the FDA issued a CRL indicating that the NDA
review cycle is complete and that the NDA is not ready for
approval in its present form. In December 2010, we met with the
FDA to discuss the CRL and we anticipate resubmitting the NDA in
July 2011 and expect a six-month FDA review.
In the CRL, the FDA stated that its primary clinical safety
concern was related to data from the three Phase 1 pulmonary
safety studies with AZ-004. This concern was primarily based on
observed, dose-related post-dose decreases in forced expiratory
volume in one second, or
FEV1,
a standard measure of lung function, in healthy subjects and in
subjects with COPD and asthma. The FDA also noted that decreases
in
FEV1
were recorded in subjects who were administered device-only,
placebo versions of AZ-004. In the information package submitted
to the FDA in response to the CRL and in preparation for the
End-of-Review
meeting, we presented evidence we believe demonstrates that the
placebo device is safe, including a blinded expert review of the
flow-volume loops data from the healthy subject study as further
evidence that there appears to be no consistent pattern
suggestive of airway obstruction in these subjects. We also
provided an analysis showing that we believe demonstrates there
is no meaningful temporal relationship between placebo
administration and decreases in
FEV1.
We believe this evidence and analysis confirm that the changes
seen were likely background events in the population studied,
where the repeated and extensive pulmonary function testing may
have contributed to some of the observations. Additionally, we
believe we showed that the aerosol characterization does not
indicate a basis for concern. We agreed to reiterate these
arguments in our NDA resubmission.
In the information package, we also believe we showed that the
pulmonary safety program in subjects with asthma and COPD had
identified patients who may be susceptible to bronchospasm, the
nature of this adverse event and how it can be managed. We
believe the risk in these patients could be mitigated through
labeling and a REMS program. At the
End-of-Review
meeting, the FDA stated that it would be reasonable to propose a
REMS program for the use of Staccato loxapine, and
requested that as part of our resubmission, we provide a
detailed REMS proposal including labeling, a medication guide
and a communication plan, to manage the potential risks. In the
resubmission we must also show how to identify patients at risk
of developing pulmonary side effects, as well as a way to decide
who should and should not be treated with Staccato
loxapine when they present for treatment. The FDA also
informed us that it would likely present the NDA to an advisory
committee.
The CRL also raised issues relating to the suitability of our
stability studies and certain other CMC concerns, including
items relating to the pre-approval manufacturing inspection
completed in August 2010. Because AZ-004 incorporates a novel
delivery system, the CRL also included input from the CDRH. In
the CRL, the CDRH requested a human factors study and related
analysis to validate that the product can be used effectively in
the proposed clinical setting. We expect to finalize the
protocol with the FDA and complete this study in the coming
months. We are not currently required to conduct any additional
efficacy or safety clinical trials for AZ-004. The CDRH also
requested further bench testing of the product under an
additional worst-case manufacturing scenario.
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We have completed this additional worst-case bench
testing of the product, submitted the data to the FDA and
believe that this issue has been adequately addressed.
INSOMNIA
PROGRAM: AZ-007 (Staccato zaleplon)
We are developing AZ-007 for the treatment of insomnia in
patients who have difficulty falling asleep, including those
patients with middle of the night awakening who have difficulty
falling back asleep. Insomnia is the most prevalent sleep
disorder, and we believe that it affects at least 15% to 20% of
the United States population, with some estimates of up to 50%
of Americans reporting difficulty getting a good nights
sleep at least a few nights a week. Insomnia can be due to a
variety of causes, including depression, grief or stress,
menopause, age, shift work, or environmental disruption.
Whatever the cause of insomnia, it can take its toll on both the
afflicted and the non-afflicted. Sleep disturbances have a major
negative impact on public health and economic productivity.
Costs for direct healthcare associated with insomnia are
estimated to be approximately $14 billion to
$15 billion each year.
Market
Opportunity
Insomnia is a prevalent disorder that drives almost
$5 billion in worldwide sales of prescription medications
each year. In a large survey conducted by the National Sleep
Foundation in 2009, results showed that 64% of the respondents
experienced a minimum of one symptom of insomnia at least a few
nights a week, with 41% reporting this occurring every night or
almost every night and 31% using some sort of sleep aid at least
a few nights per week, 18% of whom use a medication sleep aid.
Of those, respondents complained primarily of waking up feeling
unrefreshed (45%), being wake a lot during the night (46%),
having difficulty falling asleep (29%), and waking up too early
and not being able to get back to sleep (30%). Also, sleepy
Americans are creating a major public safety problem
drowsy driving. More than one-half of adults (54%) reported that
they have driven at least once while drowsy in the past year,
with almost a third (28%) reporting that they do so at least
once per month, and 28% have nodded off or fallen asleep while
driving. Of those who have driven drowsy, 38% use a sleep aid at
least a few nights per week.
Although benzodiazepines have been the gold standard in
treatment for sleep disorders for decades, issues with drug
misuse and dependency are common and concerning. Other current
treatments for insomnia include non-benzodiazepine GABA-A
receptor agonists, which include Ambien, both immediate release
and controlled-release tablets, Sonata, and Lunesta, which have
less abuse potential and fewer side effects than classical
benzodiazepines and can be used for longer term treatment.
Patients and physicians surveyed suggest that current oral forms
of these leading insomnia medications can take from
30-60
minutes to work, while promotions for insomnia medications cite
20-30
minutes. Compounds with a longer half-life keep patients asleep
longer. Those compounds that are dosed in the middle of the
night are also those that have residual side effects that can
cause a hangover feeling the next day.
We believe the opportunity in insomnia is achieving a balance in
treating patients so they can fall asleep quickly, whether at
bedtime or in the middle of the night, while enabling them to
function well the next day without a groggy feeling that can
impact driving, employment or leisure activities. We believe
there is a potentially significant clinical need for rapid and
predictable onset of sleep in patients with insomnia, coupled
with a predictable duration of sleep and rapid, clear awakening
that can be satisfied with AZ-007.
Development
Status
Clinical
Studies
In April 2008, we announced positive results from a Phase 1
clinical trial of AZ-007. The AZ-007 Phase 1 clinical trial
enrolled 40 healthy volunteers at a single U.S. clinical
center. The purpose of this trial was to assess the safety,
tolerability and pharmacokinetic parameters of a single dose of
AZ-007. Using a double blind, randomized, dose-escalation trial
design, 4 doses of zaleplon (ranging from 0.5 to 4.0 mg)
were compared to placebo.
AZ-007 delivered an IV-like pharmacokinetic profile with a
median time to peak venous concentration of 1.6 minutes.
Zaleplon exposure was dose proportional across the 4 doses
studied, as calculated by power analysis.
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Pharmacodynamics, measured as sedation assessed on a 100 mm
visual-analog scale, showed onset of effect as early as 2
minutes after dosing with AZ-007.
The most common side effects, reported by at least 10% of the
patients in any treatment group, were dizziness and somnolence.
These side effects were generally mild to moderate in severity.
These data indicated a rapid onset of effect, apparently
directly related to the IV-like pharmacokinetics, and showed
that AZ-007 was generally safe and well tolerated in this
population of healthy volunteers.
In 2010, we initiated internal work to move AZ-007 to the
current commercial production device, or CPD, and it is
anticipated that the next clinical trial with AZ-007 would be
initiated with the CPD format if our resources allow. We do not
intend to spend any external development resources on AZ-007 in
the first half of 2011, but are continuing internal work on the
technical product development of AZ-007. However, due to the FDA
not approving AZ-004 for commercial marketing in October 2010,
we are slowing the clinical development of AZ-007.
Preclinical
Studies
Zaleplon, the active pharmaceutical ingredient in AZ-007, has
been approved for marketing in oral form. There are publicly
available safety pharmacology, systemic toxicology,
carcinogenicity and reproductive toxicology data we will be able
to use for our regulatory filings. Therefore, our preclinical
development testing has been primarily focused on assessing the
local tolerability of inhaled zaleplon. Our two preclinical
inhalation toxicology studies with zaleplon have indicated that
it was generally well tolerated.
SMOKING
CESSATION PROGRAM: Staccato nicotine
Staccato nicotine is designed to help smokers quit by
addressing both the chemical and behavioral components of
nicotine addiction by combining nicotine replacement via
inhalation with a user-friendly drug delivery device. The
Staccato technology may be capable of mimicking the
pharmacokinetics of smoking cigarettes through the delivery of
optimally-sized nicotine particles to the deep lung. Staccato
nicotine may also satisfy some of the psychological aspects
of smoking, such as
hand-to-mouth
movement and oral inhalation, and could allow smokers to
self-administer and possibly titrate the dose to treat cravings.
Importantly, the electronics embedded within the Staccato
delivery system could allow for the programmed, over-time
reduction in the overall daily dose of nicotine, and ultimately
may lead to better management of nicotine cravings and eventual
sustained smoking cessation.
On August 25, 2010, we licensed the worldwide rights for
the Staccato nicotine technology to Cypress. Under the
Cypress Agreement, Cypress has responsibility for preclinical,
clinical and regulatory aspects of the development of
Staccato nicotine, along with the commercialization of
the product.
MIGRAINE
HEADACHE PROGRAM: AZ-104 (Staccato loxapine,
low-dose)
We plan to develop AZ-104 (Staccato loxapine, low-dose)
for the treatment of acute migraine headaches. Although there
are numerous products available for the treatment of migraines,
including simple analgesics such as aspirin and acetaminophen,
and nonsteroidal anti-inflammatory drugs such as ibuprofen and
naproxen, the prescription market is dominated by a class of
orally administered medications commonly known as triptans.
AZ-104 is not currently in active development.
Market
Opportunity
According to the National Headache Foundation, approximately
13 million people in the United States have been diagnosed
with migraine headaches that occur often, usually one to four
times per month and are treated with prescription medications
some of which can be addicting. According to a survey conducted
by the National Headache Foundation in 2007, 82% of migraine
respondents have taken more than one prescription medication for
their migraines, and the average number of medications a patient
has taken for migraines is four, which we believe speaks to the
need for more medication options that work for patients.
Of the estimated 29.5 million migraine sufferers, including
diagnosed and undiagnosed sufferers, there are at least two
groups of potential patients for whom we believe AZ-104 could be
effective and safe in comparison to triptans. Many migraine
sufferers who do take triptans have an insufficient therapeutic
response to these
12
medications. In addition, according to the warning labels on
triptans, patients with hypertension or high cholesterol, or who
smoke cigarettes, are contraindicated for and should not take
these medications due to potential cardiovascular and
cerebrovascular health risks.
The API of AZ-104 is loxapine, a generic drug belonging to the
class of drugs known as antipsychotics. Loxapine is currently
approved in oral and injectable (IM only) formulations in the
United States for the management of the manifestations of
schizophrenia.
Development
Status
Clinical
Trials
We reported initial results of the AZ-104 Phase 2b trial in
September 2009. This was an outpatient, multi-center,
randomized, double-blind, single administration,
placebo-controlled study. The study was designed to evaluate the
treatment of a single migraine attack of moderate to severe
intensity in each of approximately 360 migraine patients, with
or without aura. Two doses of AZ-104 (1.25 mg and
2.5 mg) and placebo were evaluated in the clinical trial.
The study enrolled a total of 366 patients:
125 patients in the placebo dose group, 121 patients
in the 1.25 mg dose group, and 120 patients in the
2.5 mg dose group. Both AZ-104 dose groups trended towards
statistical significance, but the study did not meet its primary
endpoint, which was defined as pain-relief at the
2-hour time
point, compared to placebo. There were no serious adverse events
in the clinical trial, and AZ-104 was generally safe and well
tolerated in this patient population.
Patients rated their headache pain using the IHS 4-point rating
scale. The primary efficacy endpoint was headache pain relief,
which is headache pain rated as mild or none, at 2 hours
post-dose. Secondary efficacy endpoints for the clinical trial
included various additional measurements of pain relief, as well
as effects on nausea, vomiting, phonophobia and photophobia.
Statistical significance for all results was defined as p <
0.05 , as compared to placebo, and all analyses were made on an
intent-to-treat
basis. Safety evaluations were also made throughout the clinical
trial period.
AZ-104 was numerically superior to placebo in pain-relief at
2-hours
post-dose, but these differences were not statistically
significant. Pain relief was observed in 56% of patients
receiving the 2.5 mg dose (p=0.11) and 54% of patients
receiving the 1.25 mg dose (p=0.12), as compared to 45% of
patients receiving placebo.
Another commonly used measure of efficacy in migraine studies is
the percentage of patients who are pain-free at 2 hours
post-dose. Again, AZ-104 was numerically superior to placebo in
this measure, but the differences were not statistically
significant. Pain-free responders were 31% of the patients
receiving the 2.5 mg dose and 27% of the patients receiving
the 1.25 mg dose, as compared to 23% of the patients
receiving placebo.
Preclinical
Studies
Loxapine has been approved for marketing in oral and injectable
forms. There are publicly available safety pharmacology,
systemic toxicology, carcinogenicity and reproductive toxicology
data we will be able to use for our regulatory filings.
Therefore, our preclinical development testing is primarily
focused on assessing the local tolerability of inhaled loxapine.
Our two preclinical inhalation toxicology studies with loxapine
have indicated that it was generally well tolerated.
ACUTE
PAIN PROGRAM: AZ-003 (Staccato fentanyl)
We are developing AZ-003 (Staccato fentanyl) for the
treatment of patients with acute pain, including patients with
breakthrough cancer pain and postoperative patients with acute
pain episodes. Based on our analysis of industry data and
clinical literature, we believe over 25 million
postoperative patients experience inadequate pain relief,
despite receiving some form of pain management and, according to
a three month study on cancer pain by Portenoy and Hagen
(1990) and a cross-sectional study on cancer pain by
Caraceni (2004), approximately 65% of patients diagnosed with
cancer pain experience breakthrough cancer pain. A patient
controlled analgesia, or PCA, IV pump is often used directly
after surgery so the patient can achieve quick pain relief as
needed. The PCA pump approach generally works well, but
typically requires patients to remain in the hospital with
an IV line in place. Physicians generally treat cancer pain
using a combination of a chronic, long-acting drug and an acute
or rapid
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acting drug for breakthrough pain. Treating a breakthrough pain
episode with an oral medication is difficult due to the slow
onset of therapeutic effect. However, patients usually also find
more invasive, injectable treatments undesirable. Based on
preclinical testing and the results of our Phase 1 clinical
trial, we believe the pharmacokinetics, or PK, of fentanyl
delivered using a Staccato system will be similar to the
PK of IV fentanyl administration. We believe many patients
would benefit from a noninvasive but fast acting therapy that
allows them to titrate the amount of pain medication to the
amount of pain relief required.
The API of AZ-003 is fentanyl, a generic drug belonging to the
class of drugs known as opioid analgesics. Fentanyl is currently
approved in three different formulations in the United States
for the management of various types of pain: injectable,
transmucosal, which deliver drugs through the mucous membranes
of the mouth or nose, and transdermal, which deliver drug
through the skin. Since the Staccato system can
incorporate lockout and multiple dose features, we believe that
AZ-003 will facilitate patient titration to the minimum
effective drug dose in a safe, convenient, easy to use and
simple delivery system. In addition, we believe the
incorporation of patient lockout features may be a significant
safety advantage and has the potential to prevent diversion, or
use by individuals who have not been prescribed the drug. AZ-003
is not currently in active development.
Development
Status
Clinical
Studies
We completed the initial analysis of the top-line results of our
Phase 1 clinical trial with AZ-003 in December 2006. The primary
aims of the Phase 1 clinical trial were to evaluate the arterial
PK and absolute bioavailability for AZ-003 by comparing the
AZ-003 profile to that of IV fentanyl, and to examine the
pharmacodynamics, tolerability and safety of AZ-003 in
opioid-naive healthy subjects. The trial enrolled 50 subjects
and was conducted at a single clinical center in two stages.
Stage 1 of the protocol was an open-label, crossover comparison
of a 25mcg dose of AZ-003 by a single inhalation and the same
dose of fentanyl administered intravenously over five seconds.
Stage 2 of the protocol was a randomized double-blind,
placebo-controlled, dose escalation of AZ-003 evaluating
cumulative doses of 50mcg, 100mcg, 150 mcg and 300 mcg of
fentanyl. A 25 mcg individual dose of fentanyl was inhaled once
in Stage 1, or 2, 4 or 6 times at 4 minute intervals for the
first four different cohorts in Stage 2. A fifth cohort in Stage
2 received a 150 mcg dosing sequence starting at time zero and
then a second 150 mcg dosing sequence starting at 60 minutes
after the first dose, for a cumulative dose of 300 mcg. In
addition to comprehensive PK sample collection, pharmacodynamic
data were generated using pupillometry, a surrogate measure used
to assess the functional activity of opioids.
The AZ-003 PK was substantially equivalent to the IV
fentanyl PK, with similar peak plasma concentration time to
maximum plasma concentration and area under the curve
concentration, or AUC. These data suggest very high absolute
bioavailability of the inhaled dose. Mean peak arterial plasma
concentrations were observed within 30 seconds for both
administration routes. In Stage 2 of the clinical trial,
ascending doses of AZ- 003 controlled by the Staccato
device, exhibited dose-proportionality of fentanyl
throughout the dosing range from 50 mcg to 300 mcg, following an
AUC analysis. There were no serious adverse events attributable
to AZ-003, and the results from the clinical study showed that
AZ-003 was generally safe and well tolerated at all doses.
In October 2007, clinical data from the AZ-003 Phase 1 clinical
trial were presented in four different presentations at the
American Society of Anesthesiologists 2007 Annual Meeting, in
San Francisco, California. The four presentations were
entitled, Pharmacokinetic Profiles of Fentanyl Delivered
by Intravenous and Inhaled Thermal Aerosol Routes,
Pharmacokinetic Profile of Multiple Doses of Fentanyl
Delivered by Inhaled Thermal Aerosol Route,
Pharmacodynamic Response to Fentanyl Delivered by
Intravenous and Inhaled Thermal Aerosol Routes and
Pharmacodynamic Response to Multiple Doses of Fentanyl
Delivered by Inhaled Thermal Aerosol Route. This clinical
trial demonstrated that the pharmacokinetic profile of AZ-003 in
a single breath offers a speed of onset and consistency
equivalent to fentanyl administered intravenously over 5
seconds. This clinical trial also demonstrated that the
pharmacodynamic profile of AZ-003 in a single breath was
comparable to that of fentanyl administered by IV
administration.
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Preclinical
Studies
Fentanyl is approved for marketing in injectable, transdermal
and transmucosal forms. We are able to use publicly available
safety pharmacology, systemic toxicology and reproductive
toxicology data for our regulatory filings. Therefore, our
preclinical development testing was primarily focused on
assessing the local tolerability of inhaled fentanyl. Our two
preclinical toxicology tests in two animal species with fentanyl
have indicated that it was generally well tolerated.
AZ-002
(Staccato alprazolam)
We were developing AZ-002 (Staccato alprazolam) for the
acute treatment of panic attacks associated with panic disorder,
a condition characterized by the frequent, unpredictable
occurrence of panic attacks. The API of AZ-002 is alprazolam, a
generic drug belonging to the class of drugs known as
benzodiazepines. Alprazolam is currently approved in oral
formulations in the United States for use in the management of
anxiety disorder, for the short term relief of symptoms of
anxiety, for anxiety associated with depression, and for the
treatment of panic disorder with or without agoraphobia, or
abnormal fear of being in public places. We will continue to
explore additional CNS indications for AZ-002 given its safety
profile, the successful and reproducible delivery of alprazolam,
and the IV-like pharmacological effect demonstrated. AZ-002 is
not currently in active development.
Development
Status
Clinical
Trials
In June 2008, we released the preliminary results from our Phase
2a
proof-of-concept
clinical trial with AZ-002 in patients with panic disorder. The
study did not meet its two primary endpoints, which were the
effect of AZ-002 on the incidence of a doxapram-induced panic
attack and the effect of AZ-002 on the duration of a
doxapram-induced panic attack, both as compared with placebo.
There were no serious adverse events in the clinical trial, and
AZ-002 was safe and well tolerated in the study patient
population.
The AZ-002 Phase 2a clinical trial was an in-clinic, randomized,
double-blind, placebo-controlled
proof-of-concept
evaluation of patients with panic disorder. After an open-label
pilot phase, 40 patients were enrolled at 3
U.S. clinical centers, with 20 patients receiving
1 mg AZ-002 and 20 patients receiving Staccato
placebo. The primary aim of the clinical trial was to assess
the safety and efficacy of a single dose of AZ-002 in treating a
pharmacologically-induced panic attack. Two primary endpoints
were prospectively defined for the study, one to assess the
effect of treatment on the occurrence of a doxapram-induced
panic attack of sufficient intensity and a second to assess the
effect of treatment on the duration of the doxapram-induced
panic attack. Data for these two endpoints were based on the
Acute Panic Inventory, a commonly used 22-item self-report
questionnaire designed to measure panic-like response to
biological challenges or other stressful situations. After
receiving training and baseline assessments, all patients in the
double-blind phase of the study received a Staccato
device, randomized to either 1 mg AZ-002 or placebo,
and an IV administration of doxapram, a respiratory
stimulant used to induce a simulated panic attack.
Preclinical
Studies
Alprazolam has been approved for marketing in oral tablet form.
There are publicly available safety pharmacology, systemic
toxicology, carcinogenicity and reproductive toxicology data
that we will be able to use for our regulatory filings.
Therefore, our preclinical development plan is primarily focused
on assessing the local tolerability of inhaled alprazolam. To
date, our two preclinical inhalation toxicology studies with
inhaled alprazolam have indicated that it is generally well
tolerated.
Our
Strategy
Key elements of our strategy include:
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Focus on Acute and Intermittent Conditions. We
focus our development and commercialization efforts on product
candidates based on our Staccato system that are intended
to address important unmet medical and
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patient needs in the treatment of acute and intermittent
conditions in which rapid onset, ease of use, noninvasive
administration and, in some cases, patient titration of dosage
are required.
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Establish Strategic Partnerships. We intend to
strategically partner with pharmaceutical and other companies to
provide development funding or to address markets that may
require a larger sales force or greater marketing resources than
we are able to provide, or specific expertise to maximize the
value of some product candidates. We also intend to seek
international distribution partners for our product candidates.
We may also enter into strategic partnerships with other
pharmaceutical companies to combine our Staccato system
with their proprietary compounds.
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Retain and Control Product Manufacturing. We
own all manufacturing rights to our product candidates, other
than Staccato nicotine. We intend to internally complete
the final manufacture and assembly of our product candidates and
any future products, potentially enabling greater intellectual
property protection and economic return from our future
products. We also believe controlling the final manufacture and
assembly reduces the risk of supply interruptions and allows
more cost effective manufacturing.
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Licensing
Collaborations
Cypress
Bioscience, Inc.
In August 2010 we entered into the Cypress Agreement with
Cypress for Staccato nicotine. According to the terms of
the Cypress Agreement, Cypress paid us a non-refundable upfront
payment of $5 million to acquire the worldwide license for
the Staccato nicotine technology.
Following the completion of certain preclinical and clinical
milestones relating to the Staccato nicotine technology,
if Cypress elects to continue the development of Staccato
nicotine, Cypress will be obligated to pay us an additional
technology transfer payment of $1 million. We have a
carried interest of 10%, subject to adjustment in certain
circumstances, in the net proceeds of any sale or license by
Cypress of the Staccato nicotine assets, and the carried
interest is subject to put and call rights in certain
circumstances.
Cypress has the responsibility for preclinical, clinical and
regulatory aspects of the development of Staccato
nicotine, along with the commercialization of the product.
Cypress will pay us a total of $3.9 million in research and
development funding for our efforts to execute a defined
development plan for Cypress culminating with the delivery of
clinical trial materials for a Phase 1 study with Staccato
nicotine. Through January 2011, we have received
$2.9 million of the research and development funding. In
January 2011, Cypress was acquired by Royalty Pharma. We do not
know what, if any, impact this will have on the partnership.
Additionally, we entered into an agreement with Cypress to
sublease approximately 2,500 square feet of our premises
and to provide certain administrative, facility and information
technology support for a period of 12 months for $11,000
per month. Beginning in September 2011, the space will be leased
on a
month-to-month
basis.
Biovail
Laboratories International SRL
In February 2010, we entered into a collaboration with Biovail,
for AZ-004 for the treatment of psychiatric
and/or
neurological indications and the symptoms associated with these
indications, including the initial indication for the rapid
treatment of agitation in schizophrenia and bipolar disorder
patients. Under the terms of the License Agreement, Biovail paid
us a non-refundable upfront fee of $40 million. On
September 28, 2010, Biovail and Valeant completed a merger.
On October 18, 2010, Biovail notified us of its intention
to terminate the collaboration. Upon termination, we reacquired
the U.S. and Canadian rights to our AZ-004 product
candidate licensed to Biovail pursuant to the collaboration.
Neither we nor Biovail incurred any early termination penalties
in connection with the termination of the collaboration.
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Research
and Development
Research and development expenditures made to advance our
product candidates and general research efforts during the last
three years ended December 31, 2010, were as follows (in
thousands):
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|
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Year Ended December 31,
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|
|
2010
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|
|
2009
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|
|
2008
|
|
|
Product candidate expenses
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|
$
|
26,059
|
|
|
$
|
31,896
|
|
|
$
|
48,681
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|
General research
|
|
|
7,469
|
|
|
|
7,882
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|
|
|
12,884
|
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|
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|
|
|
|
|
|
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Total research and development
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|
$
|
33,528
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|
|
$
|
39,778
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|
|
$
|
61,565
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|
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|
Manufacturing
We manufacture our product candidates with components supplied
by qualified vendors. We believe that manufacturing our product
candidates will potentially enable greater intellectual property
protection and economies of scale and decrease the risk of
supply interruptions.
After inspection and qualification, we assemble the components
of our product candidates and coat the exterior of the metal
substrate with a thin film of API. We then place the plastic
airway around the assembly and package a completed device in a
pharmaceutical-grade foil pouch. The controller for our multiple
dose delivery design includes the battery power source for
heating the individual metal substrates, a microprocessor that
directs the electric current to the appropriate metal substrate
at the appropriate time, and an icon-based liquid crystal
display that shows pertinent information to the user, for
example, the number of doses remaining in the dose cartridge and
the controller status. We may need to develop modified versions
of our devices for future product candidates.
We believe we have developed quality assurance and quality
control systems applicable to the design, manufacture,
packaging, labeling and storage of our product candidates in
compliance with applicable regulations. These systems include
extensive requirements with respect to quality management,
quality planning and organization, product design, manufacturing
facilities, equipment, purchase and handling of components,
production and process controls, packaging and labeling
controls, device evaluation, distribution and record keeping.
We outsource the production of the components of our product
candidates, including the printed circuit boards, the molded
plastic airways and the heat packages used in the single dose
version of our Staccato system device. We currently use
single source suppliers for these components, as well as for the
API used in each of our product candidates. We do not carry a
significant inventory of these components, and establishing
additional or replacement suppliers for any of these components
may not be accomplished quickly, or at all, and could cause
significant additional expense. Any supply interruption from our
vendors would limit our ability to manufacture our product
candidates and could delay clinical trials for, and regulatory
approval of, our product candidates.
In 2007, we completed the construction on a current good
manufacturing practices, or cGMP, compliant pilot manufacturing
facility located in Mountain View, California. In November 2007,
we received a pharmaceutical manufacturing license from the
California State Food and Drug Branch for this facility. We
believe this pilot manufacturing facility will have sufficient
capacity to manufacture materials for toxicology studies and
clinical trial materials for future clinical trials. We also
believe that this facility will be sufficient to manufacture
early commercial-scale batches of our products. In January 2011,
we renewed our pharmaceutical manufacturing license from the
California State Food and Drug Branch for our Mountain View
facility. This new license is valid until January 31, 2013.
In August 2010, we were subject to our first FDA Pre-Approval
Inspection, or PAI. As a result of this inspection we received
an FDA Form 483, which outlined ten observations. We
submitted responses to these observations to the FDA within the
specified response timeframe. On December 13, 2010, the FDA
issued an Establishment Inspection Report that outlined the
findings of the PAI. We believe we have taken appropriate
corrective action for all observations outlined in the
Form 483.
17
Autoliv
ASP, Inc.
In November 2007, we entered into a manufacturing and supply
agreement, or the manufacture agreement, with Autoliv relating
to the commercial supply of chemical heat packages that can be
incorporated into our single dose Staccato device.
Autoliv had developed these chemical heat packages for us
pursuant to a development agreement executed in October 2005.
Autoliv has agreed to manufacture, assemble and test the
chemical heat packages solely for us in conformance with our
specifications. We will pay Autoliv a specified purchase price,
which varies based on annual quantities ordered by us, per
chemical heat package delivered. The manufacture agreement
provides that during the term of the manufacture agreement,
Autoliv will be our exclusive supplier of chemical heat
packages. In addition, the manufacture agreement grants Autoliv
the right to negotiate for the right to supply commercially any
second generation chemical heat package, or a second generation
product, and provides that we will pay Autoliv certain royalty
payments if we manufacture second generation products ourselves
or if we obtain second generation products from a third party
manufacturer. Upon the expiration or termination of the
manufacture agreement we will also be required, on an ongoing
basis, to pay Autoliv certain royalty payments related to the
manufacture of the chemical heat packages by us or third party
manufacturers.
In June 2010 and February 2011, we entered into agreements to
amend the terms of the manufacture agreement, or the amendments.
Under the terms of the first of the amendments, we paid Autoliv
$4 million and issued Autoliv a $4 million unsecured
promissory note in return for a production line for the
commercial manufacture of chemical heat packages. Each
production line is comprised of two identical and self
sustaining cells, and the first such cell was
completed, installed and qualified in connection with such
amendment. Under the terms of the second of the amendments, the
original $4 million note was cancelled and a new unsecured
promissory note was issued with a reduced principal amount of
$2.8 million, or the second note, and production on the
second cell ceased. The second note is payable in 48 equal
monthly installments of approximately $67,900 and we have paid
the first two such installments. In the event that we request
completion of the second cell of the first production line for
the commercial manufacture of chemical heat packages, Autoliv
will complete, install and fully qualify such second cell for a
cost to us of $1.2 million and Autoliv will transfer
ownership of such cell to us upon the payment in full of such
$1.2 million and the second note.
The provisions of the amendments supersede (a) our
obligation set forth in the manufacture agreement to reimburse
Autoliv for certain expenses related to the equipment and
tooling used in production and testing of the chemical heat
packages in an amount of up to $12 million upon the
earliest of December 31, 2011, 60 days after the
termination of the manufacture agreement or 60 days after
approval by the FDA of an NDA filed by us, and (b) the
obligation of Autoliv to transfer possession of such equipment
and tooling.
At our request, Autoliv will manufacture up to two additional
production lines for the commercial manufacture of chemical heat
packages at a cost not to exceed $2.4 million for each
additional line. Pursuant to the amendments, the parties also
agreed to revise the specified purchase price of chemical heat
packages supplied by Autoliv, which varies based on annual
quantities that we order.
The initial term of the manufacture agreement expires on
December 31, 2012, at which time the manufacture agreement
will automatically renew for successive five-year renewal terms
unless we or Autoliv notify the other party no less than
36 months prior to the end of the initial term or the
then-current renewal term that such party wishes to terminate
the manufacture agreement.
Product
Commercialization
We plan to enter into strategic partnerships with another
company or companies to commercialize AZ-004 (and other product
candidates) in all geographic territories.
Government
Regulation
The testing, manufacturing, labeling, advertising, promotion,
distribution, export and marketing of our product candidates are
subject to extensive regulation by governmental authorities in
the United States and other countries. Our product candidates
include drug compounds incorporated into our delivery device and
are considered
18
combination products in the United States. We have
agreed with the FDA that our product candidates will be reviewed
by the FDAs Center for Drug Evaluation and Research. The
FDA, under the Federal Food, Drug and Cosmetic Act, or FDCA,
regulates pharmaceutical products in the United States. The
steps required before a drug may be approved for marketing in
the United States generally include:
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preclinical laboratory studies and animal tests;
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the submission to the FDA of an IND for human clinical testing,
which must become effective before human clinical trials
commence;
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adequate and well controlled human clinical trials to establish
the safety and efficacy of the product;
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the submission to the FDA of an NDA;
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satisfactory completion of an FDA inspection of the
manufacturing facilities at which the product is made to assess
compliance with cGMP. In addition, the FDA may inspect clinical
trial sites that generated the data in support of the
NDA; and
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FDA review and approval of the NDA.
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The testing and approval process requires substantial time,
effort and financial resources, and the receipt and timing of
any approval is uncertain. Preclinical studies include
laboratory evaluations of the product candidate, as well as
animal studies to assess the potential safety and efficacy of
the product candidate. The results of the preclinical studies,
together with manufacturing information and analytical data, are
submitted to the FDA as part of the IND, which must become
effective before clinical trials may be commenced. The IND will
become effective automatically 30 days after receipt by the
FDA, unless the FDA raises concerns or questions about the
conduct of the trials as outlined in the IND prior to that time.
In that case, the IND sponsor and the FDA must resolve any
outstanding concerns before clinical trials can proceed.
Clinical trials involve the administration of the product
candidates to healthy volunteers or patients under the
supervision of a qualified principal investigator. Further, each
clinical trial must be reviewed and approved by an independent
institutional review board, or IRB, at or servicing each
institution at which the clinical trial will be conducted. The
IRB will consider, among other things, ethical factors, the
safety of human subjects and the possible liability of the
institution.
Clinical trials typically are conducted in three sequential
phases prior to approval, but the phases may overlap. A fourth,
or post-approval, phase may include additional clinical studies.
These phases generally include the following:
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Phase 1. Phase 1 clinical trials involve the
initial introduction of the drug into human subjects, frequently
healthy volunteers. These studies are designed to determine the
metabolism and pharmacologic actions of the drug in humans, the
adverse effects associated with increasing doses and, if
possible, to gain early evidence of effectiveness. In Phase 1
clinical trials, the drug is usually tested for safety,
including adverse effects, dosage tolerance, absorption,
distribution, metabolism, excretion and pharmacodynamics.
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Phase 2. Phase 2 clinical trials usually
involve studies in a limited patient population to
(1) evaluate the efficacy of the drug for specific,
targeted indications; (2) determine dosage tolerance and
optimal dosage; and (3) identify possible adverse effects
and safety risks. Although there are no statutory or regulatory
definitions for Phase 2a and Phase 2b, Phase 2a is commonly used
to describe a Phase 2 clinical trial designed to evaluate
efficacy, adverse effects and safety risks and Phase 2b is
commonly used to describe a subsequent Phase 2 clinical trial
that also evaluates dosage tolerance and optimal dosage.
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Phase 3. If a compound is found to be
potentially effective and to have an acceptable safety profile
in Phase 2 clinical trials, the clinical trial program will be
expanded to further demonstrate clinical efficacy, optimal
dosage and safety within an expanded patient population at
geographically dispersed clinical trial sites. Phase 3 clinical
trials usually include several hundred to several thousand
patients.
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Phase 4. Phase 4 clinical trials are studies
required of, or agreed to by, a sponsor that are conducted after
the FDA has approved a product for marketing. These studies are
used to gain additional information from
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the treatment of patients in the intended therapeutic indication
and to verify a clinical benefit in the case of drugs approved
under accelerated approval regulations. If the FDA approves a
product while a company has ongoing clinical trials that were
not necessary for approval, a company may be able to use the
data from these clinical trials to meet all or part of any Phase
4 clinical trial requirement. These clinical trials are often
referred to as Phase 3/4 post-approval clinical trials. Failure
to promptly conduct Phase 4 clinical trials could result in
withdrawal of approval for products approved under accelerated
approval regulations.
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In the case of products for the treatment of severe or life
threatening diseases, the initial clinical trials are sometimes
conducted in patients rather than in healthy volunteers. Since
these patients are already afflicted with the target disease, it
is possible that such clinical trials may provide evidence of
efficacy traditionally obtained in Phase 2 clinical trials.
These trials are referred to frequently as Phase
1/2
clinical trials. The FDA may suspend clinical trials at any time
on various grounds, including a finding that the subjects or
patients are being exposed to an unacceptable health risk.
The results of preclinical studies and clinical trials, together
with detailed information on the manufacture and composition of
the product, are submitted to the FDA in the form of an NDA
requesting approval to market the product. Generally, regulatory
approval of a new drug by the FDA may follow one of three
routes. The most traditional of these routes is the submission
of a full NDA under Section 505(b)(1) of the FDCA. A second
route, which is possible where an applicant chooses to rely in
part on the FDAs conclusion about the safety and
effectiveness of previously approved drugs is to submit a more
limited NDA described in Section 505(b)(2) of the FDCA. The
final route is the submission of an Abbreviated New Drug
Application for products that are shown to be therapeutically
equivalent to previously approved drug products as permitted
under Section 505(j) of the FDCA. We do not expect any of
our product candidates to be submitted under
Section 505(j). Both Section 505(b)(1) and
Section 505(b)(2) applications are required by the FDA to
contain full reports of investigations of safety and
effectiveness. However, in contrast to a traditional NDA
submitted pursuant to Section 505(b)(1) in which the
applicant submits all of the data demonstrating safety and
effectiveness, we believe an application submitted pursuant to
Section 505(b)(2) can rely upon findings by the FDA that
the reference drug is safe and effective. As a consequence, the
preclinical and clinical development programs leading to the
submission of an NDA under Section 505(b)(2) may be less
expensive to carry out and may be concluded in a shorter period
of time than programs required for a Section 505(b)(1)
application. In its review of any NDA submissions, however, the
FDA has broad discretion to require an applicant to generate
additional data related to safety and efficacy, and it is
impossible to predict the number or nature of the studies that
may be required before the FDA will grant approval.
Notwithstanding the approval of many products by the FDA
pursuant to Section 505(b)(2), over the last few years
certain brand-name pharmaceutical companies and others have
objected to the FDAs interpretation of
Section 505(b)(2). If the FDA changes its interpretation of
Section 505(b)(2), this could delay or even prevent the FDA
from approving any Section 505(b)(2) NDA that we submit.
To the extent that a Section 505(b)(2) applicant is relying
on the FDAs findings for an already-approved reference
product, the applicant is required to certify to the FDA
concerning any patents listed for the reference product in the
FDAs Orange Book publication. A certification that the new
product will not infringe the reference products Orange
Book-listed patents or that such patents are invalid is called a
paragraph IV certification, and could be challenged in
court by the patent owner or holder of the application of the
reference product. This could delay the approval of any
Section 505(b)(2) application we submit. In addition, any
period of marketing exclusivity applicable to the reference
product might delay approval of any Section 505(b)(2)
application we submit. Any Section 505(b)(1) or
Section 505(b)(2) application we submit for a drug product
containing a previously approved API might be eligible for three
years of marketing exclusivity, provided new clinical
investigations that were conducted or sponsored by us are
essential to the FDAs approval of the application. Five
years of marketing exclusivity is granted if the FDA approves an
NDA for a new chemical entity. In addition, we can list in the
FDAs Orange Book publication any of our patents claiming
the drug product, drug substance or that cover an approved
method-of-use.
In order for a generic applicant to rely on the FDAs
approval of any NDA we submit, such generic applicant must
certify to any Orange Book listed patents and might be subject
to any marketing exclusivity covering our approved drug product.
In our initial AZ-004 NDA submission we followed and in future
submissions for AZ-004 and our other product candidates we
intend to follow the development pathway permitted under the
FDCA that we believe will
20
maximize the commercial opportunities for these product
candidates. We are currently pursuing the Section 505(b)(2)
application route for our product candidates. As such, we have
and intend to continue to engage in discussions with the FDA to
determine which, if any, portions of our development program can
be modified, based on previous FDA findings of a drugs
safety and effectiveness.
Before approving an NDA, the FDA will inspect the facilities at
which the product is manufactured, whether ours or our third
party manufacturers, and will not approve the product
unless the manufacturing facility complies with cGMP or, where
applicable, the Quality System Regulation, or QSR. The FDA
reviews all NDAs submitted before it accepts them for
filing and may request additional information rather than accept
an NDA for filing. Once the NDA submission has been accepted for
filing, the FDA begins an in-depth review of the NDA. Under the
goals and policies agreed to by the FDA under the Prescription
Drug User Fee Act, or PDUFA, the FDA has 10 months in which
to complete its initial review of a standard NDA and respond to
the applicant, and six months for a priority NDA. The FDA does
not always meet the PDUFA goal dates for standard and priority
NDAs. The review process is often significantly extended by FDA
requests for additional information or clarification. The FDA
may delay approval of an NDA if applicable regulatory criteria
are not satisfied, require additional testing or information
and/or
require post-marketing testing and surveillance to monitor
safety or efficacy of a product. FDA approval of any NDA
submitted by us will be at a time the FDA chooses. Also, if
regulatory approval of a product is granted, such approval may
entail limitations on the indicated uses for which such product
may be marketed. Once approved, the FDA may withdraw the product
approval if compliance with pre-and post-marketing regulatory
requirements and conditions of approvals are not maintained or
if problems occur after the product reaches the marketplace. In
addition, the FDA may require post-marketing studies, referred
to as Phase 4 clinical trials, to monitor the effect of approved
products and may limit further marketing of the product based on
the results of these post-marketing studies.
If we obtain regulatory approval for a product, that approval
will be limited to those diseases and conditions for which the
product is effective, as demonstrated through clinical trials
and as specified in the approved labeling. Even if that
regulatory approval is obtained, a marketed product, its
manufacturer and its manufacturing facilities are subject to
continual review and periodic inspections by the FDA and, in our
case, the State of California. Discovery of previously unknown
problems with a medicine, device, manufacturer or facility may
result in restrictions on the marketing or manufacturing of an
approved product, including costly recalls or withdrawal of the
product from the market. The FDA has broad post-market
regulatory and enforcement powers, including the ability to
suspend or delay issuance of approvals, seize or recall
products, withdraw approvals, enjoin violations and institute
criminal prosecution.
In addition to regulation by the FDA and certain state
regulatory agencies, the United States Drug Enforcement
Administration, or DEA, imposes various registration,
recordkeeping and reporting requirements, procurement and
manufacturing quotas, labeling and packaging requirements,
security controls and a restriction on prescription refills on
certain pharmaceutical products under the Controlled Substances
Act, or CSA. A principal factor in determining the particular
requirements, if any, applicable to a product is its actual or
potential abuse profile. The DEA regulates drug substances as
Schedule I, II, III, IV or V substances, with
Schedule I and II substances considered to present the
highest risk of substance abuse and Schedule V substances
the lowest risk. Alprazolam, the API in AZ-002, is regulated as
a Schedule IV substance, fentanyl, the API in AZ-003, is
regulated as a Schedule II substance, and zaleplon, the API
in AZ-007, is regulated as a Schedule IV substance. Each of
these product candidates is subject to DEA regulations relating
to manufacturing, storage, distribution and physician
prescription procedures, and the DEA may regulate the amount of
the scheduled substance available for clinical trials and
commercial distribution. As a Schedule II substance,
fentanyl is subject to additional controls, including quotas on
the amount of product that can be manufactured and limitations
on prescription refills. We have received necessary
registrations from the DEA for the manufacture of AZ-002, AZ-003
and AZ-007. The DEA periodically inspects facilities for
compliance with its rules and regulations. Failure to comply
with current and future regulations of the DEA could lead to a
variety of sanctions, including revocation, or denial of
renewal, of DEA registrations, injunctions, or civil or criminal
penalties, and could harm our business and financial condition.
The single dose design of our Staccato system uses what
we refer to as energetic materials to generate the
rapid heating necessary for vaporizing the drug while avoiding
degradation. Manufacture of products containing these types of
materials is controlled by the Bureau of Alcohol, Tobacco,
Firearms and Explosives, or ATF, under 18
21
United States Code Chapter 40. Technically, the energetic
materials used in our Staccato system are classified as
low explosives, and we have been granted a
license/permit by the ATF for the manufacture of such low
explosives.
Additionally, due to inclusion of the energetic materials in our
Staccato system, shipments of the single dose design of
our Staccato system are regulated by the Department of
Transportation, or DOT, under Section 173.56, Title 49
of the United States Code of Federal Regulations. The single
dose version of our Staccato device has been granted
Not Regulated as an Explosive status by the DOT.
We have received funding for one or more research projects from
a funding agency of the United States government, and inventions
conceived or first actually reduced to practice during the
performance of the research project are subject to the rights
and limitations of certain federal statutes and various
implementing regulations known generally and collectively as the
Bayh-Dole Requirements. As a funding recipient, we
are subject to certain invention reporting requirements, and
certain limitations are placed on assignment of the invention
rights. In addition, the federal government retains a
non-exclusive, irrevocable,
paid-up
license to practice the invention and, in exceptional cases, the
federal government may seek to take title to the invention.
We also will be subject to a variety of foreign regulations
governing clinical trials and the marketing of any future
products. Outside the United States, our ability to market a
product depends upon receiving a marketing authorization from
the appropriate regulatory authorities. The requirements
governing the conduct of clinical trials, marketing
authorization, pricing and reimbursement vary widely from
country to country. In any country, however, we will only be
permitted to commercialize our products if the appropriate
regulatory authority is satisfied that we have presented
adequate evidence of safety, quality and efficacy. Whether or
not FDA approval has been obtained, approval of a product by the
comparable regulatory authorities of foreign countries must be
obtained prior to the commencement of marketing of the product
in those countries. The time needed to secure approval may be
longer or shorter than that required for FDA approval. The
regulatory approval and oversight process in other countries
includes all of the risks associated with the FDA process
described above.
Pharmaceutical
Pricing and Reimbursement
In both domestic and foreign markets, our ability to
commercialize successfully and attract strategic partners for
our product candidates depends in significant part on the
availability of adequate coverage and reimbursement from
third-party payors, including, in the United States,
governmental payors such as the Medicare and Medicaid programs,
managed care organizations, and private health insurers.
Third-party payors are increasingly challenging prices charged
for medical products and services and examining their cost
effectiveness, in addition to their safety and efficacy. We may
need to conduct expensive pharmacoeconomic studies in order to
demonstrate the cost effectiveness of any future products. Even
with studies, our product candidates may be considered less
safe, less effective or less cost effective than existing
products, and third-party payors therefore may not provide
coverage and reimbursement for our product candidates, in whole
or in part.
Political, economic and regulatory influences are subjecting the
healthcare industry in the United States to fundamental changes.
There have been, and we expect there will continue to be, a
number of legislative and regulatory proposals and enactments to
change the healthcare system in ways that could significantly
affect our business, such as the Patient Protection and
Affordable Care Act, as amended by the Health Care and Education
Reconciliation Act of 2010 signed into law in March 2010. We
anticipate that Congress, state legislatures and the private
sector will continue to consider and may adopt healthcare
policies intended to curb rising healthcare costs. These cost
containment measures include:
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controls on government funded reimbursement for medical products
and services;
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controls on healthcare providers;
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challenges to the pricing of medical products and services or
limits or prohibitions on reimbursement for specific products
and therapies through other means;
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reform of drug importation laws; and
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expansion of use of managed care systems in which healthcare
providers contract to provide comprehensive healthcare for a
fixed cost per person.
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We are unable to predict what additional legislation,
regulations or policies, if any, relating to the healthcare
industry or third-party coverage and reimbursement may be
enacted in the future or what effect such legislation,
regulations or policies would have on our business. Any cost
containment measures, including those listed above, or other
healthcare system reforms that are adopted could have a material
adverse effect on our ability to operate profitably.
Patents
and Proprietary Rights
We actively seek to patent the technologies, inventions and
improvements we consider important to the development of our
business. In addition, we rely on trade secrets and contractual
arrangements to protect our proprietary information. Some areas
for which we seek patent protection include:
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the Staccato system and its components;
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methods of using the Staccato system;
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the aerosolized form of drug compounds produced by the
Staccato system; and
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methods of making and using the drug containing aerosols,
including methods of administering the aerosols to a patient.
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As of February 1, 2011, we held 232 issued and allowed
U.S. and international patents. Most of our patents are
directed to compositions for delivery of an aerosol comprising
drugs other than our primary product candidates described below,
and cover the process for producing those aerosols using the
Staccato system. As of February 1, 2011, we held 23
additional pending patent applications in the United States. As
of February 1, 2011, we also held 39 pending corresponding
foreign patent applications that will permit us to pursue
additional patents outside of the United States. The claims in
these various patents and patent applications are directed to
various aspects of our drug delivery devices and their
components, methods of using our devices, drug containing
aerosol compositions and methods of making and using such
compositions.
AZ-004/AZ-104
(Staccato loxapine)
One of our issued U.S. patents covers compositions for
delivery of a condensation aerosol comprising loxapine and
covers the process for producing such condensation aerosol using
the Staccato system technology. This patent will not
expire until 2022. Counterparts to this patent are pending in a
number of foreign jurisdictions, including Europe. We also have
three other U.S. patents directed to condensation aerosol
compositions for delivery of loxapine, kits containing devices
for forming such compositions and methods of administering such
compositions.
AZ-007
(Staccato zaleplon)
One of our issued U.S. patents covers compositions for
delivery of a condensation aerosol comprising zaleplon and
covers the process for producing such condensation aerosol using
the Staccato system technology. This patent will not
expire until 2022. Counterparts to this patent are pending in a
number of foreign jurisdictions, including Europe. We also have
three other U.S. patents directed to condensation aerosol
compositions for delivery of zaleplon, kits containing devices
for forming such compositions, and methods of administering such
compositions.
AZ-002
(Staccato alprazolam)
One of our issued U.S. patents covers compositions for
delivery of a condensation aerosol comprising alprazolam and
covers the process for producing such condensation aerosol using
the Staccato system technology. This patent will not
expire until 2022. Counterparts to this patent are pending in a
number of foreign jurisdictions, including Europe. We also have
three other U.S. patents directed to condensation aerosol
compositions for delivery of alprazolam, kits containing devices
for forming such compositions, and methods of administering such
compositions.
23
AZ-003
(Staccato fentanyl)
One of our issued U.S. patents covers compositions for
delivery of a condensation aerosol comprising fentanyl and
covers the process for producing such condensation aerosol using
the Staccato system technology. This patent will not
expire until 2022. Counterparts to this patent are pending in a
number of foreign jurisdictions, including Europe. We also have
three other U.S. patents directed to condensation aerosol
compositions for delivery of fentanyl, kits containing devices
for forming such compositions, and methods of administering such
compositions.
Staccato
nicotine
Two of our U.S. issued patents cover the apparatus and
methods for producing condensation aerosol. One of these patents
will not expire until 2026. Two of our U.S. patent
applications cover compositions for delivery of a condensation
aerosol comprising nicotine and nicotine formulations. One of
our U.S. patent applications covers a method of treating
nicotine craving by administering a condensation aerosol
comprising nicotine.
Competition
The pharmaceutical and biotechnology industries are intensely
competitive. Many pharmaceutical companies, biotechnology
companies, public and private universities, government agencies
and research organizations are actively engaged in research and
development of products targeting the same markets as our
product candidates. Many of these organizations have
substantially greater financial, research, drug development,
manufacturing and marketing resources than we have. Large
pharmaceutical companies in particular have extensive experience
in clinical testing and obtaining regulatory approvals for
drugs. Our ability to compete successfully will depend largely
on our ability to:
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develop products that are superior to other products in the
market;
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attract and retain qualified scientific, product development,
manufacturing, and commercial personnel;
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obtain patent
and/or other
proprietary protection covering our future products and
technologies;
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obtain required regulatory approvals; and
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successfully collaborate with pharmaceutical and biotechnology
companies in the development and commercialization of new
products.
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We expect any future products we develop to compete on the basis
of, among other things, product efficacy and safety, time to
market, price, extent of adverse side effects experienced and
convenience of treatment procedures. One or more of our
competitors may develop products based upon the principles
underlying our proprietary technologies earlier than we do,
obtain approvals for such products from the FDA more rapidly
than we do or develop alternative products or therapies that are
safer, more effective
and/or more
cost effective than any future products developed by us. In
addition, our ability to compete may be affected if insurers and
other third-party payors encourage the use of generic products
through other routes of administration.
Any future products developed by us would compete with a number
of alternative drugs and therapies, including the following:
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AZ-004 would compete with the injectable form of loxapine and
other antipsychotic drugs;
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AZ-007 would compete with non-benzodiazepine GABA-A receptor
agonists;
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AZ-104 would compete with available triptan drugs and IV
prochlorperazine;
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AZ-003 would compete with injectable and other forms of fentanyl
and various generic oxycodone, hydrocodone and morphine
products; and
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AZ-002 would compete with the oral tablet form of alprazolam and
other benzodiazepines.
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Many of these existing drugs have substantial current sales and
long histories of effective and safe use. As patent protection
expires for these drugs, we will also compete with their generic
versions. In addition to currently
24
marketed drugs and their generic versions, we believe there are
a number of drug candidates in clinical trials that, if approved
in the future, would compete with any future products we may
develop.
Employees
As of February 15, 2011, we had 97 full time employees, 16
of whom held Ph.D. or M.D. degrees and 70 of whom were engaged
in full time research and development activities. None of our
employees are represented by a labor union, and we consider our
employee relations to be good.
Corporate
Information
We were incorporated in the state of Delaware on
December 19, 2000 as FaxMed, Inc. In June 2001, we changed
our name to Alexza Corporation and in December 2001 we became
Alexza Molecular Delivery Corporation. In July 2005, we changed
our name to Alexza Pharmaceuticals, Inc.
Available
Information
Our website address is www.alexza.com; however, information
found on, or that can be accessed through, our website is not
incorporated by reference into this Annual Report. We file
electronically with the Securities and Exchange Commission, or
SEC, our Annual Report, quarterly reports on
Form 10-Q,
current reports on
Form 8-K
and amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of
1934. We make available free of charge on or through our website
copies of these reports as soon as reasonably practicable after
we electronically file such material with, or furnish it to, the
SEC. The SEC maintains an internet site that contains reports,
proxy and information statements and other information regarding
our filings at www.sec.gov. You may also read and copy any of
our materials filed with the SEC at the SECs Public
References Room at 100 F Street, NW, Washington, DC
20549. Information regarding the operation of the Public
Reference Room can be obtained by calling the SEC at
1-800-SEC-0330.
25
RISK
FACTORS
Investing in our common stock involves a high degree of risk.
You should carefully consider the risks described below,
together with all of the other information included in this
Annual Report, before deciding whether to invest in shares of
our common stock. Additional risks and uncertainties not
presently known to us or that we currently deem immaterial also
may impair our business operations. The occurrence of any of the
following risks could 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.
Risks
Relating to Our Business
Our
management and our independent registered public accounting
firm, in their report on our financial statements as of and for
the year ended December 31, 2010, have concluded that due
to our need for additional capital, and the uncertainties
surrounding our ability to raise such funding, substantial doubt
exists as to our ability to continue as a going
concern.
Our audited financial statements for the fiscal year ended
December 31, 2010, were prepared on a going concern basis
in accordance with United States generally accepted accounting
principles. The going concern basis of presentation assumes that
we will continue in operation for the next twelve months and
will be able to realize our assets and discharge our liabilities
and commitments in the normal course of business and do not
include any adjustments to reflect the possible future effects
on the recoverability and classification of assets or the
amounts and classification of liabilities that may result from
our inability to continue as a going concern. Our management and
our independent registered public accounting firm have concluded
that due to our need for additional capital, and the
uncertainties surrounding our ability to raise such funding,
substantial doubt exists as to our ability to continue as a
going concern. We may be forced to reduce our operating
expenses, raise additional funds, principally through the
additional sales of our securities or debt financings, or enter
into a corporate partnership to meet our working capital needs.
However, we cannot guarantee that we will be able to obtain
sufficient additional funds when needed or that such funds, if
available, will be obtainable on terms satisfactory to us. If we
are unable to raise sufficient additional capital or complete a
strategic transaction, we may be unable to continue to fund our
operations, develop our product candidates or realize value from
our assets and discharge our liabilities in the normal course of
business. These uncertainties raise substantial doubt about our
ability to continue as a going concern. If we become unable to
continue as a going concern, we may have to liquidate our
assets, and might realize significantly less than the values at
which they are carried on our financial statements, and
stockholders may lose all or part of their investment in our
common stock.
We
have a history of net losses. We expect to continue to incur
substantial and increasing net losses for the foreseeable
future, and we may never achieve or maintain
profitability.
We are not profitable and have incurred significant net losses
in each year since our inception, including net losses of
$1.5 million, $56.1 million and $77.0 million for
the years ended December 31, 2010, 2009 and 2008,
respectively, and $311.2 million for the period from
December 19, 2000 (inception) to December 31, 2010. As
of December 31, 2010, we had a deficit accumulated during
development stage of $266.1 million and stockholders
equity of $12.3 million. We expect to continue to incur
substantial net losses and negative cash flow for the
foreseeable future. These losses and negative cash flows have
had, and will continue to have, an adverse effect on our
stockholders equity and working capital.
Because of the numerous risks and uncertainties associated with
pharmaceutical product development and commercialization, we are
unable to accurately predict the timing or amount of future
expenses or when, or if, we will be able to achieve or maintain
profitability. Currently, we have no products approved for
commercial sale, and to date we have not generated any product
revenue. We have financed our operations primarily through the
sale of equity securities, capital lease and equipment
financing, debt financing, collaboration and licensing
agreements, and government grants. The size of our future net
losses will depend, in part, on the rate of growth or
contraction of our expenses and the level and rate of growth, if
any, of our revenues. Revenues from strategic partnerships are
26
uncertain because we may not enter into any additional strategic
partnerships. If we are unable to develop and commercialize one
or more of our product candidates or if sales revenue from any
product candidate that receives marketing approval is
insufficient, we will not achieve profitability. Even if we do
achieve profitability, we may not be able to sustain or increase
profitability.
We are
a development stage company. Our success depends substantially
on our lead product candidates. If we do not develop
commercially successful products, we may be forced to cease
operations.
You must evaluate us in light of the uncertainties and
complexities affecting a development stage pharmaceutical
company. We have not completed clinical development for any of
our product candidates. In October 2010, we received a CRL from
the FDA regarding our NDA for our AZ-004 product candidate. A
CRL is issued by the FDA indicating that the NDA review cycle is
complete and the application is not ready for approval in its
present form. In December 2010, we completed an
End-of-Review
meeting with the FDA to discuss the issues outlined in the
AZ-004 CRL. In January 2011, we received the official FDA
minutes of the meeting, and we anticipate resubmitting the
AZ-004 NDA in July 2011. We may be unsuccessful in resolving the
concerns raised in the CRL, and we may never receive marketing
approval for AZ-004 or any of our product candidates as a result
of the issues raised in the CRL. Each of our other product
candidates is at an earlier stage of development and may be
affected by concerns expressed in the CRL. Each of our product
candidates will be unsuccessful if it:
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does not demonstrate acceptable safety and efficacy in
preclinical studies and clinical trials or otherwise does not
meet applicable regulatory standards for approval;
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does not offer therapeutic or other improvements over existing
or future drugs used to treat the same or similar conditions;
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is not capable of being produced in commercial quantities at an
acceptable cost, or at all; or
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is not accepted by patients, the medical community or third
party payors.
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Our ability to generate product revenue in the future is
dependent on the successful development and commercialization of
our product candidates. We have not proven our ability to
develop and commercialize products. Problems frequently
encountered in connection with the development and utilization
of new and unproven technologies and the competitive environment
in which we operate might limit our ability to develop
commercially successful products. We do not expect any of our
current product candidates to be commercially available before
2012, if at all. If we are unable to make our product candidates
commercially available, we will not generate product revenues,
and we will not be successful.
We
will need substantial additional capital in the future. If
additional capital is not available, we will have to delay,
reduce or cease operations.
We will need to raise additional capital to fund our operations,
to develop our product candidates and to develop our
manufacturing capabilities. Our future capital requirements will
be substantial and will depend on many factors including:
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our response to the CRL, including the NDA we expect to resubmit
in July 2011, and interactions with the FDA regarding the issues
raised in the CRL;
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the scope, rate of progress, results and costs of our
preclinical studies, clinical trials and other research and
development activities, and our manufacturing development and
commercial manufacturing activities;
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the cost, timing and outcomes of regulatory proceedings;
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the cost and timing of developing manufacturing capacity;
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the cost and timing of developing sales and marketing
capabilities prior to receipt of any regulatory approval of our
product candidates;
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revenues received from any existing or future products;
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payments received under our collaboration with Cypress and any
future strategic partnerships;
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27
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the filing, prosecution and enforcement of patent
claims; and
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the costs associated with commercializing our product
candidates, if they receive regulatory approval.
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We believe that with current cash, cash equivalents and
marketable securities along with interest earned thereon, the
proceeds from option exercises and purchases of common stock
pursuant to our 2005 Employee Stock Purchase Plan, or ESPP, we
will be able to maintain our current operations, at our current
cost levels, into the third quarter of 2011. Further, due to the
FDA not approving AZ-004 for commercial marketing in October
2010, we are slowing the clinical development of AZ-007.
Changing circumstances may cause us to consume capital
significantly faster or slower than we currently anticipate, or
to alter our operations. We have based these estimates on
assumptions that may prove to be wrong, and we could exhaust our
available financial resources sooner than we currently expect.
The key assumptions underlying these estimates include:
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expenditures related to continued preclinical and clinical
development of our product candidates during this period within
budgeted levels;
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no unexpected costs related to the development of our
manufacturing capability;
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no unexpected costs related to the resubmission of our AZ-004
NDA: and
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no growth in the number of our employees during this period.
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We may never be able to generate a sufficient amount of product
revenue to cover our expenses. Until we do, we expect to finance
our future cash needs through public or private equity
offerings, debt financings, strategic partnerships or licensing
arrangements, as well as interest income earned on cash and
marketable securities balances and proceeds from stock option
exercises and purchases under our ESPP. Any financing
transaction may contain unfavorable terms. If we raise
additional funds by issuing equity securities, our
stockholders equity will be diluted. If we raise
additional funds through strategic partnerships, we may be
required to relinquish rights to our product candidates or
technologies, or to grant licenses on terms that are not
favorable to us.
The
process for obtaining approval of an NDA is time consuming,
subject to unanticipated delays and costs, and requires the
commitment of substantial resources. We received a CRL for our
NDA in October 2010.
In October 2010, we received a complete response letter, or CRL,
from the FDA regarding our NDA. A CRL is issued by the FDA
indicating that the NDA review cycle is complete and the
application is not ready for approval in its present form. The
CRL conveyed the FDAs comments regarding certain issues
with our NDA, including data from the three Phase 1 pulmonary
safety studies with AZ-004, suitability of stability studies and
certain other CMC concerns, including matters related to the
FDAs inspection of our manufacturing facilities. In
December 2010, we met with the FDA to address the concerns
raised in the CRL and have received official FDA minutes from
the meeting. We expect to resubmit our NDA in July 2011 to
address the FDAs concerns outlined in the CRL. We may be
unsuccessful in resolving these issues and we may never receive
marketing approval for AZ-004 or any of our product candidates
as a result of the issues raised in the CRL.
The FDA will conduct an in-depth review of our resubmission to
determine whether to approve AZ-004 for commercial marketing for
the indications we have proposed. If the FDA is not satisfied
with the information we provide, the FDA may refuse to approve
our NDA or may require us to perform additional studies or
provide other information in order to secure approval. The FDA
may delay, limit or refuse to approve our resubmitted NDA if we
do not sufficiently address the issues raised in the CRL.
If the FDA determines that the clinical trials of AZ-004 that
were submitted in support of our NDA were not conducted in full
compliance with the applicable protocols for these studies, as
well as with applicable regulations and standards, or if the FDA
does not agree with our interpretation of the results of such
studies, the FDA may reject the data that resulted from such
studies. The rejection of data from clinical trials required to
support our NDA for AZ-004 could negatively impact our ability
to obtain marketing authorization for this product candidate and
would have a material adverse effect on our business and
financial condition.
28
In addition, our resubmitted NDA may not be approved, or
approval may be delayed, as a result of changes in FDA policies
for drug approval during the review period. For example,
although many products have been approved by the FDA in recent
years under Section 505(b)(2) under the Federal Food, Drug
and Cosmetic Act, objections have been raised to the FDAs
interpretation of Section 505(b)(2). If challenges to the
FDAs interpretation of Section 505(b)(2) are
successful, the FDA may be required to change its
interpretation, which could delay or prevent the approval of an
NDA. Any significant delay in the review or approval of our
resubmitted NDA would have a material adverse effect on our
business and financial condition.
Unstable
market conditions may have serious adverse consequences on our
business.
The recent economic downturn and market instability has made the
business climate more volatile and more costly. Our general
business strategy may be adversely affected by unpredictable and
unstable market conditions. If the current equity and credit
markets deteriorate further, or do not improve, it may make any
necessary debt or equity financing more difficult, more costly,
and more dilutive. While we believe that with current cash, cash
equivalents and marketable securities along with interest earned
thereon, the proceeds from option exercises and purchases of
common stock pursuant to our ESPP, we will be able to maintain
our current operations, at our current cost levels, into the
third quarter of 2011, we may obtain additional financing on
less than attractive rates or on terms that are excessively
dilutive to existing stockholders. Failure to secure any
necessary financing in a timely manner and on favorable terms
could have a material adverse effect on our business, financial
condition and stock price and could require us to delay or
abandon clinical development plans or alter our operations.
There is a risk that one or more of our current component
manufacturers and partners may encounter difficulties during
challenging economic times, which would directly affect our
ability to attain our operating goals on schedule and on budget.
Unless
our preclinical studies demonstrate the safety of our product
candidates, we will not be able to commercialize our product
candidates.
To obtain regulatory approval to market and sell any of our
product candidates, we must satisfy the FDA and other regulatory
authorities abroad, through extensive preclinical studies, that
our product candidates are safe. Our Staccato system
creates condensation aerosol from drug compounds, and there
currently are no approved products that use a similar method of
drug delivery. Companies developing other inhalation products
have not defined or successfully completed the types of
preclinical studies we believe will be required for submission
to regulatory authorities as we seek approval to conduct our
clinical trials. We may not have conducted or may not conduct in
the future the types of preclinical testing ultimately required
by regulatory authorities, or future preclinical tests may
indicate that our product candidates are not safe for use in
humans. Preclinical testing is expensive, can take many years
and have an uncertain outcome. In addition, success in initial
preclinical testing does not ensure that later preclinical
testing will be successful.
We may experience numerous unforeseen events during, or as a
result of, the preclinical testing process, which could delay or
prevent our ability to develop or commercialize our product
candidates, including:
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our preclinical testing may produce inconclusive or negative
safety results, which may require us to conduct additional
preclinical testing or to abandon product candidates that we
believed to be promising;
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our product candidates may have unfavorable pharmacology,
toxicology or carcinogenicity; and
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our product candidates may cause undesirable side effects.
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Any such events would increase our costs and could delay or
prevent our ability to commercialize our product candidates,
which could adversely impact our business, financial condition
and results of operations.
Failure
or delay in commencing or completing clinical trials for our
product candidates could harm our business.
We have not completed all the clinical trials necessary to
support an application with the FDA for approval to market any
of our product candidates other than what we believe to be
adequate clinical trials to support the
29
marketing approval for AZ-004 in the United States. Future
clinical trials may be delayed or terminated as a result of many
factors, including:
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insufficient financial resources to fund such trials;
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delays or failure in reaching agreement on acceptable clinical
trial contracts or clinical trial protocols with prospective
sites;
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regulators or institutional review boards may not authorize us
to commence a clinical trial;
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regulators or institutional review boards may suspend or
terminate clinical research for various reasons, including
noncompliance with regulatory requirements or concerns about
patient safety;
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we may suspend or terminate our clinical trials if we believe
that they expose the participating patients to unacceptable
health risks;
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we may experience slower than expected patient enrollment or
lack of a sufficient number of patients that meet the enrollment
criteria for our clinical trials;
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patients may not complete clinical trials due to safety issues,
side effects, dissatisfaction with the product candidate, or
other reasons;
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we may have difficulty in maintaining contact with patients
after treatment, preventing us from collecting the data required
by our study protocol;
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product candidates may demonstrate a lack of efficacy during
clinical trials;
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we may experience governmental or regulatory delays, failure to
obtain regulatory approval or changes in regulatory
requirements, policy and guidelines; and
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we may experience delays in our ability to manufacture clinical
trial materials in a timely manner as a result of ongoing
process and design enhancements to our Staccato system.
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Any delay in commencing or completing clinical trials for our
product candidates would delay commercialization of our product
candidates and harm our business, financial condition and
results of operations. It is possible that none of our product
candidates will successfully complete clinical trials or receive
regulatory approval, which would severely harm our business,
financial condition and results of operations.
If our
product candidates do not meet safety and efficacy endpoints in
clinical trials, they will not receive regulatory approval, and
we will be unable to market them.
We have not yet received regulatory approval from the FDA or any
foreign regulatory authority to market any of our product
candidates. The clinical development and regulatory approval
process is extremely expensive and takes many years. The timing
of any approval cannot be accurately predicted. If we fail to
obtain regulatory approval for our product candidates, we will
be unable to market and sell them and therefore we may never be
profitable. In October 2010 the FDA issued a CRL regarding our
NDA for AZ-004. In December 2010, we met with the FDA to address
the concerns raised in the CRL and have received official FDA
minutes from the meeting. We expect to resubmit our NDA in July
2011 to address the FDAs concerns outlined in the CRL. We
may be unsuccessful in resolving these issues, and we may never
receive marketing approval for AZ-004 or any of our product
candidates as a result of the issues raised in the CRL.
As part of the regulatory process, we must conduct clinical
trials for each product candidate to demonstrate safety and
efficacy to the satisfaction of the FDA and other regulatory
authorities abroad. The number and design of clinical trials
that will be required varies depending on the product candidate,
the condition being evaluated, the trial results and regulations
applicable to any particular product candidate. In June 2008, we
announced that our Phase 2a
proof-of-concept
clinical trial of AZ-002 (Staccato alprazolam) did not
meet either of its two primary endpoints. In September 2009, we
announced that our Phase 2b clinical trial of AZ-104
(Staccato loxapine, low-dose) for the treatment of
migraine did not meet its primary endpoint.
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Prior clinical trial program designs and results are not
necessarily predictive of future clinical trial designs or
results. Initial results may not be confirmed upon full analysis
of the detailed results of a trial. Product candidates in later
stage clinical trials may fail to show the desired safety and
efficacy despite having progressed through initial clinical
trials with acceptable endpoints. In the CRL, the FDA raised
concerns regarding the safety of AZ-004 based on data from three
Phase 1 pulmonary safety studies. If we do not resolve these
concerns to the satisfaction of the FDA, AZ-004 will not be
approved for marketing.
If our
product candidates fail to show a clinically significant benefit
compared to placebo, they will not be approved for
marketing.
The design of our clinical trials is based on many assumptions
about the expected effect of our product candidates, and if
those assumptions prove incorrect, the clinical trials may not
produce statistically significant results. Our Staccato
system is not similar to other approved drug delivery
methods, and there is no precedent for the application of
detailed regulatory requirements to our product candidates. We
cannot assure you that the design of, or data collected from,
the clinical trials of our product candidates will be sufficient
to support the FDA and foreign regulatory approvals.
Regulatory
authorities may not approve our product candidates even if they
meet safety and efficacy endpoints in clinical
trials.
The FDA and other foreign regulatory agencies can delay, limit
or deny marketing approval for many reasons, including:
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a product candidate may not be considered safe or effective;
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the manufacturing processes or facilities we have selected may
not meet the applicable requirements; and
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changes in their approval policies or adoption of new
regulations may require additional work on our part.
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Part of the FDA approval process includes FDA inspections on
manufacturing facilities to ensure adherence to applicable
regulations. The FDA may delay, limit or deny marketing approval
of our other product candidates as a result of such inspections.
In August 2010 the FDA inspected our manufacturing facilities at
our Mountain View headquarters. The CRL we received in October
2010 regarding our NDA for AZ-004 raised issues regarding our
manufacturing processes that must be resolved before we will be
allowed to market AZ-004.
Any delay in, or failure to receive or maintain, approval for
any of our product candidates could prevent us from ever
generating meaningful revenues or achieving profitability. The
CRL we received in October 2010 conveyed the FDAs comments
regarding certain issues with our NDA, including Phase 1
pulmonary safety studies with AZ-004, stability studies and
matters related to the inspection of our manufacturing
faculties. We may never receive marketing approval for AZ-004 or
any of our product candidates as a result of the issues raised
in the CRL.
Our product candidates may not be approved even if they achieve
their endpoints in clinical trials. Regulatory agencies,
including the FDA, or their advisors may disagree with our trial
design and our interpretations of data from preclinical studies
and clinical trials. Regulatory agencies may change requirements
for approval even after a clinical trial design has been
approved. For example, AZ-004 and Alexzas other product
candidates combine drug and device components in a manner that
the FDA considers to render them combination products under FDA
regulations. The FDA exercises significant discretion over the
regulation of combination products, including the discretion to
require separate marketing applications for the drug and device
components in a combination product. To date, Alexzas
products are being regulated as drug products under the new drug
application process administered by the FDA. The FDA could in
the future require additional regulation of Alexzas
products under the medical device provisions of the Federal
Food, Drug, and Cosmetic Act.
Regulatory agencies also may approve a product candidate for
fewer or more limited indications than requested or may grant
approval subject to the performance of post-marketing studies.
In addition, regulatory agencies may not approve the labeling
claims that are necessary or desirable for the successful
commercialization of our product candidates.
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Our
product candidates will remain subject to ongoing regulatory
review even if they receive marketing approval. If we fail to
comply with continuing regulations, we could lose these
approvals, and the sale of any future products could be
suspended.
Even if we receive regulatory approval to market a particular
product candidate, the FDA or a foreign regulatory authority
could condition approval on conducting additional costly
post-approval studies or trials or could limit the scope of our
approved labeling or could impose burdensome post-approval
obligations, such as those required under a Risk Evaluation and
Mitigation Strategy, or REMS. If required, a REMS may include
various elements, such as distribution of a medication guide or
a patient package insert, implementation of a communication plan
to educate healthcare providers of the drugs risks, and
imposition of limitations on who may prescribe or dispense the
drug or other measures that the FDA deems necessary to assure
the safe use of the drug. Moreover, the product may later cause
adverse effects that limit or prevent its widespread use, force
us to withdraw it from the market, cause the FDA to impose
additional REMS obligations or impede or delay our ability to
obtain regulatory approvals in additional countries. In
addition, we will continue to be subject to FDA review and
periodic inspections to ensure adherence to applicable
regulations. After receiving marketing approval, the FDA imposes
extensive regulatory requirements on the manufacturing,
labeling, packaging, adverse event reporting, storage,
advertising, promotion and record keeping related to the product.
If we fail to comply with the regulatory requirements of the FDA
and other applicable U.S. and foreign regulatory
authorities or previously unknown problems with any future
products, suppliers or manufacturing processes are discovered,
we could be subject to administrative or judicially imposed
sanctions, including:
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restrictions on the products, suppliers or manufacturing
processes;
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warning letters or untitled letters;
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civil or criminal penalties or fines;
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injunctions;
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product seizures, detentions or import bans;
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voluntary or mandatory product recalls and publicity
requirements;
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suspension or withdrawal of regulatory approvals;
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total or partial suspension of production; and
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refusal to approve pending applications for marketing approval
of new drugs or supplements to approved applications.
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If we
do not produce our devices cost effectively, we will never be
profitable.
Our Staccato system based product candidates contain
electronic and other components in addition to the active
pharmaceutical ingredients. As a result of the cost of
developing and producing these components, the cost to produce
our product candidates, and any approved products, will likely
be higher per dose than the cost to produce intravenous or oral
tablet products. This increased cost of goods may prevent us
from ever selling any products at a profit. In addition, we are
developing single dose and multiple dose versions of our
Staccato system. Developing multiple versions of our
Staccato system may reduce or eliminate our ability to
achieve manufacturing economies of scale. Developing multiple
versions of our Staccato system reduces our ability to
focus development resources on each version, potentially
reducing our ability to effectively develop any particular
version. We expect to continue to modify each of our product
candidates throughout their clinical development to improve
their performance, dependability, manufacturability and quality.
Some of these modifications may require additional regulatory
review and approval, which may delay or prevent us from
conducting clinical trials. The development and production of
our technology entail a number of technical challenges,
including achieving adequate dependability, that may be
expensive or time consuming to solve. Any delay in or failure to
develop and manufacture any future products in a cost effective
way could prevent us from generating any meaningful revenues and
prevent us from becoming profitable.
32
We
rely on third parties to conduct our preclinical studies and our
clinical trials. If these third parties do not perform as
contractually required or expected, we may not be able to obtain
regulatory approval for our product candidates, or we may be
delayed in doing so.
We do not have the ability to conduct preclinical studies or
clinical trials independently for our product candidates. We
must rely on third parties, such as contract research
organizations, medical institutions, academic institutions,
clinical investigators and contract laboratories, to conduct our
preclinical studies and clinical trials. We are responsible for
confirming that our preclinical studies are conducted in
accordance with applicable regulations and that each of our
clinical trials is conducted in accordance with its general
investigational plan and protocol. The FDA requires us to comply
with regulations and standards, commonly referred to as good
laboratory practices for conducting and recording the results of
our preclinical studies and good clinical practices for
conducting, monitoring, recording and reporting the results of
clinical trials, to assure that data and reported results are
accurate and that the clinical trial participants are adequately
protected. Our reliance on third parties does not relieve us of
these responsibilities. If the third parties conducting our
clinical trials do not perform their contractual duties or
obligations, do not meet expected deadlines, fail to comply with
the FDAs good clinical practice regulations, do not adhere
to our clinical trial protocols or otherwise fail to generate
reliable clinical data, we may need to enter into new
arrangements with alternative third parties and our clinical
trials may be extended, delayed or terminated or may need to be
repeated, and we may not be able to obtain regulatory approval
for or commercialize the product candidate being tested in such
trials.
Problems
with the third parties that manufacture the active
pharmaceutical ingredients in our product candidates may delay
our clinical trials or subject us to liability.
We do not currently own or operate manufacturing facilities for
clinical or commercial production of the active pharmaceutical
ingredient, or API, used in any of our product candidates. We
have no experience in drug manufacturing, and we lack the
resources and the capability to manufacture any of the APIs used
in our product candidates, on either a clinical or commercial
scale. As a result, we rely on third parties to supply the API
used in each of our product candidates. We expect to continue to
depend on third parties to supply the API for our product
candidates and any additional product candidates we develop in
the foreseeable future.
An API manufacturer must meet high precision and quality
standards for that API to meet regulatory specifications and
comply with regulatory requirements. A contract manufacturer is
subject to ongoing periodic unannounced inspection by the FDA
and corresponding state and foreign authorities to ensure strict
compliance with current good manufacturing practice, or cGMP,
and other applicable government regulations and corresponding
foreign standards. Additionally, a contract manufacturer must
pass a pre-approval inspection by the FDA to ensure strict
compliance with cGMP prior to the FDAs approval of any
product candidate for marketing. A contract manufacturers
failure to conform with cGMP could result in the FDAs
refusal to approve or a delay in the FDAs approval of a
product candidate for marketing. We are ultimately responsible
for confirming that the APIs used in our product candidates are
manufactured in accordance with applicable regulations.
Our third party suppliers may not carry out their contractual
obligations or meet our deadlines. In addition, the API they
supply to us may not meet our specifications and quality
policies and procedures. If we need to find alternative
suppliers of the API used in any of our product candidates, we
may not be able to contract for such supplies on acceptable
terms, if at all. Any such failure to supply or delay caused by
such contract manufacturers would have an adverse effect on our
ability to continue clinical development of our product
candidates or commercialize any future products.
If our third party drug suppliers fail to achieve and maintain
high manufacturing standards in compliance with cGMP
regulations, we could be subject to certain product liability
claims in the event such failure to comply resulted in defective
products that caused injury or harm.
If we
experience problems with the manufacturers of components of our
product candidates, our development programs may be delayed or
we may be subject to liability.
We outsource the manufacturing of the components of our
Staccato system, including the printed circuit boards,
the plastic airways, and the chemical heat packages to be used
in our commercial single dose device. We
33
have no experience in the manufacturing of components, other
than our chemical heat packages, and we currently lack the
resources and the capability to manufacture them, on either a
clinical or commercial scale. As a result, we rely on third
parties to supply these components. We expect to continue to
depend on third parties to supply these components for our
current product candidates and any devices based on the Staccato
system we develop in the foreseeable future.
The third-party suppliers of the components of our Staccato
system must meet high precision and quality standards for
our finished devices to comply with regulatory requirements. A
contract manufacturer is subject to ongoing periodic unannounced
inspection by the FDA and corresponding state and foreign
authorities to ensure that our finished devices remain in strict
compliance with the QSR, which sets forth the FDAs current
good manufacturing practice requirements for medical devices,
and other applicable government regulations and corresponding
foreign standards. We are ultimately responsible for confirming
that the components used in the Staccato system are
manufactured in accordance with specifications, standards and
procedures necessary to ensure that our finished devices comply
with the QSR or other applicable regulations.
Our third party suppliers may not comply with their contractual
obligations or meet our deadlines, or the components they supply
to us may not meet our specifications and quality policies and
procedures. If we need to find alternative suppliers of the
components used in the Staccato system, we may not be
able to contract for such components on acceptable terms, if at
all. Any such failure to supply or delay caused by such contract
manufacturers would have an adverse affect on our ability to
continue clinical development of our product candidates or
commercialize any future products.
In addition, the heat packages used in the single dose version
of our Staccato system are manufactured using certain
energetic, or highly combustible, materials that are used to
generate the rapid heating necessary for vaporizing the drug
compound while avoiding degradation. Manufacture of products
containing energetic materials is regulated by the
U.S. government. We have entered into a manufacture
agreement with Autoliv for the manufacture of the heat packages
in the commercial design of our single dose version of our
Staccato system. If Autoliv fails to manufacture the heat
packages to the necessary specifications, or does not carry out
its contractual obligations to supply our heat packages to us,
or if the FDA requires different manufacturing or quality
standards than those set forth in our manufacture agreement, our
clinical trials or commercialization efforts may be delayed,
suspended or terminated while we seek additional suitable
manufacturers of our heat packages, which may prevent us from
commercializing our product candidates that utilize the single
dose version of the Staccato system.
If we
do not establish additional strategic partnerships, we will have
to undertake development and commercialization efforts on our
own, which would be costly and delay our ability to
commercialize any future products.
A key element of our business strategy is our intent to
selectively partner with pharmaceutical, biotechnology and other
companies to obtain assistance for the development and potential
commercialization of our product candidates. In December 2006,
we entered into such a development relationship with Symphony
Allegro, Inc., or Allegro, and in December 2007 we entered into
a strategic relationship with Endo Pharmaceuticals, Inc., or
Endo, for the development of AZ-003, or the Endo license
agreement. In January 2009, we mutually agreed with Endo to
terminate the Endo license agreement. In June 2009, we amended
the terms of our option agreement with Allegro, resulting in our
acquisition of Allegro and the termination of the agreement in
August 2009. In February 2010, we entered into a collaboration
with Biovail for the commercialization of AZ-004 in the United
States and Canada. In October 2010, Biovail gave us notice that
it was terminating the collaboration and the collaboration
terminated in January 2011. In August 2010, we entered into a
license and development agreement with Cypress for Staccato
nicotine. We intend to enter into additional strategic
partnerships with third parties to develop and commercialize our
product candidates. Other than Cypress, we do not currently have
any strategic partnerships for any of our product candidates. We
face significant competition in seeking appropriate strategic
partners, and these strategic partnerships can be intricate and
time consuming to negotiate and document. We may not be able to
negotiate additional strategic partnerships on acceptable terms,
or at all. We are unable to predict when, if ever, we will enter
into any additional strategic partnerships because of the
numerous risks and uncertainties associated with establishing
strategic partnerships. If we are unable to negotiate additional
strategic partnerships for our product candidates we may be
forced to curtail the development of a particular candidate,
reduce or delay its development
34
program or one or more of our other development programs, delay
its potential commercialization, reduce the scope of our sales
or marketing activities or undertake development or
commercialization activities at our own expense. In addition, we
will bear all the risk related to the development of that
product candidate. If we elect to increase our expenditures to
fund development or commercialization activities on our own, we
may need to obtain additional capital, which may not be
available to us on acceptable terms, or at all. If we do not
have sufficient funds, we will not be able to bring our product
candidates to market and generate product revenue.
If we
enter into additional strategic partnerships, we may be required
to relinquish important rights to and control over the
development of our product candidates or otherwise be subject to
terms unfavorable to us.
Our relationship with Cypress is, and any other strategic
partnerships or collaborations with pharmaceutical or
biotechnology companies we may establish will be, subject to a
number of risks including:
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business combinations or significant changes in a strategic
partners business strategy may adversely affect a
strategic partners willingness or ability to complete its
obligations under any arrangement;
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we may not be able to control the amount and timing of resources
that our strategic partners devote to the development or
commercialization of product candidates;
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strategic partners may delay clinical trials, provide
insufficient funding, terminate a clinical trial or abandon a
product candidate, repeat or conduct new clinical trials or
require a new version of a product candidate for clinical
testing;
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strategic partners may not pursue further development and
commercialization of products resulting from the strategic
partnering arrangement or may elect to discontinue research and
development programs;
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strategic partners may not commit adequate resources to the
marketing and distribution of any future products, limiting our
potential revenues from these products;
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disputes may arise between us and our strategic partners that
result in the delay or termination of the research, development
or commercialization of our product candidates or that result in
costly litigation or arbitration that diverts managements
attention and consumes resources;
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strategic partners may experience financial difficulties;
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strategic partners may not properly maintain or defend our
intellectual property rights or may use our proprietary
information in a manner that could jeopardize or invalidate our
proprietary information or expose us to potential litigation;
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strategic partners could independently move forward with a
competing product candidate developed either independently or in
collaboration with others, including our competitors; and
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strategic partners could terminate the arrangement or allow it
to expire, which would delay the development and may increase
the cost of developing our product candidates.
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If we
fail to gain market acceptance among physicians, patients,
third-party payors and the medical community, we will not become
profitable.
The Staccato system is a fundamentally new method of drug
delivery. Any future product based on our Staccato system
may not gain market acceptance among physicians, patients,
third-party payors and the medical community. If these products
do not achieve an adequate level of acceptance, we will not
generate sufficient product revenues to become profitable. The
degree of market acceptance of any of our product candidates, if
approved for commercial sale, will depend on a number of
factors, including:
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demonstration of efficacy and safety in clinical trials;
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the existence, prevalence and severity of any side effects;
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potential or perceived advantages or disadvantages compared to
alternative treatments;
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perceptions about the relationship or similarity between our
product candidates and the parent drug compound upon which each
product candidate is based;
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the timing of market entry relative to competitive treatments;
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the ability to offer any future products for sale at competitive
prices;
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relative convenience, product dependability and ease of
administration;
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the strength of marketing and distribution support;
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the sufficiency of coverage and reimbursement of our product
candidates by governmental and other third-party payors; and
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the product labeling, including the package insert, and the
marketing restrictions required by the FDA or regulatory
authorities in other countries.
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Our
product candidates that we may develop may require expensive
carcinogenicity tests.
We combine small molecule drugs with our Staccato system
to create proprietary product candidates. Some of these drugs
may not have previously undergone carcinogenicity testing that
is now generally required for marketing approval. We may be
required to perform carcinogenicity testing with product
candidates incorporating drugs that have not undergone
carcinogenicity testing or may be required to do additional
carcinogenicity testing for drugs that have undergone such
testing. Any carcinogenicity testing we are required to complete
will increase the costs to develop a particular product
candidate and may delay or halt the development of such product
candidate.
If
some or all of our patents expire, are invalidated or are
unenforceable, or if some or all of our patent applications do
not yield issued patents or yield patents with narrow claims,
competitors may develop competing products using our or similar
intellectual property and our business will
suffer.
Our success will depend in part on our ability to obtain and
maintain patent and trade secret protection for our technologies
and product candidates both in the United States and other
countries. We do not know whether any patents will issue from
any of our pending or future patent applications. In addition, a
third party may successfully circumvent our patents. Our rights
under any issued patents may not provide us with sufficient
protection against competitive products or otherwise cover
commercially valuable products or processes.
The degree of protection for our proprietary technologies and
product candidates is uncertain because legal means afford only
limited protection and may not adequately protect our rights or
permit us to gain or keep our competitive advantage. For example:
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we might not have been the first to make the inventions covered
by each of our pending patent applications and issued patents;
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we might not have been the first to file patent applications for
these inventions;
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others may independently develop similar or alternative
technologies or duplicate any of our technologies;
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the claims of our issued patents may be narrower than as filed
and not sufficiently broad to prevent third parties from
circumventing them;
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it is possible that none of our pending patent applications will
result in issued patents;
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we may not develop additional proprietary technologies or drug
candidates that are patentable;
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our patent applications or patents may be subject to
interference, opposition or similar administrative proceedings;
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any patents issued to us or our potential strategic partners may
not provide a basis for commercially viable products or may be
challenged by third parties in the course of litigation or
administrative proceedings such as reexaminations or
interferences; and
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the patents of others may have an adverse effect on our ability
to do business.
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Even
if valid and enforceable patents cover our product candidates
and technologies, the patents will provide protection only for a
limited amount of time.
Our potential strategic partners ability to obtain patents
is uncertain because, to date, some legal principles remain
unresolved, there has not been a consistent policy regarding the
breadth or interpretation of claims allowed in patents in the
United States, and the specific content of patents and patent
applications that are necessary to support and interpret patent
claims is highly uncertain due to the complex nature of the
relevant legal, scientific and factual issues. Furthermore, the
policies governing pharmaceutical and medical device patents
outside the United States may be even more uncertain. Changes in
either patent laws or interpretations of patent laws in the
United States and other countries may diminish the value of our
intellectual property or narrow the scope of our patent
protection.
Our current patents or any future patents that may be issued
regarding our product candidates or methods of using them, can
be challenged by our competitors who can argue that our patents
are invalid
and/or
unenforceable. Third parties may challenge our rights to, or the
scope or validity of, our patents. Patents also may not protect
our product candidates if competitors devise ways of making
these or similar product candidates without legally infringing
our patents. The Federal Food, Drug and Cosmetic Act and the FDA
regulations and policies provide incentives to manufacturers to
challenge patent validity or create modified, non-infringing
versions of a drug or device in order to facilitate the approval
of generic substitutes. These same types of incentives encourage
manufacturers to submit new drug applications that rely on
literature and clinical data not prepared for or by the drug
sponsor.
We also rely on trade secrets to protect our technology,
especially where we do not believe that patent protection is
appropriate or obtainable. However, trade secrets are difficult
to protect. The employees, consultants, contractors, outside
scientific collaborators and other advisors of our company and
our strategic partners may unintentionally or willfully disclose
our confidential information to competitors. Enforcing a claim
that a third party illegally obtained and is using our trade
secrets is expensive and time consuming and the outcome is
unpredictable. Failure to protect or maintain trade secret
protection could adversely affect our competitive business
position.
Our research and development collaborators may have rights to
publish data and other information in which we have rights. In
addition, we sometimes engage individuals or entities to conduct
research that may be relevant to our business. The ability of
these individuals or entities to publish or otherwise publicly
disclose data and other information generated during the course
of their research is subject to certain contractual limitations.
These contractual provisions may be insufficient or inadequate
to protect our trade secrets and may impair our patent rights.
If we do not apply for patent protection prior to such
publication or if we cannot otherwise maintain the
confidentiality of our technology and other confidential
information, then our ability to receive patent protection or
protect our proprietary information may be jeopardized.
Litigation
or other proceedings or third party claims of intellectual
property infringement could require us to spend time and money
and could shut down some of our operations.
Our commercial success depends in part on not infringing patents
and proprietary rights of third parties. Others have filed, and
in the future are likely to file, patent applications covering
products that are similar to our product candidates, as well as
methods of making or using similar or identical products. If
these patent applications result in issued patents and we wish
to use the claimed technology, we would need to obtain a license
from the third party. We may not be able to obtain these
licenses at a reasonable cost, if at all.
In addition, administrative proceedings, such as interferences
and reexaminations before the U.S. Patent and Trademark
Office, could limit the scope of our patent rights. We may incur
substantial costs and diversion of management and technical
personnel as a result of our involvement in such proceedings. In
particular, our patents and patent applications may be subject
to interferences in which the priority of invention may be
awarded to a third party. We do not know whether our patents and
patent applications would be entitled to priority over patents
or patent applications held by such a third party. Our issued
patents may also be subject to reexamination proceedings. We do
not know whether our patents would survive reexamination in
light of new questions of patentability that may be raised
following their issuance.
37
Third parties may assert that we are employing their proprietary
technology or their proprietary products without authorization.
In addition, third parties may already have or may obtain
patents in the future and claim that use of our technologies or
our products infringes these patents. We could incur substantial
costs and diversion of management and technical personnel in
defending our self against any of these claims. Furthermore,
parties making claims against us may be able to obtain
injunctive or other equitable relief, which could effectively
block our ability to further develop, commercialize and sell any
future products and could result in the award of substantial
damages against us. In the event of a successful claim of
infringement against us, we may be required to pay damages and
obtain one or more licenses from third parties. We may not be
able to obtain these licenses at a reasonable cost, if at all.
In that event, we could encounter delays in product
introductions while we attempt to develop alternative methods or
products. In the event we cannot develop alternative methods or
products, we may be effectively blocked from developing,
commercializing or selling any future products. Defense of any
lawsuit or failure to obtain any of these licenses would be
expensive and could prevent us from commercializing any future
products.
We review from time to time publicly available information
concerning the technological development efforts of other
companies in our industry. If we determine that these efforts
violate our intellectual property or other rights, we intend to
take appropriate action, which could include litigation. Any
action we take could result in substantial costs and diversion
of management and technical personnel in enforcing our patents
or other intellectual property rights against others.
Furthermore, the outcome of any action we take to protect our
rights may not be resolved in our favor.
Competition
in the pharmaceutical industry is intense. If our competitors
are able to develop and market products that are more effective,
safer or less costly than any future products that we may
develop, our commercial opportunity will be reduced or
eliminated.
We face competition from established as well as emerging
pharmaceutical and biotechnology companies, academic
institutions, government agencies and private and public
research institutions. Our commercial opportunity will be
reduced or eliminated if our competitors develop and
commercialize products that are safer, more effective, have
fewer side effects or are less expensive than any future
products that we may develop and commercialize. In addition,
significant delays in the development of our product candidates
could allow our competitors to bring products to market before
us and impair our ability to commercialize our product
candidates.
We anticipate that, if approved, AZ-004 would compete with the
available forms of loxapine and other available antipsychotic
drugs for the treatment of agitation, such as intramuscular
formulations, oral tablets and oral solutions.
We anticipate that, if approved, AZ-007 would compete with
non-benzodiazepine GABA-A receptor agonists. We are also aware
of more than 10 approved generic versions of zolpidem oral
tablets, as well as at least one insomnia product that is under
review by the FDA. Also, we are aware that a company has
received a complete response letter from the FDA with respect to
a version of zolpidem intended to treat middle of the night
awakening. Additionally, we are aware of four products in Phase
3 development for the treatment of insomnia.
We anticipate that, if approved, AZ-104 would compete with
currently marketed triptan drugs and with other migraine
headache treatments. In addition, we are aware of at least 15
product candidates in development for the treatment of
migraines, one of which is an inhaled formulation.
We anticipate that, if approved, AZ-003 would compete with some
of the available forms of fentanyl, including injectable
fentanyl, oral transmucosal fentanyl formulations and
ionophoretic transdermal delivery of fentanyl. We are also aware
of three fentanyl products under review by regulatory agencies
either in the United States or abroad, and at least 14 products
in Phase 3 clinical trial development for acute pain, four of
which are fentanyl products. There are two inhaled forms of
fentanyl products that are in at least Phase 2 development. In
addition, if approved, AZ-003 would compete with various generic
opioid drugs, such as oxycodone, hydrocodone and morphine, or
combination products including one or more of such drugs.
We anticipate that, if approved, AZ-002 would compete with the
oral tablet form of alprazolam and possibly IV and oral
forms of other benzodiazepines.
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Many of our competitors have significantly greater financial
resources and expertise in research and development,
manufacturing, preclinical testing, conducting clinical trials,
obtaining regulatory approvals and marketing approved products
than we do. Established pharmaceutical companies may invest
heavily to discover quickly and develop novel compounds or drug
delivery technology that could make our product candidates
obsolete. Smaller or early stage companies may also prove to be
significant competitors, particularly through strategic
partnerships with large and established companies. In addition,
these third parties compete with us in recruiting and retaining
qualified scientific and management personnel, establishing
clinical trial sites and patient registration for clinical
trials, as well as in acquiring technologies and technology
licenses complementary to our programs or advantageous to our
business. Accordingly, our competitors may succeed in obtaining
patent protection, receiving FDA approval or discovering,
developing and commercializing products before we do. If we are
not able to compete effectively against our current and future
competitors, our business will not grow and our financial
condition will suffer.
If we
are unable to establish sales and marketing capabilities or
enter into additional agreements with third parties to market
and sell our product candidates, we may be unable to generate
significant product revenue.
We do not have an internal sales organization and we have no
experience in the sales and distribution of pharmaceutical
products. There are risks involved with establishing our own
sales capabilities and increasing our marketing capabilities, as
well as entering into arrangements with third parties to perform
these services. Developing an internal sales force is expensive
and time consuming and could delay any product launch. On the
other hand, if we enter into arrangements with third parties to
perform sales, marketing and distribution services, our product
revenues or the profitability of these product revenues are
likely to be lower than if we market and sell any products that
we develop ourselves.
We may establish our own specialty sales force
and/or
engage additional pharmaceutical or other healthcare companies
with an existing sales and marketing organization and
distribution systems to sell, market and distribute any future
products. We are currently seeking partners for the worldwide
development and commercialization of AZ-004. We also intend to
seek international distribution partners for our product
candidates. We may not be able to establish a specialty sales
force or establish sales and distribution relationships on
acceptable terms. Factors that may inhibit our efforts to
commercialize any future products without strategic partners or
licensees include:
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our inability to recruit and retain adequate numbers of
effective sales and marketing personnel;
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the inability of sales personnel to obtain access to or persuade
adequate numbers of physicians to prescribe any future products;
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the lack of complementary products to be offered by sales
personnel, which may put us at a competitive disadvantage
relative to companies with more extensive product lines; and
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unforeseen costs and expenses associated with creating an
independent sales and marketing organization.
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Because the establishment of sales and marketing capabilities
depends on the progress towards commercialization of our product
candidates and because of the numerous risks and uncertainties
involved with establishing our own sales and marketing
capabilities, we are unable to predict when, if ever, we will
establish our own sales and marketing capabilities. If we are
not able to partner with additional third parties and are
unsuccessful in recruiting sales and marketing personnel or in
building a sales and marketing infrastructure, we will have
difficulty commercializing our product candidates, which would
adversely affect our business and financial condition.
If we
lose our key personnel or are unable to attract and retain
additional personnel, we may be unable to develop or
commercialize our product candidates.
We are highly dependent on our President and Chief Executive
Officer, Thomas B. King, the loss of whose services might
adversely impact the achievement of our objectives. In addition,
recruiting and retaining qualified clinical, scientific and
engineering personnel to manage clinical trials of our product
candidates and to perform future research and development work
will be critical to our success. There is currently a shortage
of skilled executives in our industry, which is likely to
continue. As a result, competition for skilled personnel is
intense and
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the turnover rate can be high. Although we believe we will be
successful in attracting and retaining qualified personnel,
competition for experienced management and clinical, scientific
and engineering personnel from numerous companies and academic
and other research institutions may limit our ability to do so
on acceptable terms. In addition, we do not have employment
agreements with any of our employees, and they could leave our
employment at will. We have change of control agreements with
our executive officers and vice presidents that provide for
certain benefits upon termination or a change in role or
responsibility in connection with a change of control of our
company. We do not maintain life insurance policies on any
employees. Failure to attract and retain personnel would prevent
us from developing and commercializing our product candidates.
If
plaintiffs bring product liability lawsuits against us, we may
incur substantial liabilities and may be required to limit
commercialization of the product candidates that we may
develop.
We face an inherent risk of product liability as a result of the
clinical testing of our product candidates in clinical trials
and will face an even greater risk if we commercialize any
products. We may be held liable if any product we develop causes
injury or is found otherwise unsuitable during product testing,
manufacturing, marketing or sale. Regardless of merit or
eventual outcome, liability claims may result in decreased
demand for any product candidates or products that we may
develop, injury to our reputation, withdrawal of clinical
trials, costs to defend litigation, substantial monetary awards
to clinical trial participants or patients, loss of revenue and
the inability to commercialize any products that we develop. We
have product liability insurance that covers our clinical trials
up to a $10 million aggregate annual limit. We intend to
expand product liability insurance coverage to include the sale
of commercial products if we obtain marketing approval for
AZ-004 or any other products that we may develop. However, this
insurance may be prohibitively expensive, or may not fully cover
our potential liabilities. Inability to obtain sufficient
insurance coverage at an acceptable cost or otherwise to protect
against potential product liability claims could prevent or
delay the commercialization of our product candidates. If we are
sued for any injury caused by any future products, our liability
could exceed our total assets.
Healthcare
law and policy changes, based on recently enacted legislation,
may have an adverse effect on us.
Healthcare costs have risen significantly over the past decade.
In March 2010, President Obama signed the Patient Protection and
Affordable Care Act, as amended by the Health Care and Education
Reconciliation Act, or, collectively, the Healthcare Reform Act.
This law substantially changes the way health care is financed
by both governmental and private insurers, and significantly
impacts the pharmaceutical industry. The Healthcare Reform Act
contains a number of provisions that are expected to impact our
business and operations, including provisions governing
enrollment in federal healthcare programs, reimbursement and
discount programs and fraud and abuse prevention and control,
which will impact existing government healthcare programs and
will result in the development of new programs, including
Medicare payment for performance initiatives and improvements to
the physician quality reporting system and feedback program. We
anticipate that if we obtain approval for our product
candidates, some of our revenue and the revenue from our
collaborators may be derived from U.S. government
healthcare programs, including Medicare. Additionally, in 2009,
the Department of Defense implemented a program pursuant to the
National Defense Authorization Act for Fiscal Year 2008 that
requires rebates, based on Federal statutory pricing, from
manufacturers of innovator drugs and biologics. Furthermore,
beginning in 2011, the Healthcare Reform Act imposes a
non-deductible fee treated as an excise tax on pharmaceutical
manufacturers or importers who sell branded prescription
drugs, which includes innovator drugs and biologics
(excluding certain orphan drugs, generics and
over-the-counter
drugs) to U.S. government programs. We expect that the
Healthcare Reform Act and other healthcare reform measures that
may be adopted in the future could have an adverse effect on our
industry generally and our ability to successfully commercialize
our product candidates or could limit or eliminate our spending
on development projects.
In addition to this legislation, there will continue to be
proposals by legislators at both the federal and state levels,
regulators and third-party payors to keep these costs down while
expanding individual healthcare benefits. Certain of these
changes could impose limitations on the prices we will be able
to charge for any product candidates that are approved or the
amounts of reimbursement available for these products from
governmental agencies or third-party payors, or may increase the
tax obligations on life sciences companies such as ours. While
it is too early to predict specifically what effect the Health
Reform Act and its implementation or any future legislation or
policies
40
will have on our business, we believe that healthcare reform may
have an adverse effect on our business and financial condition.
Our
product candidates AZ-002, AZ-003 and AZ-007 contain drug
substances that are regulated by the U.S. Drug Enforcement
Administration. Failure to comply with applicable regulations
and requirements could harm our business.
The Controlled Substances Act imposes various registration,
recordkeeping and reporting requirements, procurement and
manufacturing quotas, labeling and packaging requirements,
security controls and a restriction on prescription refills on
certain pharmaceutical products. A principal factor in
determining the particular requirements, if any, applicable to a
product is its actual or potential abuse profile. The
U.S. Drug Enforcement Administration, or DEA, regulates
chemical compounds as Schedule I, II, III, IV or
V substances, with Schedule I substances considered to
present the highest risk of substance abuse and Schedule V
substances the lowest risk. Alprazolam, the API in AZ-002, is
regulated as a Schedule IV substance, fentanyl, the API in
AZ-003, is regulated as a Schedule II substance, and
zaleplon, the API in AZ-007, is regulated as a Schedule IV
substance. Each of these product candidates is subject to DEA
regulations relating to manufacture, storage, distribution and
physician prescription procedures, and the DEA may regulate the
amount of the scheduled substance that would be available for
clinical trials and commercial distribution. As a
Schedule II substance, fentanyl is subject to more
stringent controls, including quotas on the amount of product
that can be manufactured as well as a prohibition on the
refilling of prescriptions without a new prescription from the
physician. The DEA periodically inspects facilities for
compliance with its rules and regulations. Failure to comply
with current and future regulations of the DEA could lead to a
variety of sanctions, including revocation, or denial of
renewal, of DEA registrations, injunctions, or civil or criminal
penalties and could harm our business, financial condition and
results of operations.
The
single dose version of our Staccato system contains materials
that are regulated by the U.S. government, and failure to comply
with applicable regulations could harm our
business.
The single dose version of our Staccato system uses
energetic materials to generate the rapid heating necessary for
vaporizing the drug, while avoiding degradation. Manufacture of
products containing energetic materials is controlled by the
U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives,
or ATF. Technically, the energetic materials used in our
Staccato system are classified as low
explosives, and the ATF has granted us a license/permit
for the manufacture of such low explosives. Additionally, due to
inclusion of the energetic materials in our Staccato
system, the U.S. Department of Transportation, or DOT,
regulates shipments of the single dose version of our
Staccato system. The DOT has granted the single dose
version of our Staccato system Not Regulated as an
Explosive status. Failure to comply with the current and
future regulations of the ATF or DOT could subject us to future
liabilities and could harm our business, financial condition and
results of operations. Furthermore, these regulations could
restrict our ability to expand our facilities or construct new
facilities or could require us to incur other significant
expenses in order to maintain compliance.
We use
hazardous chemicals and highly combustible materials in our
business. Any claims relating to improper handling, storage or
disposal of these materials could be time consuming and
costly.
Our research and development processes involve the controlled
use of hazardous materials, including chemicals. We also use
energetic materials in the manufacture of the chemical heat
packages that are used in our single dose devices. Our
operations produce hazardous waste products. We cannot eliminate
the risk of accidental contamination or discharge or injury from
these materials. Federal, state and local laws and regulations
govern the use, manufacture, storage, handling and disposal of
these materials. We could be subject to civil damages in the
event of an improper or unauthorized release of, or exposure of
individuals to, hazardous materials. In addition, claimants may
sue us for injury or contamination that results from our use or
the use by third parties of these materials and our liability
may exceed our total assets. Compliance with environmental and
other laws and regulations may be expensive, and current or
future regulations may impair our research, development or
production efforts.
Certain of our suppliers are working with these types of
hazardous and energetic materials in connection with our
component manufacturing agreements. In the event of a lawsuit or
investigation, we could be held responsible
41
for any injury caused to persons or property by exposure to, or
release of, these hazardous and energetic materials. Further,
under certain circumstances, we have agreed to indemnify our
suppliers against damages and other liabilities arising out of
development activities or products produced in connection with
these agreements.
We
will need to implement additional finance and accounting
systems, procedures and controls in the future as we grow and to
satisfy new reporting requirements.
The laws and regulations affecting public companies, including
the current provisions of the Sarbanes-Oxley Act of 2002, or
Sarbanes-Oxley, and rules enacted and proposed by the SEC and by
The NASDAQ Global Market, will result in increased costs to us
as we continue to undertake efforts to comply with rules and
respond to the requirements applicable to public companies. The
rules make it more difficult and costly for us to obtain certain
types of insurance, including director and officer liability
insurance, and we may be forced to accept reduced policy limits
and coverage or incur substantially higher costs to obtain the
same or similar coverage as compared to the polices previously
available to public companies. The impact of these events could
also make it more difficult for us to attract and retain
qualified persons to serve on our board of directors or our
board committees or as executive officers.
As a public company, we need to comply with Sarbanes-Oxley and
the related rules and regulations of the SEC, including expanded
disclosure, accelerated reporting requirements and more complex
accounting rules. Compliance with Section 404 of
Sarbanes-Oxley and other requirements will continue to increase
our costs and require additional management resources. We have
been upgrading our finance and accounting systems, procedures
and controls and will need to continue to implement additional
finance and accounting systems, procedures and controls as we
grow to satisfy new reporting requirements. We currently do not
have an internal audit group. In addition, we may need to hire
additional legal and accounting staff with appropriate
experience and technical knowledge, and we cannot assure you
that if additional staffing is necessary that we will be able to
do so in a timely fashion.
Our
business is subject to increasingly complex corporate
governance, public disclosure and accounting requirements that
could adversely affect our business and financial
results.
We are subject to changing rules and regulations of federal and
state government as well as the stock exchange on which our
common stock is listed. These entities, including the Public
Company Accounting Oversight Board, the SEC and The NASDAQ
Global Market, have issued a significant number of new and
increasingly complex requirements and regulations over the
course of the last several years and continue to develop
additional regulations and requirements in response to laws
enacted by Congress. On July 21, 2010, the Dodd-Frank Wall
Street Reform and Protection Act, or the Dodd-Frank Act, was
enacted. The Dodd-Frank Act contains significant corporate
governance and executive compensation-related provisions, some
of which the Securities and Exchange Commission, or SEC, has
recently implemented by adopting additional rules and
regulations in areas such as the compensation of executives
(say-on-pay).
We cannot assure you that we are or will be in compliance with
all potentially applicable regulations. If we fail to comply
with the Sarbanes Oxley Act of 2002, the Dodd-Frank Act and
associated SEC rules, or any other regulations, we could be
subject to a range of consequences, including restrictions on
our ability to sell equity securities or otherwise raise capital
funds, the de-listing of our common stock from The NASDAQ Global
Market, suspension or termination of our clinical trials,
failure to obtain approval to market AZ-004, restrictions on
future products or our manufacturing processes, significant
fines, or other sanctions or litigation. Our efforts to comply
with these requirements have resulted in, and are likely to
continue to result in, an increase in expenses and a diversion
of managements time from other business activities.
Our
facilities are located near known earthquake fault zones, and
the occurrence of an earthquake or other catastrophic disaster
could damage our facilities and equipment, which could cause us
to curtail or cease operations.
Our facilities are located in the San Francisco Bay Area
near known earthquake fault zones and, therefore, are vulnerable
to damage from earthquakes. We are also vulnerable to damage
from other types of disasters, such as power loss, fire, floods
and similar events. If any disaster were to occur, our ability
to operate our business could be seriously impaired. We
currently may not have adequate insurance to cover our losses
resulting from disasters or other similar significant business
interruptions, and we do not plan to purchase additional
insurance to cover such
42
losses due to the cost of obtaining such coverage. Any
significant losses that are not recoverable under our insurance
policies could seriously impair our business, financial
condition and results of operations.
Risks
Relating to Owning Our Common Stock
Our
stock price has been and may continue to be extremely
volatile.
Our common stock price has experienced large fluctuations. In
addition, the trading prices of life science and biotechnology
company stocks in general have experienced extreme price
fluctuations in recent years. The valuations of many life
science companies without consistent product revenues and
earnings are extraordinarily high based on conventional
valuation standards, such as price to revenue ratios. These
trading prices and valuations may not be sustained. Any negative
change in the publics perception of the prospects of life
science or biotechnology companies could depress our stock price
regardless of our results of operations. Other broad market and
industry factors may decrease the trading price of our common
stock, regardless of our performance. Market fluctuations, as
well as general political and economic conditions such as
terrorism, military conflict, recession or interest rate or
currency rate fluctuations, also may decrease the trading price
of our common stock. In addition, our stock price could be
subject to wide fluctuations in response to various factors,
including:
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actual or anticipated regulatory approvals or non-approvals of
our product candidates or competing products;
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actual or anticipated cash depletion of our financial resources
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actual or anticipated results and timing of our clinical trials;
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changes in laws or regulations applicable to our product
candidates;
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changes in the expected or actual timing of our development
programs, including delays or cancellations of clinical trials
for our product candidates;
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period to period fluctuations in our operating results;
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announcements of new technological innovations or new products
by us or our competitors;
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changes in financial estimates or recommendations by securities
analysts;
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sales results for AZ-004, if it is approved for marketing;
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conditions or trends in the life science and biotechnology
industries;
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changes in the market valuations of other life science or
biotechnology companies;
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developments in domestic and international governmental policy
or regulations;
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announcements by us or our competitors of significant
acquisitions, strategic partnerships, joint ventures or capital
commitments;
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additions or departures of key 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 technologies;
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sales of our common stock (or other securities) by us; and
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sales and distributions of our common stock by our stockholders.
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In the past, stockholders have often instituted securities class
action litigation after periods of volatility in the market
price of a companys securities. If a stockholder files a
securities class action suit against us, we would incur
substantial legal fees, and our managements attention and
resources would be diverted from operating our business in order
to respond to the litigation.
43
If we
sell shares of our common stock in future financings, existing
common stockholders will experience immediate dilution and, as a
result, our stock price may go down.
We will need to raise additional capital to fund our operations,
to develop our product candidates and to develop our
manufacturing capabilities. We may obtain such financing through
the sale of our equity securities from time to time. As a
result, our existing common stockholders will experience
immediate dilution upon any such issuance. For example, in
August 2009 we issued 10,000,000 shares of our common stock
and warrants to purchase an additional 5,000,000 shares of
our common stock in connection with the closing of our
acquisition of all of the equity of Symphony Allegro, Inc., in
October 2009 we issued 8,107,012 shares of our common stock
and warrants to purchase an additional 7,296,312 shares of
our common stock in a private placement, in May 2010 we issued a
warrant to purchase 376,394 shares of our common stock in
connection with a secured term debt financing, and in August
2010 we issued 6,685,183 shares of our common stock and
warrants to purchase up to an additional 3,342,589 shares
of our common stock in a registered direct offering.
Additionally, in May 2010, we entered into a common stock
purchase agreement with Azimuth that provides that, upon the
terms and subject to the conditions set forth therein, Azimuth
is committed to purchase up to 8,936,550 shares of our
common stock at times and in amounts determined by us. If we
enter into other financing transactions in which we issue equity
securities in the future, our existing common stockholders will
experience immediate dilution upon any such issuance.
If we
fail to continue to comply with the listing requirements of The
NASDAQ Global Market, the price of our common stock and our
ability to access the capital markets could be negatively
impacted.
Our common stock is currently listed on The NASDAQ Global
Market. To maintain the listing of our common stock on The
NASDAQ Global Market we are required to meet certain listing
requirements, including, among others, either: (i) a
minimum closing bid price of $1.00 per share, a market value of
publicly held shares (excluding shares held by our executive
officers, directors and 10% or more stockholders) of at least
$5 million and stockholders equity of at least
$10 million; or (ii) a minimum closing bid price of
$1.00 per share, a market value of publicly held shares
(excluding shares held by our executive officers, directors and
10% or more stockholders) of at least $15 million and a
total market value of listed securities of at least
$50 million. As of March 11, 2011, the closing bid
price of our common stock was $1.27 the total market value of
our publicly held shares of our common stock (excluding shares
held by our executive officers, directors and 10% or more
stockholders) was $59.8 million and the total market value
of our listed securities was $76.1 million. As of
December 31, 2010, we had stockholders equity of
$12.3 million. In addition, as recently as December 2010
the bid price of our common stock has been as low as $0.86 per
share. If the closing bid price of our common stock is below
$1.00 per share for 30 consecutive business days, we could be
subject to delisting from The NASDAQ Global Market. Not
maintaining our listing on The NASDAQ Global Market may result
in a decrease in the trading price of our common stock, lessen
interest by institutions and individuals in investing in our
common stock, make it more difficult to obtain analyst coverage
and make it more difficult for us to raise capital in the future.
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Item 1B.
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Unresolved
Staff Comments
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None.
We lease two buildings with an aggregate of 106,894 square
feet of manufacturing, office, and laboratory facilities in
Mountain View, California, which we began to occupy in the
fourth quarter of 2007. We currently sublease 19,334 square
feet, 20,956 square feet and 2,500 square feet,
reducing the space we occupy to 64,104 square feet. The
lease for both facilities expires on March 31, 2018, and we
have two options to extend the lease for five years each. Our
sublease agreements, as amended, expire on April 30, 2011
with regards to 19,334 square feet and on February 28,
2014 with regards to 20,956 square feet. We believe that
the Mountain View facilities are sufficient for our office,
manufacturing and laboratory needs for at least the next three
years.
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Item 3.
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Legal
Proceedings
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None.
44
Not applicable.
PART II
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Item 5.
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Market
for Registrants Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
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Item 5A.
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Quarterly
Stock Price Information and Registered
Shareholders
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Our common stock trades on The NASDAQ Global Market under the
symbol ALXA. The following table sets forth, for the
periods indicated, the high and low sales prices of our common
stock.
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2010
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High
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Low
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First Quarter
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$
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2.96
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$
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2.30
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Second Quarter
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3.92
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2.65
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Third Quarter
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3.64
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2.42
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Fourth Quarter
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3.26
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0.86
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2009
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High
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Low
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First Quarter
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$
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3.40
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$
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1.40
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Second Quarter
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3.25
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1.50
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Third Quarter
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3.01
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1.90
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Fourth Quarter
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2.55
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1.93
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As of December 31, 2010, there were 181 holders of record
of our common stock. We have not paid cash dividends on our
common stock since our inception, and we do not anticipate
paying any in the foreseeable future.
Recent
Sales of Unregistered Securities
None.
45
Performance
Graph
The graph below matches the cumulative
58-month
total return of holders of Alexza Pharmaceuticals, Inc.s
common stock with the cumulative total returns of the NASDAQ
Composite index and the NASDAQ Biotechnology index. The graph
assumes that the value of the investment in Alexzas common
stock and in each of the indexes (including reinvestment of
dividends) was $100 on
3/8/2006 and
tracks it through
12/31/2010.
COMPARISON
OF 58 MONTH CUMULATIVE TOTAL RETURN*
Among
Alexza Pharmaceuticals, Inc., the NASDAQ Composite Index
and the NASDAQ Biotechnology Index
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* |
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$100 invested on 3/8/06 in stock or 2/28/06 in index, including
reinvestment of dividends. |
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Fiscal year ending December 31. |
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3/06
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3/06
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4/06
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5/06
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6/06
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7/06
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8/06
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9/06
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10/06
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11/06
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12/06
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Alexza Pharmaceuticals, Inc.
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100.00
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114.57
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105.76
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95.89
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86.13
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86.02
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82.26
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94.48
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95.53
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98.24
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133.84
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NASDAQ Composite
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100.00
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103.06
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102.55
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96.46
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96.33
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93.16
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97.27
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100.68
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105.79
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108.88
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108.57
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NASDAQ Biotechnology
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100.00
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98.71
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93.10
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89.42
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88.02
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90.35
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|
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90.59
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|
|
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92.70
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|
|
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98.13
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96.98
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94.80
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1/07
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2/07
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3/07
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4/07
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5/07
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6/07
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7/07
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8/07
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9/07
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10/07
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11/07
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12/07
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1/08
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2/08
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113.40
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117.74
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151.12
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126.79
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113.75
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97.18
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103.17
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96.47
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101.76
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95.65
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102.94
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95.06
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74.03
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74.27
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110.98
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108.96
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109.14
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113.77
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117.24
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117.80
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115.15
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|
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117.48
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123.28
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130.68
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121.28
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121.13
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108.95
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103.59
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98.05
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95.04
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92.46
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100.59
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99.12
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96.72
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95.82
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|
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97.12
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103.07
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107.49
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|
|
|
|
104.33
|
|
|
|
|
98.01
|
|
|
|
|
96.15
|
|
|
|
|
95.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/08
|
|
|
4/08
|
|
|
5/08
|
|
|
6/08
|
|
|
7/08
|
|
|
8/08
|
|
|
9/08
|
|
|
10/08
|
|
|
11/08
|
|
|
12/08
|
|
|
1/09
|
|
|
2/09
|
|
|
3/09
|
|
|
4/09
|
80.85
|
|
|
|
77.91
|
|
|
|
|
60.16
|
|
|
|
|
46.30
|
|
|
|
|
69.10
|
|
|
|
|
62.40
|
|
|
|
|
58.05
|
|
|
|
|
33.49
|
|
|
|
|
21.15
|
|
|
|
|
37.25
|
|
|
|
|
33.96
|
|
|
|
|
18.80
|
|
|
|
|
25.97
|
|
|
|
|
19.51
|
|
103.67
|
|
|
|
110.07
|
|
|
|
|
115.10
|
|
|
|
|
104.83
|
|
|
|
|
104.88
|
|
|
|
|
106.33
|
|
|
|
|
93.40
|
|
|
|
|
77.32
|
|
|
|
|
69.39
|
|
|
|
|
71.68
|
|
|
|
|
67.32
|
|
|
|
|
63.14
|
|
|
|
|
69.60
|
|
|
|
|
77.76
|
|
95.13
|
|
|
|
95.92
|
|
|
|
|
98.00
|
|
|
|
|
96.46
|
|
|
|
|
109.52
|
|
|
|
|
106.64
|
|
|
|
|
100.12
|
|
|
|
|
91.49
|
|
|
|
|
85.30
|
|
|
|
|
91.59
|
|
|
|
|
90.31
|
|
|
|
|
81.82
|
|
|
|
|
84.87
|
|
|
|
|
83.44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5/09
|
|
|
6/09
|
|
|
7/09
|
|
|
8/09
|
|
|
9/09
|
|
|
10/09
|
|
|
11/09
|
|
|
12/09
|
|
|
1/10
|
|
|
2/10
|
|
|
3/10
|
|
|
4/10
|
|
|
5/10
|
|
|
6/10
|
24.56
|
|
|
|
27.85
|
|
|
|
|
31.02
|
|
|
|
|
31.14
|
|
|
|
|
26.44
|
|
|
|
|
25.15
|
|
|
|
|
25.85
|
|
|
|
|
28.20
|
|
|
|
|
30.55
|
|
|
|
|
30.67
|
|
|
|
|
31.55
|
|
|
|
|
39.25
|
|
|
|
|
39.01
|
|
|
|
|
31.96
|
|
80.79
|
|
|
|
83.67
|
|
|
|
|
90.32
|
|
|
|
|
92.02
|
|
|
|
|
96.91
|
|
|
|
|
93.91
|
|
|
|
|
98.62
|
|
|
|
|
104.08
|
|
|
|
|
98.50
|
|
|
|
|
102.77
|
|
|
|
|
109.98
|
|
|
|
|
112.46
|
|
|
|
|
103.11
|
|
|
|
|
96.91
|
|
86.00
|
|
|
|
91.28
|
|
|
|
|
99.06
|
|
|
|
|
97.75
|
|
|
|
|
100.46
|
|
|
|
|
91.98
|
|
|
|
|
98.10
|
|
|
|
|
101.24
|
|
|
|
|
103.81
|
|
|
|
|
106.04
|
|
|
|
|
110.27
|
|
|
|
|
107.87
|
|
|
|
|
97.09
|
|
|
|
|
93.92
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7/10
|
|
|
8/10
|
|
|
9/10
|
|
|
10/10
|
|
|
11/10
|
|
|
12/10
|
|
32
|
.55
|
|
|
|
33.14
|
|
|
|
|
37.25
|
|
|
|
|
12.22
|
|
|
|
|
10.62
|
|
|
|
|
14.69
|
|
|
103
|
.59
|
|
|
|
97.58
|
|
|
|
|
109.30
|
|
|
|
|
115.63
|
|
|
|
|
115.14
|
|
|
|
|
122.36
|
|
|
97
|
.86
|
|
|
|
95.55
|
|
|
|
|
103.89
|
|
|
|
|
107.64
|
|
|
|
|
103.99
|
|
|
|
|
109.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The stock price performance included in this graph is not
necessarily indicative of future stock price performance.
|
|
Item 5B.
|
Use
of Proceeds from the Sale of Registered Securities
|
None.
None.
47
|
|
Item 6.
|
Selected
Financial Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period From
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 19,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Inception) to
|
|
|
|
Year Ended December 31,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2010
|
|
|
|
(In thousands, except per share data)
|
|
|
Consolidated Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
42,876
|
|
|
$
|
9,514
|
|
|
$
|
486
|
|
|
$
|
|
|
|
$
|
1,028
|
|
|
$
|
59,821
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
33,528
|
|
|
|
39,778
|
|
|
|
61,565
|
|
|
|
45,645
|
|
|
|
36,494
|
|
|
|
277,989
|
|
General and administrative
|
|
|
14,000
|
|
|
|
15,406
|
|
|
|
17,641
|
|
|
|
14,888
|
|
|
|
9,969
|
|
|
|
92,110
|
|
Restructuring charges
|
|
|
|
|
|
|
2,037
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,037
|
|
Acquired in-process research and development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,916
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
47,528
|
|
|
|
57,221
|
|
|
|
79,206
|
|
|
|
60,533
|
|
|
|
46,463
|
|
|
|
376,052
|
|
Loss from operations
|
|
|
(4,652
|
)
|
|
|
(47,707
|
)
|
|
|
(78,720
|
)
|
|
|
(60,533
|
)
|
|
|
(45,435
|
)
|
|
|
(316,231
|
)
|
Change in fair value of contingent consideration liability
|
|
|
4,838
|
|
|
|
(7,983
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,145
|
)
|
Interest income/(expense) and other income/(expense), net
|
|
|
(1,667
|
)
|
|
|
(375
|
)
|
|
|
1,679
|
|
|
|
4,623
|
|
|
|
1,909
|
|
|
|
8,183
|
|
Net loss
|
|
|
(1,481
|
)
|
|
|
(56,065
|
)
|
|
|
(77,041
|
)
|
|
|
(55,910
|
)
|
|
|
(43,526
|
)
|
|
|
(311,193
|
)
|
Consideration paid in excess of carrying value of the
noncontrolling interest in Symphony Allegro, Inc.
|
|
|
|
|
|
|
(61,566
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(61,566
|
)
|
Loss attributed to noncontrolling interest in Symphony Allegro,
Inc.
|
|
|
|
|
|
|
13,987
|
|
|
|
18,591
|
|
|
|
10,791
|
|
|
|
1,720
|
|
|
|
45,089
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to Alexza common stockholders
|
|
$
|
(1,481
|
)
|
|
$
|
(103,644
|
)
|
|
$
|
(58,450
|
)
|
|
$
|
(45,119
|
)
|
|
$
|
(41,806
|
)
|
|
$
|
(327,670
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per share attributable to Alexza
common stockholders
|
|
$
|
(0.03
|
)
|
|
$
|
(2.68
|
)
|
|
$
|
(1.81
|
)
|
|
$
|
(1.58
|
)
|
|
$
|
(2.13
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used to compute basic and diluted net loss per share
attributable to Alexza common stockholders
|
|
|
55,421
|
|
|
|
38,609
|
|
|
|
32,297
|
|
|
|
28,605
|
|
|
|
19,584
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
2010
|
|
2009
|
|
2008
|
|
2007
|
|
2006
|
|
|
(In thousands)
|
|
Consolidated Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and marketable securities
|
|
$
|
41,449
|
|
|
$
|
19,916
|
|
|
$
|
37,556
|
|
|
$
|
69,391
|
|
|
$
|
42,623
|
|
Investments held by Symphony Allegro, Inc.
|
|
|
|
|
|
|
|
|
|
|
21,318
|
|
|
|
39,449
|
|
|
|
49,956
|
|
Working capital
|
|
|
8,031
|
|
|
|
(3,830
|
)
|
|
|
42,771
|
|
|
|
106,092
|
|
|
|
79,649
|
|
Total assets
|
|
|
68,482
|
|
|
|
46,174
|
|
|
|
84,635
|
|
|
|
149,125
|
|
|
|
105,766
|
|
Noncurrent portion of financing obligations
|
|
|
13,208
|
|
|
|
|
|
|
|
2,515
|
|
|
|
6,317
|
|
|
|
5,865
|
|
Convertible preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit accumulated during development stage
|
|
|
(266,104
|
)
|
|
|
(264,623
|
)
|
|
|
(222,545
|
)
|
|
|
(164,095
|
)
|
|
|
(118,976
|
)
|
Total stockholders equity (deficit)
|
|
|
12,290
|
|
|
|
(7,126
|
)
|
|
|
39,054
|
|
|
|
99,943
|
|
|
|
84,517
|
|
48
|
|
Item 7.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operations
|
The following Managements Discussion and Analysis of
Financial Condition and Results of Operations contains
forward-looking statements that are based upon current
expectations. In some cases, you can identify forward-looking
statements by terminology such as may,
will, should, expect,
plan, anticipate, believe,
estimate, predict, intend,
potential or continue or the negative of
these terms or other comparable terminology. Forward-looking
statements involve risks and uncertainties. Our actual results
and the timing of events could differ materially from those
discussed in our forward-looking statements as a result of many
factors, including those set forth under Risk
Factors and elsewhere in this Annual Report on
Form 10-K.
Overview
We are a pharmaceutical company focused on the research,
development, and commercialization of novel proprietary products
for the acute treatment of central nervous system conditions.
All of our product candidates are based on our proprietary
technology, the Staccato system. The Staccato
system vaporizes an excipient-free drug to form a condensation
aerosol that, when inhaled, allows for rapid systemic drug
delivery. Because of the particle size of the aerosol, the drug
is quickly absorbed through the deep lung into the bloodstream,
providing speed of therapeutic onset that is comparable to
intravenous, or IV, administration but with greater ease,
patient comfort and convenience
In January 2009, we reduced the development of all of our
product candidates, other than AZ-004 (Staccato
loxapine), our lead product candidate, in order to
concentrate our efforts and resources on the clinical,
regulatory, manufacturing and commercial development of AZ-004.
In December 2009, we submitted our New Drug Application, or NDA,
for AZ-004. In early 2010, we conducted a thorough review of our
product pipeline, evaluating current and potential new
Staccato-based product candidates. This review yielded
three categories of Staccato-based product candidates:
(1) product candidates where we believe we can add value
through internal development, (2) product candidates where
we have developed the product idea, but where a development
partner is required, and (3) product candidates based on
new ideas, primarily focused on new chemical entities, where the
Staccato technology can facilitate better or more
effective delivery. In July 2010, we announced that, in addition
to AZ-004, AZ-007 (Staccato zaleplon) and Staccato
nicotine would remain in active development. Active
development on the remainder of our development pipeline is
suspended. We are continuing to seek partners to support
development and commercialization of our product candidates. We
believe that our financial position as of December 31, 2010
will be sufficient to fund our operations, at our current cost
levels, into the third quarter of 2011. We are unable to assert
that our financial position is sufficient to fund operations
beyond that date, and as a result, there is substantial doubt
about our ability to continue as a going concern. We may not be
able to raise sufficient capital on acceptable terms, or at all,
to continue development of AZ-004 or to continue operations, and
we may not be able to execute any strategic transaction.
Lead
product update
Our lead product candidate is AZ-004, which is being developed
for the rapid treatment of agitation in patients with
schizophrenia or bipolar disorder. In December 2009, we filed an
NDA for our AZ-004 product candidate, submitted as
Adasuvetm
Staccato®
(loxapine) inhalation aerosol, 5 mg and 10 mg. In
October 2010, we received a Complete Response Letter, or CRL,
from the U.S. Food and Drug Administration, or FDA,
regarding our NDA for AZ-004. A CRL is issued by the FDA
indicating that the NDA review cycle is complete and the
application is not ready for approval in its present form. In
December 2010, we completed an
End-of-Review
meeting with the FDA to discuss the issues outlined in the
AZ-004 CRL. In January 2011, we received the official FDA
minutes of the meeting, and we anticipate resubmitting the
AZ-004 NDA in July 2011. We are seeking commercial partners for
the worldwide development and commercialization of AZ-004.
In the CRL, the FDA stated that its primary clinical safety
concern was related to data from the three Phase 1 pulmonary
safety studies with AZ-004. This concern was primarily based on
observed, dose-related post-dose decreases in forced expiratory
volume in one second, or
FEV1,
a standard measure of lung function, in healthy subjects and in
subjects with chronic obstructive pulmonary disease, or COPD,
and asthma. The FDA also noted that decreases in
FEV1
were recorded in subjects who were administered device-only,
placebo versions of AZ-004.
49
In the information package submitted to the FDA in response to
the CRL and in preparation for the
End-of-Review
meeting, we presented evidence that we believe demonstrates the
placebo device is safe, including a blinded expert review of the
flow-volume loops data from the healthy subject study as further
evidence that there appears to be no consistent pattern
suggestive of airway obstruction in these subjects. We also
provided an analysis that we believe shows that there is no
meaningful temporal relationship between placebo administration
and decreases in
FEV1.
We believe this evidence and analysis confirm that the changes
seen were likely background events in the population studied,
where the repeated and extensive pulmonary function testing may
have contributed to some of the observations. Additionally, we
believe we showed that the aerosol characterization does not
indicate a basis for concern. We agreed to reiterate these
arguments in our NDA resubmission.
In the information package, we also believe we showed that the
pulmonary safety program in subjects with asthma and COPD had
identified patients who may be susceptible to bronchospasm, the
nature of this adverse event, how it can be managed, and that we
believe the risk in these patients could be mitigated through
labeling and a Risk Evaluation and Mitigation Strategy, or REMS
program. At the
End-of-Review
meeting, the FDA stated that it would be reasonable to propose a
REMS program for the use of Staccato loxapine, and
requested that as part of our resubmission, we provide a
detailed REMS proposal including labeling, a medication guide
and a communication plan, to manage the potential risks. In the
resubmission we must also show how to identify patients at risk
of developing pulmonary side-effects, as well as a way to decide
who should and should not be treated with Staccato
loxapine when they present for treatment. The FDA also
informed us that it would likely present the NDA to an advisory
committee.
The CRL also raised issues relating to the suitability of our
stability studies and certain other Chemistry, Manufacturing and
Controls, or CMC, concerns, including items relating to the
FDAs pre-approval manufacturing inspection. Because AZ-004
incorporates a novel delivery system, the CRL also included
input from the FDAs Center for Devices and Radiological
Health, or the CDRH. In the CRL the CDRH requested a human
factors study and related analysis to validate that the product
can be used effectively in the proposed clinical setting. We
expect to finalize the protocol with the FDA and complete this
study in the coming months. We are not currently required to
conduct any additional efficacy or safety clinical trials for
AZ-004. The CDRH also requested further bench testing of the
product under an additional worst-case manufacturing
scenario. We have completed this additional
worst-case bench testing of the product, submitted
the data to the FDA and believe that this issue has been
adequately addressed.
In February 2010, we entered into a collaboration and license
agreement, or license agreement, and a manufacture and supply
agreement, collectively, the collaboration, with Biovail
Laboratories International SRL, or Biovail, for AZ-004 for the
treatment of psychiatric
and/or
neurological indications and the symptoms associated with these
indications, including the initial indication of treating
agitation in schizophrenia and bipolar disorder patients. On
October 18, 2010, Biovail notified us of its intention to
terminate the collaboration. Upon the termination, we reacquired
the U.S. and Canadian rights to AZ-004 and have worldwide
rights. Neither Alexza nor Biovail incurred any early
termination penalties in connection with the termination of the
collaboration.
Financing
update
In December 2006, we entered into a transaction involving a
series of related agreements providing for the financing of
additional clinical and nonclinical development of AZ-002,
Staccato alprazolam, and AZ-004/AZ-104, Staccato
loxapine. Pursuant to the agreements, Symphony Capital LLC
and other investors, whom we refer to collectively as the
Allegro Investors, invested $50 million to
form Symphony Allegro, Inc., or Symphony Allegro, to fund
additional clinical and nonclinical development of Staccato
alprazolam and Staccato loxapine. We exclusively
licensed to Symphony Allegro certain intellectual property
rights related to Staccato alprazolam and Staccato
loxapine. We retained manufacturing rights to these product
candidates. In August 2009, we completed the acquisition of
Symphony Allegro through the exercise of an option to acquire
all of the outstanding equity of Symphony Allegro, as amended in
June 2009. In exchange for all of the outstanding shares of
Symphony Allegro, we: (i) issued to the Allegro Investors
10 million shares of common stock, (ii) issued to the
Allegro Investors
5-year
warrants to purchase 5 million shares of common stock at an
exercise price of $2.26 per share and canceled the previously
outstanding warrants to purchase 2 million shares of common
stock held by the Allegro Investors, and (iii) agreed to
pay certain percentages of cash payments that may be generated
from future partnering
50
transactions for AZ-004, AZ-104
and/or
AZ-002, the product candidates that were licensed to Symphony
Allegro. In February 2010, we paid the Allegro Investors
$7.5 million of the total proceeds that were received from
Biovail pursuant to the collaboration. In addition, the Allegro
Investors will be entitled to receive a portion of future
milestone and royalty payments we may receive for AZ-004,
AZ-104,
and/or
AZ-002.
In May 2010, we entered into a Loan and Security Agreement, or
Loan Agreement, with Hercules Technology Growth Capital, Inc.,
or Hercules. Under the terms of the Loan Agreement, we have
borrowed $15,000,000 at an interest rate of the higher of
(i) 10.75% or (ii) 6.5% plus the prime rate as
reported in the Wall Street Journal, with a maximum interest
rate of 14%, and issued to Hercules a secured term promissory
note evidencing the loan. We made interest only payments for the
initial eight months, following which the loan will be repaid in
33 equal monthly installments. The Loan Agreement limits both
the seniority and amount of future debt we may incur. We may be
required to repay the loan in the event of a change in control.
In conjunction with the loan, we issued to Hercules a five-year
warrant to purchase 376,394 shares of our common stock at a
price of $2.69 per share. The warrant is immediately exercisable
and expires five years from the effective date. We estimated the
fair value of this warrant as of the issuance date to be
$921,000 which was recorded as a debt discount to the loan and
consequently a reduction to the carrying value of the loan. The
fair value of the warrant was calculated using the Black-Scholes
option valuation model, and was based on the contractual term of
the warrant of five years, a risk-free interest rate of 2.31%,
expected volatility of 84% and 0% expected dividend yield. We
also recorded fees paid to Hercules as a debt discount which
further reduced the carrying value of the loan. The debt
discount is being amortized to interest expense.
In May 2010, we obtained a committed equity financing facility
under which we may sell up to 8,936,550 shares of common
stock to Azimuth Opportunity, Ltd., or Azimuth, over a
24-month
period. We are not obligated to utilize any of the facility and
we remain free to enter into and consummate other equity and
debt financing transactions. We will determine, at our sole
discretion, the timing, the dollar amount and the price per
share of each draw under this facility, subject to certain
conditions. When and if we elect to use the facility, we will
issue shares to Azimuth at a discount between 5.00% and 6.75% to
the volume weighted average price of our common stock over a
preceding period of trading days. Azimuth is not required to
purchase any shares at a pre-discounted purchase price below
$3.00 per share. Any shares sold under this facility will be
sold pursuant to a shelf registration statement declared
effective by the Securities and Exchange Commission on
May 20, 2010. This facility replaces a similar facility
that was established in March 2008 and expired after its
24-month
term. As of December 31, 2010, there have been no sales of
common stock under either of these facilities.
In August 2010, we completed a registered direct offering of our
common stock and warrants. We sold a total of
6,685,183 units, each unit consisting of (i) one share
of common stock and (ii) one warrant to purchase 0.5 of a
share of common stock, at a purchase price of $2.70 per unit.
The warrants are exercisable six months after issuance at $3.30
per share and expire five years from the date of issuance. Net
proceeds from the offering were approximately
$16.4 million, after deducting placement agents
commissions and offering expenses. The securities were sold
pursuant to a shelf registration statement declared effective by
the Securities and Exchange Commission on May 20, 2010.
Other than those licensed to Cypress Biosciences, Inc., or
Cypress, for our Staccato nicotine product candidate, we
have retained all rights to our product candidates and the
Staccato system. We intend to capitalize on our internal
resources to develop certain product candidates and to identify
routes to utilize external resources to develop and
commercialize other product candidates.
We were incorporated December 19, 2000. We have funded our
operations primarily through the sale of equity securities,
capital lease and equipment financings, debt financings and
government grants. We have generated $59.8 million in
revenues from inception through December 31, 2010,
primarily through license and development agreements and to a
lesser extent United States Small Business Innovation Research
grants and drug compound feasibility studies. Prior to 2007, we
recognized governmental grant revenue and drug compound
feasibility revenue, however, we expect no grant revenue or drug
compound feasibility screening revenue in 2011. We do not expect
any material product revenue until at least 2012.
We have incurred significant losses since our inception. As of
December 31, 2010, our deficit accumulated during
development stage was $266.1 million and total
stockholders equity was $12.3 million. We recognized
net
51
losses of $1.5 million, $56.1 million,
$77.0 million in 2010, 2009 and 2008, respectively, and
$311.2 million in the period from December 19, 2000
(Inception) to December 31, 2010. In January 2009, we
consolidated our operations to primarily focus our efforts on
the continued rapid development of AZ-004. We expect our net
losses to increase in 2011 compared to 2010, as the 2010 results
were impacted by the revenue recognized from Biovails
termination of the license agreement.
The process of conducting preclinical studies and clinical
trials necessary to obtain FDA approval is costly and time
consuming. We consider the development of our product candidates
to be crucial to our long term success. If we do not complete
development of our product candidates and obtain regulatory
approval to market one or more of these product candidates, we
may be forced to cease operations. The probability of success
for each product candidate may be impacted by numerous factors,
including preclinical data, clinical data, competition, device
development, manufacturing capability, regulatory approval and
commercial viability. Our strategy is to focus our resources on
AZ-004. In addition, we plan to seek commercial partners for the
worldwide development and commercialization for all of our
product candidates. If in the future we enter into additional
partnerships, third parties could have control over preclinical
development or clinical trials for some of our product
candidates. Accordingly, the progress of such product candidate
would not be under our control. We cannot forecast with any
degree of certainty which of our product candidates, if any,
will be subject to any future partnerships or how such
arrangements would affect our development plans or capital
requirements.
As a result of the uncertainties discussed above, the
uncertainty associated with clinical trial enrollments, and the
risks inherent in the development process, we are unable to
determine the duration and completion costs of the current or
future clinical stages of our product candidates or when, or to
what extent, we will generate revenues from the
commercialization and sale of any of our product candidates.
Development timelines, probability of success and development
costs vary widely. While we are currently focused on developing
our product candidates, we anticipate that we and our partners,
will make determinations as to which programs to pursue and how
much funding to direct to each program on an ongoing basis in
response to the scientific and clinical success of each product
candidate, as well as an ongoing assessment as to the product
candidates commercial potential. We do not expect any of
our current product candidates to be commercially available
before 2012, if at all.
Critical
Accounting Estimates and Judgments
Our managements discussion and analysis of our financial
condition and results of operations is based on our financial
statements, which have been prepared in accordance with
U.S. generally accepted accounting principles. The
preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of
assets and liabilities and the disclosure of contingent assets
and liabilities at the date of the financial statements, as well
as reported revenues and expenses during the reporting periods.
On an ongoing basis, we evaluate our estimates and judgments
related to development costs. We base our estimates on
historical experience and on various other factors that we
believe are reasonable under the circumstances, the results of
which form the basis for making assumptions about the carrying
value of assets and liabilities that are not readily apparent
from other sources. Actual results may differ from these
estimates under different assumptions or conditions.
While our significant accounting policies are more fully
described in Note 3 of the notes to consolidated financial
statements, we believe the following accounting policies are
critical to the process of making significant estimates and
judgments in preparation of our financial statements.
Preclinical
Study and Clinical Trial Accruals
We estimate our preclinical study and clinical trial expenses
based on our estimates of the services received pursuant to
contracts with multiple research institutions and clinical
research organizations that conduct and manage preclinical
studies and clinical trials on our behalf. The financial terms
of these agreements vary from contract to contract and may
result in uneven payment flows. Preclinical study and clinical
trial expenses include the following:
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fees paid to contract research organizations in connection with
preclinical studies;
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fees paid to contract research organizations and other clinical
sites in connection with clinical trials; and
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52
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fees paid to contract manufacturers in connection with the
production of components and drug materials for preclinical
studies and clinical trials.
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We record accruals for these preclinical study and clinical
trial costs based upon the estimated amount of work completed.
All such costs are charged to research and development expenses
based on these estimates. Costs related to patient enrollment in
clinical trials are accrued as patients are entered in the
trial. We monitor patient enrollment levels and related
activities to the extent possible through internal reviews,
correspondence and discussions with research institutions and
organizations. However, if we have incomplete or inaccurate
information, we may underestimate or overestimate activity
levels associated with various preclinical studies and clinical
trials at a given point in time. In this event, we could record
significant research and development expenses in future periods
when the actual activity level becomes known. To date, we have
not made any material adjustments to our estimates of
preclinical study and clinical trial costs. We make good faith
estimates which we believe to be accurate, but the actual costs
and timing of clinical trials are highly uncertain, subject to
risk and may change depending upon a number of factors,
including our clinical development plan.
Share-Based
Compensation
We currently use the Black-Scholes option pricing model to
determine the fair value of stock options and purchase rights
issued under our 2005 Employee Stock Purchase Plan. The
determination of the fair value of share-based payment awards on
the date of grant using an option-pricing model is affected by
our stock price as well as assumptions regarding a number of
complex and subjective variables. These variables include our
expected stock price volatility over the term of the awards,
actual and projected employee stock option exercise behaviors,
risk-free interest rates and expected dividends.
The estimated fair value of restricted stock unit awards is
calculated based on the market price of our common stock on the
date of grant, reduced by the present value of dividends
expected to be paid on our common stock prior to vesting of the
restricted stock unit. Our current estimate assumes no dividends
will be paid prior to the vesting of the restricted stock unit.
We estimate the expected term of options based on the historical
term periods of options that have been granted but are no longer
outstanding and the estimated terms of outstanding options. We
estimate the volatility of our stock based on our actual
historical volatility since our initial public offering. We base
the risk-free interest rate that we use in the option pricing
model on U.S. Treasury zero-coupon issues with remaining
terms similar to the expected term on the options. We do not
anticipate paying any cash dividends in the foreseeable future
and therefore use an expected dividend yield of zero in the
option pricing model.
We are required to estimate forfeitures at the time of grant and
revise those estimates in subsequent periods if actual
forfeitures differ from those estimates. We use historical data
to estimate pre-vesting option forfeitures and record
share-based compensation expense only for those awards that are
expected to vest. All share-based payment awards are amortized
on a straight-line basis over the requisite service periods of
the awards, which are generally the vesting periods.
If factors change and we employ different assumptions for
estimating share-based compensation expense in future periods or
if we decide to use a different valuation model, the expenses in
future periods may differ significantly from what we have
recorded in the current period and could materially affect our
operating loss, net loss and net loss per share.
Contingent
Consideration Liability
In August 2009, we completed our purchase of all of the
outstanding equity of Symphony Allegro, and in exchange we:
(i) issued to the Allegro Investors 10 million shares
of our common stock; (ii) issued to the Allegro Investors
5-year
warrants to purchase five million shares of our common stock
with an exercise price of $2.26 per share; and (iii) will
pay to the Allegro Investors certain percentages of cash
payments that may be generated from future partnering
transactions pertaining to AZ-004/104 (Staccato loxapine)
or AZ-002 (Staccato alprazolam).
We estimate the fair value of the liability associated with the
contingent cash payments to the Allegro Investors, or contingent
consideration liability, on a quarterly basis using a
probability-weighted discounted cash
53
flow model. We derive multiple cash flow scenarios for each of
the product candidates subject to the cash payments and apply a
probability to each of the scenarios. These probability and risk
adjusted weighted average cash flows are then discounted
utilizing our estimated weighted average cost of capital, or
WACC. Our WACC considers our cash position, competition, risk of
substitute products, and risk associated with the financing of
the development projects. We determined the discount rate to be
18% and applied this rate to the probability adjusted cash flow
scenarios.
We record any changes in the fair value of the contingent
consideration liability in earnings in the period of the change.
Certain events including, but not limited to, clinical trial
results, FDA approval or non-approval of our submissions, the
timing and terms of any strategic partnership agreement, the
commercial success of AZ-004, AZ-104 or AZ-002 and the discount
rate assumption could have a material impact on the fair value
of the contingent consideration liability, and as a result, our
results of operations and financial position.
Revenue
Recognition
We recognize revenue in accordance with the SEC Staff Accounting
Bulletin, SAB, No. 101, Revenue Recognition in Financial
Statements, as amended by Staff Accounting
Bulletin No. 104, Revision of Topic 13.
In determining the accounting for collaboration agreements, we
determine whether an arrangement involves multiple
revenue-generating deliverables that should be accounted for as
a single unit of accounting or divided into separate units of
accounting for revenue recognition purposes and, if this
division is required, how the arrangement consideration should
be allocated among the separate units of accounting. If the
arrangement represents a single unit of accounting, the revenue
recognition policy and the performance obligation period must be
determined, if not already contractually defined, for the entire
arrangement. If the arrangement represents separate units of
accounting, a revenue recognition policy must be determined for
each unit.
Revenues for non-refundable upfront license fee payments, where
we continue to have obligations, will be recognized as
performance occurs and obligations are completed.
Recently
Issued Accounting Standards
In October 2009, the Financial Accounting Standards Board, or
FASB, published Accounting Standards Update, or ASU,
2009-13,
which amends the criteria to identify separate units of
accounting within Subtopic
605-25,
Revenue Recognition-Multiple-Element Arrangements.
The revised guidance eliminates the residual method of
allocation, and instead requires companies to use the relative
selling price method when allocating revenue in a multiple
deliverable arrangement. When applying the relative selling
price method, the selling price for each deliverable shall be
determined using vendor specific objective evidence of selling
price, if it exists, otherwise using third-party evidence of
selling price. If neither vendor specific objective evidence nor
third-party evidence of selling price exists for a deliverable,
companies shall use their best estimate of the selling price for
that deliverable when applying the relative selling price
method. The adoption of ASU
2009-13 will
only affect multiple deliverable arrangements entered into after
January 1, 2011. We are currently evaluating the potential
impact, if any, the adoption of this guidance on our financial
position, results of operations and cash flows.
In April 2010, the FASB issued ASU
2010-17,
Milestone Method of Revenue Recognition a consensus of the
FASB Emerging Issues Task Force. FASB ASU
2010-17
provides guidance on defining a milestone and determining when
it may be appropriate to apply the milestone method of revenue
recognition for research and development transactions. A vendor
can recognize consideration in its entirety as revenue in the
period in which the milestone is achieved only if the milestone
meets all criteria to be considered substantive. Additional
disclosures describing the consideration arrangement and the
entitys accounting policy for recognition of such
milestone payments are also required. FASB ASU
2010-17 is
effective for fiscal years, and interim periods within such
fiscal years, beginning on or after June 15, 2010, with
early adoption permitted. The guidance may be applied
prospectively to milestones achieved during the period of
adoption or retrospectively for all prior periods. We are
currently evaluating the potential impact, if any, of the
adoption of this guidance on our financial position, results of
operations and cash flows.
54
Results
of Operations
Comparison
of Years Ended December 31, 2010 and 2009 and
2008
Revenue. We had $42,876,000, $9,514,000 and
$486,000 of revenues in 2010, 2009 and 2008, respectively.
Revenues in 2008 consisted of revenues related to our license
and development agreement, or Endo license agreement, with Endo
Pharmaceuticals, Inc., or Endo. In January 2009, we mutually
agreed with Endo to terminate the Endo license agreement, at
which time we fulfilled our obligations under the Endo license
agreement and recognized the remaining $9.5 million of
deferred revenues into revenues in 2009. In February 2010 we
entered into a license and development agreement with Biovail in
which we received an upfront payment of $40 million. In
October 2010, Biovail gave notification of its intention to
terminate the collaboration, at which time we recognized the
upfront payment as revenues as we had fulfilled our obligations
under the collaboration. In 2010, we also recognized
$2.6 million from our license and development agreement, or
Cypress Agreement, with Cypress and $244,000 of grant revenues
from the U.S. governments Qualified Therapeutic
Development Program. We expect a decrease in 2011 revenues as a
result of the recognition of the entirety of the revenues from
Biovail in 2010 and as we do not anticipate any grant revenues.
Operating
Expenses
Research and Development Expenses. Research
and development expenses consist of costs associated with
research activities, as well as costs associated with our
product development efforts, conducting preclinical studies and
clinical trials and manufacturing development efforts. All
research and development costs, including those funded by third
parties, are expensed as incurred. Research and development
expenses include:
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external research and development expenses incurred under
agreements with third party contract research organizations and
investigational sites where a substantial portion of our
preclinical studies and all of our clinical trials are conducted;
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third party supplier, consultant and employee related expenses,
which include salary and benefits; and
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facilities, depreciation and other allocated expenses, which
include direct and allocated expenses for rent and maintenance
of facilities, depreciation of leasehold improvements and
equipment and laboratory and other supplies.
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The table below sets forth our research and development expenses
for 2010, 2009 and 2008 broken out between product candidate and
general research expenses based on our internal records and
estimated allocations of employee time and related expenses:
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Year Ended December 31,
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2010
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2009
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2008
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Product candidate expenses
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$
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26,059
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$
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31,896
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$
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48,681
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General research
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7,469
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7,882
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12,884
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Total research and development
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$
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33,528
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$
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39,778
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$
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61,565
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Research and Development Expenses. Research
and development expenses were $33.5 million,
$39.8 million and $61.6 million in years ended
December 31, 2010, 2009 and 2008, respectively. In January
2009, we restructured our operations, including an approximate
33% reduction in headcount, to focus our efforts on the
continued rapid development of our AZ-004 (Staccato
loxapine) product candidate.
The restructuring of our operations resulted in a decrease in
both product candidate and general research expenses in 2009 and
2010 as compared to prior periods as work wound down or halted
for our non-AZ-004 product candidates. This emphasis on the
rapid development of AZ-004 resulted in AZ-004 accounting for
96% of product candidate expenses in the year ended
December 31, 2010 as compared to 86% in 2009 and 47% in
2008. In July 2010, we announced that we moved AZ-007 into
active development and began preliminary work on AZ-007 in
preparation for the Phase 2 clinical trials. However, due to the
FDA not approving AZ-004 for commercial marketing in October
2010, we are slowing the clinical development of AZ-007. We
expect that 2011 research and development expenses will remain
relatively consistent with 2010 levels.
55
General and Administrative Expenses. General
and administrative expenses were $14.0 million,
$15.4 million and $17.6 million for the years ended
December 31, 2010, 2009 and 2008, respectively. General and
administrative expenses consist principally of salaries and
related costs for personnel in executive, finance, accounting,
business development, legal and human resources functions. Other
general and administrative expenses include facility and
information technology costs not otherwise included in research
and development expenses, patent related costs and professional
fees for legal, consulting and accounting services.
The decreases in general and administrative expenses were
primarily due to decreased headcount expenses as a result of our
restructuring in January 2009, reduced facility expenses as we
completed our move to our Mountain View facility in the first
half of 2008, and our efforts to reduce third party costs to
conserve cash balances. The decrease in share-based compensation
in 2010 of $1.3 million as compared to 2009 was a result of
lower expense related to the share-based awards issued under the
2009-2010
Performance Based Incentive Program as vesting milestones were
not met and previously issued share-based awards became fully
vested during the year. We expect our non-share based
compensation and general and administrative expenses in 2011 to
remain relatively consistent with 2010 levels.
Restructuring Charges In January 2009, we restructured
our operations to focus our efforts on the continued rapid
development of our AZ-004 (Staccato loxapine) product
candidate. The restructuring included a workforce reduction of
50 employees, representing approximately 33% of our total
workforce and was completed in the second quarter of 2009. We
incurred restructuring expenses related to employee severance
and other termination benefits of $2.0 million, including a
non-cash charge related to modifications to share-based awards
of $56,000. The restructuring was completed in 2009.
Interest and Other Income, Net. Interest and
other income, net, primarily represents income earned on our
cash, cash equivalents, marketable securities balances, and
prior to August 26, 2009, marketable securities held by
Symphony Allegro. Interest and other income, net was $(35,000),
$92,000 and $2.6 million for the years ended
December 31, 2010, 2009 and 2008, respectively. The 2010
income was impacted by a loss on retirements of fixed assets of
$79,000. The decrease in interest income was primarily due to
lower average cash, cash equivalent and marketable securities
balances and lower interest rates earned on such balances. We
expect to continue to earn low interest income returns on our
cash, cash equivalent and marketable securities balances.
Interest Expense. Interest expense represents
interest on our equipment loans and financing obligations and
was $1.6 million, $467,000 and $935,000 in the years ended
December 31, 2010, 2009 and 2008, respectively. The
increase in 2010 as compared to 2009 was primarily due to the
interest incurred on the $15 million note issued to
Hercules in May 2010. The decrease in 2009 from 2008 was due to
decreases in the outstanding balances of our equipment loan
borrowings as we made no additional borrowings in 2008 or 2009.
Change in the Fair Value of Contingent Consideration
Liability. In connection with our acquisition of
all of the outstanding equity of Symphony Allegro, we are
obligated to pay the Allegro Investors certain percentages of
cash payments that may be generated from future partnering
transactions for AZ-002, AZ-004
and/or
AZ-104. We measure the fair value of this contingent
consideration liability at each balance sheet date. Any changes
in the fair value of this contingent consideration liability
will be recognized in earnings in the period of the change.
Certain events including, but not limited to, clinical trial
results, FDA approval or non-approval of our submissions, the
timing and terms of strategic partnerships, the commercial
success of AZ-002, AZ-004
and/or
AZ-104 and the discount rate assumption could have a material
impact on the fair value of the contingent liability, and as a
result, our results of operations.
In October 2010, we received a CRL from the FDA for our AZ-004
NDA submitted in December 2009 and held a meeting with the FDA
in December 2010 to address the issues outlined in the CRL. As a
result of the CRL and the meeting with the FDA, we reduced the
weighted-average expected cash flows for milestone payments and
product royalties, and the timing of those cash flows, for
AZ-004. The reduction of the expected cash flows and timing of
these cash flows resulted in a reduction in the net present
value of estimated future payments to Symphony Allegro. We
recognized a gain of $4.8 million to reflect the reduction
in the contingent consideration liability during the year ended
December 31, 2010.
56
In 2009, we announced preliminary results from our Phase 2b
clinical trial of AZ-104, where AZ-104 did not meet the primary
endpoint of the study. This change resulted in a decrease in the
expected cash flow resulting in a decrease in the contingent
consideration liability. In the fourth quarter of 2009, we
modified our assumptions regarding the probability of certain
cash flow outcomes to reflect the negotiations with Biovail to
partner AZ-004 as well as the filing of our NDA. The reduction
in these uncertainties resulted in an increase in probability of
certain cash flows resulting in an increase in the contingent
consideration liability. These items combined resulted in our
incurring a loss on the change in fair value of the contingent
consideration liability of $8.0 million during the year
ended December 31, 2009.
Loss Attributed to Noncontrolling Interest in Symphony
Allegro. Prior to our purchase of Symphony
Allegro on August 26, 2009, we consolidated Symphony
Allegros financial condition and results of operations.
Accordingly, we deducted the losses attributable to the
noncontrolling interest from our net loss in the consolidated
statement of operations, and we reduced the noncontrolling
interest holders ownership interest in Symphony Allegro in
the consolidated balance sheet by the loss attributed to the
noncontrolling interests in Symphony Allegro. The losses
attributed to the noncontrolling interest holders was
$14.0 million in 2009 and $18.6 million in 2008. The
decrease in 2009 was primarily due to a full year of Symphony
Allegros losses being attributed to the noncontrolling
interest in 2008 as compared to approximately 8 months in
2009 as a result of our acquisition of all of the outstanding
equity of Symphony Allegro in August 2009.
Liquidity
and Capital Resources
Since inception, we have financed our operations primarily
through private placements and public offerings of equity
securities, revenues primarily from a licensing agreement and
government grants, and payments from Symphony Allegro. We have
received additional funding from financing obligations, interest
earned on investments, as described below, and funds received
upon exercises of stock options and exercises of purchase rights
under our 2005 Employee Stock Purchase Plan. As of
December 31, 2010, we had $41.4 million in cash, cash
equivalents and marketable securities. Our cash and marketable
security balances are held in a variety of interest bearing
instruments, including obligations of United States government
agencies, high credit rating corporate borrowers and money
market accounts. Cash in excess of immediate requirements is
invested with regard to liquidity, capital preservation and
yield.
Net cash provided by (used in) operating activities was
$8.6 million, $(53.1) million, and
$(55.1) million, in 2010, 2009 and 2008, respectively. The
net cash provided by or used in each of these periods primarily
reflects net loss for these periods, offset in part by
depreciation, non-cash stock-based compensation, the change in
fair value of the contingent consideration liability, loss
attributed to noncontrolling interests, and non-cash changes in
operating assets and liabilities. In 2010, the deferred revenue
balance resulted from upfront fees paid by Cypress as required
by the Cypress Agreement signed in 2010. The increase in other
assets in 2010 was a result of the deposit of $1.2 million
with Autoliv. The decrease in other receivables in 2010 was a
result of the collection of fees paid to the FDA upon our
submission of our NDA in 2009. Our designation as a small
business resulted in our exclusion from such fees and the amount
was refunded in 2010. In 2009, the decrease in deferred revenue
was related to the mutual termination of our license agreement
with Endo, at which time we recognized the remaining
$9.5 million of deferred revenue. The decreases in accounts
payable of $2.2 million in 2009 and accrued clinical trial
expense and other accrued liabilities of $2.7 million was
due to the decreased activity in our operations. In 2008, the
large decrease in other receivables was due to the collection of
a receivable of $10.0 million from Endo in January 2008
related to the license agreement signed in December 2007 and a
$2.1 million receivable related to the reimbursement of
leasehold improvements from the landlord of our Mountain View
facility in May 2008.
Net cash provided by (used in) investing activities was
$(30.6) million, $20.1 million and $42.8 million
in 2010, 2009 and 2008, respectively. Investing activities
consist primarily of purchases and maturities of marketable
securities and capital purchases. During 2010 we purchased
$21.5 million of marketable securities, net of maturities.
During 2009 and 2008 we had maturities, net of purchases, of
marketable securities of $4.9 million and
$27.2 million, respectively. Maturities of marketable
securities held by Symphony Allegro were $16.4 million and
18.1 million in 2009 and 2008, respectively. Purchases of
property and equipment were $9.2 million, $1.2 million
and $2.7 million in 2010, 2009 and 2008, respectively. In
2010, the purchases primarily consisted of manufacturing
equipment as we prepared for the expected commercialization of
AZ-004.
57
Net cash provided by financing activities was
$22.3 million, $20.4 million and $6.9 million in
2010, 2009 and 2008, respectively. Financing activities consist
primarily of proceeds from the sale of our common stock,
purchase of a noncontrolling interest, equipment financing
arrangements and financing obligations. In 2010, 2009 and 2008,
we received net proceeds from the issuance of common stock of
$17.0 million, $19.7 million and $11.2 million,
respectively. In 2009 we had proceeds from the purchase of the
noncontrolling interest in Symphony Allegro of
$4.9 million. In 2010, we had proceeds from debt
borrowings, net of payments, of $12.7 million, while in
2009 and 2008, payments on debt were $4.1 million and
$4.2 million, respectively.
We believe that with current cash, cash equivalents and
marketable securities along with interest earned thereon, the
proceeds from option exercises and purchases of common stock
pursuant to our Employee Stock Purchase Plan, we will be able to
maintain our current operations, at our current cost levels,
into the third quarter of 2011. Changing circumstances may cause
us to consume capital significantly faster or slower than we
currently anticipate or to alter our operations. We have based
these estimates on assumptions that may prove to be wrong, and
we could utilize our available financial resources sooner than
we currently expect. The key assumptions underlying these
estimates include:
|
|
|
|
|
expenditures related to continued preclinical and clinical
development of our lead product candidates during this period
within budgeted levels;
|
|
|
|
no unexpected costs related to the development of our
manufacturing capability; and
|
|
|
|
no growth in the number of our employees during this period.
|
Our forecast of the period of time that our financial resources
will be adequate to support operations is a forward-looking
statement and involves risks and uncertainties, and actual
results could vary as a result of a number of factors, including
the factors discussed in Risk Factors. In light of
the numerous risks and uncertainties associated with the
development and commercialization of our product candidates and
the extent to which we enter into strategic partnerships with
third parties to participate in their development and
commercialization, we are unable to estimate the amounts of
increased capital outlays and operating expenditures associated
with our current and anticipated clinical trials. Our future
funding requirements will depend on many factors, including:
|
|
|
|
|
the scope, rate of progress, results and costs of our
preclinical studies, clinical trials and other research and
development activities;
|
|
|
|
the terms and timing of any distribution, strategic partnerships
or licensing agreements that we may establish;
|
|
|
|
the cost, timing and outcomes of regulatory approvals;
|
|
|
|
the number and characteristics of product candidates that we
pursue;
|
|
|
|
the cost and timing of establishing manufacturing, marketing and
sales capabilities;
|
|
|
|
the cost of establishing clinical and commercial supplies of our
product candidates;
|
|
|
|
the cost of preparing, filing, prosecuting, defending and
enforcing any patent claims and other intellectual property
rights; and
|
|
|
|
the extent to which we acquire or invest in businesses, products
or technologies, although we currently have no commitments or
agreements relating to any of these types of transactions.
|
We will need to raise additional funds to support our
operations, and such funding may not be available to us on
acceptable terms, or at all. In this regard, we received an
explanatory paragraph from our independent registered public
accounting firm in their audit opinion raising substantial doubt
about our ability to continue as a going concern. If we are
unable to raise additional funds when needed, we may not be able
to continue development of our product candidates or we could be
required to delay, scale back or eliminate some or all of our
development programs, reduce our efforts to build our commercial
manufacturing capacity, and other operations. We may seek to
raise additional funds through public or private financing,
strategic partnerships or other arrangements. Any additional
equity financing may be dilutive to stockholders and debt
financing, if available, may involve restrictive covenants. If
we raise funds through collaborative or licensing arrangements,
we may be required to relinquish, on
58
terms that are not favorable to us, rights to some of our
technologies or product candidates that we would otherwise seek
to develop or commercialize ourselves. Our failure to raise
capital when needed may harm our business, financial condition,
results of operations, and prospects.
Contractual
Obligations
We lease two buildings with an aggregate of 106,894 square
feet of manufacturing, office and laboratory facilities in
Mountain View, California, which we began to occupy in the
fourth quarter of 2007. We currently have subleases covering
19,334 square feet, 20,956 square feet and
2,500 square feet of these facilities, reducing the space
we occupy to 64,104 square feet. The lease for both
facilities expires on March 31, 2018, and we have two
options to extend the lease for five years each. Our sublease
agreements expire on April 30, 2011 with regards to
19,334 square feet, on February 28, 2014 with regards
to 20,956 square feet and on August 31, 2011 with
regards to 2,500 square feet. We believe that the Mountain View
facilities are sufficient for our office, manufacturing and
laboratory needs for at least the next three years.
We have financed a portion of our equipment purchases through
various equipment financing agreements. Under the agreements,
equipment advances are to be repaid in 36 to 48 monthly
installments of principal and interest. The interest rate, which
is fixed for each draw, is based on the U.S. Treasuries of
comparable maturities and ranges from 9.2% to 10.5%. The
equipment purchased under the equipment financing agreement is
pledged as security.
On May 4, 2010, we entered into the Loan Agreement with
Hercules. Under the terms of the Loan Agreement, we have
borrowed $15,000,000 at an interest rate equal to the higher of
(i) 10.75% or (ii) 6.5% plus the prime rate as
reported in the Wall Street Journal, with a maximum interest
rate of 14%, and issued to Hercules a secured term promissory
note evidencing the loan. We made interest only payments for the
initial eight months following which the loan will be repaid in
33 equal monthly installments.
On November 2, 2007, we entered into a manufacturing and
supply agreement, or the manufacture agreement, with Autoliv
ASP, Inc, or Autoliv, relating to the commercial supply of
chemical heat packages that can be incorporated into our
Staccato device. Autoliv had developed these chemical
heat packages for us pursuant to a development agreement between
Autoliv and us executed in October 2005.
In June 2010 and February 2011, we entered into agreements to
amend the terms of the manufacture agreement, or the amendments.
Under the terms of the first of the amendments, we paid Autoliv
$4 million and issued Autoliv a $4 million unsecured
promissory note in return for a production line for the
commercial manufacture of chemical heat packages. Each
production line is comprised of two identical and self
sustaining cells, and the first such cell was
completed, installed and qualified in connection with such
amendment. Under the terms of the second of the amendments, the
original $4 million note was cancelled and a new unsecured
promissory note was issued with a reduced principal amount of
$2.8 million, or the second note, and production on the
second cell ceased. The second note is payable in 48 equal
monthly installments of approximately $67,900 and we have paid
the first two such installments. In the event that we request
completion of the second cell of the first production line for
the commercial manufacture of chemical heat packages, Autoliv
will complete, install and fully qualify such second cell for a
cost to us of $1.2 million and Autoliv will transfer
ownership of such cell to us upon the payment in full of such
$1.2 million and the second note. At our request, Autoliv
will manufacture up to two additional production lines for the
commercial manufacture of chemical heat packages at a cost not
to exceed $2,400,000 for each additional line.
We will pay Autoliv a specified purchase price, which varies
based on annual quantities ordered by us, per chemical heat
package delivered. The initial term of the manufacture agreement
expires on December 31, 2012, at which time the manufacture
agreement will automatically renew for successive five-year
renewal terms unless we or Autoliv notify the other party no
less than 36 months prior to the end of the initial term or
the then-current renewal term that such party wishes to
terminate the manufacture agreement.
Our recurring losses from operations and our need for additional
capital raise substantial doubt about our ability to continue as
a going concern, and as a result, we have classified all of our
financing obligations as current. If this substantial doubt is
removed in future periods, we will reclassify these financing
obligations between current
59
and non-current. Our future contractual payments, net of
sublease income, including interest at December 31, 2010
are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period
|
|
|
|
|
|
|
Less Than
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1 Year
|
|
|
1-3 Years
|
|
|
3-5 Years
|
|
|
Thereafter
|
|
|
Equipment financing obligations
|
|
$
|
443
|
|
|
$
|
443
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Operating lease obligations
|
|
|
34,582
|
|
|
|
4,572
|
|
|
|
9,294
|
|
|
|
9,582
|
|
|
|
11,134
|
|
Term note obligations
|
|
|
22,226
|
|
|
|
7,100
|
|
|
|
13,962
|
|
|
|
1,164
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
57,251
|
|
|
$
|
12,115
|
|
|
$
|
23,256
|
|
|
$
|
10,746
|
|
|
$
|
11,134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Off-Balance
Sheet Arrangements
None.
|
|
Item 7A.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
Our exposure to market risk is confined to our cash, cash
equivalents, which have maturities of less than three months,
and marketable securities. The primary objective of our
investment activities is to preserve our capital to fund
operations. We also seek to maximize income from our investments
without assuming significant risk. To achieve our objectives, we
maintain a portfolio of cash equivalents and marketable
securities in a variety of securities of high credit quality. As
of December 31, 2010, we had cash, cash equivalents and
marketable securities of $41.4 million. The securities in
our investment portfolio are not leveraged, are classified as
available for sale and are, due to their very short-term nature,
subject to minimal interest rate risk. We currently do not hedge
interest rate exposure. Because of the short-term maturities of
our investments, we do not believe that an increase in market
rates would have a material negative impact on the realized
value of our investment portfolio. We actively monitor changes
in interest rates. We perform quarterly reviews of our
investment portfolio and believe we have no exposure related to
mortgage and other asset backed securities and no exposure to
auction rate securities.
60
|
|
Item 8.
|
Financial
Statements and Supplementary Data
|
ALEXZA
PHARMACEUTICALS, INC.
INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS
61
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
Alexza Pharmaceuticals, Inc.
We have audited the accompanying consolidated balance sheets of
Alexza Pharmaceuticals, Inc. (a development stage company) (the
Company) as of December 31, 2010 and 2009, and
the related consolidated statements of operations, convertible
preferred stock and stockholders equity (deficit), and
cash flows for each of the three years in the period ended
December 31, 2010 and for the period from December 19,
2000 (inception) to December 31, 2010. These consolidated
financial statements are the responsibility of the
Companys management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Alexza Pharmaceuticals, Inc. (a
development stage company) at December 31, 2010 and 2009,
and the consolidated results of its operations and its cash
flows for each of the three years in the period ended
December 31, 2010 and for the period from December 19,
2000 (inception) to December 31, 2010, in conformity with
U.S. generally accepted accounting principles.
As discussed in Note 2 to the consolidated financial
statements, the Companys recurring losses from operations
and its need for additional capital raise substantial doubt
about its ability to continue as a going concern.
Managements plans as to these matters are described in
Note 2. The 2010 consolidated financial statements do not
include any adjustments that might result from the outcome of
this uncertainty.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States),
Alexza Pharmaceuticals, Inc.s internal control over
financial reporting as of December 31, 2010, based on
criteria established in Internal Control Integrated
Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission and our report dated March 15, 2011
expressed an unqualified opinion thereon.
Ernst & Young LLP
Palo Alto, California
March 15, 2011
62
ALEXZA
PHARMACEUTICALS, INC
(a development stage company)
CONSOLIDATED
BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(In thousands, except share
|
|
|
|
and per share amounts)
|
|
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
13,671
|
|
|
$
|
13,450
|
|
Marketable securities
|
|
|
27,778
|
|
|
|
6,466
|
|
Other receivables
|
|
|
|
|
|
|
1,406
|
|
Prepaid expenses and other current assets
|
|
|
965
|
|
|
|
804
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
42,414
|
|
|
|
22,126
|
|
Property and equipment, net
|
|
|
24,361
|
|
|
|
23,598
|
|
Restricted cash
|
|
|
400
|
|
|
|
400
|
|
Other assets
|
|
|
1,307
|
|
|
|
50
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
68,482
|
|
|
$
|
46,174
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
2,781
|
|
|
$
|
2,705
|
|
Accrued clinical trial liabilities
|
|
|
216
|
|
|
|
303
|
|
Other accrued liabilities
|
|
|
3,158
|
|
|
|
3,481
|
|
Current portion of contingent consideration liability
|
|
|
5,300
|
|
|
|
13,202
|
|
Other current liabilities
|
|
|
|
|
|
|
3,750
|
|
Financing obligations
|
|
|
18,597
|
|
|
|
2,515
|
|
Deferred revenues
|
|
|
4,331
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
34,383
|
|
|
|
25,956
|
|
Deferred rent
|
|
|
14,609
|
|
|
|
15,708
|
|
Noncurrent portion of contingent consideration liability
|
|
|
7,200
|
|
|
|
11,636
|
|
Commitments (See Note 8)
|
|
|
|
|
|
|
|
|
Stockholders equity (deficit):
|
|
|
|
|
|
|
|
|
Preferred stock, $0.0001 par value, 5,000,000 shares
authorized at December 31, 2010 and 2009; no shares issued
and outstanding at December 31, 2010 or 2009
|
|
|
|
|
|
|
|
|
Common stock, $0.0001 par value; 100,000,000 shares
authorized at December 31, 2010 and 2009; 59,766,328 and
52,411,356 shares issued and outstanding at
December 31, 2010 and 2009, respectively
|
|
|
6
|
|
|
|
5
|
|
Additional paid-in capital
|
|
|
278,386
|
|
|
|
257,493
|
|
Other comprehensive income (loss)
|
|
|
2
|
|
|
|
(1
|
)
|
Deficit accumulated during development stage
|
|
|
(266,104
|
)
|
|
|
(264,623
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders equity (deficit)
|
|
|
12,290
|
|
|
|
(7,126
|
)
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity (deficit)
|
|
$
|
68,482
|
|
|
$
|
46,174
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
63
ALEXZA
PHARMACEUTICALS, INC.
(a development stage company)
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period from
|
|
|
|
|
|
|
|
|
|
|
|
|
December 19,
|
|
|
|
|
|
|
|
|
|
|
|
|
2000 (Inception)
|
|
|
|
Year Ended December 31,
|
|
|
to December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2010
|
|
|
|
(In thousands, except per share amounts)
|
|
|
Revenue
|
|
$
|
42,876
|
|
|
$
|
9,514
|
|
|
$
|
486
|
|
|
$
|
59,821
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
33,528
|
|
|
|
39,778
|
|
|
|
61,565
|
|
|
|
277,989
|
|
General and administrative
|
|
|
14,000
|
|
|
|
15,406
|
|
|
|
17,641
|
|
|
|
92,110
|
|
Restructuring charges
|
|
|
|
|
|
|
2,037
|
|
|
|
|
|
|
|
2,037
|
|
Acquired in-process research and development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,916
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
47,528
|
|
|
|
57,221
|
|
|
|
79,206
|
|
|
|
376,052
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(4,652
|
)
|
|
|
(47,707
|
)
|
|
|
(78,720
|
)
|
|
|
(316,231
|
)
|
Change in fair value of contingent consideration liability
|
|
|
4,838
|
|
|
|
(7,983
|
)
|
|
|
|
|
|
|
(3,145
|
)
|
Interest and other income, net
|
|
|
(35
|
)
|
|
|
92
|
|
|
|
2,614
|
|
|
|
13,863
|
|
Interest expense
|
|
|
(1,632
|
)
|
|
|
(467
|
)
|
|
|
(935
|
)
|
|
|
(5,680
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(1,481
|
)
|
|
|
(56,065
|
)
|
|
|
(77,041
|
)
|
|
|
(311,193
|
)
|
Consideration paid in excess of carrying value of the
noncontrolling interest in Symphony Allegro, Inc.
|
|
|
|
|
|
|
(61,566
|
)
|
|
|
|
|
|
|
(61,566
|
)
|
Loss attributed to noncontrolling interest in Symphony Allegro,
Inc.
|
|
|
|
|
|
|
13,987
|
|
|
|
18,591
|
|
|
|
45,089
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to Alexza common stockholders
|
|
|
(1,481
|
)
|
|
|
(103,644
|
)
|
|
|
(58,450
|
)
|
|
|
(327,670
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share attributable to Alexza common stockholders
|
|
$
|
(0.03
|
)
|
|
$
|
(2.68
|
)
|
|
$
|
(1.81
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used to compute net loss per share attributable to Alexza
common stockholders
|
|
|
55,421
|
|
|
|
38,609
|
|
|
|
32,297
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alexza Pharmaceuticals, Inc. Stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
Noncontrolling
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
Interest
|
|
|
|
|
|
|
Convertible
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Stockholder
|
|
|
Deferred
|
|
|
Other
|
|
|
During the
|
|
|
in
|
|
|
Total
|
|
|
|
Preferred Stock
|
|
|
Preferred Stock
|
|
|
Common Stock
|
|
|
Paid-in
|
|
|
Note
|
|
|
Stock
|
|
|
Comprehensive
|
|
|
Development
|
|
|
Symphony
|
|
|
Stockholders
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Receivable
|
|
|
Compensation
|
|
|
(Loss) Income
|
|
|
Stage
|
|
|
Allegro, Inc.
|
|
|
Equity (Deficit)
|
|
|
|
(In thousands, except share and per share amounts)
|
|
|
Issuance of common stock to founders at $0.22 per share in
December 2000 in exchange for technology and cash of $8
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
|
454,536
|
|
|
$
|
|
|
|
$
|
100
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
100
|
|
Issuance of Series A preferred stock for cash at $0.40 per
share in July 2001, net of issuance costs of $9
|
|
|
2,500,000
|
|
|
|
991
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of Series A1 preferred stock at $1.55 per share in
December 2001, in connection with merger
|
|
|
1,610,250
|
|
|
|
2,496
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of Series B preferred stock for cash at $1.40 per
share in December 2001, net of issuance costs of $71
|
|
|
6,441,000
|
|
|
|
8,946
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock in connection with merger at $1.10 per
share in December 2001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
868,922
|
|
|
|
|
|
|
|
956
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
956
|
|
Warrants assumed in merger transaction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
|
Issuance of common stock for cash at $0.22 per share upon
exercise of options in December 2001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,090
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
Compensation expense related to consultant stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,652
|
)
|
|
|
|
|
|
|
(5,652
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2001 (carried forward)
|
|
|
10,551,250
|
|
|
$
|
12,433
|
|
|
|
|
|
|
$
|
|
|
|
|
1,332,548
|
|
|
$
|
|
|
|
$
|
1,071
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(5,652
|
)
|
|
$
|
|
|
|
$
|
(4,581
|
)
|
See accompanying notes.
65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alexza Pharmaceuticals, Inc. Stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
Noncontrolling
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
Interest
|
|
|
|
|
|
|
Convertible
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Stockholder
|
|
|
Deferred
|
|
|
Other
|
|
|
During the
|
|
|
in
|
|
|
Total
|
|
|
|
Preferred Stock
|
|
|
Preferred Stock
|
|
|
Common Stock
|
|
|
Paid-in
|
|
|
Note
|
|
|
Stock
|
|
|
Comprehensive
|
|
|
Development
|
|
|
Symphony
|
|
|
Stockholders
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Receivable
|
|
|
Compensation
|
|
|
(Loss) Income
|
|
|
Stage
|
|
|
Allegro, Inc.
|
|
|
Equity (Deficit)
|
|
|
|
(In thousands, except share and per share amounts)
|
|
|
Balance at December 31, 2001 (brought forward)
|
|
|
10,551,250
|
|
|
$
|
12,433
|
|
|
|
|
|
|
$
|
|
|
|
|
1,332,548
|
|
|
$
|
|
|
|
$
|
1,071
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(5,652
|
)
|
|
$
|
|
|
|
$
|
(4,581
|
)
|
Issuance of common stock for cash at $0.22 per share upon
exercise of options in February 2002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,606
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
Issuance of warrants to purchase Series B preferred stock
in March 2002, in connection with equipment financing loan
|
|
|
|
|
|
|
27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for cash at $0.22 per share upon
exercise of options in July 2002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,180
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock to stockholder at $0.99 per share in
exchange for promissory note in July 2002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
53,156
|
|
|
|
|
|
|
|
53
|
|
|
|
(53
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of Series C preferred stock for cash at $1.56 per
share in September 2002, net of issuance costs of $108
|
|
|
28,870,005
|
|
|
|
44,892
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase of common stock for cash at $1.05 per share in
October 2002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,634
|
)
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3
|
)
|
Issuance of common stock for cash at $1.05 per share for
services upon exercise of warrants in December 2002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,368
|
|
|
|
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
|
Compensation expense related to consultant stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
|
Unrealized gain on investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
51
|
|
|
|
|
|
|
|
|
|
|
|
51
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,163
|
)
|
|
|
|
|
|
|
(8,163
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2002 (carried forward)
|
|
|
39,421,255
|
|
|
$
|
57,352
|
|
|
|
|
|
|
$
|
|
|
|
|
1,405,224
|
|
|
$
|
|
|
|
$
|
1,144
|
|
|
$
|
(53
|
)
|
|
$
|
|
|
|
$
|
51
|
|
|
$
|
(13,815
|
)
|
|
$
|
|
|
|
$
|
(12,673
|
)
|
See accompanying notes.
66
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alexza Pharmaceuticals, Inc. Stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
Noncontrolling
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
Interest
|
|
|
|
|
|
|
Convertible
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Stockholder
|
|
|
Deferred
|
|
|
Other
|
|
|
During the
|
|
|
in
|
|
|
Total
|
|
|
|
Preferred Stock
|
|
|
Preferred Stock
|
|
|
Common Stock
|
|
|
Paid-in
|
|
|
Note
|
|
|
Stock
|
|
|
Comprehensive
|
|
|
Development
|
|
|
Symphony
|
|
|
Stockholders
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Receivable
|
|
|
Compensation
|
|
|
(Loss) Income
|
|
|
Stage
|
|
|
Allegro, Inc.
|
|
|
Equity (Deficit)
|
|
|
|
(In thousands, except share and per share amounts)
|
|
|
Balance at December 31, 2002 (brought forward)
|
|
|
39,421,255
|
|
|
$
|
57,352
|
|
|
|
|
|
|
$
|
|
|
|
|
1,405,224
|
|
|
$
|
|
|
|
$
|
1,144
|
|
|
$
|
(53
|
)
|
|
$
|
|
|
|
$
|
51
|
|
|
$
|
(13,815
|
)
|
|
$
|
|
|
|
$
|
(12,673
|
)
|
Issuance of common stock for cash at $0.22, $0.99 and $1.10 per
share upon exercise of options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
74,903
|
|
|
|
|
|
|
|
47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47
|
|
Issuance of warrants to purchase Series C preferred stock
in connection with equipment financing loan in January 2003
|
|
|
|
|
|
|
35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of warrants to purchase Series C preferred stock
in connection with equipment financing loan in September 2003
|
|
|
|
|
|
|
27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase of common stock for cash at $1.05 per share in
January 2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,172
|
)
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
Repurchase of common stock for cash at $0.22 per share in
November 2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(14,772
|
)
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3
|
)
|
Compensation expense related to consultant stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31
|
|
Deferred stock compensation expense related to modification of
consultant stock option
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss on investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(55
|
)
|
|
|
|
|
|
|
|
|
|
|
(55
|
)
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(14,328
|
)
|
|
|
|
|
|
|
(14,328
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2003 (carried forward)
|
|
|
39,421,255
|
|
|
$
|
57,414
|
|
|
|
|
|
|
$
|
|
|
|
|
1,464,183
|
|
|
$
|
|
|
|
$
|
1,219
|
|
|
$
|
(53
|
)
|
|
$
|
(1
|
)
|
|
$
|
(4
|
)
|
|
$
|
(28,143
|
)
|
|
$
|
|
|
|
$
|
(26,982
|
)
|
See accompanying notes.
67
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alexza Pharmaceuticals, Inc. Stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
Noncontrolling
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
Interest
|
|
|
|
|
|
|
Convertible
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Stockholder
|
|
|
Deferred
|
|
|
Other
|
|
|
During the
|
|
|
in
|
|
|
Total
|
|
|
|
Preferred Stock
|
|
|
Preferred Stock
|
|
|
Common Stock
|
|
|
Paid-in
|
|
|
Note
|
|
|
Stock
|
|
|
Comprehensive
|
|
|
Development
|
|
|
Symphony
|
|
|
Stockholders
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Receivable
|
|
|
Compensation
|
|
|
(Loss) Income
|
|
|
Stage
|
|
|
Allegro, Inc.
|
|
|
Equity (Deficit)
|
|
|
|
(In thousands, except share and per share amounts)
|
|
|
Balance at December 31, 2003 (brought forward)
|
|
|
39,421,255
|
|
|
$
|
57,414
|
|
|
|
|
|
|
$
|
|
|
|
|
1,464,183
|
|
|
$
|
|
|
|
$
|
1,219
|
|
|
$
|
(53
|
)
|
|
$
|
(1
|
)
|
|
$
|
(4
|
)
|
|
$
|
(28,143
|
)
|
|
$
|
|
|
|
$
|
(26,982
|
)
|
Cancellation of unvested common stock at $0.99 per share in
March 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(24,365
|
)
|
|
|
|
|
|
|
(24
|
)
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayment of vested portion of stockholder note receivable for
cash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29
|
|
Issuance of warrants to purchase Series C preferred stock
in connection with equipment financing loan in April 2004
|
|
|
|
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for cash at $0.22, $0.99 and $1.10 per
share upon exercise of options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,192
|
|
|
|
|
|
|
|
72
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
72
|
|
Repurchase of common stock for cash at $1.05 per share in
September 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(404
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of Series D preferred stock at $1.29 per share in
November and December 2004, net of issuance costs of $2,239
|
|
|
40,435,448
|
|
|
|
49,760
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of warrants to purchase common stock in connection with
Series D financing in November 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
91
|
|
Compensation expense related to consultant stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40
|
|
Compensation expense related to employee stock option
modifications
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
|
|
Amortization of deferred stock compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
Unrealized loss on investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(41
|
)
|
|
|
|
|
|
|
|
|
|
|
(41
|
)
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(16,625
|
)
|
|
|
|
|
|
|
(16,625
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2004 (carried forward)
|
|
|
79,856,703
|
|
|
$
|
107,194
|
|
|
|
|
|
|
$
|
|
|
|
|
1,539,606
|
|
|
$
|
|
|
|
$
|
1,417
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(45
|
)
|
|
$
|
(44,768
|
)
|
|
$
|
|
|
|
$
|
(43,396
|
)
|
See accompanying notes.
68
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alexza Pharmaceuticals, Inc. Stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
Noncontrolling
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
Interest
|
|
|
|
|
|
|
Convertible
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Stockholder
|
|
|
Deferred
|
|
|
Other
|
|
|
During the
|
|
|
in
|
|
|
Total
|
|
|
|
Preferred Stock
|
|
|
Preferred Stock
|
|
|
Common Stock
|
|
|
Paid-in
|
|
|
Note
|
|
|
Stock
|
|
|
Comprehensive
|
|
|
Development
|
|
|
Symphony
|
|
|
Stockholders
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Receivable
|
|
|
Compensation
|
|
|
(Loss) Income
|
|
|
Stage
|
|
|
Allegro, Inc.
|
|
|
Equity (Deficit)
|
|
|
|
(In thousands, except share and per share amounts)
|
|
|
Balance at December 31, 2004 (brought forward)
|
|
|
79,856,703
|
|
|
$
|
107,194
|
|
|
|
|
|
|
$
|
|
|
|
|
1,539,606
|
|
|
$
|
|
|
|
$
|
1,417
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(45
|
)
|
|
$
|
(44,768
|
)
|
|
$
|
|
|
|
$
|
(43,396
|
)
|
Issuance of common stock upon exercise of options $0.22, $0.99,
$1.10, per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
380,508
|
|
|
|
|
|
|
|
357
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
357
|
|
Compensation expense related to consultant stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
195
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
195
|
|
Deferred stock compensation, net of $4 reversal in connection
with employee terminations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,329
|
|
|
|
|
|
|
|
(3,329
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of deferred stock compensation,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
404
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
404
|
|
Variable compensation expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
442
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
442
|
|
Unrealized gain on investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
15
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(32,402
|
)
|
|
|
|
|
|
|
(32,402
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2005 (carried forward)
|
|
|
79,856,703
|
|
|
$
|
107,194
|
|
|
|
|
|
|
$
|
|
|
|
|
1,920,114
|
|
|
$
|
|
|
|
$
|
5,740
|
|
|
$
|
|
|
|
$
|
(2,925
|
)
|
|
$
|
(30
|
)
|
|
$
|
(77,170
|
)
|
|
$
|
|
|
|
$
|
(74,385
|
)
|
See accompanying notes.
69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alexza Pharmaceuticals, Inc. Stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
Noncontrolling
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
Interest
|
|
|
|
|
|
|
Convertible
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Stockholder
|
|
|
Deferred
|
|
|
Other
|
|
|
During the
|
|
|
in
|
|
|
Total
|
|
|
|
Preferred Stock
|
|
|
Preferred Stock
|
|
|
Common Stock
|
|
|
Paid-in
|
|
|
Note
|
|
|
Stock
|
|
|
Comprehensive
|
|
|
Development
|
|
|
Symphony
|
|
|
Stockholders
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Receivable
|
|
|
Compensation
|
|
|
(Loss) Income
|
|
|
Stage
|
|
|
Allegro, Inc.
|
|
|
Equity (Deficit)
|
|
|
|
(In thousands, except share and per share amounts)
|
|
|
Balance at December 31, 2005 (brought forward)
|
|
|
79,856,703
|
|
|
$
|
107,194
|
|
|
|
|
|
|
$
|
|
|
|
|
1,920,114
|
|
|
$
|
|
|
|
$
|
5,740
|
|
|
$
|
|
|
|
$
|
(2,925
|
)
|
|
$
|
(30
|
)
|
|
$
|
(77,170
|
)
|
|
$
|
|
|
|
$
|
(74,385
|
)
|
Issuance of common stock for cash and shares upon exercise of
options at a weighted average price of $1.28 per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
159,446
|
|
|
|
|
|
|
|
195
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
195
|
|
Issuance of common stock for cash under the Companys
Employee Stock Purchase Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
131,682
|
|
|
|
|
|
|
|
896
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
896
|
|
Issuance of common stock for shares upon exercise of warrant
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
85,359
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for cash, net of offering costs of
$2,156
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,325,000
|
|
|
|
1
|
|
|
|
44,901
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44,902
|
|
Conversion of convertible preferred stock into common stock
|
|
|
(79,856,703
|
)
|
|
|
(107,194
|
)
|
|
|
|
|
|
|
|
|
|
|
15,197,712
|
|
|
|
1
|
|
|
|
107,193
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
107,194
|
|
Purchase of noncontrolling interest by Symphony Allegro, Inc,
preferred shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,463
|
|
|
|
36,463
|
|
Compensation expense related to consultant stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
145
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
145
|
|
Compensation expense related to fair value of employee share
based awards issued after January 1, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,601
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,601
|
|
Amortization of deferred stock compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
727
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
727
|
|
Reversal of deferred stock compensation in connection with
employee terminations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(495
|
)
|
|
|
|
|
|
|
495
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Variable compensation expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(442
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(442
|
)
|
Issuance of warrant to Symphony Allegro Holdings LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,708
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,708
|
|
Unrealized gain on investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39
|
|
|
|
|
|
|
|
|
|
|
|
39
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(41,806
|
)
|
|
|
(1,720
|
)
|
|
|
(43,526
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2006 (carried forward)
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
|
23,819,319
|
|
|
$
|
2
|
|
|
$
|
170,442
|
|
|
$
|
|
|
|
$
|
(1,703
|
)
|
|
$
|
9
|
|
|
$
|
(118,976
|
)
|
|
$
|
34,743
|
|
|
$
|
84,517
|
|
See accompanying notes.
70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alexza Pharmaceuticals, Inc. Stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
Noncontrolling
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
Interest
|
|
|
|
|
|
|
Convertible
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Stockholder
|
|
|
Deferred
|
|
|
Other
|
|
|
During the
|
|
|
In
|
|
|
Total
|
|
|
|
Preferred Stock
|
|
|
Preferred Stock
|
|
|
Common Stock
|
|
|
Paid-In
|
|
|
Note
|
|
|
Stock
|
|
|
Comprehensive
|
|
|
Development
|
|
|
Symphony
|
|
|
Stockholders
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Receivable
|
|
|
Compensation
|
|
|
(Loss) Income
|
|
|
Stage
|
|
|
Allegro, Inc.
|
|
|
Equity (Deficit)
|
|
|
|
(In thousands, except share and per share amounts)
|
|
|
Balance at December 31, 2006 (brought forward)
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
|
23,819,319
|
|
|
$
|
2
|
|
|
$
|
170,442
|
|
|
$
|
|
|
|
$
|
(1,703
|
)
|
|
$
|
9
|
|
|
$
|
(118,976
|
)
|
|
$
|
34,743
|
|
|
$
|
84,517
|
|
Issuance of common stock for cash and shares upon exercise of
options at a weighted average price of $1.28 per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
204,423
|
|
|
|
|
|
|
|
432
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
432
|
|
Issuance of common stock for cash under the Companys
Employee Stock Purchase Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
205,870
|
|
|
|
|
|
|
|
1,405
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,405
|
|
Issuance of common stock upon vesting of restricted stock units
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,245
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for cash, net of offering costs of
$4,743
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,900,000
|
|
|
|
1
|
|
|
|
65,981
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
65,982
|
|
Compensation expense related to consultant stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75
|
|
Compensation expense related to fair value of employee share
based awards issued after January 1, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,733
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,733
|
|
Amortization of deferred stock compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
577
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
577
|
|
Reversal of deferred stock compensation in connection with
employee terminations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(387
|
)
|
|
|
|
|
|
|
387
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain on investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
132
|
|
|
|
|
|
|
|
|
|
|
|
132
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(45,119
|
)
|
|
|
(10,791
|
)
|
|
|
(55,910
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2007(carried forward)
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
|
31,137,857
|
|
|
$
|
3
|
|
|
$
|
240,681
|
|
|
$
|
|
|
|
$
|
(739
|
)
|
|
$
|
141
|
|
|
$
|
(164,095
|
)
|
|
$
|
23,952
|
|
|
$
|
99,943
|
|
See accompanying notes.
71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alexza Pharmaceuticals, Inc. Stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
Noncontrolling
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
Interest
|
|
|
|
|
|
|
Convertible
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Stockholder
|
|
|
Deferred
|
|
|
Other
|
|
|
During the
|
|
|
In
|
|
|
Total
|
|
|
|
Preferred Stock
|
|
|
Preferred Stock
|
|
|
Common Stock
|
|
|
Paid-In
|
|
|
Note
|
|
|
Stock
|
|
|
Comprehensive
|
|
|
Development
|
|
|
Symphony
|
|
|
Stockholders
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Receivable
|
|
|
Compensation
|
|
|
(Loss) Income
|
|
|
Stage
|
|
|
Allegro, Inc.
|
|
|
Equity (Deficit)
|
|
|
|
(In thousands, except share and per share amounts)
|
|
|
Balance at December 31, 2007 (brought forward)
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
|
31,137,857
|
|
|
$
|
3
|
|
|
$
|
240,681
|
|
|
$
|
|
|
|
$
|
(739
|
)
|
|
$
|
141
|
|
|
$
|
(164,095
|
)
|
|
$
|
23,952
|
|
|
$
|
99,943
|
|
Issuance of common stock and common stock warrant for cash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,250,000
|
|
|
|
|
|
|
|
9,840
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,840
|
|
Issuance of common stock for cash upon exercise of options at a
weighted average price of $1.55 per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
104,428
|
|
|
|
|
|
|
|
161
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
161
|
|
Issuance of common stock for cash under the Companys
Employee Stock Purchase Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
305,146
|
|
|
|
|
|
|
|
1,172
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,172
|
|
Issuance of common stock upon vesting of restricted stock units
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,443
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation expense related to consultant stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22
|
|
Compensation expense related to fair value of employee share
based awards issued after January 1, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,633
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,633
|
|
Amortization of deferred stock compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
437
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
437
|
|
Reversal of deferred stock compensation in connection with
employee terminations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(83
|
)
|
|
|
|
|
|
|
83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss on investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(113
|
)
|
|
|
|
|
|
|
|
|
|
|
(113
|
)
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(58,450
|
)
|
|
|
(18,591
|
)
|
|
|
(77,041
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
|
32,820,874
|
|
|
$
|
3
|
|
|
$
|
256,426
|
|
|
$
|
|
|
|
$
|
(219
|
)
|
|
$
|
28
|
|
|
$
|
(222,545
|
)
|
|
$
|
5,361
|
|
|
$
|
39,054
|
|
See accompanying notes.
72
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alexza Pharmaceuticals, Inc. Stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
Noncontrolling
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
Interest
|
|
|
|
|
|
|
Convertible
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Stockholder
|
|
|
Deferred
|
|
|
Other
|
|
|
During the
|
|
|
In
|
|
|
Total
|
|
|
|
Preferred Stock
|
|
|
Preferred Stock
|
|
|
Common Stock
|
|
|
Paid-In
|
|
|
Note
|
|
|
Stock
|
|
|
Comprehensive
|
|
|
Development
|
|
|
Symphony
|
|
|
Stockholders
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Receivable
|
|
|
Compensation
|
|
|
(Loss) Income
|
|
|
Stage
|
|
|
Allegro, Inc.
|
|
|
Equity (Deficit)
|
|
|
|
(In thousands, except share and per share amounts)
|
|
|
Balance at December 31, 2008 (brought forward)
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
|
32,820,874
|
|
|
$
|
3
|
|
|
$
|
256,426
|
|
|
$
|
|
|
|
$
|
(219
|
)
|
|
$
|
28
|
|
|
$
|
(222,545
|
)
|
|
$
|
5,361
|
|
|
$
|
39,054
|
|
Issuance of common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
135,041
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock and common stock warrants for cash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,107,012
|
|
|
|
1
|
|
|
|
18,989
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,990
|
|
Issuance of common stock and common stock warrants for the
purchase of noncontrolling interest in Symphony Allegro,
Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000,000
|
|
|
|
1
|
|
|
|
36,084
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,085
|
|
Deemed dividend for purchase of noncontrolling interest in
Symphony Allegro, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(61,566
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,626
|
|
|
|
(52,940
|
)
|
Issuance of common stock for cash upon exercise of options at a
weighted average price of $1.20 per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
69,708
|
|
|
|
|
|
|
|
84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
84
|
|
Issuance of common stock for cash under the Companys
Employee Stock Purchase Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
439,252
|
|
|
|
|
|
|
|
599
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
599
|
|
Issuance of common stock upon vesting of restricted stock units
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
839,469
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation expense related to consultant stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
53
|
|
Compensation expense related to fair value of employee share
based awards issued after January 1, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,860
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,860
|
|
Amortization of deferred stock compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
183
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
183
|
|
Reversal of deferred stock compensation in connection with
employee terminations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(36
|
)
|
|
|
|
|
|
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss on investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(29
|
)
|
|
|
|
|
|
|
|
|
|
|
(29
|
)
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(42,078
|
)
|
|
|
(13,987
|
)
|
|
|
(56,065
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
|
52,411,356
|
|
|
$
|
5
|
|
|
$
|
257,493
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(1
|
)
|
|
$
|
(264,623
|
)
|
|
$
|
|
|
|
$
|
(7,126
|
)
|
73
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alexza Pharmaceuticals, Inc. Stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
Noncontrolling
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
Accumulated
|
|
|
Interest
|
|
|
|
|
|
|
Convertible
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Stockholder
|
|
|
Deferred
|
|
|
Comprehensive
|
|
|
During the
|
|
|
in
|
|
|
Total
|
|
|
|
Preferred Stock
|
|
|
Preferred Stock
|
|
|
Common Stock
|
|
|
Paid in
|
|
|
Note
|
|
|
Stock
|
|
|
(Loss)
|
|
|
Development
|
|
|
Symphony
|
|
|
Stockholders
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Receivable
|
|
|
Compensation
|
|
|
Income
|
|
|
Stage
|
|
|
Allegro, Inc.
|
|
|
(Deficit) Equity
|
|
|
|
(In thousands, except share and per share balances)
|
|
|
Balance at December 31, 2009 (brought forward)
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
|
52,411,356
|
|
|
$
|
5
|
|
|
$
|
257,493
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(1
|
)
|
|
$
|
(264,623
|
)
|
|
$
|
|
|
|
$
|
(7,126
|
)
|
Issuance of common stock and common stock warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,685,183
|
|
|
|
1
|
|
|
|
16,351
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,352
|
|
Issuance of common stock warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
921
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
921
|
|
Issuance of common stock for cash upon exercise of options at a
weighted average price of $1.87 per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
114,278
|
|
|
|
|
|
|
|
215
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
215
|
|
Issuance of common stock for cash under the Companys
Employee Stock Purchase Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
406,207
|
|
|
|
|
|
|
|
482
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
482
|
|
Issuance of common stock upon vesting of restricted stock units
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
149,304
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation expense related to consultant stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28
|
|
Compensation expense related to fair value of employee share
based awards issued after January 1, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,896
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,896
|
|
Unrealized gain on investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,481
|
)
|
|
|
|
|
|
|
(1,481
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2010
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
|
59,766,328
|
|
|
$
|
6
|
|
|
$
|
278,386
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
2
|
|
|
$
|
(266,104
|
)
|
|
$
|
|
|
|
$
|
12,290
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
74
ALEXZA
PHARMACEUTICALS, INC
(a development stage company)
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period from
|
|
|
|
|
|
|
|
|
|
|
|
|
December 19,
|
|
|
|
|
|
|
|
|
|
|
|
|
2000
|
|
|
|
|
|
|
|
|
|
|
|
|
(Inception) to
|
|
|
|
Year Ended December 31,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2010
|
|
|
|
(In thousands)
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(1,481
|
)
|
|
|
(56,065
|
)
|
|
|
(77,041
|
)
|
|
|
(311,193
|
)
|
Adjustments to reconcile net loss to net cash provided by (used
in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation expense
|
|
|
2,924
|
|
|
|
7,096
|
|
|
|
5,092
|
|
|
|
21,859
|
|
Change in fair value of contingent consideration liability
|
|
|
(4,838
|
)
|
|
|
7,983
|
|
|
|
|
|
|
|
3,145
|
|
Extinguishment of officer note receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,300
|
|
Issuance of common stock for intellectual property
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
92
|
|
Charge for acquired in-process research and development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,916
|
|
Amortization of assembled workforce
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
222
|
|
Amortization of debt discount and deferred interest
|
|
|
299
|
|
|
|
29
|
|
|
|
38
|
|
|
|
690
|
|
Amortization of discount on
available-for-sale
securities
|
|
|
180
|
|
|
|
126
|
|
|
|
(797
|
)
|
|
|
(421
|
)
|
Write-off of other asset
|
|
|
2,800
|
|
|
|
|
|
|
|
|
|
|
|
2,800
|
|
Depreciation
|
|
|
4,557
|
|
|
|
4,850
|
|
|
|
5,294
|
|
|
|
26,166
|
|
Loss on disposal of property and equipment
|
|
|
79
|
|
|
|
43
|
|
|
|
17
|
|
|
|
205
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other receivables
|
|
|
1,406
|
|
|
|
(1,406
|
)
|
|
|
12,055
|
|
|
|
|
|
Prepaid expenses and other current assets
|
|
|
(161
|
)
|
|
|
326
|
|
|
|
247
|
|
|
|
(959
|
)
|
Other assets
|
|
|
(71
|
)
|
|
|
|
|
|
|
(24
|
)
|
|
|
(2,696
|
)
|
Accounts payable
|
|
|
76
|
|
|
|
(2,223
|
)
|
|
|
(278
|
)
|
|
|
2,652
|
|
Accrued clinical trial expense and other accrued liabilities
|
|
|
(410
|
)
|
|
|
(2,715
|
)
|
|
|
111
|
|
|
|
(326
|
)
|
Deferred revenues
|
|
|
4,331
|
|
|
|
(9,514
|
)
|
|
|
(486
|
)
|
|
|
4,331
|
|
Other liabilities
|
|
|
(1,099
|
)
|
|
|
(1,678
|
)
|
|
|
701
|
|
|
|
17,999
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
8,592
|
|
|
|
(53,148
|
)
|
|
|
(55,071
|
)
|
|
|
(229,218
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of
available-for-sale
securities
|
|
|
(63,434
|
)
|
|
|
(13,259
|
)
|
|
|
(47,111
|
)
|
|
|
(401,606
|
)
|
Maturities of
available-for-sale
securities
|
|
|
41,945
|
|
|
|
18,158
|
|
|
|
74,329
|
|
|
|
374,252
|
|
Purchase of
available-for-sale
securities held by Symphony Allegro, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(49,975
|
)
|
Maturities of
available-for-sale
securities held by Symphony Allegro, Inc.
|
|
|
|
|
|
|
16,436
|
|
|
|
18,131
|
|
|
|
45,093
|
|
Decrease (increase) in restricted cash
|
|
|
|
|
|
|
|
|
|
|
204
|
|
|
|
(400
|
)
|
Purchases of property and equipment
|
|
|
(9,178
|
)
|
|
|
(1,189
|
)
|
|
|
(2,732
|
)
|
|
|
(50,524
|
)
|
Proceeds from disposal of property and equipment
|
|
|
29
|
|
|
|
|
|
|
|
25
|
|
|
|
57
|
|
Cash paid for merger
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(250
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
(30,638
|
)
|
|
|
20,146
|
|
|
|
42,846
|
|
|
|
(83,353
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock, common stock warrants
and exercise of stock options and stock purchase rights
|
|
|
17,049
|
|
|
|
19,673
|
|
|
|
11,173
|
|
|
|
162,207
|
|
Repurchase of common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8
|
)
|
Proceeds from issuance of convertible preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
104,681
|
|
Proceeds from repayment of stockholder note receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29
|
|
Proceeds received from purchase of the noncontrolling interest
in Symphony Allegro, Inc.
|
|
|
|
|
|
|
4,882
|
|
|
|
|
|
|
|
4,882
|
|
Proceeds from purchase of non controlling interest by preferred
shareholders in Symphony Allegro, Inc., net of fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47,171
|
|
Payment of contingent payment to Symphony Allegro Holdings, LLC
|
|
|
(7,500
|
)
|
|
|
|
|
|
|
|
|
|
|
(7,500
|
)
|
Proceeds from term loans
|
|
|
14,806
|
|
|
|
|
|
|
|
|
|
|
|
33,738
|
|
Payments of term loans
|
|
|
(2,088
|
)
|
|
|
(4,139
|
)
|
|
|
(4,249
|
)
|
|
|
(18,958
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
22,267
|
|
|
|
20,416
|
|
|
|
6,924
|
|
|
|
326,242
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
221
|
|
|
|
(12,586
|
)
|
|
|
(5,301
|
)
|
|
|
13,671
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of period
|
|
|
13,450
|
|
|
|
26,036
|
|
|
|
31,337
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
|
13,671
|
|
|
|
13,450
|
|
|
|
26,036
|
|
|
|
13,671
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
1,080
|
|
|
$
|
467
|
|
|
$
|
935
|
|
|
$
|
3,732
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non cash investing and financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of convertible preferred stock to common stock
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
107,194
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares and warrants, net of warrant cancellation in
conjunction with Symphony Allegro purchase
|
|
$
|
|
|
|
$
|
36,085
|
|
|
$
|
|
|
|
$
|
36,085
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of contingent consideration liability
|
|
$
|
|
|
|
$
|
16,855
|
|
|
$
|
|
|
|
$
|
16,855
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of warrants in conjunction with establishment of
Symphony Allegro
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
10,708
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of warrants in conjunction with debt issuance
|
|
$
|
921
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
921
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
75
|
|
1.
|
The
Company and Basis of Presentation
|
Business
Alexza Pharmaceuticals, Inc. (Alexza or the
Company), was incorporated in the state of Delaware
on December 19, 2000 as FaxMed, Inc. In June 2001, the
Company changed its name to Alexza Corporation and in December
2001 became Alexza Molecular Delivery Corporation. In July 2005,
the Company changed its name to Alexza Pharmaceuticals, Inc.
The Company is a pharmaceutical development company focused on
the research, development, and commercialization of novel
proprietary products for the acute treatment of central nervous
system conditions. The Companys primary activities since
incorporation have been establishing its offices, recruiting
personnel, conducting research and development, conducting
preclinical studies and clinical trials, performing business and
financial planning, and raising capital. Accordingly, the
Company is considered to be in the development stage and
operates in one business segment. The Companys facilities
and employees are currently located in the United States.
Basis
of Consolidation
The consolidated financial statements include the accounts of
Alexza and its wholly-owned subsidiaries. On August 26,
2009, Alexza acquired all of the outstanding equity of Symphony
Allegro, Inc. (Allegro) (see Note 9). Prior to
August 26, 2009, Alexza consolidated the financial results
of Allegro, as Allegro was deemed a variable interest entity and
Alexza was deemed the primary beneficiary. All significant
intercompany balances and transactions have been eliminated.
Registered
Direct Equity Issuances
In March 2008, the Company completed the sale of
1,250,000 shares of its registered common stock to
Biomedical Sciences Investment Fund Pte. Ltd.
(Bio*One) at a price of $8.00 per share. As outlined
in the agreement, if the average closing price of the
Companys stock over a 45 consecutive day trading period
does not exceed $8.00 between the closing date and
December 31, 2008, Bio*One would receive 135,041 additional
shares, which would adjust the effective purchase price to $7.22
per share. The Companys average stock price did not meet
this level during the specified period and the Company issued
the additional shares to Bio*One in January 2009.
In addition, the Company issued a warrant to Bio*One to purchase
up to 375,000 of additional shares of Alexza common stock at a
purchase price per share of $8.00. The warrant was subject to
the same price adjustment as the common stock sale, and
effective January 1, 2009 the warrant was automatically
adjusted to give Bio*One the right to purchase
415,522 shares at a purchase price of $7.22 per share. The
Company committed to initiate and maintain manufacturing
operations in Singapore, and the warrant was to become
exercisable only if the Company terminated operations in
Singapore or did not achieve certain performance milestones. In
December 2008, the Company did not meet its defined performance
milestone, and as a result the warrant became fully exercisable.
The warrant is cash or net exercisable for a period of
5 years. Net proceeds from the sale of the stock and
warrant were approximately $9.84 million after deducting
offering expenses and is classified as equity in the
consolidated balance sheets.
In August 2010, the Company issued an aggregate of
6,685,183 shares of its common stock and warrants to
purchase up to an additional 3,342,589 shares of its common
stock in a registered direct offering. These securities were
sold as units with each unit consisting of (i) one share of
common stock and (ii) a warrant to purchase 0.5 of a share
of common stock, at a purchase price of $2.70 per unit. Net
proceeds from the offering were approximately
$16.4 million, after deducting placement agents
commissions and offering expenses. The warrants are exercisable
six months after issuance at $3.30 per share and expire five
years after August 10, 2010.
76
ALEXZA
PHARMACEUTICALS, INC.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The securities were sold pursuant to a shelf registration
statement declared effective by the Securities and Exchange
Commission on May 20, 2010. The Company agreed to customary
obligations regarding registration, including indemnification
and maintenance of the registration statement.
Unregistered
Direct Equity Issuance
On October 5, 2009, the Company issued an aggregate of
8,107,012 shares of its common stock and warrants to
purchase up to an additional 7,296,312 shares of its common
stock in a private placement. These securities were sold as
units with each unit consisting of one share of common stock and
a warrant to purchase 0.9 shares of common stock at a
purchase price of $2.4325 per unit. The net proceeds, after
deducting the payment of a placement agent fee and other
offering expenses, were approximately $19.0 million and are
classified as equity in the consolidated balance sheets. The
warrants are cash or net exercisable for a period of seven years
from October 5, 2009 and have an exercise price of $2.77
per share.
The Company granted to the investors certain registration rights
related to the shares of common stock sold in the private
placement and the shares of common stock underlying the
warrants. The Company filed with the SEC a registration
statement covering the resale of these shares, and the SEC
declared such registration statement effective on
October 27, 2009. The Company also agreed to other
customary obligations regarding registration, including
indemnification and maintenance of the registration statement.
If the Company does not maintain an effective registration
statement, it will be subject to liquidated damages of 2% for
each 30 day period the registration statement is not
effective. The Company believes the risk of payment of the
liquidated damages to be remote.
Equity
Financing Facility
On May 26, 2010, the Company obtained a committed equity
financing facility under which the Company may sell up to
8,936,550 shares of its common stock to Azimuth
Opportunity, Ltd. (Azimuth) over a
24-month
period pursuant to the terms of a Common Stock Purchase
Agreement (the Purchase Agreement). The Company is
not obligated to utilize any of the facility.
The Company will determine, at its sole discretion, the timing,
the dollar amount and the price per share of each draw under
this facility, subject to certain conditions. When and if the
Company elects to use the facility by delivery of a draw down
notice to Azimuth, the Company will issue shares to Azimuth at a
discount of between 5.00% and 6.75% to the volume weighted
average price of the Companys common stock over a
preceding period of trading days (a Draw Down
Period). The Purchase Agreement also provides that from
time to time, at the Companys sole discretion, it may
grant Azimuth the right to purchase additional shares of the
Companys common stock during each Draw Down Period for an
amount of shares specified by the Company based on the trading
price of its common stock. Upon Azimuths exercise of an
option, the Company will sell to Azimuth the shares subject to
the option at a price equal to the greater of the daily volume
weighted average price of the Companys common stock on the
day Azimuth notifies the Company of its election to exercise its
option or the threshold price for the option determined by the
Company, less a discount calculated in the same manner as it is
calculated in the draw down notices.
Azimuth is not required to purchase any shares at a
pre-discounted purchase price below $3.00 per share, and any
shares sold under this facility will be sold pursuant to a shelf
registration statement declared effective by the Securities and
Exchange Commission on May 20, 2010. As of
December 31, 2010, the Companys stock price was
$1.25. The Purchase Agreement will terminate on May 26,
2012. As of December 31, 2010, there have been no sales of
common stock under the Purchase Agreement.
77
ALEXZA
PHARMACEUTICALS, INC.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
2.
|
Need to
Raise Additional Capital
|
The Company has incurred significant losses from operations
since its inception and expects losses to continue for the
foreseeable future. As of December 31, 2010, the Company
had cash, cash equivalents and marketable securities of
$41.4 million and working capital of $8.0 million. The
Companys operating and capital plans call for cash
expenditure to exceed that amount for 2011. The Company plans to
raise additional capital to fund its operations, to develop its
product candidates and to develop its manufacturing
capabilities. Management plans to finance the Companys
operations through the sale of equity securities, debt
arrangements or partnership or licensing collaborations. Such
funding may not be available or may be on terms which are not
favorable to the Company. The Companys inability to raise
capital as and when needed could have a negative impact on its
financial condition and its ability to continue as a going
concern. Based on the Companys cash, cash equivalents and
marketable securities balance at December 31, 2010 and its
expected cash usage, management estimates that it has sufficient
capital resources to meet its anticipated cash needs into the
third quarter of 2011.
The accompanying financial statements have been prepared
assuming the Company will continue to operate as a going
concern, which contemplates the realization of assets and the
settlement of liabilities in the normal course of business. The
consolidated financial statements do not include any adjustments
to reflect the possible future effects on the recoverability and
classification of assets or the amounts of liabilities that may
result from uncertainty related to the Companys ability to
continue as a going concern. As of December 31, 2010, the
Company classified all of its outstanding financing obligations
as a current liability due to this uncertainty.
|
|
3.
|
Summary
of Significant Accounting Policies
|
Use of
Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported
in the financial statements and accompanying notes. Actual
results could differ from those estimates.
Fair
Value of Financial Instruments
Fair value is defined as the exchange price that would be
received for an asset or paid to transfer a liability (an exit
price) in the principal or most advantageous market for the
asset or liability in an orderly transaction between market
participants on the measurement date. Valuation techniques used
to measure fair value must maximize the use of observable inputs
and minimize the use of unobservable inputs. Three levels of
inputs, of which the first two are considered observable and the
last unobservable, may be used to measure fair value which are
the following:
|
|
|
|
|
Level 1 Quoted prices in active markets for
identical assets or liabilities.
|
|
|
|
Level 2 Inputs other than Level 1 that are
observable, either directly or indirectly, such as quoted prices
for similar assets or liabilities; quoted prices in markets that
are not active; or other inputs that are observable or can be
corroborated by observable market data for substantially the
full term of the assets or liabilities.
|
|
|
|
Level 3 Unobservable inputs that are supported
by little or no market activity and that are significant to the
fair value of the assets or liabilities.
|
78
ALEXZA
PHARMACEUTICALS, INC.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following table represents the Companys fair value
hierarchy for its financial assets (cash equivalents and
marketable securities) by major security type and contingent
consideration liability measured at fair value on a recurring
basis as of December 31, 2010 and 2009 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
$
|
12,750
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
12,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale debt securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt securities
|
|
$
|
|
|
|
$
|
12,997
|
|
|
$
|
|
|
|
$
|
12,997
|
|
Government-sponsored enterprises
|
|
|
|
|
|
|
14,781
|
|
|
|
|
|
|
|
14,781
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available for sale debt securities
|
|
$
|
|
|
|
$
|
27,778
|
|
|
$
|
|
|
|
$
|
27,778
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
12,750
|
|
|
$
|
27,778
|
|
|
$
|
|
|
|
$
|
40,528
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent consideration liability
|
|
$
|
|
|
|
$
|
|
|
|
$
|
12,500
|
|
|
$
|
12,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
|
|
|
$
|
|
|
|
$
|
12,500
|
|
|
$
|
12,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
$
|
10,421
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
10,421
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale debt securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government-sponsored enterprises
|
|
$
|
|
|
|
$
|
5,217
|
|
|
$
|
|
|
|
$
|
5,217
|
|
Corporate debt securities
|
|
|
|
|
|
|
3,500
|
|
|
|
|
|
|
|
3,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available for sale debt securities
|
|
$
|
|
|
|
$
|
8,717
|
|
|
$
|
|
|
|
$
|
8,717
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
10,421
|
|
|
$
|
8,717
|
|
|
$
|
|
|
|
$
|
19,138
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent consideration liability
|
|
$
|
|
|
|
$
|
|
|
|
$
|
24,838
|
|
|
$
|
24,838
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
|
|
|
$
|
|
|
|
$
|
24,838
|
|
|
$
|
24,838
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Companys available for sale debt securities are valued
utilizing a multi-dimensional relational model. Inputs, listed
in approximate order of priority for use when available, include
benchmark yields, reported trades, broker/dealer quotes, issuer
spreads, two-sided markets, benchmark securities, bids, offers
and reference data. There have been no transfers between
Level 1 and Level 2 measurements during the year ended
December 31, 2010, and there were no changes in the
Companys valuation technique.
Contingent
consideration liability
In connection with the exercise of the Companys option to
purchase all of the outstanding equity of Allegro, the Company
is obligated to make contingent cash payments to the former
Allegro stockholders related to certain payments received by the
Company from future partnering agreements pertaining to
AZ-004/104 (Staccato loxapine) or AZ-002 (Staccato
alprazolam) (see Note 9). In order to estimate the fair
value of the liability associated with the contingent cash
payments, the Company prepared several cash flow scenarios for
the three product candidates, AZ-004, AZ-002 and AZ-104, that
are subject to the contingent payment obligation. Each potential
cash flow scenario consisted of assumptions of the range of
estimated milestone and license payments potentially
79
ALEXZA
PHARMACEUTICALS, INC.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
receivable from such partnerships and assumed royalties received
from future product sales. Based on these estimates, the Company
computed the estimated payments to be made to the former Allegro
stockholders. Payments were assumed to terminate upon the
expiration of the related patents.
The projected cash flows for AZ-004 in the U.S. and Canada
continue to be based on the terms of the agreements with Biovail
Laboratories International SRL (Biovail) signed in
February 2010 and multiple internal product sales forecasts, as
the Company expects that any potential partnership agreement for
AZ-004 in the U.S. and Canada will have similar terms to
that of the Biovail agreements, despite these agreements being
terminated in October 2010. The timing and extent of the
projected cash flows for AZ-004 outside of the U.S. and
Canada, AZ-002 and AZ-104 were based on internal estimates for
potential milestones and multiple product royalty scenarios and
are also consistent in structure to the Biovail agreements (see
Note 9) as the Company expects future partnerships for
these product candidates to have similar structures.
The Company then assigned a probability to each of the cash flow
scenarios based on several factors, including: the product
candidates stage of development, preclinical and clinical
results, technological risk related to the successful
development of the different drug candidates, estimated market
size, market risk and potential partnership interest to
determine a risk adjusted weighted average cash flow based on
all of these scenarios. These probability and risk adjusted
weighted average cash flows were then discounted utilizing the
Companys estimated weighted average cost of capital
(WACC). The Companys WACC considered the
Companys cash position, competition, risk of substitute
products, and risk associated with the financing of the
development projects. The Company determined the discount rate
to be 18% and applied this rate to the probability adjusted cash
flow scenarios.
This fair value measurement is based on significant inputs not
observed in the market and thus represents a Level 3
measurement. Level 3 instruments are valued based on
unobservable inputs that are supported by little or no market
activity and reflect the Companys assumptions in measuring
fair value.
The Company records any changes in the fair value of the
contingent consideration liability in earnings in the period of
the change. Certain events including, but not limited to,
clinical trial results, U.S. Food and Drug Administration
(FDA) approval or non-approval of the Companys
submissions, the timing and terms of any strategic partnership
agreement, the commercial success of AZ-004, AZ-104 or AZ-002
and the discount rate assumption could have a material impact on
the fair value of the contingent consideration liability, and as
a result, the Companys results of operations and financial
position.
During the year ended December 31, 2010, the Company
reduced the fair value of the contingent consideration liability
to reflect the reduction in the probability-weighted estimated
cash flows from AZ-004 and the timing of receipt of such cash
flows, due to (a) the Complete Response Letter
(CRL) received from the FDA on October 8, 2010
regarding the Companys New Drug Application
(NDA) for its AZ-004 product candidate and
(b) the termination of the Companys agreements with
Biovail (see Note 9). A CRL is issued by the FDA indicating
that the NDA review cycle is complete and the application is not
ready for approval in its present form. In December 2010, the
Company met with the FDA to discuss the issues identified in the
CRL and anticipates filing an amended NDA in July 2011. This
reduction in the liability resulted in a decrease in net loss
per share of $0.08 for the year ended December 31, 2010.
In February 2010, Biovail paid the Company an upfront
$40 million payment for the rights to commercialize AZ-004
in the United States and Canada (see Note 9). The Company
in turn paid $7.5 million of the upfront payment to the
former Allegro stockholders under the terms of the agreement to
purchase all of the outstanding equity of Allegro.
80
ALEXZA
PHARMACEUTICALS, INC.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following table represents a reconciliation of the change in
the fair value measurement of the contingent consideration
liability for the years ended December 31, 2010 and 2009
(in thousands).
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
Beginning balance
|
|
$
|
24,838
|
|
|
$
|
|
|
Acquisition date fair value measurement
August 26, 2009
|
|
|
|
|
|
|
16,855
|
|
Payments made
|
|
|
(7,500
|
)
|
|
|
|
|
Adjustments to fair value measurement
|
|
|
(4,838
|
)
|
|
|
7,983
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
12,500
|
|
|
$
|
24,838
|
|
|
|
|
|
|
|
|
|
|
Concentration
of Credit Risk
Financial instruments that potentially subject the Company to
credit risk consist of cash, cash equivalents and marketable
securities and restricted cash to the extent of the amounts
recorded on the balance sheets. The Companys cash, cash
equivalents, marketable securities and restricted cash are
placed with high credit-quality U.S. financial institutions
and issuers. The Company believes that its established
guidelines for investment of its excess cash maintain liquidity
through its policies on diversification and investment maturity.
Cash
Equivalents and Marketable Securities
Management determines the appropriate classification of its
investments at the time of purchase. These securities are
recorded as either cash equivalents or marketable securities.
The Company considers all highly liquid investments with
original maturities of three months or less from date of
purchase to be cash equivalents. Cash equivalents consist of
interest-bearing instruments including obligations of
U.S. government agencies, high credit rating corporate
borrowers and money market funds, which are carried at market
value.
All other investments are classified as
available-for-sale
marketable securities. The Company views its
available-for-sale
investments as available for use in current operations.
Accordingly, the Company has classified all investments as
short-term marketable securities, even though the stated
maturity date may be one year or more beyond the current balance
sheet date. Marketable securities are carried at estimated fair
value with unrealized gains or losses included in accumulated
other comprehensive income (loss) in stockholders equity
(deficit).
The amortized cost of debt securities is adjusted for
amortization of premiums and accretion of discounts to maturity.
Such amortization and accretion are included in interest and
other income (expense), net. Realized gains and losses, if any,
are also included in interest and other income (expense), net.
The cost of all securities sold is based on the
specific-identification method. Interest and dividends are
included in interest income.
The Company reviews its investments for other than temporary
decreases in market value on a quarterly basis. For the years
ended December 31, 2010, 2009 and 2008, the Company has not
recorded any charges related to
other-than-temporary
impairments.
Property
and Equipment
Property and equipment are stated at cost, less accumulated
depreciation. Property and equipment are depreciated using the
straight-line method over the estimated life of the asset,
generally three years for computer equipment and five years for
manufacturing equipment, laboratory equipment and seven years
for furniture.
81
ALEXZA
PHARMACEUTICALS, INC.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Leasehold improvements are amortized over the estimated useful
life or the remaining lease term, whichever is shorter.
Restricted
Cash
The Company must maintain a $400,000 letter of credit as
security for performance under its facility lease agreement. The
letter of credit is secured by a certificate of deposit for the
same amount, which is classified as restricted cash, a
non-current asset.
Impairment
of Long-Lived Assets
The Company reviews long-lived assets, including property and
equipment, for impairment whenever events or changes in business
circumstances indicate that the carrying amount of the assets
may not be fully recoverable. An impairment loss would be
recognized when estimated undiscounted future cash flows
expected to result from the use of the asset and its eventual
disposition are less than its carrying amount. The impairment
loss, if recognized, would be based on the excess of the
carrying value of the impaired asset over its respective fair
value. Through December 31, 2010, the Company has not
recorded an impairment of a long-lived asset.
Revenue
Recognition
The Company recognizes revenue in accordance with the Securities
and Exchange Commission (SEC) Staff Accounting
Bulletin No. 101, Revenue Recognition in Financial
Statements, as amended by Staff Accounting
Bulletin No. 104, Revision of Topic 13.
Revenue has consisted primarily of amounts earned from
collaboration agreements and under research grants with the
National Institutes of Health. In determining the accounting for
collaboration agreements the Company determines if the
arrangement represents a single unit of accounting or includes
multiple units of accounting. If the arrangement represents a
single unit of accounting, the revenue recognition policy and
the performance obligation period must be determined, if not
already contractually defined, for the entire arrangement. If
the arrangement represents separate units of accounting, a
revenue recognition policy must be determined for each unit.
Revenues for non-refundable upfront license fee payments, where
the Company continues to have performance obligations, will be
recognized as performance occurs and obligations are completed
(see Note 9 for a description of the Companys
collaborations).
The Companys federal government research grants provided
for the reimbursement of qualified expenses for research and
development as defined under the terms of each grant. Equipment
purchased specifically for grant programs was recorded at cost
and depreciated over the grant period. Revenue under grants was
recognized when the related qualified research and development
expenses were incurred up to the limit of the approval funding
amounts. In 2010 the Company recorded $244,000 of grant revenues
from the U.S. governments Qualified Therapeutic
Development Program.
Research
and Development
Research and development expenses include personnel and
facility-related expenses, outside contracted services including
clinical trial costs, manufacturing and process development
costs, research costs and other consulting services. Research
and development costs are expensed as incurred.
Clinical development costs are a significant component of
research and development expenses. The Company has a history of
contracting with third parties that perform various clinical
trial activities on its behalf in the ongoing development of its
product candidates. The financial terms of these contracts are
subject to negotiations and may vary from contract to contract
and may result in uneven payment flow. The Company accrues and
expenses costs for clinical trial activities performed by third
parties based upon estimates of the percentage of work completed
over
82
ALEXZA
PHARMACEUTICALS, INC.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
the life of the individual study in accordance with agreements
established with contract research organizations and clinical
trial sites.
Income
Taxes
The Company utilizes the asset and liability method of
accounting for income taxes. Under this method, deferred tax
assets and liabilities are determined based on differences
between financial reporting and tax basis of assets and
liabilities and are measured using enacted tax rates and laws
that will be in effect when the differences are expected to
reverse. A valuation allowance is provided when it is more
likely than not that some portion or all of a deferred tax asset
will not be realized.
The impact of an uncertain income tax position on the income tax
return must be recognized at the largest amount that is
more-likely-than-not to be sustained upon audit by the relevant
taxing authority. An uncertain income tax position will not be
recognized if it has less than a 50% likelihood of being
sustained.
Comprehensive
Income (Loss) Attributable to Alexza Common
Stockholders
Comprehensive loss attributable to Alexza common stockholders is
comprised of net loss, unrealized gains (losses) on marketable
securities and comprehensive loss attributed to noncontrolling
interest in Allegro, net of taxes. Total comprehensive loss
attributable to Alexza common stockholders for the years ended
December 31, 2010, 2009 and 2008 and the period from
December 19, 2000 (Inception) to December 31, 2010 is
as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period from
|
|
|
|
|
|
|
|
|
|
|
|
|
December 19, 2000
|
|
|
|
|
|
|
|
|
|
|
|
|
(Inception) to
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
December 31, 2010
|
|
|
Net loss
|
|
$
|
(1,481
|
)
|
|
$
|
(56,065
|
)
|
|
$
|
(77,041
|
)
|
|
$
|
(311,193
|
)
|
Change in unrealized income (loss) on marketable securities, net
of taxes
|
|
|
3
|
|
|
|
(29
|
)
|
|
|
(113
|
)
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
|
(1,478
|
)
|
|
|
(56,094
|
)
|
|
|
(77,154
|
)
|
|
|
(311,191
|
)
|
Comprehensive loss attributable to noncontrolling interest in
Symphony Allegro. Inc., net of taxes
|
|
|
|
|
|
|
13,987
|
|
|
|
18,591
|
|
|
|
45,089
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss attributable to Alexza common stockholders
|
|
$
|
(1,478
|
)
|
|
$
|
(42,107
|
)
|
|
$
|
(58,563
|
)
|
|
$
|
(266,102
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-Based
Compensation
Compensation cost for employee stock options granted prior to
January 1, 2006 was accounted for using the options
intrinsic value. The Company recorded the total valuation of
these options as a component of stockholders equity
(deficit), which was amortized over the vesting period of the
applicable option on a straight line basis. During the years
ended December 31, 2009 and 2008, the Company reversed
$36,000 and $83,000, respectively, of deferred share-based
compensation related to unvested options cancelled as a result
of employee terminations. As of December 31, 2009, all
deferred stock compensation had been recognized.
Compensation cost for employee share-based awards granted on or
after January 1, 2006 is based on the grant-date fair value
and will be recognized over the vesting period of the applicable
award on a straight-line basis. The Company issues employee
share-based awards in the form of stock options and restricted
stock units under the Companys equity incentive plans and
stock purchase rights under the Companys employee stock
purchase plan.
83
ALEXZA
PHARMACEUTICALS, INC.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
All share-based payment awards are amortized on a ratable basis
over the requisite service periods of the awards, which are
generally the vesting periods or, for performance-based options,
the expected period during which the performance criteria is
expected to be met.
During the year ended December 31, 2010, the Company did
not record share-based compensation on performance based stock
options and restricted stock units issued pursuant to the
2009-2010
Performance Based Incentive Program, as the vesting of such
items is not considered probable.
Stock
Options, Stock Purchase Rights and Restricted Stock
Units
During the years ended December 31, 2010, 2009 and 2008,
the weighted average fair value of the employee stock options
granted was $1.86, $1.71 and $3.04, respectively, the weighted
average fair value of stock purchase rights granted was $1.97,
$2.81 and $2.58, respectively, and the weighted average fair
value of restricted stock units granted was $2.54, $2.19 and
$4.35, respectively.
The estimated grant date fair values of the stock options and
stock purchase rights were calculated using the Black-Scholes
valuation model, and the following assumptions:
|
|
|
|
|
|
|
|
|
2010
|
|
2009
|
|
2008
|
|
Stock Option Plans
|
|
|
|
|
|
|
Weighted-average expected term
|
|
5.0 years
|
|
5.0 years
|
|
5.0 years
|
Expected volatility
|
|
84%
|
|
86%
|
|
67%
|
Risk-free interest rate
|
|
2.0%
|
|
1.8%
|
|
3.1%
|
Dividend yield
|
|
0%
|
|
0%
|
|
0%
|
Employee Stock Purchase Plan
|
|
|
|
|
|
|
Weighted-average expected term
|
|
1.93 Years
|
|
1.90 Years
|
|
1.65 years
|
Expected volatility
|
|
79%
|
|
74%
|
|
71%
|
Risk-free interest rate
|
|
1.6%
|
|
2.6%
|
|
2.7%
|
Dividend yield
|
|
0%
|
|
0%
|
|
0%
|
Weighted-Average Expected Term The Company
determines the expected term of stock options granted through a
combination of the Companys own historical exercise
experience and expected future exercise activities and
post-vesting termination behavior. Under the Employee Stock
Purchase Plan, the expected term of employee stock purchase plan
shares is the weighted average of the purchase periods under
each offering period.
Volatility The Company utilizes its historical volatility
to determine future volatility for the purpose of determining
share-based payments for all options granted.
Risk-Free Interest Rate The Company utilizes
U.S. Treasury zero-coupon issues with remaining terms
similar to the expected term of the options or purchase rights
on the respective grant dates to determine its risk-free
interest rate.
Dividend Yield The Company has never declared or paid any
cash dividends and does not plan to pay cash dividends in the
foreseeable future, and, therefore, used an expected dividend
yield of zero in the valuation model.
Forfeiture Rate The Company uses historical data to
estimate pre-vesting option forfeitures and record stock-based
compensation expense only for those awards that are expected to
vest. All stock-based payment awards are amortized on a
straight-line basis over the requisite service periods of the
awards, which are generally the vesting periods.
Restricted Stock Units The estimated fair
value of restricted stock unit awards is calculated based on the
market price of Alexzas common stock on the date of grant,
reduced by the present value of dividends expected to
84
ALEXZA
PHARMACEUTICALS, INC.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
be paid on Alexza common stock prior to vesting of the
restricted stock unit. The Companys estimate assumes no
dividends will be paid prior to the vesting of the restricted
stock unit.
As of December 31, 2010, there was $2,885,000, $3,176,000
and $168,000 total unrecognized compensation costs related to
non-vested stock option awards, non-vested restricted stock
units and stock purchase rights, respectively, which are
expected to be recognized over a weighted average period of
1.68 years, 1.08 years and 1.06 years,
respectively.
Recently
Issued Accounting Standards
In October 2009, the FASB published Accounting Standards Update
(ASU)
2009-13,
which amends the criteria to identify separate units of
accounting within Subtopic
605-25,
Revenue Recognition-Multiple-Element Arrangements.
The revised guidance eliminates the residual method of
allocation, and instead requires companies to use the relative
selling price method when allocating revenue in a multiple
deliverable arrangement. When applying the relative selling
price method, the selling price for each deliverable shall be
determined using vendor specific objective evidence of selling
price, if it exists, otherwise using third-party evidence of
selling price. If neither vendor specific objective evidence nor
third-party evidence of selling price exists for a deliverable,
companies shall use their best estimate of the selling price for
that deliverable when applying the relative selling price
method. The adoption of ASU
2009-13 will
only affect multiple deliverable arrangements entered into, or
materially modified, after January 1, 2011. The Company is
currently evaluating the potential impact, if any, of the
adoption of this guidance on its financial position, results of
operations and cash flows.
In April 2010, the FASB issued ASU
2010-17,
Milestone Method of Revenue Recognition a consensus of the
FASB Emerging Issues Task Force. FASB ASU
2010-17
provides guidance on defining a milestone and determining when
it may be appropriate to apply the milestone method of revenue
recognition for research and development transactions. A vendor
can recognize consideration in its entirety as revenue in the
period in which the milestone is achieved only if the milestone
meets all criteria to be considered substantive. Additional
disclosures describing the consideration arrangement and the
entitys accounting policy for recognition of such
milestone payments are also required. FASB ASU
2010-17 is
effective for fiscal years, and interim periods within such
fiscal years, beginning on or after June 15, 2010, with
early adoption permitted. The guidance may be applied
prospectively to milestones achieved during the period of
adoption or retrospectively for all prior periods. The Company
is currently evaluating the potential impact, if any, of the
adoption of this guidance on its financial position, results of
operations and cash flows.
|
|
4.
|
Net Loss
per Share Attributable to Alexza Common Stockholders
|
Basic and diluted net loss per share attributable to Alexza
common stockholders is calculated by dividing the net loss
attributable to Alexza common stockholders by the
weighted-average number of common shares outstanding for the
period less weighted average shares subject to repurchase, of
which there were none in 2010, 2009 or 2008. Outstanding stock
options, warrants, and unvested restricted stock units are not
included in the net loss per share attributable to Alexza common
stockholders calculation for the years ended December 31,
2010, 2009 and 2008 as the inclusion of such shares would have
had an anti-dilutive effect.
Potentially anti-dilutive securities include the following (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2010
|
|
2009
|
|
2008
|
|
Outstanding stock options
|
|
|
4,559
|
|
|
|
4,570
|
|
|
|
3,710
|
|
Unvested restricted stock units
|
|
|
1,168
|
|
|
|
706
|
|
|
|
123
|
|
Warrants to purchase common stock
|
|
|
14,290
|
|
|
|
5,091
|
|
|
|
2,324
|
|
85
ALEXZA
PHARMACEUTICALS, INC.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
5.
|
Cash
Equivalents and Marketable Securities
|
The following table outlines the amortized cost, fair value and
unrealized gain/(loss) for the Companys financial assets
by major security type as of December 31, 2010 and 2009 (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized
|
|
|
|
|
|
Unrealized
|
|
December 31, 2010
|
|
Cost
|
|
|
Fair Value
|
|
|
Gain/(Loss)
|
|
|
Money market funds
|
|
$
|
12,750
|
|
|
$
|
12,750
|
|
|
$
|
|
|
Corporate debt securities
|
|
|
12,994
|
|
|
|
12,997
|
|
|
|
3
|
|
Government-sponsored enterprises
|
|
|
14,782
|
|
|
|
14,781
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
40,526
|
|
|
$
|
40,528
|
|
|
$
|
2
|
|
Less amounts classified as cash equivalents
|
|
$
|
(12,750
|
)
|
|
$
|
(12,750
|
)
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments
|
|
$
|
27,776
|
|
|
$
|
27,778
|
|
|
$
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized
|
|
|
|
|
|
Unrealized
|
|
December 31, 2009
|
|
Cost
|
|
|
Fair Value
|
|
|
Gain/(Loss)
|
|
|
Money market funds
|
|
$
|
10,421
|
|
|
$
|
10,421
|
|
|
$
|
|
|
Government-sponsored enterprises
|
|
|
5,218
|
|
|
|
5,217
|
|
|
|
(1
|
)
|
Corporate debt securities
|
|
|
3,500
|
|
|
|
3,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
19,139
|
|
|
$
|
19,138
|
|
|
$
|
(1
|
)
|
Less amounts classified as cash equivalents
|
|
|
(12,672
|
)
|
|
|
(12,672
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments
|
|
$
|
6,467
|
|
|
$
|
6,466
|
|
|
$
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2010, all of the Companys
marketable securities have a maturity of less than one year.
|
|
6.
|
Property
and Equipment
|
Property and equipment consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
Lab equipment
|
|
$
|
10,862
|
|
|
$
|
11,702
|
|
Manufacturing equipment
|
|
|
8,606
|
|
|
$
|
4,240
|
|
Computer equipment and software
|
|
|
4,798
|
|
|
|
4,755
|
|
Furniture
|
|
|
1,025
|
|
|
|
1,060
|
|
Leasehold improvements
|
|
|
19,759
|
|
|
|
19,255
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,050
|
|
|
|
41,012
|
|
Less: accumulated depreciation
|
|
|
(20,689
|
)
|
|
|
(17,414
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
24,361
|
|
|
$
|
23,598
|
|
|
|
|
|
|
|
|
|
|
Property and equipment also includes equipment that secures the
Companys equipment financing agreements of $4,764,000 and
$7,813,000 at December 31, 2010 and 2009, respectively.
Accumulated depreciation related to assets under the equipment
financing loans was $3,705,000 and $5,498,000 at
December 31, 2010 and 2009, respectively. Depreciation of
property and equipment under equipment financing agreements is
included in depreciation expense in the statement of cash flows.
86
ALEXZA
PHARMACEUTICALS, INC.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
7.
|
Other
Accrued Liabilities
|
Other accrued liabilities consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
Accrued compensation
|
|
$
|
1,557
|
|
|
$
|
2,174
|
|
Accrued professional fees
|
|
|
798
|
|
|
|
630
|
|
Other
|
|
|
803
|
|
|
|
677
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,158
|
|
|
|
3,481
|
|
|
|
|
|
|
|
|
|
|
Equipment
Financing Obligations
The Company has outstanding borrowings under financing
agreements to finance equipment purchases. Borrowings under the
agreements are to be repaid in 36 to 48 monthly
installments of principal and interest. The interest rate, which
is fixed for each draw, is based on the U.S. Treasury
securities of comparable maturities and ranges from 9.2% to
10.5%. The equipment purchased under each of the equipment
financing agreements is pledged as security. The Company
believes the amortized book value represents the approximate
fair value of the outstanding debt.
Term
Loan Agreements
Hercules
Technology Growth Capital
In May 2010, the Company entered into a Loan and Security
Agreement (Loan Agreement) with Hercules Technology
Growth Capital, Inc. (Hercules). Under the terms of
the Loan Agreement, the Company borrowed $15,000,000 at an
interest rate of the higher of (i) 10.75% or (ii) 6.5%
plus the prime rate as reported in the Wall Street Journal, with
a maximum interest rate of 14% and issued to Hercules a secured
term promissory note evidencing the loan. The Company made
interest only payments for the initial eight months following
which the loan will be repaid in 33 equal monthly installments.
The Company believes the amortized book value represents the
approximate fair value of the outstanding debt.
The Loan Agreement limits both the seniority and amount of
future debt the Company may incur. The Company may be required
to prepay the loan in the event of a change in control. In
conjunction with the loan, the Company issued to Hercules a
five-year warrant to purchase 376,394 shares of the
Companys common stock at a price of $2.69 per share. The
warrant is immediately exercisable and expires in May 2015. The
Company estimated the fair value of this warrant as of the
issuance date to be $921,000, which was recorded as a debt
discount to the loan and consequently a reduction to the
carrying value of the loan. The fair value of the warrant was
calculated using the Black-Scholes option valuation model, and
was based on the contractual term of the warrant of five years,
a risk-free interest rate of 2.31%, expected volatility of 84%
and 0% expected dividend yield. The Company also recorded fees
paid to Hercules as a debt discount, which further reduced the
carrying value of the loan. The debt discount is being amortized
to interest expense.
Autoliv
ASP, Inc.
In June 2010, in return for transfer to the Company of all
right, title and interest in a production line for the
commercial manufacture of chemical heat packages completed or to
be completed by Autoliv ASP, Inc (Autoliv) on behalf
of the Company, the Company paid Autoliv $4 million in cash
and issued Autoliv a $4 million unsecured
87
ALEXZA
PHARMACEUTICALS, INC.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
promissory note. In February 2011, the Company entered into an
agreement to amend the terms of the unsecured promissory note.
Under the terms of that amendment, the original $4 million
note was cancelled and a new unsecured promissory note was
issued with a reduced principal amount of $2.8 million (the
New Note).
The New Note bears interest beginning on January 1, 2011 at
8% per annum and will be paid in 48 consecutive and equal
installments of approximately $67,900. The Company believes the
amortized book value represents the approximate fair value of
the outstanding debt.
Future scheduled principal payments under the equipment
financing agreements and the term loan agreements as of
December 31, 2010 are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment
|
|
|
|
|
|
|
|
|
|
Financing
|
|
|
Loan
|
|
|
|
|
|
|
Obligations
|
|
|
Agreements
|
|
|
Total
|
|
|
2011
|
|
$
|
427
|
|
|
$
|
5,407
|
|
|
$
|
5,834
|
|
2012
|
|
|
|
|
|
|
6,396
|
|
|
|
6,396
|
|
2013
|
|
|
|
|
|
|
6,082
|
|
|
|
6,082
|
|
2014
|
|
|
|
|
|
|
1,115
|
|
|
|
1,115
|
|
Thereafter
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
427
|
|
|
$
|
19,000
|
|
|
$
|
19,427
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Leases
The Company leases two buildings in Mountain View, California,
which the Company began to occupy in the fourth quarter of 2007.
Certain of these arrangements have free or escalating rent
payment provisions. The Company recognizes rental expense on the
facility on a straight line basis over the initial term of the
lease. Differences between the straight line rent expense and
rent payments are classified as deferred rent liability on the
balance sheet. The lease for both facilities expires on
March 31, 2018, and the Company has two options to extend
the lease for five years each.
The Mountain View lease, as amended, included $15,964,000 of
tenant improvement reimbursements from the landlord. The Company
has recorded all tenant improvements as additions to property
and equipment and is amortizing the improvements over the
shorter of the estimated useful life of the improvement or the
remaining life of the lease. The reimbursements received from
the landlord are included in deferred rent liability and
amortized over the life of the lease as a contra-expense.
In May 2008, the Company entered into an agreement to sublease a
portion of its Mountain View facility. The sublease agreement,
as amended, expires on April 30, 2011, at which time it
will convert to a
month-to-month
lease.
In January 2010, the Company entered into an agreement to
sublease an additional portion of its Mountain View facility
from March 1, 2010 through February 28, 2014. The
sublessee has an option to extend the lease agreement for
12 months and a second option to extend the lease agreement
an additional 37 months. If the sublessee exercises these
options, the rent will be at fair market rates at the time the
option is exercised. In the year ended December 31, 2010,
the Company recorded a charge of $1,144,000 to record the excess
of the lease payments made by the Company and the cash receipts
generated from the sublease over the life of the sublease.
In August 2010, the Company entered into an agreement to
sublease approximately 2,500 square feet of the
Companys premises to Cypress Bioscience, Inc.
(Cypress) and to provide certain administrative,
facility and information technology support for a period of
12 months for $11,000 per month. After 12 months, the
space will be leased on a
month-to-month
basis.
88
ALEXZA
PHARMACEUTICALS, INC.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Companys recurring losses from operations and its need
for additional capital raise substantial doubt about its ability
to continue as a going concern, and as a result, the Company has
classified all of its financing obligations as current. If this
substantial doubt is removed in future periods, the Company will
reclassify the financing obligations between current and
non-current. Future minimum lease payments under non-cancelable
operating leases, net of sublease income, at December 31,
2010 were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease
|
|
|
Sublease
|
|
|
Net
|
|
|
|
Payments
|
|
|
Receipts
|
|
|
Payments
|
|
|
2011
|
|
$
|
5,138
|
|
|
$
|
(566
|
)
|
|
$
|
4,572
|
|
2012
|
|
|
5,263
|
|
|
|
(438
|
)
|
|
|
4,825
|
|
2013
|
|
|
4,919
|
|
|
|
(451
|
)
|
|
|
4,468
|
|
2014
|
|
|
4,934
|
|
|
|
(75
|
)
|
|
|
4,859
|
|
2015
|
|
|
4,723
|
|
|
|
|
|
|
|
4,723
|
|
Thereafter
|
|
|
11,135
|
|
|
|
|
|
|
|
11,135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total minimum payments
|
|
$
|
36,112
|
|
|
$
|
(1,530
|
)
|
|
$
|
34,582
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental expense, net of sublease income, was $4,169,000,
$3,050,000, $4,778,000 and $23,140,000, for the years ended
December 31, 2010, 2009, 2008 and, for the period from
December 19, 2000 (inception) to December 31, 2010,
respectively. Rental income from the sublease agreements was
$1,037,000, $656,000, $430,000, and $2,248,000 for the years
ended December 31, 2010, 2009, 2008 and, for the period
from December 19, 2000 (inception) to December 31,
2010, respectively.
Manufacturing
and Supply Agreement
On November 2, 2007, the Company entered into a
Manufacturing and Supply Agreement (the Manufacture
Agreement) with Autoliv relating to the commercial supply
of chemical heat packages that can be incorporated into the
Companys Staccato device (the Chemical Heat
Packages). Autoliv had developed these Chemical Heat
Packages for the Company pursuant to a development agreement
between Autoliv and the Company. Under the terms of the
Manufacture Agreement, Autoliv agreed to develop a manufacturing
line capable of producing 10 million Chemical Heat Packages
a year.
In June 2010 and February 2011, the Company entered into
agreements to amend the terms of the Manufacture Agreement
(together the Amendments). Under the terms of the
first of the Amendments, the Company paid Autoliv
$4 million and issued Autoliv a $4 million unsecured
promissory note in return for a production line for the
commercial manufacture of Chemical Heat Packages. Each
production line is comprised of two identical and self
sustaining cells, and the first such cell was
completed, installed and qualified in connection with such
Amendment. Under the terms of the Second Amendment, the original
$4 million note was cancelled and the New Note was issued
with a reduced principal amount of $2.8 million, and
production on the second cell ceased. The New Note is payable in
48 equal monthly installments of approximately $67,900 and we
have paid the first two such installments. In the event that the
Company requests completion of the second cell of the first
production line for the commercial manufacture of Chemical Heat
Packages, Autoliv will complete, install and fully qualify such
second cell for a cost to the Company of $1.2 million and
Autoliv will transfer ownership of such cell to the Company upon
the payment in full of such $1.2 million and the New Note.
The provisions of the Amendments supersede (a) the
Companys obligation set forth in the Manufacture Agreement
to reimburse Autoliv for certain expenses related to the
equipment and tooling used in production and testing of the
Chemical Heat Packages in an amount of up to $12 million
upon the earliest of December 31, 2011, 60 days after
the termination of the Manufacture Agreement or 60 days
after approval by the FDA of an NDA filed by the Company, and
(b) the obligation of Autoliv to transfer possession of
such equipment and tooling.
89
ALEXZA
PHARMACEUTICALS, INC.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Subject to certain exceptions, Autoliv has agreed to
manufacture, assemble and test the Chemical Heat Packages solely
for the Company in conformance with the Companys
specifications. The Company will pay Autoliv a specified
purchase price, which varies based on annual quantities ordered
by the Company, per Chemical Heat Package delivered. The initial
term of the Manufacture Agreement expires on December 31,
2012, at which time the Manufacture Agreement will automatically
renew for successive five-year renewal terms unless the Company
or Autoliv notifies the other party no less than 36 months
prior to the end of the initial term or the then-current renewal
term that such party wishes to terminate the Manufacture
Agreement. The Manufacture Agreement provides that during the
term of the Manufacture Agreement, Autoliv will be the
Companys exclusive supplier of the Chemical Heat Packages.
In addition, the Manufacture Agreement grants Autoliv the right
to negotiate for the right to supply commercially any second
generation Chemical Heat Package (a Second Generation
Product) and provides that the Company will pay Autoliv
certain royalty payments if the Company manufactures Second
Generation Products itself or if the Company obtains Second
Generation Products from a third party manufacturer. Upon the
termination of the Manufacture Agreement, the Company will be
required, on an ongoing basis, to pay Autoliv certain royalty
payments related to the manufacture of the Chemical Heat
Packages by the Company or third party manufacturers.
Symphony
Allegro, Inc.
On December 1, 2006, the Company entered into a series of
related agreements with Symphony Capital LLC (Symphony
Capital), Symphony Allegro Holdings LLC
(Holdings) and Allegro, providing for the financing
of the clinical development of its AZ-002, Staccato
alprazolam, and AZ-004/104, Staccato loxapine,
product candidates (the Programs). Symphony Capital
and other investors (collectively, the Allegro
Investors) invested $50,000,000 in Holdings, which then
invested the $50,000,000 in Allegro. Pursuant to the agreements,
Allegro agreed to invest up to the full $50,000,000 to fund the
clinical development of the Programs, and the Company licensed
to Allegro certain intellectual property rights related to the
Programs.
The Company issued to Holdings five-year warrants to purchase
2,000,000 shares of the Companys common stock at
$9.91 per share. In consideration for the warrants, the Company
received an exclusive purchase option (the Purchase
Option) that gave the Company the right, but not the
obligation, to acquire all, but not less than all, of the
outstanding equity of Allegro, thereby allowing the Company to
reacquire all of the Programs.
In June 2009, the Company entered into an agreement with
Holdings to amend the provisions of and to exercise the Purchase
Option. The Company completed the acquisition of all of the
outstanding equity of Allegro pursuant to the amended Purchase
Option on August 26, 2009. In exchange for all of the
outstanding equity of Allegro, the Company, in lieu of the
consideration described above: (i) issued to the Allegro
Investors 10,000,000 shares of common stock
(ii) issued to the Allegro Investors warrants to purchase
5,000,000 shares of common stock at an exercise price of
$2.26 per share that are cash or net exercisable for a period of
5 years and canceled the warrants to purchase
2,000,000 shares of common stock held by the Allegro
Investors and (iii) will pay Holdings certain percentages
of cash payments that may be generated from future partnering
transactions for the Programs. Pursuant to a registration rights
agreement with Holdings, the Company filed with the SEC a
registration statement for these shares of common stock and the
shares of common stock underlying the warrants. The SEC declared
such registration statement effective on October 16, 2009
and, pursuant to the registration rights agreement with
Holdings, the Company has an obligation to take certain actions
as are necessary keep such registration statement effective.
Prior to the completion of the acquisition of all of the
outstanding equity of Allegro pursuant to the amended Purchase
Option, the Company had concluded that Allegro was by design a
variable interest entity. The noncontrolling interest in Allegro
represented an equity investment by the Allegro Investors in
Allegro of $50,000,000 reduced by $10,708,000 for the value of
the Purchase Option, and by $2,829,000 for a structuring
90
ALEXZA
PHARMACEUTICALS, INC.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
fee and related expenses that the Company paid to Symphony
Capital in connection with the closing of the Allegro
transaction, resulting in the recording of a net noncontrolling
interest of $36,463,000 on the effective date. The Company
charged the losses incurred by Allegro, prior to August 26,
2009, to the noncontrolling interest in the determination of the
net loss attributable to the Alexza common stockholders in the
consolidated statements of operations, and the Company also
reduced the noncontrolling interest in the consolidated balance
sheets by Allegros losses. For the years ended
December 31, 2009 and 2008, and the period from
December 19, 2000 (inception) to December 31, 2009,
the net losses of Allegro charged to the noncontrolling interest
were $13,987,000, $18,591,000, and $45,089,000 respectively.
Upon closing of the acquisition of all of the outstanding equity
of Allegro pursuant to the amended Purchase Option, the Company
recorded the acquisition as a capital transaction that did not
affect its net loss. However, because the acquisition was
accounted for as a capital transaction, the excess consideration
transferred over the carrying value of the noncontrolling
interest in Allegro was treated as a deemed dividend for
purposes of reporting net loss per share, increasing net loss
per share attributable to Alexza stockholders by $61,566,000
during the year ended December 31, 2009. In addition, upon
the closing, the Company ceased to charge net losses of Allegro
against the noncontrolling interest.
The following table outlines the estimated fair value of
consideration transferred by Alexza and the computation of the
excess consideration transferred over the carrying value of the
noncontrolling interest in Allegro at the acquisition date (in
thousands):
|
|
|
|
|
Description
|
|
Fair Value
|
|
|
Fair value of consideration transferred:
|
|
|
|
|
10,000,000 shares of Alexza common stock
|
|
$
|
28,000
|
|
Warrant consideration, net
|
|
|
8,085
|
|
Fair value of contingent cash payments to Allegro stockholders
|
|
|
16,855
|
|
|
|
|
|
|
Total consideration transferred
|
|
|
52,940
|
|
Add: Deficit of noncontrolling interest in Allegro
|
|
|
8,626
|
|
|
|
|
|
|
Excess consideration transferred over the carrying value of the
noncontrolling interest in Allegro
|
|
$
|
61,566
|
|
|
|
|
|
|
The fair value of the Alexza common stock of $2.80 was based on
the closing sales price of the Companys common stock on
the NASDAQ Global Market on August 26, 2009, which is the
date the transaction was completed.
The estimated fair values of the warrant consideration were
calculated using the Black-Scholes valuation model, and the
following assumptions:
|
|
|
|
|
|
|
Warrant
|
|
Warrant
|
|
|
Issued
|
|
Cancelled
|
|
Number of Shares
|
|
5,000,000
|
|
2,000,000
|
Expected term
|
|
5.0 years
|
|
2.3 years
|
Expected volatility
|
|
89%
|
|
117%
|
Risk-free interest rate
|
|
2.46%
|
|
1.06%
|
Dividend yield
|
|
0%
|
|
0%
|
91
ALEXZA
PHARMACEUTICALS, INC.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Endo
Pharmaceuticals, Inc.
On December 27, 2007, the Company entered into a license,
development and supply agreement (the license
agreement), with Endo Pharmaceuticals, Inc.
(Endo) for AZ-003 (Staccato fentanyl) and the
fentanyl class of molecules for North America. Under the terms
of the license agreement, Endo paid the Company a $10,000,000
non-refundable upfront fee and Endo was obligated to pay
potential additional milestone payments of up to $40,000,000
upon achievement of predetermined regulatory and clinical
milestones. Endo was also obligated to pay royalties to the
Company on net sales of the product, from which the Company
would be required to pay for the cost of goods for the
manufacture of the commercial version of the product. Under the
terms of the license agreement, the Company had primary
responsibility for the development and costs of the Staccato
Electronic Multiple Dose device and the exclusive right to
manufacture the product for clinical development and commercial
supply. Endo had the responsibility for future pre-clinical,
clinical and regulatory development, and, if AZ-003 was approved
for marketing, for commercializing the product in North America.
The Company recorded the $10,000,000 upfront fee it received
from Endo in January 2008 as deferred revenue. The Company was
unable to allocate a fair value to the each of the deliverables
outlined in the agreement and therefore accounted for the
deliverables as a single unit of accounting. The Company began
to recognize the $10,000,000 upfront payment as revenue in the
third quarter of 2008 over the estimated performance period of
six years, resulting in revenues of $486,000 in 2008.
In January 2009, the Company and Endo mutually agreed to
terminate the license agreement, with all rights to AZ-003
reverting back to the Company. The Companys obligations
under the license agreement were fulfilled upon the termination
of the agreement, and the Company recognized the remaining
deferred revenue of $9,514,000 in 2009.
Biovail
Laboratories International SRL
In February 2010, the Company entered into a collaboration and
license agreement and a manufacture and supply agreement,
(together the collaboration), with Biovail, for the
commercialization of AZ-004 for the treatment of psychiatric
and/or
neurological indications and the symptoms associated with these
indications, including the initial indication for the rapid
treatment of agitation in schizophrenia and bipolar disorder
patients. On October 18, 2010, Biovail notified the Company
of its intention to terminate the collaboration. Upon the
termination, the Company reacquired the U.S. and Canadian
rights to its AZ-004 product candidate licensed to Biovail
pursuant to the collaboration. Neither the Company nor Biovail
incurred any early termination penalties in connection with the
termination of the collaboration. Under the terms of the
collaboration, Biovail paid the Company a non-refundable upfront
fee of $40 million that was recognized as revenue in the
year ended December 31, 2010.
Cypress
Bioscience, Inc.
On August 25, 2010, the Company entered into a license and
development agreement (the Cypress Agreement) with
Cypress for Staccato nicotine. According to the terms of
the Cypress Agreement, Cypress paid the Company a non-refundable
upfront payment of $5 million to acquire the worldwide
license for the Staccato nicotine technology.
Following the completion of certain preclinical and clinical
milestones relating to the Staccato nicotine technology,
if Cypress elects to continue the development of Staccato
nicotine, Cypress will be obligated to pay the Company an
additional technology transfer payment of $1 million. The
Company retains a carried interest of 10%, subject to adjustment
in certain circumstances, in the net proceeds of any sale or
license by Cypress of the Staccato nicotine assets, and
the carried interest will be subject to put and call rights in
certain circumstances.
92
ALEXZA
PHARMACEUTICALS, INC.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Cypress has the responsibility for preclinical, clinical and
regulatory aspects of the development of Staccato
nicotine, along with the commercialization of the product.
Cypress will pay the Company a total of $3.9 million in
research and development funding for the Companys efforts
to execute a development plan culminating with the delivery of
clinical trial materials for a Phase 1 study with Staccato
nicotine. The Company received $2.0 million of these
payments in 2010. In January 2011, Cypress was acquired by
Ramius Value and Opportunity Advisors LLC, Royalty Pharma US
Partner, LP, Royalty Pharma US Partners 2008, LP and RP
Investment Corp. The Company does not know what, if any, impact
this will have on the partnership.
Additionally, Cypress and the Company entered into an agreement
to sublease approximately 2,500 square feet of the
Companys premises and to provide certain administrative,
facility and information technology support for a period of
12 months for $11,000 per month. Beginning in September
2011, the space will be leased on a
month-to-month
basis.
For revenue recognition purposes, the Company viewed the Cypress
Agreement as a multiple element arrangement. Multiple element
arrangements are analyzed to determine whether the various
performance obligations, or elements, can be separated or
whether they must be accounted for as a single unit of
accounting. The Company evaluates whether the delivered elements
under the arrangement have value on a stand-alone basis and
whether objective and reliable evidence of fair value of the
undelivered items exist. Deliverables that do not meet these
criteria are not evaluated separately for the purpose of revenue
recognition. For a single unit of accounting, payments received
are recognized in a manner consistent with the final
deliverable. The Company was unable to allocate a fair value to
the each of the deliverables outlined in the agreement and
therefore accounted for the deliverables as a single unit of
accounting. The Company has begun to deliver all elements of the
arrangement and is recognizing revenue ratably over the
estimated performance period of the agreement. Amounts received
prior to amounts earned as revenues are classified as deferred
revenues in the balance sheet.
In March 2002, in connection with an equipment financing
agreement, the Company issued immediately exercisable and fully
vested warrants to purchase 21,429 shares of Series B
preferred stock at a per share price of $1.40. The warrants
expire on April 8, 2013. The Company recorded a deferred
financing cost of $27,000 related to the issuance of these
warrants. The Company valued these warrants using the
Black-Scholes valuation model, assuming an exercise price and
fair value of $1.40, an expected volatility of 100%, an expected
life of 10 years, an expected dividend yield of 0%, and a
risk-free interest rate of 4.61%. The estimated fair value of
the warrants is recorded as debt discount. This amount was
amortized to interest expense over the commitment term of the
equipment financing agreement. In 2006, the warrants were
converted into warrants to purchase 4,116 shares of common
stock at a price of $7.29 per share. As of December 31,
2010, these warrants remained outstanding and exercisable.
In January and September 2003, in connection with the
modifications of an equipment financing agreement, the Company
issued immediately exercisable and fully vested warrants to
purchase 24,058 and 19,247 shares of Series C
preferred stock, respectively, at a per share price of $1.56.
The warrants expire on April 8, 2013. The Company valued
these warrants using the Black-Scholes valuation model, assuming
an exercise price and fair value of $1.56, an expected
volatility of 100%, an expected life of 10 years, an
expected dividend yield of 0%, and risk-free interest rate of
4.05% and 4.45%, respectively. The estimated fair values of the
warrants issued in January and September of $35,000 and $27,000,
respectively, were recorded as debt discount and were amortized
to interest expense over the remaining commitment term of the
financing agreement. In 2006, these warrants were converted into
warrants to purchase 4,852 shares and 3,882 shares of
common stock, respectively, both at a price of
$7.74 shares. As of December 31, 2010, both of these
warrants remained outstanding and exercisable.
In March 2004, in connection with the modifications of an
equipment financing agreement, the Company issued immediately
exercisable and fully vested warrants to purchase
14,232 shares of Series C preferred stock at a
93
ALEXZA
PHARMACEUTICALS, INC.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
per share price of $1.56. The warrants expire on April 8,
2013. The Company valued these warrants using the Black-Scholes
valuation model, assuming an exercise price and fair value of
$1.56, an expected volatility of 100%, an expected life of
10 years, an expected dividend yield of 0%, and risk-free
interest rate of 4.35%. The estimated fair value of $20,000 was
recorded as debt discount and amortized to interest expense over
the remaining commitment term of the financing agreement. In
2006, these warrants were converted into a warrant to purchase
2,870 shares of common stock at a price of $7.74. As of
December 31, 2010, these warrants remained outstanding and
exercisable.
In December 2006, in connection with the Allegro transaction
(see Note 9), the Company issued to Holdings a five-year
warrant to purchase 2,000,000 shares of the Companys
common stock at $9.91 per share. The warrants issued upon
closing were assigned a value of $10.7 million in
accordance with the Black-Scholes option valuation methodology
assuming an exercise price of $9.91, an expected volatility of
80%, an expected life of 5 years, an expected dividend
yield of 0% and risk-free interest rate of 4.45%. This fair
value has been recorded as a reduction to the noncontrolling
interest in Allegro. In August 2009, this warrant was cancelled
in conjunction with the Companys purchase of Allegro.
In March 2008, in connection with the registered direct equity
issuance to Bio*One described in Note 1, the Company issued
a warrant to Bio*One to purchase up to 375,000 of additional
shares of Alexza common stock at a purchase price per share of
$8.00. As outlined in the agreement, the warrant was subject to
the same price adjustment as the common stock sale, and
effective January 1, 2009 the warrant was adjusted to
purchase 415,522 shares at a purchase price of $7.22 per
share. The Company committed to initiate and maintain
manufacturing operations in Singapore, and the warrant was to
become exercisable only if the Company terminates operations in
Singapore or does not achieve certain performance milestones.
The warrant has a maximum term of 5 years. Net proceeds
from the sale of the stock and warrant were approximately
$9.84 million after deducting offering expenses. In
December 2008, the Company did not meet its defined performance
milestone, and as a result the warrant became fully exercisable.
At December 31, 2010, this warrant remained outstanding and
exercisable.
In August 2009, in connection with the acquisition of Allegro
(See Note 9) the Company issued five year warrants to
the Allegro Investors to purchase 5,000,000 shares of
Alexza common stock at a price per share of $2.26. At
December 31, 2010, the warrants remained outstanding and
exercisable.
In October 2009, in conjunction with a private equity issuance
(see Note 1), the Company issued seven year warrants to
purchase an aggregate of 7,296,312 shares of its common
stock with an exercise price per share of $2.77. The warrants
are cash or net exercisable for a period of seven years from
October 5, 2009 and have an exercise price of $2.77 per
share. The Company granted to the investors certain registration
rights related to the shares of common stock underlying the
warrants. The Company filed with the SEC a registration
statement covering the resale of these shares, and the SEC
declared such registration statement effective on
October 27, 2009. The Company also agreed to other
customary obligations regarding registration, including
indemnification and maintenance of the registration statement.
At December 31, 2010, these warrants remained outstanding
and exercisable.
In May 2010, in conjunction with the Loan Agreement with
Hercules, the Company issued to Hercules a five-year warrant to
purchase 376,394 shares of the Companys common stock
at a price of $2.69 per share. The warrant is immediately
exercisable and expires in May 2015. At December 31, 2010,
this warrant remained outstanding and exercisable.
In August 2010, the Company issued an aggregate of
6,685,183 shares of its common stock and warrants to
purchase up to an additional 3,342,589 shares of its common
stock in a registered direct offering. These securities were
sold as units with each unit consisting of (i) one share of
common stock and (ii) a warrant to purchase 0.5 of a share
of common stock, at a purchase price of $2.70 per unit. The
warrants are exercisable six months after issuance at $3.30 per
share and expire five years after August 2010. At
December 31, 2010, these warrants remained outstanding.
94
ALEXZA
PHARMACEUTICALS, INC.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
11.
|
Equity
Incentive Plans
|
2005
Equity Incentive Plan
In December 2005, the Companys Board of Directors adopted
the 2005 Equity Incentive Plan (the 2005 Plan) and
authorized for issuance thereunder 1,088,785 shares of
common stock. The 2005 Plan became effective upon the closing of
the Companys initial public offering on March 8,
2006. The 2005 Plan is an amendment and restatement of the
Companys previous stock option plans.
Stock options issued under the 2005 Plan generally vest over
4 years, vesting is generally based on service time, and
have a maximum contractual term of 10 years. Restricted
stock units granted to employees under the 2005 Plan generally
vest over a four-year period from the grant date or upon
completion of certain performance milestones. Restricted stock
units granted to non-employee directors, which are granted in
lieu of paying director fees in cash, generally vest one year
after the date of grant. Prior to vesting, restricted stock
units do not have dividend equivalent rights, do not have voting
rights and the shares underlying the restricted units are not
considered issued and outstanding. Shares are issued on the date
the restricted stock units vest.
The 2005 Plan provides for annual reserve increases on the first
day of each fiscal year commencing on January 1, 2007 and
ending on January 1, 2015. The annual reserve increases
will be equal to the lesser of (i) 2% of the total number
of shares of the Companys common stock outstanding on
December 31 of the preceding calendar year, or
(ii) 1,000,000 shares of common stock. The
Companys Board of Directors has the authority to designate
a smaller number of shares by which the authorized number of
shares of common stock will be increased prior to the last day
of any calendar year. In May 2008, the Companys
stockholders approved an amendment to the plan to increase the
number of shares of the Companys stock reserved for
issuance under the 2005 Plan by an additional
1,500,000 shares.
2005
Non-Employee Directors Stock Option Plan
In December 2005, the Companys Board of Directors adopted
the 2005 Non-Employee Directors Stock Option Plan (the
Directors Plan) and authorized for issuance
thereunder 250,000 shares of common stock. The
Directors Plan provides for the automatic grant of
nonstatutory stock options to purchase shares of common stock to
the Companys non-employee directors, which vest over four
years and have a term of 10 years. The Directors Plan
provides for an annual reserve increase to be added on the first
day of each fiscal year, commencing on January 1, 2007 and
ending on January 1, 2015. The annual reserve increases
will be equal to the number of shares subject to options granted
during the preceding fiscal year less the number of shares that
revert back to the share reserve during the preceding fiscal
year. The Companys Board of Directors has the authority to
designate a smaller number of shares by which the authorized
number of shares of common stock will be increased prior to the
last day of any calendar year.
The following table sets forth the summary of stock option
activity under the Equity Incentive Plans:
|
|
|
|
|
|
|
|
|
|
|
Outstanding Options
|
|
|
|
Number of
|
|
|
Weighted Average
|
|
|
|
Shares
|
|
|
Exercise Price
|
|
|
Options granted
|
|
|
298,351
|
|
|
$
|
0.34
|
|
Options exercised
|
|
|
(9,090
|
)
|
|
$
|
0.22
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2001
|
|
|
289,261
|
|
|
$
|
0.34
|
|
Options granted
|
|
|
210,777
|
|
|
$
|
1.03
|
|
Options exercised
|
|
|
(65,942
|
)
|
|
$
|
0.84
|
|
Options forfeited
|
|
|
(10,909
|
)
|
|
$
|
0.22
|
|
|
|
|
|
|
|
|
|
|
95
ALEXZA
PHARMACEUTICALS, INC.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
Outstanding Options
|
|
|
|
Number of
|
|
|
Weighted Average
|
|
|
|
Shares
|
|
|
Exercise Price
|
|
|
Balance as of December 31, 2002
|
|
|
423,187
|
|
|
$
|
0.61
|
|
Options granted
|
|
|
703,486
|
|
|
$
|
1.10
|
|
Options exercised
|
|
|
(74,904
|
)
|
|
$
|
0.60
|
|
Options forfeited
|
|
|
(50,092
|
)
|
|
$
|
0.57
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2003
|
|
|
1,001,677
|
|
|
$
|
0.95
|
|
Options granted
|
|
|
893,952
|
|
|
$
|
1.10
|
|
Options exercised
|
|
|
(100,192
|
)
|
|
$
|
0.74
|
|
Options forfeited
|
|
|
(132,641
|
)
|
|
$
|
1.08
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2004
|
|
|
1,662,796
|
|
|
$
|
1.04
|
|
Options granted
|
|
|
824,035
|
|
|
$
|
2.86
|
|
Options exercised
|
|
|
(380,501
|
)
|
|
$
|
0.94
|
|
Options forfeited
|
|
|
(98,310
|
)
|
|
$
|
1.08
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2005
|
|
|
2,008,020
|
|
|
$
|
1.80
|
|
Options granted
|
|
|
848,075
|
|
|
$
|
7.71
|
|
Options exercised
|
|
|
(160,662
|
)
|
|
$
|
1.28
|
|
Options forfeited
|
|
|
(82,938
|
)
|
|
$
|
2.00
|
|
Options cancelled
|
|
|
(1,453
|
)
|
|
$
|
8.64
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2006
|
|
|
2,611,042
|
|
|
$
|
5.23
|
|
Options granted
|
|
|
1,054,656
|
|
|
$
|
9.10
|
|
Options exercised
|
|
|
(204,423
|
)
|
|
$
|
2.11
|
|
Options forfeited
|
|
|
(249,536
|
)
|
|
$
|
6.98
|
|
Options cancelled
|
|
|
(4,875
|
)
|
|
$
|
6.60
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2007
|
|
|
3,206,864
|
|
|
$
|
6.56
|
|
Options granted
|
|
|
1,472,171
|
|
|
$
|
5.26
|
|
Options exercised
|
|
|
(104,428
|
)
|
|
$
|
1.55
|
|
Options forfeited
|
|
|
(190,284
|
)
|
|
$
|
7.20
|
|
Options cancelled
|
|
|
(200,975
|
)
|
|
$
|
7.81
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2008
|
|
|
4,183,348
|
|
|
$
|
6.14
|
|
Options granted
|
|
|
1,394,632
|
|
|
$
|
2.48
|
|
Options exercised
|
|
|
(69,708
|
)
|
|
$
|
1.20
|
|
Options forfeited
|
|
|
(422,118
|
)
|
|
$
|
5.79
|
|
Options cancelled
|
|
|
(345,655
|
)
|
|
$
|
6.08
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2009
|
|
|
4,740,499
|
|
|
$
|
5.17
|
|
Options granted
|
|
|
425,071
|
|
|
$
|
2.77
|
|
Options exercised
|
|
|
(114,278
|
)
|
|
$
|
1.87
|
|
Options forfeited
|
|
|
(113,551
|
)
|
|
$
|
6.33
|
|
Options cancelled
|
|
|
(419,085
|
)
|
|
$
|
8.18
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2010
|
|
|
4,518,656
|
|
|
$
|
4.72
|
|
|
|
|
|
|
|
|
|
|
96
ALEXZA
PHARMACEUTICALS, INC.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
Outstanding Options
|
|
|
|
Number of
|
|
|
Weighted Average
|
|
|
|
Shares
|
|
|
Exercise Price
|
|
|
Options exercisable at:
|
|
|
|
|
|
|
|
|
December 31, 2008
|
|
|
1,950,662
|
|
|
$
|
6.02
|
|
December 31, 2009
|
|
|
2,865,898
|
|
|
$
|
5.71
|
|
December 31, 2010
|
|
|
3,219,369
|
|
|
$
|
5.25
|
|
The total intrinsic value of options exercised during the years
ended December 31, 2010, 2009 and 2008 was $141,000,
$80,000 and $463,000, respectively. None of the Companys
options have expired.
On January 21, 2011, the Company launched a voluntary
employee stock option exchange program (the Exchange
Program) to permit the Companys eligible employees
to exchange some or all of their outstanding options to purchase
the Companys common stock with an exercise price greater
than or equal to $2.37 per share, whether vested or unvested,
for a lesser number of new stock options. See Note 15.
Information regarding the stock options outstanding at
December 31, 2010 is summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
|
|
|
Exercisable
|
|
|
|
|
|
|
Remaining
|
|
|
|
|
|
|
|
Remaining
|
|
|
|
|
|
|
|
|
Contractual
|
|
Aggregate
|
|
|
|
|
|
Contractual
|
|
Aggregate
|
|
|
|
Number
|
|
|
Life
|
|
Intrinsic
|
|
|
Number
|
|
|
Life
|
|
Intrinsic
|
|
Exercise Price
|
|
of Shares
|
|
|
(In Years)
|
|
Value
|
|
|
of Shares
|
|
|
(In Years)
|
|
Value
|
|
|
$1.10 1.38
|
|
|
454,744
|
|
|
3.96
|
|
$
|
46,000
|
|
|
|
454,744
|
|
|
3.96
|
|
$
|
46,000
|
|
1.69 2.37
|
|
|
738,718
|
|
|
8.65
|
|
|
|
|
|
|
275,263
|
|
|
8.19
|
|
|
|
|
2.38 2.81
|
|
|
708,923
|
|
|
8.64
|
|
|
|
|
|
|
402,556
|
|
|
8.11
|
|
|
|
|
2.90 4.24
|
|
|
358,599
|
|
|
7.89
|
|
|
|
|
|
|
170,322
|
|
|
7.09
|
|
|
|
|
4.35 4.35
|
|
|
464,600
|
|
|
7.52
|
|
|
|
|
|
|
279,318
|
|
|
7.52
|
|
|
|
|
4.41 7.20
|
|
|
575,632
|
|
|
6.34
|
|
|
|
|
|
|
487,862
|
|
|
6.16
|
|
|
|
|
7.30 7.90
|
|
|
111,724
|
|
|
6.75
|
|
|
|
|
|
|
101,272
|
|
|
6.73
|
|
|
|
|
8.00 8.00
|
|
|
575,457
|
|
|
3.56
|
|
|
|
|
|
|
575,457
|
|
|
3.56
|
|
|
|
|
8.01 11.70
|
|
|
530,259
|
|
|
6.36
|
|
|
|
|
|
|
472,575
|
|
|
6.33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,518,656
|
|
|
6.74
|
|
$
|
46,000
|
|
|
|
3,219,369
|
|
|
6.01
|
|
$
|
46,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The intrinsic value is calculated as the difference between the
market value as of December 31, 2010 and the exercise price
of the shares. The market value as of December 31, 2010 was
$1.25 as reported by The NASDAQ Stock Market.
97
ALEXZA
PHARMACEUTICALS, INC.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Information with respect to unvested share units (restricted
stock units) as of December 31, 2010 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
Number
|
|
|
Average
|
|
|
|
of
|
|
|
Grant Date
|
|
|
|
Shares
|
|
|
Fair Value
|
|
|
Outstanding at January 1, 2006
|
|
|
|
|
|
$
|
|
|
Granted
|
|
|
34,680
|
|
|
|
7.00
|
|
Released
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(600
|
)
|
|
|
7.00
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2006
|
|
|
34,080
|
|
|
|
7.00
|
|
Granted
|
|
|
74,575
|
|
|
|
8.89
|
|
Released
|
|
|
(8,245
|
)
|
|
|
7.00
|
|
Forfeited
|
|
|
(7,285
|
)
|
|
|
7.71
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2007
|
|
|
93,125
|
|
|
|
8.42
|
|
Granted
|
|
|
112,423
|
|
|
|
4.35
|
|
Released
|
|
|
(23,443
|
)
|
|
|
8.33
|
|
Forfeited
|
|
|
(10,151
|
)
|
|
|
7.00
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2008
|
|
|
171,954
|
|
|
|
5.86
|
|
Granted
|
|
|
965,643
|
|
|
|
2.19
|
|
Released
|
|
|
(839,469
|
)
|
|
|
2.31
|
|
Forfeited
|
|
|
(101,858
|
)
|
|
|
4.03
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2009
|
|
|
196,270
|
|
|
|
3.90
|
|
Granted
|
|
|
1,445,284
|
|
|
|
2.54
|
|
Released
|
|
|
(149,304
|
)
|
|
|
2.55
|
|
Forfeited
|
|
|
(90,313
|
)
|
|
|
3.06
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2010
|
|
|
1,401,937
|
|
|
|
2.60
|
|
|
|
|
|
|
|
|
|
|
The total intrinsic value of restricted stock units released
during the years ended December 31, 2010, 2009 and 2008 was
$380,000, $1,898,000 and $131,000, respectively.
The Company authorized shares of common stock for issuance under
the Plans as follows.
98
ALEXZA
PHARMACEUTICALS, INC.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
Year
|
|
Number of Shares
|
|
|
2001
|
|
|
363,636
|
|
2002
|
|
|
770,732
|
|
2003
|
|
|
454,545
|
|
2004
|
|
|
1,000,000
|
|
2005
|
|
|
25,544
|
|
2006
|
|
|
1,327,990
|
|
2007
|
|
|
676,386
|
|
2008
|
|
|
2,174,840
|
|
2009
|
|
|
656,417
|
|
2010
|
|
|
1,037,500
|
|
As of December 31, 2010, 149,273 and 175,000 shares
remained available for issuance under the 2005 Plan and the
Directors Plan, respectively.
On January 1, 2011 an additional 1,000,000 and
75,000 shares were authorized for issuance under the
evergreen provisions of the 2005 Plan and the Directors
Plan, respectively.
2005
Employee Stock Purchase Plan
In December 2005, the Companys Board of Directors adopted
the 2005 Employee Stock Purchase Plan (ESPP) and
authorized for issuance thereunder 500,000 shares of common
stock. The ESPP allows eligible employee participants to
purchase shares of the Companys common stock at a discount
through payroll deductions. The ESPP consists of a fixed
offering period, generally twenty-four months with four purchase
periods within each offering period. Purchases are generally
made on the last trading day of each October and April.
Employees purchase shares at each purchase date at 85% of the
market value of our common stock on their enrollment date or the
end of the purchase period, whichever price is lower. The
Company issued 406,207, 439,252 and 305,146 shares at
weighted average prices of $1.19, $1.36 and $3.84, during the
years ended December 31, 2010, 2009, and 2008, respectively.
The ESPP provides for annual reserve increases on the first day
of each fiscal year commencing on January 1, 2007 and
ending on January 1, 2015. The annual reserve increases
will be equal to the lesser of (i) 1% of the total number
of shares of the Companys common stock outstanding on
December 31 of the preceding calendar year, or
(ii) 250,000 shares of common stock. The
Companys Board of Directors has the authority to designate
a smaller number of shares by which the authorized number of
shares of common stock will be increased prior to the last day
of any calendar year. On each of January 1, 2010, 2009 and
2008 an additional 250,000 shares, respectively, were
reserved for issuance under this provision. At December 31,
2010, 36 shares were available for issuance under the ESPP.
On January 1, 2011 an additional 250,000 shares were
reserved for issuance under the ESPP.
|
|
12.
|
Restructuring
Charges
|
In January 2009, the Company restructured its operations to
focus its efforts on the continued rapid development of its
AZ-004 (Staccato loxapine) product candidate. The
restructuring included a workforce reduction of
50 employees, representing approximately 33% of the
Companys total workforce and was completed in the second
quarter of 2009. The Company incurred $2,037,000 of
restructuring expenses related to employee severance and other
termination benefits, including a non-cash charge of $56,000
related to modifications to share-
99
ALEXZA
PHARMACEUTICALS, INC.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
based awards, and does not expect to incur any additional
expenses related to this restructuring in future periods. As of
December 31, 2010 and 2009, the Company had no outstanding
amounts due related to the restructuring.
The Company sponsors a 401(k) Plan that stipulates that eligible
employees can elect to contribute to the 401(k) Plan, subject to
certain limitations. Pursuant to the 401(k) Plan, the Company
does not match any employee contributions.
There is no provision for income taxes because the Company has
incurred operating losses since inception.
The reported amount of income tax expense attributable to
operations for the year differs from the amount that would
result from applying domestic federal statutory tax rates to
loss before income taxes from operations as summarized below (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Federal tax benefit at statutory rate
|
|
$
|
(525
|
)
|
|
$
|
(14,307
|
)
|
|
$
|
(19,873
|
)
|
State tax benefit net of federal effect
|
|
|
(90
|
)
|
|
|
(2,385
|
)
|
|
|
(3,402
|
)
|
Research and development credits
|
|
|
(1,502
|
)
|
|
|
(2,537
|
)
|
|
|
(2,693
|
)
|
Other permanent differences
|
|
|
13
|
|
|
|
(31
|
)
|
|
|
19
|
|
Share-based compensation
|
|
|
1,296
|
|
|
|
1,112
|
|
|
|
1,450
|
|
Adjustment to basis in subsidiary
|
|
|
(1,927
|
)
|
|
|
3,180
|
|
|
|
|
|
Change in valuation allowance
|
|
|
2,740
|
|
|
|
14,662
|
|
|
|
24,567
|
|
Other
|
|
|
(5
|
)
|
|
|
306
|
|
|
|
(68
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes reflect the net tax effects of the
temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amount used
for income tax purposes. The deferred tax assets were calculated
using an effective tax rate of 40%. Significant components of
the Companys deferred tax assets are as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
Federal and state net operating loss carryforwards
|
|
$
|
90,114
|
|
|
$
|
79,479
|
|
Federal and state research and development credit carryforwards
|
|
|
13,331
|
|
|
|
11,840
|
|
Accrued liabilities
|
|
|
8,008
|
|
|
|
9,410
|
|
Capitalized research and development costs
|
|
|
16,142
|
|
|
|
25,675
|
|
Other
|
|
|
1,695
|
|
|
|
49
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
129,290
|
|
|
|
126,453
|
|
Valuation allowance
|
|
|
(129,290
|
)
|
|
|
(126,453
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
The Companys accounting for deferred taxes involves the
evaluation of a number of factors concerning the realizability
of the Companys net deferred tax assets. The Company
primarily considered such factors as the Companys history
of operating losses, the nature of the Companys deferred
tax assets and the timing, likelihood
100
ALEXZA
PHARMACEUTICALS, INC.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
and amount, if any, of future taxable income during the periods
in which those temporary differences and carryforwards become
deductible. At present, the Company does not believe that it is
more likely than not that the deferred tax assets will be
realized; accordingly, a full valuation allowance has been
established and no deferred tax asset is shown in the
accompanying balance sheets. The valuation allowance increased
by approximately $2,837,000, $31,798,000 and $25,252,000 during
the years ended December 31, 2010, 2009 and 2008,
respectively.
As of December 31, 2010 the Company had federal net
operating loss carryforwards of approximately $228,357,000. The
Company also had federal research and development tax credit
carryforwards of approximately $8,836,000. The net operating
loss and tax credit carryforwards will expire at various dates
beginning in 2021, if not utilized.
As of December 31, 2010, the Company had state net
operating loss carryforwards of approximately $223,278,000,
which will begin to expire in 2011. The Company also had state
research and development tax credit carryforwards of
approximately $4,495,000, which have no expiration.
As of December 31, 2010, approximately $555,000 of deferred
tax assets is attributable to certain employee stock option
deductions and the federal and state net operating loss
carryforward has been adjusted accordingly. When realized, the
benefit of the tax deduction related to these options will be
accounted for as a credit to stockholders equity rather
than as a reduction of the income tax provision.
Utilization of the net operating loss carryforwards and credits
may be subject to an annual limitation with substantial effect,
due to the ownership change limitations provided by the Internal
Revenue Code that are applicable if the Company experiences an
ownership change. That may occur, for example, as a
result of trading in the Companys stock by institutional
investors.
101
ALEXZA
PHARMACEUTICALS, INC.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
A reconciliation of the beginning and ending amount of
unrecognized tax benefits is as follows (in thousands):
|
|
|
|
|
Balance at January 1, 2008
|
|
$
|
2,246
|
|
Additions based on tax positions taken during a prior period
|
|
|
|
|
Reductions based on tax positions taken during a prior period
|
|
|
(1,067
|
)
|
Additions based on tax positions taken during the current period
|
|
|
401
|
|
Reductions based on tax positions taken during the current period
|
|
|
|
|
Reductions related to settlement of tax matters
|
|
|
|
|
Reductions related to a lapse of applicable statute of
limitations
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008
|
|
$
|
1,580
|
|
Additions based on tax positions taken during a prior period
|
|
|
645
|
|
Reductions based on tax positions taken during a prior period
|
|
|
|
|
Additions based on tax positions taken during the current period
|
|
|
385
|
|
Reductions based on tax positions taken during the current period
|
|
|
|
|
Reductions related to settlement of tax matters
|
|
|
|
|
Reductions related to a lapse of applicable statute of
limitations
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009
|
|
$
|
2,610
|
|
Additions based on tax positions taken during a prior period
|
|
|
46
|
|
Reductions based on tax positions taken during a prior period
|
|
|
|
|
Additions based on tax positions taken during the current period
|
|
|
302
|
|
Reductions based on tax positions taken during the current period
|
|
|
|
|
Reductions related to settlement of tax matters
|
|
|
|
|
Reductions related to a lapse of applicable statute of
limitations
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2010
|
|
$
|
2,958
|
|
|
|
|
|
|
If the Company eventually is able to recognize these uncertain
tax positions, most of the unrecognized tax benefits would
reduce the effective tax rate.
The Company has not incurred any material tax interest or
penalties as of December 31, 2010. The Company does not
anticipate any significant change within 12 months of this
reporting date of its uncertain tax positions. The Company is
subject to taxation in the United States and various states
jurisdictions. We are currently under a Limited Issue Focus
Examination by the Internal Revenue Service (IRS), for the year
ended 2008. There are no other ongoing examinations by taxing
authorities at this time. The Companys various tax years
starting with 2000 to 2010 remain open in various taxing
jurisdictions.
Employee
Stock Option Exchange Program
On January 21, 2011, the Company launched a voluntary
employee stock option exchange program (the Exchange
Program) to permit the Companys eligible employees
to exchange some or all of their outstanding options to purchase
the Companys common stock with an exercise price greater
than or equal to $2.37 per share, whether vested or unvested,
for a lesser number of new stock options.
In accordance with the terms and conditions of the Exchange
Program, on February 22, 2011 (the Grant Date),
the Company accepted outstanding options to purchase an
aggregate of 2,128,430 shares of the Companys common
stock, with exercise prices ranging from $2.38 to $11.70, and
issued, in exchange, an aggregate of 808,896
102
ALEXZA
PHARMACEUTICALS, INC.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
new stock options with an exercise price of $1.23. The new stock
options will vest 33% on February 22, 2012 with the balance
of the shares vesting in a series of twenty-four successive
equal monthly installments thereafter, and have a term of five
years. The exchange resulted in a decrease in the Companys
common stock subject to outstanding stock options by
1,319,534 shares, which increased the number of shares
available to be issued under the 2005 Plan.
|
|
16.
|
Quarterly
Results (Unaudited)
|
The following table is in thousands, except per share amounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
March 31
|
|
June 30
|
|
September 30
|
|
December 31
|
|
Fiscal 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
|
|
|
$
|
|
|
|
$
|
744
|
|
|
$
|
42,132
|
|
Profit (loss) from operations
|
|
|
(12,616
|
)
|
|
|
(12,102
|
)
|
|
|
(8,520
|
)
|
|
|
28,586
|
|
Net income (loss )
|
|
|
(13,412
|
)
|
|
|
(12,893
|
)
|
|
|
(591
|
)
|
|
|
25,415
|
|
Net loss attributable to Alexza common stockholders
|
|
|
(13,412
|
)
|
|
|
(12,893
|
)
|
|
|
(591
|
)
|
|
|
25,415
|
|
Basic net loss per share attributable to Alexza common
stockholders
|
|
|
(0.26
|
)
|
|
|
(0.24
|
)
|
|
|
(0.01
|
)
|
|
|
0.43
|
|
Diluted net loss per share attributable to Alexza common
stockholders
|
|
|
(0.26
|
)
|
|
|
(0.24
|
)
|
|
|
(0.01
|
)
|
|
|
0.42
|
|
Fiscal 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
9,514
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Loss from operations
|
|
|
(6,843
|
)
|
|
|
(16,835
|
)
|
|
|
(13,007
|
)
|
|
|
(11,022
|
)
|
Net loss
|
|
|
(6,904
|
)
|
|
|
(16,969
|
)
|
|
|
(12,425
|
)
|
|
|
(19,767
|
)
|
Net loss attributable to Alexza common stockholders
|
|
|
(1,714
|
)
|
|
|
(9,740
|
)
|
|
|
(72,423
|
)
|
|
|
(19,767
|
)
|
Basic and diluted net loss per share attributable to Alexza
common stockholders
|
|
|
(0.05
|
)
|
|
|
(0.29
|
)
|
|
|
(1.95
|
)
|
|
|
(0.39
|
)
|
103
|
|
Item 9.
|
Changes
in and Disagreements With Accountants on Accounting and
Financial Disclosure
|
Not Applicable.
|
|
Item 9A.
|
Controls
and Procedures
|
Evaluation
of Disclosure Controls and Procedures:
We maintain disclosure controls and procedures that are designed
to ensure that information required to be disclosed in our
reports under the Securities Exchange Act of 1934, as amended,
is recorded, processed, summarized and reported within the time
periods specified in the SECs rules and forms and that
such information is accumulated and communicated to our
management, including our Chief Executive Officer and Chief
Financial Officer, as appropriate, to allow for timely decisions
regarding required disclosure. In designing and evaluating the
disclosure controls and procedures, management recognizes that
any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the
desired control objectives, and in reaching a reasonable level
of assurance, management is required to apply its judgment in
evaluating the cost-benefit relationship of possible controls
and procedures.
As of December 31, 2010, the end of the period covered by
this report, we carried out an evaluation, under the supervision
and with the participation of our management, including our
Chief Executive Officer and our Chief Financial Officer, of the
effectiveness of the design and operation of our disclosure
controls and procedures. Based on the foregoing, our Chief
Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures were effective at the
reasonable assurance level.
Managements
Annual Report on Internal Control Over Financial
Reporting:
Our management is responsible for establishing and maintaining
adequate internal control over financial reporting, as such term
is defined in Exchange Act
Rules 13a-15(f)
and
15d-15(f).
Under the supervision and with the participation of our
management, including our Chief Executive Officer and Chief
Financial Officer, we conducted an evaluation of the
effectiveness of our internal control over financial reporting
as of December 31, 2010 based on the framework in
Internal Control Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). Based on that evaluation, our management
concluded that our internal control over financial reporting was
effective as of December 31, 2010. Our independent
registered public accounting firm, Ernst &Young LLP,
audited the consolidated financial statements included in this
Annual Report on
Form 10-K
and have issued an audit report on the effectiveness of our
internal control over financial reporting. Their report on the
audit of internal control over financial reporting appears below.
104
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
Alexza Pharmaceuticals, Inc.
We have audited Alexza Pharmaceuticals, Inc.s internal
control over financial reporting as of December 31, 2010,
based on criteria established in Internal Control
Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (the COSO criteria).
Alexza Pharmaceuticals, Inc.s management is responsible
for maintaining effective internal control over financial
reporting, and for its assessment of the effectiveness of
internal control over financial reporting included in the
accompanying Managements Annual Report on Internal Control
over Financial Reporting. Our responsibility is to express an
opinion on the companys internal control over financial
reporting based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the
design and operating effectiveness of internal control based on
the assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
In our opinion, Alexza Pharmaceuticals, Inc. maintained, in all
material respects, effective internal control over financial
reporting as of December 31, 2010, based on the COSO
criteria.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of Alexza Pharmaceuticals, Inc. (a
development stage company) as of December 31, 2010 and
December 31, 2009 and the related consolidated statements
of operations, convertible preferred stock and
stockholders equity (deficit), and cash flows for each of
the three years in the period ended December 31, 2010 and
for the period from December 19, 2000 (inception) to
December 31, 2010 and our report dated March 15, 2011
expressed an unqualified opinion that included an explanatory
paragraph regarding Alexza Pharmaceutical, Inc.s ability
to continue as a going concern.
Ernst & Young LLP
Palo Alto, California
March 15, 2011
105
Changes
in Internal Control Over Financial Reporting:
There has been no change in our internal control over financial
reporting during our most recent fiscal quarter that has
materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.
|
|
Item 9B.
|
Other
Information
|
None.
PART III
|
|
Item 10.
|
Directors
and Executive Officers of the Registrant
|
The information required by this Item concerning our directors
is incorporated by reference to the information to be set forth
in the sections entitled
Proposal No. 1 Election of
Directors and Section 16(a) Beneficial
Ownership Reporting Compliance in our definitive Proxy
Statement for the 2011 Annual Meeting of Stockholders to be
filed within 120 days after the end of the
Registrants fiscal year ended December 31, 2010, or
the Proxy Statement. The information required by this Item
concerning our executive officers is incorporated by reference
to the information to be set forth in the section of the Proxy
Statement entitled Executive Officers. The
information required by this item concerning compliance with
Section 16(a) of the Exchange Act, our code of business
conduct and ethics, the procedures by which security holders may
recommend nominees for our board of directors and certain
information related to our Audit and Ethics Committee is
incorporated by reference to the information to be set forth in
the sections entitled Information Regarding the Board of
Directors and Corporate Governance and
Section 16(a) Beneficial Ownership Reporting
Compliance in the Proxy Statement.
|
|
Item 11.
|
Executive
Compensation
|
The information required by this Item 11 is incorporated by
reference to the information to be set forth in the sections
entitled Executive Compensation and
Information Regarding the Board of Directors and Corporate
Governance in the Proxy Statement.
|
|
Item 12.
|
Security
Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
|
The information required by this Item 12 with respect to
stock ownership of certain beneficial owners and management and
securities authorized for issuance under equity compensation
plans are incorporated by reference to the information to be set
forth under the caption Security Ownership of Certain
Beneficial Owners and Management in the Proxy Statement.
Securities
Authorized For Issuance Under Equity Compensation
Plans
We maintain the 2005 Equity Incentive Plan (the 2005
Plan), 2005 Non-Employee Directors Stock Option Plan
(the Directors Plan) and 2005 Employee Stock
Purchase Plan (the ESPP) pursuant to which we may
grant equity awards to eligible persons.
106
The following table gives information about equity awards under
our 2005 Equity Incentive Plan, 2005 Non-Employee
Directors Stock Option Plan and 2005 Employee Stock
Purchase Plan as of December 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
|
|
Number of Securities
|
|
|
Weighted- Average
|
|
|
Number of Securities Remaining
|
|
|
|
to be Issued upon
|
|
|
Exercise Price of
|
|
|
Available for Future Issuance
|
|
|
|
Exercise of
|
|
|
Outstanding
|
|
|
Under Equity Compensation
|
|
|
|
Outstanding Options,
|
|
|
Options, Warrants
|
|
|
Plans (Excluding Securities
|
|
Plan Category
|
|
Warrants and Rights
|
|
|
and Rights
|
|
|
Reflected in Column (a))
|
|
|
Equity compensation plans approved by security holders
|
|
|
5,920,593
|
|
|
$
|
3.60
|
|
|
|
324,309
|
(1)(2)
|
Equity compensation plans not approved by security holders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
5,920,593
|
|
|
|
3.60
|
|
|
|
324,309
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The 2005 Plan incorporates an evergreen formula pursuant to
which on each January 1, the aggregate number of shares
reserved for issuance under the 2005 Plan will increase by a
number equal to the lesser of (i) 1,000,000 shares,
(ii) 2% of the outstanding shares on December 31 of the
preceding calendar year, or (iii) an amount determined by
our Board. |
|
|
|
The Directors Plan incorporates an evergreen formula
pursuant to which on each January 1, the aggregate number
of shares reserved for issuance under the Directors Plan
will increase by the number of shares subject to options granted
during the preceding calendar year less the number of shares
that revert back to the share reserve during the preceding
calendar year. |
|
|
|
The ESPP incorporates an evergreen formula pursuant to which on
each January 1, the aggregate number of shares reserved for
issuance under the ESPP will increase by a number equal to the
lesser of (i) 250,000 shares, (ii) 1% of the
outstanding shares on December 31 of the preceding calendar
year, or (iii) an amount determined by our Board. |
|
(2) |
|
Of these shares, 149,273 shares remained available as of
December 31, 2010 under the 2005 Plan, 175,000 shares
under the Directors Plan and 36 under the ESPP. |
|
|
Item 13.
|
Certain
Relationships and Related Transactions and Director
Independence
|
The information required in this Item 13 is incorporated by
reference to the information to be set forth in the sections
entitled Certain Relationships and Related Transactions
and Director Independence and Information Regarding
the Board of Directors and Corporate Governance in the
Proxy Statement.
|
|
Item 14.
|
Principal
Accountant Fees and Services
|
The information required by this Item 14 is incorporated by
reference to the information to be set forth in the sections
entitled Principal Accountant Fees and Services and
Pre-Approval Policies and Procedures in the Proxy
Statement.
PART IV
|
|
Item 15.
|
Exhibits
and Financial Statement Schedules
|
(a) 1. Financial Statements
See Index to Financial Statements under Item 8 on
page 61
(a) 2. Financial Statement Schedules
All schedules are omitted because they are not applicable or are
not required or the information required to be set forth therein
is included in the Financial Statements or notes thereto.
(a) 3. Exhibits
107
EXHIBIT INDEX
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description of Document
|
|
|
3
|
.5
|
|
Restated Certificate of Incorporation(1)
|
|
3
|
.7
|
|
Amended and Restated Bylaws(1)
|
|
3
|
.8
|
|
Amendment to Amended and Restated Bylaws(5)
|
|
4
|
.1
|
|
Specimen Common Stock Certificate(1)
|
|
4
|
.2
|
|
Second Amended and Restated Investors Rights Agreement
between Registrant and certain holders of Preferred Stock dated
November 5, 2004(1)
|
|
10
|
.1
|
|
Form of Director/Officer Indemnification Agreement entered into
between Registrant and each of its directors and officers(9)*
|
|
10
|
.2
|
|
Form of Change of Control Agreement*(15)
|
|
10
|
.3
|
|
2005 Equity Incentive Plan(7)*
|
|
10
|
.4
|
|
Form of Option Grant Notice, Form of Option Agreement and Form
of Notice of Exercise to 2005 Equity Incentive Plan(1)*
|
|
10
|
.5
|
|
2005 Non-Employee Directors Stock Option Plan(1)
|
|
10
|
.6
|
|
Form of Option Grant Notice, Form of Option Agreement and Form
of Notice of Exercise to 2005 Non-Employee Directors Stock
Option Plan(1)
|
|
10
|
.7
|
|
2005 Employee Stock Purchase Plan(1)*
|
|
10
|
.8
|
|
Form of Offering Document to 2005 Employee Stock Purchase
Plan(1)*
|
|
10
|
.9
|
|
Development Agreement between Registrant and Autoliv ASP, Inc.
dated October 3, 2005(1)
|
|
10
|
.10
|
|
Master Security Agreement between Registrant and General
Electric Capital Corporation dated May 17, 2005, as amended
on May 18, 2005(1)
|
|
10
|
.11
|
|
Promissory Note between Registrant and General Electric Capital
Corporation dated June 15, 2005(1)
|
|
10
|
.12
|
|
Promissory Note between Registrant and General Electric Capital
Corporation dated August 24, 2005(1)
|
|
10
|
.13
|
|
Warrant to Purchase shares of Series B Preferred Stock
issued to Silicon Valley Bank dated March 20, 2002(1)
|
|
10
|
.14
|
|
Warrant to Purchase shares of Series C Preferred Stock
issued to Silicon Valley Bank dated January 7, 2003, as
amended on March 4, 2003(1)
|
|
10
|
.15
|
|
Warrant to Purchase shares of Series C Preferred Stock
issued to Silicon Valley Bank dated September 19, 2003(1)
|
|
10
|
.16
|
|
Warrant to Purchase shares of Series C Preferred Stock
issued to Silicon Valley Bank dated April 7, 2004(1)
|
|
10
|
.17
|
|
Lease Agreement between the Brittania, LLC and Registrant dated
August 25, 2006(2)
|
|
10
|
.18
|
|
First Amendment to Lease between Britannia Hacienda VIII LLC and
Registrant dated May 4, 2007(3)
|
|
10
|
.19
|
|
Second Amendment to Lease between Britannia Hacienda VIII LLC
and Registrant dated August 28, 2007(4)
|
|
10
|
.20
|
|
Manufacturing and Supply Agreement between Registrant and
Autoliv ASP, Inc., dated November 2, 2007(5)
|
|
10
|
.21
|
|
Offer Letter between Registrant and Michael Simms, dated
January 23, 2008(5)
|
|
10
|
.22
|
|
Stock and Warrant Purchase Agreement between Registrant and
Biomedical Investment Fund Pte Ltd., dated March 26,
2008(6)
|
|
10
|
.23
|
|
Warrant to Purchase shares of Common Stock issued to Biomedical
Investment Fund Pte Ltd. dated March 27, 2008(6)
|
|
10
|
.24
|
|
Form of Notice of Grant of Award and Stock Unit Award Agreement
to 2005 Equity Incentive Plan(15)
|
|
10
|
.25
|
|
2009-2010
Performance Based Incentive Program*(10)
|
|
10
|
.26
|
|
Amended and Restated Purchase Option Agreement by and among
Registrant, Symphony Allegro Holdings LLC and Symphony Allegro,
Inc. dated June 15, 2009*(11)
|
108
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description of Document
|
|
|
10
|
.27
|
|
Warrant Purchase Agreement between Registrant and Symphony
Allegro Holdings LLC dated June 15, 2009(11)
|
|
10
|
.28
|
|
Amended and Restated Registration Rights Agreement between
Registrant and Symphony Allegro Holdings LLC dated June 15,
2009(11)
|
|
10
|
.29
|
|
Form of Amendment to Change of Control Agreement*(12)
|
|
10
|
.30
|
|
Form of Warrants to Purchase Shares of Common Stock, dated
August 26, 2009(13)
|
|
10
|
.31
|
|
Letter Agreement among Registrant, Symphony Allegro Holdings
LLC, Symphony Capital Partners, L.P. and Symphony Strategic
Partners, LLC, dated August 26, 2009(13)
|
|
10
|
.32
|
|
Securities Purchase Agreement by and among Registrant and the
purchasers identified therein, dated September 29, 2009(14)
|
|
10
|
.33
|
|
Form of Warrants to Purchase shares of Common Stock, dated
October 5, 2009(14)
|
|
10
|
.34
|
|
Collaboration and License Agreement between Registrant and
Biovail Laboratories International SRL dated February 9,
2010(16)
|
|
10
|
.35
|
|
Manufacture and Supply Agreement between Registrant and Biovail
Laboratories International SRL dated February 9, 2010(16)
|
|
10
|
.36
|
|
Loan and Security Agreement between Registrant and Hercules
Technology Growth Capital, Inc. dated May 4, 2010(17)
|
|
10
|
.37
|
|
Warrant issued by Registrant to Hercules Technology Growth
Capital, Inc. dated May 4, 2010(17)
|
|
10
|
.38
|
|
Common Stock Purchase Agreement between Registrant and Azimuth
Opportunity Ltd. dated May 26, 2010(18)
|
|
10
|
.39
|
|
Amendment No. 1 to Manufacturing and Supply Agreement
between Registrant and Autoliv ASP, Inc. dated June 30,
2010(17)
|
|
10
|
.40
|
|
Promissory Note issued by Registrant to Autoliv ASP, Inc. dated
June 30, 2010(17)
|
|
10
|
.41*
|
|
Form of RSU Agreement between Registrant and each of Thomas B.
King, August J. Moretti, James V. Casella and Michael J. Simms
dated May 19, 2010(19)
|
|
10
|
.42
|
|
Amendment No. 1 to Loan and Security Agreement between
Registrant and Hercules Technology Growth Capital, Inc. dated
September 20, 2010(20)
|
|
10
|
.43
|
|
Form of Warrant to Purchase Shares of Common Stock dated
August 10, 2010(21)
|
|
10
|
.44
|
|
Amendment to 2005 Non Employee Directors Option Plan(20)
|
|
10
|
.45u
|
|
2011 Cash Bonus Plan
|
|
10
|
.46u
|
|
Amendment No. 2 to Manufacturing and Supply Agreement
between Registrant and Autoliv ASP, Inc. dated February 15,
2011
|
|
10
|
.47u
|
|
Promissory Note issued by Registrant to Autoliv ASP, Inc. dated
February 15, 2011
|
|
10
|
.48
|
|
Form of Notice of Grant of Stock Options to 2005 Equity
Incentive Plan(22)*
|
|
10
|
.49
|
|
Form of Option Agreement to 2005 Equity Incentive Plan(22)*
|
|
10
|
.50
|
|
Form of Option Agreement to 2005 Equity Incentive Plan(22)*
|
|
14
|
.1
|
|
Alexza Pharmaceuticals, Inc. Code of Business Conduct for
Employees, Executive Officers and Directors(2)
|
|
21
|
.1u
|
|
Subsidiaries of Registrant
|
|
23
|
.1u
|
|
Consent of Independent Registered Public Accounting Firm
|
|
24
|
.1u
|
|
Power of Attorney included on the signature pages hereto
|
|
31
|
.1u
|
|
Section 302 Certification of CEO.
|
|
31
|
.2u
|
|
Section 302 Certification of CFO.
|
|
32
|
.1u
|
|
Section 906 Certifications of CEO and CFO.
|
|
|
|
* |
|
Management contract or compensation plan or arrangement. |
|
u |
|
Filed herein |
109
|
|
|
|
|
Confidential treatment has been granted with respect to certain
portions of this exhibit. This exhibit omits the information
subject to this confidentiality request. Omitted portions have
been filed separately with the SEC. |
|
|
|
Confidential treatment has been requested with respect to
certain portions of this exhibit. This exhibit omits the
information subject to this confidentiality request. Omitted
portions have been filed separately with the SEC. |
|
(1) |
|
Incorporated by reference to exhibits to our Registration
Statement on
Form S-1
filed on December 22, 2005, as amended (File No.
333-130644). |
|
(2) |
|
Incorporated by reference to our Annual Report on
Form 10-K
(File No.
000-51820)
as filed with the SEC on March 29, 2007. |
|
(3) |
|
Incorporated by reference to our Quarterly Report on
Form 10-Q
(File
No. 000-51820)
as filed with the SEC on August 13, 2007. |
|
(4) |
|
Incorporated by reference to our Quarterly Report on
Form 10-Q
(File
No. 000-51820)
as filed with the SEC on November 1, 2007. |
|
(5) |
|
Incorporated by reference to our Annual Report on
Form 10-K
(File No.
000-51820)
as filed with the SEC on March 17, 2008. |
|
(6) |
|
Incorporated by reference to our Current Report on
Form 8-K
(File No.
000-51820)
as filed with the SEC on March 17, 2008. |
|
(7) |
|
Incorporated by reference to our Current Report on
Form 8-K
(File No.
000-51820)
as filed with the SEC on May 30, 2008. |
|
(8) |
|
Incorporated by reference to our Current Report on
Form 8-K
(File No.
000-51820)
as filed with the SEC on July 14, 2008. |
|
(9) |
|
Incorporated by reference to our Current Report on
Form 8-K
(File No.
000-51820)
as filed with the SEC on June 5, 2006. |
|
(10) |
|
Incorporated by reference to our Current Report on
Form 8-K
(File No.
000-51820)
as filed with the SEC on February 24, 2009. |
|
(11) |
|
Incorporated by reference to our Current Report on
Form 8-K/A
(File
No. 000-51820)
as filed with the SEC on June 26, 2009. |
|
(12) |
|
Incorporated by reference to our Quarterly Report on
Form 10-Q
(File
No. 000-51820)
as filed with the SEC on August 5, 2009. |
|
(13) |
|
Incorporated by reference to our Current Report on
Form 8-K
(File No.
000-51820)
as filed with the SEC on August 26, 2009. |
|
(14) |
|
Incorporated by reference to our Current Report on
Form 8-K
(File No.
000-51820)
as filed with the SEC on September 30, 2009. |
|
(15) |
|
Incorporated by reference to our Annual Report on
Form 10-K
(File No.
000-51820)
as filed with the SEC on March 10, 2009. |
|
(16) |
|
Incorporated by reference to our Annual Report on
Form 10-K
(File No.
000-51820)
as filed with the SEC on March 9, 2010. |
|
(17) |
|
Incorporated by reference to our Quarterly Report on
Form 10-Q
(File
No. 000-51820)
as filed with the SEC on July 26, 2010. |
|
(18) |
|
Incorporated by reference to our Current Report on
Form 8-K
(File No.
000-51820)
as filed with the SEC on May 26, 2010. |
|
(19) |
|
Incorporated by reference to our Quarterly Report on
Form 10-Q/A
(File
No. 000-51820)
as filed with the SEC on July 28, 2010. |
|
(20) |
|
Incorporated by reference to our Quarterly Report on
Form 10-Q
(File
No. 000-51820)
as filed with the SEC on November 9, 2010. |
|
(21) |
|
Incorporated by reference to our Current Report on
Form 8-K
(File No.
000-51820)
as filed with the SEC on August 5, 2010. |
|
(22) |
|
Incorporated by reference to our Current Report on
Form 8-K
(File No.
000-51820)
as filed with the SEC on February 22, 2011. |
110
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, (the Exchange
Act) the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly
authorized.
ALEXZA PHARMACEUTICALS, INC.
Thomas B. King
President and Chief Executive Officer
Dated: March 15, 2011
POWER OF
ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Thomas B. King
and August J. Moretti, and each of them, as his true and lawful
attorneys-in-fact and agents, with full power of substitution
and resubstitution, for him and in his name, place, and stead,
in any and all capacities, to sign any and all amendments to
this Report, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorneys-in-fact
and agents, and each of them, full power and authority to do and
perform each and every act and thing requisite and necessary to
be done in connection therewith, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and
confirming that all said attorneys-in-fact and agents, or any of
them or their or his substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Exchange Act, this report
has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on March 15,
2011.
|
|
|
|
|
Signature
|
|
Title
|
|
|
|
|
/s/ THOMAS
B. KING
Thomas
B. King
|
|
President, Chief Executive Officer and Director
(Principal Executive Officer)
|
|
|
|
/s/ AUGUST
J. MORETTI
August
J. Moretti
|
|
Senior Vice President, Chief Financial Officer,
General Counsel and Secretary
(Principal Financial Officer)
|
|
|
|
/s/ MARK
K. OKI
Mark
K. Oki
|
|
Vice President, Finance and Controller
(Principal Accounting Officer)
|
|
|
|
/s/ HAL
V. BARRON
Hal
V. Barron
|
|
Director
|
|
|
|
/s/ ANDREW
L. BUSSER
Andrew
L. Busser
|
|
Director
|
|
|
|
/s/ SAMUEL
D. COLELLA
Samuel
D. Colella
|
|
Director
|
|
|
|
/s/ ALAN
D. FRAZIER
Alan
D. Frazier
|
|
Director
|
111
|
|
|
|
|
Signature
|
|
Title
|
|
|
|
|
|
|
Director
|
|
|
|
|
|
Director
|
|
|
|
/s/ GORDON
RINGOLD
Gordon
Ringold
|
|
Director
|
|
|
|
/s/ ISAAC
STEIN
Isaac
Stein
|
|
Director
|
|
|
|
/s/ JOSEPH
L. TURNER
Joseph
L. Turner
|
|
Director
|
112
EXHIBIT INDEX
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description of Document
|
|
|
3
|
.5
|
|
Restated Certificate of Incorporation(1)
|
|
3
|
.7
|
|
Amended and Restated Bylaws(1)
|
|
3
|
.8
|
|
Amendment to Amended and Restated Bylaws(5)
|
|
4
|
.1
|
|
Specimen Common Stock Certificate(1)
|
|
4
|
.2
|
|
Second Amended and Restated Investors Rights Agreement
between Registrant and certain holders of Preferred Stock dated
November 5, 2004(1)
|
|
10
|
.1
|
|
Form of Director/Officer Indemnification Agreement entered into
between Registrant and each of its directors and officers(9)*
|
|
10
|
.2
|
|
Form of Change of Control Agreement*(15)
|
|
10
|
.3
|
|
2005 Equity Incentive Plan(7)*
|
|
10
|
.4
|
|
Form of Option Grant Notice, Form of Option Agreement and Form
of Notice of Exercise to 2005 Equity Incentive Plan(1)*
|
|
10
|
.5
|
|
2005 Non-Employee Directors Stock Option Plan(1)
|
|
10
|
.6
|
|
Form of Option Grant Notice, Form of Option Agreement and Form
of Notice of Exercise to 2005 Non-Employee Directors Stock
Option Plan(1)
|
|
10
|
.7
|
|
2005 Employee Stock Purchase Plan(1)*
|
|
10
|
.8
|
|
Form of Offering Document to 2005 Employee Stock Purchase
Plan(1)*
|
|
10
|
.9
|
|
Development Agreement between Registrant and Autoliv ASP, Inc.
dated October 3, 2005(1)
|
|
10
|
.10
|
|
Master Security Agreement between Registrant and General
Electric Capital Corporation dated May 17, 2005, as amended
on May 18, 2005(1)
|
|
10
|
.11
|
|
Promissory Note between Registrant and General Electric Capital
Corporation dated June 15, 2005(1)
|
|
10
|
.12
|
|
Promissory Note between Registrant and General Electric Capital
Corporation dated August 24, 2005(1)
|
|
10
|
.13
|
|
Warrant to Purchase shares of Series B Preferred Stock
issued to Silicon Valley Bank dated March 20, 2002(1)
|
|
10
|
.14
|
|
Warrant to Purchase shares of Series C Preferred Stock
issued to Silicon Valley Bank dated January 7, 2003, as
amended on March 4, 2003(1)
|
|
10
|
.15
|
|
Warrant to Purchase shares of Series C Preferred Stock
issued to Silicon Valley Bank dated September 19, 2003(1)
|
|
10
|
.16
|
|
Warrant to Purchase shares of Series C Preferred Stock
issued to Silicon Valley Bank dated April 7, 2004(1)
|
|
10
|
.17
|
|
Lease Agreement between the Brittania, LLC and Registrant dated
August 25, 2006(2)
|
|
10
|
.18
|
|
First Amendment to Lease between Britannia Hacienda VIII LLC and
Registrant dated May 4, 2007(3)
|
|
10
|
.19
|
|
Second Amendment to Lease between Britannia Hacienda VIII LLC
and Registrant dated August 28, 2007(4)
|
|
10
|
.20
|
|
Manufacturing and Supply Agreement between Registrant and
Autoliv ASP, Inc., dated November 2, 2007(5)
|
|
10
|
.21
|
|
Offer Letter between Registrant and Michael Simms, dated
January 23, 2008(5)
|
|
10
|
.22
|
|
Stock and Warrant Purchase Agreement between Registrant and
Biomedical Investment Fund Pte Ltd., dated March 26,
2008(6)
|
|
10
|
.23
|
|
Warrant to Purchase shares of Common Stock issued to Biomedical
Investment Fund Pte Ltd. dated March 27, 2008(6)
|
|
10
|
.24
|
|
Form of Notice of Grant of Award and Stock Unit Award Agreement
to 2005 Equity Incentive Plan(15)
|
|
10
|
.25
|
|
2009-2010
Performance Based Incentive Program*(10)
|
|
10
|
.26
|
|
Amended and Restated Purchase Option Agreement by and among
Registrant, Symphony Allegro Holdings LLC and Symphony Allegro,
Inc. dated June 15, 2009*(11)
|
113
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description of Document
|
|
|
10
|
.27
|
|
Warrant Purchase Agreement between Registrant and Symphony
Allegro Holdings LLC dated June 15, 2009(11)
|
|
10
|
.28
|
|
Amended and Restated Registration Rights Agreement between
Registrant and Symphony Allegro Holdings LLC dated June 15,
2009(11)
|
|
10
|
.29
|
|
Form of Amendment to Change of Control Agreement*(12)
|
|
10
|
.30
|
|
Form of Warrants to Purchase Shares of Common Stock, dated
August 26, 2009(13)
|
|
10
|
.31
|
|
Letter Agreement among Registrant, Symphony Allegro Holdings
LLC, Symphony Capital Partners, L.P. and Symphony Strategic
Partners, LLC, dated August 26, 2009(13)
|
|
10
|
.32
|
|
Securities Purchase Agreement by and among Registrant and the
purchasers identified therein, dated September 29, 2009(14)
|
|
10
|
.33
|
|
Form of Warrants to Purchase shares of Common Stock, dated
October 5, 2009(14)
|
|
10
|
.34
|
|
Collaboration and License Agreement between Registrant and
Biovail Laboratories International SRL dated February 9,
2010(16)
|
|
10
|
.35
|
|
Manufacture and Supply Agreement between Registrant and Biovail
Laboratories International SRL dated February 9, 2010(16)
|
|
10
|
.36
|
|
Loan and Security Agreement between Registrant and Hercules
Technology Growth Capital, Inc. dated May 4, 2010(17)
|
|
10
|
.37
|
|
Warrant issued by Registrant to Hercules Technology Growth
Capital, Inc. dated May 4, 2010(17)
|
|
10
|
.38
|
|
Common Stock Purchase Agreement between Registrant and Azimuth
Opportunity Ltd. dated May 26, 2010(18)
|
|
10
|
.39
|
|
Amendment No. 1 to Manufacturing and Supply Agreement
between Registrant and Autoliv ASP, Inc. dated June 30,
2010(17)
|
|
10
|
.40
|
|
Promissory Note issued by Registrant to Autoliv ASP, Inc. dated
June 30, 2010(17)
|
|
10
|
.41*
|
|
Form of RSU Agreement between Registrant and each of Thomas B.
King, August J. Moretti, James V. Casella and Michael J. Simms
dated May 19, 2010(19)
|
|
10
|
.42
|
|
Amendment No. 1 to Loan and Security Agreement between
Registrant and Hercules Technology Growth Capital, Inc. dated
September 20, 2010(20)
|
|
10
|
.43
|
|
Form of Warrant to Purchase Shares of Common Stock dated
August 10, 2010(21)
|
|
10
|
.44
|
|
Amendment to 2005 Non Employee Directors Option Plan(20)
|
|
10
|
.45u
|
|
2011 Cash Bonus Plan
|
|
10
|
.46u
|
|
Amendment No. 2 to Manufacturing and Supply Agreement
between Registrant and Autoliv ASP, Inc. dated February 15,
2011
|
|
10
|
.47u
|
|
Promissory Note issued by Registrant to Autoliv ASP, Inc. dated
February 15, 2011
|
|
10
|
.48
|
|
Form of Notice of Grant of Stock Options to 2005 Equity
Incentive Plan(22)*
|
|
10
|
.49
|
|
Form of Option Agreement to 2005 Equity Incentive Plan(22)*
|
|
10
|
.50
|
|
Form of Option Agreement to 2005 Equity Incentive Plan(22)*
|
|
14
|
.1
|
|
Alexza Pharmaceuticals, Inc. Code of Business Conduct for
Employees, Executive Officers and Directors(2)
|
|
21
|
.1u
|
|
Subsidiaries of Registrant
|
|
23
|
.1u
|
|
Consent of Independent Registered Public Accounting Firm
|
|
24
|
.1u
|
|
Power of Attorney included on the signature pages hereto
|
|
31
|
.1u
|
|
Section 302 Certification of CEO.
|
|
31
|
.2u
|
|
Section 302 Certification of CFO.
|
|
32
|
.1u
|
|
Section 906 Certifications of CEO and CFO.
|
|
|
|
* |
|
Management contract or compensation plan or arrangement. |
|
u |
|
Filed herein |
114
|
|
|
|
|
Confidential treatment has been granted with respect to certain
portions of this exhibit. This exhibit omits the information
subject to this confidentiality request. Omitted portions have
been filed separately with the SEC. |
|
|
|
Confidential treatment has been requested with respect to
certain portions of this exhibit. This exhibit omits the
information subject to this confidentiality request. Omitted
portions have been filed separately with the SEC. |
|
(1) |
|
Incorporated by reference to exhibits to our Registration
Statement on
Form S-1
filed on December 22, 2005, as amended (File
No. 333-130644). |
|
(2) |
|
Incorporated by reference to our Annual Report on
Form 10-K
(File
No. 000-51820)
as filed with the SEC on March 29, 2007. |
|
(3) |
|
Incorporated by reference to our Quarterly Report on
Form 10-Q
(File
No. 000-51820)
as filed with the SEC on August 13, 2007. |
|
(4) |
|
Incorporated by reference to our Quarterly Report on
Form 10-Q
(File
No. 000-51820)
as filed with the SEC on November 1, 2007. |
|
(5) |
|
Incorporated by reference to our Annual Report on
Form 10-K
(File
No. 000-51820)
as filed with the SEC on March 17, 2008. |
|
(6) |
|
Incorporated by reference to our Current Report on
Form 8-K
(File
No. 000-51820)
as filed with the SEC on March 17, 2008. |
|
(7) |
|
Incorporated by reference to our Current Report on
Form 8-K
(File
No. 000-51820)
as filed with the SEC on May 30, 2008. |
|
(8) |
|
Incorporated by reference to our Current Report on
Form 8-K
(File
No. 000-51820)
as filed with the SEC on July 14, 2008. |
|
(9) |
|
Incorporated by reference to our Current Report on
Form 8-K
(File
No. 000-51820)
as filed with the SEC on June 5, 2006. |
|
(10) |
|
Incorporated by reference to our Current Report on
Form 8-K
(File
No. 000-51820)
as filed with the SEC on February 24, 2009. |
|
(11) |
|
Incorporated by reference to our Current Report on
Form 8-K/A
(File
No. 000-51820)
as filed with the SEC on June 26, 2009. |
|
(12) |
|
Incorporated by reference to our Quarterly Report on
Form 10-Q
(File
No. 000-51820)
as filed with the SEC on August 5, 2009. |
|
(13) |
|
Incorporated by reference to our Current Report on
Form 8-K
(File
No. 000-51820)
as filed with the SEC on August 26, 2009. |
|
(14) |
|
Incorporated by reference to our Current Report on
Form 8-K
(File
No. 000-51820)
as filed with the SEC on September 30, 2009. |
|
(15) |
|
Incorporated by reference to our Annual Report on
Form 10-K
(File
No. 000-51820)
as filed with the SEC on March 10, 2009. |
|
(16) |
|
Incorporated by reference to our Annual Report on
Form 10-K
(File
No. 000-51820)
as filed with the SEC on March 9, 2010. |
|
(17) |
|
Incorporated by reference to our Quarterly Report on
Form 10-Q
(File
No. 000-51820)
as filed with the SEC on July 26, 2010. |
|
(18) |
|
Incorporated by reference to our Current Report on
Form 8-K
(File
No. 000-51820)
as filed with the SEC on May 26, 2010. |
|
(19) |
|
Incorporated by reference to our Quarterly Report on
Form 10-Q/A
(File
No. 000-51820)
as filed with the SEC on July 28, 2010. |
|
(20) |
|
Incorporated by reference to our Quarterly Report on
Form 10-Q
(File
No. 000-51820)
as filed with the SEC on November 9, 2010. |
|
(21) |
|
Incorporated by reference to our Current Report on
Form 8-K
(File
No. 000-51820)
as filed with the SEC on August 5, 2010. |
|
(22) |
|
Incorporated by reference to our Current Report on
Form 8-K
(File
No. 000-51820)
as filed with the SEC on February 22, 2011. |
115