As filed with
the Securities and Exchange Commission on October 31,
2011
Registration No. 333-175080
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
AMENDMENT NO. 3
TO
FORM S-1
REGISTRATION
STATEMENT
UNDER
THE SECURITIES ACT OF
1933
CLOVIS ONCOLOGY, INC.
(Exact name of registrant as
specified in its charter)
|
|
|
|
|
Delaware
|
|
2834
|
|
90-0475355
|
(State or other jurisdiction of
incorporation or organization)
|
|
(Primary Standard Industrial
Classification Code Number)
|
|
(I.R.S. Employer
Identification Number)
|
2525 28th Street,
Suite 100
Boulder, Colorado
80301
(303) 625-5000
(Address, including zip code,
and telephone number, including area code, of registrants
principal executive offices)
Patrick J. Mahaffy
President and Chief Executive
Officer
Clovis Oncology, Inc.
2525 28th Street,
Suite 100
Boulder, Colorado
80301
(303) 625-5000
(Name, address, including zip
code, and telephone number, including area code, of agent for
service)
Copies to:
|
|
|
Peter H. Jakes, Esq.
William H. Gump, Esq.
Willkie Farr & Gallagher LLP
787 Seventh Avenue
New York, New York 10019
(212) 728-8000
|
|
Cheston J. Larson, Esq.
Divakar Gupta, Esq.
Latham & Watkins LLP
12636 High Bluff Drive, Suite 400
San Diego, California 92130
(858) 523-5400
|
Approximate date of commencement of proposed sale to the
public: As soon as practicable after this
Registration Statement becomes effective.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act, check the following
box. o
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same
offering. o
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. o
If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in Rule
12b-2 of the
Exchange Act. (Check one):
|
|
|
|
Large
accelerated
filer o
|
Accelerated
filer o
|
Non-accelerated
filer þ
|
Smaller reporting
company o
|
(Do not check if a smaller
reporting company)
CALCULATION OF REGISTRATION
FEE
|
|
|
|
|
|
|
|
|
|
Proposed Maximum
|
|
|
Amount of
|
Title of Each Class of
|
|
|
Aggregate Offering
|
|
|
Registration
|
Securities to be Registered
|
|
|
Price(1)(2)
|
|
|
Fee(3)
|
Common Stock, par value $0.001 per share
|
|
|
$160,425,000
|
|
|
$18,626
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Estimated solely for purposes of
determining the registration fee in accordance with
Rule 457(o) under the Securities Act of 1933, as amended.
|
|
|
|
(2)
|
|
Includes shares of common stock
which may be purchased by the underwriters to cover
over-allotments, if any.
|
|
|
|
(3)
|
|
Of this amount, the registrant
previously paid $17,357 in connection with the initial filing of
this Registration Statement.
|
The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933, as amended, or until this
Registration Statement shall become effective on such date as
the Securities and Exchange Commission, acting pursuant to said
Section 8(a), may determine.
The
information in this prospectus is not complete and may be
changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these
securities and we are not soliciting offers to buy these
securities in any state or other jurisdiction where the offer or
sale is not permitted.
|
Subject to completion, dated
October 31, 2011
Prospectus
9,300,000 Shares
COMMON STOCK
This is the initial public offering of common stock of Clovis
Oncology, Inc. We are selling 9,300,000 shares of common
stock. Prior to this offering, there has been no public market
for our common stock. The initial public offering price of our
common stock is expected to be between $13.00 and $15.00 per
share.
We have applied for listing of our common stock on the NASDAQ
Global Market under the symbol CLVS.
|
|
|
|
|
|
|
|
|
|
|
Per Share
|
|
|
Total
|
|
|
Initial public offering price
|
|
$
|
|
|
|
$
|
|
|
Underwriting discounts and commissions
|
|
$
|
|
|
|
$
|
|
|
Proceeds to Clovis, before expenses
|
|
$
|
|
|
|
$
|
|
|
Certain of our existing stockholders, including our executive
officers, certain of our directors and certain affiliates of our
directors, have indicated an interest in purchasing an aggregate
of approximately $50.6 million of shares of our common
stock in this offering at the initial public offering price.
However, because indications of interest are not binding
agreements or commitments to purchase, the underwriters may
determine to sell more, less or no shares in this offering to
any of these stockholders, or any of these stockholders may
determine to purchase more, less or no shares in this offering.
The underwriters will receive an underwriting discount of
$ per share on any sales of shares
to such stockholders.
We have granted the underwriters an option to purchase up to
1,395,000 additional shares of common stock to cover
over-allotments.
Investing in our common stock involves risks. See
Risk Factors beginning on page 10.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
The underwriters expect to deliver the shares on or
about ,
2011.
|
|
J.P.
Morgan |
Credit Suisse |
, 2011
TABLE OF
CONTENTS
You should rely only on the information contained in this
prospectus or in any free writing prospectus that we may
specifically authorize to be delivered or made available to you.
We have not, and the underwriters have not, authorized anyone
to provide you with any information other than that contained in
this prospectus or in any free writing prospectus we may
authorize to be delivered or made available to you. We take no
responsibility for, and can provide no assurance as to the
reliability of, any other information that others may give you.
This prospectus may only be used where it is legal to offer and
sell shares of our common stock. The information in this
prospectus is accurate only as of the date of this prospectus,
regardless of the time of delivery of this prospectus or any
sale of shares of our common stock. Our business, financial
condition, results of operations and prospects may have changed
since that date. We are not, and the underwriters are not,
making an offer of these securities in any jurisdiction where
the offer is not permitted.
Until ,
2011 (25 days after the commencement of this offering), all
dealers that buy, sell or trade shares of our common stock,
whether or not participating in this offering, may be required
to deliver a prospectus. This delivery requirement is in
addition to the dealers obligation to deliver a prospectus
when acting as underwriters and with respect to their unsold
allotments or subscriptions.
For investors outside the United States: We have not and the
underwriters have not done anything that would permit this
offering or possession or distribution of this prospectus in any
jurisdiction where action for that purpose is required, other
than in the United States. Persons outside the United States who
come into possession of this prospectus must inform themselves
about, and observe any restrictions relating to, the offering of
the shares of common stock and the distribution of this
prospectus outside the United States.
i
PROSPECTUS
SUMMARY
The following summary highlights information contained
elsewhere in this prospectus and is qualified in its entirety by
the more detailed information and consolidated financial
statements included elsewhere in this prospectus. This summary
does not contain all of the information that may be important to
you. You should read and carefully consider the following
summary together with the entire prospectus, including our
consolidated financial statements and the related notes thereto
appearing elsewhere in this prospectus and the matters discussed
in the sections in this prospectus entitled Risk
Factors, Selected Consolidated Financial Data
and Managements Discussion and Analysis of Financial
Condition and Results of Operations, before deciding to
invest in our common stock. Some of the statements in this
prospectus constitute forward-looking statements that involve
risks and uncertainties. See Cautionary Note Regarding
Forward-Looking Statements and Industry Data. Our actual
results could differ materially from those anticipated in such
forward-looking statements as a result of certain factors,
including those discussed in the Risk Factors and
other sections of this prospectus.
Except as otherwise indicated herein or as the context
otherwise requires, references in this prospectus to
Clovis, the Company, we,
us, and our, refer to Clovis Oncology, Inc.
together with its consolidated subsidiary.
Overview
We are a biopharmaceutical company focused on acquiring,
developing and commercializing innovative anti-cancer agents in
the United States, Europe and additional international markets.
We target our development programs for the treatment of specific
subsets of cancer populations, and seek to simultaneously
develop, with partners, companion diagnostics that direct our
product candidates to the patients that are most likely to
benefit from their use. We are currently developing three
product candidates for which we hold global marketing rights:
CO-101, a
lipid-conjugated form of the anti-cancer drug gemcitabine, which
is in a pivotal study in a specific patient population for the
treatment of metastatic pancreatic cancer; CO-1686, an orally
available, small molecule epidermal growth factor receptor, or
EGFR, covalent inhibitor that is currently in preclinical
development for the treatment of non-small cell lung cancer, or
NSCLC, in patients with activating EGFR mutations, including the
initial activating mutations, as well as the primary resistance
mutation, T790M; and CO-338, an orally available, small molecule
poly (ADP-ribose) polymerase, or PARP, inhibitor being developed
for various solid tumors that is currently in a Phase I clinical
trial.
We believe that discovery productivity exceeds development
capacity in oncology, and we have built our organization to meet
the need for innovative patient-specific oncology drug
development. To implement our strategy, we have assembled an
experienced team with core competencies in global clinical
development and regulatory operations in oncology, as well as
conducting collaborative relationships with companies
specializing in companion diagnostic development. As our product
candidates mature, we intend to build our own commercial
organizations in major global markets and contract with local
distributors in smaller markets.
The most common anti-cancer drug therapies typically address
cancers within a specific organ as a single disease as opposed
to a collection of different disease subtypes, often resulting
in poor response rates and minimal effect on overall survival.
We believe the oncology community is increasingly recognizing
that tumors in a particular organ have unique pathologic and
molecular characteristics that may warrant different treatment
strategies. By better understanding differences in tumor biology
and underlying disease pathways, researchers are identifying
biomarkers to guide development of targeted oncology therapies,
with streamlined clinical trials, stratified patient populations
and improved patient outcomes. We believe that targeted
therapies and companion diagnostics offer a patient-tailored
approach to the treatment of cancers with improved diagnosis and
outcomes.
We were founded in April 2009 by former executives of Pharmion
Corporation, which successfully developed and commercialized
novel oncology products in the United States and Europe and was
ultimately acquired by Celgene Corporation in 2008. Our
investors include the following entities or their affiliates:
Domain Associates, New Enterprise Associates, Versant Ventures,
Aberdare Ventures, Abingworth Bioventures, Frazier Healthcare
Ventures, Pfizer Inc., ProQuest Investments and our management
team. To date, we have not generated any revenues. Based on our
current development plans, we do not expect to generate revenues
until 2014 at the earliest. As of September 30, 2011, we
had an accumulated deficit of $95.6 million.
1
Our
Strategy
Our strategy is to acquire, develop, and commercialize
innovative anti-cancer agents in the United States, Europe and
additional international markets in oncology indications with
significant unmet medical need. The critical components of our
business strategy include the following:
|
|
|
|
|
Focus on oncology. The oncology market
is characterized by a number of disorders with high rates of
recurrence and a limited response from current therapies or
treatments.
|
|
|
|
Focus on compounds where improved outcomes are associated
with specific biomarkers. Our strategy to
date has been to prioritize opportunities in which a strong
biological hypothesis has been established linking a specific
characteristic or biological state of a cell, or biomarker, with
improved outcomes for the product candidate.
|
|
|
|
|
|
Combine companion diagnostics with drug development
efforts to realize superior clinical
outcomes. A companion diagnostic is a test or
measurement intended to assist physicians in making treatment
decisions for their patients. Companion diagnostics do so by
evaluating the presence of biomarkers, and physicians use this
information to select a specific drug or treatment to which
their patient will most likely respond. Our development strategy
is based on the premise that we can utilize effective companion
diagnostics to identify different patient subsets who we believe
will uniquely benefit from our product candidates.
|
|
|
|
|
|
Manage and control global development activities and
regulatory operations. We believe our
development and regulatory experience enables us to devise time-
and cost-efficient strategies to develop and obtain regulatory
approvals for new drugs, and to identify the regulatory pathway
that allows us to get a product candidate to market as quickly
as possible.
|
|
|
|
Seek and maintain global commercial
rights. We believe that it is very important
to maintain global rights to our product candidates, and that we
can build our own commercial organizations in major
pharmaceutical markets as well as a network of third-party
distributors in smaller markets.
|
Our
Product Pipeline
Consistent with our strategy, each of our initial three
in-licensed product candidates, for which we hold global
marketing rights, is being developed for selected patient
subsets. The following table summarizes the status of our
product pipeline:
2
CO-101
a Lipid-Conjugated Form of the Anti-Cancer Drug
Gemcitabine
CO-101 is currently in a Phase II clinical study in
patients with metastatic pancreatic cancer for use as an initial
therapy recommended for treatment of the disease, or a so-called
first-line treatment. CO-101 is a novel, patented,
lipid-conjugated form of the anti-cancer drug gemcitabine that
is designed to treat patients with pancreatic cancer whose
tumors express low amounts of a membrane transporter protein on
the surface of the cancer cell known as hENT1 and are thus
expected to be resistant to standard gemcitabine-based therapy.
Based on the published results of multiple studies assessing the
correlation of hENT1 expression to survival outcomes in
pancreatic cancer patients treated with gemcitabine, we believe
that approximately 50% of pancreatic cancer patients express low
levels of hENT1, and thus derive little or no benefit from
gemcitabine therapy. For example, in 2009, a study published in
Gastroenterology reported the results of a retrospective
analysis of randomized samples collected from 198 pancreatic
cancer patients between 1998 and 2002 comparing treatment with
gemcitabine versus 5-fluorouracil (5-FU). Patients in this study
treated with gemcitabine who had a high level of hENT1
expression had a median overall survival of 21 months,
compared to a median overall survival of 16 months for
gemcitabine-treated patients with low hENT1 expression and
12 months for gemcitabine-treated patients with no hENT1
expression.
CO-101, which we in-licensed from Clavis Pharma ASA, is
currently in an international, randomized and controlled
360-patient Phase II clinical study for the first-line
treatment of metastatic pancreatic cancer. This open-label study
compares CO-101 to gemcitabine as a first-line treatment in
patients with metastatic pancreatic cancer. The primary
objective of this study is to compare the overall survival of
patients with metastatic pancreatic cancer and low hENT1
expression that are treated with CO-101 versus gemcitabine.
Secondary endpoints include overall survival in all patients and
in patients with high hENT1 expression, disease response rate,
and drug tolerability and toxicity. We expect to complete
enrollment for this trial in the first quarter of 2012 and
report top line results as to overall survival in the
prespecified hENT1-low patient subset in the fourth quarter of
2012. While we have not sought a Special Protocol Assessment, or
SPA, from the U.S. Food and Drug Administration, or FDA, for
this trial, for the reasons set forth under CO-101
Regulatory Strategy, we believe that if its
results are positive, this study will serve as a pivotal trial
for CO-101 and enable us to file a New Drug Application, or NDA,
with the FDA and a Marketing Approval Application, or MAA, with
the European Medicines Agency, or EMA, in mid-2013. We have
partnered with Ventana Medical Systems for the development and
commercialization of a companion diagnostic for the assessment
of hENT1 levels.
CO-1686an
Oral EGFR Mutant-Selective Inhibitor
CO-1686 is a novel, orally available, small molecule covalent
inhibitor of the cancer-causing mutant forms of EGFR for the
treatment of NSCLC. Because CO-1686 targets both the initial
activating EGFR mutations as well as the primary resistance
mutation, T790M, it has the potential to treat NSCLC patients
with EGFR mutations, both as a first-line treatment, or as a
therapy recommended for patients when a first-line treatment has
been ineffective, a so-called second-line treatment.
According to a study published in Clinical Cancer
Research in 2008, such initiating activating mutations occur
in approximately 10% to 15% of NSCLC cases in Caucasian patients
and approximately 30% to 35% of NSCLC cases in East Asian
patients. Based on multiple published reports, including a study
in Nature Reviews Cancer in 2007, following treatment
with approved NSCLC therapies, Tarceva (erlotinib) or
Iressa (gefitinib), both known as tyrosine kinase
inhibitors, or TKIs, approximately half of these patients
develop the T790M mutation.
CO-1686, which we in-licensed from Avila Therapeutics, Inc., is
currently in preclinical development and we plan to file an
Investigational New Drug application, or IND, in the first
quarter of 2012. We have designed an accelerated clinical
development program for CO-1686, and if successful, have a goal
of filing an NDA for an initial indication within approximately
four years of filing our IND. We intend to pursue the
development of CO-1686 as both a second-line therapy for
EGFR-mutated
NSCLC patients who become resistant to TKIs due to the emergence
of the T790M secondary mutation and potentially as a first-line
treatment for
EGFR-mutated
NSCLC. We expect to initiate a Phase I/II trial of CO-1686 in
the first half of 2012. We have partnered with Roche Molecular
Systems, Inc., or Roche, for the development and
commercialization of a companion diagnostic for identification
of EGFR mutations.
3
CO-338a
PARP Inhibitor
CO-338 is a novel, orally available, small molecule PARP
inhibitor that we intend to develop as both monotherapy and in
combination with chemotherapeutic agents for the treatment of
patients with cancers predisposed to PARP inhibitor sensitivity.
Such cancers include serous ovarian cancer and selected patients
with breast cancer.
CO-338,
which we in-licensed from Pfizer Inc., is currently in a Phase I
clinical trial to determine the maximum tolerated dose of oral
CO-338 that can be combined with intravenous, or IV, platinum
chemotherapy in the treatment of solid tumors. This program is
supplemented by two ongoing investigator-initiated trials,
currently using the IV formulation of CO-338: a Phase I/II
study in germ-line BRCA mutant breast and ovarian cancer and a
Phase II study in the adjuvant treatment of germ-line BRCA
mutant and triple-negative breast cancer. As soon as practical,
we intend to replace the IV formulation with the oral
formulation in these studies. We also intend to initiate a Phase
I monotherapy study of the oral formulation in the fourth
quarter of 2011 to determine an appropriate dose and schedule
for long term administration.
Risks
Associated with Our Business
Our business and our future results of operations and financial
condition are subject to a number of risks and uncertainties.
These risks and uncertainties that could adversely affect our
actual results and performance, as well as the successful
implementation of our business strategy, are discussed more
fully in the Risk Factors and Cautionary Note
Regarding Forward-Looking Statements and Industry Data
sections of this prospectus. You should carefully consider all
of the information set forth in this prospectus and, in
particular, should evaluate the specific factors set forth under
Risk Factors and Cautionary Note Regarding
Forward-Looking Statements and Industry Data in deciding
whether to invest in our common stock. Among these important
risks and uncertainties that could adversely affect our results
of operations and business condition are the following:
|
|
|
|
|
We have incurred significant losses since our inception and
anticipate that we will continue to incur losses for the
foreseeable future. We are a clinical-stage company with no
approved products, and no historical revenues, which makes it
difficult to assess our future viability.
|
|
|
|
If we fail to obtain additional financing, we may be unable to
complete the development and commercialization of our product
candidates, or continue our development programs. In addition,
the report of our independent registered public accounting firm
on our financial statements appearing at the end of this
prospectus contains an explanatory paragraph stating that our
recurring losses raise substantial doubt about our ability to
continue as a going concern.
|
|
|
|
We are heavily dependent on the success of our three product
candidates, two of which are in clinical development, and one of
which is in preclinical development, and we cannot give any
assurance that any of our product candidates will receive
regulatory approval, which is necessary before they can be
commercialized.
|
|
|
|
Clinical drug development involves a lengthy and expensive
process with an uncertain outcome, and results of earlier
studies and trials may not be predictive of future trial results.
|
|
|
|
The regulatory approval processes of the FDA and similar foreign
authorities is lengthy, time consuming and inherently
unpredictable, and if we are ultimately unable to obtain
regulatory approval for our product candidates, our business
will be substantially harmed.
|
|
|
|
Failure to successfully validate, develop and obtain regulatory
approval for companion diagnostics could harm our drug
development strategy.
|
|
|
|
Our commercial success depends upon attaining significant market
acceptance of our product candidates, if approved, among
physicians, patients, healthcare payors and major operators of
cancer clinics.
|
|
|
|
We face significant competition from other biotechnology and
pharmaceutical companies and our operating results will suffer
if we fail to compete effectively.
|
4
|
|
|
|
|
If our efforts to protect the proprietary nature of the
intellectual property related to our technologies are not
adequate, we may not be able to compete effectively in our
market.
|
|
|
|
Other factors identified elsewhere in this prospectus, including
those set forth under Risk Factors.
|
Our
Corporate Information
We were incorporated under the laws of the State of Delaware in
April 2009. Our principal executive offices are located at 2525
28th Street, Suite 100, Boulder, Colorado 80301, and our
telephone number is
(303) 625-5000.
Our website address is
www.clovisoncology.com. Our website and the
information contained on, or that can be accessed through, the
website will not be deemed to be incorporated by reference in,
and are not considered part of, this prospectus. You should not
rely on any such information in making your decision whether to
purchase our common stock.
This prospectus includes references to trademarks and service
marks of other entities, and those trademarks and service marks
are the property of their respective owners.
5
THE
OFFERING
|
|
|
Common stock offered
|
|
9,300,000 shares |
|
|
|
Common stock to be outstanding immediately following this
offering
|
|
20,765,590 shares |
|
|
|
Over-allotment option
|
|
Up to 1,395,000 shares |
|
|
|
Use of proceeds
|
|
We estimate that the net proceeds from this offering will be
approximately $121.2 million, or approximately
$139.4 million if the underwriters exercise their
over-allotment option in full, assuming an initial public
offering price of $14.00 per share, the midpoint of the price
range set forth on the cover page of this prospectus, after
deducting estimated underwriting discounts and commissions and
estimated offering expenses payable by us. We expect to use the
proceeds of this offering to fund our clinical trials related to
CO-101 and CO-338, to advance the development of CO-1686, our
preclinical product candidate, and for working capital and
general corporate purposes. See Use of Proceeds for
a more complete description of the intended use of proceeds from
this offering. |
|
|
|
Risk factors
|
|
You should read Risk Factors for a discussion of
factors you should carefully consider before deciding to invest
in our common stock. |
|
Proposed NASDAQ Global Market symbol
|
|
CLVS |
The number of shares of our common stock to be outstanding after
this offering set forth above is based on 11,465,590 shares
of our common stock outstanding as of September 30, 2011,
after giving effect to (1) the conversion of all
outstanding shares of our convertible preferred stock into
7,244,523 shares of common stock immediately prior to the
closing of this offering and (2) the issuance of
2,559,774 shares of our common stock immediately prior to
the closing of this offering as a result of the conversion of
$35.0 million in aggregate principal amount of our 5%
convertible promissory notes due 2012 (including accrued and
unpaid interest thereon), assuming an initial public offering
price of $14.00 per share, the midpoint of the price range
set forth on the cover page of this prospectus, and assuming the
conversion occurs on November 18, 2011.
The number of shares of our common stock to be outstanding after
this offering set forth above excludes:
|
|
|
|
|
883,953 shares of our common stock issuable upon the
exercise of stock options outstanding as of September 30,
2011 at a weighted-average exercise price of $4.35 per
share;
|
|
|
|
|
|
1,250,000 shares of our common stock reserved for future
issuance under our 2011 Equity Incentive Plan, or the 2011 Plan,
which will become effective immediately prior to the completion
of this offering, plus the number of shares of our common
stock available for grant under our 2009 Equity Incentive Plan,
or the 2009 Plan, as of the closing of this offering (which as
of September 30, 2011 was 170,274), which shares will be
added to the shares to be reserved under our 2011 Plan upon the
effectiveness of the 2011 Plan, plus any annual increases in the
number of shares of common stock reserved for future issuance
under the 2011 Plan pursuant to an evergreen
provision and any other shares that may become issuable
under the 2011 Plan pursuant to its terms, as more fully
described in Executive and Director
CompensationEmployee Benefit Plans2011 Equity
Incentive Plan; and
|
|
|
|
|
|
189,656 shares of our common stock reserved for future
issuance under our 2011 Employee Stock Purchase Plan, or the
ESPP, which will become effective immediately prior to the
completion of this offering, plus any annual increases in the
number of shares of our common stock reserved for future
issuance under the ESPP pursuant to an evergreen
provision and any other shares that may become issuable
under the ESPP
|
6
|
|
|
|
|
pursuant to its terms, as more fully described in
Executive and Director CompensationEmployee Benefit
Plans2011 Employee Stock Purchase Plan.
|
Unless we specifically state otherwise, the information in this
prospectus assumes or gives effect to:
|
|
|
|
|
no exercise by the underwriters of their over-allotment option
to purchase up to 1,395,000 additional shares of common stock
from us;
|
|
|
|
|
|
the consent of the requisite holders of our preferred stock for
the conversion of their shares of preferred stock into common
stock;
|
|
|
|
|
|
the implementation of a 1 for 2.9 reverse stock split, effective
as of September 22, 2011; and
|
|
|
|
|
|
the filing of our amended and restated certificate of
incorporation and the adoption of our amended and restated
bylaws immediately prior to the completion of this offering.
|
Holders of our convertible preferred stock immediately prior to
this offering, including our executive officers, certain of our
directors and certain affiliates of our directors, have
indicated an interest in purchasing an aggregate of
approximately $50.6 million of shares of our common stock
in this offering, expected to be allocated pro rata among them
based on each such stockholders ownership of shares of our
convertible preferred stock outstanding immediately prior to
this offering, at the initial public offering price. However,
because indications of interest are not binding agreements or
commitments to purchase, the underwriters may determine to sell
more, less or no shares in this offering to any of these
stockholders, or any of these stockholders may determine to
purchase more, less or no shares in this offering. The
underwriters will receive an underwriting discount of
$ per share on any sales of shares
to such stockholders.
7
SUMMARY
CONSOLIDATED FINANCIAL DATA
The following table sets forth a summary of our historical
consolidated financial data at the dates and for the periods
indicated. The summary historical financial data presented below
for the year ended December 31, 2010 and the period from
April 20, 2009 (inception) to December 31, 2009 has
been derived from our audited financial statements, which are
included elsewhere in this prospectus.
The summary historical consolidated financial data presented
below for the nine months ended September 30, 2011 and 2010
has been derived from our unaudited consolidated financial
statements and has been prepared on the same basis as the
audited financial statements included elsewhere in this
prospectus. In the opinion of management, the unaudited data
reflects all adjustments, consisting only of normal and
recurring adjustments, necessary for a fair presentation of
results as of and for these periods. The historical results are
not necessarily indicative of results to be expected in any
future period and the results for the nine months ended
September 30, 2011 are not necessarily indicative of the
results that may be expected for the full fiscal year.
The summary historical financial data presented below should be
read in conjunction with Managements Discussion and
Analysis of Financial Condition and Results of Operations
and our consolidated financial statements and the related notes
thereto, which are included elsewhere in this prospectus. The
summary historical financial data in this section is not
intended to replace our financial statements and the related
notes thereto.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period from
|
|
|
|
|
|
|
|
|
Cumulative from
|
|
|
|
|
|
|
April 20, 2009
|
|
|
|
|
|
|
|
|
April 20, 2009
|
|
|
|
Year Ended
|
|
|
(inception) to
|
|
|
Nine Months Ended
|
|
|
(inception) to
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
(In thousands, except per share amounts)
|
|
|
Revenue
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
22,323
|
|
|
|
1,762
|
|
|
|
28,286
|
|
|
|
13,672
|
|
|
|
52,371
|
|
General and administrative
|
|
|
4,302
|
|
|
|
2,209
|
|
|
|
4,824
|
|
|
|
3,065
|
|
|
|
11,335
|
|
Acquired in-process research and development
|
|
|
12,000
|
|
|
|
13,085
|
|
|
|
7,000
|
|
|
|
2,000
|
|
|
|
32,085
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(38,625
|
)
|
|
|
(17,056
|
)
|
|
|
(40,110
|
)
|
|
|
(18,737
|
)
|
|
|
(95,791
|
)
|
Other income (expense), net
|
|
|
795
|
|
|
|
(43
|
)
|
|
|
(552
|
)
|
|
|
340
|
|
|
|
200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(37,830
|
)
|
|
$
|
(17,099
|
)
|
|
$
|
(40,662
|
)
|
|
$
|
(18,397
|
)
|
|
$
|
(95,591
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per common
share(1)
|
|
$
|
(28.55
|
)
|
|
$
|
(15.38
|
)
|
|
$
|
(26.80
|
)
|
|
$
|
(13.91
|
)
|
|
$
|
(72.25
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average common shares outstanding
|
|
|
1,325
|
|
|
|
1,112
|
|
|
|
1,517
|
|
|
|
1,323
|
|
|
|
1,323
|
|
Pro forma basic and diluted net loss per common share
(unaudited)(2)
|
|
$
|
(4.41
|
)
|
|
|
|
|
|
$
|
(4.09
|
)
|
|
|
|
|
|
$
|
(12.58
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma basic and diluted weighted average common shares
outstanding (unaudited)
|
|
|
8,570
|
|
|
|
|
|
|
|
9,939
|
|
|
|
|
|
|
|
7,598
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2011
|
|
|
|
|
|
|
|
|
|
Pro Forma
|
|
|
|
Actual
|
|
|
Pro
Forma(2)
|
|
|
As
Adjusted(3)(4)
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
(In thousands)
|
|
|
Balance sheet data:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and available for sale securities
|
|
|
$22,028
|
|
|
$
|
22,028
|
|
|
$
|
143,258
|
|
Working capital (excluding convertible promissory notes)
|
|
|
16,385
|
|
|
|
16,385
|
|
|
|
137,615
|
|
Total assets
|
|
|
26,388
|
|
|
|
26,388
|
|
|
|
147,618
|
|
Convertible promissory notes and accrued interest
|
|
|
35,602
|
|
|
|
|
|
|
|
|
|
Convertible preferred stock
|
|
|
75,499
|
|
|
|
|
|
|
|
|
|
Total stockholders equity (deficit)
|
|
|
$(93,552
|
)
|
|
$
|
17,549
|
|
|
$
|
138,779
|
|
8
|
|
|
(1) |
|
See Note 11 within the notes to our consolidated financial
statements which are included elsewhere in this prospectus for a
description of the method used to compute basic and diluted loss
per common share. |
|
|
|
(2) |
|
Pro forma to reflect (i) the conversion of all outstanding
shares of our convertible preferred stock into
7,244,523 shares of common stock immediately prior to the
closing of this offering; and (ii) the conversion of
$35.0 million in aggregate principal amount of our 5%
convertible promissory notes due 2012 (including accrued and
unpaid interest thereon) into 2,559,774 shares of our
common stock immediately prior to the closing of this offering,
assuming an initial public offering price of $14.00 per share,
the midpoint of the price range set forth on the cover page of
this prospectus, and assuming the conversion occurs on
November 18, 2011. |
|
|
|
(3) |
|
Pro forma as adjusted to further reflect the sale of
9,300,000 shares of our common stock offered in this
offering, assuming an initial public offering price of $14.00
per share, the midpoint of the price range set forth on the
cover page of this prospectus, after deducting estimated
underwriting discounts and commissions and estimated offering
expenses payable by us. |
|
|
|
(4) |
|
A $1.00 increase or decrease in the assumed initial public
offering price of $14.00 per share, the midpoint of the price
range set forth on the cover page of this prospectus, would
increase or decrease the pro forma as adjusted amount of each of
cash, cash equivalents and available for sale securities and
each of working capital, total assets and total
stockholders equity (deficit) by approximately
$8.8 million, assuming that the number of shares offered by
us, as set forth on the cover page of this prospectus, remains
the same, and after deducting estimated underwriting discounts
and commissions and estimated offering expenses payable by us. |
9
RISK
FACTORS
Investing in our common stock involves a high degree of risk.
You should carefully consider the risks described below,
together with the other information contained in this
prospectus, including our financial statements and the related
notes appearing at the end of this prospectus, before making
your decision to invest in shares of our common stock. We cannot
assure you that any of the events discussed in the risk factors
below will not occur. These risks could have a material and
adverse impact on our business, results of operations, financial
condition and cash flows. If that were to happen, the trading
price of our common stock could decline, and you could lose all
or part of your investment.
This prospectus also contains forward-looking statements that
involve risks and uncertainties. Our actual results could differ
materially from those anticipated in these forward-looking
statements as a result of certain factors, including the risks
faced by us described below and elsewhere in this prospectus.
See Cautionary Note Regarding Forward-Looking Statements
and Industry Data for information relating to these
forward-looking statements.
Risks
Related to Our Financial Position and Capital
Requirements
We
have incurred significant losses since our inception and
anticipate that we will continue to incur losses for the
foreseeable future. We are a clinical-stage company with no
approved products, and no historical revenues, which makes it
difficult to assess our future viability.
We are a clinical-stage biopharmaceutical company with a limited
operating history. Biopharmaceutical product development is a
highly speculative undertaking and involves a substantial degree
of risk. We have focused primarily on in-licensing and
developing our product candidates, CO-101,
CO-1686 and
CO-338. We are not profitable and have incurred losses in each
year since our inception in April 2009. Because we were only
recently formed, we have only a limited operating history upon
which you can evaluate our business and prospects. In addition,
as an early stage company, we have limited experience and have
not yet demonstrated an ability to successfully overcome many of
the risks and uncertainties frequently encountered by companies
in new and rapidly evolving fields, particularly in the
biopharmaceutical area. We have not generated any revenue from
product sales to date. We continue to incur significant research
and development and other expenses related to our ongoing
operations. Our net loss for the year ended December 31,
2010 and for the nine months ended September 30, 2011 was
approximately $37.8 million and approximately
$40.7 million, respectively. As of September 30, 2011,
we had an accumulated deficit of $95.6 million. We expect
to continue to incur losses for the foreseeable future, and we
expect these losses to increase as we continue our development
of, and seek regulatory approvals for, our product candidates,
and begin to commercialize any approved products. As such, we
are subject to all of the risks incident in the development of
new biopharmaceutical products and related companion
diagnostics, and we may encounter unforeseen expenses,
difficulties, complications, delays and other unknown factors
that may adversely affect our business. If any of our product
candidates fail in clinical trials or do not gain regulatory
approval, or if any of our product candidates, if approved, fail
to achieve market acceptance, we may never become profitable.
Even if we achieve profitability in the future, we may not be
able to sustain profitability in subsequent periods. Our prior
losses, combined with expected future losses, have had and will
continue to have an adverse effect on our stockholders
equity and working capital.
If we
fail to obtain additional financing, we may be unable to
complete the development and commercialization of our product
candidates, or continue our development programs. In addition,
the report of our independent registered public accounting firm
on our financial statements appearing at the end of this
prospectus contains an explanatory paragraph stating that our
recurring losses raise substantial doubt about our ability to
continue as a going concern.
Our operations have consumed substantial amounts of cash since
inception. We expect to continue to spend substantial amounts to
advance the clinical development of our product candidates and
launch and commercialize any product candidates for which we
receive regulatory approval, including building our own
commercial organizations to address certain markets.
10
The report of our independent registered public accounting firm
on our financial statements appearing at the end of this
prospectus contains an explanatory paragraph stating that our
recurring losses from operations raise substantial doubt about
our ability to continue as a going concern. We estimate that our
net proceeds from this offering will be approximately
$121.2 million, based upon an assumed initial public
offering price of $14.00 per share, the midpoint of the price
range set forth on the cover page of this prospectus, after
deducting estimated underwriting discounts and commissions and
estimated offering expenses payable by us. We expect that the
net proceeds from this offering, together with our existing cash
and cash equivalents will be sufficient to fund our capital
requirements for at least the next 12 months. We will
require additional capital for the further development and
commercialization of our product candidates and may also need to
raise additional funds sooner if we choose to expand more
rapidly than we presently anticipate. The report of our
independent registered public accounting firm appearing at the
end of this prospectus contains an explanatory paragraph stating
that our recurring losses from operations raise substantial
doubt about our ability to continue as a going concern, which
may create a perception in the public market that could
adversely affect our ability to raise additional capital.
We cannot be certain that additional funding will be available
on acceptable terms, or at all. If we are unable to raise
additional capital in sufficient amounts or on terms acceptable
to us we may have to significantly delay, scale back or
discontinue the development or commercialization of one or more
of our product candidates. We may also seek collaborators for
one or more of our current or future product candidates at an
earlier stage than otherwise would be desirable or on terms that
are less favorable than might otherwise be available. Any of
these events could significantly harm our business, financial
condition and prospects.
Risks
Related to Our Business and Industry
We are
heavily dependent on the success of our three product
candidates, two of which are in clinical development, and one of
which is in preclinical development, and we cannot give any
assurance that any of our product candidates will receive
regulatory approval, which is necessary before they can be
commercialized.
To date, we have invested a significant portion of our efforts
and financial resources in the acquisition and development of
our product candidates. Our future success is substantially
dependent on our ability to successfully develop, obtain
regulatory approval for, and then successfully commercialize
such product candidates. Two of our product candidates, CO-101
and CO-338, are in clinical trials, while our third product
candidate,
CO-1686, is
in preclinical development. Our business depends entirely on the
successful development and commercialization of our product
candidates, which may never occur. We currently generate no
revenues from sales of any drugs, and we may never be able to
develop or commercialize a marketable drug.
Each of our product candidates will require additional clinical
development, management of clinical, preclinical and
manufacturing activities, regulatory approval in multiple
jurisdictions, obtaining manufacturing supply, building of a
commercial organization, substantial investment and significant
marketing efforts before we generate any revenues from product
sales. We are not permitted to market or promote any of our
product candidates before we receive regulatory approval from
the FDA or comparable foreign regulatory authorities, and we may
never receive such regulatory approval for any of our product
candidates. We believe that, depending on the result of our
current CO-101 clinical trial, this trial may serve as a pivotal
trial to support our application for approval of CO-101. To the
extent that the results of the trial are not satisfactory to the
FDA or the EMA for support of an NDA or MAA, respectively, with
respect to CO-101, we will be required to expend significant
additional resources to conduct additional clinical trials in
support of approval of
CO-101. In
addition, many of our product development programs contemplate
the development of companion diagnostics by our
third-party
collaborators. Companion diagnostics are subject to regulation
as medical devices and must themselves be approved for marketing
by the FDA or certain other foreign regulatory agencies before
we may commercialize our product candidates.
We have not previously submitted an NDA to the FDA, or similar
drug approval filings to comparable foreign authorities, for any
product candidate, and we cannot be certain that any of our
product candidates will be successful in clinical trials or
receive regulatory approval. Further, our product candidates may
not receive regulatory approval even if they are successful in
clinical trials. If we do not receive regulatory approvals for
our product candidates, we may not be able to continue our
operations. Even if we successfully obtain regulatory approvals
to market one or more of our product candidates, our revenues
will be dependent, in part, upon our collaborators ability
to obtain
11
regulatory approval of the companion diagnostics to be used with
our product candidates, as well as the size of the markets in
the territories for which we gain regulatory approval and have
commercial rights. If the markets for patient subsets that we
are targeting are not as significant as we estimate, we may not
generate significant revenues from sales of such products, if
approved.
We plan to seek regulatory approval to commercialize our product
candidates both in the United States, the European Union and in
additional foreign countries. While the scope of regulatory
approval is similar in other countries, to obtain separate
regulatory approval in many other countries we must comply with
numerous and varying regulatory requirements of such countries
regarding safety and efficacy and governing, among other things,
clinical trials and commercial sales, pricing and distribution
of our product candidates, and we cannot predict success in
these jurisdictions.
Clinical
drug development involves a lengthy and expensive process with
an uncertain outcome, and results of earlier studies and trials
may not be predictive of future trial results.
Clinical testing is expensive and can take many years to
complete, and its outcome is inherently uncertain. Failure can
occur at any time during the clinical trial process. The results
of preclinical studies and early clinical trials of our product
candidates may not be predictive of the results of later-stage
clinical trials. For example, the positive results generated to
date in clinical trials for CO-101 and CO-338 do not ensure that
later clinical trials will demonstrate similar results. Product
candidates in later stages of clinical trials may fail to show
the desired safety and efficacy traits despite having progressed
through preclinical studies and initial clinical trials. A
number of companies in the biopharmaceutical industry have
suffered significant setbacks in advanced clinical trials due to
lack of efficacy or adverse safety profiles, notwithstanding
promising results in earlier trials. Our future clinical trial
results may not be successful.
Although we have clinical trials ongoing for CO-101 and CO-338,
and although we are planning to initiate clinical trials for
CO-1686 in the first half of 2012, we may experience delays in
our ongoing clinical trials and we do not know whether planned
clinical trials will begin on time, need to be redesigned,
enroll patients on time or be completed on schedule, if at all.
Clinical trials can be delayed for a variety of reasons,
including delays related to:
|
|
|
|
|
obtaining regulatory approval to commence a trial;
|
|
|
|
reaching agreement on acceptable terms with prospective contract
research organizations, or CROs, and clinical trial sites, the
terms of which can be subject to extensive negotiation and may
vary significantly among different CROs and trial sites;
|
|
|
|
obtaining institutional review board, or IRB, approval at each
site;
|
|
|
|
recruiting suitable patients to participate in a trial;
|
|
|
|
developing and validating companion diagnostics on a timely
basis;
|
|
|
|
having patients complete a trial or return for post-treatment
follow-up;
|
|
|
|
clinical sites deviating from trial protocol or dropping out of
a trial;
|
|
|
|
adding new clinical trial sites; or
|
|
|
|
manufacturing sufficient quantities of product candidate for use
in clinical trials.
|
Patient enrollment, a significant factor in the timing of
clinical trials, is affected by many factors including the size
and nature of the patient population, the proximity of patients
to clinical sites, the eligibility criteria for the trial, the
design of the clinical trial, competing clinical trials and
clinicians and patients perceptions as to the
potential advantages of the drug being studied in relation to
other available therapies, including any new drugs that may be
approved for the indications we are investigating. Furthermore,
we rely on CROs and clinical trial sites to ensure the proper
and timely conduct of our clinical trials and while we have
agreements governing their committed activities, we have limited
influence over their actual performance.
We could encounter delays if a clinical trial is suspended or
terminated by us, by the IRBs of the institutions in which such
trials are being conducted, by the Data Safety Monitoring Board,
or DSMB, for such trial or by the FDA
12
or other regulatory authorities. Such authorities may impose
such a suspension or termination due to a number of factors,
including failure to conduct the clinical trial in accordance
with regulatory requirements or our clinical protocols,
inspection of the clinical trial operations or trial site by the
FDA or other regulatory authorities resulting in the imposition
of a clinical hold, unforeseen safety issues or adverse side
effects, failure to demonstrate a benefit from using a drug,
changes in governmental regulations or administrative actions or
lack of adequate funding to continue the clinical trial. If we
experience delays in the completion of, or termination of, any
clinical trial of our product candidates, the commercial
prospects of our product candidates will be harmed, and our
ability to generate product revenues from any of these product
candidates will be delayed. In addition, any delays in
completing our clinical trials will increase our costs, slow
down our product candidate development and approval process and
jeopardize our ability to commence product sales and generate
revenues. Any of these occurrences may harm our business,
financial condition and prospects significantly. In addition,
many of the factors that cause, or lead to, a delay in the
commencement or completion of clinical trials may also
ultimately lead to the denial of regulatory approval of our
product candidates.
In addition, we only entered into a license agreement with
Pfizer with respect to
CO-338 in
June 2011 and have not previously been involved in the
development of that product candidate. We may experience
difficulties in the transition of this product candidate from
Pfizer to us, which may result in delays in clinical trials as
well as problems in our development efforts and regulatory
filings, particularly if we do not receive all of the necessary
information and data from Pfizer in a timely manner. These
problems could result in increased costs and delays in the
development of CO-338 which could adversely affect any future
revenues from this product candidate.
The
regulatory approval processes of the FDA and comparable foreign
authorities are lengthy, time consuming and inherently
unpredictable, and if we are ultimately unable to obtain
regulatory approval for our product candidates, our business
will be substantially harmed.
The time required to obtain approval by the FDA and comparable
foreign authorities is unpredictable but typically takes many
years following the commencement of clinical trials and depends
upon numerous factors, including the substantial discretion of
the regulatory authorities. In addition, approval policies,
regulations, or the type and amount of clinical data necessary
to gain approval may change during the course of a product
candidates clinical development and may vary among
jurisdictions. We have not obtained regulatory approval for any
product candidate and it is possible that none of our existing
product candidates or any product candidates we may seek to
develop in the future will ever obtain regulatory approval.
Our product candidates could fail to receive regulatory approval
for many reasons, including the following:
|
|
|
|
|
the FDA or comparable foreign regulatory authorities may
disagree with the design or implementation of our clinical
trials;
|
|
|
|
we may be unable to demonstrate to the satisfaction of the FDA
or comparable foreign regulatory authorities that a product
candidate is safe and effective for its proposed indication;
|
|
|
|
the results of clinical trials may not meet the level of
statistical significance required by the FDA or comparable
foreign regulatory authorities for approval;
|
|
|
|
we may be unable to demonstrate that a product candidates
clinical and other benefits outweigh its safety risks;
|
|
|
|
the FDA or comparable foreign regulatory authorities may
disagree with our interpretation of data from preclinical
studies or clinical trials;
|
|
|
|
the data collected from clinical trials of our product
candidates may not be sufficient to support the submission of an
NDA or other submission or to obtain regulatory approval in the
United States or elsewhere;
|
|
|
|
the FDA or comparable foreign regulatory authorities may fail to
approve the manufacturing processes or facilities of third-party
manufacturers with which we contract for clinical and commercial
supplies;
|
13
|
|
|
|
|
the FDA or comparable foreign regulatory authorities may fail to
approve the companion diagnostics we contemplate developing with
partners; and
|
|
|
|
the approval policies or regulations of the FDA or comparable
foreign regulatory authorities may significantly change in a
manner rendering our clinical data insufficient for approval.
|
This lengthy approval process as well as the unpredictability of
future clinical trial results may result in our failing to
obtain regulatory approval to market CO-101, CO-338 and CO-1686,
which would significantly harm our business, results of
operations and prospects.
In addition, even if we were to obtain approval, regulatory
authorities may approve any of our product candidates for fewer
or more limited indications than we request, may not approve the
price we intend to charge for our products, may grant approval
contingent on the performance of costly post-marketing clinical
trials, or may approve a product candidate with a label that
does not include the labeling claims necessary or desirable for
the successful commercialization of that product candidate. Any
of the foregoing scenarios could materially harm the commercial
prospects for our product candidates.
Our
product candidates may cause undesirable side effects or have
other properties that could delay or prevent their regulatory
approval, limit the commercial profile of an approved label, or
result in significant negative consequences following marketing
approval, if any.
Undesirable side effects caused by our product candidates could
cause us or regulatory authorities to interrupt, delay or halt
clinical trials and could result in a more restrictive label or
the delay or denial of regulatory approval by the FDA or other
comparable foreign authorities. To date, patients treated with
CO-101 have experienced drug-related side effects including
nausea, vomiting, anorexia, fatigue, myelosuppression (an
impairment of bone marrow function), neutropenia (a reduction in
white blood cells), and thrombocytopenia (a reduction in blood
platelet cells) and those treated with CO-338 have experienced
drug-related side effects such as nausea and vomiting. While we
have not yet initiated clinical trials for CO-1686, as is the
case with all oncology drugs, it is likely that there may be
side effects associated with its use. Results of our trials
could reveal a high and unacceptable severity and prevalence of
these or other side effects. In such an event, our trials could
be suspended or terminated and the FDA or comparable foreign
regulatory authorities could order us to cease further
development of or deny approval of our product candidates for
any or all targeted indications. The drug-related side effects
could affect patient recruitment or the ability of enrolled
patients to complete the trial or result in potential product
liability claims. Any of these occurrences may harm our
business, financial condition and prospects significantly.
Additionally if one or more of our product candidates receives
marketing approval, and we or others later identify undesirable
side effects caused by such products, a number of potentially
significant negative consequences could result, including:
|
|
|
|
|
regulatory authorities may withdraw approvals of such product;
|
|
|
|
regulatory authorities may require additional warnings on the
label;
|
|
|
|
we may be required to create a medication guide outlining the
risks of such side effects for distribution to patients;
|
|
|
|
we could be sued and held liable for harm caused to
patients; and
|
|
|
|
our reputation may suffer.
|
Any of these events could prevent us from achieving or
maintaining market acceptance of the particular product
candidate, if approved, and could significantly harm our
business, results of operations and prospects.
Failure
to successfully validate, develop and obtain regulatory approval
for companion diagnostics could harm our drug development
strategy.
As one of the key elements of our clinical development strategy,
we seek to identify patient subsets within a disease category
who may derive selective and meaningful benefit from the product
candidates we are developing. In collaboration with partners, we
plan to develop companion diagnostics to help us to more
accurately identify
14
patients within a particular subset, both during our clinical
trials and in connection with the commercialization of our
product candidates. Companion diagnostics are subject to
regulation by the FDA and comparable foreign regulatory
authorities as medical devices and require separate regulatory
approval prior to commercialization. We do not develop companion
diagnostics internally and thus we are dependent on the
sustained cooperation and effort of our third-party
collaborators in developing and obtaining approval for these
companion diagnostics. We and our collaborators may encounter
difficulties in developing and obtaining approval for the
companion diagnostics, including issues relating to
selectivity/specificity, analytical validation, reproducibility,
or clinical validation. Any delay or failure by our
collaborators to develop or obtain regulatory approval of the
companion diagnostics could delay or prevent approval of our
product candidates. In addition, our collaborators may encounter
production difficulties that could constrain the supply of the
companion diagnostics, and both they and we may have
difficulties gaining acceptance of the use of the companion
diagnostics in the clinical community. If such companion
diagnostics fail to gain market acceptance, it would have an
adverse effect on our ability to derive revenues from sales of
our products. In addition, the diagnostic company with whom we
contract may decide to discontinue selling or manufacturing the
companion diagnostic that we anticipate using in connection with
development and commercialization of our product candidates or
our relationship with such diagnostic company may otherwise
terminate. We may not be able to enter into arrangements with
another diagnostic company to obtain supplies of an alternative
diagnostic test for use in connection with the development and
commercialization of our product candidates or do so on
commercially reasonable terms, which could adversely affect
and/or delay
the development or commercialization of our product candidates.
If we
established the hENT1 cut-off improperly, or if our LEAP trial
results do not support the hENT1 hypothesis, we could jeopardize
our potential for success with
CO-101.
Retrospective analysis of tissue samples has shown a correlation
between hENT1 expression levels and response to gemcitabine
therapy such that patients with low levels of hENT1 expression
are believed to derive little or no benefit from the drug. Our
ongoing pivotal trial will, to our knowledge, be the first
clinical trial to prospectively identify patients as hENT1-low
and to then correlate their response to CO-101 versus
gemcitabine. We will utilize both previously published research
data, as well as the data we derive from our own retrospective
analysis of tissue samples, to reach a judgment as to those
pancreatic cancer patients whose level of hENT1 expression we
will characterize as hENT1-low. If the cut-off was
set too high (to cover a broader range of patients), we may
reduce our chances of being able to show a statistically
significant improvement in the rate of survival in the patients
classified as hENT1-low, and thereby fail to meet the
pre-defined endpoint of the trial. Conversely, if we were overly
conservative in our judgment of classifying patients as
hENT1-low, we may improve our chance of success in achieving the
pre-defined endpoint, but at the cost of limiting the
prescribing label on CO-101 to such a small subset of potential
patients as to significantly constrain the commercial potential
for this product candidate, if approved. Finally, we have
established our hENT1 cut-off based on tissue samples that came
from primary pancreatic tumors, but are using tissue samples
from metastatic cancer sites to define the hENT1 status of the
patients in the trial. While there are limited data that suggest
that the hENT1 status is generally consistent between metastatic
and primary tumors, this may not be the case in the clinical
setting, which could adversely affect the outcome of the trial.
There have been multiple publications addressing the
relationship between hENT1 levels and gemcitabine treatment
outcomes. To date, all of these publications have suggested the
same relationship, namely that hENT1-high patients tend to
respond better to gemcitabine therapy than hENT1-low patients.
For example, in 2009, a study published in
Gastroenterology reported the results of a retrospective
analysis of randomized samples collected from 198 pancreatic
cancer patients between 1998 and 2002 comparing treatment with
gemcitabine versus 5-FU. Patients in this study treated with
gemcitabine who had a high level of hENT1 expression had a
median overall survival of 21 months, compared to a median
overall survival of 16 months for gemcitabine-treated
patients with low hENT1 expression and 12 months for
gemcitabine-treated patients with no hENT1 expression.
Importantly, the results of this study also demonstrated that
there was no correlation between overall survival and hENT1
expression for patients treated with 5-FU. It is possible that
other retrospective analyses of tissue samples may be published
that do not reflect this correlation. Moreover, none of such
studies have attempted to do what our LEAP trial is designed to
do, which is to seek to prospectively prove this hENT1
hypothesis. Accordingly, we bear the risk that in a prospective,
well controlled clinical trial, we may not be able to prove the
hENT1 hypothesis. Our failure to achieve
15
the predefined endpoints of the LEAP trial that support this
hENT1 hypothesis would have an adverse impact on our ability to
obtain approval for CO-101 and on our business, financial
condition and prospects.
We
rely on third parties to conduct our preclinical and clinical
trials. If these third parties do not successfully carry out
their contractual duties or meet expected deadlines, we may not
be able to obtain regulatory approval for or commercialize our
product candidates and our business could be substantially
harmed.
We have relied upon and plan to continue to rely upon
third-party CROs to monitor and manage data for our ongoing
preclinical and clinical programs. We rely on these parties for
execution of our preclinical and clinical trials, and control
only certain aspects of their activities. Nevertheless, we are
responsible for ensuring that each of our studies is conducted
in accordance with the applicable protocol, legal, regulatory
and scientific standards and our reliance on the CROs does not
relieve us of our regulatory responsibilities. We and our CROs
are required to comply with current good clinical practices, or
cGCP, which are regulations and guidelines enforced by the FDA,
the Competent Authorities of the Member States of the European
Economic Area, or EEA, and comparable foreign regulatory
authorities for all of our products in clinical development.
Regulatory authorities enforce these cGCPs through periodic
inspections of trial sponsors, principal investigators and trial
sites. If we or any of our CROs fail to comply with applicable
cGCPs, the clinical data generated in our clinical trials may be
deemed unreliable and the FDA, EMA or comparable foreign
regulatory authorities may require us to perform additional
clinical trials before approving our marketing applications. We
cannot assure you that upon inspection by a given regulatory
authority, such regulatory authority will determine that any of
our clinical trials comply with cGCP regulations. In addition,
our clinical trials must be conducted with product produced
under cGMP regulations. Our failure to comply with these
regulations may require us to repeat clinical trials, which
would delay the regulatory approval process.
Our CROs have the right to terminate their agreements with us in
the event of an uncured material breach. In addition, some of
our CROs have an ability to terminate their respective
agreements with us if it can be reasonably demonstrated that the
safety of the subjects participating in our clinical trials
warrants such termination, if we make a general assignment for
the benefit of our creditors or if we are liquidated.
If any of our relationships with these third-party CROs
terminate, we may not be able to enter into arrangements with
alternative CROs or to do so on commercially reasonable terms.
In addition, our CROs are not our employees, and except for
remedies available to us under our agreements with such CROs, we
cannot control whether or not they devote sufficient time and
resources to our on-going clinical, nonclinical and preclinical
programs. If CROs do not successfully carry out their
contractual duties or obligations or meet expected deadlines, if
they need to be replaced or if the quality or accuracy of the
clinical data they obtain is compromised due to the failure to
adhere to our clinical protocols, regulatory requirements or for
other reasons, our clinical trials may be extended, delayed or
terminated and we may not be able to obtain regulatory approval
for or successfully commercialize our product candidates. As a
result, our results of operations and the commercial prospects
for our product candidates would be harmed, our costs could
increase and our ability to generate revenues could be delayed.
Switching or adding additional CROs involves additional cost and
requires management time and focus. In addition, there is a
natural transition period when a new CRO commences work. As a
result, delays occur, which can materially impact our ability to
meet our desired clinical development timelines. Though we
carefully manage our relationships with our CROs, there can be
no assurance that we will not encounter similar challenges or
delays in the future or that these delays or challenges will not
have a material adverse impact on our business, financial
condition and prospects.
We
rely completely on third parties to manufacture our preclinical
and clinical drug supplies and we intend to rely on third
parties to produce commercial supplies of any approved product
candidate, and our commercialization of any of our product
candidates could be stopped, delayed or made less profitable if
those third parties fail to obtain approval of the FDA,
Competent Authorities of the Member States of the EEA or
comparable regulatory authorities, fail to provide us with
sufficient quantities of drug product or fail to do so at
acceptable quality levels or prices.
We do not currently have nor do we plan to acquire the
infrastructure or capability internally to manufacture our
preclinical and clinical drug supplies for use in the conduct of
our clinical trials and we lack the resources and
16
the capability to manufacture any of our product candidates on a
clinical or commercial scale. The facilities used by our
contract manufacturers to manufacture our product candidates
must be approved by the FDA pursuant to inspections that will be
conducted after we submit our NDA to the FDA. We do not control
the manufacturing process of, and are completely dependent on,
our contract manufacturing partners for compliance with the
regulatory requirements, known as current good manufacturing
practices, or cGMPs, for manufacture of both active drug
substances and finished drug products. If our contract
manufacturers cannot successfully manufacture material that
conforms to our specifications and the strict regulatory
requirements of the FDA or others, they will not be able to
secure
and/or
maintain regulatory approval for their manufacturing facilities.
In addition, we have no control over the ability of our contract
manufacturers to maintain adequate quality control, quality
assurance and qualified personnel. If the FDA or a comparable
foreign regulatory authority does not approve these facilities
for the manufacture of our product candidates or if it withdraws
any such approval in the future, we may need to find alternative
manufacturing facilities, which would significantly impact our
ability to develop, obtain regulatory approval for or market our
product candidates, if approved.
We rely on our manufacturers to purchase from third-party
suppliers the materials necessary to produce our product
candidates for our clinical trials. There are a limited number
of suppliers for raw materials that we use to manufacture our
drugs and there may be a need to assess alternate suppliers to
prevent a possible disruption of the manufacture of the
materials necessary to produce our product candidates for our
clinical trials, and if approved, ultimately for commercial
sale. We do not have any control over the process or timing of
the acquisition of these raw materials by our manufacturers.
Moreover, we currently do not have any agreements for the
commercial production of these raw materials. Although we
generally do not begin a clinical trial unless we believe we
have a sufficient supply of a product candidate to complete the
clinical trial, any significant delay in the supply of a product
candidate, or the raw material components thereof, for an
ongoing clinical trial due to the need to replace a third-party
manufacturer could considerably delay completion of our clinical
trials, product testing and potential regulatory approval of our
product candidates. If our manufacturers or we are unable to
purchase these raw materials after regulatory approval has been
obtained for our product candidates, the commercial launch of
our product candidates would be delayed or there would be a
shortage in supply, which would impair our ability to generate
revenues from the sale of our product candidates.
We expect to continue to depend on third-party contract
manufacturers for the foreseeable future. We have not entered
into long-term agreements with our current contract
manufacturers or with any alternate fill/finish suppliers, and
though we intend to do so prior to commercial launch in order to
ensure that we maintain adequate supplies of finished drug
product, we may be unable to enter into such an agreement or do
so on commercially reasonable terms, which could have a material
adverse impact upon our business. We currently obtain our
supplies of finished drug product through individual purchase
orders.
Even
if we receive regulatory approval for any of our product
candidates, we will be subject to ongoing obligations and
continued regulatory review, which may result in significant
additional expense. Additionally, our product candidates, if
approved, could be subject to labeling and other restrictions
and market withdrawal and we may be subject to penalties if we
fail to comply with regulatory requirements or experience
unanticipated problems with our products.
Any regulatory approvals that we receive for our product
candidates may also be subject to limitations on the approved
indicated uses for which the product may be marketed or to the
conditions of approval, or contain requirements for potentially
costly post-marketing testing, including Phase IV clinical
trials, and surveillance to monitor the safety and efficacy of
the product candidate. In addition, if the FDA or a comparable
foreign regulatory authority approves any of our product
candidates, the manufacturing processes, labeling, packaging,
distribution, adverse event reporting, storage, advertising,
promotion and recordkeeping for the product will be subject to
extensive and ongoing regulatory requirements. These
requirements include submissions of safety and other
post-marketing information and reports, registration, as well as
continued compliance with cGMPs and cGCPs for any clinical
trials that we conduct post-approval. Later discovery of
previously unknown problems with a product,
17
including adverse events of unanticipated severity or frequency,
or with our third-party manufacturers or manufacturing
processes, or failure to comply with regulatory requirements,
may result in, among other things:
|
|
|
|
|
restrictions on the marketing or manufacturing of the product,
withdrawal of the product from the market, or voluntary or
mandatory product recalls;
|
|
|
|
fines, warning letters or holds on clinical trials;
|
|
|
|
refusal by the FDA to approve pending applications or
supplements to approved applications filed by us, or suspension
or revocation of product license approvals;
|
|
|
|
product seizure or detention, or refusal to permit the import or
export of products; and
|
|
|
|
injunctions or the imposition of civil or criminal penalties.
|
The FDAs policies may change and additional government
regulations may be enacted that could prevent, limit or delay
regulatory approval of our product candidates. If we are slow or
unable to adapt to changes in existing requirements or the
adoption of new requirements or policies, or if we are not able
to maintain regulatory compliance, we may lose any marketing
approval that we may have obtained, which would adversely affect
our business, prospects and ability to achieve or sustain
profitability.
We
currently have no marketing and sales organization. If we are
unable to establish marketing and sales capabilities or enter
into agreements with third parties to market and sell our
product candidates, we may not be able to effectively market and
sell our product candidates, if approved, or generate product
revenues.
We currently do not have a marketing or sales organization for
the marketing, sales and distribution of pharmaceutical
products. In order to commercialize any product candidates, we
must build our marketing, sales, distribution, managerial and
other non-technical capabilities or make arrangements with third
parties to perform these services, and we may not be successful
in doing so. If our product candidates receive regulatory
approval, we intend to establish our sales and marketing
organization with technical expertise and supporting
distribution capabilities to commercialize our product
candidates, which will be expensive and time consuming. Any
failure or delay in the development of our internal sales,
marketing and distribution capabilities would adversely impact
the commercialization of these products. With respect to our
product candidates, we may choose to collaborate with third
parties that have direct sales forces and established
distribution systems, either to augment our own sales force and
distribution systems or in lieu of our own sales force and
distribution systems. If we are unable to enter into such
arrangements on acceptable terms or at all, we may not be able
to successfully commercialize any of our product candidates that
receive regulatory approval. If we are not successful in
commercializing our product candidates, either on our own or
through collaborations with one or more third parties, our
future product revenue will suffer and we may incur significant
additional losses.
Our
commercial success depends upon attaining significant market
acceptance of our product candidates, if approved, among
physicians, patients, healthcare payors and major operators of
cancer clinics.
Even if we obtain regulatory approval for our product
candidates, the product may not gain market acceptance among
physicians, health care payors, patients and the medical
community, which are critical to commercial success. Market
acceptance of any product candidate for which we receive
approval depends on a number of factors, including:
|
|
|
|
|
the efficacy and safety as demonstrated in clinical trials;
|
|
|
|
the timing of market introduction of such product candidate as
well as competitive products;
|
|
|
|
the clinical indications for which the drug is approved;
|
|
|
|
the approval, availability, market acceptance and reimbursement
for the companion diagnostic;
|
|
|
|
acceptance by physicians, major operators of cancer clinics and
patients of the drug as a safe and effective treatment;
|
18
|
|
|
|
|
the potential and perceived advantages of such product candidate
over alternative treatments, especially with respect to patient
subsets that we are targeting with such product candidate;
|
|
|
|
the safety of such product candidate seen in a broader patient
group, including its use outside the approved indications;
|
|
|
|
the cost of treatment in relation to alternative treatments;
|
|
|
|
the availability of adequate reimbursement and pricing by
third-party payors and government authorities;
|
|
|
|
relative convenience and ease of administration;
|
|
|
|
the prevalence and severity of adverse side effects; and
|
|
|
|
the effectiveness of our sales and marketing efforts.
|
If our product candidates are approved but fail to achieve an
adequate level of acceptance by physicians, health care payors
and patients, we will not be able to generate significant
revenues, and we may not become or remain profitable.
We
face significant competition from other biotechnology and
pharmaceutical companies, and our operating results will suffer
if we fail to compete effectively.
The biotechnology and pharmaceutical industries are intensely
competitive and subject to rapid and significant technological
change. In addition, the competition in the oncology market is
intense. We have competitors both in the United States and
internationally, including major multinational pharmaceutical
companies, biotechnology companies and universities and other
research institutions. For example, there are currently two
agents approved for the treatment of metastatic pancreatic
cancer:
Gemzar®/gemcitabine
marketed by Eli Lilly, Teva Pharmaceutical Industries and APP
Pharmaceuticals, and
Tarcevatm
(erlotinib) marketed by Astellas Pharma, and there are a number
of active clinical trials ongoing in pancreatic cancer,
including by AB Science SA, Amgen Inc., Astellas Pharma,
BioSante Pharmaceuticals, Inc., Celgene Corporation,
Immunomedics, Inc., Lorus Therapeutics, Merrimack
Pharmaceuticals, Inc. and Threshold Pharmaceuticals, Inc. In
addition, we are aware of two products in development targeting
EGFR for the treatment of NSCLC: Boehringer Ingelheims
BIBW-2992 (afatinib) and Pfizers PF-299804. Finally, we
believe the products in development targeting the PARP pathway
consist of Sanofi-Aventis BSI-201 (iniparib), Astra
Zenecas AZD-2281 (olaparib), Abbotts ABT-888
(velaparib), Mercks MK-4827, Eisais
E-7016,
Cephalons CEP-9722 and Biomarins BMN-673.
Many of our competitors have substantially greater financial,
technical and other resources, such as larger research and
development staff and experienced marketing and manufacturing
organizations. Additional mergers and acquisitions in the
biotechnology and pharmaceutical industries may result in even
more resources being concentrated in our competitors. As a
result, these companies may obtain regulatory approval more
rapidly than we are able and may be more effective in selling
and marketing their products as well. Smaller or early-stage
companies may also prove to be significant competitors,
particularly through collaborative arrangements with large,
established companies. Competition may increase further as a
result of advances in the commercial applicability of
technologies and greater availability of capital for investment
in these industries. Our competitors may succeed in developing,
acquiring or licensing on an exclusive basis drug products that
are more effective or less costly than any drug candidate that
we are currently developing or that we may develop. If approved,
our product candidates will face competition from commercially
available drugs as well as drugs that are in the development
pipelines of our competitors.
Established pharmaceutical companies may invest heavily to
accelerate discovery and development of novel compounds or to
in-license novel compounds that could make our product
candidates less competitive. In addition, any new product that
competes with an approved product must demonstrate compelling
advantages in efficacy, convenience, tolerability and safety in
order to overcome price competition and to be commercially
successful. Accordingly, our competitors may succeed in
obtaining patent protection, receiving FDA, EMA or other
regulatory approval or discovering, developing and
commercializing medicines before we do, which would have a
material adverse impact on our business.
19
Reimbursement
may be limited or unavailable in certain market segments for our
product candidates, which could make it difficult for us to sell
our products profitably.
There is significant uncertainty related to the third-party
coverage and reimbursement of newly approved drugs. We intend to
seek approval to market our product candidates in the United
States, Europe and other selected foreign jurisdictions. Market
acceptance and sales of our product candidates in both domestic
and international markets will depend significantly on the
availability of adequate coverage and reimbursement from
third-party payors for any of our product candidates and may be
affected by existing and future health care reform measures.
Government authorities and third-party payors, such as private
health insurers and health maintenance organizations, decide
which drugs they will pay for and establish reimbursement
levels. Reimbursement by a third-party payor may depend upon a
number of factors, including the third-party payors
determination that use of a product is:
|
|
|
|
|
a covered benefit under its health plan;
|
|
|
|
safe, effective and medically necessary;
|
|
|
|
appropriate for the specific patient;
|
|
|
|
cost-effective; and
|
|
|
|
neither experimental nor investigational.
|
Obtaining coverage and reimbursement approval for a product from
a government or other third-party payor is a time consuming and
costly process that could require us to provide supporting
scientific, clinical and cost-effectiveness data for the use of
our products to the payor. We may not be able to provide data
sufficient to gain acceptance with respect to coverage and
reimbursement. If reimbursement of our future products is
unavailable or limited in scope or amount, or if pricing is set
at unsatisfactory levels, we may be unable to achieve or sustain
profitability.
In both the United States and certain foreign jurisdictions,
there have been and we expect there will continue to be a number
of legislative and regulatory changes to the health care system
that could impact our ability to sell our products profitably.
In particular, the Medicare Modernization Act of 2003 revised
the payment methodology for many products under the Medicare
program in the United States. This has resulted in lower rates
of reimbursement. In 2010, the Patient Protection and Affordable
Care Act, as amended by the Health Care and Education
Reconciliation Act, collectively, the Healthcare Reform Law, was
enacted. The Healthcare Reform Law substantially changes the way
healthcare is financed by both governmental and private insurers
and significantly affects the pharmaceutical industry. Among the
provisions of the Healthcare Reform Law of greatest importance
to the pharmaceutical industry are the following:
|
|
|
|
|
an annual, nondeductible fee on any entity that manufactures or
imports certain branded prescription drugs and biologic agents,
beginning in 2011;
|
|
|
|
an increase in the minimum rebates a manufacturer must pay under
the Medicaid Drug Rebate Program;
|
|
|
|
a new Medicare Part D coverage gap discount program, under
which manufacturers must agree to offer 50 percent
point-of-sale
discounts off negotiated prices of applicable brand drugs to
eligible beneficiaries during their coverage gap period, as a
condition for the manufacturers outpatient drugs to be
covered under Medicare Part D, beginning in 2011;
|
|
|
|
extension of manufacturers Medicaid rebate liability to
covered drugs dispensed to individuals who are enrolled in
Medicaid managed care organizations, effective March 23,
2010;
|
|
|
|
expansion of the entities eligible for discounts under the
Public Health Service pharmaceutical pricing program, effective
January 2010;
|
|
|
|
a licensure framework for follow-on biologic products; and
|
|
|
|
a new Patient-Centered Outcomes Research Institute to oversee,
identify priorities in, and conduct comparative clinical
effectiveness research.
|
20
There have been, and likely will continue to be, legislative and
regulatory proposals at the federal and state levels directed at
broadening the availability of healthcare and containing or
lowering the cost of healthcare. We cannot predict the
initiatives that may be adopted in the future. The continuing
efforts of the government, insurance companies, managed care
organizations and other payors of healthcare services to contain
or reduce costs of healthcare may adversely affect:
|
|
|
|
|
the demand for any drug products for which we may obtain
regulatory approval;
|
|
|
|
our ability to set a price that we believe is fair for our
products;
|
|
|
|
our ability to generate revenues and achieve or maintain
profitability;
|
|
|
|
the level of taxes that we are required to pay; and
|
|
|
|
the availability of capital.
|
In addition, governments may impose price controls, which may
adversely affect our future profitability.
In some foreign countries, particularly in the European Union,
the pricing of prescription pharmaceuticals is subject to
governmental control. In these countries, pricing negotiations
with governmental authorities can take considerable time after
the receipt of marketing approval for a product candidate. To
obtain reimbursement or pricing approval in some countries, we
may be required to conduct additional clinical trials that
compare the cost-effectiveness of our product candidates to
other available therapies. If reimbursement of our product
candidates is unavailable or limited in scope or amount in a
particular country, or if pricing is set at unsatisfactory
levels, we may be unable to achieve or sustain profitability of
our products in such country.
If we
are not successful in attracting and retaining highly qualified
personnel, we may not be able to successfully implement our
business strategy.
Our industry has experienced a high rate of turnover of
management personnel in recent years. Our ability to compete in
the highly competitive biotechnology and pharmaceuticals
industries depends upon our ability to attract and retain highly
qualified managerial, scientific and medical personnel. We are
highly dependent on our management, scientific and medical
personnel, especially Patrick J. Mahaffy, our President and
Chief Executive Officer, Erle T. Mast, our Executive Vice
President and Chief Financial Officer, Andrew R. Allen, our
Executive Vice President of Clinical and Pre-Clinical
Development and Chief Medical Officer, and Gillian C.
Ivers-Read, our Executive Vice President, Technical Operations
and Chief Regulatory Officer, whose services are critical to the
successful implementation of our product candidate acquisition,
development and regulatory strategies. We are not aware of any
present intention of any of these individuals to leave our
company. In order to induce valuable employees to continue their
employment with us, we have provided stock options that vest
over time. The value to employees of stock options that vest
over time is significantly affected by movements in our stock
price that are beyond our control, and may at any time be
insufficient to counteract more lucrative offers from other
companies.
Despite our efforts to retain valuable employees, members of our
management, scientific and development teams may terminate their
employment with us on short notice. Pursuant to their employment
arrangements, each of our executive officers may voluntarily
terminate their employment at any time by providing as little as
thirty days advance notice. Our employment arrangements, other
than those with our executive officers, provide for at-will
employment, which means that any of our employees (other than
our executive officers) could leave our employment at any time,
with or without notice. The loss of the services of any of our
executive officers or other key employees and our inability to
find suitable replacements could potentially harm our business,
financial condition and prospects. Our success also depends on
our ability to continue to attract, retain and motivate highly
skilled junior, mid-level, and senior managers as well as
junior, mid-level, and senior scientific and medical personnel.
We may not be able to attract or retain qualified management and
scientific personnel in the future due to the intense
competition for a limited number of qualified personnel among
biopharmaceutical, biotechnology, pharmaceutical and other
businesses. Many of the other pharmaceutical companies that we
compete against for qualified personnel have greater financial
and other resources, different risk profiles and a longer
history in the industry than we do. They also may provide more
diverse opportunities and better chances for career advancement.
Some of these characteristics may be more appealing to high
quality candidates than what we have to offer. If we are
21
unable to continue to attract and retain high quality personnel,
the rate and success at which we can develop and commercialize
product candidates will be limited.
We
will need to grow the size of our organization, and we may
experience difficulties in managing this growth.
As of October 20, 2011, we had 45 full-time employees.
As our development and commercialization plans and strategies
develop, we expect to need additional managerial, operational,
sales, marketing, financial and other resources. Future growth
would impose significant added responsibilities on members of
management, including:
|
|
|
|
|
managing our clinical trials effectively;
|
|
|
|
identifying, recruiting, maintaining, motivating and integrating
additional employees;
|
|
|
|
managing our internal development efforts effectively while
complying with our contractual obligations to licensors,
licensees, contractors and other third parties;
|
|
|
|
improving our managerial, development, operational and finance
systems; and
|
|
|
|
expanding our facilities.
|
As our operations expand, we expect that we will need to manage
additional relationships with various strategic partners,
suppliers and other third parties. Our future financial
performance and our ability to commercialize our product
candidates and to compete effectively will depend, in part, on
our ability to manage any future growth effectively. To that
end, we must be able to manage our development efforts and
clinical trials effectively and hire, train and integrate
additional management, administrative and sales and marketing
personnel. We may not be able to accomplish these tasks, and our
failure to accomplish any of them could prevent us from
successfully growing our company.
Our
employees may engage in misconduct or other improper activities,
including noncompliance with regulatory standards and
requirements, which could have a material adverse effect on our
business.
We are exposed to the risk of employee fraud or other
misconduct. Misconduct by employees could include intentional
failures to comply with FDA regulations, provide accurate
information to the FDA, comply with manufacturing standards we
have established, comply with federal and state health-care
fraud and abuse laws and regulations, report financial
information or data accurately or disclose unauthorized
activities to us. In particular, sales, marketing and business
arrangements in the healthcare industry are subject to extensive
laws and regulations intended to prevent fraud, kickbacks,
self-dealing and other abusive practices. These laws and
regulations may restrict or prohibit a wide range of pricing,
discounting, marketing and promotion, sales commission, customer
incentive programs and other business arrangements. Employee
misconduct could also involve the improper use of information
obtained in the course of clinical trials, which could result in
regulatory sanctions and serious harm to our reputation. We have
adopted a Code of Business Ethics, which will be effective as of
the closing of this offering, but it is not always possible to
identify and deter employee misconduct, and the precautions we
take to detect and prevent this activity may not be effective in
controlling unknown or unmanaged risks or losses or in
protecting us from governmental investigations or other actions
or lawsuits stemming from a failure to be in compliance with
such laws or regulations. If any such actions are instituted
against us, and we are not successful in defending ourselves or
asserting our rights, those actions could have a significant
impact on our business and results of operations, including the
imposition of significant fines or other sanctions.
We may
be subject, directly or indirectly, to federal and state
healthcare fraud and abuse laws, false claims laws and health
information privacy and security laws. If we are unable to
comply, or have not fully complied, with such laws, we could
face substantial penalties.
If we obtain FDA approval for any of our product candidates and
begin commercializing those products in the United States, our
operations may be directly, or indirectly through our customers,
subject to various federal and state fraud and abuse laws,
including, without limitation, the federal Anti-Kickback Statute
and the federal False Claims Act. These laws may impact, among
other things, our proposed sales, marketing and education
programs. In
22
addition, we may be subject to patient privacy regulation by
both the federal government and the states in which we conduct
our business. The laws that may affect our ability to operate
include:
|
|
|
|
|
the federal Anti-Kickback Statute, which prohibits, among other
things, persons from knowingly and willfully soliciting,
receiving, offering or paying remuneration, directly or
indirectly, to induce, or in return for, the purchase or
recommendation of an item or service reimbursable under a
federal healthcare program, such as the Medicare and Medicaid
programs;
|
|
|
|
federal civil and criminal false claims laws and civil monetary
penalty laws, which prohibit, among other things, individuals or
entities from knowingly presenting, or causing to be presented,
claims for payment from Medicare, Medicaid, or other third-party
payers that are false or fraudulent;
|
|
|
|
the federal Health Insurance Portability and Accountability Act
of 1996, or HIPAA, which created new federal criminal statutes
that prohibit executing a scheme to defraud any healthcare
benefit program and making false statements relating to
healthcare matters;
|
|
|
|
HIPAA, as amended by the Health Information Technology and
Clinical Health Act, or HITECH, and its implementing
regulations, which imposes certain requirements relating to the
privacy, security and transmission of individually identifiable
health information; and
|
|
|
|
state law equivalents of each of the above federal laws, such as
anti-kickback and false claims laws which may apply to items or
services reimbursed by any third-party payer, including
commercial insurers, and state laws governing the privacy and
security of health information in certain circumstances, many of
which differ from each other in significant ways and may not
have the same effect, thus complicating compliance efforts.
|
If our operations are found to be in violation of any of the
laws described above or any other governmental regulations that
apply to us, we may be subject to penalties, including civil and
criminal penalties, damages, fines and the curtailment or
restructuring of our operations, any of which could adversely
affect our ability to operate our business and our results of
operations.
If
product liability lawsuits are brought against us, we may incur
substantial liabilities and may be required to limit
commercialization of our product candidates.
We face an inherent risk of product liability as a result of the
clinical testing of our product candidates and will face an even
greater risk if we commercialize any products. For example, we
may be sued if any product we develop allegedly causes injury or
is found to be otherwise unsuitable during product testing,
manufacturing, marketing or sale. Any such product liability
claims may include allegations of defects in manufacturing,
defects in design, a failure to warn of dangers inherent in the
product, negligence, strict liability, and a breach of
warranties. Claims could also be asserted under state consumer
protection acts. If we cannot successfully defend ourselves
against product liability claims, we may incur substantial
liabilities or be required to limit commercialization of our
product candidates, if approved. Even successful defense would
require significant financial and management resources.
Regardless of the merits or eventual outcome, liability claims
may result in:
|
|
|
|
|
decreased demand for our product candidates or products that we
may develop;
|
|
|
|
injury to our reputation;
|
|
|
|
withdrawal of clinical trial participants;
|
|
|
|
initiation of investigations by regulators;
|
|
|
|
costs to defend the related litigation;
|
|
|
|
a diversion of managements time and our resources;
|
|
|
|
substantial monetary awards to trial participants or patients;
|
|
|
|
product recalls, withdrawals or labeling, marketing or
promotional restrictions;
|
|
|
|
loss of revenues from product sales; and
|
|
|
|
the inability to commercialize our product candidates.
|
23
Our inability to obtain and retain sufficient product liability
insurance at an acceptable cost to protect against potential
product liability claims could prevent or inhibit the
commercialization of products we develop. We currently carry
$5.0 million of product liability insurance, which we
believe is adequate for our clinical trials. Although we
maintain such insurance, any claim that may be brought against
us could result in a court judgment or settlement in an amount
that is not covered, in whole or in part, by our insurance or
that is in excess of the limits of our insurance coverage. Our
insurance policies also have various exclusions, and we may be
subject to a product liability claim for which we have no
coverage. We will have to pay any amounts awarded by a court or
negotiated in a settlement that exceed our coverage limitations
or that are not covered by our insurance, and we may not have,
or be able to obtain, sufficient capital to pay such amounts.
Our
ability to utilize our net operating loss carryforwards and
certain other tax attributes may be limited.
We have incurred substantial losses during our history and do
not expect to become profitable in 2011 and may never achieve
profitability. To the extent that we continue to generate
taxable losses, unused losses will carry forward to offset
future taxable income, if any, until such unused losses expire.
Under Section 382 of the Internal Revenue Code of 1986, as
amended, or the Code, if a corporation undergoes an
ownership change (generally defined as a greater
than 50% change (by value) in its equity ownership over a three
year period), the corporations ability to use its
pre-change net operating loss carryforwards and other pre-change
tax attributes to offset its post-change income may be limited.
We do not believe that we will experience an ownership change as
a result of this initial public offering. However, we may
experience ownership changes in the future as a result of
subsequent shifts in our stock ownership. As of
December 31, 2010, we had federal net operating loss
carryforwards of approximately $24.4 million that could be
limited if we experience an ownership change, which could have
an adverse effect on our results of operations.
Our
business and operations would suffer in the event of system
failures.
Despite the implementation of security measures, our internal
computer systems and those of our CROs and other contractors and
consultants are vulnerable to damage from computer viruses,
unauthorized access, natural disasters, terrorism, war and
telecommunication and electrical failures. While we have not
experienced any such system failure, accident or security breach
to date, if such an event were to occur and cause interruptions
in our operations, it could result in a material disruption of
our drug development programs. For example, the loss of clinical
trial data from completed or ongoing or planned clinical trials
could result in delays in our regulatory approval efforts and
significantly increase our costs to recover or reproduce the
data. To the extent that any disruption or security breach were
to result in a loss of or damage to our data or applications, or
inappropriate disclosure of confidential or proprietary
information, we could incur liability and the further
development of our product candidates could be delayed.
Risks
Related to Our Intellectual Property
If our
efforts to protect the proprietary nature of the intellectual
property related to our technologies are not adequate, we may
not be able to compete effectively in our market.
We rely upon a combination of patents, trade secret protection
and confidentiality agreements to protect the intellectual
property related to our technologies. Any disclosure to or
misappropriation by third parties of our confidential
proprietary information could enable competitors to quickly
duplicate or surpass our technological achievements, thus
eroding our competitive position in our market.
The strength of patents in the biotechnology and pharmaceutical
field involves complex legal and scientific questions and can be
uncertain. The patent applications that we own or license may
fail to result in issued patents in the United States or in
other foreign countries. Even if the patents do successfully
issue, third parties may challenge the validity, enforceability
or scope thereof, which may result in such patents being
narrowed, invalidated or held unenforceable. Furthermore, even
if they are unchallenged, our patents and patent applications
may not adequately protect our intellectual property or prevent
others from designing around our claims. If the breadth or
strength of protection provided by the patent applications we
hold or pursue with respect to our product candidates is
threatened, it could threaten our ability to commercialize our
product candidates. Further, if we encounter delays in our
clinical trials, the period of time during which we could market
our product candidates under patent protection
24
would be reduced. Since patent applications in the United States
and most other countries are confidential for a period of time
after filing, we cannot be certain that we were the first to
file any patent application related to our product candidates.
Furthermore, an interference proceeding can be provoked by a
third-party or instituted by the United States Patent and
Trademark Office, or the U.S. PTO, to determine who was the
first to invent any of the subject matter covered by the patent
claims of our applications.
With respect to CO-101, we have an exclusive, worldwide license
from Clavis to a portfolio of patents directed to the CO-101
composition of matter that expire in 2018. With respect to
CO-338, we have an exclusive, worldwide license from Pfizer to a
portfolio of patents and patent applications directed to the
CO-338 composition of matter that expire in 2020. While patent
term extensions under the Hatch-Waxman Act in the United States
and under supplementary protection certificates in Europe may be
available to extend our patent exclusivity for either CO-101 or
CO-338, we cannot provide any assurances that any such patent
term extension will be obtained.
In addition to the protection afforded by patents, we seek to
rely on trade secret protection and confidentiality agreements
to protect proprietary know-how that is not patentable,
processes for which patents are difficult to enforce and any
other elements of our drug development processes that involve
proprietary know-how, information or technology that is not
covered by patents. Although we require all of our employees to
assign their inventions to us, and all of our employees,
consultants, advisors and any third parties who have access to
our proprietary know-how, information or technology to enter
into confidentiality agreements, we cannot be certain that our
trade secrets and other confidential proprietary information
will not be disclosed or that competitors will not otherwise
gain access to our trade secrets or independently develop
substantially equivalent information and techniques. Further,
the laws of some foreign countries do not protect proprietary
rights to the same extent or in the same manner as the laws of
the United States. As a result, we may encounter significant
problems in protecting and defending our intellectual property
both in the United States and abroad. If we are unable to
prevent material disclosure of the intellectual property related
to our technologies to third parties, we will not be able to
establish or maintain a competitive advantage in our market,
which could materially adversely affect our business, results of
operations and financial condition.
Third-party
claims of intellectual property infringement may prevent or
delay our drug discovery and development efforts.
Our commercial success depends in part on our avoiding
infringement of the patents and proprietary rights of third
parties. There is a substantial amount of litigation involving
patent and other intellectual property rights in the
biotechnology and pharmaceutical industries, including
interference and reexamination proceedings before the
U.S. PTO or oppositions and other comparable proceedings in
foreign jurisdictions. Numerous United States and foreign issued
patents and pending patent applications, which are owned by
third parties, exist in the fields in which we are developing
product candidates. As the biotechnology and pharmaceutical
industries expand and more patents are issued, the risk
increases that our product candidates may give rise to claims of
infringement of the patent rights of others.
Third parties may assert that we are employing their proprietary
technology without authorization. There may be third-party
patents of which we are currently unaware with claims to
materials, formulations, methods of manufacture or methods for
treatment related to the use or manufacture of our product
candidates. Because patent applications can take many years to
issue, there may be currently pending patent applications which
may later result in issued patents that our product candidates
may infringe. In addition, third parties may obtain patents in
the future and claim that use of our technologies infringes upon
these patents. If any third-party patents were held by a court
of competent jurisdiction to cover the manufacturing process of
any of our product candidates, any molecules formed during the
manufacturing process or any final product itself, the holders
of any such patents may be able to block our ability to
commercialize such product candidate unless we obtained a
license under the applicable patents, or until such patents
expire or they are finally determined to be held invalid or
unenforceable. Similarly, if any third-party patent were held by
a court of competent jurisdiction to cover aspects of our
formulations, processes for manufacture or methods of use,
including combination therapy or patient selection methods, the
holders of any such patent may be able to block our ability to
develop and commercialize the applicable product candidate
unless we obtained a license, limit our uses, or until such
patent expires or is finally determined to be held invalid or
unenforceable. In either case, such a license may not be
available on commercially reasonable terms or at all.
25
We are aware of a family of patents and patent applications
controlled by a third party that claim certain uses of PARP
inhibitors that could potentially be asserted against our use of
CO-338 in certain indications. We are conducting clinical trials
for the treatment of solid tumors, a subset of which are ovarian
cancer and breast cancer characterized as having positive
germ-line BRCA mutations. Methods for treating such germ-line
BRCA mutant positive patients with CO-338 could potentially fall
within the scope of the issued or to be issued claims of such
patents or patent applications. We are evaluating the validity
of the patents and patent applications, including the scope or
potential scope of the claims of these patents and patent
applications, to determine whether to seek a license under such
patents or patent applications, when and if they issue, or
alternatively whether to initiate proceedings to challenge such
patents. If we are unable to either license or successfully
challenge such patents, we may consider shifting our development
emphasis among alternative uses, and in so doing we could reduce
the size of the aggregate potential market for CO-338.
Parties making claims against us may obtain injunctive or other
equitable relief, which could effectively block our ability to
further develop and commercialize one or more of our product
candidates. Defense of these claims, regardless of their merit,
would involve substantial litigation expense and would be a
substantial diversion of employee resources from our business.
In the event of a successful claim of infringement against us,
we may have to pay substantial damages, including treble damages
and attorneys fees for willful infringement, obtain one or
more licenses from third parties, limit our uses, pay royalties
or redesign our infringing product candidates, which may be
impossible or require substantial time and monetary expenditure.
We cannot predict whether any such license would be available at
all or whether it would be available on commercially reasonable
terms. Furthermore, even in the absence of litigation, we may
need to obtain licenses from third parties to advance our
research or allow commercialization of our product candidates,
and we have done so from time to time. We may fail to obtain any
of these licenses at a reasonable cost or on reasonable terms,
if at all. In that event, we would be unable to further develop
and commercialize one or more of our product candidates, which
could harm our business significantly.
The
patent protection and patent prosecution for some of our product
candidates is dependent on third parties.
While we normally seek and gain the right to fully prosecute the
patents relating to our product candidates, there may be times
when platform technology patents that relate to our product
candidates are controlled by our licensors. This is the case
with our license of CO-1686 from Avila Therapeutics, Inc., in
which Avila retained the right to prosecute and maintain the
patents and patent applications covering its core discovery
technology, including molecular backbones, building blocks and
classes of compounds generated by that technology, aspects of
which relate to CO-1686. While we have the right to prosecute
and maintain the patent rights for the composition of matter for
CO-1686, if Avila or any of our future licensing partners fail
to appropriately prosecute and maintain patent protection for
patents covering any of our product candidates, our ability to
develop and commercialize those product candidates may be
adversely affected and we may not be able to prevent competitors
from making, using and selling competing products.
We may
be involved in lawsuits to protect or enforce our patents or the
patents of our licensors, which could be expensive, time
consuming and unsuccessful.
Competitors may infringe our patents or the patents of our
licensors. To counter infringement or unauthorized use, we may
be required to file infringement claims, which can be expensive
and time-consuming. In addition, in an infringement proceeding,
a court may decide that a patent of ours or our licensors is not
valid or is unenforceable, or may refuse to stop the other party
from using the technology at issue on the grounds that our
patents do not cover the technology in question. An adverse
result in any litigation or defense proceedings could put one or
more of our patents at risk of being invalidated, held
unenforceable, or interpreted narrowly and could put our patent
applications at risk of not issuing.
Interference proceedings provoked by third parties or brought by
the U.S. PTO may be necessary to determine the priority of
inventions with respect to our patents or patent applications or
those of our licensors. An unfavorable outcome could require us
to cease using the related technology or to attempt to license
rights to it from the prevailing party. Our business could be
harmed if the prevailing party does not offer us a license on
commercially reasonable terms. Litigation or interference
proceedings may fail and, even if successful, may result in
substantial costs and distract our management and other
employees.
26
We may not be able to prevent, alone or with our licensors,
misappropriation of our trade secrets or confidential
information, particularly in countries where the laws may not
protect those rights as fully as in the United States.
Furthermore, because of the substantial amount of discovery
required in connection with intellectual property litigation,
there is a risk that some of our confidential information could
be compromised by disclosure during this type of litigation. In
addition, there could be public announcements of the results of
hearings, motions or other interim proceedings or developments.
If securities analysts or investors perceive these results to be
negative, it could have a substantial adverse effect on the
price of our common stock.
We may
not be able to protect our intellectual property rights
throughout the world.
Filing, prosecuting and defending patents on all of our product
candidates throughout the world would be prohibitively
expensive. Competitors may use our technologies in jurisdictions
where we have not obtained patent protection to develop their
own products and further, may export otherwise infringing
products to territories where we have patent protection, but
enforcement is not as strong as that in the United States. These
products may compete with our products in jurisdictions where we
do not have any issued patents and our patent claims or other
intellectual property rights may not be effective or sufficient
to prevent them from so competing.
Many companies have encountered significant problems in
protecting and defending intellectual property rights in foreign
jurisdictions. The legal systems of certain countries,
particularly certain developing countries, do not favor the
enforcement of patents and other intellectual property
protection, particularly those relating to biopharmaceuticals,
which could make it difficult for us to stop the infringement of
our patents or marketing of competing products in violation of
our proprietary rights generally. Proceedings to enforce our
patent rights in foreign jurisdictions could result in
substantial cost and divert our efforts and attention from other
aspects of our business.
If we
breach any of the agreements under which we license
commercialization rights to our product candidates from third
parties, we could lose license rights that are important to our
business.
We license the use, development and commercialization rights for
all of our product candidates, and may enter into similar
licenses in the future. Under each of our existing license
agreements with Clavis (CO-101),
Avila (CO-1686)
and
Pfizer (CO-338),
we are subject to commercialization and development, diligence
obligations, milestone payment obligations, royalty payments and
other obligations. If we fail to comply with any of these
obligations or otherwise breach our license agreements, our
licensing partners may have the right to terminate the license
in whole or in part. Generally, the loss of any one of our three
current licenses or other licenses in the future could
materially harm our business, prospects, financial condition and
results of operations.
Intellectual
property rights do not necessarily address all potential threats
to our competitive advantage.
The degree of future protection afforded by our intellectual
property rights is uncertain because intellectual property
rights have limitations, and may not adequately protect our
business, or permit us to maintain our competitive advantage.
The following examples are illustrative:
|
|
|
|
|
Others may be able to make compounds that are similar to our
product candidates but that are not covered by the claims of the
patents that we own or have exclusively licensed.
|
|
|
|
We or our licensors or strategic partners might not have been
the first to make the inventions covered by the issued patent or
pending patent application that we own or have exclusively
licensed.
|
|
|
|
We or our licensors or strategic partners might not have been
the first to file patent applications covering certain of our
inventions.
|
|
|
|
Others may independently develop similar or alternative
technologies or duplicate any of our technologies without
infringing our intellectual property rights.
|
|
|
|
It is possible that our pending patent applications will not
lead to issued patents.
|
|
|
|
Issued patents that we own or have exclusively licensed may not
provide us with any competitive advantages, or may be held
invalid or unenforceable, as a result of legal challenges by our
competitors.
|
27
|
|
|
|
|
Our competitors might conduct research and development
activities in countries where we do not have patent rights and
then use the information learned from such activities to develop
competitive products for sale in our major commercial markets.
|
|
|
|
We may not develop additional proprietary technologies that are
patentable.
|
|
|
|
The patents of others may have an adverse effect on our business.
|
Should any of these events occur, they could significantly harm
our business, results of operations and prospects.
Risks
Related to This Offering and Ownership of our Common
Stock
We do
not know whether an active, liquid and orderly trading market
will develop for our common stock or what the market price of
our common stock will be and as a result it may be difficult for
you to sell your shares of our common stock.
Prior to this offering there has been no market for shares of
our common stock. Although we expect that our common stock will
be approved for listing on The NASDAQ Global Market, an active
trading market for our shares may never develop or be sustained
following this offering. The initial public offering price for
our common stock was determined through negotiations with the
underwriters, and the negotiated price may not be indicative of
the market price of our common stock after this offering. This
initial public offering price may vary from the market price of
our common stock after the offering. As a result of these and
other factors, you may be unable to resell your shares of our
common stock at or above the initial public offering price.
Further, an inactive market may also impair our ability to raise
capital by selling shares of our common stock and may impair our
ability to enter into strategic partnerships or acquire
companies or products by using our shares of common stock as
consideration.
The
price of our stock may be volatile, and you could lose all or
part of your investment.
The trading price of our common stock following this offering is
likely to be highly volatile and could be subject to wide
fluctuations in response to various factors, some of which are
beyond our control. In addition to the factors discussed in this
Risk Factors section and elsewhere in this
prospectus, these factors include:
|
|
|
|
|
our failure to commercialize our product candidates, if approved;
|
|
|
|
actual or anticipated adverse results or delays in our clinical
trials;
|
|
|
|
unanticipated serious safety concerns related to the use of any
of our product candidates;
|
|
|
|
adverse regulatory decisions;
|
|
|
|
changes in laws or regulations applicable to our product
candidates, including but not limited to clinical trial
requirements for approvals;
|
|
|
|
disputes or other developments relating to proprietary rights,
including patents, litigation matters and our ability to obtain
patent protection for our product candidates;
|
|
|
|
our decision to initiate a clinical trial, not to initiate a
clinical trial or to terminate an existing clinical trial;
|
|
|
|
our dependence on third parties, including CROs as well as our
partners that provide us with companion diagnostic products;
|
|
|
|
additions or departures of key scientific or management
personnel;
|
|
|
|
failure to meet or exceed any financial guidance or expectations
regarding development milestones that we may provide to the
public;
|
|
|
|
actual or anticipated variations in quarterly operating results;
|
|
|
|
failure to meet or exceed the estimates and projections of the
investment community;
|
28
|
|
|
|
|
overall performance of the equity markets and other factors that
may be unrelated to our operating performance or the operating
performance of our competitors, including changes in market
valuations of similar companies;
|
|
|
|
conditions or trends in the biotechnology and biopharmaceutical
industries;
|
|
|
|
introduction of new products offered by us or our competitors;
|
|
|
|
announcements of significant acquisitions, strategic
partnerships, joint ventures or capital commitments by us or our
competitors;
|
|
|
|
our ability to maintain an adequate rate of growth and manage
such growth;
|
|
|
|
issuances of debt or equity securities;
|
|
|
|
significant lawsuits, including patent or stockholder litigation;
|
|
|
|
sales of our common stock by us or our stockholders in the
future;
|
|
|
|
trading volume of our common stock;
|
|
|
|
publication of research reports about us or our industry or
positive or negative recommendations or withdrawal of research
coverage by securities analysts;
|
|
|
|
ineffectiveness of our internal controls;
|
|
|
|
general political and economic conditions;
|
|
|
|
effects of natural or man-made catastrophic events; and
|
|
|
|
other events or factors, many of which are beyond our control.
|
In addition, the stock market in general, and the NASDAQ Global
Market and biotechnology companies in particular, have
experienced extreme price and volume fluctuations that have
often been unrelated or disproportionate to the operating
performance of these companies. Broad market and industry
factors may negatively affect the market price of our common
stock, regardless of our actual operating performance. The
realization of any of the above risks or any of a broad range of
other risks, including those described in these Risk
Factors, could have a dramatic and material adverse impact
on the market price of our common stock.
Our
principal stockholders and management own a significant
percentage of our stock and will be able to exert significant
control over matters subject to stockholder
approval.
Prior to this offering, our executive officers, directors,
holders of 5% or more of our capital stock and their respective
affiliates beneficially owned approximately 90.5% of our voting
stock and, upon the closing of this offering, that same group
will hold approximately 66.2% of our outstanding voting stock
(assuming no exercise of the underwriters over-allotment
option and no exercise of outstanding options) in each case
assuming (i) the purchase of $50.6 million of shares
of our common stock by existing investors who have indicated an
interest in making such a purchase of our common stock in this
offering, (ii) the conversion of all outstanding shares of
our convertible preferred stock into 7,244,523 shares of
common stock immediately prior to the closing of this offering
and (iii) the issuance of 2,559,774 shares of our
common stock immediately prior to the closing of this offering
as a result of the conversion of $35.0 million in aggregate
principal amount of our 5% convertible promissory notes due
2012, including accrued and unpaid interest thereon, assuming an
initial public offering price of $14.00 per share (the midpoint
of the price range set forth on the cover page of this
prospectus) and a conversion date of November 18, 2011 (for
purposes of calculating the accrued interest on the notes to be
converted into shares of common stock). Therefore, even after
this offering these stockholders will have the ability to
influence us through this ownership position. These stockholders
may be able to determine all matters requiring stockholder
approval. For example, these stockholders may be able to control
elections of directors, amendments of our organizational
documents, or approval of any merger, sale of assets, or other
major corporate transaction. This may prevent or discourage
unsolicited acquisition proposals or offers for our common stock
that you may feel are in your best interest as one of our
stockholders.
29
If you
purchase our common stock in this offering, you will incur
immediate and substantial dilution in the book value of your
shares.
The initial public offering price is substantially higher than
the net tangible book value per share of our common stock.
Investors purchasing common stock in this offering will pay a
price per share that substantially exceeds the book value of our
tangible assets after subtracting our liabilities. As a result,
investors purchasing common stock in this offering will incur
immediate dilution of $7.32 per share, based on an initial
public offering price of $14.00 per share (the midpoint of the
price range set forth on the cover page of this prospectus).
Further, investors purchasing common stock in this offering will
contribute approximately 54% of the total amount invested by
stockholders since our inception, but will own only
approximately 45% of the shares of common stock outstanding
after giving effect to this offering.
This dilution is due to our investors who purchased shares prior
to this offering having paid substantially less than the price
offered to the public in this offering when they purchased their
shares. In addition, as of September 30, 2011, options to
purchase 883,953 shares of our common stock at a
weighted-average exercise price of $4.35 per share were
outstanding. The exercise of any of these options would result
in additional dilution. As a result of the dilution to investors
purchasing shares in this offering, investors may receive
significantly less than the purchase price paid in this
offering, if anything, in the event of our liquidation. Further,
because we will need to raise additional capital to fund our
clinical development programs, we may in the future sell
substantial amounts of common stock or securities convertible
into or exchangeable for common stock. These future issuances of
common stock or common stock-related securities, together with
the exercise of outstanding options and any additional shares
issued in connection with acquisitions, if any, may result in
further dilution to investors. For a further description of the
dilution that you will experience immediately after this
offering, see Dilution.
We
will incur increased costs as a result of operating as a public
company, and our management will be required to devote
substantial time to new compliance initiatives.
As a public company, we will incur significant legal, accounting
and other expenses that we did not incur as a private company.
We will be subject to the reporting requirements of the
Securities Exchange Act of 1934, as amended, or the Exchange
Act, the Sarbanes-Oxley Act of 2002, or the Sarbanes Oxley Act,
as well as rules subsequently adopted by the SEC and the NASDAQ
Stock Market, or NASDAQ. The Exchange Act will require, among
other things, that we file annual, quarterly and current reports
with respect to our business and financial condition. In
addition, on July 21, 2010, the Dodd-Frank Wall Street
Reform and Protection Act, or the Dodd-Frank Act, was enacted.
There are significant corporate governance and executive
compensation-related provisions in the Dodd-Frank Act that
require the SEC to adopt additional rules and regulations in
these areas such as say on pay and proxy access, and
the SEC has since issued final rules implementing say on
pay measures. We expect these rules and regulations to
substantially increase our legal and financial compliance costs
and to make some activities more time-consuming and costly. The
increased costs will decrease our net income or increase our
consolidated net loss, and may require us to reduce costs in
other areas of our business or increase the prices of our
products or services. For example, we expect these rules and
regulations to make it more difficult and more expensive for us
to obtain director and officer liability insurance and we may be
required to incur substantial costs to maintain the same or
similar coverage. We estimate that we will annually incur
approximately $2.5 million in expenses in response to these
requirements. The impact of these requirements could also make
it more difficult for us to attract and retain qualified persons
to serve on our board of directors, our board committees or as
executive officers.
The Sarbanes-Oxley Act requires, among other things, that we
maintain effective internal controls for financial reporting and
disclosure controls and procedures. In particular, we will be
required to perform system and process evaluation and testing of
our internal controls over financial reporting to allow
management to report, commencing in our annual report on
Form 10-K
for the year ending December 31, 2012, on the effectiveness
of our internal controls over financial reporting, if then
required by Section 404 of the Sarbanes-Oxley Act. Our
testing, or the subsequent testing by our independent registered
public accounting firm, may reveal deficiencies in our internal
controls over financial reporting that are deemed to be material
weaknesses. Our compliance with Section 404 will require
that we incur substantial accounting expense and expend
significant management efforts. We currently do not have an
internal audit group, and we will need to hire additional
accounting and financial staff with appropriate public company
experience and technical accounting knowledge. Moreover, if we
are not able to comply with the
30
requirements of Section 404 in a timely manner or if we
identify or our independent registered public accounting firm
identifies deficiencies in our internal controls over financial
reporting that are deemed to be material weaknesses, the market
price of our stock could decline and we could be subject to
sanctions or investigations by the NASDAQ, the SEC or other
regulatory authorities, which would require additional financial
and management resources.
New laws and regulations as well as changes to existing laws and
regulations affecting public companies, including the provisions
of the Sarbanes-Oxley Act and rules adopted by the SEC and by
NASDAQ, would likely result in increased costs to us as we
respond to their requirements.
Sales
of a substantial number of shares of our common stock in the
public market could cause our stock price to fall.
If our existing stockholders sell, or indicate an intention to
sell, substantial amounts of our common stock in the public
market after the
lock-up and
other legal restrictions on resale discussed in this prospectus
lapse, the trading price of our common stock could decline.
Based upon the number of shares outstanding as of
September 30, 2011, upon the closing of this offering, we
will have outstanding a total of 20,765,590 shares of
common stock, assuming no exercise of the underwriters
overallotment option. Of these shares, approximately
5,683,744 (assuming the purchase of $50.6 million of shares
of our common stock by existing investors who have indicated an
interest in making such a purchase of our common stock in this
offering, based upon an assumed initial public offering price of
$14.00 per share, the midpoint of the price range set forth on
the cover page of this prospectus) shares of common stock, plus
any shares sold upon exercise of the underwriters
overallotment option, will be freely tradable, without
restriction, in the public market immediately following this
offering. J.P. Morgan Securities LLC and Credit Suisse
Securities (USA) LLC, however, may, in their sole discretion,
permit our officers, directors and other stockholders who are
subject to these
lock-up
agreements to sell shares prior to the expiration of the
lock-up
agreements.
The lock-up
agreements pertaining to this offering will expire 180 days
from the date of this prospectus (subject to extension upon the
occurrence of specified events). After the
lock-up
agreements expire, up to an additional 15,081,846 shares of
common stock, subject to vesting schedules, will be eligible for
sale in the public market, 11,192,962 of which shares are held
by directors, executive officers and other affiliates and will
be subject to vesting schedules, volume limitations under
Rule 144 under the Securities Act of 1933, as amended, or
the Securities Act, assuming (i) the purchase of
$50.6 million of shares of our common stock by existing
investors who have indicated an interest in making such a
purchase of our common stock in this offering, (ii) the
conversion of all outstanding shares of our convertible
preferred stock into 7,244,523 shares of common stock
immediately prior to the closing of this offering and
(iii) the issuance of 2,559,774 shares of our common
stock immediately prior to the closing of this offering as a
result of the conversion of $35.0 million in aggregate
principal amount of our 5% convertible promissory notes due
2012, including accrued and unpaid interest thereon, assuming an
initial public offering price of $14.00 per share (the midpoint
of the price range set forth on the cover page of this
prospectus) and a conversion date of November 18, 2011 (for
purposes of calculating the accrued interest on the notes to be
converted into shares of common stock).
In addition, shares of common stock that are either subject to
outstanding options or reserved for future issuance under our
equity incentive plans will become eligible for sale in the
public market to the extent permitted by the provisions of
various vesting schedules, the
lock-up
agreements and Rule 144 and Rule 701 under the
Securities Act. If these additional shares of common stock are
sold, or if it is perceived that they will be sold, in the
public market, the trading price of our common stock could
decline.
After this offering, the holders of 14,867,109 shares of
our common stock, or approximately 71.6% of our total
outstanding common stock as of October 20, 2011 (and
holders of 297,237 shares of our common stock issuable upon
exercise of options to purchase our common stock), will be
entitled to rights with respect to the registration of their
shares under the Securities Act, subject to vesting schedules
and to the
lock-up
agreements described above and assuming (i) the purchase of
$50.6 million of shares of our common stock by existing
investors who have indicated an interest in making such a
purchase of our common stock in this offering, (ii) the
conversion of all outstanding shares of our convertible
preferred stock into 7,244,523 shares of common stock
immediately prior to the closing of this offering and
(iii) the issuance of 2,559,774 shares of our common
stock immediately prior to the closing of this offering as a
result of the conversion of $35.0 million in aggregate
principal amount of our 5%
31
convertible promissory notes due 2012, including accrued and
unpaid interest thereon, assuming an initial public offering
price of $14.00 per share (the midpoint of the price range set
forth on the cover page of this prospectus) and a conversion
date of November 18, 2011 (for purposes of calculating the
accrued interest on the notes to be converted to shares of
common stock). Registration of these shares under the Securities
Act would result in the shares becoming freely tradable without
restriction under the Securities Act, except for shares
purchased by affiliates. Any sales of securities by these
stockholders could have a material adverse effect on the trading
price of our common stock.
Future
sales and issuances of our common stock or rights to purchase
common stock, including pursuant to our equity incentive plans,
could result in additional dilution of the percentage ownership
of our stockholders and could cause our stock price to
fall.
We expect that significant additional capital will be needed in
the future to continue our planned operations. To raise capital,
we may sell common stock, convertible securities or other equity
securities in one or more transactions at prices and in a manner
we determine from time to time. If we sell common stock,
convertible securities or other equity securities in more than
one transaction, investors may be materially diluted by
subsequent sales. Such sales may also result in material
dilution to our existing stockholders, and new investors could
gain rights, preferences and privileges senior to those of
holders of our common stock, including shares of common stock
sold in this offering.
Pursuant to our equity incentive plan(s), our compensation
committee (or a subset thereof) is authorized to grant
equity-based incentive awards to our employees, directors and
consultants. The number of shares of our common stock available
for future grant under our 2011 Plan, which will become
effective immediately prior to the completion of this offering,
is 1,250,000 plus the number of shares of our common stock
reserved for issuance under our 2009 Plan, as of the effective
date of the 2011 Plan. As of September 30, 2011, there were
170,274 shares of our common stock reserved for future issuance
under our 2009 Plan. Thereafter, the number of shares of our
common stock reserved for issuance under our 2011 Plan will be
increased (i) from time to time by the number of shares of
our common stock forfeited upon the expiration, cancellation,
forfeiture, cash settlement or other termination of awards under
our 2009 Plan following the effective date of the 2011 Plan, and
(ii) at the discretion of our board of directors, on the
date of each annual meeting of our stockholders, by up to the
lesser of (x) a number of additional shares of our common
stock representing 4% of our then-outstanding shares of common
stock on such date and (y) 2,758,621 shares of our
common stock. Future option grants and issuances of common stock
under our 2011 Plan may have an adverse effect on the market
price of our common stock.
We
have broad discretion in the use of the net proceeds from this
offering and may not use them effectively.
Our management will have broad discretion in the application of
the net proceeds from this offering, and you will be relying on
the judgment of our management regarding the application of
these proceeds. You will not have the opportunity, as part of
your investment decision, to assess whether the proceeds are
being used appropriately. Our management might not apply our net
proceeds in ways that ultimately increase the value of your
investment. We expect to use the net proceeds from this offering
to fund our clinical trials related to CO-101 and CO-338, to
advance the development of CO-1686, our preclinical product
candidate, and for working capital and general corporate
purposes. Pending their use, we may invest the net proceeds from
this offering in short-term, investment-grade, interest-bearing
securities. These investments may not yield a favorable return
to our stockholders. If we do not invest or apply the net
proceeds from this offering in ways that enhance stockholder
value, we may fail to achieve expected financial results, which
could cause our stock price to decline.
Some
provisions of our charter documents and Delaware law may have
anti-takeover effects that could discourage an acquisition of us
by others, even if an acquisition would be beneficial to our
stockholders and may prevent attempts by our stockholders to
replace or remove our current management.
Provisions in our amended and restated certificate of
incorporation and bylaws that will be in effect immediately
prior to the closing of this offering, as well as provisions of
Delaware law, could make it more
32
difficult for a third-party to acquire us or increase the cost
of acquiring us, even if doing so would benefit our stockholders
or remove our current management. These provisions include:
|
|
|
|
|
authorizing the issuance of blank check preferred
stock, the terms of which may be established and shares of which
may be issued without stockholder approval;
|
|
|
|
limiting the removal of directors by the stockholders;
|
|
|
|
creating a staggered board of directors;
|
|
|
|
prohibiting stockholder action by written consent, thereby
requiring all stockholder actions to be taken at a meeting of
our stockholders;
|
|
|
|
eliminating the ability of stockholders to call a special
meeting of stockholders;
|
|
|
|
permitting our board of directors to accelerate the vesting of
outstanding option grants upon certain transactions that result
in a change of control; and
|
|
|
|
establishing advance notice requirements for nominations for
election to the board of directors or for proposing matters that
can be acted upon at stockholder meetings.
|
These provisions may frustrate or prevent any attempts by our
stockholders to replace or remove our current management by
making it more difficult for stockholders to replace members of
our board of directors, which is responsible for appointing the
members of our management. Because we are incorporated in
Delaware, we are governed by the provisions of Section 203
of the Delaware General Corporation Law, which may discourage,
delay or prevent someone from acquiring us or merging with us
whether or not it is desired by or beneficial to our
stockholders. Under Delaware law, a corporation may not, in
general, engage in a business combination with any holder of 15%
or more of its capital stock unless the holder has held the
stock for three years or, among other things, the board of
directors has approved the transaction. Any provision of our
certificate of incorporation or bylaws or Delaware law that has
the effect of delaying or deterring a change in control could
limit the opportunity for our stockholders to receive a premium
for their shares of our common stock, and could also affect the
price that some investors are willing to pay for our common
stock.
If
securities or industry analysts do not publish research or
publish inaccurate or unfavorable research about our business,
our stock price and trading volume could decline.
The trading market for our common stock will depend in part on
the research and reports that securities or industry analysts
publish about us or our business. Securities and industry
analysts do not currently, and may never, publish research on
our company. If no securities or industry analysts commence
coverage of our company, the trading price for our stock would
likely be negatively impacted. In the event securities or
industry analysts initiate coverage, if one or more of the
analysts who cover us downgrade our stock or publish inaccurate
or unfavorable research about our business, our stock price
would likely decline. If one or more of these analysts cease
coverage of our company or fail to publish reports on us
regularly, demand for our stock could decrease, which might
cause our stock price and trading volume to decline.
Claims
for indemnification by our directors and officers may reduce our
available funds to satisfy successful third-party claims against
us and may reduce the amount of money available to the
Company.
Our certificate of incorporation provides that we will indemnify
our directors and officers, in each case to the fullest extent
permitted by Delaware law.
In addition, as permitted by Section 145 of the Delaware
General Corporation Law, our bylaws to be effective immediately
prior to the completion of this offering and our indemnification
agreements that we have entered into with our directors and
officers provide that:
|
|
|
|
|
We will indemnify our directors and officers for serving us in
those capacities or for serving other business enterprises at
our request, to the fullest extent permitted by Delaware law.
Delaware law provides that a corporation may indemnify such
person if such person acted in good faith and in a manner such
person reasonably believed to be in or not opposed to the best
interests of the registrant and, with respect to any criminal
proceeding, had no reasonable cause to believe such
persons conduct was unlawful.
|
33
|
|
|
|
|
We may, in our discretion, indemnify employees and agents in
those circumstances where indemnification is permitted by
applicable law.
|
|
|
|
We are required to advance expenses, as incurred, to our
directors and officers in connection with defending a
proceeding, except that such directors or officers shall
undertake to repay such advances if it is ultimately determined
that such person is not entitled to indemnification.
|
|
|
|
We will not be obligated pursuant to our bylaws to indemnify a
person with respect to proceedings initiated by that person
against us or our other indemnitees, except with respect to
proceedings authorized by our board of directors or brought to
enforce a right to indemnification.
|
|
|
|
The rights conferred in our bylaws are not exclusive, and we are
authorized to enter into indemnification agreements with our
directors, officers, employees and agents and to obtain
insurance to indemnify such persons.
|
|
|
|
We may not retroactively amend our bylaw provisions to reduce
our indemnification obligations to directors, officers,
employees and agents.
|
34
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY
DATA
This prospectus includes statements that are, or may be deemed,
forward-looking statements. In some cases, these
forward-looking statements can be identified by the use of
forward-looking terminology, including the terms
believes, estimates,
anticipates, expects, plans,
intends, may, could,
might, will, should,
approximately or, in each case, their negative or
other variations thereon or comparable terminology, although not
all forward-looking statements contain these words. They appear
in a number of places throughout this prospectus and include
statements regarding our intentions, beliefs, projections,
outlook, analyses or current expectations concerning, among
other things, our ongoing and planned preclinical studies and
clinical trials, the timing of and our ability to make
regulatory filings and obtain and maintain regulatory approvals
for our product candidates, the degree of clinical utility of
our products, particularly in specific patient populations,
expectations regarding clinical trial data, our results of
operations, financial condition, liquidity, prospects, growth
and strategies, the industry in which we operate and the trends
that may affect the industry or us.
By their nature, forward-looking statements involve risks and
uncertainties because they relate to events, competitive
dynamics, and industry change and depend on the economic
circumstances that may or may not occur in the future or may
occur on longer or shorter timelines than anticipated. Although
we believe that we have a reasonable basis for each
forward-looking statement contained in this prospectus, we
caution you that forward-looking statements are not guarantees
of future performance and that our actual results of operations,
financial condition and liquidity, and the development of the
industry in which we operate may differ materially from the
forward-looking statements contained in this prospectus. In
addition, even if our results of operations, financial condition
and liquidity, and the development of the industry in which we
operate are consistent with the forward-looking statements
contained in this prospectus, they may not be predictive of
results or developments in future periods.
Some of the factors that we believe could cause actual results
to differ from those anticipated or predicted include:
|
|
|
|
|
the success and timing of our preclinical studies and clinical
trials;
|
|
|
|
our ability to obtain and maintain regulatory approval of our
product candidates, and the labeling under any approval we may
obtain;
|
|
|
|
our plans to develop and commercialize our product candidates;
|
|
|
|
our ability, with partners, to validate, develop and obtain
regulatory approval of companion diagnostics for our product
candidates;
|
|
|
|
the loss of key scientific or management personnel;
|
|
|
|
the size and growth of the potential markets for our product
candidates and our ability to serve those markets;
|
|
|
|
regulatory developments in the United States and foreign
countries;
|
|
|
|
the rate and degree of market acceptance of any of our product
candidates;
|
|
|
|
our use of the proceeds from this offering;
|
|
|
|
the accuracy of our estimates regarding expenses, future
revenues, capital requirements and needs for additional
financing;
|
|
|
|
our ability to obtain and maintain intellectual property
protection for our product candidates;
|
|
|
|
the successful development of our sales and marketing
capabilities;
|
|
|
|
the success of competing drugs that are or become
available; and
|
|
|
|
the performance of third-party manufacturers.
|
Any forward-looking statements that we make in this prospectus
speak only as of the date of such statement, and we undertake no
obligation to update such statements to reflect events or
circumstances after the date of this
35
prospectus or to reflect the occurrence of unanticipated events.
Comparisons of results for current and any prior periods are not
intended to express any future trends or indications of future
performance, unless expressed as such, and should only be viewed
as historical data.
You should also read carefully the factors described in the
Risk Factors section of this prospectus to better
understand the risks and uncertainties inherent in our business
and underlying any forward-looking statements. As a result of
these factors, we cannot assure you that the forward-looking
statements in this prospectus 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 timeframe, or at all. The
Private Securities Litigation Reform Act of 1995 and
Section 27A of the Securities Act do not protect any
forward-looking statements that we make in connection with this
offering.
This prospectus also includes estimates of market size and
industry data that we obtained from industry publications and
surveys and internal company sources. The industry publications
and surveys used by management to determine market size and
industry data contained in this prospectus have been obtained
from sources believed to be reliable.
36
USE OF
PROCEEDS
We estimate that our net proceeds from the sale of the shares of
common stock in this offering will be approximately
$121.2 million, based on an assumed initial public offering
price of $14.00 per share, the midpoint of the price range
set forth on the cover page of this prospectus, and after
deducting estimated underwriting discounts and commissions and
estimated offering expenses payable by us.
If the underwriters exercise their over-allotment option in
full, we estimate that our net proceeds will be approximately
$139.4 million, based on an assumed initial public offering
price of $14.00 per share, the midpoint of the price range
set forth on the cover page of this prospectus, and after
deducting estimated underwriting discounts and commissions and
estimated offering expenses payable by us.
The principal purposes of this offering are to obtain additional
capital to support our operations, establish a public market for
our common stock and to facilitate our future access to the
public capital markets. We anticipate that we will use the net
proceeds of this offering as follows:
|
|
|
|
|
approximately $50.0 million to fund our clinical trials and
other development activities related to CO-101;
|
|
|
|
|
|
approximately $25.0 million to fund our clinical trials and
other development activities related to
CO-1686;
|
|
|
|
|
|
approximately $30.0 million to fund our clinical trials and
other development activities related to CO-338; and
|
|
|
|
|
|
the remainder for working capital and general corporate purposes.
|
Although it is difficult to predict future liquidity
requirements, we believe that the net proceeds from this
offering and our existing cash and cash equivalents, together
with interest thereon, will be sufficient to fund our operations
for at least the next 12 months. In particular, we believe
the net proceeds from this offering intended for clinical
development and our existing cash and cash equivalents, together
with interest thereon, will be sufficient to fund our clinical
development efforts through the following events:
|
|
|
|
|
completion of our LEAP trial of CO-101;
|
|
|
|
completion of our Phase II trial of CO-101 as a second-line
treatment for pancreatic cancer patients with an absence of
hENT1 expression;
|
|
|
|
completion of the dose ranging portion of our Phase I/II
trials of
CO-338 as
monotherapy and in combination with chemotherapy in solid
tumors; and
|
|
|
|
filing of an IND and initiation of our Phase I/II trial of
CO-1686 in NSCLC.
|
The expected use of the net proceeds from this offering
represents our intentions based upon our current plans and
business conditions. The amounts and timing of our actual
expenditures depend on numerous factors, including the ongoing
status of and results from clinical trials and other studies, as
well as any strategic partnerships that we may enter into with
third parties for our product candidates and any unforeseen cash
needs. As a result, management will have broad discretion in
applying the net proceeds of this offering. Pending these uses,
we intend to invest the net proceeds of this offering in
short-term, interest-bearing investment grade securities,
certificates of deposit or direct or guaranteed obligations of
the U.S. government.
Each $1.00 increase (decrease) in the assumed initial public
offering price of $14.00 per share, the midpoint of the price
range set forth on the cover page of this prospectus, would
increase (decrease) the net proceeds to us from this offering by
approximately $8.8 million, assuming the number of shares
offered by us, as set forth on the cover page of this
prospectus, remains the same and after deducting estimated
underwriting discounts and commissions and estimated offering
expenses payable by us.
DIVIDEND
POLICY
We have never declared or paid any cash dividends on our capital
stock. We currently intend to retain all available funds and any
future earnings to support our operations and finance the growth
and development of our business. We do not intend to pay cash
dividends on our common stock for the foreseeable future. Any
future determination related to our dividend policy will be made
at the discretion of our board of directors and will depend
upon, among other factors, our results of operations, financial
condition, capital requirements, contractual restrictions,
business prospects and other factors our board of directors may
deem relevant.
37
CAPITALIZATION
The following table sets forth our consolidated cash and cash
equivalents and our consolidated capitalization as of
September 30, 2011 on:
|
|
|
|
|
an actual basis;
|
|
|
|
a pro forma basis giving effect to:
|
|
|
|
|
(1)
|
the conversion of all outstanding shares of our convertible
preferred stock into 7,244,523 shares of common stock
immediately prior to the closing of this offering; and
|
|
|
|
|
(2)
|
the conversion of $35.0 million in aggregate principal
amount of our 5% convertible promissory notes due 2012
(including accrued and unpaid interest thereon) into
2,559,774 shares of our common stock immediately prior to
the closing of this offering, assuming an initial public
offering price of $14.00 per share, the midpoint of the price
range set forth on the cover page of this prospectus, and
assuming the conversion occurs on November 18,
2011; and
|
|
|
|
|
|
a pro forma as adjusted basis giving additional effect to the
sale of 9,300,000 shares of our common stock offered in
this offering, assuming an initial public offering price of
$14.00 per share, the midpoint of the price range set forth on
the cover page of this prospectus, after deducting estimated
underwriting discounts and commissions and estimated offering
expenses payable by us.
|
The information in this table is illustrative only and our
capitalization following the completion of this offering will be
adjusted based on the actual initial public offering price and
other terms of this offering determined at pricing. You should
read this table in conjunction with the information contained in
Use of Proceeds, Selected Consolidated
Financial Data and Managements Discussion and
Analysis of Financial Condition and Results of Operations,
as well as the consolidated financial statements and the notes
thereto included elsewhere in this prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2011
|
|
|
|
|
|
|
|
|
|
Pro Forma
|
|
|
|
Actual
|
|
|
Pro Forma
|
|
|
as
Adjusted(1)
|
|
|
|
(unaudited)
|
|
|
|
(dollars in thousands)
|
|
|
Cash and cash equivalents
|
|
|
$19,992
|
|
|
$
|
19,992
|
|
|
$
|
141,222
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5% convertible promissory notes due 2012
|
|
|
35,602
|
|
|
|
|
|
|
|
|
|
Convertible preferred stock, par value $0.001 per share;
39,922,093 shares authorized; 21,009,196 shares issued
and outstanding, actual; no shares authorized, issued or
outstanding, pro forma and pro forma as adjusted
|
|
|
75,499
|
|
|
|
|
|
|
|
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, par value $0.001 per share; no shares
authorized, issued or outstanding, actual;
10,000,000 shares authorized and no shares issued and
outstanding, pro forma and pro forma as adjusted
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, par value $0.001 per share; 58,000,000 shares
authorized and 1,661,293 shares issued and outstanding,
actual; 100,000,000 shares authorized and
11,465,590 shares issued and outstanding, pro forma and
20,765,590 shares issued and outstanding, pro forma as
adjusted
|
|
|
2
|
|
|
|
11
|
|
|
|
21
|
|
Additional paid-in capital
|
|
|
1,989
|
|
|
|
113,316
|
|
|
|
234,536
|
|
Accumulated other comprehensive income
|
|
|
48
|
|
|
|
48
|
|
|
|
48
|
|
Accumulated deficit
|
|
|
(95,591
|
)
|
|
|
(95,826
|
)
|
|
|
(95,826
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity (deficit)
|
|
|
(93,552
|
)
|
|
|
17,549
|
|
|
$
|
138,779
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capitalization
|
|
|
$17,549
|
|
|
$
|
17,549
|
|
|
$
|
138,779
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38
|
|
|
(1) |
|
A $1.00 increase (decrease) in the assumed initial public
offering price of $14.00 per share, the midpoint of the price
range set forth on the cover page of this prospectus, would
increase (decrease) the pro forma as adjusted amount of each of
cash and cash equivalents, additional paid-in capital, total
stockholders equity (deficit) and total capitalization by
approximately $8.8 million, assuming that the number of
shares offered by us, as set forth on the cover page of this
prospectus, remains the same and after deducting estimated
underwriting discounts and commissions and estimated offering
expenses payable by us. |
The number of shares of our common stock to be outstanding after
this offering set forth above is based on 11,465,590 shares
of our common stock outstanding as of September 30, 2011,
after giving effect to (1) the conversion of all
outstanding shares of our convertible preferred stock into
7,244,523 shares of common stock immediately prior to the
closing of this offering and (2) the issuance of
2,559,774 shares of our common stock immediately prior to
the closing of this offering as a result of the conversion of
$35.0 million in aggregate principal amount of our 5%
convertible promissory notes due 2012 (including accrued and
unpaid interest thereon), assuming an initial public offering
price of $14.00 per share, the midpoint of the price range set
forth on the cover page of this prospectus, and assuming the
conversion occurs on November 18, 2011.
The number of shares of our common stock to be outstanding after
this offering set forth above excludes:
|
|
|
|
|
883,953 shares of our common stock issuable upon the
exercise of stock options outstanding as of September 30,
2011 at a weighted-average exercise price of $4.35 per share;
|
|
|
|
|
|
1,250,000 shares of our common stock reserved for future
issuance under our 2011 Plan, which will become effective
immediately prior to the completion of this offering, plus the
number of shares of our common stock available for grant under
our 2009 Plan as of the closing of this offering (which as of
September 30, 2011 was 170,274), which shares will be added
to the shares to be reserved under our 2011 Plan upon the
effectiveness of the 2011 Plan, plus any annual increases in the
number of shares of common stock reserved for future issuance
under the 2011 Plan pursuant to an evergreen
provision and any other shares that may become issuable
under the 2011 Plan pursuant to its terms, as more fully
described in Executive and Director
CompensationEmployee Benefit Plans2011 Equity
Incentive Plan; and
|
|
|
|
|
|
189,656 shares of our common stock reserved for future
issuance under our ESPP, which will become effective immediately
prior to the completion of this offering, plus any annual
increases in the number of shares of our common stock reserved
for future issuance under the ESPP pursuant to an
evergreen provision and any other shares that may
become issuable under the ESPP pursuant to its terms, as more
fully described in Executive and Director
CompensationEmployee Benefit Plans2011 Employee
Stock Purchase Plan.
|
39
DILUTION
If you invest in our common stock in this offering, your
ownership interest will be diluted to the extent of the
difference between the initial public offering price per share
of our common stock and the pro forma as adjusted net tangible
book value per share of our common stock upon completion of this
offering. Net tangible book value (deficit) per share of our
common stock is determined at any date by subtracting our total
liabilities from the amount of our total tangible assets (total
assets less intangible assets) and dividing the difference by
the number of shares of our common stock deemed to be
outstanding at that date.
Our historical net tangible book value (deficit) as of
September 30, 2011 was approximately $(93.6) million,
or $(56.31) per share, based on 1,661,293 shares of common
stock outstanding as of September 30, 2011.
On a pro forma basis, after giving effect to (1) the
conversion of all outstanding shares of our convertible
preferred stock into 7,244,523 shares of common stock
immediately prior to the closing of this offering; and
(2) the conversion of $35.0 million in aggregate
principal amount of our 5% convertible promissory notes due 2012
(including accrued and unpaid interest thereon) into
2,559,774 shares of our common stock immediately prior to
the closing of this offering, assuming an initial public
offering price of $14.00 per share, the midpoint of the
price range set forth on the cover page of this prospectus, and
assuming the conversion occurs on November 18, 2011, our
net tangible book value as of September 30, 2011 would have
been approximately $17.5 million, or approximately $1.53
per share of our pro forma outstanding common stock based on
11,465,590 shares of our common stock outstanding, which
gives effect to a 1 for 2.9 reverse stock split, effective as of
September 22, 2011.
Investors participating in this offering will incur immediate,
substantial dilution. After giving effect to our receipt of
approximately $121.2 million of estimated net proceeds
(after deducting estimated underwriting discounts and
commissions and estimated offering expenses payable by us) from
our sale of common stock in this offering at an assumed initial
public offering price of $14.00 per share, the midpoint of the
price range set forth on the cover page of this prospectus, our
pro forma as adjusted net tangible book value as of
September 30, 2011 would have been $138.8 million , or
$6.68 per share. This amount represents an immediate increase in
net tangible book value of $5.15 per share of our common stock
to existing stockholders and an immediate dilution in net
tangible book value of $7.32 per share of our common stock to
new investors purchasing shares of common stock in this offering.
The following table illustrates this dilution on a per share
basis:
|
|
|
|
|
|
|
|
|
|
Assumed initial public offering price per share
|
|
|
|
|
|
$
|
14.00
|
|
|
|
|
|
|
|
|
|
|
Historical net tangible book deficit per share as of
September 30, 2011 (unaudited)
|
|
$
|
(56.31
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma increase in net tangible book value per share
attributable to pro forma transactions described in preceding
paragraphs
|
|
|
57.84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma net tangible book value per share as of
September 30, 2011 (unaudited)
|
|
|
1.53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma increase in net tangible book value per share
attributable to investors participating in this offering
|
|
$
|
5.15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma as adjusted net tangible book value per share after
this offering
|
|
|
|
|
|
$
|
6.68
|
|
|
|
|
|
|
|
|
|
|
Dilution of pro forma as adjusted net tangible book value per
share to new investors
|
|
|
|
|
|
$
|
7.32
|
|
|
|
|
|
|
|
|
|
|
Each $1.00 increase (decrease) in the assumed initial public
offering price of $14.00 per share, the midpoint of the price
range set forth on the cover page of this prospectus, would
increase (decrease) our pro forma as adjusted net tangible book
value by $8.8 million, the pro forma as adjusted net
tangible book value per share after this offering by $0.43 per
share and the dilution in pro forma as adjusted net tangible
book value to new investors in this offering by $0.57 per share,
assuming the number of shares offered by us, as set forth on the
cover page of this prospectus, remains the same and after
deducting the estimated underwriting discounts and commissions
and estimated offering expenses payable by us.
The following table summarizes, as of September 30, 2011,
giving effect to the pro forma adjustments noted above, the
differences between the number of shares purchased from us, the
total consideration paid to us, and the average price per share
paid to us by existing stockholders and by new investors
purchasing shares in this offering, before deducting estimated
underwriting discounts and commissions and estimated offering
expenses payable by
40
us, at an assumed initial public offering price of $14.00 per
share, the midpoint of the price range set forth on the cover
page of this prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Purchased
|
|
|
Total Consideration
|
|
|
Average Price
|
|
|
|
Number
|
|
|
Percent
|
|
|
Amount
|
|
|
Percent
|
|
|
per Share
|
|
|
|
(dollars in thousands, except per share amounts)
|
|
|
Existing stockholders before this offering
|
|
|
11,465,590
|
|
|
|
55
|
%
|
|
$
|
112,452
|
|
|
|
46
|
%
|
|
$
|
9.81
|
|
Investors purchasing common stock in this offering
|
|
|
9,300,000
|
|
|
|
45
|
%
|
|
|
130,200
|
|
|
|
54
|
%
|
|
|
14.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
20,765,590
|
|
|
|
100
|
%
|
|
$
|
242,652
|
|
|
|
100
|
%
|
|
$
|
11.69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The number of shares of our common stock to be outstanding
immediately following this offering set forth above excludes:
|
|
|
|
|
883,953 shares of our common stock issuable upon the
exercise of stock options outstanding as of September 30,
2011 at a weighted-average exercise price of $4.35 per share;
|
|
|
|
|
|
1,250,000 shares of our common stock reserved for future
issuance under our 2011 Plan, which will become effective
immediately prior to the completion of this offering, plus the
number of shares of our common stock available for grant under
our 2009 Plan as of the closing of this offering (which as of
September 30, 2011 was 170,274), which shares will be added
to the shares to be reserved under our 2011 Plan upon the
effectiveness of the 2011 Plan, plus any annual increases in the
number of shares of common stock reserved for future issuance
under the 2011 Plan pursuant to an evergreen
provision and any other shares that may become issuable
under the 2011 Plan pursuant to its terms, as more fully
described in Executive and Director
CompensationEmployee Benefit Plans2011 Equity
Incentive Plan; and
|
|
|
|
|
|
189,656 shares of our common stock reserved for future
issuance under our ESPP, which will become effective immediately
prior to the completion of this offering, plus any annual
increases in the number of shares of our common stock reserved
for future issuance under the ESPP pursuant to an
evergreen provision and any other shares that may
become issuable under the ESPP pursuant to its terms, as more
fully described in Executive and Director
CompensationEmployee Benefit Plans2011 Employee
Stock Purchase Plan.
|
If the underwriters over-allotment option is exercised in
full, the pro forma as adjusted net tangible book value per
share after giving effect to this offering would be $7.08 per
share, which amount represents an immediate increase in pro
forma net tangible book value of $5.55 per share of our common
stock to existing stockholders and an immediate dilution in net
tangible book value of $6.92 per share of our common stock to
new investors purchasing shares of common stock in this offering.
Holders of our convertible preferred stock immediately prior to
this offering, including our executive officers, certain of our
directors and certain affiliates of our directors, have
indicated an interest in purchasing an aggregate of
approximately $50.6 million of shares of our common stock
in this offering, expected to be allocated pro rata among them
based on each such stockholders ownership of shares of our
convertible preferred stock outstanding immediately prior to
this offering, at the initial public offering price. However,
because indications of interest are not binding agreements or
commitments to purchase, the underwriters may determine to sell
more, less or no shares in this offering to any of these
stockholders, or any of these stockholders may determine to
purchase more, less or no shares in this offering. The foregoing
discussion and tables do not reflect any potential purchases by
such stockholders.
If all our outstanding stock options had been exercised as of
September 30, 2011, assuming the treasury stock method, our
pro forma net tangible book value as of September 30, 2011
(calculated on the basis of the assumptions set forth above)
would have been approximately $17.5 million or $1.45 per
share of our common stock, and the pro forma as adjusted net
tangible book value would have been $6.49 per share,
representing dilution in our pro forma as adjusted net tangible
book value per share to new investors of $7.51.
In addition, we may choose to raise additional capital due to
market conditions or strategic considerations even if we believe
we have sufficient funds for our current or future operating
plans. To the extent that we raise additional capital by issuing
equity securities or convertible debt, your ownership will be
further diluted.
41
SELECTED
CONSOLIDATED FINANCIAL DATA
The following table sets forth certain of our selected
historical financial data at the dates and for the periods
indicated. The selected historical statement of operations data
presented below for the year ended December 31, 2010 and
the period from April 20, 2009 (inception) to
December 31, 2009 and as of December 31, 2010 and 2009
have been derived from our audited financial statements, which
are included elsewhere in this prospectus.
The selected historical consolidated financial data presented
below for the nine months ended September 30, 2011 and 2010
and as of September 30, 2011 have been derived from our
unaudited consolidated financial statements and have been
prepared on the same basis as the audited financial statements
included elsewhere in this prospectus. The financial information
presented from April 20, 2009 (inception) to
December 31, 2010 was based solely on the results of Clovis
Oncology, Inc. Subsequent to January 1, 2011, the financial
information is consolidated and includes the results of our
wholly owned subsidiary in the United Kingdom. In the opinion of
management, the unaudited data reflects all adjustments,
consisting only of normal and recurring adjustments, necessary
for a fair presentation of results as of and for these periods.
The historical results are not necessarily indicative of results
expected in any future period and the results for the nine
months ended September 30, 2011 are not necessarily
indicative of the results that may be expected for the full
fiscal year.
The selected historical financial data presented below should be
read in conjunction with Managements Discussion and
Analysis of Financial Condition and Results of Operations
and our financial statements and the related notes thereto,
which are included elsewhere in this prospectus. The selected
historical financial information in this section is not intended
to replace our financial statements and the related notes
thereto.
Statement
of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period from
|
|
|
|
|
|
|
|
|
Cumulative from
|
|
|
|
|
|
|
April 20, 2009
|
|
|
|
|
|
|
|
|
April 20, 2009
|
|
|
|
Year Ended
|
|
|
(Inception) to
|
|
|
Nine Months Ended
|
|
|
(Inception) to
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
|
(in thousands, except per share amounts)
|
|
|
Revenue
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
22,323
|
|
|
|
1,762
|
|
|
|
28,286
|
|
|
|
13,672
|
|
|
|
52,371
|
|
General and administrative
|
|
|
4,302
|
|
|
|
2,209
|
|
|
|
4,824
|
|
|
|
3,065
|
|
|
|
11,335
|
|
Acquired in-process research and development
|
|
|
12,000
|
|
|
|
13,085
|
|
|
|
7,000
|
|
|
|
2,000
|
|
|
|
32,085
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(38,625
|
)
|
|
|
(17,056
|
)
|
|
|
(40,110
|
)
|
|
|
(18,737
|
)
|
|
|
(95,791
|
)
|
Other income (expense), net
|
|
|
795
|
|
|
|
(43
|
)
|
|
|
(552
|
)
|
|
|
340
|
|
|
|
200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(37,830
|
)
|
|
$
|
(17,099
|
)
|
|
$
|
(40,662
|
)
|
|
$
|
(18,397
|
)
|
|
$
|
(95,591
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per common share
|
|
$
|
(28.55
|
)
|
|
$
|
(15.38
|
)
|
|
$
|
(26.80
|
)
|
|
$
|
(13.91
|
)
|
|
$
|
(72.25
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares used in the computation of basic and diluted net
loss per common share
|
|
|
1,325
|
|
|
|
1,112
|
|
|
|
1,517
|
|
|
|
1,323
|
|
|
|
1,323
|
|
Pro forma basic and diluted net loss per common share (unaudited)
|
|
$
|
(4.41
|
)
|
|
|
|
|
|
$
|
(4.09
|
)
|
|
|
|
|
|
$
|
(12.58
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma basic and diluted weighted average common shares
outstanding (unaudited)
|
|
|
8,570
|
|
|
|
|
|
|
|
9,939
|
|
|
|
|
|
|
|
7,598
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42
Balance
Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
As of September 30,
|
|
|
2010
|
|
2009
|
|
2011
|
|
|
|
|
|
|
(unaudited)
|
|
|
(in thousands)
|
|
Cash, cash equivalents and available for sale securities
|
|
|
$22,299
|
|
|
|
$57,311
|
|
|
|
$22,028
|
|
Working capital (excluding convertible promissory notes)
|
|
|
19,886
|
|
|
|
57,349
|
|
|
|
16,385
|
|
Total assets
|
|
|
26,200
|
|
|
|
59,574
|
|
|
|
26,388
|
|
Convertible promissory notes and accrued interest
|
|
|
|
|
|
|
|
|
|
|
35,602
|
|
Convertible preferred stock
|
|
|
75,499
|
|
|
|
75,499
|
|
|
|
75,499
|
|
Total stockholders deficit
|
|
|
(54,749
|
)
|
|
|
(17,058
|
)
|
|
|
(93,552
|
)
|
43
MANAGEMENTS
DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our
financial condition and results of operations together with our
financial statements and related notes appearing at the end of
this prospectus. Some of the information contained in this
discussion and analysis or set forth elsewhere in this
prospectus, including information with respect to our plans and
strategy for our business and related financing, includes
forward-looking statements that involve risks and uncertainties.
You should read the Risk Factors section of this
prospectus for a discussion of important factors that could
cause actual results to differ materially from the results
described in or implied by the forward-looking statements
contained in the following discussion and analysis.
Overview
We are a biopharmaceutical company focused on acquiring,
developing and commercializing innovative anti-cancer agents in
the United States, Europe and additional international markets.
We target our development programs for the treatment of specific
subsets of cancer populations, and seek to simultaneously
develop, with partners, companion diagnostics that direct our
product candidates to the patients that are most likely to
benefit from their use. We are currently developing three
product candidates for which we hold global marketing rights:
CO-101, a
lipid-conjugated form of the anti-cancer drug gemcitabine, which
is in a pivotal study in a specific patient population for the
treatment of metastatic pancreatic cancer; CO-1686, an orally
available, small molecule EGFR covalent inhibitor that is
currently in preclinical development for NSCLC patients with
activating EGFR mutations, including the initial activating
mutations, as well as the primary resistance mutation, T790M;
and CO-338, an orally available, small molecule PARP inhibitor
being developed for various solid tumors that is currently in a
Phase I clinical trial. As our product candidates mature, we
intend to build commercial organizations of our own in major
global markets and contract with local distributors in smaller
markets.
We were incorporated in Delaware in April 2009 and commenced
operations in May 2009. To date, we have devoted substantially
all of our resources to identifying and in-licensing product
candidates, performing development activities with respect to
those product candidates, and the general and administrative
support of these operations. We have generated no revenues and,
through September 30, 2011, have principally funded our
operations using the $75.5 million of net proceeds from the
sale of convertible preferred stock and the issuance of $35.0
million aggregate principal amount of convertible promissory
notes due 2012. The outstanding principal amount of the
convertible promissory notes and all accrued and unpaid interest
thereon will convert into shares of our common stock immediately
prior to the closing of this offering at a price per share equal
to our initial public offering price set forth on the cover page
of this prospectus. On September 22, 2011, our Board of
Directors and stockholders effectuated a 1 for 2.9 reverse stock
split. Our historical share information has been retrospectively
adjusted to give effect to this reverse stock split.
We have never been profitable and, as of September 30,
2011, we had an accumulated deficit of $95.6 million. We
incurred losses of $17.1 million, $37.8 million, and
$40.7 million for the period from April 20, 2009
(inception) through December 31, 2009, the year ended
December 31, 2010, and the nine months ended
September 30, 2011, respectively. We expect to incur
significant and increasing losses for the foreseeable future as
we advance our product candidates through preclinical activities
and clinical trials to seek regulatory approval and, if
approved, commercialize such product candidates. We will need
additional financing to support our operating activities. In
addition, the report of our independent registered public
accounting firm on our financial statements appearing at the end
of this prospectus contains an explanatory paragraph stating
that our recurring losses from operations raise substantial
doubt about our ability to continue as a going concern. We will
seek to fund our operations through public or private equity or
debt financings or other sources. Adequate additional financing
may not be available to us on acceptable terms, or at all. Our
failure to raise capital as and when needed would have a
negative impact on our financial condition and our ability to
pursue our business strategy. We expect that research and
development expenses will increase as we continue the
development of our product candidates and general and
administrative costs will increase as we grow and operate as a
public company. We will need to generate significant revenues to
achieve profitability and we may never do so.
The financial information presented from April 20, 2009
(inception) to December 31, 2010 was based solely on the results
of Clovis Oncology, Inc. Subsequent to January 1, 2011, the
financial information is consolidated and includes the results
of our wholly owned subsidiary in the United Kingdom. All
intercompany transactions and balances are eliminated in this
consolidation.
44
Convertible
Promissory Notes
In May and June 2011, we issued an aggregate $35.0 million
aggregate principal amount of 5% convertible promissory notes
due 2012 in two separate transactions described as follows.
|
|
|
|
|
In May 2011, we issued $20.0 million aggregate principal
amount of 5% convertible promissory notes due 2012 to raise
additional working capital to advance the development programs
of our product candidates and for general corporate purposes.
The notes accrue interest at an annual rate of 5% and mature on
May 25, 2012. Upon the completion of this offering, the
principal balance and all accrued and unpaid interest due on the
notes will be converted into shares of our common stock at a per
share price equal to the initial public offering price shown on
the cover page of this prospectus.
|
|
|
|
In June 2011, we entered into a license agreement with Pfizer as
further described under the heading Product License
Agreements. Pursuant to the terms of the license
agreement, we made an up-front payment by issuing Pfizer
$7.0 million principal amount of a 5% convertible
promissory note due 2012. Pfizer concurrently purchased for cash
an additional $8.0 million principal amount of another 5%
convertible promissory note due 2012, bringing the total
principal amount of the notes issued to Pfizer to
$15.0 million. These convertible promissory notes have
substantially the same terms as the $20.0 million aggregate
principal amount of convertible promissory notes described in
the preceding paragraph, including identical interest
provisions, maturity date, and conversion features.
|
Product
License Agreements
CO-101
In November 2009, we entered into a license agreement with
Clavis to develop and commercialize CO-101 in North America,
Central America, South America and Europe. Under the terms of
the license agreement, we made an up-front payment to Clavis in
the amount $15.0 million, which was comprised of
$13.1 million for development costs incurred prior to the
execution of the agreement, which we recognized as acquired
in-process research and development and $1.9 million for
the prepayment of preclinical activities to be performed by
Clavis. In November 2010, the license agreement was amended to
expand the license territory to include Asia and other
international markets. We paid Clavis $10.0 million for the
territory expansion and recognized that payment as acquired
in-process research and development expense. As part of the
amendment to the license agreement, Clavis has also agreed to
reimburse up to $3.0 million of our research and
development costs for certain CO-101 development activities
subject to our incurring such costs. We are responsible for all
remaining development and commercialization costs of the
compound and, if approved, Clavis will be entitled to receive
royalties based on the volume of annual net sales achieved. We
may be required to pay Clavis an aggregate of up to
$115.0 million in development and regulatory milestone
payments if certain clinical study objectives and regulatory
filings, acceptances and approvals are achieved. In addition, we
may be required to pay Clavis an aggregate of up to
$445.0 million in sales milestone payments if certain
annual sales targets are met for CO-101.
Subject to certain conditions set forth in the license
agreement, Clavis may elect to co-develop and co-promote CO-101
in Europe. If Clavis were to make this election, it would be
required to reimburse us for a portion of both past and future
development costs. In addition, our milestone payment
obligations described above would be reduced. Clavis would not
be entitled to royalties on the net sales in Europe, but would
instead share equally in the pretax profits or losses resulting
from commercialization activities in Europe.
CO-1686
In May 2010, we entered into a worldwide license agreement with
Avila to discover, develop and commercialize preclinical
covalent inhibitors of mutant forms of EGFR. CO-1686 was
identified as the lead inhibitor candidate developed by Avila
under the license agreement. We are responsible for all
preclinical, clinical, regulatory and other activities necessary
to develop and commercialize
CO-1686. We
made an up-front payment of $2.0 million to Avila upon
execution of the license agreement which we recognized as
acquired in-process research and development expense. We are
obligated to pay Avila royalties on net sales of CO-1686, based
on the volume of annual net sales achieved. Avila has the option
to increase royalty rates by electing to reimburse a portion of
our development expenses. This option must be exercised within a
limited period of time of Avilas being notified by us of
our intent to pursue regulatory approval of CO-1686 in the
United States or the European Union as a first-line
45
treatment. We may be required to pay Avila up to an aggregate of
$119.0 million in development and regulatory milestone
payments if certain clinical study objectives and regulatory
filings, acceptances and approvals are achieved. In addition, we
may be required to pay Avila up to an aggregate of
$120.0 million in sales milestone payments if certain
annual sales targets are achieved.
CO-338
In June 2011, we entered into a license agreement with Pfizer to
acquire exclusive global development and commercialization
rights to Pfizers drug candidate PF-01367338, which we
have renamed CO-338. This drug candidate is a small molecule
PARP inhibitor which we are developing for the treatment of
selected solid tumors. Pursuant to the terms of the license
agreement, we made an up-front payment by issuing Pfizer
$7.0 million principal amount of a 5% convertible
promissory note due 2012. We are responsible for all development
and commercialization costs of CO-338 and, if approved, we will
be required to pay Pfizer royalties on sales of the product. In
addition, we may be required to pay Pfizer up to an aggregate of
$259.0 million in milestone payments if certain
development, regulatory and sales milestones are achieved.
Financial
Operations Overview
Revenue
To date, we have not generated any revenues. In the future, we
may generate revenue from the sales of product candidates that
are currently under development. Based on our current
development plans, we do not expect to generate revenues until
2014 at the earliest. If we fail to complete the development of
our product candidates and, together with our partners,
companion diagnostics or obtain regulatory approval for them,
our ability to generate future revenue, and our results of
operations and financial position, will be adversely affected.
Research
and Development Expenses
Research and development expenses consist of costs incurred for
the development of our product candidates and companion
diagnostics, which include:
|
|
|
|
|
license fees related to the acquisition of in-licensed products,
which are reported on our statements of operations as acquired
in-process research and development;
|
|
|
|
employee-related expenses, including salaries, benefits, travel
and stock-based compensation expense;
|
|
|
|
expenses incurred under agreements with CROs and investigative
sites that conduct our clinical trials and preclinical studies;
|
|
|
|
the cost of acquiring, developing and manufacturing clinical
trial materials;
|
|
|
|
costs associated with preclinical activities and regulatory
operations; and
|
|
|
|
activities associated with the development of companion
diagnostics for our product candidates.
|
Research and development costs are expensed as incurred. License
fees and milestone payments related to in-licensed products and
technology are expensed if it is determined that they have no
alternative future use. Costs for certain development
activities, such as clinical trials, are recognized based on an
evaluation of the progress to completion of specific tasks using
data such as patient enrollment, clinical site activations or
information provided to us by our vendors.
Research and development activities are central to our business
model. Product candidates in later stages of clinical
development generally have higher development costs than those
in earlier stages of clinical development, primarily due to the
increased size and duration of later stage clinical trials. We
plan to increase our research and development expenses for the
foreseeable future as we seek to complete development of our
most advanced product candidate, CO-101, and its companion
diagnostic, transition our CO-1686 product candidate into human
clinical trials, and assume responsibility for the development
costs of CO-338, which was in-licensed in June 2011, including
the cost of ongoing clinical trials.
The following table identifies research and development costs
and acquired in-process research and development costs on a
program-specific basis for our product candidates in-licensed
through September 30, 2011 and their companion diagnostics.
Personnel-related costs, depreciation and stock-based
compensation are not
46
allocated to a program as they are deployed across multiple
projects under development and, as such, are separately
classified as personnel and other expenses in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period from
|
|
|
|
|
|
|
|
|
|
|
|
|
April 20, 2009
|
|
|
|
|
|
Cumulative from
|
|
|
|
Year Ended
|
|
|
(Inception) to
|
|
|
Nine Months Ended
|
|
|
April 20, 2009
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
September 30,
|
|
|
(Inception) to
|
|
|
|
2010
|
|
|
2009
|
|
|
2011
|
|
|
2010
|
|
|
September 30, 2011
|
|
|
|
|
|
|
|
|
|
(unaudited, in thousands)
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
CO-101 Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquired in-process R&D
|
|
$
|
10,000
|
|
|
$
|
13,085
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
23,085
|
|
Research and development
|
|
|
14,461
|
|
|
|
371
|
|
|
|
15,417
|
|
|
|
8,707
|
|
|
|
30,249
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CO-101 Total
|
|
|
24,461
|
|
|
|
13,456
|
|
|
|
15,417
|
|
|
|
8,707
|
|
|
|
53,334
|
|
CO-1686 Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquired in-process R&D
|
|
|
2,000
|
|
|
|
|
|
|
|
|
|
|
|
2,000
|
|
|
|
2,000
|
|
Research and development
|
|
|
2,432
|
|
|
|
|
|
|
|
4,532
|
|
|
|
1,154
|
|
|
|
6,964
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CO-1686 Total
|
|
|
4,432
|
|
|
|
|
|
|
|
4,532
|
|
|
|
3,154
|
|
|
|
8,964
|
|
CO-338 Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquired in-process R&D
|
|
|
|
|
|
|
|
|
|
|
7,000
|
|
|
|
|
|
|
|
7,000
|
|
Research and development
|
|
|
|
|
|
|
|
|
|
|
1,359
|
|
|
|
|
|
|
|
1,359
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CO-338 Total
|
|
|
|
|
|
|
|
|
|
|
8,359
|
|
|
|
|
|
|
|
8,359
|
|
Personnel and other expenses
|
|
|
5,430
|
|
|
|
1,391
|
|
|
|
6,978
|
|
|
|
3,811
|
|
|
|
13,799
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
34,323
|
|
|
$
|
14,847
|
|
|
$
|
35,286
|
|
|
$
|
15,672
|
|
|
$
|
84,456
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and Administrative Expenses
General and administrative expenses consist principally of
salaries and related costs for personnel in executive, finance,
business development, and information technology functions.
Other general and administrative expenses include facility
costs, communication expenses, and professional fees for legal,
patent review, consulting and accounting services.
We anticipate that our general and administrative expenses will
increase due to many factors and the most significant of these
factors include:
|
|
|
|
|
increased personnel expenses to support the growth in research
and development activities; and
|
|
|
|
increased expenses related to becoming a publicly traded
company, including increased legal and accounting services,
addition of new headcount to support compliance and
communication needs, and increased insurance premiums.
|
Other
Income and Expense
Other income is comprised of interest income earned on cash,
cash equivalents and available for sale securities, gain on the
sale of available for sale securities, and a federal grant
awarded to us under the Qualifying Therapeutic Discovery Project
Program in 2010. In addition, we hold cash balances at financial
institutions denominated in currencies other than the
U.S. dollar to fund research and development activities
performed by various third-party vendors. The translation of
these currencies into U.S. dollars results in foreign
currency gains or losses, depending on the change in value of
these currencies against the U.S. dollar. These gains and
losses are included in Other Income and Expense.
Critical
Accounting Policies and Significant Judgments and
Estimates
Our discussion and analysis of our financial condition and
results of operations are 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, liabilities and
expenses and the disclosure of contingent assets and liabilities
in our financial statements. On an ongoing basis, we evaluate
our estimates and judgments, including those related to accrued
47
expenses and stock-based compensation. We base our estimates on
historical experience, known trends and events and various other
factors that are believed to be reasonable under the
circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results
may differ from these estimates under different assumptions or
conditions.
Our significant accounting policies are described in more detail
in the notes to our financial statements appearing elsewhere in
this prospectus. We believe the following accounting policies to
be most critical to the judgments and estimates used in the
preparation of our financial statements.
Accrued
Research and Development Expenses
As part of the process of preparing our financial statements, we
are required to estimate our accrued expenses. This process
involves reviewing open contracts and purchase orders,
communicating with our personnel to identify services that have
been performed on our behalf and estimating the level of service
performed and the associated cost incurred for the service when
we have not yet been invoiced or otherwise notified of the
actual cost. The majority of our service providers invoice us
monthly in arrears for services performed or when contractual
milestones are met. We make estimates of our accrued expenses as
of each balance sheet date in our financial statements based on
facts and circumstances known to us at that time. We
periodically confirm the accuracy of our estimates with the
service providers and make adjustments if necessary. Examples of
estimated accrued research and development expenses include:
|
|
|
|
|
fees paid to CROs in connection with clinical studies;
|
|
|
|
fees paid to investigative sites in connection with clinical
studies;
|
|
|
|
fees paid to vendors in connection with preclinical development
activities;
|
|
|
|
fees paid to vendors associated with the development of
companion diagnostics; and
|
|
|
|
fees paid to vendors related to product manufacturing,
development and distribution of clinical supplies.
|
We base our expenses related to clinical studies on our
estimates of the services received and efforts expended pursuant
to contracts with multiple CROs that conduct and manage clinical
studies on our behalf. The financial terms of these agreements
are subject to negotiation, vary from contract to contract and
may result in uneven payment flows. There may be instances in
which payments made to our vendors will exceed the level of
services provided and result in a prepayment of the clinical
expense. Payments under some of these contracts depend on
factors such as the successful enrollment of patients and the
completion of clinical trial milestones. In accruing service
fees, we estimate the time period over which services will be
performed, enrollment of patients, number of sites activated and
the level of effort to be expended in each period. If the actual
timing of the performance of services or the level of effort
varies from our estimate, we adjust the accrual or prepaid
accordingly. Although we do not expect our estimates to be
materially different from amounts actually incurred, our
understanding of the status and timing of services performed
relative to the actual status and timing of services performed
may vary and may result in us reporting amounts that are too
high or too low in any particular period. Based on the amount of
accrued research and development expenses as of
September 30, 2011, if our estimates are too high or too
low by 5%, this could increase or decrease our research and
development expenses by approximately $214,000.
Stock-Based
Compensation
Described below is the methodology we have utilized in measuring
stock-based compensation expense. Following the consummation of
this offering, stock option values will be determined based on
the quoted market price of our common stock.
Since our inception in 2009, we have applied the fair value
recognition provisions of Financial Accounting Standards Board
Accounting Standards Codification, or ASC, 718 Accounting
for Stock Based Compensation, which we refer to as
ASC 718. Determining the amount of stock-based compensation
to be recorded requires us to develop estimates of the fair
value of stock options as of their grant date. Compensation
expense is recognized over the vesting period of the award.
Calculating the fair value of stock-based awards requires that
we make highly subjective assumptions. We use the Black-Scholes
option pricing model to value our stock option awards. Use of
this valuation methodology requires that we make assumptions as
to the price volatility of our common stock, the
48
expected term of our stock options, the risk free interest rate
for a period that approximates the expected term of our stock
options and our expected dividend yield. Because we are a
privately-held company with a limited operating history, we
utilize data from several peer companies to estimate expected
stock price volatility and the expected term of our options. We
selected peer companies from the biopharmaceutical industry with
similar characteristics as us, including stage of product
development, market capitalization, number of employees and
therapeutic focus. We utilize a dividend yield of zero based on
the fact that we have never paid cash dividends and have no
current intention to pay cash dividends. The risk-free interest
rate used for each grant is based on the U.S. Treasury
yield curve in effect at the time of grant for instruments with
a similar expected life.
The fair value of stock options was estimated at the grant date
using the following weighted average assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period from April 20
|
|
|
|
Nine Months
|
|
|
|
|
Year Ended
|
|
|
|
(Inception) Through
|
|
|
|
Ended
|
|
|
|
|
December 31,
|
|
|
|
December 31,
|
|
|
|
September 30,
|
|
|
|
|
2010
|
|
|
|
2009
|
|
|
|
2011
|
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
|
(unaudited)
|
|
|
|
Dividend yield
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Volatility
|
|
|
80
|
|
%
|
|
|
80
|
|
%
|
|
|
74
|
|
%
|
|
|
84
|
|
%
|
Risk-free interest rate
|
|
|
2.10
|
|
%
|
|
|
2.33
|
|
%
|
|
|
2.21
|
|
%
|
|
|
2.25
|
|
%
|
Expected term (years)
|
|
|
5.6
|
|
|
|
|
5.3
|
|
|
|
|
6.0
|
|
|
|
|
5.4
|
|
|
In accordance with ASC 718, we recognized stock-based
compensation expense of approximately $4,000 and $68,000 for the
period April 20, 2009 (inception) through December 31,
2009 and for the year ended December 31, 2010,
respectively, and $42,000 and $802,000 for the nine months ended
September 30, 2010 and 2011, respectively. As of
September 30, 2011, we had $6.2 million in total
unrecognized compensation expense, net of related forfeiture
estimates, which is expected to be recognized over a
weighted-average remaining vesting period of approximately
3.2 years. While our stock-based compensation has not been
significant historically, we expect the impact to grow in future
periods due to the potential increases in the value of our
common stock and headcount.
Under ASC 718, we are required to estimate the level of
forfeitures expected to occur and record compensation expense
only for those awards that we ultimately expect will vest. Due
to the lack of historical forfeiture activity of our plan, we
estimated our forfeiture rate based on peer company data with
characteristics similar to our company.
As there has been no public market for our common stock to date,
the estimated fair value of our common stock has been determined
contemporaneously by our board of directors based on valuation
estimates provided by management and prepared in accordance with
the framework of the 2004 AICPA Technical Practice Aid,
Valuation of Privately-Held-Company Equity Practice Aids, or the
Practice Aid.
For the period from April 20, 2009 (inception) to
December 31, 2009, our board of directors determined the
fair value of our common stock to be $0.29 per share. Due to the
minimal value of non-cash assets owned during this period, the
superior preferences associated with our convertible preferred
stock in relation to our common stock and our focus on start up
activities, there was a nominal value attributed to the fair
value of our common stock during this time.
In the fourth quarter of 2009, we completed the in-licensing of
our first product candidate and the issuance of our
Series A-2
and Series B convertible preferred stock for total net
proceeds of $65.6 million. Based on the significance of
these transactions, we deemed it appropriate to update the
estimated valuation of our common stock as of December 31,
2009. This valuation was updated again as of December 31,
2010.
Based on the valuation methodology selection criteria set forth
in the Practice Aid and the stage of our development as a
company as of December 31, 2009 and 2010, we determined
that the Option Pricing Method based on a Black-Scholes option
pricing model was the most appropriate valuation methodology to
estimate the fair value of our common stock. We concluded that
there were no significant transactions affecting our capital
structure or changes in the development plans for our product
candidates from what was previously expected which would have
indicated that an update to our valuation was required at dates
other than December 31, 2009 and 2010, which was validated
by the relatively insignificant change in value during each
period.
49
Key variables used in applying the Option Pricing Method are as
follows:
|
|
|
|
|
Underlying equity value To estimate the value of our
total equity (including both common and preferred equity), we
utilized the marketable equity value based on the most recent
rounds our preferred stock issuances, which we believed to be
the most indicative of our value.
|
|
|
|
Volatility We estimated volatility based on
comparison to volatility of publicly-traded comparable companies.
|
|
|
|
Time to liquidity We estimated time to a liquidity
event based on the forecasted time to significant clinical
development events for our product candidates which we believed
could lead to an initial public offering, or IPO, or other type
of liquidation event for our stockholders.
|
|
|
|
Risk-free interest rate We determined the risk-free
interest rate based on the yield of a U.S. Treasury bill
with a maturity date closest to the estimated time to a
liquidation event for our stockholders.
|
|
|
|
Discounts for lack of marketability Because we are a
privately-held company, shares of our common stock are highly
illiquid and, as such, warrant a discount in value from their
estimated marketable price. We estimate the discount
factor for illiquidity using legal guidelines from U.S. Tax
Court cases regarding privately-held business valuations,
fundamental business factors, and empirical studies on the
discount for lack of marketability. We corroborated the discount
factor based on the value of a put option compared to the value
of common stock using a Black-Scholes option pricing model.
|
The following tables summarize the significant assumptions
utilized in the Option Pricing Method used to determine the fair
value of our common stock as of the dates indicated.
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
2009
|
|
2010
|
|
|
|
|
1 Yr. Liquidity
|
|
2 Yr. Liquidity
|
|
Underlying equity value ($ millions)
|
|
$89.7
|
|
$99.0
|
|
$104.4
|
Volatility
|
|
80%
|
|
70%
|
|
70%
|
Time to liquidity
|
|
3 yrs.
|
|
1 yr.
|
|
2 yrs.
|
Risk-free interest rate
|
|
1.69%
|
|
0.29%
|
|
0.61%
|
Discount for lack of marketability
|
|
55%
|
|
40%
|
|
50%
|
Estimated per-share fair value of common stock
|
|
$3.08
|
|
$3.10
|
|
$3.45
|
Average of 2010 valuations
|
|
|
|
$3.28
|
|
|
For our valuation as of December 31, 2009, we assumed a
three-year time to liquidity based on our assumption that
clinical data from the LEAP study for CO-101 would be available
in the fourth quarter of 2012. At that time, we believed that an
IPO or other liquidity event would most likely occur following
the availability of those data. For our valuation as of
December 31, 2010, we performed two valuation models, one
that assumed a one-year time to liquidity and another that
assumed a two-year time to liquidity. As of December 31,
2010, we believed that a liquidity event was possible within one
year due to the fact that we had in-licensed a second product
candidate
(CO-1686),
which was expected to commence human clinical trials in the
first half of 2012, and the development of CO-101 was
progressing as planned. We also believed that a liquidity event
was equally likely to occur after the availability of the
clinical data from the LEAP study, which was still expected
within two years of the valuation. Since neither of these
scenarios seemed more likely than the other, we calculated
valuations using both liquidity event assumptions and equally
weighted the results to estimate the fair value of our common
stock. The primary reason for the lower marketable value per
share of our common stock in comparison to the marketable value
per share of our preferred stock on each valuation date was the
value of the superior rights and preferences associated with the
preferred stock, the most significant of which are the
liquidation rights held by the preferred stockholders.
The estimated fair value of our common stock increased
significantly from our initial estimate of $0.29 made at our
inception to $3.08 as of December 31, 2009. This increase
was primarily due to our improved financial position resulting
from the issuance of our
Series A-2
and Series B convertible preferred stock as well as the
in-licensing of our first product candidate, CO-101, each of
which occurred in the fourth quarter of 2009. These events
increased the likelihood of creating value for common
stockholders above the thresholds necessary to satisfy the
liquidation preferences held by our preferred stockholders.
50
In April 2011, our board of directors authorized management to
pursue an IPO. As a result of this action, we determined that
the valuation of our common stock should be updated to reflect
the greater clarity as to a likely liquidity event for common
stockholders (i.e., this offering), as well as the
in-licensing of our third product candidate, CO-338, and the
issuance in May and June 2011 of $35.0 million in aggregate
principal amount of our 5% convertible promissory notes due
2012. In accordance with the Practice Aid, we determined that
the probability weighted expected return method, or PWERM, was
the most appropriate valuation methodology going forward.
Accordingly, we updated the valuation of our common stock
effective June 30, 2011.
In our application of PWERM, we estimated the fair value of our
common stock using three potential liquidity scenarios and then
probability weighted the resulting valuation under each of these
scenarios. The three liquidity scenarios assumed were as follows:
|
|
|
|
|
completing this IPO, or the IPO scenario;
|
|
|
|
remaining as a private company and selling the company at a
future date, or the merger and acquisition, or M&A,
scenario; and
|
|
|
|
remaining as a private company and executing an IPO at a future
date, or the Future IPO scenario.
|
In order to estimate our equity value under the IPO scenario, we
employed an income approach using a discounted cash flow
analysis. Net cash flows from the multi-year forecast for each
of our product candidates were discounted to their present value
based on our estimated weighted average cost of capital, or
WACC. The WACC was estimated using a capital asset pricing
model, taking into account risk-free interest rates, an equity
risk premium, risk premiums for our industry and entity size,
company-specific risks associated with the development and
commercialization of our product candidates, and the cost and
capital structure weighting of our debt. The estimated future
cash flows were based on anticipated timing of the clinical
development and regulatory approvals for each of our product
candidates as well as their commercialization opportunity. This
equity value was applied to the number of common shares
outstanding determined on a fully diluted basis to calculate the
per share fair value of our common stock, assuming the
conversion of all preferred stock into common stock.
To value our common stock under the M&A and Future IPO
scenarios, we utilized the Option Pricing Method as described
above. However, for these scenarios the current value of our
underlying common and preferred equity was determined using a
discounted cash flow analysis that is substantially the same as
the analysis performed for the IPO scenario rather than using a
marketable equity value based on recent rounds of our preferred
stock issuances as was used in the December 31, 2009 and
2010 valuations. We believed this to be a more accurate
measurement of our equity value as of June 30, 2011 due to
the 19 month time gap since our last issuance of preferred
stock. Once our equity value for the M&A and Future IPO
scenarios was determined, we allocated a portion of the value to
our common stock based on a best economic outcome
model. For the M&A scenario, the value assigned to our
common stock was determined using a break point analysis to
estimate the various enterprise values at which holders of each
series of our preferred stock would elect to convert to common
stock and the points at which holders of options would exercise
as a result of the value of the common stock exceeding the
exercise price. For the Future IPO scenario, the value assigned
to our common stock was estimated using a fully diluted
outstanding share analysis assuming the conversion of all
preferred stock into common stock as such a conversion would be
required to execute an IPO.
The following tables summarize the significant assumptions
utilized for each of the valuation scenarios used to determine
the fair value of our common stock as of June 30, 2011.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liquidity Scenario
|
|
|
|
|
Initial Public
|
|
|
|
|
Key Assumptions
|
|
|
|
Offering
|
|
Future IPO
|
|
M&A
|
|
Probability weighting
|
|
|
|
|
|
80%
|
|
10%
|
|
10%
|
Liquidity date
|
|
|
|
|
|
10/1/2011
|
|
6/30/2014
|
|
6/30/2014
|
Underlying equity value ($ millions)
|
|
|
|
|
|
$124.6
|
|
$120.0
|
|
$120.0
|
WACC
|
|
|
|
|
|
28%
|
|
N/A
|
|
N/A
|
Volatility
|
|
|
|
|
|
N/A
|
|
100%
|
|
100%
|
Risk-free interest rate
|
|
|
|
|
|
N/A
|
|
0.81%
|
|
0.81%
|
Discount for lack of marketability
|
|
|
|
|
|
N/A
|
|
50%
|
|
50%
|
Estimated per-share fair value of common stock
|
|
|
|
|
|
$12.47
|
|
$5.57
|
|
$4.93
|
PWERM
|
|
$
|
11.02
|
|
|
|
|
|
|
|
51
The estimated per share fair value of our common stock
determined as of June 30, 2011 increased significantly from
the December 31, 2010 valuation. This is primarily due to
the April 2011 decision by our board of directors to authorize
management to pursue an IPO and the June 2011 authorization of
our board of directors to file this registration statement with
the SEC, which, among other things, contributed to the
elimination of the discount for lack of marketability from the
IPO scenario in the June 30, 2011 analysis. Given the
assumed acceleration of the IPO to October 1, 2011, we
believe the value of our common stock no longer warrants a
discount from its marketable price. In addition, the
June 30, 2011 valuation was positively impacted by the
assumption that all preferred stock would automatically convert
into common stock upon the IPO, thereby eliminating the impact
of preferred stock liquidation preferences on the value of the
common stock.
We utilized the common stock valuation contemporaneously
prepared as of December 31, 2010 to set the exercise price
for stock options granted during the six months ended
June 30, 2011. In light of the close proximity of the stock
option grants in March, April, May and June 2011 to the April
and June 2011 actions by our board of directors with respect to
the IPO and our June 2011 entry into a license agreement to
acquire exclusive global development and commercialization
rights to CO-338, we retrospectively determined to use the fair
value of our common stock as of June 30, 2011 to calculate
stock-based compensation expense for those stock option grants.
No stock options were granted in January or February 2011.
The following table presents the grant dates and related
exercise prices of stock options granted to our employees and
our board of directors from April 20, 2009 (inception)
through September 30, 2011 along with the corresponding
exercise price for each grant and the fair value per share
utilized to calculate stock-based compensation expense.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
Shares
|
|
|
|
Common Stock
|
|
|
Underlying
|
|
Exercise
|
|
Fair Value per
|
|
|
Options
|
|
Price per
|
|
Share on Grant
|
Month of Grant
|
|
Granted
|
|
Share
|
|
Date
|
|
August 2009
|
|
|
260,348
|
|
|
$
|
0.29
|
|
|
$
|
0.29
|
|
October 2009
|
|
|
34,482
|
|
|
$
|
0.29
|
|
|
$
|
0.29
|
|
November 2009
|
|
|
12,069
|
|
|
$
|
0.29
|
|
|
$
|
0.29
|
|
December 2009
|
|
|
4,311
|
|
|
$
|
0.29
|
|
|
$
|
0.29
|
|
April 2010
|
|
|
114,309
|
|
|
$
|
3.08
|
|
|
$
|
3.08
|
|
May 2010
|
|
|
29,309
|
|
|
$
|
3.08
|
|
|
$
|
3.08
|
|
June 2010
|
|
|
12,069
|
|
|
$
|
3.08
|
|
|
$
|
3.08
|
|
August 2010
|
|
|
1,034
|
|
|
$
|
3.08
|
|
|
$
|
3.08
|
|
October 2010
|
|
|
4,310
|
|
|
$
|
3.08
|
|
|
$
|
3.08
|
|
November 2010
|
|
|
31,897
|
|
|
$
|
3.08
|
|
|
$
|
3.08
|
|
December 2010
|
|
|
48,273
|
|
|
$
|
3.08
|
|
|
$
|
3.08
|
|
March 2011
|
|
|
534,449
|
|
|
$
|
3.28
|
|
|
$
|
11.02
|
|
April 2011
|
|
|
5,173
|
|
|
$
|
3.28
|
|
|
$
|
11.02
|
|
May 2011
|
|
|
12,412
|
|
|
$
|
3.28
|
|
|
$
|
11.02
|
|
June 2011
|
|
|
48,274
|
|
|
$
|
3.28
|
|
|
$
|
11.02
|
|
July 2011
|
|
|
5,172
|
|
|
$
|
11.02
|
|
|
$
|
11.02
|
|
August 2011
|
|
|
194,647
|
|
|
$
|
11.02
|
|
|
$
|
11.02
|
|
We and representatives of the underwriters determined the price
range set forth on the cover page of this prospectus. The
midpoint of the price range set forth on the cover page of this
prospectus is $14.00 per share, as compared to our most recent
common stock valuation of $11.02 per share completed as of
June 30, 2011. As is typical in initial public offerings,
the range set forth on the cover page of this prospectus was not
derived using a formal determination of fair value, but was
determined based upon discussions between us and the
underwriters based on prevailing market conditions and estimates
of our business potential. In addition to the difference in
purpose and methodology, we believe that the difference in
estimated value between the midpoint of the price range and
managements determination of the estimated fair value of
our common stock as of June 30, 2011 is primarily the
result of the following factors:
|
|
|
|
|
The contemporaneous valuation prepared as of June 30, 2011
contained multiple liquidity scenarios, including an initial
public offering with an anticipated completion date of
October 1, 2011 and two scenarios that assumed we remained
as a private company for an extended period of time. If we had
considered only the October 1, 2011 initial public offering
scenario with 100% probability, the contemporaneous valuation
|
52
would have resulted in a fair value determination of $12.47 per
share, representing a discount of 11% from the midpoint of the
range.
|
|
|
|
|
We believe that it is reasonable to expect that the completion
of an initial public offering could increase the value of our
common stock as a result of the significant increase in our
liquidity as well as the ability to buy and sell these
securities. However, it is not possible to measure the potential
increase in value with precision or certainty.
|
|
|
|
|
|
We would also note that a number of the most-recently completed
initial public offerings by companies in the biotech and
specialty pharmaceutical industries were completed at a discount
to the midpoint of their filing ranges. Therefore, it is
possible that the price at which this offering is completed will
be lower than the midpoint of the price range set forth on the
cover page of this prospectus.
|
During the period of October 1, 2011 through
October 28, 2011, we granted options to purchase a total of
5,516 shares of our common stock. All such options were
unvested as of October 28, 2011. These options have an
exercise price of $11.02 per share, and we used the
June 30, 2011 common stock valuation prepared by management
to calculate stock-based compensation expense associated with
these options. Based on an assumed initial public offering price
of $14.00 per share, the midpoint of the price range set forth
on the cover page of this prospectus, the intrinsic value of
these options was $16,438, all of which related to unvested
options.
There are significant judgments and estimates inherent in the
determination of these valuations. These judgments and estimates
include assumptions regarding our future performance, including
the successful completion of our clinical trials as well as the
determination of the appropriate valuation methods. If we had
made different assumptions, our share-based compensation expense
could have been different. The foregoing valuation methodologies
are not the only methodologies available and they will not be
used to value our common stock once this offering is complete.
We cannot make assurances as to any particular valuation for our
common stock. Accordingly, investors are cautioned not to place
undue reliance on the foregoing valuation methodologies as an
indicator of future stock prices.
Results
of Operations
Comparison
of the Nine Months Ended September 30, 2011 and
2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
|
|
|
September 30,
|
|
|
Increase
|
|
|
|
2011
|
|
|
2010
|
|
|
(Decrease)
|
|
|
|
(unaudited, in thousands)
|
|
|
|
|
|
Revenues
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
28,286
|
|
|
|
13,672
|
|
|
|
14,614
|
|
General and administrative
|
|
|
4,824
|
|
|
|
3,065
|
|
|
|
1,759
|
|
Acquired in-process research and development
|
|
|
7,000
|
|
|
|
2,000
|
|
|
|
5,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(40,110
|
)
|
|
|
(18,737
|
)
|
|
|
21,373
|
|
Other income (expense), net
|
|
|
(552
|
)
|
|
|
340
|
|
|
|
(892
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(40,662
|
)
|
|
$
|
(18,397
|
)
|
|
$
|
22,265
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and Development
Expenses. Research and development expenses
for the nine months ended September 30, 2011 were
$28.3 million compared to $13.7 million for the nine
months ended September 30, 2010, an increase of
$14.6 million. Clinical trial expenses increased by
$6.7 million due to growth in the number of patients,
active sites and investigators that are participating in our
CO-101 clinical trials, as well as the assumption of clinical
development costs for CO-338 following the in-licensing of that
product candidate in June 2011. Drug product development and
manufacturing activities also increased by $1.0 million in
support of the
CO-101
development. In addition, $3.4 million of the increase was
the result of discovery, formulation development and the
commencement of preclinical activities associated with CO-1686,
a compound that was in-licensed in May 2010. The remaining
increase of $3.5 million was due primarily to an increase
in salaries, benefits and personnel related costs resulting from
additional headcount hired to support the expanding development
activities of CO-101 and CO-1686.
General and Administrative
Expenses. General and administrative expenses
for the nine months ended September 30, 2011 were
$4.8 million compared to $3.1 million for the nine
months ended September 30, 2010, an increase of
$1.8 million. The increase was primarily attributable to
the leasing of new office space in San Francisco,
California commencing in May 2010 and in Cambridge, England
commencing in August 2010, as well as legal fees
53
associated with patent review and analysis activities for two
of our product candidates, and increased travel and information
system costs to support company growth. Additionally, stock
compensation expense increased by $394,000 relative to the
increase in the valuation of our common stock in 2011.
Acquired In-Process Research and Development
Expenses. Acquired in-process research and
development expenses for the nine months ended
September 30, 2011 was $7.0 million compared to
$2.0 million for the nine months ended September 30,
2010, an increase of $5.0 million. The increase was due to
the difference in up-front acquisition costs for the development
and commercialization rights of CO-338 in comparison to CO-1686.
The licensing rights to
CO-338 were
acquired in June 2011. We made an up-front payment by issuing
Pfizer a $7.0 million convertible promissory note, which
was recognized as acquired in-process research and development
expense. In May 2010, we acquired the global rights to
develop and commercialize CO-1686 and made a $2.0 million
up-front payment which was recognized as acquired in-process
research and development expense.
Other Income (Expense), Net. Other
income (expense), net for the nine months ended
September 30, 2011 was $(552,000) compared to $340,000 for
the nine months ended September 30, 2010, a change of
$(892,000). Interest expense increased by $602,000, resulting
from the convertible promissory notes issued to our existing
investors and Pfizer during the second quarter of 2011. This
variance was also due to a change in the value of the Euro in
relation to the U.S. Dollar which created a foreign
currency transaction gain to our Euro denominated cash account
for the nine months ended September 30, 2011 of $118,000.
In the same period for the prior year, we recognized a foreign
currency transaction gain of $292,000, resulting in a decrease
to other income of $174,000.
Comparison
of the Year Ended December 31, 2010 to the Period from
April 20, 2009 (Inception) to December 31,
2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period from
|
|
|
|
|
|
|
|
|
|
April 20, 2009
|
|
|
|
|
|
|
Year ended
|
|
|
(Inception) to
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
Increase
|
|
|
|
2010
|
|
|
2009
|
|
|
(Decrease)
|
|
|
Revenues
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
22,323
|
|
|
|
1,762
|
|
|
|
20,561
|
|
General and administrative
|
|
|
4,302
|
|
|
|
2,209
|
|
|
|
2,093
|
|
Acquired in-process research and development
|
|
|
12,000
|
|
|
|
13,085
|
|
|
|
(1,085
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(38,625
|
)
|
|
|
(17,056
|
)
|
|
|
21,569
|
|
Other income (expense), net
|
|
|
795
|
|
|
|
(43
|
)
|
|
|
838
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(37,830
|
)
|
|
$
|
(17,099
|
)
|
|
$
|
20,731
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and Development
Expenses. Research and development expenses
were $22.3 million for the year ended December 31,
2010, compared to $1.8 million for the period from
April 20, 2009 (inception) to December 31, 2009, an
increase of $20.6 million. The increase was due to the
commencement of research and development activities in 2010 for
our in-licensed compounds CO-101 and CO-1686. Significant 2010
development activities included:
|
|
|
|
|
increase of $5.5 million related to the commencement of our
pivotal clinical trial for CO-101 in January 2010;
|
|
|
|
increase of $4.7 million for CO-101 drug product
development, clinical supply manufacturing and distribution;
|
|
|
|
increase of $2.3 million associated with CO-1686 product
development and IND enabling activities;
|
|
|
|
increase of $2.0 million for the initiation of additional
supporting CO-101 clinical studies;
|
|
|
|
increase of $1.1 million for companion diagnostic
development related to both CO-101 and
CO-1686; and
|
|
|
|
increase of $4.0 million to salaries, benefits and other
personnel costs to support the growth in our 2010 development
activities.
|
54
General and Administrative
Expenses. General and administrative expenses
for the year ended December 31, 2010 were $4.3 million
compared to $2.2 million for the period from April 20,
2009 (inception) to December 31, 2009, an increase of
$2.1 million. The increase was due primarily to an increase
of $0.9 million in personnel related expenses to support
corporate operational activities and the commencement of
research and development activities for CO-101 and CO-1686 in
2010. In addition, office lease expense increased by
$0.9 million due to new lease agreements for the Boulder,
Colorado and San Francisco, California locations, effective
in December 2009 and May 2010, respectively. In addition, we
commenced operations in May 2009 and, as such, expenses for the
period ended December 31, 2009 reflect only a partial
years activity.
Acquired In-Process Research and Development
Expenses. The rights to develop and
commercialize CO-101 in North America, Central America, South
America and Europe were licensed from Clavis in November 2009.
As part of the in-license transaction, we recognized
$13.1 million in 2009 as acquired in-process research and
development expense. In November 2010, we made a payment of
$10.0 million to Clavis to expand the territory rights
under the license agreement to include Asia and other
international markets and we recorded this payment as acquired
in-process research and development expense. The acquired
in-process research and development expense associated with
CO-101 decreased $3.1 million for the year ended
December 31, 2010 in comparison to the period from
April 20, 2009 (inception) to December 31, 2009 as a
result of the transactions described above. This reduction was
partially offset by the acquisition of the worldwide rights to
CO-1686 in May 2010. We recognized the up-front payment of
$2.0 million for CO-1686 rights as acquired in-process
research and development expense during 2010.
Other Income (Expense), Net. Other
income (expense), net for the year ended December 31, 2010
was $795,000 compared to $(43,000) for the period from
April 20, 2009 (inception) to December 31, 2009, a
change of $838,000. The net change to other income (expense) was
largely due to a $489,000 award received in 2010 under the
Qualifying Therapeutic Discovery Project Program for the
development of CO-101 and CO-1686. In addition, $232,000 was due
to the strengthening of the Euro value in relation to the
U.S. Dollar over the 2010 year, which created an
exchange gain to our Euro denominated cash account. The Euro
cash account was established in May 2010 and had no impact in
the period ended December 31, 2009.
Liquidity
and Capital Resources
We have funded our operations primarily through the private
placement of equity and convertible debt securities. As of
September 30, 2011, we have received $75.5 million in
net proceeds from the issuance of convertible preferred stock.
In May and June 2011, we received proceeds of $28.0 million
through the issuance of convertible promissory notes. The
outstanding principal amount and all accrued and unpaid interest
thereon will convert into shares of our common stock immediately
prior to the closing of this offering at a price per share equal
to our initial public offering price set forth on the cover page
of this prospectus. As of September 30, 2011, we had cash,
cash equivalents and available for sale securities totaling
$22.0 million.
The following table sets forth the primary sources and uses of
cash for each of the periods set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period from
|
|
|
|
|
|
|
|
|
|
April 20, 2009
|
|
|
|
|
|
|
Year Ended
|
|
|
(Inception) to
|
|
|
Nine Months Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2011
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
Net cash used in operating activities
|
|
$
|
(34,011
|
)
|
|
$
|
(17,955
|
)
|
|
$
|
(27,165
|
)
|
|
$
|
(16,174
|
)
|
Net cash provided by (used in) investing activities
|
|
|
(12,821
|
)
|
|
|
(270
|
)
|
|
|
9,169
|
|
|
|
(16,922
|
)
|
Net cash provided by financing activities
|
|
|
29
|
|
|
|
75,536
|
|
|
|
27,441
|
|
|
|
2
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
$
|
(46,803
|
)
|
|
$
|
57,311
|
|
|
$
|
9,484
|
|
|
$
|
(33,094
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Activities
The use of cash in all periods resulted primarily from our net
losses adjusted for non-cash charges and changes in components
of working capital. The significant increase in cash used in
operating activities for the year ended December 31, 2010
compared to the period from April 20, 2009 (inception) to
December 31, 2009 is due to an
55
increase in research and development expenses as we commenced
development work on CO-101 and CO-1686 following the
in-licensing of those programs in November 2009 and May 2010,
respectively. In addition, we commenced operations in May 2009
and, as such, the period ended December 31, 2009 reflects
only a partial year of activity. The increase of
$11.0 million to cash used in operating activities for the
nine months ended September 30, 2011 in comparison to the
same period in the prior year was due to an increase in clinical
trial costs for CO-101 resulting from an increase in the number
of patients enrolled and sites activated for our ongoing LEAP
trial and commencement of CO-1686 research and development
activities, a product candidate we in-licensed in May 2010.
Investing
Activities
The cash provided by (used in) investing activities for all
periods primarily reflects the purchase of available for sale
securities offset by maturities and sales of available for sale
securities. The net use of cash for these activities increased
from zero in 2009 to $12.0 million in 2010 as we invested a
portion of the proceeds received from the sale of convertible
preferred stock in November 2009 in available for sale
securities. In addition, we purchased $0.8 million in
property and equipment in 2010 compared to $0.3 million in
2009. The increase of $26.1 million in cash provided by
investing activities for the nine months ended
September 30, 2011 compared to the nine months ended
September 30, 2010 was due primarily to a reduction of cash
outflows for the purchase of available for sale securities of
$27.1 million during the first nine months of 2011.
Financing
Activities
The cash provided by financing activities in 2009 is the result
of the sale and issuance of 5,044,828 shares of our
Series A-1
convertible preferred stock for net proceeds of
$9.9 million, 5,044,828 shares of our
Series A-2
convertible preferred stock for net proceeds of
$15.1 million, and 10,919,540 shares of our
Series B convertible preferred stock for net proceeds of
$50.4 million. Cash provided by financing activities for
the nine months ended September 30, 2011 are due to the
issuance of $28.0 million principal amount of 5%
convertible promissory notes for cash in the second quarter of
2011 and the exercise of stock options of $1.1 million,
offset by stock issuance costs of $1.5 million for our
planned IPO.
Operating
Capital Requirements
Assuming we successfully complete clinical trials and obtain
requisite regulatory approvals, we do not anticipate
commercializing any of our product candidates until 2014 at the
earliest. As such, we anticipate that we will continue to
generate significant losses for the next several years as we
incur expenses to complete our development activities for each
of our programs, including clinical trial activities, companion
diagnostic development, drug development, establishing our
commercial capabilities, and expanding our general and
administrative functions to support the growth in our research
and development and commercial organizations. In addition, the
report of our independent registered public accounting firm on
our financial statements appearing at the end of this prospectus
contains an explanatory paragraph stating that our recurring
losses from operations raise substantial doubt about our ability
to continue as a going concern. We believe that the successful
completion of this offering will eliminate this doubt and enable
us to continue as a going concern; however, if we are unable to
raise sufficient capital in this offering, we will need to
obtain alternative financing or significantly modify our
operational plan for us to continue as a going concern.
The net proceeds from this offering alone will not be sufficient
to fund our operations through successful development and
commercialization of our product candidates. As a result, we
will need to raise additional capital following this offering to
fund our operations and continue to conduct clinical trials to
support additional development and potential regulatory
approval, make milestone payments to our licensors and
commercialize our product candidates.
We believe that the net proceeds from this offering, together
with our existing cash and cash equivalents and available for
sale securities, will allow us to fund our operating plan
through at least the next 12 months. If our available cash
and cash equivalents and available for sale securities are
insufficient to satisfy our liquidity requirements, we may seek
to sell additional equity or debt securities or obtain a credit
facility. The sale of additional equity and debt securities may
result in additional dilution to our shareholders.
In addition, if we raise additional funds through the issuance
of debt securities or convertible preferred stock, these
securities may have rights senior to those of our common stock
and could contain covenants that would restrict
56
our operations. Furthermore, any such required additional
capital may not be available on reasonable terms, if at all. If
we were unable to obtain additional financing, we may be
required to reduce the scope of, delay, or eliminate some or all
of our planned development and commercialization activities,
which could harm our business.
Because of the numerous risks and uncertainties associated with
research, development and commercialization of pharmaceutical
products, we are unable to estimate the exact amounts of our
working capital requirements. Our future funding requirements
will depend on many factors, including but not limited to:
|
|
|
|
|
the number and characteristics of the product candidates,
companion diagnostics, and indications we pursue;
|
|
|
|
the achievement of various development, regulatory and
commercial milestones resulting in required payments to partners
pursuant to the terms of our license agreements;
|
|
|
|
the scope, progress, results and costs of researching and
developing our product candidates and related companion
diagnostics and conducting clinical and preclinical trials;
|
|
|
|
the timing of, and the costs involved in, obtaining regulatory
approvals for our product candidates and companion diagnostics;
|
|
|
|
the cost of commercialization activities, if any, of our product
candidates are approved for sale, including marketing and
distribution costs;
|
|
|
|
the cost of manufacturing any of our product candidates we
successfully commercialize;
|
|
|
|
the costs involved in preparing, filing, prosecuting,
maintaining, defending and enforcing patent claims, including
litigation costs and outcome of such litigation; and
|
|
|
|
the timing, receipt and amount of sales, if any, of our product
candidates.
|
Contractual
Obligations and Commitments
The following table summarizes our contractual obligations at
December 31, 2010 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than
|
|
|
|
|
|
More than
|
|
|
Total
|
|
1 Year
|
|
1 to 3 Years
|
|
3 to 5 Years
|
|
5 Years
|
|
Operating lease obligations
|
|
$
|
2,198
|
|
|
$
|
665
|
|
|
$
|
1,140
|
|
|
$
|
393
|
|
|
|
|
|
In addition, we have certain obligations under licensing
agreements with third parties contingent upon achieving various
development, regulatory and commercial milestones. Pursuant to
our license agreement with Clavis for the development and
commercialization of
CO-101, we
may be required to pay Clavis an aggregate of up to
$115.0 million if certain clinical study objectives and
regulatory filings and approvals are achieved. Further, we may
be required to pay Clavis up to an aggregate of
$445.0 million in sales milestone payments if certain
annual sales targets are met for CO-101. Subject to certain
conditions set forth in the license agreement, Clavis may elect
to co-develop and co-promote CO-101 in Europe. If Clavis were to
make this election, it would be required to reimburse us for a
portion of both past and future development costs. In addition,
the milestone payments described above would be reduced.
Pursuant to our license agreement with Avila for the development
and commercialization of CO-1686, we may be required to pay
Avila an aggregate of up to $119.0 million if certain
clinical study objectives and regulatory approvals are achieved,
including $4.0 million payable upon our planned filing of
an IND for CO-1686 in the first quarter of 2012. Further, we may
be required to pay Avila an aggregate of up to
$120.0 million in sales milestone payments if certain
annual sales targets are met for CO-1686. Pursuant to our
license agreement with Pfizer for the development of CO-338,
which was signed in June 2011, we may be required to pay Pfizer
up to an aggregate $259.0 million in milestone payments
upon the successful attainment of development, regulatory and
sales milestones. Finally, pursuant to terms of each of these
license agreements, we will pay royalties to our licensors on
sales, if any, of the respective products.
In May and June 2011, we issued an aggregate $35.0 million
aggregate principal amount of 5% convertible promissory notes in
two separate transactions as described under the heading
Convertible Promissory Notes. Upon the completion of
this offering, the principal balance and all accrued and unpaid
interest due on the notes will be converted into shares of our
common stock at a per share price equal to the initial public
offering price shown on the cover page of this prospectus.
57
Off-Balance
Sheet Arrangements
We did not have during the periods presented, and we do not
currently have, any off-balance sheet arrangements, as defined
under the rules promulgated by the SEC.
Tax Loss
Carryforwards
As of December 31, 2010, we have federal net operating loss
carryforwards of $24.4 million to offset future federal
income taxes. We also have federal research and development tax
credit carryforwards of $7.2 million to offset future
federal income taxes. The federal net operating loss
carryforwards and research and development tax credit
carryforwards expire at various times through 2030. The federal
tax credits expire at various times through 2030. To date, there
have not been any ownership changes under Section 382 of
the Code that would limit the amount of net operating loss
carryforwards and tax credit carryfowards available in future
years. However, the occurrence of certain events, including
significant changes in ownership interests, may limit the amount
of the tax carryforwards available in future years. At
December 31, 2010, we recorded a 100% valuation allowance
against our net operating loss and research and development tax
credit carryforwards of approximately $16.6 million, as we
believe it is more likely than not that the tax benefits will
not be fully realized. In the future, if we determine that a
portion or all of the tax benefits associated with our tax
carryforwards will be realized, net income would increase in the
period of determination.
Quantitative
and Qualitative Disclosures about Market Risks
We are exposed to market risk related to changes in interest
rates. As of December 31, 2010 and September 30, 2011,
we had cash, cash equivalents and available for sale securities
of $22.3 million and $22.0 million, respectively,
consisting of money market funds, U.S. government and
agency obligations, and corporate debt securities. Our primary
exposure to market risk is interest rate sensitivity, which is
affected by changes in the general level of U.S. interest
rates, particularly because our investments are in short-term
securities. Our available for sale securities are subject to
interest rate risk and will fall in value if market interest
rates increase. Due to the short-term duration of our investment
portfolio and the low risk profile of our investments, an
immediate 100 basis point change in interest rates would not
have a material effect on the fair market value of our portfolio.
We contract with CROs, investigational sites, and contract
manufacturers globally. We may be subject to fluctuations in
foreign currency rates in connection with these agreements.
While we periodically hold foreign currencies, primarily Euros,
we do not use other financial instruments to hedge our foreign
exchange risk. Transactions denominated in currencies other than
the functional currency are recorded based on exchange rates at
the time such transactions arise. As of September 30, 2011
and December 31, 2010, approximately 24% and 23% of our
total liabilities, excluding our convertible promissory notes,
respectively, were denominated in currencies other than the
functional currency.
The convertible promissory notes we issued in May and June 2011
bear interest at a fixed rate. As a result we have limited
exposure to changes in interest rates. In addition, these
convertible promissory notes will convert into shares of our
common stock upon the completion of this offering.
Recently
Adopted Accounting Standards
We have not recently adopted any new accounting standards. There
are no recently issued accounting standards that have a material
impact on us.
Financial
Statements and Supplementary Data
Reference is made to the consolidated financial statements, the
report thereon, and the notes thereto, commencing at
page F-1
of the consolidated financial statements included in this
prospectus.
58
BUSINESS
Overview
We are a biopharmaceutical company focused on acquiring,
developing and commercializing innovative anti-cancer agents in
the United States, Europe and additional international markets.
We target our development programs for the treatment of specific
subsets of cancer populations, and seek to simultaneously
develop, with partners, companion diagnostics that direct our
product candidates to the patients that are most likely to
benefit from their use. We are currently developing three
product candidates for which we hold global marketing rights:
CO-101, a
lipid-conjugated form of the anti-cancer drug gemcitabine, which
is in a pivotal study in a specific patient population for the
treatment of metastatic pancreatic cancer; CO-1686, an orally
available, small molecule epidermal growth factor receptor, or
EGFR, covalent inhibitor that is currently in preclinical
development for the treatment of non-small cell lung cancer, or
NSCLC, in patients with activating EGFR mutations, including the
initial activating mutations, as well as the primary resistance
mutation, T790M; and CO-338, an orally available, small molecule
poly (ADP-ribose) polymerase, or PARP, inhibitor being developed
for various solid tumors that is currently in a Phase I clinical
trial.
We believe that discovery productivity exceeds development
capacity in oncology, and we have built our organization to meet
the need for innovative patient-specific oncology drug
development. To implement our strategy, we have assembled an
experienced team with core competencies in global clinical
development and regulatory operations in oncology, as well as
conducting collaborative relationships with companies
specializing in companion diagnostic development. As our product
candidates mature, we intend to build our own commercial
organizations in major global markets and contract with local
distributors in smaller markets.
The most common anti-cancer drug therapies typically address
cancers within a specific organ as a single disease as opposed
to a collection of different disease subtypes, often resulting
in poor response rates and minimal effect on overall survival.
We believe the oncology community is increasingly recognizing
that tumors in a particular organ have unique pathologic and
molecular characteristics that may warrant different treatment
strategies. By better understanding differences in tumor biology
and underlying disease pathways, researchers are identifying
biomarkers to guide development of targeted oncology therapies,
with streamlined clinical trials, stratified patient populations
and improved patient outcomes. We believe that targeted
therapies and companion diagnostics offer a patient-tailored
approach to the treatment of cancers with improved diagnosis and
outcomes.
Our pipeline consists of the following three product candidates,
each of which is being developed for selected patient subsets:
|
|
|
|
|
CO-101-Our most advanced product candidate, CO-101, is
currently in a pivotal clinical study comparing CO-101 to
gemcitabine in patients with metastatic pancreatic cancer for
use as an initial therapy recommended for treatment of the
disease, or a so-called first-line treatment. We
expect to complete enrollment for this trial in the first
quarter of 2012 and report top line results as to overall
survival in the prespecified hENT1-low patient subset in the
fourth quarter of 2012. CO-101 is a novel, patented,
lipid-conjugated form of the anti-cancer drug gemcitabine that
is designed to treat patients with pancreatic cancer whose
tumors express low amounts of a membrane transporter protein on
the surface of the cancer cell known as hENT1 and are thus
expected to be resistant to standard gemcitabine-based therapy.
Based on the published results of multiple studies assessing the
correlation of hENT1 expression to survival outcomes in
pancreatic cancer patients treated with gemcitabine, which found
similar distributions of pancreatic cancer patients with low
expressions of hENT1, we believe that approximately 50% of
pancreatic cancer patients express low levels of hENT1, and thus
derive little or no benefit from gemcitabine therapy. We have
partnered with Ventana Medical Systems for the development and
commercialization of a companion diagnostic for the assessment
of hENT1 levels.
|
|
|
|
|
|
CO-1686-Our second product candidate, CO-1686, is an
orally available, small molecule covalent inhibitor of the
cancer-causing mutant forms of EGFR for the treatment of NSCLC.
Because CO-1686 targets both the initial activating mutations as
well as the primary resistance mutation, T790M, it has the
potential to treat NSCLC patients with EGFR mutations, both as a
first-line treatment, or as a therapy recommended for patients
when a first-line treatment has been ineffective, a so-called
second-line treatment. CO-1686 is currently in
preclinical development and we plan to file an Investigational
New
|
59
|
|
|
|
|
Drug application, or IND, in the first quarter of 2012. We have
designed an accelerated clinical development program for
CO-1686, and if successful, have a goal of filing a New Drug
Application, or NDA, for an initial indication within
approximately four years of filing our IND. We have partnered
with Roche Molecular Systems, Inc., or Roche, for the
development and commercialization of a companion diagnostic for
EGFR mutations.
|
|
|
|
|
|
CO-338-Our third product candidate, CO-338, is an orally
available, small molecule PARP inhibitor being developed for use
as monotherapy or in combination with chemotherapeutic agents
for the treatment of various cancers. CO-338 is currently in a
dose ranging Phase I clinical trial in combination with
carboplatin chemotherapy for the treatment of solid tumors. This
program is supplemented by two investigator-sponsored trials of
CO-338 for the treatment of breast and ovarian cancers. We
intend to initiate a Phase I monotherapy study of the oral
formulation in the fourth quarter of 2011 to determine an
appropriate dose and schedule for long term administration.
|
We were founded in April 2009 by former executives of Pharmion
Corporation, which successfully developed and commercialized
novel oncology products in the United States and Europe and was
ultimately acquired by Celgene Corporation in 2008. Our
investors include the following entities or their affiliates:
Domain Associates, New Enterprise Associates, Versant Ventures,
Aberdare Ventures, Abingworth Bioventures, Frazier Healthcare
Ventures, Pfizer Inc., ProQuest Investments and our management
team.
Our
Strategy
Our strategy is to acquire, develop, and commercialize
innovative anti-cancer agents in the United States, Europe and
additional international markets in oncology indications with
significant unmet medical need. The critical components of our
business strategy include the following:
|
|
|
|
|
Focus on oncology. The oncology market
is characterized by a number of disorders with high rates of
recurrence and a limited response from current therapies or
treatments. Many of these therapies include severe side effects.
New oncology product candidates addressing unmet medical needs
or providing superior safety profiles are frequently the subject
of expedited regulatory reviews and, if approved, can experience
rapid adoption rates. We believe that the increasing role of
targeted therapies and companion diagnostics to identify
selected patient subsets in oncology presents the potential for
improved patient outcomes.
|
|
|
|
Focus on compounds where improved outcomes are associated
with specific biomarkers. Our licensing
strategy to date has been to prioritize opportunities in which a
strong biological hypothesis has been established linking a
specific characteristic or biological state of a cell, or
biomarker, with improved outcomes for the product candidate. As
evidenced by the proliferation of studies focused on the
biomarkers of specific cancers, significant progress has been
made over the last several years in the identification of
molecular targets and pathways that more narrowly specify the
causes of cancer and the variation in responses to different
therapies experienced by patient subsets with a particular
cancer or tumor type. In certain cases, the underlying science
has progressed to the point that subset patient populations
deriving little or no benefit from existing therapies can be
identified and targeted by newly developed therapies, such as
our product candidates. We believe that the identification of
such subsets, and the correlation of their specific
characteristics to the drug under development, should increase
the clinical benefit to targeted patients and the probability of
success in our clinical trials. Such patient identification
should also enable us to design clinical trials that may be
completed more rapidly than has traditionally been the case,
and, if successful, to achieve clinical outcomes for the
targeted group that are sufficiently attractive to support the
risk/benefit metrics of healthcare payors.
|
|
|
|
|
|
Combine companion diagnostics with drug development
efforts to realize superior clinical
outcomes. A companion diagnostic is a test or
measurement intended to assist physicians in making treatment
decisions for their patients. Companion diagnostics do so by
identifying the presence of biomarkers, and physicians use this
information to select a specific drug or treatment to which
their patient will most likely respond. Our development strategy
is based on the premise that we can utilize effective companion
diagnostics to identify different patient subsets who we believe
will uniquely benefit from our product
|
60
|
|
|
|
|
candidates. We are partnering to develop these companion
diagnostics for use in the clinical development and ultimate
commercial utilization of our product candidates. Because we do
not develop diagnostics internally, we are able to select from
among all available technologies when choosing a partner for our
programs under development. This flexibility allows us to choose
the most appropriate partner and diagnostic platform for each
program under development and affords us the best chance of
clinical success. We have partnered with experienced diagnostic
companies that we believe have the ability and commitment to
gain the required regulatory approvals and support global
commercialization for these companion diagnostics.
|
|
|
|
|
|
Manage and control global development activities and
regulatory operations. We believe our
development and regulatory experience enables us to devise time-
and cost-efficient strategies to develop and obtain regulatory
approvals for new drugs, and to identify the regulatory pathway
that allows us to get a product candidate to market as quickly
as possible. Unlike many early stage biotechnology and
pharmaceutical companies that have development or regulatory
capabilities only in the country in which they are located, we
have assembled an experienced team with a successful track
record at managing global clinical development activities, and
with multinational expertise in obtaining regulatory approvals
for new drugs and in maintaining compliance with the regulations
governing the sales, marketing and distribution of
pharmaceutical products. We believe we can manage a global
development program without local partners. We manage critical
functions in house, including clinical development,
biostatistics, pharmaceutical development, molecular diagnostics
and clinical and regulatory operations, and we outsource certain
activities where economically and strategically appropriate.
|
|
|
|
Seek and maintain global commercial
rights. We believe that it is very important
to maintain global rights to our product candidates, and that we
can build our own commercial organizations in major
pharmaceutical markets as well as a network of third-party
distributors in smaller markets. We believe there are a
relatively small number of oncologists practicing in each of the
major pharmaceutical markets and an even smaller number of
oncology opinion leaders who significantly influence the types
of drugs prescribed in cancer therapy. We therefore believe that
we can effectively reach the oncology markets with a relatively
small sales and marketing organization focused on these
physicians and oncology opinion leaders. As a result, we plan to
maintain commercial autonomy and will not require a
pharmaceutical partner for commercialization activities. By
managing the global sales and marketing of our products on our
own, we believe we can provide uniform marketing programs and
consistent product positioning, pricing and labeling. Finally,
by controlling commercial activities ourselves in major markets,
we will retain the vast majority of the revenues from our
product candidates.
|
61
Product
Candidates
Consistent with our strategy, each of our initial three
in-licensed product candidates, for which we hold global
marketing rights, is being developed for selected patient
subsets. The following table summarizes the status of our
product pipeline:
CO-101 - a
Lipid-Conjugated form of the Anti-Cancer Drug
Gemcitabine
Overview
CO-101 is a new chemical entity that we in-licensed in November
2009 from Clavis Pharma ASA, a publicly traded biotechnology
company based in Oslo, Norway. CO-101 is a novel, patented,
lipid-conjugated form of the anti-cancer drug gemcitabine.
CO-101 is designed to treat patients with pancreatic cancer
whose tumors express low amounts of a membrane transporter
protein known as hENT1 and thus are expected to be resistant to
standard gemcitabine-based therapy. CO-101 is currently in an
international, randomized, controlled 360-patient Phase II
clinical study comparing CO-101 to gemcitabine for the
first-line treatment of metastatic pancreatic cancer. We expect
to complete enrollment for this trial in the first quarter of
2012 and report top line results as to overall survival in the
prespecified hENT1-low patient subset in the fourth quarter of
2012. While we have not sought a Special Protocol Assessment, or
SPA, from the U.S. Food and Drug Administration, or FDA, for
this trial, for the reasons set forth under
Regulatory Strategy below, we believe
that if its results are positive, this study will serve as a
pivotal trial for CO-101 and enable us to file a New Drug
Application, or NDA, with the FDA and a Marketing Approval
Application, or MAA, with the European Medicines Agency, or EMA,
in mid-2013. We are also conducting clinical trials of CO-101
for the second-line treatment of pancreatic cancer.
Pancreatic
Cancer Market Overview
According to the American Cancer Society, over 43,000 new cases
of pancreatic cancer occurred in the United States in 2010. In
addition, according to Pancreatic Cancer Action Network, over
60,000 new cases are reported each year in the European Union
and according to a study published in Cancer Chemotherapy and
Pharmacology in 2004, over 20,000 new cases are reported
annually in Japan. According to Medical, Surgical &
Radiation Oncology (9th Edition, 2005), 85% of patients with
pancreatic cancer present with unresectable, locally advanced,
also referred to as Stage III, or metastatic, also referred to
as Stage IV, disease. Even after surgical resection and adjuvant
chemotherapy or radiotherapy for apparently localized disease,
these patients often experience early recurrence and rapid
disease progression. As a result, according to the American
Cancer Society, pancreatic cancer has one of the highest
mortality rates among all cancers, with estimates for one- and
five-year overall survival of 24% and 5%, respectively, in the
United States.
62
The standard first-line treatment for patients with unresectable
or metastatic disease is gemcitabine, given as monotherapy.
Gemcitabine was originally introduced in the United States in
1996 under the brand name
Gemzar®,
and is now widely available as a generic drug. Gemcitabine is
part of a class of drugs known as nucleoside analogues and can
be used alone or in combination with other chemotherapy agents
in the treatment of various malignancies, including pancreatic,
NSCLC, breast, and ovarian cancers. Current guidelines of the
National Comprehensive Cancer Network list gemcitabine
monotherapy as an appropriate therapy for all pancreatic cancer
patients eligible for cytotoxic therapy. Although the drug
Tarcevatm
(erlotinib) is approved in combination with gemcitabine in
patients with metastatic pancreatic cancer, this combination
involves increased toxicity and has been shown to confer a
median survival benefit of only approximately two weeks when
compared to gemcitabine monotherapy. Alternative therapies for
the treatment of pancreatic cancer include: FOLFIRINOX
(combination 5-fluorouracil
(5-FU),
leucovorin, irinotecan and oxaliplatin), gemcitabine combination
therapy or capecitabine. Some patients initially respond to
cytotoxic chemotherapy, but all eventually progress, and many
fail to derive even an initial benefit from such treatment.
There are no approved second-line treatments for pancreatic
cancer, and in practice, for those patients that do receive
second-line treatment, it is typically a treatment that was not
utilized in the first-line setting. Based upon a survey which we
commissioned in 2009 of approximately 25 physicians in the
United States and Europe, we believe that the consequence of
this treatment paradigm is that approximately 80% of all
pancreatic cancer patients will receive gemcitabine during their
disease course.
Targeting
Gemcitabine Non-Responders: the hENT1 Hypothesis
For gemcitabine to kill cancer cells, it must enter them through
specific membrane transporters, or channels, on the surface of
the cancer cells. The human equilibrative nucleoside transporter
1, or hENT1, is believed to be the dominant transporter for
gemcitabine. As a consequence, it is believed that tumor cells
with low hENT1 expression will be resistant to gemcitabine
therapy. This was first supported by clinical data in 2004.
Specifically, Clinical Cancer Research reported the study
results of 21 metastatic pancreatic cancer patients treated with
gemcitabine. This study demonstrated that survival after
gemcitabine therapy was positively correlated with hENT1
expression. As shown in the figure below, also referred to as a
Kaplan-Meier estimate of survival, patients with a high level of
hENT1 expression had a median overall survival of 13 months
compared to four months for those patients with a low level
of hENT1 expression when treated with gemcitabine.
Kaplan-Meier estimate of survival in gemcitabine-treated
hENT1-high and hENT1-low pancreatic cancer patients.
*hENT1-high
= all tumor cells had detectable hENT1 protein by IHC
Source: Spratlin et al. Clin Can Res(2004)
63
This correlation of overall survival and hENT1 expression in
pancreatic cancer patients treated with gemcitabine has been
further demonstrated in multiple studies. For example, in 2009,
a study published in Gastroenterology reported the
results of a retrospective analysis of randomized samples
collected from 198 pancreatic cancer patients between 1998 and
2002 comparing treatment with gemcitabine versus 5-FU. Patients
in this study treated with gemcitabine who had a high level of
hENT1 expression had a median overall survival of
21 months, compared to a median overall survival of
16 months for gemcitabine-treated patients with low hENT1
expression and 12 months for gemcitabine-treated patients
with no hENT1 expression. Importantly, the results of this study
also demonstrated that there was no correlation between overall
survival and hENT1 expression for patients treated with 5-FU.
This suggests that the correlation between survival and hENT1
expression is specific to pancreatic cancer patients treated
with gemcitabine and not a prognostic marker. The Kaplan-Meier
curves for this study are shown in the figure below.
Source: Farrell et al. Gastroenterology 2009:136:187-195
A positive, and statistically significant association is seen
between tumor hENT1 expression and overall survival for
recipients of gemcitabine (left, p=0.002 for high vs. no hENT1,
p=0.03 for low vs. no hENT1), but not for recipients of
5-FU (right,
p=not significant). hENT1 expression was characterized as no,
low or high. High hENT1 was defined by strong
reactivity in greater than 50% of neoplastic cells on IHC,
whereas no hENT1 was defined as no staining in
greater than 50% of neoplastic cells. A score of low hENT1
staining was given to all cases in between.
64
The table below summarizes a number of studies conducted over
the past several years that have repeatedly confirmed the
correlation between survival outcomes for pancreatic cancer
patients treated with gemcitabine and their hENT1 expression and
repeatedly found distributions of pancreatic cancer patients
with low expressions of hENT1 ranging from 40% to 60% of all
pancreatic cancer patients.
In the Spratlin study, samples defined as hENT1-high had
uniformly detectable hENT1 and samples defined as hENT1-low had
10-100% of
tumor cells without detectable hENT1. In the Giovanetti study, a
median hENT1 expression was established based on gene expression
levels, and samples with hENT1 expression over the median were
defined as hENT1-high and samples with hENT1 expression under
the median were defined as hENT1-low. In the Farrell study,
hENT1-high was defined by strong reactivity in greater than 50%
of neoplastic cells on IHC, no hENT1 was defined as no staining
in greater than 50% of neoplastic cells and hENT1-low was
defined as all cases in between. In the Morinaga study, a median
hENT1 expression was established based on an assessment of
intensity of sample staining and the percentage of positive
tumor cells, and samples with hENT1 expression over the median
were defined as hENT1-high and samples with hENT1 expression
under the median were defined as hENT1-low. In the Marechal
study, a median hENT1 expression was established based on an
assessment of intensity of sample staining, and samples with
hENT1 expression over the median were defined as hENT1-high and
samples with hENT1 expression under the median were defined as
hENT1-low.
These studies were conducted independently of each other with
different personnel, methodologies, criteria and protocols,
including different definitions of hENT1 expression. Indeed, as
is described below, one of the principal concepts underlying the
LEAP clinical trial was our decision to arrive at our own
definition of a low level of hENT1 expression, based upon our
retrospective analysis of existing tissue samples from other
trials and using the companion diagnostic we have developed with
Ventana, and to then apply this definition prospectively in our
LEAP clinical trial.
CO-101:
Addressing Patients with Low Levels of hENT1
CO-101, also known as gemcitabine-5-elaidate, is a new
chemical entity that is derived by adding a fatty acid to the
gemcitabine chemical structure, creating a lipid-conjugate. In
contrast to the conventional form of gemcitabine, the
lipid-conjugate enables CO-101 to enter cancer cells without the
need for a specific membrane transporter protein on the surface
of the cancer cell known as hENT1, as evidenced by the
accumulation of active drug metabolite inside cells with low
hENT1 that are treated with CO-101. CO-101 is thus designed to
address the unmet need of patients with pancreatic cancer whose
tumors express low amounts of hENT1 and are thus expected to be
resistant to standard gemcitabine-based therapy. Based on the
published results of multiple studies assessing the correlation
of hENT1 expression to survival outcomes in pancreatic cancer
patients treated with gemcitabine, we believe that approximately
50% of pancreatic cancer patients express low levels of hENT1.
CO-101 has a broad spectrum of anti-proliferative activity
in vitro and antitumor activity in a wide range of
mouse and human tumor models in vivo. These tumor models
are similar to those used for evaluating the in vivo
activity of gemcitabine.
CO-101
Clinical Development
LEAP Study: Pivotal Trial of CO-101 in First-Line Pancreatic
Cancer. In mid-2010, we commenced a pivotal study of
CO-101, which we refer to as LEAP (Low hENT1 and
Adenocarcinoma of the Pancreas). We plan to enroll
a total of
65
360 patients across approximately 90 sites in North and
South America, Europe and Australia. This open-label,
randomized, controlled, multicenter study compares CO-101 to
gemcitabine as a first-line treatment in patients with
metastatic pancreatic cancer. The primary objective of this
study is to compare the overall survival of patients with
metastatic pancreatic cancer and low hENT1 expression that are
treated with CO-101 versus gemcitabine. Secondary endpoints
include overall survival in all patients and in patients with
high hENT1 expression, disease response rate, and drug
tolerability and toxicity. Patients enrolled in the trial are
being randomized on a
one-to-one
basis to receive either
CO-101 or
gemcitabine. Patients receiving CO-101 are dosed at
1250mg/m2
delivered through intravenous infusion once per week for three
out of every four weeks. Gemcitabine patients are dosed at its
standard prescribing regimen of
1000mg/m2
delivered through intravenous infusion once per week for seven
weeks, followed by one week of rest and then once per week for
three out of every four weeks. We expect enrollment to be
completed in the first quarter of 2012. The study was designed
to show that gemcitabine will have no better effect than best
supportive care in hENT1-low patients, and that CO-101 will
perform in hENT1-low patients similarly to the way gemcitabine
does in hENT1-high patients. Since, according to its FDA
approved prescribing information, gemcitabine has a median
overall survival of 5.7 months in metastatic pancreatic
cancer patients, we have designed the study to show a median
survival of approximately 4 months for gemcitabine in
hENT1-low patients, which is consistent with best supportive
care, versus 7.7 months for CO-101 in hENT1-low patients.
While multiple publications support this hypothesis, the LEAP
trial is the first prospective test of this hypothesis. We
expect to report top line overall survival data from this trial
in the fourth quarter of 2012. While we have not sought an SPA
from the FDA for this trial, we believe that if its results are
positive, this study will serve as a pivotal trial for CO-101
and enable us to file a NDA with the FDA and a MAA with the EMA
in mid-2013.
To test the primary hypothesis that CO-101 is more effective
than gemcitabine in pancreatic cancer patients with low levels
of hENT1, we need to develop an in vitro diagnostic,
or IVD, product to reliably measure tissue hENT1 expression and
enable prospective classification of patients as either hENT1
high or hENT1 low. We are collaborating with Ventana Medical
Systems, Inc., part of the Roche Group, or Ventana, to develop
the IVD using an IHC based approach. Key characteristics of this
companion diagnostic are:
|
|
|
|
|
Ability to analyze accessible tissue: Patients with
metastatic pancreatic cancer typically have liver metastases
which can be biopsied quite easily and analyzed by IHC;
|
|
|
|
Simple assay/local analysis: IHC is a standard
laboratory technique that is widely utilized and does not
require samples to be sent off-site for analysis;
|
|
|
|
|
|
Based on existing technology: Ventana utilized
established IHC diagnostic techniques to develop a validated
hENT1 IHC assay using knowledge already gained from IHC hENT1
assays developed by academics;
|
|
|
|
|
|
Regulatory precedent: IHC IVDs have previously been
approved by the FDA as companion diagnostics for cancer
therapeutics, including Ventanas PATHWAY HER-2/neu assay
intended to assist in the assessment of breast cancer patients
for whom Herceptin treatment is considered; and
|
|
|
|
Reimbursement: IHC diagnostic kits are widely
reimbursed by health care payors.
|
In the United States, the marketing approval of this type of IVD
requires the submission to and approval by the FDA of a
Pre-Market Approval Application, or PMA, submission. We and
Ventana will generate data on the IVD, including the necessary
analytical and clinical validation studies, with the goal of
being in a position to submit a PMA and, assuming a successful
outcome for the LEAP trial, seek approval of the PMA for the IHC
hENT1 assay substantially simultaneously with the approval of an
NDA for CO-101. In the European Union, the EMA is not currently
involved in approving companion diagnostics and, instead,
Ventana will apply for a CE mark designation in the European
Union that will allow it to sell the diagnostic in the European
Union.
Study CO-101-002: Establishing a hENT1
Cut-Off. Having developed the IHC assay with
Ventana, we also needed to establish a cut-off for
determining whether an individual patient is hENT1-high or
hENT1-low. This cut-off must be robust such that the assay will
provide consistent results when run and interpreted in different
geographies by different labs and pathologists. Our goal is for
a patient who presents with metastatic pancreatic cancer to
undergo a metastasis biopsy and subsequent IHC assay that will
be interpreted by a local pathologist, to determine whether a
patient is hENT1-low and thus a good candidate for CO-101
therapy. In order to prospectively establish the hENT1-high/low
cut-off, we commenced study CO-101-002. Pursuant to the protocol
for this study, we collected tumor tissue samples from
previously completed clinical studies of gemcitabine for the
treatment of
66
pancreatic cancer. Using the Ventana IHC assay, we assessed the
hENT1 levels in each of the tissue samples and correlated the
hENT1 expression with clinical outcomes. We then defined a
cut-off level of hENT1 expression that is optimally associated
with overall survival outcomes following gemcitabine therapy.
According to the hypothesis, patients with tumor hENT1
expression levels below the cut-off will derive minimal benefit
from gemcitabine and will constitute the prospectively defined
hENT1-low population in the LEAP trial. Collection and analysis
of the tissue samples is complete and we established the hENT1
cut-off in October 2011. Importantly, patients from LEAP will
thus be prospectively classified as hENT1-high or -low before
data from the ongoing LEAP trial are known. The primary efficacy
analysis for LEAP is in hENT1-low patients, and their
prospective classification prior to analyzing survival outcomes
is important to ensure study integrity. Based on the published
results of multiple studies assessing the correlation of hENT1
expression to survival outcomes in pancreatic cancer patients
treated with gemcitabine, which found similar distributions of
pancreatic cancer patients with low expressions of hENT1, we
believe that approximately 50% of pancreatic cancer patients are
hENT1-low.
As part of study CO-101-002, we analyzed tissue samples from a
large comparative study comparing adjuvant gemcitabine to
adjuvant 5-FU in pancreatic cancer. These patient samples were
from the same study evaluated by Farrell, et al., and published
in Gastroenterology in 2009. In this analysis, using the Ventana
hENT1 IHC assay, we were able to establish a rigorous algorithm
of two qualitative measurements (intensity of staining and area
stained) to stratify patients into hENT1-low and hENT1-high.
Using this algorithm, the hENT1-high gemcitabine treated patient
population had a median survival of approximately 24 months
versus approximately 15 months for the hENT1-low
gemcitabine treated population. We also evaluated 5-FU survival
outcomes based on hENT1 status and detected no difference in
survival related to hENT1. Using this algorithm, approximately
two-thirds of patients in both the gemcitabine and 5-FU arms
were hENT1-low.
The gemcitabine analysis had a p-value of 0.018 and a hazard
ratio of 0.58. In clinical trials, the p-value is the
probability of obtaining a test statistic at least as extreme as
the one that was actually observed, assuming-as true-the
hypothesis that a potential treatment has no effect. A p-value
of 0.018 is considered statistically significant. The hazard
ratio is a statistical measure of the relative risk of death for
patients in different groups. A hazard ratio of 0.58 means that
a hENT1-high patient treated with gemcitabine has a 42% lower
chance of dying than a hENT1-low patient. The Kaplan-Meier
curves for this study are shown in the figure below.
Kaplan-Meier Curves for 38 hENT1-high and 64 hENT1-low
Pancreatic Cancer Patients After Receiving Adjuvant
Gemcitabine
67
Kaplan-Meier Curves for 35 hENT1-high and 64 hENT1-low
Pancreatic Cancer Patients After Receiving Adjuvant 5-FU
Based on this analysis, as well as that analysis of other tissue
samples, we selected this algorithm as the basis for setting the
hENT1 cut-off for the LEAP study. In addition, a
16-patient
study of matched metastatic and primary tumor samples from the
same patients demonstrated 100% correlation of hENT1
classification in the metastatic samples as in the primary
samples using our selected algorithm. The hENT1-low population
in this study was also approximately 66%.
68
The following chart shows the LEAP study and companion
diagnostic validation study design:
Study CO-101-003: a Phase II Study in Second-Line
Pancreatic Cancer. We are also conducting a
Phase II study to evaluate the efficacy of CO-101 as a
second-line treatment for pancreatic cancer patients whose
disease has progressed after first-line therapy and whose tumor
tissue samples demonstrate a complete absence of hENT1 using an
IHC diagnostic test. Study CO-101-003 is being conducted at up
to 20 investigational centers in the United States. The first
patient was enrolled in February 2011 and enrollment is expected
to be completed in the fourth quarter of 2012.
Study CO-101-003 uses an open-label, single-arm, two-stage,
Phase II design to evaluate CO-101 as second-line therapy
in patients with measurable metastatic pancreatic cancer whose
best response to gemcitabine as a first-line therapy, measured
radiographically after treatment, was progressive disease; that
is, patients who received no demonstrable benefit from
gemcitabine therapy. Patients receive the same dosing regimen of
CO-101 as in the LEAP trial. The primary endpoint for this study
is disease control, which is defined as a complete response,
partial response, or stable disease using response evaluation
criteria in solid tumors, or RECIST, a set of published rules
that define when a cancer patient responds, stabilizes, or
progresses during treatments. After the first 18 patients
have been assessed, the remaining 17 patients will be
treated only if three or more patients in the initial 18-patient
cohort have exhibited disease control. The study will close when
a six-month
follow-up
has been completed for all patients. If meaningful numbers of
patients experience extended stable disease or even partial
responses on CO-101, we will view the study as successful in
demonstrating CO-101s activity in second-line pancreatic
cancer.
Other Potential Indications for CO-101: the hENT1 Hypothesis
Applied to other Cancers. In addition to its use
in pancreatic cancer, gemcitabine is approved, generally in
combination with cisplatin, for use in NSCLC, ovarian and breast
cancer, and we believe the hENT1 hypothesis could be applicable
in each of these types of cancers. A small amount of preliminary
data suggests the efficacy of gemcitabine in combination with
cisplatin in NSCLC may relate to hENT1 expression. Consequently,
we are considering clinical studies of CO-101 in other tumor
types, initially NSCLC, and will seek to confirm a hENT1 cut-off
using the Ventana IHC assay in these tumors. Testing of the IHC
assay will be undertaken using lung tissue samples obtained from
previously completed studies of gemcitabine in NSCLC, using a
retrospective tissue collection protocol. The primary objective
of the study will be to correlate the hENT1 expression with
clinical outcomes in order to confirm the cut-off level of hENT1
that is optimally associated with treatment outcomes and
survival in NSCLC patients treated with gemcitabine in
combination with cisplatin.
69
Early
Clinical Development of CO-101
During its initial development by Clavis Pharma, CO-101,
identified by Clavis Pharma as CP4126, was the subject of two
clinical trials:
Study
CP-4126-201:
an Abbreviated Phase II Study Conducted by Clavis
Pharma. In June 2009, Clavis Pharma initiated a
Phase II, open-label, multicenter European study evaluating
CO-101 in
patients with advanced pancreatic cancer. This study started as
a single-arm study and included patients with locally advanced
as well as metastatic disease, who had no prior chemotherapy for
advanced disease. The patients were treated with
CO-101 1250 mg/m2
once per week for three out of every four weeks. The primary
endpoint was change in a specific tumor marker, CA
19-9, and
secondary endpoints were overall survival and overall response
rate according to RECIST. Tumor hENT1 status was analyzed using
an academically available assay only after patients were
enrolled and treatment had begun. The protocol was amended in
July 2009 to replace the single-arm treatment with a randomized
treatment allocation to either
CO-101 or
gemcitabine after the first 10 patients had been enrolled
in the study.
Upon obtaining the rights to CO-101, we and Clavis made the
decision to stop this trial and begin the LEAP study, which, for
the reasons set forth in detail below, we believe offers the
potential for an accelerated pathway to approval. Due to the
small number of patients in each treatment group of the Clavis
Pharma trial, meaningful treatment comparisons between CO-101
and gemcitabine with respect to the primary endpoint of CA
19-9
response and overall survival could not be made.
Twenty-one patients completed this study. While the study
database has not been locked and the final results are therefore
subject to change, a preliminary analysis of the data shows the
following: two patients in the CO-101 treatment group had a
partial response, driving an overall response rate of 13.3%,
whereas no patients in the gemcitabine group had a response.
Five additional CO-101 patients achieved stable disease,
some for a prolonged period, including one patient for
8 months. When analyzed in the subset of patients with
metastatic disease and performance status of 0-1, a set of
patient criteria similar to the ongoing LEAP study, the median
overall survival time for
CO-101
recipients was 7.6 months (N=14) versus 5.9 months for
patients receiving gemcitabine (N=4). In this same subset, when
analyzed by hENT1 status, the median survival time for
hENT1-low
patients was 9.2 months for CO-101 (N=3) and
3.3 months for gemcitabine (N=1). The activity of CO-101
appeared to be independent of hENT1 status, whereas the activity
of gemcitabine appeared to be correlated with hENT1 expression.
Most patients in the study experienced one or more
treatment-emergent adverse events, or TEAEs. More than half of
the CO-101 patients experienced nausea
and/or
vomiting, which were the most frequent TEAEs reported and
occurred at higher frequencies than gemcitabine. There were 29
Grade 3 and four Grade 4 events in the CO-101 arm, the
most significant level of TEAEs. The most frequent Grade 3 or 4
TEAE in
CO-101 patients
was neutropenia, a reduction in white blood cells. Neutropenia
was also one of the events that led most often to dose reduction
of CO-101, with the other being thrombocytopenia, or reduction
in blood platelet cells, which was rarely assessed as Grade 3 or
4.
Phase I Trial: First in Man Study on
CP-4126. The
first-in-human
study conducted by Clavis Pharma aimed to determine the maximum
tolerated dose and the recommended dose for Phase II
studies of CO-101. All 43 patients in the study finished
treatment by December 2009. The most frequently reported
toxicities were mild (Grade 1-2) nausea, vomiting, anorexia and
fatigue. Myelosuppression, the impairment of bone marrow
function, was also reported. Pharmacokinetic data suggested that
CO-101 was present in plasma in a dose-proportional manner after
IV administration. Gemcitabine can also be measured in plasma
after CO-101 administration, and at the
1250mg/m2
dose of CO-101, gemcitabine exposure exceeds that seen with
conventional gemcitabine given at the standard dose of
1000mg/m2.
Based on the dose limiting toxicities, the recommended
Phase II dose of CO-101 was determined to be
1250 mg/m2,
given as an IV infusion once per week for three out of every
four weeks.
Regulatory
Strategy
CO-101 LEAP Trial Design and Requirements for Regulatory
Approval. In most cases, the FDA requires at
least two adequate and well-controlled clinical trials to
support marketing approval. In certain cases, evidence from a
single clinical trial may be sufficient, and it is often the
case in oncology where there is an unmet medical need. A single
trial may be sufficient in cases where a multicenter study
provides highly reliable and statistically strong
70
evidence of an important clinical benefit, such as an effect on
survival, and in which confirmation of the result in a second
trial would be practically or ethically impossible.
We believe that if CO-101 meets the protocol specified endpoints
of the LEAP study, this single Phase II clinical study
should be sufficient for submission for marketing approval in
the United States and the European Union. We have not sought an
SPA for the LEAP study because we believe that the overall
survival endpoint and other aspects of the study design are
consistent with recent clinical guidelines for pancreatic cancer
studies, as published in the Journal of Clinical Oncology
in 2009. Nevertheless, in September 2010, in response to a
briefing document and questions submitted to the FDA, we had a
joint meeting with the oncology therapeutic and diagnostic
device divisions of the FDA to review the clinical development
plan for
CO-101 and
the development plan for its companion diagnostic. Based on this
meeting and our adherence to established guidelines, we believe
that this single clinical study could be used for registration
if the results are positive. The adequacy of the safety and
efficacy database will be a review issue, as with any
submission. Similarly, following Protocol Assistance in the
European Union, the Committee for Medicinal Products for Human
Use, part of the EMA, indicated that a submission based on this
single clinical study could be acceptable provided a meaningful
survival benefit is demonstrated.
Applications for FDA approval to market a new drug should be
based on adequate and well-controlled studies in order to
distinguish the effect of the drug from other influences, such
as a spontaneous change in the disease, or a biased observation.
The reports on adequate and well-controlled studies provide the
primary basis for determining whether there is substantial
evidence to support the claims for effectiveness of a new drug.
The key characteristics considered in determining whether a
study is adequate and well-controlled are as follows:
(1) The protocol clearly defines objectives and methods of
analysis.
(2) The study design provides a valid comparison with a
control and quantitative assessment of drug effect.
(3) The method for selection of subjects assures that they
have the disease being studied.
(4) The method of assigning patients to the treatment and
control groups minimizes bias and is intended to assure the
comparability of the groups.
(5) Adequate measures are taken to minimize bias on the
part of the subjects, observers and analysts of the data.
(6) The methods of assessment of response are well-defined
and reliable.
(7) The analysis of the results of the study is adequate to
assess the effects of the drug.
We believe that the LEAP study protocol meets these requirements
and that the study fulfills the criteria of an adequate and
well-controlled study. The protocol clearly defines the
objectives and patient population. The methods of analysis are
subject to a detailed statistical analysis plan. The protocol
includes an active treatment control, which is the standard of
care, gemcitabine. Various types of control arms can be used,
but in oncology an active control is most often used. The sample
size for the study is predetermined and the study is powered to
provide a quantitative assessment of drug effect and detect a
difference between treatments. The selection of subjects follows
best practice principles and incorporates the guidance provided
in a recent consensus report for clinical trials in pancreatic
cancer.
Patients are randomized to therapy with CO-101 or gemcitabine,
stratified to ensure the comparability of the groups and
precautions are taken to minimize potential bias. The primary
efficacy variable is overall survival, which is an objective
endpoint and the gold standard for measurement of
efficacy for oncology clinical trials. Survival is considered
the most reliable cancer endpoint and bias is not considered to
be a factor in endpoint measurement.
CO-101 has an orphan drug designation in the United States and
the European Union for the treatment of pancreatic cancer. If a
product that has an orphan drug designation subsequently
receives the first regulatory approval for the indication for
which it has such designation, the product is entitled to orphan
exclusivity, meaning that the applicable regulatory authority
may not approve any other applications to market the same drug
for the same indication, except in certain very limited
circumstances, for a period of seven years in the U.S. and
ten years in the European Union. Orphan drug designation does
not prevent competitors from developing or marketing different
71
drugs for an indication. Orphan drug designation must be
requested before submitting an NDA or MAA. After orphan drug
designation is granted, the identity of the therapeutic agent
and its potential orphan use are publicly disclosed. Orphan drug
designation does not convey an advantage in, or shorten the
duration of, the review and approval process for a drug by the
applicable regulatory authority.
The regulations for accelerated approval for new drugs for
serious or life threatening illnesses often referred to as
subpart H, do not apply to the LEAP study. Although CO-101 is
being developed for a serious and life threatening disease, this
guidance applies to approvals based on a surrogate endpoint or
clinical endpoint other than survival. Since the endpoint in the
LEAP study is survival, the NDA would be subject to a regular
approval procedure. CO-101 requires the concomitant availability
of an in vitro diagnostic device to identify the
relevant patient population. This diagnostic needs to be
available in parallel with the drug product and therefore the
development plan for CO-101 allows for the diagnostic to be
developed and validated in a time frame that will allow for
regulatory approval at the same time that CO-101 would be
approved. We are working with Ventana to develop the data
necessary for a PMA submission with the FDA. Assuming a
successful outcome of our LEAP study, we expect that Ventana
will submit a PMA for the hENT1 IHC assay in parallel with our
submission of an NDA for CO-101 such that approval would be
expected at the same time for both products.
CO-1686 - an
Oral EGFR Mutant-Selective Inhibitor
Overview
CO-1686 is a new chemical entity we in-licensed pursuant to an
agreement effective May 2010 from Avila Therapeutics, Inc., a
privately held biotechnology company in Waltham, Massachusetts.
It is a novel, orally available, small molecule covalent
inhibitor of the cancer-causing mutant forms of EGFR for the
treatment of NSCLC. Because CO-1686 targets both the initial
activating EGFR mutations as well as the primary resistance
mutation, T790M, it has the potential to treat both first- and
second-line NSCLC patients with EGFR mutations. According to a
study published in Clinical Cancer Research in 2008, such
initiating activating mutations occur in approximately 10% to
15% of NSCLC cases in Caucasian patients and approximately 30%
to 35% of NSCLC cases in East Asian patients. Based on multiple
published reports, including a study in Nature Reviews Cancer
in 2007, following treatment with
Tarcevatm
(erlotinib) or
Iressatm
(gefitinib), approximately half of these patients develop the
T790M mutation. CO-1686 is currently in IND enabling studies,
and we anticipate filing an IND in the first quarter of 2012.
Market
Overview: Resistance to EGFR Tyrosine Kinase Inhibitors, or
TKIs, Represents an Unmet Medical Need
Lung Cancer and EGFR TKIs. According to the
American Cancer Society, there were an estimated 223,000 new
cases of lung cancer in the United States in 2010, making it the
most common type of cancer. In addition, according to Cancer
Research UK, there are an estimated 288,000 new cases of lung
cancer in the European Union each year and, according to a white
paper entitled Cancer White
PaperIncidence/Death/Prognosis2004
(Shinoharashinsha Inc.), there are an estimated 85,000 new cases
in Japan each year. Lung cancer typically presents relatively
late in its clinical course, when locally directed therapy
(surgery and radiation) is not curative. The treatment of
locally advanced and metastatic lung cancer is a significant
unmet medical need.
Lung cancer is typically divided into two groups based upon the
histologic appearance of the tumor cellssmall-cell and non
small-cell lung cancer, each of which is treated with distinct
chemotherapeutic approaches. According to the American Cancer
Society, NSCLC accounts for approximately 85% of lung cancer
cases, and can be subdivided into further histologic
subsetsadenocarcinoma, bronchioalveolar, squamous cell,
anaplastic and large cell being the most commonalthough
until recently treatment was similar for all of these subsets.
The standard of care for treatment of advanced or metastatic
NSCLC has historically been a cytotoxic chemotherapy doublet of
platinum plus paclitaxel. In the last few years, specifically
for non-squamous cell, a subset of NSCLC patients,
Avastin®
(bevacizumab) has been shown to prolong survival when added to
the doublet, and
Alimta®
(pemetrexed) has replaced paclitaxel on the basis of improved
tolerability and ease of administration. Despite these
additions, patients with locally advanced or metastatic NSCLC
have five-year survival rates of just 24% and 4%, respectively,
according to the Survival Epidemiology and End Results program
of the National Cancer Institute.
72
Approximately 10 years ago, orally active small molecule
inhibitors of the tyrosine kinase activity of EGFR were
introduced into the treatment of lung cancer. The
growth-promoting EGFR was known to be frequently expressed on
lung cancer cells, often at high levels, and preclinical work
had suggested that EGFR TKIs, such as gefitinib and erlotinib,
could provide effective cancer therapy in certain patient
subsets. Clinical trials were conducted in humans with NSCLC and
the drugs were approved by the FDA in 2003
(Iressatm
(gefitinib)) and 2004
(Tarcevatm
(erlotinib)) for patients who had failed to respond to
conventional chemotherapy. It was noted in a study published in
Nature Reviews Cancer in 2010 that a small subset of
patients experienced profound tumor responses to TKI therapy.
In 2004, it was discovered that the subset of NSCLC patients who
experienced dramatic clinical responses to the EGFR TKIs had
activating mutations in the EGFR gene in their lung cancer
tissue, known as an L858R mutation, rendering the EGFR protein
hyperactive. It became clear that the EGFR TKIs potently
inhibited the mutant EGFR proteins, switching off their activity
and causing dramatic tumor shrinkage in patients. This is an
example of oncogene addiction, whereby a single gene
mutation (EGFR in this case) is absolutely necessary for the
proliferation
and/or
survival of a tumor cell. A corollary of this situation is that
inhibition of that single gene product (in this case with TKIs)
is therapeutic and drives tumor shrinkage. It was subsequently
shown in a study conducted by Jeffrey A. Engelman, et al.
published in Clinical Cancer Research in 2008 that EGFR
mutations generate tumors with adenocarcinoma histology, and are
found in approximately 10% to 15% of Caucasian NSCLC patients
and 30 to 35% of East Asian NSCLC patients.
The original approvals of the TKIs made no reference to patient
selection, but these new data have suggested that the majority
of their therapeutic benefit can be attributed to the subset of
patients with activating EGFR mutations. Recent clinical trials
have shown that for patients with activating EGFR mutations,
treatment with TKIs is superior to standard cytotoxic
chemotherapy as it has resulted in superior progression free
survival and improved quality of life. Consequently, many cancer
therapy guidelines (National Comprehensive Cancer Network and
American Society for Clinical Oncology) suggest that patients
with adenocarcinoma histology NSCLC should undergo genetic
testing for EGFR mutations and TKIs should be used in those
patients with identified activating mutations. Molecular testing
of NSCLC tissues for EGFR mutations has become standard across
many countries, although no specific diagnostic test is included
in the regulatory labels for any of the approved TKIs to date.
Resistance to EGFR TKIs. Despite the success
of TKIs in patients with mutant EGFR-related NSCLC, most
patients disease will progress, typically after
approximately one year of therapy. Molecular studies have shown
that approximately 50% of the resistant tumors carry a second,
acquired resistance mutation in the EGFR gene. This resistance
mutation is a specific change in the type of amino acid located
at position 790 in the EGFR protein, called a T790M
mutation. As a consequence of this switch the three-dimensional
structure of the TKI binding site changes and thus the EGFR
becomes resistant to TKI therapy. This T790M mutation is also
called the gatekeeper mutation because of its
strategically important position in the EGFR protein.
An early approach to therapy for this important resistance
mutation was to develop covalent inhibitors, drugs that bind
irreversibly through a covalent bond to their receptor target,
and permanently inactivate it. There is a specific location on
the EGFR protein, a cysteine residue, that is close to the
proteins active site, and is where most covalent drugs
bind to in order to achieve their inhibitory effect. We are
aware of two product candidates currently in clinical
development that bind to this cysteine residue in EGFR, which
are referred to as second generation TKIs. Both
drugs have been tested in patients with the T790M mutation in
their EGFR, but no responses have been reported to date. We
believe the likely explanation for this effect is that these
drugs are extremely potent inhibitors of the normal form of the
EGFR, and cause very substantial toxicity in the skin (rash) and
intestine (diarrhea) which limits dosing significantly. Patients
appear to be unable to tolerate the dose of drug needed to
inhibit the T790M mutant EGFR in a lung tumor. Consequently, at
present, patients who develop TKI resistance receive standard
cytotoxic chemotherapy that carries toxicity and only modest
palliative efficacy, and all patients will ultimately succumb to
their disease. Thus, patients with mutant EGFR-related NSCLC who
also carry the T790 mutation represent a defined subset of
patients with a clear unmet medical need.
73
Opportunity
for Clovis
We partnered with Avila to discover and develop an orally
active, small molecule covalent inhibitor of the mutant forms of
EGFR that does not bind to unmutated or normal EGFR. We
identified CO-1686 as a potential product candidate because it
has three important potential advantages:
|
|
|
|
|
potential to effectively treat patients with T790M mutant EGFR
NSCLCa large and growing group of patients, which have
been identified with greater frequency due to recently approved
guidelines, who today have no effective therapy;
|
|
|
|
potential to effectively treat patients with initial activating
mutations in the EGFR who receive first-generation
TKIs, but develop resistance due to the acquired T790M mutation;
CO-1686 would be expected to prevent resistance through this
mechanism and may thus cause responses of greater duration than
seen with first generation TKIs and extend progression-free
survival; and
|
|
|
|
it would not be expected to inhibit normal EGFR in skin or
intestine, and thus would be less likely to cause skin rash and
diarrhea, which are dose limiting with all other EGFR inhibitors.
|
Design of
CO-1686 a Targeted Covalent Drug
Most human diseases are rooted in the improper activity of
certain proteins. Traditional small molecule drugs, while able
to inhibit disease-causing proteins, are generally only able to
form transient binding interactions with the disease targets,
and thus considered reversible. A covalent drug, however, forms
a strong and durable bond with its protein target, known as a
covalent bond. A targeted covalent drug is designed to form its
covalent bond in a highly directed and controlled manner with a
specific site on the disease target. This directed bond
formation is key to achieving a distinct selectivity profile
that is difficult to achieve with traditional reversible small
molecules.
Covalent drugs have been developed by the pharmaceutical
industry for decades, with several successfully commercialized,
including
Nexium®,
Plavix®
and penicillins. However, these drugs were not intentionally
designed to be covalent drugs. Avila has developed a proprietary
platform called
Avilomicstm
to purposefully and systematically design and develop targeted
covalent inhibitors. CO-1686 was designed using this platform.
There are a number of drugs both on the market and being
developed that inhibit various kinases, including EGFR. Because
kinases are structurally similar to each other, it is difficult
to design small molecules that selectively inhibit a single
kinase that do not also inhibit other kinases to some degree.
Most kinase inhibitors are only modestly selective and inhibit a
variety of kinases; these are typically referred to as
multi-kinase inhibitors.
However, because of the design of its bond-forming capability, a
targeted covalent drug is potent against the disease target of
interest, including EGFR, and due to its selectiveness, it is
not potent against other targets, even related targets. This is
important to avoid undesired off-target side effects
which can occur with reversible small molecules, such as
multi-kinase inhibitors which are not highly selective.
A targeted covalent approach was employed by Avila in order to
design a drug that could potently inhibit the mutant forms of
EGFR, while sparing normal EGFR.
Avila designed CO-1686 by identifying a site on the EGFR protein
where a covalent bond could be formed and used its proprietary
drug design techniques to model chemical structures that could
selectively form a bond with this site. These molecules were
then synthesized and tested in assays to verify their ability to
form targeted covalent bonds and to potently inhibit the mutant
forms of EGFR and also to demonstrate that covalent bonds were
not formed indiscriminately with other targets.
Preclinical
Development
CO-1686 has demonstrated up to 200-fold greater binding
selectivity for EGFR activating mutations and the T790M
resistance mutation relative to the normal receptor when
evaluated in vitro. Binding to normal EGFR can cause
significant side effects, such as rash and diarrhea, which have
been observed upon treatment with first and second-generation
EGFR inhibitors. Furthermore, experiments have been conducted in
which human tumor tissue or cells have been implanted in mice or
rats. These experiments, known as xenograft models, have
demonstrated
74
that CO-1686 can lead to tumor regression in two relevant models
of EGFR-driven lung cancer tumors. The H1975 model employs
tumors that contain both the L858R activating EGFR mutation and
the T790M resistance mutation. This model represents EGFR-driven
NSCLC that is resistant to
Tarcevatm
(erlotinib). Use of CO-1686 in this model demonstrates a dose
response with drug activity at doses of 30mg/kg and greater
activity at doses of 100mg/kg. In addition, because
CO-1686 is
designed to spare the normal EGFR receptor, the drug was well
tolerated at all dose levels with no apparent body weight loss
in the mice, which is a surrogate measure for intestinal
toxicity.
CO-1686 is currently in exploratory toxicology studies and
undergoing formulation work, to prepare for an IND submission
which we expect to file in the first quarter of 2012.
Clinical
Development
We have designed an accelerated clinical development program for
CO-1686, and if successful, have a goal of filing an NDA for an
initial indication within approximately four years of filing our
IND. We intend to pursue the development of CO-1686 as both a
second-line treatment for EGFR-mutated NSCLC patients who become
resistant to TKIs due to the emergence of the T790M mutation
and, potentially, as a first-line treatment for EGFR-mutated
NSCLC. We expect to initiate a Phase
I/II trial
of CO-1686 in the first half of 2012. Data from this trial will
be used to determine the tolerability and pharmacokinetics of
CO-1686, as well as provide evidence of efficacy in selected
NSCLC patients with the T790M mutation. We anticipate receiving
preliminary data from this trial in the second half of 2013.
Once we complete the dose ranging portion of the study, we plan
to enroll an expanded cohort of NSCLC patients with the T790M
mutation to test the efficacy of CO-1686 in the selected patient
subset. If this study is successful, it will be followed by a
pivotal trial in T790M mutant positive NSCLC patients as a
second-line treatment following TKI failure. At the same time,
pending data from the Phase I/II study, we may initiate a study
comparing CO-1686 to Tarceva (erlotinib) in confirmed
EGFR-mutant NSCLC patients.
In addition to the drug development program, we have commenced a
collaboration for the development of a companion diagnostic to
enable identification of patients with the T790M mutation. We
believe such a patient selection tool would enable a focused
clinical development plan, thereby enhancing response rate and
optimizing the
benefit-to-risk
ratio for
CO-1686. To
achieve this goal, we have partnered with Roche to develop a
molecular diagnostic test for EGFR mutations including T790M.
The eventual goal of the collaboration is to commence a pivotal
trial of CO-1686 in patients selected for the T790M mutation
using a PCR-based tool. The diagnostic test will be developed in
parallel with the clinical development of CO-1686, with the goal
of filing a PMA with the FDA in a time frame that would allow
for regulatory approval of the companion diagnostic at
substantially the same time that CO-1686 would be approved.
CO-338 - a
PARP Inhibitor
Overview
CO-338 is a new chemical entity we in-licensed from Pfizer Inc.
in June 2011. CO-338, formerly known as PF- 01367338 and
AG-014699, is a novel, orally available, small molecule poly
ADP-ribose polymerase, known as PARP, inhibitor that we intend
to develop as both monotherapy and as a therapy in combination
with chemotherapeutic agents for the treatment of patients with
cancers predisposed to PARP inhibitor sensitivity. Such cancers
include serous ovarian cancer and selected patients with breast
cancer. Pursuant to our license agreement with Pfizer, we
possess global development and commercialization rights to
CO-338.
CO-338 is currently in a Phase I clinical trial to determine the
maximum tolerated dose of oral
CO-338 that
can be combined with IV platinum chemotherapy in the
treatment of solid tumors. This program is supplemented by two
ongoing investigator-initiated trials, currently using
the IV formulation of CO-338: a Phase I/II study in
germ-line BRCA mutant breast and ovarian cancer and a
Phase II study in the adjuvant treatment of hereditary, or
germ-line, BRCA mutant and triple-negative breast cancer, a
particularly difficult to treat form of breast cancer. As soon
as practical, we intend to replace the IV formulation with
the oral formulation in these studies. We also intend to
initiate a Phase I monotherapy study of the oral formulation in
the fourth quarter of 2011 to determine an appropriate dose and
schedule for long term administration.
75
DNA
Repair and PARP
Cells in the human body are under constant attack from agents
that can cause damage to DNA, including sunlight and other forms
of radiation, as well as DNA-binding chemicals that can cause
changes in the composition of DNA. Since DNA is the vehicle by
which fundamental information is passed on when a cell divides,
it is critical to the integrity of cells and human health that
DNA damage can be repaired. Cells have evolved multiple
mechanisms to enable such DNA repair, and these mechanisms are
complementary to each other, each driving repair of specific
types of DNA damage. If a cells DNA damage repair system
is overwhelmed, then the cell will undergo a form of suicide
called apoptosis that appears to operate as a fail-safe system
to limit the ability of a mutated cell to proliferate and
potentially form a cancer. A fundamental principle of cancer
therapy is to damage cells profoundly with radiation or
DNA-binding drugs, for example alkylating agents or platinums,
and induce apoptosis in those cells, thus killing the cancer
cells. DNA repair mechanisms may reduce the activity of these
anti-cancer therapies but, conversely, inhibition of DNA repair
processes may enhance the effects of DNA-damaging anti-cancer
therapy.
Poly-ADP ribose (PAR) is a part of the early warning system for
DNA damage, and is synthesized by PARP enzymes on regions of
damaged DNA, where it signals to the cell that DNA repair needs
to take place. In the absence of PARP, as is seen in
gene-knockout mice, cells are unusually sensitive to DNA damage
when exposed to radiation or DNA-alkylating agents. There are
two major forms of PARP that signal DNA damage in this way,
PARP-1 and PARP-2. Knockout of either PARP gene leads to
enhanced DNA damage in both instances although the mice may
survive. However, the double knockout in which both the PARP-1
and PARP-2 genes are deleted is fatal to the mice at an
embryonic stage. We believe that a drug that inhibits both
PARP-1 and PARP-2 may have enhanced activity in preventing DNA
repair.
As small molecule inhibitors of PARP became available, they were
tested for their ability to inhibit DNA damage repair and
potentiate the effects of radiation or cytotoxic chemotherapy,
and were shown to be potent enhancers of these anti-cancer
therapies in preclinical studies. Subsequently, PARP inhibitors
have been explored in clinical trials as
chemopotentiators, often in combination with drugs
that add alkyl groups to DNA, such as temozolamide. Results to
date have demonstrated anti-cancer activity, but have clearly
demonstrated the need for patient selection in order to show
compelling data.
Synthetic
Lethality
A large advance in the field came when it was recognized that
germ-line mutations in the BRCA genes (BRCA1 and BRCA2, two
tumor suppressor genes) were associated both with high rates of
breast and ovarian cancer in female mutant gene carriers, and
also impaired the ability of cells to repair DNA damage. BRCA
gene products were shown to be key mediators of DNA repair. The
notion was advanced that treatment of BRCA-defective cells with
PARP inhibitors could lead to a disabling blow against a tumor
cells ability to repair DNA and could induce apoptosis.
This phenomenon was termed synthetic lethality and
was demonstrated in a study conducted by H. Farmer, et al.,
published in Nature in 2005 to be true
in vitro, and then, in a study conducted by Peter C.
Fong, M.D. et al., published in the New England Journal of
Medicine in 2009, it was shown to be valid in humans, as
evidenced by women with advanced breast and ovarian cancer and
germ-line BRCA mutations experiencing objective tumor responses
when treated with monotherapy PARP inhibitors.
Germ-line BRCA mutations are a minority subset of all breast and
ovarian cancers, and the hypothesis was explored that some
tumors might have defective BRCA function for reasons other than
germ-line gene mutation. This notion has been called
BRCA-ness. Subsequent work has shown that BRCA-ness
exists, and that cancer patients with normal germ-line BRCA
genes can respond to monotherapy with PARP inhibitors. Work is
underway to identify a molecular signature for
BRCA-ness that could enable patient selection for
therapy. As a complement to the work to identify a BRCA-ness
signature, clinical criteria have been developed to identify
patients likely to respond to PARP inhibitors. If the notion of
synthetic lethality is accepted, then PARP inhibitors should
work well in patients with pre-existing defective DNA repair in
their tumors. Defective DNA repair in a tumor would likely mean
that the tumor is responsive to DNA-damaging chemotherapy, since
the therapeutic DNA damage that triggers apoptosis cannot be
effectively repaired by the tumor cell. Platinum chemotherapy
drugs are a good example of one such DNA-damaging agent. To
examine the hypothesis that platinum-sensitive tumors will
respond to PARP
76
inhibition, ovarian cancer patients have recently been studied,
since ovarian cancer typically responds well to initial
platinum-based chemotherapy, although relapses are expected
after several months. Recent data from a study abstract
published in the Journal of Clinical Oncology in 2011
demonstrated that in women with advanced ovarian cancer who have
responded twice to platinum chemotherapy, maintenance therapy
with an oral PARP inhibitor approximately doubled the time until
disease progression versus a placebo-treated arm. This study was
not conducted in all ovarian cancer subtypes, but specifically
in high grade serous ovarian cancer. According to the National
Cancer Institute, approximately 22,000 new cases of ovarian
cancer each year. According to Cancer: Principles and
Practice of Oncology (7th Edition, 2005), high grade
serous ovarian cancer accounts for approximately 90% of ovarian
cancers. According to an article published in Nature Reviews
Clinical Oncology in 2010, BRCA mutation, or BRCA-ness, is
believed to be present in at least 50% of high grade serous
ovarian cancer tumors.
PARP
Inhibitor Development Strategy
Based upon the basic science observations and clinical data
described above, we will consider at least three ways to develop
CO-338 for the treatment of solid tumors:
|
|
|
|
|
monotherapy in germ-line BRCA patients (mostly breast and
ovarian cancer although a few patients develop tumors in
pancreas and prostate);
|
|
|
|
monotherapy (induction
and/or
maintenance therapy) in patients with high BRCA-ness tumors; and
|
|
|
|
combination therapy with cytotoxic chemotherapy or radiation or
targeted therapy in other tumors.
|
These approaches will require, in many cases, a patient
selection strategy utilizing either a molecular diagnostic or a
clinical filter. Consistent with our strategy with other
projects, we will consider partnering with a molecular
diagnostic company to develop a companion diagnostic where it is
needed. Some indications, as noted above, may be adequately
explored using clinical selection criteria and obviate the need
for a companion diagnostic.
Opportunity
for Clovis
Within the universe of PARP inhibitors, we were particularly
attracted to the profile of CO-338 from a variety of
perspectives:
|
|
|
|
|
it is a very potent inhibitor of PARP-1 and PARP-2 proteins;
|
|
|
|
it is available in both oral and IV. In combination with
intravenous cytotoxic chemotherapy, it is possible that brief,
high-intensity PARP inhibition is optimal for efficacy, and an
intravenous formulation may be a preferred option under such
conditions;
|
|
|
|
the oral formulation offers good bioavailability and low
inter-individual pharmacokinetic variability;
|
|
|
|
CO-338 can be used as monotherapy in germ-line BRCA patients and
has shown activity in this setting (with the IV
formulation);
|
|
|
|
CO-338 can be used in combination with cytotoxic chemotherapy
and can be safely given at doses shown to be highly PARP
inhibitory, as suggested by the trial results described below;
and
|
|
|
|
CO-338 can likely be used as oral maintenance therapy after
cytotoxic chemotherapy.
|
Clinical
Development of CO-338
IV Formulation. The IV formulation of
CO-338 has been studied in two Phase I clinical trials and one
Phase II clinical trial. The first Phase I clinical trial
was designed to identify a dose of CO-338 that was both
pharmaceutically active and well tolerated by patients and to
identify the dose of temozolomide, or TMZ, a chemotherapy, that
could be combined with CO-338 in a safe and well-tolerated
manner. After appropriate dose-escalation, the study concluded
that the recommended treatment dose of CO-338 was
12 mg/m2
each day with TMZ
200 mg/m2
each day.
77
The second Phase I clinical trial is a dose escalation study
that began in 2009 to evaluate tolerability and pharmacokinetics
in combination with four different chemotherapy regimens in
patients with solid tumors. In this study, the initial
chemotherapies were carboplatin, carboplatin/paclitaxel,
pemetrexed/cisplatin and epirubicin/cyclophosphamide. To date, a
total of 52 patients have been enrolled and no maximum
tolerated dose was reached in any of the enrolled cohorts. In 27
evaluable patients with no pre-specified tumor type required for
enrollment, three had a partial response, including one partial
response in a breast cancer patient with a BRCA defect, one
partial response in a breast cancer patient with no observable
BRCA defect and one partial response in an ovarian cancer
patient with a BRCA defect. In this case, a partial response is
considered a 30% decrease in the longest diameter of the target
lesions.
A Phase II study evaluated the combination of CO-338 and
TMZ in patients with metastatic melanoma. Forty-six patients
were treated at the dose level of
12 mg/m2
each day for three cycles and TMZ
200 mg/m2
every 21 days. Seventeen percent of patients achieved a
partial response, an additional 17% had stable disease of
greater than or equal to 24 weeks, the median progression
free survival was 3.5 months and median overall survival
was 9.9 months. The most common adverse events for the
CO-338 and temozolomide combination were gastrointestinal,
including nausea and vomiting.
Oral Formulation. The ongoing Phase I
trial of the IV formulation of CO-338 in combination with four
different chemotherapy regimes has been recently amended to
investigate the use of an oral formulation of CO-338 in
combination only with carboplatin.
An oral, continuous daily dosing schedule has not been
established for CO-338 monotherapy. Therefore, we plan to
conduct a Phase I trial in approximately 30 patients with
BRCA-deficiencies to determine the optimal dose and schedule.
During such a Phase I trial, careful assessment of the
pharmaceutical properties of CO-338 will be performed to
establish whether a blood-based assay could be used to guide
optimal dosing.
Our CO-338 clinical development plan is supplemented by two
investigator-sponsored trials of the IV formulation of
CO-338. One is a Phase I/II trial in the treatment of germline
BRCA mutation breast and ovarian cancer; the second is a
Phase II trial in the adjuvant treatment of patients with
high risk germline BRCA-defective breast cancer and
triple-negative breast cancer. In both of these studies, our
intent is to transition to oral CO-338 once the optimal dose and
duration of treatment are established.
Upon analysis of the Phase I/II trial results, we may pursue
future development of CO-338 as monotherapy
and/or in
combination with chemotherapy. Potential indications may include
serous ovarian cancer, breast cancer, NSCLC, endometrial cancer,
and chronic lymphocytic leukemia. We may also study the
inhibition of PARP in the maintenance setting after cytotoxic
chemotherapy, which seems to be effective in the setting of
certain cancers that are sensitive to platinum chemotherapy.
Competition
The commercialization of new drugs is competitive and we will
face competition from major pharmaceutical companies, specialty
pharmaceutical companies and biotechnology companies worldwide.
Our competitors may develop or market products or other novel
technologies that are more effective, safer or less costly than
any that have been or will be commercialized by us, or may
obtain regulatory approval for their products more rapidly than
we may obtain approval for ours.
The acquisition or licensing of pharmaceutical products is also
very competitive, and a number of more established companies,
which have acknowledged strategies to license or acquire
products, may have competitive advantages as may other emerging
companies taking similar or different approaches to product
acquisitions. In addition, a number of established
research-based pharmaceutical and biotechnology companies may
acquire products in late stages of development to augment their
internal product lines. These established companies may have a
competitive advantage over us due to their size, cash flows and
institutional experience.
Many of our competitors will have substantially greater
financial, technical and human resources than we have.
Additional mergers and acquisitions in the pharmaceutical
industry may result in even more resources being concentrated in
our competitors. Competition may increase further as a result of
advances made in the commercial applicability of technologies
and greater availability of capital for investment in these
fields. Our success will be
78
based in part on our ability to build and actively manage a
portfolio of drugs that addresses unmet medical needs and
creates value in patient therapy.
CO-101
Competition
There are currently two agents approved for the treatment of
metastatic pancreatic cancer:
Gemzar®/gemcitabine
marketed by Eli Lilly, Teva Pharmaceutical Industries, APP
Pharmaceuticals, Hospira, Inc. and Sandoz Inc. and
Tarcevatm
(erlotinib) marketed by Astellas Pharma. Gemcitabine represents
the current standard of care across all lines of pancreatic
cancer therapy, either as monotherapy or as part of combination
regimens.
There are a number of companies with active clinical trials
ongoing in pancreatic cancer. Companies in late stage pancreatic
cancer clinical trials include AB Science SA, Amgen Inc.,
Astellas Pharma, BioSante Pharmaceuticals, Inc., Celgene
Corporation, Immunomedics, Inc., Lorus Therapeutics, Merrimack
Pharmaceuticals, Inc. and Threshold Pharmaceuticals, Inc. The
majority of these companies have programs under development in
combination with gemcitabine. We are not aware of any
competitors with programs targeting low hENT1 expression in
pancreatic cancer.
CO-1686
Competition
Tarcevatm
and
Iressatm
are two of the currently approved drugs that are used to treat
EGFR mutant NSCLC. In addition, we are aware of two products in
development targeting cancer-causing mutant forms of the
epidermal growth factor receptor, or EGFR, for the treatment of
NSCLC patients. These products include Boehringer
Ingelheims BIBW-2992 (afatinib), currently in
Phase III trials, and Pfizers PF-299804, currently in
Phase II. We believe CO-1686 potentially offers several
important advantages over the second generation EGFR inhibitors,
including superior efficacy due to activity against the T790M
resistance mutation and higher selectivity for the T790M
mutation with relative sparing of normal EGFR, therefore
avoiding the significant skin rash and gastro-intestinal
toxicities associated with other first and second generation
inhibitors, including Tarceva and Iressa. We also believe that
other pharmaceutical companies may be seeking to develop EGFR
mutant selective inhibitors that may enter clinical development
on a similar time frame to CO-1686.
CO-338
Competition
We believe the products in development targeting the PARP
pathway consist of Sanofi-Aventis BSI-201 (iniparib)
currently in Phase III clinical trials, Astra Zenecas
AZD-2281 (olaparib) currently in Phase II clinical trials,
Abbotts ABT-888 (velaparib) currently in Phase II
clinical trials, Mercks MK-4827 currently in Phase I
trial, Eisais
E-7016
currently in Phase I trials, Cephalons CEP-9722 currently
in Phase I trials, and Biomarins
BMN-673
currently in Phase I trials.
License
Agreements and Agreements for the Development of Companion
Diagnostics
Clavis
Pharma ASA
In November 2009, we entered into a license agreement with
Clavis to obtain the exclusive rights to develop and
commercialize CO-101 in North America, Central America, South
America and Europe. The exclusive rights are exclusive even as
to Clavis and include the right to grant sublicenses. Under the
terms of the license agreement, we made an up-front payment to
Clavis of $15.0 million, which was comprised of
$13.1 million for development costs incurred prior to the
execution of the agreement, and recognized by us as acquired
in-process research and development, and $1.9 million for
the prepayment of preclinical activities to be performed by
Clavis. In November 2010, the license agreement was amended to
expand the license territory to include exclusive rights in Asia
and other international markets, in consideration for our making
a payment of $10.0 million, which again we recognized as
acquired in-process research and development. As part of the
amended license, Clavis agreed to reimburse us for up to
$3.0 million of costs incurred by us for CO-101 development
activities. Under the amended license agreement, we are
obligated to use commercially reasonable efforts to develop and
commercialize CO-101, and with the exception of the specific
amounts to be reimbursed by Clavis, we are responsible for all
remaining development and commercialization costs for CO-101.
When and if commercial sales of CO-101 begin, we will pay Clavis
tiered royalties at percentage rates ranging from the mid-teens
to the low twenties based on the volume of annual net sales
achieved, with standard provisions for royalty offsets to the
extent we need to obtain any rights from third parties to
79
commercialize CO-101 and royalty reductions in the event of
generic competition, each on a country by country basis. We are
required to make regulatory milestone payments to Clavis of up
to $115.0 million if specified clinical study objectives
and regulatory filings, acceptances and approvals are achieved.
In addition, we are obligated to make sales milestone payments
to Clavis if specified annual sales targets for CO-101 are met,
the majority of which relate to annual sales targets of
$500.0 million and above, which, in the aggregate, could
amount to total milestone payments of $445.0 million.
Under the license agreement, for a limited period of time
related to the timing of the filing of the first MAA for CO-101
in Europe, Clavis may elect to co-develop and co-promote CO-101
in Europe. If Clavis were to make this election, it would be
required to reimburse us for either 35% or 40% of all
development costs incurred by us up to the date of such
election, depending on the timing of such election relative to
the disclosure to Clavis of top line data from its first
completed Phase II or Phase III clinical trial, and
thereafter, Clavis would be required to pay us 25% of all
ongoing development costs for CO-101. In addition, milestone
payments described above would be reduced and, instead of
receiving royalties on net sales in Europe, Clavis would share
equally in the pretax profits or losses resulting from
commercialization activities in Europe.
The license agreement will remain in effect until we or our
sublicensees are no longer selling CO-101 in any country in our
global licensed territory, unless we elect to terminate the
license earlier. If we fail to meet our obligations under the
agreement and are unable to cure such failure within specified
time periods, Clavis can terminate the agreement, resulting in a
loss of our rights to CO-101 and an obligation to assign or
license to Clavis any intellectual property rights or other
rights we may have in CO-101, including our regulatory filings,
regulatory approvals, patents and trademarks for CO-101.
Avila
Therapeutics, Inc.
In May 2010, we entered into an exclusive worldwide license
agreement with Avila to discover, develop and commercialize a
pre-clinical covalent inhibitor of mutant forms of the EGFR gene
discovered by Avila and selected by us. As a result of the
collaboration contemplated by the agreement, CO-1686 was
identified as the lead inhibitor candidate which we are
proceeding to develop under the terms of the license agreement.
Under the agreement, we are required to use commercially
reasonable efforts to develop and commercialize CO-1686, and we
are responsible for all preclinical, clinical, regulatory and
other activities necessary to develop and commercialize CO-1686.
We made an up-front payment of $2.0 million to Avila upon
execution of the license agreement, which we recognized as an
acquired in-process research and development expense. When and
if commercial sales of CO-1686 commence, we will pay Avila
tiered royalties at percentage rates ranging from mid-single
digits to low-teens based on annual net sales achieved. Avila
has the option to increase royalty rates on annual net sales in
the United States and the European Union by electing to
reimburse us for a share of our development expenses for
CO-1686. This option must be exercised within a limited period
of time of Avilas being notified by us of our intent to
pursue regulatory approval of CO-1686 in the United States or
the European Union as a first-line treatment. Under the
agreement, we are required to make regulatory milestone payments
to Avila of up to $119.0 million if specified clinical
study objectives and regulatory filings, acceptances and
approvals are achieved. In addition, we are obligated to make
sales milestone payments to Avila if specified annual sales
targets for CO-1686 are met, the majority of which relate to
annual sales targets of $500.0 million and above, which, in
the aggregate, could amount to total milestone payments of
$120.0 million.
We have full sublicensing rights under the license agreement
with Avila, subject to our sharing equally with Avila any
up-front payments from any
sub-licensing
arrangements relating to Japan, or Japan and any one or more of
China, South Korea and Taiwan, which we refer to herein as an
Asian Partnership, and subject to our paying Avila royalties on
sales in Asia equal to the greater of the royalty rates
contained in our license agreement with Avila or 50% of the
royalties we receive from our Asian Partnership.
The license agreement with Avila will remain in effect until the
expiration of all of our royalty and sublicense revenue
obligations to Avila, determined on a
product-by-product
and
country-by-country
basis, unless we elect to terminate the license agreement
earlier. If we fail to meet our obligations under the agreement
and are unable to cure such failure within specified time
periods, Avila can terminate the agreement, resulting in a loss
of our rights to CO-1686 and an obligation to assign or license
to Avila any intellectual property rights or other rights we may
have in CO-1686, including our regulatory filings, regulatory
approvals, patents and trademarks for CO-1686.
80
Pfizer
Inc.
In June 2011, we entered into a license agreement with Pfizer,
to obtain the exclusive global rights to develop and
commercialize CO-338. The exclusive rights are exclusive even as
to Pfizer and include the right to grant sublicenses. Under the
terms of the license agreement, we made an up-front payment by
issuing to Pfizer $7.0 million principal amount of a
5% convertible promissory note due 2012. Under the license
agreement, we will assume responsibility for an ongoing Phase I
dose ranging clinical trial previously conducted by Pfizer
examining the maximum tolerated dose of the oral form of CO-338
in combination with intravenous platinum chemotherapy in the
treatment of solid tumors. We are obligated under the license
agreement to use commercially reasonable efforts to develop and
commercialize
CO-338, and
with the exception of transfer to us, without cost, of
Pfizers existing inventory of CO-338, we are responsible
for all remaining development and commercialization costs for
CO-338. When and if commercial sales of CO-338 begin, we will
pay Pfizer tiered royalties at a mid-teen percentage rate on our
net sales, with standard provisions for royalty offsets to the
extent we need to obtain any rights from third parties to
commercialize CO-338. We are required to make regulatory
milestone payments to Pfizer of up to $89.0 million if
specified clinical study objectives and regulatory filings,
acceptances and approvals are achieved. In addition, we are
obligated to make sales milestone payments to Pfizer if
specified annual sales targets for CO-338 are met, the majority
of which relate to annual sales targets of $500.0 million
and above, which, in the aggregate, could amount to total
milestone payments of $170.0 million.
The license agreement with Pfizer will remain in effect until
the expiration of all of our royalty and sublicense revenue
obligations to Pfizer, determined on a
product-by-product
and
country-by-country
basis, unless we elect to terminate the license agreement
earlier. If we fail to meet our obligations under the agreement
and are unable to cure such failure within specified time
periods, Pfizer can terminate the agreement, resulting in a loss
of our rights to
CO-338 and
an obligation to assign or license to Pfizer any intellectual
property rights or other rights we may have in CO-338, including
our regulatory filings, regulatory approvals, patents and
trademarks for CO-338.
Ventana
Medical Systems, Inc.
In March 2010, we entered into an agreement with Ventana with
respect to the development and commercialization of an IVD to
measure tissue hENT1 expression and enable prospective
classification of patients as either hENT1-high or hENT1-low.
Ventana will develop a hENT1 IHC assay, seek FDA approval of a
PMA for the IVD, arrange for the manufacture of the hENT1 IHC
assay and develop a commercialization strategy for the hENT1 IHC
assay. We will provide Ventana the access and data necessary for
the PMA IVD submission. We are responsible for the costs and
expenses associated with the development of the companion
diagnostic. The companion diagnostic will be owned by Ventana,
subject to certain rights we may retain in the event Ventana
does not commercialize such companion diagnostic, and all
revenues generated from the sale of the companion diagnostic
will be retained by Ventana. The agreement has a three-year
term. Either party may terminate the agreement for any reason
upon prior written notice to the other party or immediately upon
a material breach of the agreement by the other party that is
not cured within a specified time or upon the other partys
insolvency or bankruptcy.
Roche
Molecular Systems, Inc.
In April 2011, we entered into an agreement with Roche with
respect to the development and commercialization of a companion
diagnostic test to detect and identify EGFR mutations, including
the T790M mutation, in human samples. The companion diagnostic
will be developed in stages pursuant to a mutually agreed
development plan. Roche will be responsible for the technical
development of the EGFR assay, including software development,
technical validation and verification of the EGFR assay,
clinical reproducibility studies of the EGFR assay and the
manufacturability of the EGFR assay. We will be responsible for
the validation of the clinical utility of the EGFR assay. We and
Roche will jointly promote the EGFR assay once it is
commercialized by Roche. We share with Roche the costs and
expenses of the development of the companion diagnostic. We may
terminate the agreement upon prior written notice to Roche.
Roche may terminate the agreement if we breach any of our
material obligations under the agreement and are unable to cure
such breach within specified time periods or if we were to
liquidate, dissolve,
wind-up our
business or be declared insolvent or bankrupt. The companion
diagnostic will be owned by Roche and all revenues generated
from the sale of the companion diagnostic will be retained by
Roche.
81
Government
Regulation
Government authorities in the United States (including federal,
state and local authorities) and in other countries, extensively
regulate, among other things, the manufacturing, research and
clinical development, marketing, labeling and packaging,
storage, distribution, post-approval monitoring and reporting,
advertising and promotion, pricing and export and import of
pharmaceutical products, such as those we are developing. The
process of obtaining regulatory approvals and the subsequent
compliance with appropriate federal, state, local and foreign
statutes and regulations require the expenditure of substantial
time and financial resources. Moreover, failure to comply with
applicable regulatory requirements may result in, among other
things, warning letters, clinical holds, civil or criminal
penalties, recall or seizure of products, injunction,
disbarment, partial or total suspension of production or
withdrawal of the product from the market. Any agency or
judicial enforcement action could have a material adverse effect
on us.
U.S.
Government Regulation
In the United States, the FDA regulates drugs under the Federal
Food, Drug, and Cosmetic Act, or FDCA, and its implementing
regulations. Drugs are also subject to other federal, state and
local statutes and regulations. The process required by the FDA
before product candidates may be marketed in the United States
generally involves the following:
|
|
|
|
|
submission to the FDA of an IND which must become effective
before human clinical trials may begin and must be updated
annually;
|
|
|
|
completion of extensive preclinical laboratory tests and
preclinical animal studies, all performed in accordance with the
FDAs Good Laboratory Practice, or GLP, regulations;
|
|
|
|
performance of adequate and well-controlled human clinical
trials to establish the safety and efficacy of the product
candidate for each proposed indication;
|
|
|
|
submission to the FDA of an NDA after completion of all pivotal
clinical trials;
|
|
|
|
a determination by the FDA within 60 days of its receipt of
an NDA to file the NDA for review;
|
|
|
|
satisfactory completion of an FDA pre-approval inspection of the
manufacturing facilities at which the active pharmaceutical
ingredient, or API, and finished drug product are produced and
tested to assess compliance with cGMP regulations; and
|
|
|
|
FDA review and approval of an NDA prior to any commercial
marketing or sale of the drug in the United States.
|
An IND is a request for authorization from the FDA to administer
an investigational drug product to humans.
The central focus of an IND submission is on the general
investigational plan and the protocol(s) for human studies. The
IND also includes results of animal studies or other human
studies, as appropriate, as well as manufacturing information,
analytical data and any available clinical data or literature to
support the use of the investigational new drug. An IND must
become effective before human clinical trials may begin. An IND
will automatically become effective 30 days after receipt
by the FDA, unless before that time the FDA raises concerns or
questions related to the proposed clinical trials. In such a
case, the IND may be placed on clinical hold and the IND sponsor
and the FDA must resolve any outstanding concerns or questions
before clinical trials can begin. Accordingly, submission of an
IND may or may not result in the FDA allowing clinical trials to
commence.
Clinical trials involve the administration of the
investigational drug to human subjects under the supervision of
qualified investigators in accordance with Good Clinical
Practices, or GCPs, which include the requirement that all
research subjects provide their informed consent for their
participation in any clinical trial. Clinical trials are
conducted under protocols detailing, among other things, the
objectives of the study, the parameters to be used in monitoring
safety, and the efficacy criteria to be evaluated. A protocol
for each clinical trial and any subsequent protocol amendments
must be submitted to the FDA as part of the IND. Additionally,
approval must also be obtained from each clinical trial
sites IRB before the trials may be initiated, and the IRB
must monitor the study until completed. There are also
requirements governing the reporting of ongoing clinical trials
and clinical trial results to public registries.
82
The clinical investigation of a drug is generally divided into
three phases. Although the phases are usually conducted
sequentially, they may overlap or be combined. The three phases
of an investigation are as follows:
|
|
|
|
|
Phase I. Phase I includes the initial
introduction of an investigational new drug into humans. Phase I
clinical trials are typically closely monitored and may be
conducted in patients with the target disease or condition or in
healthy volunteers. These studies are designed to evaluate the
safety, dosage tolerance, metabolism and pharmacologic actions
of the investigational drug in humans, the side effects
associated with increasing doses, and if possible, to gain early
evidence on effectiveness. During Phase I clinical trials,
sufficient information about the investigational drugs
pharmacokinetics and pharmacological effects may be obtained to
permit the design of well-controlled and scientifically valid
Phase II clinical trials. The total number of participants
included in Phase I clinical trials varies, but is generally in
the range of 20 to 80.
|
|
|
|
Phase II. Phase II includes controlled
clinical trials conducted to preliminarily or further evaluate
the effectiveness of the investigational drug for a particular
indication(s) in patients with the disease or condition under
study, to determine dosage tolerance and optimal dosage, and to
identify possible adverse side effects and safety risks
associated with the drug. Phase II clinical trials are
typically well-controlled, closely monitored, and conducted in a
limited patient population, usually involving no more than
several hundred participants.
|
|
|
|
Phase III. Phase III clinical trials are
generally controlled clinical trials conducted in an expanded
patient population generally at geographically dispersed
clinical trial sites. They are performed after preliminary
evidence suggesting effectiveness of the drug has been obtained,
and are intended to further evaluate dosage, clinical
effectiveness and safety, to establish the overall benefit-risk
relationship of the investigational drug product, and to provide
an adequate basis for product approval. Phase III clinical
trials usually involve several hundred to several thousand
participants.
|
A pivotal study is a clinical study which adequately meets
regulatory agency requirements for the evaluation of a drug
candidates efficacy and safety such that it can be used to
justify the approval of the product. Generally, pivotal studies
are also Phase III studies but may be Phase II studies if the
trial design provides a well-controlled and reliable assessment
of clinical benefit, particularly in situations where there is
an unmet medical need.
The FDA , the IRB or the clinical trial sponsor may suspend or
terminate a clinical trial at any time on various grounds,
including a finding that the research subjects are being exposed
to an unacceptable health risk. Additionally, some clinical
trials are overseen by an independent group of qualified experts
organized by the clinical trial sponsor, known as a data safety
monitoring board or committee. This group provides authorization
for whether or not a trial may move forward at designated check
points based on access to certain data from the study. We may
also suspend or terminate a clinical trial based on evolving
business objectives
and/or
competitive climate.
Assuming successful completion of all required testing in
accordance with all applicable regulatory requirements, detailed
investigational drug product information is submitted to the FDA
in the form of an NDA requesting approval to market the product
for one or more indications.
The application includes all relevant data available from
pertinent preclinical and clinical trials, including negative or
ambiguous results as well as positive findings, together with
detailed information relating to the products chemistry,
manufacturing, controls and proposed labeling, among other
things. Data can come from company-sponsored clinical trials
intended to test the safety and effectiveness of a use of a
product, or from a number of alternative sources, including
studies initiated by investigators. To support marketing
approval, the data submitted must be sufficient in quality and
quantity to establish the safety and effectiveness of the
investigational drug product to the satisfaction of the FDA.
Once the NDA submission has been accepted for filing, the
FDAs goal is to review applications within ten months of
submission or, if the application relates to an unmet medical
need in a serious or life-threatening indication, six months
from submission. The review process is often significantly
extended by FDA requests for additional information or
clarification. The FDA may refer the application to an advisory
committee for review, evaluation and recommendation as to
whether the application should be approved. The FDA is not bound
by the recommendation of an advisory committee, but it typically
follows such recommendations.
83
After the FDA evaluates the NDA and conducts inspections of
manufacturing facilities where the drug product
and/or its
API will be produced, it may issue an approval letter or a
Complete Response Letter. An approval letter authorizes
commercial marketing of the drug with specific prescribing
information for specific indications. A Complete Response Letter
indicates that the review cycle of the application is complete
and the application is not ready for approval. A Complete
Response Letter may require additional clinical data
and/or an
additional pivotal Phase III clinical trial(s),
and/or other
significant, expensive and time-consuming requirements related
to clinical trials, preclinical studies or manufacturing. Even
if such additional information is submitted, the FDA may
ultimately decide that the NDA does not satisfy the criteria for
approval. The FDA could also approve the NDA with a Risk
Evaluation and Mitigation Strategies, or REMS, plan to mitigate
risks, which could include medication guides, physician
communication plans, or elements to assure safe use, such as
restricted distribution methods, patient registries and other
risk minimization tools. The FDA also may condition approval on,
among other things, changes to proposed labeling, development of
adequate controls and specifications, or a commitment to conduct
one or more post-market studies or clinical trials. Such
post-market testing may include Phase IV clinical trials
and surveillance to further assess and monitor the
products safety and effectiveness after commercialization.
Regulatory approval of oncology products often requires that
patients in clinical trials be followed for long periods to
determine the overall survival benefit of the drug.
After regulatory approval of a drug product is obtained, we are
required to comply with a number of post-approval requirements.
As a holder of an approved NDA, we would be required to report,
among other things, certain adverse reactions and production
problems to the FDA, to provide updated safety and efficacy
information, and to comply with requirements concerning
advertising and promotional labeling for any of our products.
Also, quality control and manufacturing procedures must continue
to conform to cGMP after approval to ensure and preserve the
long term stability of the drug product. The FDA periodically
inspects manufacturing facilities to assess compliance with
cGMP, which imposes extensive procedural, substantive and record
keeping requirements. In addition, changes to the manufacturing
process are strictly regulated, and, depending on the
significance of the change, may require prior FDA approval
before being implemented. FDA regulations also require
investigation and correction of any deviations from cGMP and
impose reporting and documentation requirements upon us and any
third-party manufacturers that we may decide to use.
Accordingly, manufacturers must continue to expend time, money
and effort in the area of production and quality control to
maintain compliance with cGMP and other aspects of regulatory
compliance.
We rely, and expect to continue to rely, on third parties for
the production of clinical and commercial quantities of our
product candidates. Future FDA and state inspections may
identify compliance issues at our facilities or at the
facilities of our contract manufacturers that may disrupt
production or distribution, or require substantial resources to
correct. In addition, discovery of previously unknown problems
with a product or the failure to comply with applicable
requirements may result in restrictions on a product,
manufacturer or holder of an approved NDA, including withdrawal
or recall of the product from the market or other voluntary,
FDA-initiated or judicial action that could delay or prohibit
further marketing. Newly discovered or developed safety or
effectiveness data may require changes to a products
approved labeling, including the addition of new warnings and
contraindications, and also may require the implementation of
other risk management measures. Also, new government
requirements, including those resulting from new legislation,
may be established, or the FDAs policies may change, which
could delay or prevent regulatory approval of our products under
development.
Europe/Rest
of World Government Regulation
In addition to regulations in the United States, we will be
subject to a variety of regulations in other jurisdictions
governing, among other things, clinical trials and any
commercial sales and distribution of our products.
Whether or not we obtain FDA approval for a product, we must
obtain the requisite approvals from regulatory authorities in
foreign countries prior to the commencement of clinical trials
or marketing of the product in those countries. Certain
countries outside of the United States have a similar process
that requires the submission of a clinical trial application
much like the IND prior to the commencement of human clinical
trials. In Europe, for example, a clinical trial application, or
CTA, must be submitted to each countrys national health
authority and an independent ethics committee, much like the FDA
and IRB, respectively. Once the CTA is approved in accordance
with a countrys requirements, clinical trial development
may proceed.
84
The requirements and process governing the conduct of clinical
trials, product licensing, pricing and reimbursement vary from
country to country. In all cases, the clinical trials are
conducted in accordance with GCP and the applicable regulatory
requirements and the ethical principles that have their origin
in the Declaration of Helsinki.
To obtain regulatory approval of an investigational drug under
European Union regulatory systems, we must submit a marketing
authorization application. The application used to file the NDA
in the United States is similar to that required in Europe, with
the exception of, among other things, country-specific document
requirements.
For other countries outside of the European Union, such as
countries in Eastern Europe, Latin America or Asia, the
requirements governing the conduct of clinical trials, product
licensing, pricing and reimbursement vary from country to
country. In all cases, again, the clinical trials are conducted
in accordance with GCP and the applicable regulatory
requirements and the ethical principles that have their origin
in the Declaration of Helsinki.
If we fail to comply with applicable foreign regulatory
requirements, we may be subject to, among other things, fines,
suspension or withdrawal of regulatory approvals, product
recalls, seizure of products, operating restrictions and
criminal prosecution.
Available
Special Regulatory Procedures
Formal
Meetings
We are encouraged to engage and seek guidance from health
authorities relating to the development and review of
investigational drugs, as well as marketing applications. In the
United States, there are different types of official meetings
that may occur between us and the FDA. Each meeting type is
subject to different procedures. Conclusions and agreements from
each of these meetings are captured in the official final
meeting minutes issued by the FDA.
The EMA also provides the opportunity for dialogue with us. This
is usually done in the form of Scientific Advice, which is given
by the Scientific Advice Working Party of the Committee for
Medicinal Products for Human Use, or CHMP. A fee is incurred
with each Scientific Advice meeting.
Advice from either the FDA or EMA is typically provided based on
questions concerning, for example, quality (chemistry,
manufacturing and controls testing), nonclinical testing and
clinical studies, and pharmacovigilance plans and
risk-management programs. Such advice is not legally binding on
the sponsor. To obtain binding commitments from health
authorities in the United States and the European Union, SPA or
Protocol Assistance procedures are available. An SPA is an
evaluation by the FDA of a protocol with the goal of reaching an
agreement with the sponsor that the protocol design, clinical
endpoints and statistical analyses are acceptable to support
regulatory approval of the product candidate with respect to
effectiveness in the indication studied. The FDAs
agreement to an SPA is binding upon the FDA except in limited
circumstances, such as if the FDA identifies a substantial
scientific issue essential to determining the safety or
effectiveness of the product after clinical studies begin, or if
the study sponsor fails to follow the protocol that was agreed
upon with the FDA. There is no guarantee that a study will
ultimately be adequate to support an approval even if the study
is subject to an SPA.
Orphan
Drug Designation
The FDA may grant orphan drug designation to drugs intended to
treat a rare disease or condition that affects fewer than
200,000 individuals in the United States, or if it affects more
than 200,000 individuals in the United States, there is no
reasonable expectation that the cost of developing and making
the drug for this type of disease or condition will be recovered
from sales in the United States. In the European Union, the
EMAs Committee for Orphan Medicinal Products, or COMP,
grants orphan drug designation to promote the development of
products that are intended for the diagnosis, prevention or
treatment of a life-threatening or chronically debilitating
conditions affecting not more than 5 in 10,000 persons in
the European Union Community. Additionally, designation is
granted for products intended for the diagnosis, prevention or
treatment of a life-threatening, seriously debilitating or
serious and chronic condition and when, without incentives, it
is unlikely that sales of the drug in the European Union would
be sufficient to justify the necessary investment in developing
the drug or biological product.
85
In the United States, orphan drug designation entitles a party
to financial incentives such as opportunities for grant funding
towards clinical trial costs, tax advantages and user-fee
waivers. In addition, if a product receives the first FDA
approval for the indication for which it has orphan designation,
the product is entitled to orphan drug exclusivity, which means
the FDA may not approve any other application to market the same
drug for the same indication for a period of 7 years,
except in limited circumstances, such as a showing of clinical
superiority over the product with orphan exclusivity.
In the European Union, orphan drug designation also entitles a
party to financial incentives such as reduction of fees or fee
waivers and 10 years of market exclusivity is granted
following drug or biological product approval. This period may
be reduced to 6 years if the orphan drug designation
criteria are no longer met, including where it is shown that the
product is sufficiently profitable not to justify maintenance of
market exclusivity.
Orphan drug designation must be requested before submitting an
application for marketing approval. Orphan dug designation does
not convey any advantage in, or shorten the duration of, the
regulatory review and approval process.
Pediatric
Development
In the United States, the FDCA provides for an additional
6 months of marketing exclusivity for a drug if reports are
filed of investigations studying the use of the drug product in
a pediatric population in response to a written request from the
FDA. Separate from this potential exclusivity benefit, NDAs must
contain data (or a proposal for post-marketing activity) to
assess the safety and effectiveness of an investigational drug
product for the claimed indications in all relevant pediatric
populations in order to support dosing and administration for
each pediatric subpopulation for which the drug is safe and
effective. The FDA may, on its own initiative or at the request
of the applicant, grant deferrals for submission of some or all
pediatric data until after approval of the product for use in
adults or full or partial waivers if certain criteria are met.
Discussions about pediatric development plans can be discussed
with the FDA at any time, but usually occur any time between the
end-of-Phase II
meeting and submission of the NDA.
For the EMA, a Pediatric Investigation Plan,
and/or a
request for waiver or deferral, is required for submission prior
to submitting a marketing authorization application.
Authorization
Procedures in the European Union
Medicines can be authorized in the European Union by using
either the centralized authorization procedure or national
authorization procedures.
|
|
|
|
|
Centralized procedure. The EMA implemented the
centralized procedure for the approval of human medicines to
facilitate marketing authorizations that are valid throughout
the European Union. This procedure results in a single marketing
authorization issued by the EMA that is valid across the
European Union, as well as Iceland, Liechtenstein and Norway.
The centralized procedure is compulsory for human medicines that
are: derived from biotechnology processes, such as genetic
engineering, contain a new active substance indicated for the
treatment of certain diseases, such as HIV/AIDS, cancer,
diabetes, neurodegenerative disorders or autoimmune diseases and
other immune dysfunctions, and officially designated orphan
medicines.
|
|
|
|
|
|
For medicines that do not fall within these categories, an
applicant has the option of submitting an application for a
centralized marketing authorization to the EMA, as long as the
medicine concerned is a significant therapeutic, scientific or
technical innovation, or if its authorization would be in the
interest of public health.
|
|
|
|
National authorization procedures. There are
also two other possible routes to authorize medicinal products
in several countries, which are available for investigational
drug products that fall outside the scope of the centralized
procedure:
|
|
|
|
|
|
Decentralized procedure. Using the
decentralized procedure, an applicant may apply for simultaneous
authorization in more than one European Union country of
medicinal products
|
86
|
|
|
|
|
that have not yet been authorized in any European Union country
and that do not fall within the mandatory scope of the
centralized procedure.
|
|
|
|
|
|
Mutual recognition procedure. In the mutual
recognition procedure, a medicine is first authorized in one
European Union Member State, in accordance with the national
procedures of that country. Following this, further marketing
authorizations can be sought from other European Union countries
in a procedure whereby the countries concerned agree to
recognize the validity of the original, national marketing
authorization.
|
Priority
Review/Standard Review (United States) and Accelerated Review
(European Union)
Based on results of the Phase III clinical trial(s)
submitted in an NDA, upon the request of an applicant, the FDA
may grant the NDA a priority review designation, which sets the
target date for FDA action on the application at
six months. Priority review is granted where preliminary
estimates indicate that a product, if approved, has the
potential to provide a safe and effective therapy where no
satisfactory alternative therapy exists, or a significant
improvement compared to marketed products is possible. If
criteria are not met for priority review, the NDA is subject to
the standard FDA review period of 10 months. Priority
review designation does not change the scientific/medical
standard for approval or the quality of evidence necessary to
support approval.
Under the Centralized Procedure in the European Union, the
maximum timeframe for the evaluation of a marketing
authorization application is 210 days (excluding clock
stops, when additional written or oral information is to be
provided by the applicant in response to questions asked by the
CHMP. Accelerated evaluation might be granted by the CHMP in
exceptional cases, when a medicinal product is expected to be of
a major public health interest, defined by three cumulative
criteria: the seriousness of the disease (e.g. heavy disabling
or life-threatening diseases) to be treated; the absence or
insufficiency of an appropriate alternative therapeutic
approach; and anticipation of high therapeutic benefit. In this
circumstance, EMA ensures that the opinion of the CHMP is given
within 150 days, excluding clock stops.
Pharmaceutical
Coverage, Pricing and Reimbursement
Significant uncertainty exists as to the coverage and
reimbursement status of any drug products for which we obtain
regulatory approval. In the United States and markets in other
countries, sales of any products for which we receive regulatory
approval for commercial sale will depend in part on the
availability of reimbursement from third-party payors.
Third-party payors include government health administrative
authorities, managed care providers, private health insurers and
other organizations. The process for determining whether a payor
will provide coverage for a drug product may be separate from
the process for setting the price or reimbursement rate that the
payor will pay for the drug product. Third-party payors may
limit coverage to specific drug products on an approved list, or
formulary, which might not include all of the
FDA-approved
drugs for a particular indication. Third-party payors are
increasingly challenging the price and examining the medical
necessity and cost-effectiveness of medical products and
services, in addition to their safety and efficacy. We may need
to conduct expensive pharmacoeconomic studies in order to
demonstrate the medical necessity and cost-effectiveness of our
products, in addition to the costs required to obtain FDA
approvals. Our product candidates may not be considered
medically necessary or cost-effective. A payors decision
to provide coverage for a drug product does not imply that an
adequate reimbursement rate will be approved. Adequate
third-party reimbursement may not be available to enable us to
maintain price levels sufficient to realize an appropriate
return on our investment in product development.
In 2003, the United States government enacted legislation
providing a partial prescription drug benefit for Medicare
beneficiaries, which became effective at the beginning of 2006.
Government payment for some of the costs of prescription drugs
may increase demand for any products for which we receive
marketing approval. However, to obtain payments under this
program, we would be required to sell products to Medicare
recipients through prescription drug plans operating pursuant to
this legislation. These plans will likely negotiate discounted
prices for our products. Further, the Healthcare Reform Law
substantially changes the way healthcare is financed in
87
the United States by both government and private insurers. Among
other cost containment measures, the Healthcare Reform Law
establishes:
|
|
|
|
|
An annual, nondeductible fee on any entity that manufactures or
imports certain branded prescription drugs and biologic agents;
|
|
|
|
A new Medicare Part D coverage gap discount program, in
which pharmaceutical manufacturers who wish to have their drugs
covered under Part D must offer discounts to eligible
beneficiaries during their coverage gap period (the donut
hole); and
|
|
|
|
A new formula that increases the rebates a manufacturer must pay
under the Medicaid Drug Rebate Program.
|
We expect that federal, state and local governments in the
United States will continue to consider legislation to limit the
growth of healthcare costs, including the cost of prescription
drugs. Future legislation could limit payments for
pharmaceuticals such as the drug candidates that we are
developing.
Different pricing and reimbursement schemes exist in other
countries. In the European Community, governments influence the
price of pharmaceutical products through their pricing and
reimbursement rules and control of national health care systems
that fund a large part of the cost of those products to
consumers. Some jurisdictions operate positive and negative list
systems under which products may only be marketed once a
reimbursement price has been agreed. To obtain reimbursement or
pricing approval, some of these countries may require the
completion of clinical trials that compare the
cost-effectiveness of a particular product candidate to
currently available therapies. Other member states allow
companies to fix their own prices for medicines, but monitor and
control company profits. The downward pressure on health care
costs in general, particularly prescription drugs, has become
very intense. As a result, increasingly high barriers are being
erected to the entry of new products. In addition, in some
countries, cross-border imports from low-priced markets exert a
commercial pressure on pricing within a country.
The marketability of any products for which we receive
regulatory approval for commercial sale may suffer if the
government and third-party payors fail to provide adequate
coverage and reimbursement. In addition, an increasing emphasis
on managed care in the United States has increased and we expect
will continue to increase the pressure on pharmaceutical
pricing. Coverage policies and third-party reimbursement rates
may change at any time. Even if favorable coverage and
reimbursement status is attained for one or more products for
which we receive regulatory approval, less favorable coverage
policies and reimbursement rates may be implemented in the
future.
Other
Healthcare Laws and Compliance Requirements
If we obtain regulatory approval for any of our product
candidates, we may be subject to various federal and state laws
targeting fraud and abuse in the healthcare industry. For
example, in the United States, there are federal and state
anti-kickback laws that prohibit the payment or receipt of
kickbacks, bribes or other remuneration intended to induce the
purchase or recommendation of healthcare products and services
or reward past purchases or recommendations. Violations of these
laws can lead to civil and criminal penalties, including fines,
imprisonment and exclusion from participation in federal
healthcare programs.
The federal Anti-Kickback Statute prohibits persons from
knowingly and willfully soliciting, receiving, offering or
paying remuneration, directly or indirectly, to induce either
the referral of an individual, or the furnishing, recommending,
or arranging for a good or service, for which payment may be
made under a federal healthcare program, such as the Medicare
and Medicaid programs. The reach of the Anti-Kickback Statute
was broadened by the Healthcare Reform Law, which, among other
things, amends the intent requirement of the federal
Anti-Kickback Statute and the applicable criminal healthcare
fraud statutes contained within 42 U.S.C.
§ 1320a-7b,
effective March 23, 2010. Pursuant to the statutory
amendment, a person or entity no longer needs to have actual
knowledge of this statute or specific intent to violate it in
order to have committed a violation. In addition, the Healthcare
Reform Law provides that the government may assert that a claim
including items or services resulting from a violation of the
federal Anti-Kickback Statute constitutes a false or fraudulent
claim for purposes of the civil False Claims Act (discussed
below) or the civil monetary penalties statute. Many states have
adopted laws similar to
88
the federal Anti-Kickback Statute, some of which apply to the
referral of patients for healthcare items or services reimbursed
by any source, not only the Medicare and Medicaid programs.
The federal False Claims Act imposes liability on any person
who, among other things, knowingly presents, or causes to be
presented, a false or fraudulent claim for payment by a federal
healthcare program. The qui tam provisions of the
False Claims Act allow a private individual to bring civil
actions on behalf of the federal government alleging that the
defendant has submitted a false claim to the federal government,
and to share in any monetary recovery. In addition, various
states have enacted false claims laws analogous to the False
Claims Act. Many of these state laws apply where a claim is
submitted to any third-party payer and not merely a federal
healthcare program. When an entity is determined to have
violated the False Claims Act, it may be required to pay up to
three times the actual damages sustained by the government, plus
civil penalties of $5,500 to $11,000 for each separate false
claim.
Also, the Health Insurance Portability and Accountability Act of
1996, or HIPAA, created several new federal crimes, including
health care fraud, and false statements relating to health care
matters. The health care fraud statute prohibits knowingly and
willfully executing a scheme to defraud any health care benefit
program, including private third-party payers. The false
statements statute prohibits knowingly and willfully falsifying,
concealing or covering up a material fact or making any
materially false, fictitious or fraudulent statement in
connection with the delivery of or payment for health care
benefits, items or services.
In addition, we may be subject to, or our marketing activities
may be limited by, HIPAA, as amended by the Health Information
Technology for Economic and Clinical Health Act, or HITECH, and
its implementing regulations, which established uniform
standards for certain covered entities (healthcare
providers, health plans and healthcare clearinghouses) and their
business associates governing the conduct of certain electronic
healthcare transactions and protecting the security and privacy
of protected health information.
Regulation
of Diagnostic Tests
In the United States, the FDCA and its implementing regulations,
and other federal and state statutes and regulations govern,
among other things, medical device design and development,
preclinical and clinical testing, premarket clearance or
approval, registration and listing, manufacturing, labeling,
storage, advertising and promotion, sales and distribution,
export and import, and post-market surveillance. Diagnostic
tests are classified as medical devices under the FDCA. Unless
an exemption applies, diagnostic tests require marketing
clearance or approval from the FDA prior to commercial
distribution. The two primary types of FDA marketing
authorization applicable to a medical device are premarket
notification, also called 510(k) clearance, and premarket
approval, or PMA approval. Because the diagnostic tests being
developed by our third-party collaborators are of substantial
importance in preventing impairment of human health, they are
subject to the PMA approval process.
PMA applications must be supported by valid scientific evidence,
which typically requires extensive data, including technical,
preclinical, clinical and manufacturing data, to demonstrate to
the FDAs satisfaction the safety and effectiveness of the
device. For diagnostic tests, a PMA application typically
includes data regarding analytical and clinical validation
studies. As part of its review of the PMA, the FDA will conduct
a pre-approval inspection of the manufacturing facility or
facilities to ensure compliance with the Quality System
Regulation, or QSR, which requires manufacturers to follow
design, testing, control, documentation and other quality
assurance procedures. FDA review of an initial PMA application
is required by statute to take between six to ten months,
although the process typically takes longer, and may require
several years to complete. If the FDA evaluations of both the
PMA application and the manufacturing facilities are favorable,
the FDA will either issue an approval letter or an approvable
letter, which usually contains a number of conditions that must
be met in order to secure the final approval of the PMA. If the
FDAs evaluation of the PMA or manufacturing facilities is
not favorable, the FDA will deny approval of the PMA or issue a
not approvable letter. A not approvable letter will outline the
deficiencies in the application and, where practical, will
identify what is necessary to make the PMA approvable. The FDA
may also determine that additional clinical trials are
necessary, in which case the PMA approval may be delayed for
several months or years while the trials are conducted and then
the data submitted in an amendment to the PMA. Once granted, PMA
approval may be withdrawn by the FDA if compliance with post
approval requirements, conditions of approval or other
regulatory standards is not maintained or problems are
identified following initial marketing.
89
We and our third-party collaborators who are developing the
companion diagnostics will work cooperatively to generate the
data required for submission with the PMA application, and will
remain in close contact with the Center for Devices and
Radiological Health, or CDRH, at FDA to ensure that any changes
in requirements are incorporated into the development plans. We
anticipate that meetings with the FDA with regard to our drug
product candidates as well as companion diagnostic product
candidates will include representatives from the Center for Drug
Evaluation and Research, or CDER, and CDRH to ensure that the
NDA and PMA submissions are coordinated to enable FDA to conduct
a parallel review of both submissions. On July 14, 2011,
the FDA issued for comment a draft guidance document addressing
the development and approval process for In Vitro
Companion Diagnostic Devices. According to the draft
guidance, for novel therapeutic products such as our product
candidates, the PMA for a companion diagnostic device should be
developed and approved or cleared contemporaneously with the
therapeutic. While this draft guidance is not yet finalized, we
believe our programs for the development of our companion
diagnostics are consistent with the draft guidance as proposed.
In the EEA, in vitro medical devices are required to
conform with the essential requirements of the E.U. Directive on
in vitro diagnostic medical devices (Directive No
98/79/EC, as amended). To demonstrate compliance with the
essential requirements, the manufacturer must undergo a
conformity assessment procedure. The conformity assessment
varies according to the type of medical device and its
classification. For low-risk devices, the conformity assessment
can be carried out internally, but for higher risk devices it
requires the intervention of an accredited EEA Notified Body. If
successful, the conformity assessment concludes with the drawing
up by the manufacturer of an EC Declaration of Conformity
entitling the manufacturer to affix the CE mark to its products
and to sell them throughout the EEA. The data generated for the
U.S. registration will be sufficient to satisfy the
regulatory requirements for the European Union and other
countries.
Patents
and Proprietary Rights
The proprietary nature of, and protection for, our product
candidates, processes and know-how are important to our
business. Our success depends in part on our ability to protect
the proprietary nature of our product candidates, technology,
and know-how, to operate without infringing on the proprietary
rights of others, and to prevent others from infringing our
proprietary rights. We seek patent protection in the
United States and internationally for our product
candidates and other technology. Our policy is to patent or
in-license the technology, inventions and improvements that we
consider important to the development of our business. We also
rely on trade secrets, know-how and continuing innovation to
develop and maintain our competitive position. We cannot be sure
that patents will be granted with respect to any of our pending
patent applications or with respect to any patent applications
filed by us in the future, nor can we be sure that any of our
existing patents or any patents granted to us in the future will
be commercially useful in protecting our technology.
We have an exclusive, worldwide license from Clavis to a
portfolio of patents related to CO-101. United States
Patent 6,384,019 and its equivalent counterparts in 32 other
countries, directed to the CO-101 composition of matter, expire
in 2018 and are potentially eligible for up to five years patent
term extension in various jurisdictions. We believe that patent
term extension under the Hatch-Waxman Act could be available to
extend our patent exclusivity for CO-101 to at least
2020-2021 in
the United States depending on timing of our first approval. In
Europe, we believe that patent term extension under a
supplementary protection certificate could be available for an
additional five years to 2023. A patent application directed to
the CO-101 formulation is pending in the United States, PCT, and
Taiwan and, if issued, would expire in 2030. We and Clavis have
also filed patent applications for various aspects related to
CO-101 administration and diagnostics to assess hENT1 levels.
We acquired an exclusive, worldwide license to CO-1686 from
Avila in May 2010. Multiple patent applications are pending that
claim CO-1686 generically and specifically (including with
respect to composition of matter) that, if issued, would have
expiration dates between 2029 and 2031.
We obtained an exclusive, worldwide license from Pfizer to
develop and commercialize CO-338 in June 2011. U.S. Patent
6,495,541, and its equivalent counterparts issued or pending in
dozens of countries, directed to the
CO-338
composition of matter, expire in 2020 and are potentially
eligible for up to five years patent term extension in various
jurisdictions. We believe that patent term extension under the
Hatch-Waxman Act could be available to extend our patent
exclusivity for CO-338 to at least
2022-2024 in
the United States depending on timing of our first
90
approval. In Europe, we believe that patent term extension under
a supplementary protection certificate could be available for an
additional five years to 2025. Additionally, other patents and
patent applications are directed to methods of making, methods
of using, dosing regimens, and various salt forms have
expiration dates ranging from 2020 through 2031.
We are aware of a family of patents and patent applications
controlled by a third party that claim certain uses of PARP
inhibitors that could potentially be asserted against our use of
CO-338 in certain indications. We are conducting clinical trials
for the treatment of solid tumors, a subset of which are ovarian
cancer and breast cancer characterized as having positive
germ-line BRCA mutations. Methods for treating such germ-line
BRCA mutant positive patients with CO-338 could potentially fall
within the scope of the issued or to be issued claims of such
patents or patent applications. We are evaluating the validity
of the patents and patent applications, including the scope or
potential scope of the claims of these patents and patent
applications, to determine whether to seek a license under such
patents or patent applications, when and if they issue, or
alternatively whether to initiate proceedings to challenge such
patents. If we are unable to either license or successfully
challenge such patents, we may consider shifting our development
emphasis among alternative uses, and in so doing we could reduce
the size of the aggregate potential market for CO-338.
In addition, we intend to seek patent protection whenever
available for any products or product candidates and related
technology we acquire in the future.
The patent positions of pharmaceutical firms like us are
generally uncertain and involve complex legal, scientific and
factual questions. In addition, the coverage claimed in a patent
application can be significantly reduced before the patent is
issued. Consequently, we do not know whether any of the product
candidates we acquire or license will gain patent protection or,
if any patents are issued, whether they will provide significant
proprietary protection or will be challenged, circumvented or
invalidated. Because patent applications in the United States
and certain other jurisdictions are maintained in secrecy for 18
months, and since publication of discoveries in the scientific
or patent literature often lags behind actual discoveries, we
cannot be certain of the priority of inventions covered by
pending patent applications. Moreover, we may have to
participate in interference proceedings declared by the
U.S. PTO or a foreign patent office to determine priority
of invention, or in opposition proceedings in a foreign patent
office, either of which could result in substantial cost to us,
even if the eventual outcome is favorable to us. There can be no
assurance that the patents, if issued, would be held valid by a
court of competent jurisdiction. An adverse outcome could
subject us to significant liabilities to third parties, require
disputed rights to be licensed from third parties or require us
to cease using specific compounds or technology. To the extent
prudent, we intend to bring litigation against third parties
that we believe are infringing one or more of our patents.
The term of individual patents depends upon the legal term of
the patents in the countries in which they are obtained. In most
countries in which we file, the patent term is 20 years
from the earliest date of filing a non-provisional patent
application. In the United States, a patents term may be
lengthened by patent term adjustment, which compensates a
patentee for administrative delays by the U.S. PTO in
granting a patent, or may be shortened if a patent is terminally
disclaimed over another patent.
The patent term of a patent that covers an FDA-approved drug may
also be eligible for patent term extension, which permits patent
term restoration as compensation for the patent term lost during
the FDA regulatory review process. The Drug Price Competition
and Patent Term Restoration Act of 1984, or the Hatch-Waxman
Act, permits a patent term extension of up to five years beyond
the expiration of the patent. The length of the patent term
extension is related to the length of time the drug is under
regulatory review. Patent extension cannot extend the remaining
term of a patent beyond a total of 14 years from the date
of product approval and only one patent applicable to an
approved drug may be extended. Similar provisions are available
in Europe and other
non-U.S. jurisdictions
to extend the term of a patent that covers an approved drug. In
the future, if and when our pharmaceutical products receive FDA
approval, we expect to apply for patent term extensions on
patents covering those products.
To protect our rights to any of our issued patents and
proprietary information, we may need to litigate against
infringing third parties, or avail ourselves of the courts or
participate in hearings to determine the scope and validity of
those patents or other proprietary rights. These types of
proceedings are often costly and could be very time-consuming to
us, and we cannot assure you that the deciding authorities will
rule in our favor. An unfavorable
91
decision could allow third parties to use our technology without
being required to pay us licensing fees or may compel us to
license needed technologies to avoid infringing third-party
patent and proprietary rights. Such a decision could even result
in the invalidation or a limitation in the scope of our patents
or forfeiture of the rights associated with our patents or
pending patent applications.
In addition we have sought and intend to continue seeking orphan
drug status whenever it is available. If a product which has an
orphan drug designation subsequently receives the first
regulatory approval for the indication for which it has such
designation, the product is entitled to orphan exclusivity,
meaning that the applicable regulatory authority may not approve
any other applications to market the same drug for the same
indication, except in certain very limited circumstances, for a
period of seven years in the United States and ten years in the
European Union. Orphan drug designation does not prevent
competitors from developing or marketing different drugs for an
indication.
We also rely on trade secret protection for our confidential and
proprietary information. No assurance can be given that others
will not independently develop substantially equivalent
proprietary information and techniques or otherwise gain access
to our trade secrets or disclose such technology, or that we can
meaningfully protect our trade secrets. However, we believe that
the substantial costs and resources required to develop
technological innovations will help us to protect the
competitive advantage of our products.
It is our policy to require our employees, consultants, outside
scientific collaborators, sponsored researchers and other
advisors to execute confidentiality agreements upon the
commencement of employment or consulting relationships with us.
These agreements provide that all confidential information
developed or made known to the individual during the course of
the individuals relationship with us is to be kept
confidential and not disclosed to third parties except in
specific circumstances. In the case of employees, the agreements
provide that all inventions conceived by the individual shall be
our exclusive property. There can be no assurance, however, that
these agreements will provide meaningful protection or adequate
remedies for our trade secrets in the event of unauthorized use
or disclosure of such information.
Plan of
Operation
Our plan of operation for the remainder of 2011 and the first
six months of 2012 is to:
|
|
|
|
|
continue with the clinical development of our product
candidates, including the clinical trials for CO-101 and
CO-338; and
|
|
|
|
continue with the preclinical development of CO-1686, looking
toward the filing of an IND in the first quarter of 2012, and
the commencement of a Phase I clinical trial in the first half
of 2012.
|
We believe that the proceeds from this offering will satisfy our
cash requirements during this period.
Manufacturing
We currently contract with third parties for the manufacture of
our product candidates for preclinical studies and clinical
trials and intend to do so in the future. We have not entered
into long-term agreements with our current contract
manufacturers. We currently obtain our supplies of finished drug
product through individual purchase orders. We do not own or
operate manufacturing facilities for the production of clinical
quantities of our product candidates. We currently have no plans
to build our own clinical or commercial scale manufacturing
capabilities. To meet our projected needs for commercial
manufacturing, third parties with whom we currently work will
need to increase their scale of production or we will need to
secure alternate suppliers. Although we rely on contract
manufacturers, we have personnel with extensive manufacturing
experience to oversee the relationships with our contract
manufacturers.
One of our contract manufacturers has manufactured what we
believe to be sufficient quantities of CO-101s active
pharmaceutical ingredient (or drug substance) to complete the
ongoing clinical trials. We have engaged a second drug substance
manufacturing to ensure continuity of supply and to increase
overall production capacity. Improvements to the current drug
substance manufacturing process are being implemented to further
ensure production capacity adequate to meet future development
and commercial demands. Another of our existing contract
manufacturers continues to produce CO-101 drug product for use
in ongoing clinical trials. We are implementing
scale-up
operations at this manufacturing site to provide additional
quantities of CO-101 drug product. We have also identified a
second drug product contract manufacturer to provide further
capacity for
92
clinical and commercial production. In addition a separate
contract manufacturer labels, packages and distributes clinical
supplies of CO-101. We believe the manufacturing processes for
the active pharmaceutical ingredient and finished drug product
for CO-101 have been developed to adequately support future
development and commercial demands. While we believe that our
existing suppliers of active pharmaceutical ingredient and drug
product would be capable of continuing to produce materials in
commercial quantities, we may need to identify additional
third-party manufacturers capable of providing commercial
quantities of drug product. If we are unable to arrange for such
a third-party manufacturing source, or fail to do so on
commercially reasonable terms, we may not be able to
successfully produce and market CO-101.
The process for producing CO-1686 active pharmaceutical
ingredient is currently being developed at a single third-party
contract manufacturer. The current process has already been
sufficiently developed to satisfy immediate clinical demands.
Additional process development work
and/or
additional production capacity may be necessary to support
larger clinical development or commercialization requirements.
If we are unable to adequately develop a suitable process, or
arrange for such a third-party manufacturing source, or fail to
do so on commercially reasonable terms, we may not be able to
successfully produce and market CO-1686. Drug product
formulation development work for CO-1686 is in progress. We have
engaged a third-party manufacturer capable of both formulation
development and drug product manufacturing. Definition of an
acceptable formulation and suitable manufacturing process to
prepare that formulation are critical to the successful
development of CO-1686. If we fail to define such a formulation
and process, or fail to do so on commercially reasonable terms,
we may be unable to successfully produce and market CO-1686.
We have developed the process for manufacturing CO-338s
active pharmaceutical ingredient to a degree sufficient to meet
clinical demands and projected commercial requirements. Pfizer
is currently performing manufacturing for CO-338. Although we
believe the licensor has available quantities of the active
pharmaceutical ingredient to permit current production
sufficient to allow us to conclude the currently pending trials
for CO-338, we will need to identify an alternate third-party
contract manufacturer for preparation of the CO-338 active
pharmaceutical ingredient. While we believe that sufficient
capacity and capabilities for manufacture of this compound
exists, failure to arrange such a third-party source, or failure
to do so on commercially reasonable terms may prevent successful
production and marketing of CO-338. The CO-338 drug product
formulation and manufacturing process to produce that
formulation, both as an IV and as an oral dosage form have
been developed to a degree sufficient to meet clinical demands
and projected commercial requirements. While Pfizer will turn
over to us its existing inventory of finished dosage
form CO-338,
and produce additional quantities for us, we will need to
identify an alternate third-party contract manufacturer for
preparation of CO-338 in finished dosage form. While we believe
that sufficient capacity and capabilities for manufacture of
this formulation exists, failure to arrange such a third-party
source, or failure to do so on commercially reasonable terms may
prevent successful production and marketing of CO-338.
To date, our third-party manufacturers have met our
manufacturing requirements. We expect third-party manufacturers
to be capable of providing sufficient quantities of our product
candidates to meet anticipated full scale commercial demands. We
believe that there are alternate sources of supply that can
satisfy our clinical and commercial requirements, although we
cannot be certain that identifying and establishing
relationships with such sources, if necessary, would not result
in significant delay or material additional costs.
Sales and
Marketing
We intend to build the commercial infrastructure in the United
States and Europe necessary to effectively support the
commercialization of CO-101, CO-338 and CO-1686, if and when we
believe a regulatory approval of the first of such product
candidates in a particular geographic market appears imminent.
The commercial infrastructure for oncology products typically
consists of a targeted, specialty sales force that calls on a
limited and focused group of physicians supported by sales
management, internal sales support, an internal marketing group
and distribution support. Additional capabilities important to
the oncology marketplace include the management of key accounts
such as managed care organizations, group-purchasing
organizations, specialty pharmacies, oncology group networks,
and government accounts. To develop the appropriate commercial
infrastructure, we will have to invest significant amounts of
financial and management resources, some of which will be
committed prior to any confirmation that CO-101, CO-338, or
CO-1686 will be approved.
93
Outside of the United States and Europe, where appropriate, we
may elect in the future to utilize strategic partners,
distributors, or contract sales forces to assist in the
commercialization of our products. We are actively considering
an Asian commercial presence, including establishing our own
sales and marketing organization in Japan.
Employees
As of October 20, 2011, we had 45 full-time employees.
None of our employees is represented by labor unions or covered
by collective bargaining agreements. We consider our
relationship with our employees to be good.
Facilities
Our offices are located at three leased facilities, a
10,369 square foot facility in Boulder, Colorado used
primarily for corporate functions, a 17,195 square foot
facility in San Francisco, California used for clinical
development operations and research laboratory space, and a
1,050 square foot facility in Cambridge, United Kingdom
used for our European regulatory and clinical operations. These
leases expire in December 2015, May 2013, and May 2012,
respectively. We believe that our existing facilities are
sufficient for our needs for the foreseeable future.
Legal
Proceedings
We are not currently a party to any material legal proceedings.
94
MANAGEMENT
Executive
Officers and Directors
The following table sets forth the name, age and position of
each of our executive officers and directors as of
September 30, 2011:
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position
|
|
Patrick J. Mahaffy
|
|
|
48
|
|
|
President and Chief Executive Officer; Director
|
Erle T. Mast
|
|
|
49
|
|
|
Executive Vice President and Chief Financial Officer
|
Andrew R. Allen, Ph.D.
|
|
|
45
|
|
|
Executive Vice President of Clinical and Pre-Clinical
Development and Chief Medical Officer
|
Gillian C. Ivers-Read
|
|
|
58
|
|
|
Executive Vice President, Technical Operations and Chief
Regulatory Officer
|
Steven L. Hoerter
|
|
|
40
|
|
|
Senior Vice President of Commercial Operations
|
Brian G. Atwood
|
|
|
58
|
|
|
Director
|
M. James Barrett, Ph.D.
|
|
|
69
|
|
|
Director
|
James C. Blair, Ph.D.
|
|
|
72
|
|
|
Director
|
Paul Klingenstein
|
|
|
56
|
|
|
Director
|
Edward J. McKinley
|
|
|
59
|
|
|
Director
|
John C. Reed, M.D., Ph.D.
|
|
|
52
|
|
|
Director
|
Thorlef Spickschen
|
|
|
70
|
|
|
Director
|
Executive
Officers
Patrick J. Mahaffy is one of our co-founders and
has served as our President and Chief Executive Officer and a
member of our board of directors since our inception.
Previously, Mr. Mahaffy served as President and Chief
Executive Officer and as a member of the board of directors at
Pharmion Corporation, which he founded in 2000 and sold to
Celgene Corporation in 2008. From 1992 through 1998,
Mr. Mahaffy was President and Chief Executive Officer of
NeXagen, Inc. and its successor, NeXstar Pharmaceuticals, Inc.,
a biopharmaceutical company. Prior to that, Mr. Mahaffy was
a Vice President at the private equity firm E.M. Warburg Pincus
and Co. Mr. Mahaffy also serves on the boards of directors
of Orexigen Therapeutics, Inc. (NASDAQ: OREX) and Flexion
Therapeutics, Inc. He is also a trustee of Lewis and Clark
College. Mr. Mahaffy has a B.A. in international affairs
from Lewis and Clark College and a M.A. in international affairs
from Columbia University. We believe that Mr. Mahaffy
possesses specific attributes that qualify him to serve as a
member of our board of directors, including his experience in
the venture capital industry, his historical knowledge, his
operational and management expertise and his years of leadership
experience.
Erle T. Mast is one of our co-founders and has
served as our Executive Vice President and Chief Financial
Officer since our inception. Previously, Mr. Mast served in
the same role at Pharmion Corporation, beginning in 2002. From
1997 through 2002, Mr. Mast worked for Dura
Pharmaceuticals, Inc. and its successor, Elan Corporation. From
2000 to 2002, he served as Chief Financial Officer for the
Global Biopharmaceuticals business unit for Elan. From 1997 to
2000, Mr. Mast served as Vice President of Finance for Dura
Pharmaceuticals. Prior to that, Mr. Mast was a partner with
Deloitte & Touche, LLP. Mr. Mast also serves on
the boards of directors of Somaxon Pharmaceuticals, Inc.
(NASDAQ: SOMX) and Zogenix, Inc. (NASDAQ: ZGNX). Mr. Mast
received a B.Sc. in business administration from California
State University Bakersfield.
Dr. Andrew R. Allen is one of our co-founders
and has served as our Executive Vice President of Clinical and
Pre-Clinical Development and Chief Medical Officer since our
inception. Previously, Dr. Allen served in the same role at
Pharmion Corporation, beginning in 2006. From 2004 through 2006,
Dr. Allen served as Vice President of BioPharma Development
and Head of the Oncology Therapeutic Unit for Chiron
Corporation. Previously, Dr. Allen served as global project
head in Abbott Laboratories oncology franchise, and prior
to that he progressed through positions of increasing
responsibility at the management consulting firm
McKinsey & Company, with a focus on oncology strategy.
Dr. Allen serves on the board of directors of Nodality,
Inc., a privately-held biotechnology company. Dr. Allen
qualified in medicine at Oxford University and earned his Ph.D.
from the Imperial College of Science, Technology and Medicine in
London. Dr. Allen also obtained post-graduate internal
medicine qualification as a Member of Royal College of
Physicians (MRCP).
95
Gillian C. Ivers-Read is one of our co-founders
and has served as our Executive Vice President, Technical
Operations and Chief Regulatory Officer since our inception.
Previously, Ms. Ivers-Read served as Executive Vice
President, Development Operations at Pharmion Corporation,
beginning in 2002. From 1996 to 2001,
Ms. Ivers-Read
held various regulatory positions with Hoechst Marion Roussel
and its successor, Aventis Pharmaceuticals, Inc., where she most
recently held the position of Vice President, Global Regulatory
Affairs. From 1994 to 1996, Ms. Ivers-Read was Vice
President, Development and Regulatory Affairs for Argus
Pharmaceuticals, and from 1984 to 1994, she served as a
regulatory affairs director for Marion Merrell Dow.
Ms. Ivers-Read serves on the board of Bio-Path Holdings,
Inc. (OTC BB: BPTH). Ms. Ivers-Read received a B.Sc. in
pharmacology from University College London.
Steven L. Hoerter has served as our Senior Vice
President of Commercial Operations since August 2011. From 2010
to 2011, Mr. Hoerter was General Manager and Management
Center Head at Hoffman-LaRoche Ltd. for the
Sub-Saharan
Africa and Indian Ocean Region, based in Johannesburg, South
Africa. From 2005 to 2010, Mr. Hoerter held a variety of
positions at Genentech, Inc., including serving on the senior
leadership team for Genentechs BioOncology business as
Senior Director, Pipeline Development and Commercial Operations.
Prior to that he worked at Chiron Corporation and Eli Lilly and
Company. During Mr. Hoerters
11-year
career at Lilly, he held positions in sales, business
development, marketing and business unit management in the US,
Europe and Africa. Mr. Hoerter has a B.A. in Russian and
Political Science from Bucknell University, an M.B.A. from
Tilburg University and a M.S. in Management from Purdue
University.
Directors
Brian G. Atwood has served as a member of our
board of directors since our inception. In 1999, he co-founded
and currently serves as a Managing Director for Versant
Ventures, a healthcare-focused venture capital firm. Prior to
founding Versant Ventures, Mr. Atwood served as a general
partner of Brentwood Associates, a venture capital firm.
Mr. Atwood also serves on the boards of several
pharmaceutical and biotechnology companies, including Cadence
Pharmaceuticals, Inc. (NASDAQ: CADX), Five Prime Therapeutics,
Groove Biopharma Corporation, Helicos BioSciences Corporation
(NASDAQ: HLCS), Immune Design Corp., OpGen Inc., PhaseRx
Pharmaceuticals, Spark Diagnostics, Trius Therapeutics, Inc.
(NASDAQ: TSRX) and Veracyte, Inc. Mr. Atwood also served on
the board of Pharmion Corporation from January 2000 until the
companys acquisition in 2008. Mr. Atwood holds a B.S.
in biological sciences from the University of California,
Irvine, a M.S. in ecology from the University of California,
Davis, and an M.B.A. from Harvard University. We believe that
Mr. Atwood possesses specific attributes that qualify him
to serve as a member of our board of directors, including his
experience in the venture capital industry, his years of
business and leadership experience and his financial
sophistication and expertise.
Dr. M. James Barrett has served as a member
of our board of directors since our inception. Since September
2001, he has served as a general partner of New Enterprise
Associates Inc., a venture capital firm focusing on the
healthcare, information technology and energy technology
industries. From 1997 to 2001, Dr. Barrett served as
Chairman and Chief Executive Officer of Sensors for Medicine and
Science, which he founded in 1997. Dr. Barrett serves on
the boards of several pharmaceutical and biotechnology
companies, including Amicus Therapeutics, Inc. (NASDAQ: FOLD),
Cardioxyl Pharmaceuticals, Inc., GlycoMimetics, Inc., Inhibitex,
Inc. (NASDAQ: INHX), Peptimmune, Inc., PhaseBio Pharmaceuticals,
Inc., Predictive Biosciences, Ltd., Psyadon Pharmaceuticals,
Inc. (formerly known as Ruxton Pharmaceuticals, Inc.), Roka
Bioscience, Inc., Supernus Pharmaceuticals, Inc., Targacept,
Inc. (NASDAQ: TRGT), and Zosano Pharma, Inc., as well as
continuing to serve as Chairman of Sensors for Medicine and
Science. Dr. Barrett previously served on the board of YM
Biosciences, Inc. (NYSE AMEX: YMI), and also served on the board
of Pharmion Corporation from December 2001 until the
companys acquisition in 2008. Dr. Barrett received a
Ph.D. in biochemistry from the University of Tennessee, his
M.B.A. from the University of Santa Clara, and a B.S. in
chemistry from Boston College. We believe that Dr. Barrett
possesses specific attributes that qualify him to serve as a
member of our board of directors, including his experience in
the venture capital industry and his years of business and
leadership experience.
Dr. James C. Blair has served as a member of
our board of directors since our inception. Since 1985, he has
served as a general partner of Domain Associates, L.L.C., a
venture capital management company focused on life sciences.
Dr. Blair currently serves on the boards of Astute Medical,
Inc., aTyr Pharma, Inc., Cadence Pharmaceuticals, Inc. (NASDAQ:
CADX), CoDa Therapeutics, Inc., IntegenX, Inc., Meritage Pharma
Inc.,
96
NeuroPace, Inc., and Zogenix, Inc. (NASDAQ: ZGNX). He has
previously served on the boards of over 40 life science
ventures including Amgen Inc. (NASDAQ: AMGN), Aurora Biosciences
Corp., Amylin Pharmaceuticals, Inc. (NASDAQ: AMLN), Applied
Biosystems Inc., Dura Pharmaceuticals, Inc., Nuvasive, Inc.
(NASDAQ: NUVA), and Volcano Corporation (NASDAQ: VOLC).
Dr. Blair served on the board of Pharmion Corporation from
January 2000 until the companys acquisition in 2008.
Dr. Blair currently serves on the board of directors of the
Prostate Cancer Foundation, and he is on the advisory boards of
the Department of Molecular Biology at Princeton University and
the Department of Biomedical Engineering at the University of
Pennsylvania, the USC Stevens Institute for Innovation, and the
Division of Chemistry and Chemical Engineering at the California
Institute of Technology. He received a B.S.E. from Princeton
University and M.S.E. and Ph.D. degrees from the University of
Pennsylvania, all in electrical engineering. We believe that
Dr. Blair possesses specific attributes that qualify him to
serve as a member of our board of directors, including his
experience in the life science industry and his years of
business and leadership experience.
Paul Klingenstein has served as a member of our
board of directors since our inception. He is the Managing
Partner of Aberdare Ventures, a healthcare-focused venture
capital firm he formed in 1999. Prior to founding Aberdare,
Mr. Klingenstein worked in venture capital and private
equity with Warburg Pincus and Accel Partners, and was an
advisor to the Rockefeller Foundation. Mr. Klingenstein
currently serves on the boards of Anacor Pharmaceuticals, Inc.
(NASDAQ: ANAC) and EnteroMedics, Inc. (NASDAQ: ETRM).
Mr. Klingenstein has previously served on the boards of
Ablation Frontiers, Inc., Alibris, Ample Medical Corporation,
Aviron, Conatus Pharmaceuticals Inc., EP Technologies, Glycomed
Inc., Idun Pharmaceuticals Inc., Isis Pharmaceuticals, Inc.
(NASDAQ: ISIS), Nevro Corp., Pharmion Corp., Posit Science
Corporation, U.S. Behavioral Health, VertiFlex Inc.,
Viagene Inc., and Xomed Surgical Products Inc. He is currently
the Chairman of the Board of the International AIDS Vaccine
Initiative, and is an advisory board member of the University of
California Berkeley School of Public Health. He has also served
on the boards of various educational and non-profit
institutions. Mr. Klingenstein received an A.B. in
anthropology from Harvard University and an M.B.A. from Stanford
University. We believe that Mr. Klingenstein possesses
specific attributes that qualify him to serve as a member of our
board of directors, including his experience in the venture
capital industry and his years of business and leadership
experience.
Edward J. McKinley has served as a member of our
board of directors since our inception. Mr. McKinley spent
20 years serving in various roles at the private equity
firm Warburg Pincus, including managing the firms private
equity activity in Europe and serving on the firms
Management Committee. Before joining Warburg Pincus, he was with
the management consulting firm McKinsey & Company.
Mr. McKinley also served on the board of Pharmion
Corporation from October 2004 until the companys
acquisition in 2008 and currently serves and on the boards of
several private companies, and as an advisor or investment
committee head for several investment management firms. He also
serves on the investment committee of several endowments, and on
the boards or advisory boards of several non-profit
organizations. He graduated Phi Beta Kappa with honors from
Stanford University and holds a graduate management degree from
Yale University. We believe that Mr. McKinley possesses
specific attributes that qualify him to serve as a member of our
board of directors, including his experience in the venture
capital industry, his years of business and leadership
experience and his financial sophistication and expertise.
Dr. John C. Reed has served as a member of
our board of directors since our inception. Dr. Reed served
as the President and Chief Executive Officer since January 2002,
and in 2010 he became Chief Executive Officer, Professor, and
Donald Bren Chief Executive Chair, of Sanford-Burnham Medical
Research Institute, an independent, nonprofit, public benefit
organization dedicated to biomedical research. Dr. Reed has
been with Sanford-Burnham Medical Research Institute for the
past 19 years, serving as the Deputy Director of the Cancer
Center beginning in 1994, as Scientific Director of the
Institute beginning in 1995, and as Cancer Center Director in
2002. He also currently serves as an adjunct professor in the
medical schools at University of California San Diego
School of Medicine and University of Central Florida, and in the
graduate Schools of Arts and Sciences at the University of
Florida and San Diego State Universitys Biology
department. Dr. Reed was recognized as the worlds
most highly cited scientist in the field of cell biology for the
decade
1995-2005.
He is the author of approximately 800 scientific and medical
journal publications and more than 50 book chapters.
Dr. Reed currently serves on the board of Isis
Pharmaceuticals, Inc. (NASDAQ: ISIS). He has previously served
on the boards of Stratagene Inc., Repros Therapeutics Inc.
(NASDAQ: RPRX) and Pharmion Corporation, and was appointed to
the Independent Citizens Oversight Committee of the
California Institute for Regenerative Medicine. Dr. Reed
graduated Phi Beta
97
Kappa from the University of Virginia and earned an M.D. and
Ph.D. from the University of Pennsylvania School of Medicine. He
completed his residency in pathology and laboratory medicine at
the Hospital of the University of Pennsylvania and was a
postdoctoral fellow in molecular biology at the Wistar Institute
of Anatomy and Biology. We believe that Dr. Reed possesses
specific attributes that qualify him to serve as a member of our
board of directors, including his scientific background and
experience as the Chief Executive Officer of the prestigious
Sanford-Burnham Medical Research Institute, as well as his
expertise reflected in his significant scientific and medical
journal publications.
Dr. Thorlef Spickschen has served as a member
of our board of directors since our inception. From 1994 to
2001, Dr. Spickschen was chairman and Chief Executive
Officer of BASF Pharma/Knoll AG. From 1984 to 1994,
Dr. Spickschen worked with Boehringer Mannheim GmbH, where
he was responsible for sales and marketing and has been Chairman
of its Executive Board since 1990. From 1976 to 1984,
Dr. Spickschen was Managing Director, Germany and Central
Europe for Eli Lilly & Co. Dr. Spickschen is
currently Chairman of BIOTEST AG, a publicly traded company in
Germany and on the board of Cytos Biotechnology AG, which is
publicly-traded in Switzerland. Dr. Spickschen also served
on the board of Pharmion Corporation from December 2001 through
the companys acquisition in 2008. Dr. Spickschen
received a Doctorate in business management from the University
of Cologne. We believe that Dr. Spickschen possesses
specific attributes that qualify him to serve as a member of our
board of directors, including his business and leadership
experience in the biomedical industry.
Composition
of the Board of Directors
Our board of directors consists of eight directors, seven of
whom, including Drs. Barrett, Blair, Reed and Spickschen
and Messrs. Atwood, Klingenstein and McKinley, qualify as
independent directors under the corporate governance standards
of the NASDAQ Global Market.
Board
Committees and Independence
Rule 5605 of the NASDAQ Marketplace Rules requires a
majority of a listed companys board of directors to be
comprised of independent directors within one year of listing.
In addition, the NASDAQ Marketplace Rules require that, subject
to specified exceptions, each member of a listed companys
audit, compensation and nominating and governance committees be
independent and that audit committee members also satisfy
independence criteria set forth in
Rule 10A-3
under the Exchange Act. Under Rule 5605(a)(2), a director
will only qualify as an independent director if, in
the opinion of our board of directors, that person does not have
a relationship that would interfere with the exercise of
independent judgment in carrying out the responsibilities of a
director. In order to be considered independent for purposes of
Rule 10A-3,
a member of an audit committee of a listed company may not,
other than in his or her capacity as a member of the audit
committee, the board of directors, or any other board committee:
(1) accept, directly or indirectly, any consulting,
advisory, or other compensatory fee from the listed company or
any of its subsidiaries; or (2) be an affiliated person of
the listed company or any of its subsidiaries.
In June 2011, our board of directors undertook a review of the
composition of our board of directors and its committees and the
independence of each director. Based upon information requested
from and provided by each director concerning his background,
employment and affiliations, including family relationships, our
board of directors has determined that none of Drs. Barrett,
Blair, Reed and Spickschen or Messrs. Atwood, Klingenstein and
McKinley, representing seven of our eight directors, has a
relationship that would interfere with the exercise of
independent judgment in carrying out the responsibilities of a
director and that each of these directors is
independent as that term is defined under
Rule 5605(a)(2) of the NASDAQ Marketplace Rules. Our board
of directors also determined that Messrs. Atwood, Klingenstein
and McKinley, who comprise our audit committee, Drs. Barrett,
Blair and Spickschen, who comprise our compensation committee,
and Drs. Barrett and Blair and Mr. Atwood, who comprise our
nominating and corporate governance committee, satisfy the
independence standards for such committees established by the
SEC and the NASDAQ Marketplace Rules, as applicable. In making
such determination, our board of directors considered the
relationships that each such non-employee director has with our
company and all other facts and circumstances our board of
directors deemed relevant in determining independence, including
the beneficial ownership of our capital stock by each
non-employee director.
98
Role of
the Board in Risk Oversight
Our audit committee is primarily responsible for overseeing our
risk management processes on behalf of the full board of
directors. Going forward, we expect that the audit committee
will receive reports from management at least quarterly
regarding our assessment of risks. In addition, the audit
committee reports regularly to the full board of directors,
which also considers our risk profile. The audit committee and
the full board of directors focus on the most significant risks
we face and our general risk management strategies. While our
board of directors oversees our risk management, company
management is responsible for
day-to-day
risk management processes. Our board of directors expects
company management to consider risk and risk management in each
business decision, to proactively develop and monitor risk
management strategies and processes for
day-to-day
activities and to effectively implement risk management
strategies adopted by the audit committee and the board of
directors. We believe this division of responsibilities is the
most effective approach for addressing the risks we face and
that our board leadership structure, which also emphasizes the
independence of the board in its oversight of our business and
affairs, supports this approach.
Term and
Class of Directors
Upon the closing of this offering, our board of directors will
be divided into three staggered classes of directors of the same
or nearly the same number, designated Class I,
Class II and Class III. Messrs. Barrett, Mahaffy and
Spickschen will serve as Class I directors whose terms
expire at the 2012 annual meeting of stockholders. Messrs.
Atwood, Blair and Klingenstein will serve as Class II
directors whose terms expire at the 2013 annual meeting of
stockholders. Messrs. McKinley and Reed will serve as
Class III directors whose terms expire at the 2014 annual
meeting of stockholders. At each annual meeting of stockholders
beginning in 2012, successors to the class of directors whose
term expires at that annual meeting will be elected for a
three-year term.
Any additional directorships resulting from an increase in the
number of directors will be distributed among the three classes
so that, as nearly as possible, each class shall consist of
one-third of the directors. The division of the board of
directors into three classes with staggered three-year terms may
delay or prevent a change of our management or a change in
control. Our directors may be removed for cause only by the
affirmative vote of the holders of at least a majority of our
voting stock.
Term of
Executive Officers
Each of our executive officers is appointed and serves at the
discretion of our board of directors and is appointed by the
board of directors to serve until a successor is appointed and
qualified or until his or her death, resignation, retirement or
removal, if earlier.
Director
Compensation
For a discussion of our director compensation arrangements, see
Executive and Director CompensationDirector
Compensation.
Board
Committees
Upon the closing of this offering, our board of directors will
have an audit committee, a compensation committee and a
nominating and corporate governance committee, each of which
will have the composition and responsibilities described below.
Our board of directors may from time to time establish other
committees.
Audit
Committee
The members of the audit committee are Messrs. Atwood,
Klingenstein and McKinley, each of whom qualifies as an
independent director under the corporate governance standards of
the NASDAQ Stock Market and the independence requirements of
Rule 10A-3
of the Exchange Act. Mr. McKinley serves as chairman of
this committee. Our board of directors has determined that
Mr. McKinley qualifies as an audit committee
financial expert as such term is defined in
Item 407(d)(5) of
Regulation S-K.
99
Our audit committee oversees a broad range of issues surrounding
our accounting and financial reporting processes and audits of
our financial statements, and assists our board of directors by:
(1) overseeing and monitoring the quality and integrity of
our financial statements, our compliance with legal and
regulatory requirements and our internal accounting procedures
and systems of internal controls (2) assuming direct
responsibility for the appointment, compensation, retention and
oversight of work of any independent registered public
accounting firm engaged for the purpose of performing any audit,
review or attestation services, for overseeing and monitoring
our independent registered public accounting firms
qualifications and independence, and for dealing directly with
any such accounting firm, including resolving disagreements
between management and our independent auditor;
(3) providing a medium for consideration of matters
relating to any audit issues; and (4) preparing the audit
committee report that the rules require be included in our
filings with the SEC.
The written charter for the audit committee will be available on
our website upon the closing of this offering.
Compensation
Committee
The members of the compensation committee are Drs. Barrett,
Blair and Spickschen, each of whom qualifies as an independent
director under the corporate governance standards of the NASDAQ
Stock Market. Each member of our compensation committee is a
non-employee director, as defined in
Rule 16b-3
promulgated under the Exchange Act and is an outside director,
as defined pursuant to Section 162(m) of the Code.
Dr. Blair serves as chairman of this committee. The purpose
of the compensation committee is to assist our board of
directors in discharging its responsibilities relating to
(1) setting our compensation program and compensation and
benefits of all of our executive officers and directors;
(2) providing oversight for our incentive and equity-based
compensation plans; (3) establishing and reviewing general
policies relating to compensation and benefits of our employees;
and (4) preparing the compensation committee report
required to be included in our proxy statement under the rules
and regulations of the SEC. The compensation committee will
review and evaluate, at least annually, the performance of the
compensation committee and its members, including compliance of
the compensation committee with its charter.
The written charter for the compensation committee will be
available on our website upon the closing of this offering.
Nominating
and Corporate Governance Committee
The members of the nominating and corporate governance committee
are Drs. Barrett and Blair and Mr. Atwood, each of whom
qualifies as an independent director under the corporate
governance standards of the NASDAQ Stock Market. Dr. Barrett
serves as chairman of this committee. The purpose of our
nominating and corporate governance committee will be to assist
our board of directors in discharging its responsibilities
relating to (1) developing and recommending criteria for
selecting new directors, and identifying, screening and
recommending nominees for election as directors;
(2) screening and recommending to the board of directors
individuals qualified to become executive officers;
(3) evaluating our board of directors and its dealings with
management; (4) developing, reviewing and recommending
corporate governance guidelines and a code of business ethics;
and (5) generally advising our board of directors on other
corporate governance and related matters.
The written charter for the nominating and corporate governance
committee will be available on our website upon the closing of
this offering.
Compensation
Committee Interlocks and Insider Participation
No member of our compensation committee has ever been an
executive officer or employee of ours. None of our officers
currently serves, or has served during the last completed fiscal
year, on the compensation committee or board of directors of any
other entity that has one or more officers serving as a member
of our board of directors or compensation committee.
100
Limitation
on Liability and Indemnification of Directors and
Officers
Our amended and restated certificate of incorporation and bylaws
limits our directors and officers liability to the
fullest extent permitted under Delaware corporate law.
Specifically, our directors and officers will not be liable to
us or our stockholders for monetary damages for any breach of
fiduciary duty by a director or officer, except for liability:
|
|
|
|
|
for any breach of the directors or officers duty of
loyalty to us or our stockholders;
|
|
|
|
for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law;
|
|
|
|
under Section 174 of the Delaware General Corporation Law
(unlawful dividends or stock repurchases); or
|
|
|
|
for any transaction from which a director or officer derives an
improper personal benefit.
|
If the Delaware General Corporation Law is amended to authorize
corporate action further eliminating or limiting the personal
liability of directors or officers, then the liability of our
directors or officers shall be eliminated or limited to the
fullest extent permitted by the Delaware General Corporation
Law, as so amended.
The provision regarding indemnification of our directors and
officers in our amended and restated certificate of
incorporation will generally not limit liability under state or
federal securities laws.
Delaware law and our amended and restated certificate of
incorporation and bylaws provide that we will, in certain
situations, indemnify any person made or threatened to be made a
party to a proceeding by reason of that persons former or
present official capacity with us against judgments, penalties,
fines, settlements and reasonable expenses. Any person is also
entitled, subject to certain limitations, to payment or
reimbursement of reasonable expenses (including attorneys
fees and disbursements and court costs) in advance of the final
disposition of the proceeding.
We maintain a directors and officers insurance
policy pursuant to which our directors and officers are insured
against liability for actions taken in their capacities as
directors and officers. We believe that these indemnification
provisions and insurance are useful to attract and retain
qualified directors and officers.
The limitation of liability and indemnification provisions in
our amended and restated certificate of incorporation and bylaws
may discourage stockholders from bringing a lawsuit against
directors for breach of their fiduciary duty. These provisions
may also have the effect of reducing the likelihood of
derivative litigation against directors and officers, even
though such an action, if successful, might otherwise benefit us
and our stockholders. In addition, your investment may be
adversely affected to the extent that, in a class action or
direct suit, we pay the costs of settlement and damage awards
against directors and officers pursuant to these indemnification
provisions.
In addition, we have entered into indemnification agreements
with each of our directors and named executive officers, which
also provide, subject to certain exceptions, for indemnification
for related expenses, including, among others, reasonable
attorneys fees, judgments, fines and settlements incurred
in any action or proceeding.
There is currently no pending material litigation or proceeding
involving any of our directors, officers or employees for which
indemnification is sought.
Code of
Business Ethics
We have adopted a written Code of Business Ethics, which will be
effective as of the closing of this offering, that is reviewed
and published annually and contains the ethical principles by
which our chief executive officer and chief financial officer,
among others, are expected to conduct themselves when carrying
out their duties and responsibilities. We intend to satisfy the
disclosure requirements under Item 5.05 of
Form 8-K
regarding amendments to, or waivers from, a provision of our
Code of Business Ethics by posting such information on our
website at www.clovisoncology.com.
Our Code of Business Ethics will be available on our website
upon the closing of this offering.
101
EXECUTIVE
AND DIRECTOR COMPENSATION
Compensation
Discussion and Analysis
Our named executive officers for our fiscal year
ending December 31, 2010 consisted of the following
individuals:
|
|
|
|
|
Patrick J. Mahaffy, our President and Chief Executive Officer;
|
|
|
|
Erle T. Mast, our Executive Vice President and Chief Financial
Officer;
|
|
|
|
Gillian C. Ivers-Read, our Executive Vice President, Technical
Operations and Chief Regulatory Officer; and
|
|
|
|
Andrew R. Allen, our Executive Vice President of Clinical and
Pre-Clinical Development and Chief Medical Officer.
|
Compensation
Overview and Objectives
Compensation decisions with respect to our named executive
officers have generally been made based on the need to attract,
motivate and retain talented executives, to align executive
interests with those of our stockholders, and to motivate the
achievement of individual objectives and key strategic financial
and operational goals. To that end, our compensation programs
are designed to provide fixed compensation within market
competitive ranges, to incentivize our executives to achieve
performance goals that maximize rational growth, and to motivate
our executives to achieve the greatest possible returns for our
stockholders. The fixed aspects of our compensation
programincluding base salary and benefitsenable us
to compensate our executives at market compensation levels,
which is necessary to attract and retain top talent. Our annual
incentive programs allow us to pay for performance, based on
achievement of company-wide performance targets, as well as
individual goals. Finally, our stock incentive plan enables us
to promote executive retention and to directly link the value of
the compensation paid to our executive officers to the value of
our common stock.
Determination
of Compensation
The compensation committee of our board of directors is
primarily responsible for reviewing compensatory arrangements
with our named executive officers in light of our compensation
philosophies and objectives, and making recommendations, based
upon this consideration and review, to the board of directors.
Final determinations on compensation levels and arrangements for
our named executive officers are made by the board of directors,
which meets regularly to discuss compensation matters as they
arise, and make any adjustments to compensation as the board of
directors deems necessary and advisable for our continued growth
and success. Our named executive officers frequently provide
input and recommendations to the board of directors on
compensation matters, and our President and Chief Executive
Officer periodically reviews each named executive officers
overall performance and makes recommendations to the board of
directors on the elements of the named executive officers
compensation. However, our President and Chief Executive Officer
does not participate in discussions regarding his compensation,
and recuses himself from meetings when his compensation is
discussed.
In determining the levels and mix of compensation, our board of
directors has not generally relied on formulaic guidelines, but
rather has maintained a flexible approach to compensation
determinations which allows it to adapt the various elements of
compensation to motivate individual executives and achieve our
specific strategic and financial goals. The board of directors
considered both individual performance and contributions to our
growth and success, as well as overall achievement of
performance goals, in making its compensation determinations.
The board of directors has not made use of compensation
consultants or advisors in determining the compensation of our
named executive officers in the past, but engaged Radford, an
Aon Hewitt company, to review and advise on our compensation
practices during 2011. The board of directors used
Radfords report as one factor for determining the
compensation of our named executive officers during 2011. For
2010, the board of directors generally relied on its
members collective experience and expertise in determining
the appropriate levels of compensation.
Components
of Compensation for Fiscal 2010
Compensation packages of our named executive officers generally
consist of base salary, annual discretionary performance
bonuses, retirement and health benefits, and equity
compensation. We believe that the relationship of
102
fixed to performance-based compensation was properly balanced
and provided us with an effective means to attract, motivate and
retain our named executive officers, as well as reward them for
increase in the value of our common stock.
Base
Salary
The base salary payable to each named executive officer is
intended to provide a fixed component of compensation reflecting
the executives skill set, experience, roles, and
responsibilities. Base salary amounts for each named executive
officer were determined at the time of the named executive
officers appointment to their position with us. The board
of directors periodically reviews the base salary of each named
executive officer and may make adjustments as and when
appropriate, consistent with our compensation objectives and
based on the board of directors consideration of an
executives individual performance and our overall
performance. The board of directors reviewed the base salaries
of the named executive officers in 2010 and determined that no
increases were necessary to achieve performance goals, and
consequently none of the named executive officers received
salary increases during 2010.
Annual
Discretionary Performance Bonuses
In the initial establishment of compensation packages for the
named executive officers in 2009, the board of directors
reviewed the advisability of, and approved the use of, a
proposed structure of bonuses to be paid to the named executive
officers based on the achievement of certain corporate goals. As
part of that process, the board of directors determined that
Mr. Mahaffys target annual bonus for each calendar
year should equal 50% of his annual base salary and that the
target annual bonuses for Messrs. Mast and Allen and
Ms. Ivers-Read should equal 40% of their respective annual
base salaries.
For 2010, the compensation committee did not set any specific
performance targets for the payment of bonuses to our named
executive officers. Instead, in the first quarter of 2011, the
compensation committee subjectively reviewed our overall
performance and determined that in a normal year, it would have
recommended to pay bonus awards in an amount equal to 80% of
target levels based on our overall performance during 2010. In
considering our overall performance during 2010, the
compensation committee reviewed our business development
progress during 2010 (which included the in-licensing of CO-1686
and the expansion of our geographic rights to CO-101), the
development of CO-101 during 2010 and our cash burn during 2010
(which was approximately $35.0 million). However, given the
early stage of our development, the compensation committee
recommended (and the board of directors determined) that bonuses
for 2010 would be set at 50% of amounts that the compensation
committee otherwise determined would be regular target levels.
Therefore, 2010 bonuses for the named executive officers were
set at 40% of the target levels.
Equity
Compensation
We maintain the Clovis Oncology, Inc. 2009 Equity Incentive
Plan, or the 2009 Plan, the terms of which are described below.
In 2010, the board of directors determined that no new equity
grants would be made to our named executive officers in 2010.
The board of directors determined that the original grants of
restricted stock made to the named executive officers in 2009
still provided sufficient incentive to maximize our value for
our stockholders, given that the restricted stock was granted
subject to a four-year vesting schedule: 25% on the date of
grant, and in 48 equal monthly installments thereafter. The
board of directors reasoned that vesting of previously granted
awards during 2010 would serve as a sufficient retention
incentive for the named executive officers in that year.
Retirement
Benefits
In 2010, we provided retirement benefits to our named executive
officers through the Clovis Oncology, Inc. 401(k) plan, a
defined contribution pension plan, on the same basis as our
other employees. We make matching contributions to the account
of each eligible employee under the 401(k) plan of 100% of the
first 4% of an employees contributions to his or her
account.
Other
Benefits
In 2010, our named executive officers were eligible to receive
the same basic benefits, including health benefits, that were
available to our other employees.
103
Compensation
Decisions Relating to Fiscal Year 2011
2011
Option Grants
On March 8, 2011, Mr. Mahaffy was granted options to
purchase 206,897 shares of common stock pursuant to the
2009 Plan, and Messrs. Mast and Allen and
Ms. Ivers-Read were each granted options to purchase
68,965 shares of common stock pursuant to the 2009 Plan, in
each case at an exercise price per share of $3.28. Twenty-five
percent of the shares of common stock subject to the options
will vest on the one-year anniversary of the date of grant, and
the remainder will vest in substantially equal installments over
the 36 months immediately following such anniversary,
subject to continued employment through such date. The options
may be exercised by the named executive officers prior to
vesting in exchange for shares of restricted stock with the same
vesting schedule as the options. The shares of our common stock
acquired upon exercise of an option (or upon vesting of any
restricted shares acquired upon an exercise prior to the
vesting) are subject to a
180-day
lock-up
period following an initial public offering of the Company.
Increase
to Base Salaries
On August 24, 2011, in order to provide each of our named
executive officers with base salaries that are competitive with
our publicly traded peer companies, the annual base salaries of
each of Messrs. Mahaffy, Mast, and Allen and
Ms. Ivers-Read were increased retroactively to
March 1, 2011 to $450,000, $350,000, $375,000, and
$350,000, respectively.
New
Employment Agreements
On August 24, 2011, we entered into new employment
agreements with each of our named executive officers to replace
each of their existing at-will employment, confidential
information, invention assignment and arbitration agreements.
With the assistance of our compensation consultants, we
determined that it was advisable to enter into new employment
agreements with each of our named executive officers prior to
the effective date of this offering to ensure that the
compensation and benefits provided to our named executive
officers were competitive with our publicly traded peer
companies.
The employment agreements for Messrs. Mahaffy, Mast and
Allen and Ms. Ivers-Read provide for an annual base salary
of no less than $450,000, $350,000, $375,000, and $350,000,
respectively. Additionally, the target annual bonuses are set at
50% of his annual base salary for Mr. Mahaffy and 40% of
their respective annual base salaries for Messrs. Mast and
Allen and Ms. Ivers-Read. In the event that a named
executive officers employment is terminated by us without
just cause (as defined in the employment agreement)
or by the executive for good reason (as defined in
the employment agreement), the executive will, subject to his or
her execution of a general release of claims and continued
compliance with any restrictive covenants, be entitled to
(i) any earned but unpaid bonus for the calendar year
immediately preceding the calendar year of termination,
(ii) continuation of his or her then-current base salary
during the severance period and (iii) payment
of an applicable percentage (the percentage of employee health
care premium costs covered by us as of the date of termination)
of the executives COBRA premiums during the severance
period. For purposes of the employment agreements, the term
severance period generally means 9 months for
Mr. Mahaffy and 6 months for Messrs. Mast and
Allen and Ms. Ivers-Read, except that the severance period
will increase to 24 months for Mr. Mahaffy and
12 months for Messrs. Mast and Allen and
Ms. Ivers-Read in the event that such termination occurs
during the 12 months following a change in
control (as defined in the employment agreement).
Additionally, in the event that such termination occurs within
12 months following a change in control, the executives
will also be entitled to (x) accelerated vesting of all
outstanding equity awards, and (y) an amount equal to the
executives then-current target bonus, payable in equal
monthly installments during the severance period. Each named
executive officer will also be entitled to a gross-up payment
for payments that result in an excise tax imposed by
Section 4999 of the Internal Revenue Code, subject to a
maximum
gross-up
payment of $2,000,000.
Following any termination of a named executive officers
employment, he or she will be subject to customary noncompete
restrictions for 6 months (or in the case of Mr. Mahaffy,
9 months) and also a customary 12 month nonsolicit
period with respect to employees and customers.
Compensation
Risk Management
Our board of directors has reviewed our overall compensation
policies and practices to determine whether those policies and
practices are reasonably likely to have a material adverse
effect on us and has concluded that they
104
are not reasonably likely to have a material effect on us. In
conducting its analysis, the board of directors considered the
following factors:
|
|
|
|
|
Base salary: Base salary is a fixed portion of overall
compensation that is set based on factors such as the scope of
an employees responsibilities, and which provides income
regardless of our short-term performance. Our board of directors
does not believe that base salary creates an incentive for our
employees to take undue risks.
|
|
|
|
Bonus programs: Bonuses are designed to reward employees for
achieving annual company-wide performance goals that are
important to our success, and intended to compensate our
employees for achieving such goals. Although the board of
directors has historically based bonuses on the achievement of
company-wide goals, the actual amount of any bonus is subject to
board of directors discretion. For these reasons, our board of
directors does not believe that our bonus programs encourage
employees to take risks which could have an adverse effect on us.
|
|
|
|
Equity compensation: Equity awards are designed to encourage our
employees to align their interests with the long-term interests
of our stockholders. Our board of directors believes that equity
compensation discourages our employees from taking unnecessary
risks because the ultimate value of the equity awards is
determined based on the long-term appreciation in the value of
our stock.
|
After considering the risk implications of each element of the
above elements of our overall compensation program, our board of
directors concluded that our overall compensation policies and
practices are not likely to have a material adverse effect on us.
Executive
Compensation
The following table shows the compensation of our principal
executive officer, our principal financial officer and our other
named executive officers for 2010.
Summary
Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
|
|
|
|
Salary
|
|
Bonus
|
|
compensation(1)
|
|
Total
|
Name and principal position
|
|
Year
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
Patrick J. Mahaffy
|
|
|
2010
|
|
|
|
375,000
|
|
|
|
75,000
|
|
|
|
9,800
|
|
|
|
459,800
|
|
President and Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Erle T. Mast
|
|
|
2010
|
|
|
|
325,000
|
|
|
|
52,000
|
|
|
|
9,208
|
|
|
|
386,208
|
|
EVP, Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gillian C. Ivers-Read
|
|
|
2010
|
|
|
|
325,000
|
|
|
|
52,000
|
|
|
|
9,208
|
|
|
|
386,208
|
|
EVP, Technical Operations and Chief Regulatory Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andrew R. Allen
|
|
|
2010
|
|
|
|
325,000
|
|
|
|
52,000
|
|
|
|
9,208
|
|
|
|
386,208
|
|
EVP of Clinical and Pre-Clinical Development and Chief Medical
Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Represents the matching contributions made during 2010 to our
401(k) plan on behalf of each named executive officer. |
Narrative
Disclosure Relating to Summary Compensation Table
For an explanation of the amount of salary and bonus paid to our
named executive officers, please see the discussion of
Annual Discretionary Performance Bonuses and
Base Salary in the Compensation Discussion and
Analysis, and the disclosure provided in the Summary
Compensation Table, above.
105
Outstanding
Equity Awards at Fiscal Year End
The following table sets forth summary information regarding the
outstanding equity awards held by our named executive officers
at December 31, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
Market value of
|
|
|
Number of shares or
|
|
shares or units of
|
|
|
units of stock that
|
|
stock that have
|
|
|
have not vested
|
|
not vested
|
Name
|
|
(#)(1)
|
|
($)(2)
|
|
Patrick J. Mahaffy
|
|
|
273,438
|
|
|
|
896,877
|
|
Erle T. Mast
|
|
|
91,146
|
|
|
|
298,959
|
|
Gillian C. Ivers-Read
|
|
|
91,146
|
|
|
|
298,959
|
|
Andrew R. Allen
|
|
|
91,146
|
|
|
|
298,959
|
|
|
|
|
(1) |
|
The restricted stock held by the named executive officers was
granted in May 2009 and was 25% vested as of the date of grant,
and thereafter 1/48th of the remaining restricted stock vests on
each monthly anniversary of the date of grant thereafter. In the
event that a named executive officers employment is
terminated by us without cause within six months
following a change in control of the Company, 100% of the
unvested shares of restricted stock will immediately vest upon
such termination. |
|
|
|
(2) |
|
Represents the estimated market value of the shares on
December 31, 2010 of $3.28 per share. |
Option
Exercises and Stock Vested
|
|
|
|
|
|
|
|
|
|
|
Restricted stock awards
|
|
|
Number of shares
|
|
Value realized on
|
Name
|
|
acquired on vesting (#)
|
|
vesting
($)(1)
|
|
Patrick J. Mahaffy
|
|
|
113,147
|
|
|
|
348,493
|
|
Erle T. Mast
|
|
|
37,715
|
|
|
|
116,162
|
|
Gillian C. Ivers-Read
|
|
|
37,715
|
|
|
|
116,162
|
|
Andrew R. Allen
|
|
|
37,715
|
|
|
|
116,162
|
|
|
|
|
(1) |
|
Represents the aggregate value realized upon vesting based on
the estimated market value on each applicable vesting date of
$3.08 per share. |
Potential
Payments Upon a Termination or Change in Control
Each of our named executive officers was employed on an
at-will basis as of December 31, 2010 and none
would have been entitled to receive any cash severance benefits
had their employment terminated on December 31, 2010.
Pursuant to their restricted stock agreements, as discussed
above under Compensation Discussion and
AnalysisEquity Compensation, the named executive
officers are entitled to full vesting of their restricted stock
upon a termination without cause (a qualifying
termination) within 6 months following a change
in control (as defined in the restricted stock
agreements). Assuming a qualifying termination occurred on
December 31, 2010, the total value that would have been
received by each of our named executive officers on account of
the accelerated vesting described in the previous sentence are
as follows (based on the estimated market value of our common
stock on December 31, 2010 of $3.28 per share): $896,877
for Mr. Mahaffy, and $298,959 for each of Mr. Mast,
Dr. Allen and Ms. Ivers-Read.
106
Director
Compensation
Director
Compensation Table
The following table summarizes the compensation received by our
directors for the year ended December 31, 2010.
|
|
|
|
|
|
|
|
|
|
|
Option awards
|
|
|
Name
|
|
($)(1)(2)
|
|
Total ($)
|
|
Brian G. Atwood
|
|
|
13,800
|
|
|
|
13,800
|
|
M. James Barrett
|
|
|
13,800
|
|
|
|
13,800
|
|
James C. Blair
|
|
|
13,800
|
|
|
|
13,800
|
|
Paul Klingenstein
|
|
|
13,800
|
|
|
|
13,800
|
|
Edward J. McKinley
|
|
|
13,800
|
|
|
|
13,800
|
|
John C. Reed
|
|
|
13,800
|
|
|
|
13,800
|
|
Thorlef Spickschen
|
|
|
13,800
|
|
|
|
13,800
|
|
|
|
|
(1) |
|
The directors each received a grant of options to purchase
6,897 shares of our common stock on December 2, 2010.
As of December 31, 2010, each of the directors other than
Dr. Blair had a total of 32,760 options outstanding.
As of December 31, 2010, Dr. Blair had exercised
25,863 options for shares of our restricted common stock
and had 6,897 options outstanding. |
|
|
|
(2) |
|
Amount represents the fair value of the awards on the date of
grant computed in accordance with FASB ASC Topic 718. The
assumptions used in the valuation of these awards are consistent
with the valuation methodologies specified in the notes to our
financial statements included elsewhere in this prospectus. |
Narrative
Disclosure relating to Director Compensation Table
Stock
Option Grants
On December 2, 2010, we made grants of options to purchase
6,897 shares of our stock to each of our directors pursuant
to the 2009 Plan, at an exercise price per share of $3.08.
Twenty-five percent of the options were fully vested as of the
date of grant and 25% will vest on each of the first three
anniversaries of August 26, 2010. The option agreements
provide that the directors may exercise their options prior to
vesting, in which case the directors will receive grants of
restricted stock upon exercise of the options and the purchase
price of such restricted stock will be the exercise price paid
by the directors for the options.
Director
Compensation Policy
For a discussion of the director compensation arrangements to be
effective following the effective date of this offering, please
see Certain Relationships and Related Party
Transactions Director Compensation.
Employee
Benefit Plans
2009
Equity Incentive Plan
We maintain the 2009 Equity Incentive Plan (the 2009 Plan),
pursuant to which 1,508,621 shares of our common stock are
reserved for grant to our employees, consultants and directors.
Pursuant to the 2009 Plan, we may make grants of incentive stock
options, nonstatutory stock options, stock appreciation rights,
restricted stock, and restricted stock units to our employees,
consultants, and directors.
Upon the occurrence of a corporate event (such as a merger,
recapitalization, stock split, reorganization, consolidation, or
other similar event), the board of directors may adjust the
number, class, and price of shares covered by each award granted
under the 2009 Plan. In the event of a merger or a change
in control (as defined in the 2009 Plan), the board of
directors may determine that awards will (i) be assumed or
substituted by the acquiring company, (ii) be terminated,
(iii) become fully vested and exercisable, (iv) be
terminated and cashed out, or (v) be treated in any
combination thereof.
The board of directors may amend, suspend, alter, or terminate
the 2009 Plan or awards granted under the 2009 Plan at any time,
provided that a participants rights with respect to
outstanding awards may not be impaired without their express
written consent. Absent earlier termination by the board of
directors, the 2009 Plan will expire in February 2021. It is
currently anticipated that no additional grants will be made
under the 2009 Plan following this offering.
107
2011
Equity Incentive Plan
We have adopted a new equity incentive plan, the 2011 Plan,
which will be effective as of the closing of this offering, that
will afford our compensation committee with more flexibility by
allowing grants of a wide variety of equity awards to our key
employees, directors and consultants, including incentive and
nonqualified stock options, stock appreciation rights,
restricted stock, restricted stock units, performance awards,
and other stock-based awards. The 2011 Plan will be designed to
assist us in attracting, retaining, motivating and rewarding key
employees, directors, and consultants, and promoting the
creation of long-term value for our stockholders by closely
aligning the interests of the participants with those of our
stockholders.
The 2011 Plan will initially reserve for issuance a number of
shares of common stock equal to the sum of (x) 1,250,000,
and (y) the number of shares of our common stock that were
available for grant under the 2009 Plan as of the date of this
prospectus (not including issued or outstanding shares granted
pursuant to awards under the 2009 Plan as of such date). No
future grants will be made pursuant to the 2009 Plan following
the date of this prospectus. Thereafter, the number of shares of
our common stock reserved for issuance under the 2011 Plan will
be increased (i) from time to time by the number of shares
of our common stock forfeited upon the expiration, cancellation,
forfeiture, cash settlement or other termination of awards under
the 2009 Plan following the date of this prospectus, and
(ii) at the discretion of our board of directors, on the
date of each annual meeting of our stockholders, by up to the
lesser of (x) a number of additional shares of our common
stock representing 4% of our then-outstanding shares of common
stock on such date and (y) 2,758,621 shares of our
common stock. The number of shares reserved for issuance will
also be subject to adjustment in the event of any stock split,
reverse stock split, reorganization, recapitalization, merger,
consolidation, combination, share exchange or any other similar
change in our capitalization, or in connection with any
extraordinary dividend declared and paid in respect of shares of
our common stock.
Upon the occurrence of certain corporate events, including a
change in control, our compensation committee may
(i) provide for the assumption or substitution of all
outstanding awards, (ii) accelerate the vesting of
outstanding awards, (iii) cancel all outstanding unvested
awards for no consideration and cancel all vested awards in
consideration for a payment equal to the per share consideration
received by our stockholders in connection with such corporate
event,
and/or
(iv) convert all outstanding awards into cash-based awards.
The 2011 Plan will be administered by our compensation
committee, which will have the authority to select participants
and to determine the time and form or awards thereunder. Our
board of directors will have the ability to suspend, terminate,
or amend the 2011 Plan at any time, although the board of
directors generally may not amend the 2011 Plan in such a way
that would adversely affect the rights of any participating
employee without that employees consent or stockholder
approval. The 2011 Plan explicitly prohibits the repricing of
awards granted pursuant to the 2011 Plan without stockholder
approval. Unless sooner terminated, the 2011 Plan will terminate
in August 2021.
2011
Employee Stock Purchase Plan
We have adopted a new employee stock purchase plan, the ESPP,
which will be effective as of the closing of this offering, that
will provide our employees, including our named executive
officers, and employees of certain designated subsidiaries with
an opportunity to purchase our ordinary shares at a discount on
a tax-qualified basis through payroll deductions following the
effective date of this registration statement. The ESPP will be
designed to qualify as an employee stock purchase
plan under Section 423 of the U.S. Internal
Revenue Code.
A total of 189,656 shares of our common stock, as the same
may, at the discretion of our board of directors, be increased
annually on the date of each annual meeting of our stockholders,
by up to the lesser of (x) a number of additional shares of our
common stock representing 1% of our then-outstanding shares of
common stock and (y) 344,828 shares of our common stock
will be reserved for issuance under the ESPP. The number of
shares of our common stock reserved for issuance pursuant to the
ESPP shall also be subject to adjustment in the event of certain
changes in our corporate structure or ordinary shares. The ESPP
will provide for consecutive 6-month offering periods, during
which participating employees may elect to have between 1% and
10% of their compensation withheld and applied to the purchase
of ordinary shares at the end of the period. Unless otherwise
determined by our compensation committee before an offering
period, the purchase price will be the lesser of (x) 85% of the
fair market value of the ordinary shares at the start of the
offering period and (y) 85% of the fair market value on the last
day of the offering period.
108
In the event that there is a proposed merger or amalgamation
with or into another corporation or a proposed sale of all or
substantially all of our assets, all outstanding options under
the ESPP will either be assumed by the successor corporation,
parent or surviving corporation or the offering period then in
effect will be shortened to end prior to the closing of such
merger, amalgamation, or sale.
The ESPP will be administered by our compensation committee. Our
board of directors will have the ability to suspend, terminate,
or amend the ESPP at any time, although the board of directors
generally may not amend the ESPP in such a way that would
adversely affect the rights of any participating employee
without that employees consent or stockholder approval.
Unless sooner terminated, the ESPP will terminate in August 2021.
2011
Cash Bonus Plan
We have adopted a new cash bonus plan pursuant to which annual
performance-based cash bonuses (up to a maximum of
$10.0 million per year per employee) may be paid to our
named executive officers at the discretion of our compensation
committee. It is intended that any bonuses paid pursuant to the
cash bonus plan following the consummation of this offering will
be considered performance-based compensation within
the meaning of Section 162(m) of the Internal Revenue Code
of 1986. The cash bonus plan will be administered by our
compensation committee, which will have the discretion to grant
awards under the cash bonus plan, set and adjust performance
targets, and certify whether the applicable performance targets
have been satisfied. The performance goals with respect to any
bonus under the cash bonus plan may be based on any one or more
of the following business criteria: (i) enterprise value or
value creation targets; (ii) after-tax or pre-tax profits
or net income; (iii) after-tax or pre-tax margins;
(iv) revenues; (v) operational cash flow or earnings
before income tax or other exclusions; (vi) reduction of,
or limiting the level of increase in, all or a portion of our
bank debt or other long-term or short-term public or private
debt or other similar financial obligations;
(vii) consummation of debt and equity offerings;
(viii) equity capital raised; (ix) earnings per share,
earnings per diluted share or earnings per share from continuing
operations; (x) return on capital employed;
(xi) market share; (xii) the fair market value of our
common stock; (xiii) the growth in the value of an
investment in our common stock; (xiv) reduction of, or
limiting the level of increase in, all or a portion of
controllable expenses or costs or other expenses or costs;
(xv) economic value added targets based on a cash flow
return on investment formula; (xvi) customer satisfaction
or service measures or indices; (xvii) employee
satisfaction; (xviii) efficiency or productivity measures;
(xix) asset management (e.g., inventory and receivable
levels); (xx) compliance goals (e.g., regulatory and legal
compliance); or (xxi) strategic business objectives, goals
or initiatives.
Our board of directors or our compensation committee may amend
or terminate our cash bonus plan at any time, although the cash
bonus plan generally may not amend in such a way that would
adversely affect the rights of any participating employee
without that employees consent or stockholder approval or
if such amendment would result in any bonus failing to be
deductible under Section 162(m) of the Internal Revenue
Code of 1986. No bonuses may be granted pursuant to the cash
bonus plan on or after our first stockholder meeting that occurs
after the close of the third (3rd) calendar year following the
calendar year in which this offering becomes effective, unless
our stockholders reapprove the business criteria on or before
such stockholder meeting.
109
CERTAIN
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The following is a description of transactions, since our
formation in April 2009, to which we have been a party, in which
the amount involved exceeded or will exceed $120,000, and in
which any of our executive officers, directors or holders of
more than 5% of our voting securities, or an affiliate or
immediate family member thereof, had or will have a direct or
indirect material interest, other than compensation, termination
and change in control arrangements, which are described under
Executive and Director Compensation. We believe the
terms obtained or consideration that we paid or received, as
applicable, in connection with the transactions described below
were comparable to terms available or the amounts that would be
paid or received, as applicable, in arms-length
transactions with unrelated third parties.
Preferred
Stock and Convertible Promissory Note Issuances
Since our inception, we have sold shares of our common
stock, shares of our
Series A-1
convertible preferred stock, shares of our
Series A-2
convertible preferred stock, shares of our Series B
convertible preferred stock and the aggregate principal amount
of convertible promissory notes to our executive officers,
directors or holders of more than 5% of our voting securities in
the amounts and as of the dates shown below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal
|
|
|
|
|
|
|
Series A-1
|
|
|
Series A-2
|
|
|
Series B
|
|
|
Amount of
|
|
|
|
|
|
|
Convertible
|
|
|
Convertible
|
|
|
Convertible
|
|
|
Convertible
|
|
|
|
Common
|
|
|
Preferred
|
|
|
Preferred
|
|
|
Preferred
|
|
|
Promissory
|
|
|
|
Stock
|
|
|
Stock
|
|
|
Stock
|
|
|
Stock
|
|
|
Notes
|
|
|
Stockholders beneficially owning 5% or more of our voting
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Entities affiliated with Domain Associates
|
|
|
|
|
|
|
1,206,897
|
|
|
|
1,206,897
|
|
|
|
2,612,330
|
|
|
|
$4,784,000
|
|
Entities affiliated with New Enterprise Associates
|
|
|
|
|
|
|
1,206,897
|
|
|
|
1,206,897
|
|
|
|
2,612,330
|
|
|
|
$4,784,000
|
|
Entities affiliated with Versant Ventures
|
|
|
|
|
|
|
862,069
|
|
|
|
862,069
|
|
|
|
1,865,950
|
|
|
|
$3,418,000
|
|
Entities affiliated with Aberdare Ventures
|
|
|
|
|
|
|
517,241
|
|
|
|
517,241
|
|
|
|
1,119,570
|
|
|
|
$2,050,000
|
|
Abingworth Bioventures V, L.P.
|
|
|
|
|
|
|
517,241
|
|
|
|
517,241
|
|
|
|
1,119,570
|
|
|
|
$2,050,000
|
|
Directors and Executive Officers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patrick J. Mahaffy
|
|
|
603,449
|
|
|
|
51,724
|
|
|
|
51,724
|
|
|
|
111,957
|
|
|
|
$206,000
|
|
Erle T. Mast
|
|
|
201,150
|
|
|
|
6,897
|
|
|
|
6,897
|
|
|
|
14,928
|
|
|
|
$28,000
|
|
Andrew R. Allen
|
|
|
201,150
|
|
|
|
10,345
|
|
|
|
10,345
|
|
|
|
22,391
|
|
|
|
$40,000
|
|
Gillian C. Ivers-Read
|
|
|
201,150
|
|
|
|
6,897
|
|
|
|
6,897
|
|
|
|
14,928
|
|
|
|
$28,000
|
|
Brian G. Atwood
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
M. James Barrett
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James C. Blair
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul Klingenstein
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Edward J. McKinley
|
|
|
|
|
|
|
103,448
|
|
|
|
103,448
|
|
|
|
223,914
|
|
|
|
$410,000
|
|
John C. Reed
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thorlef Spickschen
|
|
|
|
|
|
|
17,241
|
|
|
|
17,241
|
|
|
|
37,319
|
|
|
|
$68,000
|
|
Price Per Share
|
|
|
$0.0029
|
|
|
|
$2.00
|
|
|
|
$3.00
|
|
|
|
$4.62
|
|
|
|
N/A
|
|
Conversion Price Per Share
|
|
|
N/A
|
|
|
|
$5.80
|
|
|
|
$8.70
|
|
|
|
$13.40
|
|
|
|
$14.00
|
*
|
Date of Purchase
|
|
|
May 12, 2009
|
|
|
|
May 15, 2009
|
|
|
|
November 9, 2009
|
|
|
|
November 18, 2009
|
|
|
|
May 25, 2011
|
|
|
|
|
* |
|
Assuming an initial public offering price of $14.00 per share,
the midpoint of the price range set forth on the cover page of
this prospectus. |
110
Restricted
Stock Purchase Agreements
Each of our named executive officers purchased restricted shares
of our common stock in May 2009 pursuant to restricted stock
purchase agreements between the named executive officers and us.
Pursuant to these agreements, Mr. Mahaffy purchased
603,449 shares of restricted stock, Mr. Mast,
Dr. Allen and Ms. Ivers-Read each purchased
201,150 shares of restricted stock. Until such time as the
shares vest (as described below), the shares are subject to
repurchase by us following a termination of the named executive
officers employment for any reason at a purchase price
equal to the lesser of the then-current fair market value and
the purchase price paid for such shares. The restricted stock
was 25% vested as of the date of grant, and 1/48th of the
remaining shares of stock vest on each monthly anniversary
thereafter, subject to continued employment through such date.
In the event that a named executive officers employment is
terminated by us without cause within six months
following a change in control of the Company, 100% of the
unvested shares of restricted stock will immediately vest upon
such termination. The agreements impose restrictions on transfer
of the restricted stock and a
lock-up
period for 180 days following our initial public offering.
Convertible
Promissory Notes
On May 25, 2011, we issued to existing holders of our
convertible preferred stock on a pro rata basis with their
respective ownership of our convertible preferred stock, at face
value, $20.0 million aggregate principal amount of our 5%
convertible promissory notes due 2012. On June 2, 2011, we
issued to Pfizer $15.0 million aggregate principal amount
of our 5% convertible promissory notes due 2012,
$7.0 million of which were issued as consideration for the
up-front payment under our license agreement with Pfizer for
CO-338 and $8.0 million of which were issued for an
investment of $8.0 million of cash by Pfizer. The notes
accrue interest at an annual rate of 5% which is not due until
maturity. The outstanding principal amount and all accrued and
unpaid interest thereon will convert into shares of our common
stock immediately prior to the closing of this offering at a
price per share equal to our initial public offering price set
forth on the cover page of this prospectus.
Participation
in this Offering
In May 2009, we entered into a
Series A-1,
A-2, B and C
Preferred Stock Purchase Agreement with certain of our existing
stockholders, including entities affiliated with Domain
Associates, New Enterprise Associates, Versant Ventures and
Aberdare Ventures; Abingworth Bioventures V, L.P.; and our
executive officers and certain of our directors,
Messrs. Mahaffy, Mast, Allen, McKinley and Spickschen and
Ms. Ivers-Read, pursuant to which such stockholders agreed
to purchase, subject to certain conditions, up to
$146.3 million of shares of convertible preferred stock
with each such series of convertible preferred stock issuable
upon the approval of our board of directors and holders of 55%
of our convertible preferred stock. As of the date of this
prospectus, these holders of our convertible preferred stock
have purchased an aggregate of approximately $75.7 million
of shares of our convertible preferred stock and $20.0 aggregate
principal amount of our 5% convertible promissory notes due
2012. These holders of our convertible preferred stock have
indicated an interest in purchasing an aggregate of
approximately $50.6 million of shares of our common stock
in this offering, expected to be allocated pro rata among them
based on each such stockholders ownership of the
outstanding shares of our convertible preferred stock
outstanding immediately prior to this offering, at the initial
public offering price. However, because indications of interest
are not binding agreements or commitments to purchase, the
underwriters may determine to sell more, less or no shares in
this offering to any of these stockholders, or any of these
stockholders may determine to purchase more, less or no shares
in this offering.
Voting
Agreement
We have entered into a voting agreement with holders of our
convertible preferred stock and certain other stockholders that
contains agreements with respect to the election of our board of
directors and its composition. All of our current directors were
elected pursuant to the terms of this voting agreement. The
voting agreement will terminate upon the closing of this
offering.
Right of
First Refusal and Co-Sale Agreement
We have entered into a right of first refusal and co-sale
agreement with holders of our convertible preferred stock and
certain other stockholders. This agreement provides the holders
of convertible preferred stock a right of purchase and of
co-sale in respect of sales of securities by certain holders of
our common stock. These rights of purchase and co-sale will
terminate upon the closing of this offering.
111
Investors
Rights Agreement
We and our founders and holders of our convertible preferred
stock have entered into an agreement under which such security
holders have registration rights with respect to their shares of
common stock following this offering. Upon the closing of this
offering, all of our currently outstanding shares of convertible
preferred stock will convert into shares of our common stock at
the conversion prices set forth in the table above, and the
outstanding principal amount of our convertible promissory notes
and all accrued and unpaid interest thereon will convert into
shares of our common stock at a price per share equal to our
initial public offering price set forth on the cover page of
this prospectus. For more information regarding these
agreements, see Description of Capital
StockRegistration Rights.
Director
Compensation
For a discussion of the director compensation arrangements that
were in effect prior to the effective date of this offering, see
Executive and Director CompensationDirector
Compensation. Following the effective date of this
offering, each non-executive director will be entitled to
receive a $40,000 (or $50,000 in the case of our chairman)
annual cash retainer. Further, the chairman of each of our
audit, compensation, and nominating and corporate governance
committees will receive an additional annual cash retainer of
$16,000, $10,000, and $7,000, respectively. Other members of our
audit, compensation, and nominating and corporate governance
committees will receive an additional annual cash retainer of
$8,000, $5,000, and $5,000, respectively. Finally, each
non-executive director will receive an annual grant of a stock
option to purchase 12,414 shares of common stock, which
will vest on the first anniversary of the date of grant, subject
to continued service through the vesting date. It is currently
intended that new directors will receive a one-time initial
grant of a stock option to purchase 27,587 shares of common
stock upon joining the board of directors, with one-third of the
grant vesting on each of the first three anniversaries of the
date of grant.
Employment
Agreements
We have entered into employment agreements with each of
Messrs. Mahaffy and Mast, Dr. Allen and
Ms. Ivers-Read. For more information regarding these
agreements, see Executive and Director
CompensationNew Employment Agreements.
On August 5, 2011, we entered into an at-will employment
letter agreement with Steven L. Hoerter, pursuant to which
Mr. Hoerter has agreed to serve as our Senior Vice
President of Commercial Operations. Pursuant to the letter
agreement, Mr. Hoerter will be entitled to an initial base
salary of $310,000 per year and a one-time bonus of
$100,000, of which $50,000 was paid on his start date and the
remaining $50,000 will be paid on the first anniversary of his
start date, if he remains employed through such date. The letter
agreement also provides for the grant to Mr. Hoerter of an
option to purchase 86,206 shares of our common stock. As a
condition to his employment, Mr. Hoerter also executed our
standard confidential information, invention assignment and
non-solicitation agreement.
Indemnification
Agreements
We have entered into indemnification agreements with each of our
directors and named executive officers. For more information
regarding these agreements, see ManagementLimitation
on Liability and Indemnification of Directors and Officers.
Stock
Option Awards
We have granted stock options to our executive officers and
directors. For more information regarding these stock option
awards, see Executive and Director CompensationStock
Option Grants.
In March 2011, Mr. Mahaffy was granted options to purchase
206,897 shares of common stock pursuant to the 2009 Plan,
and Messrs. Mast and Allen and Ms. Ivers-Read were
each granted options to purchase 68,966 shares of common
stock pursuant to the 2009 Plan, in each case at an exercise
price per share of $3.28. Twenty-five percent of the shares of
common stock subject to the options will vest on the one-year
anniversary of the date of grant, and the remainder will vest in
substantially equal installments over the 36 months
immediately following such anniversary, subject to continued
employment through such date. The options may be exercised by
the named executive officers prior to vesting in exchange for
shares of restricted stock with the same vesting schedule as the
options.
In August 2009, we made grants of options to purchase
25,863 shares of our common stock to each of our
non-executive directors, at an exercise price per share of
$0.29. Twenty-five percent of the options were fully vested as
of
112
the date of grant and 25% will vest on each of the first three
anniversaries of the date of grant. The options may be exercised
by the directors prior to vesting in exchange for shares of
restricted stock with the same vesting schedule as the options.
In December 2010, we made grants of options to purchase
6,896 shares of our common stock to each of our
non-executive directors pursuant to the 2009 Plan, at an
exercise price per share of $3.08. Twenty-five percent of the
options were fully vested as of the date of grant and 25% will
vest on each of the first three anniversaries of August 26,
2010. The options may be exercised by the directors prior to
vesting in exchange for shares of restricted stock with the same
vesting schedule as the options.
In August 2011, each of our non-executive directors
received their annual stock option grant. Each non-executive
director was granted a stock option to purchase
12,413 shares of common stock pursuant to the 2009 Plan, at
an exercise price per share of $11.02. The stock options will
vest in August 2012. The options may be exercised by the
directors prior to vesting in exchange for shares of restricted
stock with the same vesting schedule as the options.
In August 2011, Mr. Hoerter was granted options to purchase
86,206 shares of common stock pursuant to the 2009 Plan, at
an exercise price per share of $11.02. Twenty-five percent of
the shares of common stock subject to the options will vest on
the one-year anniversary of the date of grant, and the remainder
will vest in substantially equal installments over the
36 months immediately following such anniversary, subject
to continued employment through such date. The options may be
exercised by Mr. Hoerter prior to vesting in exchange for
shares of restricted stock with the same vesting schedule as the
options.
The shares of our common stock acquired upon exercise of an
option (or upon vesting of any restricted shares acquired upon
an exercise prior to vesting) by our executive officers and
directors are subject to a
180-day
lock-up
period following our initial public offering.
Policies
and Procedures Regarding Transactions with Related
Persons
We have adopted a written policy that sets forth our policies
regarding the identification, review, consideration, approval
and oversight of related-person transactions, which
will be effective as of the closing of this offering. For
purposes of our policy only, a related-person
transaction is a past, present or future transaction,
arrangement or relationship (or any series of similar
transactions, arrangements or relationships) in which we and any
related person are participants, the amount involved
exceeds $120,000 and a related person has a direct or indirect
material interest. Transactions involving compensation for
services provided to us as an employee, director, consultant or
similar capacity by a related person are not covered by this
policy. A related person, as determined since the
beginning of our last fiscal year, is any executive officer,
director or nominee to become director, a holder of more than 5%
of our common stock, including any immediate family members of
such persons or any entity in which such a person has a 10% or
greater equity interest. Any related-person transaction may only
be consummated if our audit committee has approved or ratified
the transaction in accordance with the policy guidelines set
forth below.
The policy imposes an affirmative duty upon each director and
executive officer to identify, and we will request that
significant stockholders identify, any transaction involving
them, their affiliates or immediate family members that may be
considered a related party transaction before such person
engages in the transaction. Under the policy, where a
transaction has been identified as a related-person transaction,
management must present information regarding the proposed
related-person transaction to our audit committee (or, where
review by our audit committee would be inappropriate, to another
independent body of our board of directors) for review. The
presentation must include a description of, among other things,
the material facts, the direct and indirect interests of the
related persons, the benefits of the transaction to us and
whether any alternative transactions are available.
In the event a director has an interest in the proposed
transaction, the director must recuse himself or herself from
the deliberations and approval process. Prior to the closing of
this offering, we did not have a formal policy concerning
transactions with related persons.
113
PRINCIPAL
STOCKHOLDERS
The following table and accompanying footnotes set forth certain
information regarding the beneficial ownership of our common
stock as of October 20, 2011 and as adjusted to reflect the
sale of shares of common stock in this offering, by:
|
|
|
|
|
each person or group of affiliated persons who are known by us
to own beneficially more than 5% of our common stock;
|
|
|
|
each member of our board of directors and each of our named
executive officers; and
|
|
|
|
all members of our board of directors and our named executive
officers as a group.
|
The amounts and percentages of shares beneficially owned are
reported on the basis of SEC regulations governing the
determination of beneficial ownership of securities. Under SEC
rules, a person is deemed to be a beneficial owner
of a security if that person has or shares voting power or
investment power over the security, which includes the power to
dispose of or to direct the disposition of such security. A
person is also deemed to be a beneficial owner of any securities
of which that person has a right to acquire beneficial ownership
within 60 days. Securities that can be so acquired are
deemed to be outstanding for purposes of computing such
persons ownership percentage, but not for purposes of
computing any other persons percentage. Under these rules,
more than one person may be deemed to be a beneficial owner of
the same securities and a person may be deemed to be a
beneficial owner of securities as to which such person has no
economic interest.
The number of shares of our common stock beneficially owned
prior to this offering set forth below is based
on 11,465,590 shares of our common stock outstanding
as of October 20, 2011, after giving effect to (1) the
conversion of all outstanding shares of our convertible
preferred stock into 7,244,523 shares of common stock
immediately prior to the closing of this offering and
(2) the issuance of 2,559,774 shares of our common
stock immediately prior to the closing of this offering as a
result of the conversion of $35.0 million in aggregate
principal amount of our 5% convertible promissory notes due 2012
(including accrued and unpaid interest thereon), assuming an
initial public offering price of $14.00 per share, the midpoint
of the price range set forth on the cover page of this
prospectus, and assuming the conversion occurs on
November 18, 2011. The number of shares of our common stock
beneficially owned after this offering set forth below is based
on 20,765,590 shares of our common stock to be issued and
outstanding immediately after the closing of this offering.
Holders of our convertible preferred stock immediately prior to
this offering, including our executive officers, certain of our
directors and certain affiliates of our directors, have
indicated an interest in purchasing an aggregate of
approximately $50.6 million of shares of our common
stock in this offering, expected to be allocated among them as
indicated in the table below, at the initial public offering
price set forth on the cover page of this prospectus (or an
aggregate of approximately 3,616,256 shares of common stock
assuming an initial public offering price of $14.00 per share,
the midpoint of the price range set forth on the cover page of
this prospectus). The information set forth in the table below
assumes the purchase of all of these shares in this offering by
such stockholders. Although we anticipate that these
stockholders will purchase, and that the underwriters will sell
to these stockholders, all of the shares of our common stock
that these stockholders have indicated an interest in
purchasing, indications of interest are not binding agreements
or commitments to purchase and the underwriters may determine to
sell more, less or no shares in this offering to any of these
stockholders, or any of these stockholders may determine to
purchase more, less or no shares in this offering.
Except as indicated in the footnotes below and subject to
applicable community property laws, each of the beneficial
owners named in the table below has, and upon the closing of
this offering will have, to our knowledge, sole voting and
investment power with respect to all shares of common stock
listed as beneficially owned by them.
114
Unless otherwise indicated, the address for each of the
stockholders in the table below is
c/o Clovis
Oncology, Inc., 2525 28th Street, Suite 100, Boulder,
Colorado 80301.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior to This Offering
|
|
After This Offering
|
|
|
Number of
|
|
Percent of
|
|
Number of
|
|
Percent of
|
|
|
Shares
|
|
Shares
|
|
Shares
|
|
Shares
|
|
|
Beneficially
|
|
Beneficially
|
|
Beneficially
|
|
Beneficially
|
Name Of Beneficial Owner
|
|
Owned
|
|
Owned
|
|
Owned
|
|
Owned
|
|
Stockholders beneficially owning 5% or more of our common
stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Entities affiliated with Domain Associates
|
|
|
2,115,950
|
(1)
|
|
|
18.5
|
%
|
|
|
2,981,085
|
|
|
|
14.4
|
%
|
Entities affiliated with New Enterprise Associates, Inc.
|
|
|
2,083,190
|
(2)
|
|
|
18.2
|
%
|
|
|
2,948,325
|
|
|
|
14.2
|
%
|
Entities affiliated with Versant Ventures
|
|
|
1,488,055
|
(3)
|
|
|
13.0
|
%
|
|
|
2,106,009
|
|
|
|
10.1
|
%
|
Entities affiliated with Aberdare Ventures
|
|
|
892,771
|
(4)
|
|
|
7.8
|
%
|
|
|
1,263,542
|
|
|
|
6.1
|
%
|
Abingworth Bioventures V, L.P.
|
|
|
892,773
|
(5)
|
|
|
7.8
|
%
|
|
|
1,263,544
|
|
|
|
6.1
|
%
|
Pfizer Inc.
|
|
|
1,096,378
|
(6)
|
|
|
9.6
|
%
|
|
|
1,096,378
|
|
|
|
5.3
|
%
|
Officers and Directors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patrick J. Mahaffy
|
|
|
899,694
|
|
|
|
7.8
|
%
|
|
|
936,770
|
|
|
|
4.5
|
%
|
Erle T. Mast
|
|
|
282,066
|
(7)
|
|
|
2.4
|
%
|
|
|
287,009
|
|
|
|
1.4
|
%
|
Andrew R. Allen
|
|
|
287,896
|
(8)
|
|
|
2.5
|
%
|
|
|
291,467
|
|
|
|
1.4
|
%
|
Gillian C. Ivers-Read
|
|
|
282,066
|
(9)
|
|
|
2.4
|
%
|
|
|
287,009
|
|
|
|
1.4
|
%
|
Steven L. Hoerter
|
|
|
86,206
|
(10)
|
|
|
*
|
|
|
|
86,206
|
|
|
|
*
|
|
Brian G. Atwood
|
|
|
1,533,226
|
(11)
|
|
|
13.3
|
%
|
|
|
2,151,180
|
|
|
|
10.3
|
%
|
M. James Barrett
|
|
|
2,128,361
|
(12)
|
|
|
18.5
|
%
|
|
|
2,993,496
|
|
|
|
14.4
|
%
|
James C. Blair
|
|
|
2,128,363
|
(13)
|
|
|
18.5
|
%
|
|
|
2,993,498
|
|
|
|
14.4
|
%
|
Paul Klingenstein
|
|
|
937,942
|
(14)
|
|
|
8.1
|
%
|
|
|
1,308,713
|
|
|
|
6.3
|
%
|
Edward J. McKinley
|
|
|
223,723
|
(15)
|
|
|
1.9
|
%
|
|
|
297,876
|
|
|
|
1.4
|
%
|
John C. Reed
|
|
|
45,171
|
(16)
|
|
|
*
|
|
|
|
45,171
|
|
|
|
*
|
|
Thorlef Spickschen
|
|
|
74,904
|
(17)
|
|
|
*
|
|
|
|
87,263
|
|
|
|
*
|
|
All directors and named executive officers as a group
(12 persons)
|
|
|
8,909,618
|
|
|
|
74.0
|
%
|
|
|
11,765,658
|
|
|
|
55.1
|
%
|
|
|
|
* |
|
Represents beneficial ownership of less than 1% of our common
stock. |
|
|
|
(1) |
|
Includes 2,048,256 shares of common stock owned by Domain
Partners VII, L.P., 34,934 shares of common stock owned by
DP VII Associates, L.P. and 32,760 shares of common stock
owned by Domain Associates, L.L.C. With respect to the shares
owned by Domain Partners VII, L.P. and DP VII Associates, L.P.,
James C. Blair, Brian H. Dovey, Jesse I. Treu,
Kathleen K. Schoemaker, Brian K. Halak and Nicole Vitullo, the
managing members of One Palmer Square Associates VII, L.L.C.,
the general partner of Domain Partners VII, L.P. and DP VII
Associates, L.P., share voting and investment power with respect
to these shares. With respect to the shares owned by Domain
Associates, L.L.C., voting and investment power is shared among
the managing members, James C. Blair, Brian H. Dovey, Jesse I.
Treu, Kathleen K. Schoemaker, Brian K. Halak and Nicole Vitullo.
Domain Associates is located at One Palmer Square,
Suite 515, Princeton, NJ 08542. |
|
|
|
(2) |
|
Includes (i) 2,076,294 shares of common stock held of
record by New Enterprise Associates 13, L.P. (NEA 13); and
(ii) 6,896 shares of common stock held of record by
NEA Ventures 2009, L.P. (Ven 2009). The shares directly held by
NEA 13 are indirectly held by NEA Partners 13, L.P. (NEA
Partners 13), the sole general partner of NEA 13, NEA 13 GP, LTD
(NEA 13 LTD), the sole general partner of NEA Partners 13 and
each of the individual directors of NEA 13 LTD. The individual
Directors (collectively, the Directors) of NEA 13
LTD, M. James Barrett (a member of our board of directors),
Peter J. Barris, Forest Baskett, Ryan D. Drant, Patrick J.
Kerins, Krishna Kittu Kolluri, C. Richard Kramlich,
David M. Mott, Scott D. Sandell, Ravi Viswanathan and Harry R.
Weller, share voting and investment power with respect to these
shares. The shares directly held by Ven 2009 are indirectly held
by Karen P. Welsh, the general partner of Ven 2009. NEA 13, NEA
Partners 13, NEA 13 LTD and the Directors share voting and
dispositive power with regard to the shares directly held by NEA
13. Karen P. Welsh, the general partner of Ven 2009, holds
voting and dispositive power over the shares held by Ven 2009.
All indirect holders of the above-referenced shares disclaim
beneficial ownership of all applicable shares except to the
extent of their actual pecuniary interest therein. The principal
business address of New Enterprise Associates, Inc. is 1954
Greenspring Drive, Suite 600, Timonium, MD 21093. |
115
|
|
|
(3) |
|
Includes 1,478,741 shares of common stock held of record by
Versant Venture Capital IV, L.P. and 9,314 shares of common
stock owned by Versant Side Fund IV, L.P. Voting and
investment power over the shares held of record by Versant
Venture Capital IV, L.P., and Versant Side Fund IV, L.P. is held
by Versant Ventures IV, LLC, their sole general partner.
Brian G. Atwood, a member of our board of directors, is a
managing member of Versant Ventures IV, LLC but he disclaims
beneficial ownership of these securities, except to the extent
of his pecuniary interest therein, and the options held by him.
The individual managing members of Versant Ventures IV, LLC are
Brian G. Atwood, Bradley J. Bolzon, Samuel D. Colella, Ross A.
Jaffe, William J. Link, Kirk G. Nielsen, Robin L. Praeger,
Rebecca B. Robertson, Camille D. Samuels, Charles M. Warden and
Kevin J. Wasserstein, all of whom share voting and investment
power with respect to these shares. Each individual managing
member disclaims beneficial ownership of these shares, except to
the extent of their pecuniary interest in such shares. The
address of each entity affiliated with Versant Ventures is 3000
Sand Hill Road, Building Four, Suite 210, Menlo Park, CA 94025. |
|
|
|
(4) |
|
Includes 875,302 shares of common stock owned by Aberdare
Ventures IV, L.P. and 17,469 shares of common stock owned
by Aberdare Partners IV, L.P. Mr. Klingenstein is a
managing member of Aberdare GP IV, LLC, the general partner of
Aberdare Ventures IV, L.P. and Aberdare Partners IV, L.P. With
respect to the shares owned by Aberdare Ventures IV, L.P. and
Aberdare Partners IV, L.P., voting and investment power is
shared among Mr. Klingenstein, Sami Hamade and John H.
Odden, the managing members of Aberdare GP IV, LLC.
Mr. Klingenstein disclaims beneficiary ownership of such
shares except to the extent of his pecuniary interest therein.
Aberdare Ventures is located at One Embarcadero Center,
Suite 4000, San Francisco, CA 94111. |
|
|
|
(5) |
|
Abingworth LLP is the Manager of Abingworth
Bioventures V L.P. The investment committee of
Abingworth LLP comprising Dr. Joseph Anderson, Michael
Bigham, Dr. Stephen Bunting and Dr. Jonathan MacQuitty
share voting and investment power with respect to these shares,
and disclaim beneficial ownership except to the extent of their
pecuniary interest therein. Abingworth LLP is located at
38 Jermyn Street, London, SW1Y 6DN, United Kingdom. |
|
(6) |
|
Pfizer Inc. is located at 235 East 42nd Street, New York, NY
10017. |
|
|
|
(7) |
|
Includes 68,965 shares of common stock subject to
outstanding options which are exercisable within the next
60 days. |
|
|
|
(8) |
|
Includes 68,965 shares of common stock subject to
outstanding options which are exercisable within the next
60 days. |
|
|
|
(9) |
|
Includes 68,965 shares of common stock subject to
outstanding options which are exercisable within the next
60 days. |
|
|
|
(10) |
|
Includes 86,206 shares of common stock subject to
outstanding options which are exercisable within the next
60 days. |
|
|
|
(11) |
|
Includes 45,171 shares of common stock subject to
outstanding options which are exercisable within the next
60 days, 1,478,741 shares of common stock owned by
Versant Venture Capital IV, L.P. and 9,314 shares of common
stock owned by Versant Side Fund IV, L.P. Versant Ventures
IV, L.L.C. is the general partner of Versant Venture Capital IV,
L.P. and Versant Side Fund IV, L.P. Versant Ventures IV, L.L.C.
shares voting and dispositive power over the shares of common
stock held by Versant Venture Capital IV, L.P. and Versant Side
Fund IV, L.P. Mr. Atwood is a managing member of Versant
Ventures IV, L.L.C. Mr. Atwood disclaims beneficial
ownership of these securities, except to the extent of his
pecuniary interest therein. |
|
|
|
(12) |
|
Includes 45,171 shares of common stock subject to
outstanding options which are exercisable within the next
60 days. See footnote (2) above regarding
Dr. Barretts relationship with New Enterprise
Associates, Inc. and its affiliated entities. Dr. Barrett
disclaims beneficial ownership of the shares held by NEA 13 and
Ven 2009, referenced in footnote (2) above, except to the
extent of his actual pecuniary interest therein.
Dr. Barrett does not have voting or dispositive power over
the shares held of record by Ven 2009. |
|
|
|
(13) |
|
Includes 12,413 shares of common stock subject to
outstanding options which are exercisable within the next
60 days, 2,048,256 shares of common stock owned by
Domain Partners VII, L.P., 34,934 shares of common stock
owned by DP VII Associates, L.P. and 32,760 shares of
common stock owned by Domain Associates, L.L.C. Dr. Blair
is a managing member of One Palmer Square Associates VII,
L.L.C., which is the general partner of Domain Partners VII,
L.P. and DP VII Associates, L.P. Dr. Blair is also a
managing member of Domain Associates, L.L.C. Dr. Blair
disclaims beneficial ownership of these shares except to the
extent of his pecuniary interest in such shares. |
116
|
|
|
(14) |
|
Includes 45,171 shares of common stock subject to
outstanding options which are exercisable within the next
60 days, 875,302 shares of common stock owned by
Aberdare Ventures IV, L.P. and 17,469 shares of common
stock owned by Aberdare Partners IV, L.P. Mr. Klingenstein
is a managing member of Aberdare GP IV, LLC, the general partner
of Aberdare Ventures IV, L.P. and Aberdare Partners IV, L.P.
With respect to the shares owned by Aberdare Ventures IV, L.P.
and Aberdare Partners IV, L.P., voting and investment power is
shared among the managing members of Aberdare GP IV, LLC.
Mr. Klingenstein disclaims beneficiary ownership of such
shares except to the extent of his pecuniary interest therein. |
|
|
|
(15) |
|
Includes 45,171 shares of common stock subject to
outstanding options which are exercisable within the next
60 days. |
|
|
|
(16) |
|
Includes 45,171 shares of common stock subject to
outstanding options which are exercisable within the next
60 days. |
|
|
|
(17) |
|
Includes 45,171 shares of common stock subject to
outstanding options which are exercisable within the next
60 days. |
117
DESCRIPTION
OF CAPITAL STOCK
The following summary describes our capital stock and the
material provisions of our amended and restated certificate of
incorporation and our amended and restated bylaws, which will
become effective upon the closing of this offering, the
registration rights agreement to which we and certain of our
stockholders are parties and of the Delaware General Corporation
Law. Because the following is only a summary, it does not
contain all of the information that may be important to you. For
a complete description, you should refer to our amended and
restated certificate of incorporation, amended and restated
bylaws and registration rights agreement, copies of which have
been filed as exhibits to the registration statement of which
this prospectus is part.
General
Our amended and restated certificate of incorporation that will
be in effect upon the closing of this offering authorizes us to
issue up to 100 million shares of common stock, par value
$0.001 per share, and 10 million shares of preferred stock,
par value $0.001 per share. No shares of preferred stock will be
issued or outstanding immediately after this offering.
Common
Stock
The holders of our common stock are entitled to one vote for
each share held of record on all matters submitted to a vote of
stockholders and are not entitled to cumulative votes with
respect to the election of directors. The holders of common
stock are entitled to receive dividends ratably, if, as and when
dividends are declared from time to time by our board of
directors out of legally available funds, after payment of
dividends required to be paid on outstanding preferred stock, if
any. Any decision to declare and pay dividends in the future
will be made at the discretion of our board of directors and
will depend on, among other things, our results of operations,
cash requirements, financial condition, contractual restrictions
and other factors that our board of directors may deem relevant.
For more information, see Dividend Policy. Upon our
liquidation, dissolution or winding up, the holders of common
stock are entitled to share ratably in all assets that are
legally available for distribution after payment of all debts
and other liabilities, subject to the prior rights of any
holders of preferred stock then outstanding. The holders of
common stock have no other preemptive, subscription, redemption,
sinking fund or conversion rights. All outstanding shares of our
common stock are fully paid and nonassessable. The shares of
common stock to be issued upon closing of the offering will also
be fully paid and nonassessable. The rights, preferences and
privileges of holders of common stock are subject to, and may be
negatively impacted by, the rights of the holders of shares of
any series of preferred stock which we may designate and issue
in the future.
As of September 30, 2011, there were 1,661,293 shares
of our common stock outstanding and held of record by
22 stockholders.
As of September 30, 2011, options to purchase
883,953 shares of our common stock at a weighted average
exercise price of $4.35 per share were outstanding.
Undesignated
Preferred Stock
Immediately prior to the closing of this offering, all
outstanding shares of our preferred stock will be converted into
shares of common stock. Under our amended and restated
certificate of incorporation that will be in effect upon the
closing of this offering our board of directors has the
authority, without action by our stockholders, to designate and
issue up to 10 million shares of preferred stock in one or
more series and to designate the rights, preferences and
privileges of each series, any or all of which may be greater
than the rights of our common stock. It is not possible to state
the actual effect of the issuance of any shares of preferred
stock upon the rights of holders of our common stock until our
board of directors determines the specific rights of the holders
of preferred stock. However, the effects might include, among
other things, restricting dividends on the common stock,
diluting the voting power of the common stock, impairing the
liquidation rights of the common stock and delaying or
preventing a change in control of our common stock without
further action by our stockholders and may adversely affect the
market price of our common stock. We have no present plans to
issue any shares of preferred stock.
118
Registration
Rights
After the closing of this offering, the holders of
14,867,109 shares or approximately 71.6% of our common
stock (as of October 20, 2011) or their transferees
(assuming the purchase of $50.6 million of shares of our
common stock by existing investors who have indicated an
interest in making such a purchase of our common stock in this
offering) and holders of 297,237 shares of our common stock
issuable upon exercise of options to purchase our common stock,
subject to vesting schedules and to the lock-up agreements
described elsewhere in this prospectus, will be entitled to
certain rights with respect to the registration of such shares
under the Securities Act. In the event that we propose to
register any of our securities under the Securities Act, either
for our own account or for the account of other security
holders, these holders will be entitled to notice of such
registration and will be entitled to include their common stock
in such registration, subject to certain marketing and other
limitations. The holders of at least 55% of these securities
have the right to require us, on not more than two occasions, to
file a registration statement on
Form S-1
under the Securities Act in order to register the resale of
shares of their common stock. We may, in certain circumstances,
defer such registrations and the underwriters have the right,
subject to certain limitations, to limit the number of shares
included in such registrations. Further, these holders may
require us to register the resale of all or a portion of their
shares on a registration statement on
Form S-3,
subject to certain conditions and limitations. In an
underwritten offering, the managing underwriter, if any, has the
right, subject to specified conditions, to limit the number of
registrable securities such holders may include. Generally, we
are required to bear all registration and related expenses
incurred in connection with the demand and piggyback
registrations described above. If we are required to file a
registration statement, we must use our best efforts to cause
the registration statement to become effective. These rights
will terminate on the earlier of: (i) five years after the
closing of this offering and (ii) with respect to an
individual holder, when such holder is able to sell all of its
shares pursuant to Rule 144 under the Securities Act in any
three month period.
Anti-Takeover
Provisions of Delaware Law
We are subject to Section 203 of the Delaware General
Corporation Law. In general, Section 203 prohibits a
publicly held Delaware corporation from engaging in a business
combination with an interested stockholder for a period of three
years following the date the person became an interested
stockholder, unless the business combination or the transaction
in which the person became an interested stockholder is approved
in a prescribed manner. Generally, a business combination
includes a merger, asset or stock sale, or other transaction
resulting in a financial benefit to the interested stockholder.
Generally, an interested stockholder is a person who, together
with affiliates and associates, owns or, in the case of
affiliates or associates of the corporation, within three years
prior to the determination of interested stockholder status,
owned 15% or more of a corporations voting stock. The
existence of this provision could have anti-takeover effects
with respect to transactions not approved in advance by our
board of directors, such as discouraging takeover attempts that
might result in a premium over the market price of our common
stock. The foregoing provisions of the Delaware General
Corporation Law may have the effect of deterring or discouraging
hostile takeovers or delaying changes in control of our company.
Charter
and Bylaws Anti-Takeover Provisions
Classified
Board of Directors
Our amended and restated certificate of incorporation that will
be in effect upon the closing of this offering provides that our
board of directors will be divided into three classes of
directors, with the number of directors in each class to be as
nearly equal as possible. Our classified board of directors
staggers terms of the three classes and will be implemented
through one, two and three-year terms for the initial three
classes, followed in each case by full three-year terms. With a
classified board of directors, only one-third of the members of
our board of directors will be elected each year. This
classification of directors will have the effect of making it
more difficult for stockholders to change the composition of our
board of directors.
Size
of Board of Directors and Removal of Directors
Our amended and restated certificate of incorporation and bylaws
that will be in effect upon the closing of this offering provide
that:
|
|
|
|
|
the number of directors will be fixed from time to time
exclusively pursuant to a resolution adopted by our board of
directors, but must consist of not less than three directors,
which will prevent stockholders from circumventing the
provisions of our classified board of directors;
|
119
|
|
|
|
|
directors may be removed only for cause; and
|
|
|
|
vacancies on our board of directors may be filled only by a
majority of directors then in office, even though less than a
quorum.
|
Authorized
Preferred Stock
Our amended and restated certificate of incorporation that will
be in effect upon the closing of this offering provides for the
issuance by our board of directors, without stockholder
approval, of up to 10 million shares of preferred stock,
with voting power, designations, preferences and other special
rights as may be determined in the discretion of our board of
directors. The issuance of preferred stock could decrease the
amount of earnings and assets available for distribution to the
holders of common stock or could adversely affect the rights and
powers, including voting rights, of holders of common stock. In
certain circumstances, such issuance could have the effect of
decreasing the market price of the common stock. Preferred
stockholders could also make it more difficult for a third party
to acquire our company. At the closing of this offering, no
shares of preferred stock will be outstanding and we currently
have no plans to issue any shares of preferred stock.
No
Stockholder Action by Written Consent
Our amended and restated certificate of incorporation and bylaws
require that any action required or permitted to be taken by our
stockholders must be effected at a duly called annual or special
meeting of stockholders and may not be effected by a consent in
writing.
Calling
of Special Meetings of Stockholders
Our amended and restated bylaws provide that special stockholder
meetings for any purpose may only be called by our board of
directors, our chairman or our chief executive officer.
Advance
Notice Requirements for Stockholder Proposals and Director
Nominations
Our amended and restated bylaws establish an advance notice
procedure for stockholder proposals to be brought before an
annual meeting of stockholders, including proposed nominations
of candidates for election to the board of directors.
Stockholders at an annual meeting may only consider proposals or
nominations specified in the notice of meeting or brought before
the meeting by or at the direction of the board of directors, or
by a stockholder of record on the record date for the meeting,
who is entitled to vote at the meeting and who has delivered
timely written notice in proper form to our secretary of the
stockholders intention to bring such business before the
meeting. These provisions could have the effect of delaying
until the next stockholder meeting stockholder actions that are
favored by the holders of a majority of our outstanding voting
stock. These provisions also could discourage a third party from
making a tender offer for our common stock, because even if it
acquired a majority of our outstanding voting stock, it would be
able to take action as a stockholder, such as electing new
directors or approving a merger, only at a duly called
stockholders meeting and not by written consent.
Limitation
on Liability and Indemnification of Directors and
Officers
See ManagementLimitation on Liability and
Indemnification of Directors and Officers.
Transfer
Agent and Registrar
Our transfer agent and registrar for our common stock is
Continental Stock Transfer & Trust Company.
Listing
At present, there is no established trading market for our
common stock. We have applied to have our common stock listed on
the NASDAQ Global Market under the symbol CLVS.
120
SHARES ELIGIBLE
FOR FUTURE SALE
Prior to this offering, there was no public market for our
common stock. Sales of substantial amounts of common stock in
the public market, or the perception that such sales could
occur, could materially and adversely affect the market price of
our common stock and could impair our future ability to raise
capital through the sale of our equity or equity-related
securities at a time and price that we deem appropriate. As
described below, only a limited number of shares of our common
stock will be available for sale in the public market for a
period of several months after completion of this offering due
to contractual and legal restrictions on resale described below.
Nevertheless, sales of a substantial number of shares of our
common stock in the public market after such restrictions lapse,
or the perception that those sales may occur, could adversely
affect the prevailing market price of our common stock. Although
we have applied to list our common stock on the NASDAQ Global
Market, we cannot assure you that there will be an active market
for our common stock.
Based upon the number of shares outstanding as of
September 30, 2011, upon the closing of this offering, we
will have outstanding an aggregate of 20,765,590 shares of
our common stock, assuming no exercise of the underwriters
over-allotment option and no exercise of outstanding options,
after giving effect to (1) the conversion of all
outstanding shares of our convertible preferred stock into
7,244,523 shares of common stock immediately prior to the
closing of this offering (2) the issuance of
2,559,774 shares of our common stock immediately prior to
the closing of this offering as a result of the conversion of
$35.0 million in aggregate principal amount of our 5%
convertible promissory notes due 2012 (including accrued and
unpaid interest thereon), assuming an initial public offering
price of $14.00 per share, the midpoint of the price range set
forth on the cover page of this prospectus, and assuming the
conversion occurs on November 18, 2011 and (3) the
assumed purchase of $50.6 million of shares of our common
stock by existing investors who have indicated an interest in
making such a purchase of our common stock in this offering,
assuming an initial public offering price of $14.00 per share,
the midpoint of the price range set forth on the cover page of
this prospectus. Of these shares, approximately 5,683,744
(assuming the purchase of $50.6 million of shares of our
common stock by existing investors who have indicated an
interest in making such a purchase of our common stock in this
offering, based upon an assumed initial public offering price of
$14.00 per share, the midpoint of the price range set forth on
the cover page of this prospectus) shares sold in this offering,
including any shares sold in this offering in connection with
the exercise by the underwriters of their over-allotment option,
will be freely tradable without restriction or further
registration under the Securities Act.
14,325,474 shares of our common stock that will be outstanding
after this offering, including the shares owned by our existing
equity investors, will be deemed restricted
securities or control securities as that term
is defined under Rule 144. Restricted securities may be
sold in the public market only if registered, or if they qualify
for an exemption from registration, under the Securities Act,
such as under Rule 144 or Rule 701 under the
Securities Act, which we summarize below.
We may issue shares of common stock from time to time as
consideration for future acquisitions, investments or other
corporate purposes. In the event that any such acquisition,
investment or other transaction is significant, the number of
shares of common stock that we may issue may in turn be
significant. We may also grant registration rights covering
those shares of common stock issued in connection with any such
acquisition and investment.
In addition, shares of common stock that are either subject to
outstanding options or reserved for future issuance under our
equity incentive plans will become eligible for sale in the
public market to the extent permitted by the provisions of
various vesting schedules, the
lock-up
agreements and Rule 144 and Rule 701 under the
Securities Act.
Rule 144
In general, under Rule 144 under the Securities Act, as in
effect on the date of this prospectus, beginning 90 days
after the effective date of the registration statement of which
this prospectus is a part, a person who is not one of our
affiliates at any time during the three months preceding a sale,
and who has beneficially owned shares of our common stock for at
least six months, would be entitled to sell an unlimited number
of shares of our common stock provided current public
information about us is available and, after owning such shares
for at least one year, would be entitled to sell an unlimited
number of shares of our common stock without regard to the
current public information requirements of Rule 144.
Beginning 90 days after the effective date of the
registration statement of
121
which this prospectus is a part, our affiliates who have
beneficially owned shares of our common stock for at least six
months are entitled to sell within any three-month period a
number of shares that does not exceed the greater of:
|
|
|
|
|
1% of the number of shares of our common stock then outstanding,
which will equal approximately 207,656 shares, or
221,606 shares if the underwriters exercise their
over-allotment option in full, immediately after this offering,
based on the number of shares of our common stock outstanding as
of September 30, 2011; or
|
|
|
|
|
|
the average weekly trading volume of our common stock on the
NASDAQ Global Market during the four calendar weeks preceding
the filing of a notice on Form 144 with respect to the sale.
|
Sales under Rule 144 by our affiliates are also subject to
manner of sale provisions and notice requirements and to the
availability of current public information about us.
Rule 144 also provides that affiliates relying on
Rule 144 to sell shares of our common stock that are not
restricted shares must nonetheless comply with the same
restrictions applicable to restricted shares, other than the
holding period requirement.
Rule 701
Rule 701 generally allows a stockholder who purchased
shares of our common stock pursuant to a written compensatory
plan or contract and who is not deemed to have been an affiliate
of ours during the immediately preceding 90 days to sell
these shares in reliance upon Rule 144, but without being
required to comply with the public information, holding period,
volume limitation, or notice provisions of Rule 144.
Rule 701 also permits affiliates of ours to sell their
Rule 701 shares under Rule 144 without complying
with the holding period requirements of Rule 144. All
holders of Rule 701 shares, however, are required to
wait until 90 days after the date of this prospectus before
selling such shares pursuant to Rule 701 and until
expiration of the lockup agreements to which they are subject.
As of September 30, 2011, 454,394 shares of our
outstanding common stock had been issued in reliance on
Rule 701 as a result of exercises of stock options and
stock awards.
Lock-up
Agreements
In connection with this offering, we, our directors, our
executive officers and substantially all of our other
stockholders have agreed, subject to certain exceptions, with
the underwriters not to dispose of or hedge any shares of our
common stock or securities convertible into or exchangeable for
shares of common stock during the period from the date of the
lock-up agreement continuing through the date 180 days
after the date of this prospectus, except with the prior written
consent of J.P. Morgan Securities LLC and Credit Suisse
Securities (USA) LLC. J.P. Morgan Securities LLC and Credit
Suisse Securities (USA) LLC have advised us that they have no
current intent or arrangement to release any of the shares
subject to the
lock-up
agreements prior to the expiration of the
lock-up
period. The
lock-up
agreements permit stockholders to transfer common stock and
other securities subject to the
lock-up
agreements in certain circumstances.
The 180-day
restricted period described in the preceding paragraph will be
automatically extended if:
|
|
|
|
|
during the last 17 days of the
180-day
restricted period we issue an earnings release or announce
material news or a material event; or
|
|
|
|
prior to the expiration of the
180-day
restricted period, we announce that we will release earnings
results during the
16-day
period beginning on the last day of the
180-day
period,
|
in which case the restrictions described in the preceding
paragraph will continue to apply until the expiration of the
18-day
period beginning on the date of the issuance of the earnings
release or the announcement of the material news or material
event.
Following the
lock-up
periods set forth in the agreements described above, and
assuming that the representatives of the underwriters do not
release any parties from these agreements and that there is no
extension of the
lock-up
period, all of the shares of our common stock that are
restricted securities or are held by our affiliates as of the
date of this prospectus will be eligible for sale in the public
market in compliance with Rule 144 under the Securities Act.
122
Equity
Incentive Plans
Upon the closing of this offering, we intend to file one or more
registration statements on
Form S-8
under the Securities Act to register the shares of common stock
issued or reserved for issuance under our equity incentive
plans, including the equity incentive plans we adopted in
connection with this offering. Accordingly, shares registered
under such registration statement will be available for sale in
the open market, unless such shares are subject to vesting
restrictions with us or the
lock-up
restrictions described above.
Registration
Rights
Some of our security holders have the right to require us to
register shares of our common stock for resale in some
circumstances. See Description of Capital
StockRegistration Rights.
Initial
Public Offering Price
Prior to this offering, there has been no public market for our
common stock. The initial public offering price will be
negotiated between us and the representatives of the
underwriters. Among the factors to be considered in these
negotiations are:
|
|
|
|
|
the history of, and prospects for, our company and the industry
in which we compete;
|
|
|
|
our past and present financial performance;
|
|
|
|
an assessment of our management;
|
|
|
|
the present state of our development;
|
|
|
|
the prospects for our future earnings;
|
|
|
|
the prevailing conditions of the applicable U.S. securities
market at the time of this offering;
|
|
|
|
market valuations of publicly traded companies that we and the
representatives of the underwriters believe to be comparable to
us; and
|
|
|
|
other factors deemed relevant.
|
The estimated initial public offering price range set forth on
the cover page of this preliminary prospectus is subject to
change as a result of market conditions and other factors.
123
MATERIAL
U.S. FEDERAL INCOME AND ESTATE TAX CONSIDERATIONS
The following is a general discussion of the material
U.S. federal income and estate tax consequences of the
acquisition, ownership and disposition of our common stock, but
is not a complete analysis of all the potential
U.S. federal income and estate tax consequences relating
thereto. Except where noted, this summary deals only with common
stock that is purchased by a
non-U.S. holder
pursuant to this offering and is held as a capital asset by the
non-U.S. holder.
A
non-U.S. holder
means a person (other than a partnership) that is for
U.S. federal income tax purposes any of the following:
|
|
|
|
|
a nonresident alien individual;
|
|
|
|
a corporation (or any other entity treated as a corporation for
U.S. federal income tax purposes) created or organized in
or under the laws of a jurisdiction other than the United
States, any state thereof or the District of Columbia;
|
|
|
|
an estate other than one the income of which is subject to
U.S. federal income taxation regardless of its
source; or
|
|
|
|
a trust other than a trust if it (A) is subject to the
primary supervision of a court within the United States and the
control of one or more U.S. persons having the authority to
control all substantial decisions of the trust, or (B) has
a valid election in effect to be treated as a U.S. person.
|
If an entity treated as a partnership for U.S. federal
income tax purposes holds common stock, the tax treatment of a
partner will generally depend on the status of the partner and
upon the activities of the partnership. Accordingly,
partnerships that hold common stock and partners in such
partnerships should consult their respective tax advisors with
respect to the U.S. federal income and estate tax
consequences of the ownership and disposition of common stock.
A
non-U.S. holder
does not include an individual who is present in the United
States for 183 days or more in the taxable year of
disposition and is not otherwise a resident of the United States
for U.S. federal income tax purposes. Such an individual is
urged to consult his or her own tax advisor regarding the
U.S. federal income and estate tax consequences of the
ownership and disposition of common stock.
This discussion does not address all aspects of
U.S. federal income and estate taxation that may be
relevant in light of a
non-U.S. holders
special tax status or special circumstances.
U.S. expatriates, controlled foreign
corporations, passive foreign investment
companies, corporations that accumulate earnings to avoid
U.S. federal income tax and investors that hold common
stock as part of a hedge, straddle or conversion transaction are
among those categories of potential investors that may be
subject to special rules not covered in this discussion. This
discussion does not address any U.S. federal tax
consequences other than income and estate tax consequences or
any tax consequences arising under the laws of any state, local
or
non-U.S. taxing
jurisdiction. Furthermore, the following discussion is based on
current provisions of the Code, Treasury Regulations and
administrative and judicial interpretations thereof, all as in
effect on the date hereof, and all of which are subject to
change, possibly with retroactive effect. Accordingly, each
non-U.S. holder
should consult its tax advisors regarding the U.S. federal,
state, local and
non-U.S. income,
estate and other tax consequences of acquiring, holding and
disposing of shares of our common stock.
THIS SUMMARY IS FOR GENERAL INFORMATION ONLY AND IS NOT TAX
ADVICE. INVESTORS CONSIDERING THE PURCHASE OF SECURITIES
PURSUANT TO THIS OFFERING ARE ENCOURAGED TO CONSULT THEIR OWN
TAX ADVISORS REGARDING THE APPLICATION OF THE U.S. FEDERAL
INCOME AND ESTATE TAX LAWS TO THEIR PARTICULAR SITUATIONS AND
THE APPLICATION OF OTHER FEDERAL TAX LAWS, FOREIGN, STATE AND
LOCAL LAWS, AND TAX TREATIES.
Dividends
Distributions in cash or other property on our common stock will
constitute dividends for U.S. federal income tax purposes
to the extent paid from our current or accumulated earnings and
profits, as determined under U.S. federal income tax
principles. Amounts not treated as dividends for
U.S. federal income tax purposes will constitute a return
of capital and will first be applied against and reduce a
holders adjusted basis in the common
124
stock, but not below zero, and then the excess, if any, will be
treated as gain from the sale of common stock, as described
below.
As discussed above in the section titled Dividend
Policy, we do not intend to pay cash dividends on our
common stock for the foreseeable future. In the event that we do
make distributions on our common stock, amounts paid to a
non-U.S.
holder of common stock that are treated as dividends for
U.S. federal income tax purposes generally will be subject
to U.S. withholding tax at a rate of 30% of the gross
amount of the dividends or such lower rate as may be specified
by an applicable tax treaty. In order to receive a reduced
treaty rate, a
non-U.S. holder
generally must provide a valid Internal Revenue Service, or IRS,
Form W-8BEN
or other successor form certifying qualification for the reduced
rate.
Dividends received by a
non-U.S. holder
that are effectively connected with a U.S. trade or
business conducted by the
non-U.S. holder
(and, if required by an applicable income tax treaty, are
attributable to a U.S. permanent establishment) are exempt
from such withholding tax. In order to obtain this exemption, a
non-U.S. holder
must provide a valid IRS
Form W-8ECI
or other applicable form properly certifying such exemption.
Such effectively connected dividends, although not subject to
withholding tax, will generally be subject to regular
U.S. federal income tax as if the
non-U.S. holder
were a U.S. resident, unless an applicable income tax
treaty provides otherwise. A
non-U.S. corporation
receiving effectively connected dividends may also be subject to
an additional branch profits tax imposed at a rate
of 30% (or a lower treaty rate) on the earnings and profits
attributable to its effectively connected income.
Gain on
Disposition of Common Stock
A
non-U.S. holder
generally will not be subject to U.S. federal income tax on
any gain realized upon the sale or other disposition of common
stock unless:
|
|
|
|
|
the gain is effectively connected with the
non-U.S. holders
conduct of a trade or business in the United States (and, if
required by an applicable income tax treaty, is attributable to
a U.S. permanent establishment); or
|
|
|
|
we are or have been a U.S. real property holding
corporation, as defined below, at any time within the five-year
period preceding the disposition or the
non-U.S. holders
holding period, whichever period is shorter (the relevant
period).
|
Unless an applicable treaty provides otherwise, gain described
in the first bullet point above generally will be subject to
regular U.S. federal income tax as if the
non-U.S. holder
were a U.S. resident and, in the case of
non-U.S. holders
taxed as corporations, the branch profits tax described above.
Generally, a corporation is a U.S. real property holding
corporation, or USRPHC, if the fair market value of its
U.S. real property interests, as defined in the Code and
applicable Treasury regulations, equals or exceeds 50% of the
aggregate fair market value of its worldwide real property
interests and its other assets used or held for use in a trade
or business.
We believe that we are not, and currently do not anticipate
becoming, a USRPHC. However, there can be no assurance that our
current analysis is correct or that we will not become a USRPHC
in the future. Even if we are or become a USRPHC, as long as our
common stock is regularly traded on an established
securities market, within the meaning of applicable
Treasury regulations, such common stock will be treated as
U.S. real property interests only if the
non-U.S. holder
actually or constructively held more than 5% of such regularly
traded common stock at some time during the relevant period.
Backup
Withholding and Information Reporting
Information returns will be filed with the IRS in connection
with payments of dividends and the proceeds from a sale or other
disposition of common stock. A
non-U.S. holder
may have to comply with certification procedures to establish
that it is not a U.S. person in order to avoid information
reporting and backup withholding tax requirements. The
certification procedures required to claim a reduced rate of
withholding under a treaty generally will satisfy the
certification requirements necessary to avoid the backup
withholding tax as well. The
125
amount of any backup withholding from a payment to a
non-U.S. holder
will be allowed as a credit against its U.S. federal income
tax liability and may entitle it to a refund, provided that the
required information is timely furnished to the IRS.
U.S.
Federal Estate Tax
Shares of common stock held (or deemed held) by an individual
who is a
non-U.S. holder
at the time of his or her death will be included in such
non-U.S. holders
gross estate for U.S. federal estate tax purposes, unless
an applicable estate tax treaty provides otherwise.
Legislation
Relating to Foreign Accounts
Legislation enacted in 2010 will generally impose a
U.S. federal withholding tax of 30% on dividends and the
gross proceeds of a disposition of our common stock paid after
December 31, 2012 to a foreign financial institution unless
such institution enters into an agreement with the
U.S. government to withhold on certain payments and to
collect and provide to the U.S. tax authorities substantial
information regarding U.S. account holders of such
institution (which includes certain equity and debt holders of
such institution, as well as certain account holders that are
foreign entities with U.S. owners). The recently enacted
legislation will also generally impose a U.S. federal
withholding tax of 30% on dividends and the gross proceeds of a
disposition of our common stock paid after December 31,
2012 to a foreign entity (other than a financial institution)
unless such entity provides the withholding agent with a
certification identifying the direct and indirect
U.S. owners of the entity. Under certain circumstances, a
holder might be eligible for refunds or credits of such taxes.
Investors are encouraged to consult with their own tax advisors
regarding the possible impact of this legislation on their
investment in our common stock.
126
UNDERWRITING
We are offering the shares of common stock described in this
prospectus through a number of underwriters. J.P. Morgan
Securities LLC and Credit Suisse Securities (USA) LLC are acting
as joint book-running managers of the offering and as
representatives of the underwriters. We have entered into an
underwriting agreement with the underwriters. Subject to the
terms and conditions of the underwriting agreement, we have
agreed to sell to the underwriters, and each underwriter has
severally agreed to purchase, at the public offering price less
the underwriting discounts and commissions set forth on the
cover page of this prospectus, the number of shares of common
stock listed next to its name in the following table:
|
|
|
|
|
|
|
Number of
|
|
Name
|
|
Shares
|
|
|
J.P. Morgan Securities LLC
|
|
|
|
|
Credit Suisse Securities (USA) LLC
|
|
|
|
|
Leerink Swann LLC
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
9,300,000
|
|
|
|
|
|
|
The underwriters are committed to purchase all the common shares
offered by us if they purchase any shares. The underwriting
agreement also provides that if an underwriter defaults, the
purchase commitments of non-defaulting underwriters may also be
increased or the offering may be terminated.
The underwriters propose to offer the common shares directly to
the public at the initial public offering price set forth on the
cover page of this prospectus and to certain dealers at that
price less a concession not in excess of
$ per share. Any such dealers may
resell shares to certain other brokers or dealers at a discount
of up to $ per share from the
initial public offering price. After the initial public offering
of the shares, the offering price and other selling terms may be
changed by the underwriters. Sales of shares made outside of the
United States may be made by affiliates of the underwriters. The
representatives have advised us that the underwriters do not
intend to confirm discretionary sales in excess of 5% of the
common shares offered in this offering.
The underwriters have an option to buy up to 1,395,000
additional shares of common stock from us to cover sales of
shares by the underwriters which exceed the number of shares
specified in the table above. The underwriters have 30 days
from the date of this prospectus to exercise this over-allotment
option. If any shares are purchased with this over-allotment
option, the underwriters will purchase shares in approximately
the same proportion as shown in the table above. If any
additional shares of common stock are purchased, the
underwriters will offer the additional shares on the same terms
as those on which the shares are being offered. Holders of our
convertible preferred stock immediately prior to this offering,
including our executive officers, certain of our directors and
certain affiliates of our directors, have indicated an interest
in purchasing an aggregate of
approximately $50.6 million of shares of our common
stock in this offering, expected to be allocated pro rata among
them based on each such stockholders ownership of shares
of our convertible preferred stock outstanding immediately prior
to this offering, at the initial public offering price. However,
because indications of interest are not binding agreements or
commitments to purchase, the underwriters may determine to sell
more, less or no shares in this offering to any of these
stockholders, or any of these stockholders may determine to
purchase more, less or no shares in this offering. The
underwriters will receive an underwriting discount of
$ per share on any sales of shares
to such stockholders.
The underwriting fee is equal to the public offering price per
share of common stock less the amount paid by the underwriters
to us per share of common stock. The underwriting fee is
$ per share. The following table
shows the per share and total underwriting discounts and
commissions to be paid to the underwriters assuming both no
exercise and full exercise of the underwriters option to
purchase additional shares.
|
|
|
|
|
|
|
|
|
|
|
Without
|
|
|
With full
|
|
|
|
over-allotment
|
|
|
over-allotment
|
|
|
|
exercise
|
|
|
exercise
|
|
|
Per Share
|
|
$
|
|
|
|
$
|
|
|
Total
|
|
$
|
|
|
|
$
|
|
|
127
We estimate that the total expenses of this offering, including
registration, filing and listing fees, printing fees and legal
and accounting expenses, but excluding the underwriting
discounts and commissions, will be approximately
$2.4 million.
A prospectus in electronic format may be made available on the
web sites maintained by one or more underwriters, or selling
group members, if any, participating in the offering. The
underwriters may agree to allocate a number of shares to
underwriters and selling group members for sale to their online
brokerage account holders. Internet distributions will be
allocated by the representatives to underwriters and selling
group members that may make Internet distributions on the same
basis as other allocations.
We have agreed that we will not: (i) offer, pledge,
announce the intention to sell, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase, or
otherwise transfer or dispose of, directly or indirectly, or
file with the Securities and Exchange Commission a registration
statement under the Securities Act relating to, any shares of
our common stock or securities convertible into or exchangeable
or exercisable for any shares of our common stock, or
(ii) enter into any swap or other agreement that transfers,
in whole or in part, any of the economic consequences of
ownership of any shares of our common stock or such other
securities (regardless of whether any of these transactions are
to be settled by the delivery of shares of common stock, or such
other securities, in cash or otherwise), in each case without
the prior written consent of J.P. Morgan Securities LLC and
Credit Suisse Securities (USA) LLC for a period of 180 days
after the date of this prospectus. Notwithstanding the
foregoing, if (1) during the last 17 days of the
180-day
restricted period, we issue an earnings release or material news
or a material event relating to our company occurs; or
(2) prior to the expiration of the
180-day
restricted period, we announce that we will release earnings
results during the
16-day
period beginning on the last day of the
180-day
period, the restrictions described above shall continue to apply
until the expiration of the
18-day
period beginning on the issuance of the earnings release or the
occurrence of the material news or material event.
Our directors and executive officers, and substantially all of
our other stockholders have entered into
lock-up
agreements with the underwriters prior to the commencement of
this offering pursuant to which we and each of these persons or
entities, with limited exceptions, for a period of 180 days
after the date of this prospectus, may not, without the prior
written consent of J.P. Morgan Securities LLC and Credit
Suisse Securities (USA) LLC, (1) offer, pledge, announce
the intention to sell, sell, contract to sell, sell any option
or contract to purchase, purchase any option or contract to
sell, grant any option, right or warrant to purchase, or
otherwise transfer or dispose of, directly or indirectly, any
shares of our common stock or securities convertible into or
exchangeable or exercisable for any shares of our common stock
(including, without limitation, common stock which may be deemed
to be beneficially owned by such directors, executive officers,
managers and members in accordance with the rules and
regulations of the SEC and securities which may be issued upon
exercise of a stock option or warrant), (2) enter into any
swap or other agreement that transfers, in whole or in part, any
of the economic consequences of ownership of any shares of our
common stock or such other securities, whether any such
transaction described in clause (1) above or this
clause (2) is to be settled by delivery of common stock or
such other securities, in cash or otherwise or (3) make any
demand for or exercise any right with respect to the
registration of any shares of our common stock or any security
convertible into or exercisable or exchangeable for our common
stock. Notwithstanding the foregoing, if (1) during the
last 17 days of the
180-day
restricted period, we issue an earnings release or material news
or a material event relating to our company occurs; or
(2) prior to the expiration of the
180-day
restricted period, we announce that we will release earnings
results during the
16-day
period beginning on the last day of the
180-day
period, the restrictions described above shall continue to apply
until the expiration of the
18-day
period beginning on the issuance of the earnings release or the
occurrence of the material news or material event. Each of the
lock-up
agreements contain certain exceptions, including transfers of
shares as a gift or by will or intestacy; transfers of shares to
any trust, the sole beneficiaries of which are the transferor
and/or its
immediate family members; or transfers to certain entities or
persons affiliated with the stockholder; provided that in the
case of each of the above (except transfers by will or
intestacy), each donee, distributee, transferee and recipient
agrees to be subject to the restrictions described in this
paragraph, and no transaction includes a disposition for value.
We have agreed to indemnify the underwriters against certain
liabilities, including liabilities under the Securities Act.
128
We expect to have our common stock approved for listing on the
NASDAQ Global Market under the symbol CLVS.
In connection with this offering, the underwriters may engage in
stabilizing transactions, which involves making bids for,
purchasing and selling shares of common stock in the open market
for the purpose of preventing or retarding a decline in the
market price of the common stock while this offering is in
progress. These stabilizing transactions may include making
short sales of the common stock, which involves the sale by the
underwriters of a greater number of shares of common stock than
they are required to purchase in this offering, and purchasing
shares of common stock on the open market to cover positions
created by short sales. Short sales may be covered
shorts, which are short positions in an amount not greater than
the underwriters over-allotment option referred to above,
or may be naked shorts, which are short positions in
excess of that amount. The underwriters may close out any
covered short position either by exercising their over-allotment
option, in whole or in part, or by purchasing shares in the open
market. In making this determination, the underwriters will
consider, among other things, the price of shares available for
purchase in the open market compared to the price at which the
underwriters may purchase shares through the over-allotment
option. A naked short position is more likely to be created if
the underwriters are concerned that there may be downward
pressure on the price of the common stock in the open market
that could adversely affect investors who purchase in this
offering. To the extent that the underwriters create a naked
short position, they will purchase shares in the open market to
cover the position.
The underwriters have advised us that, pursuant to
Regulation M of the Securities Act, they may also engage in
other activities that stabilize, maintain or otherwise affect
the price of the common stock, including the imposition of
penalty bids. This means that if the representatives of the
underwriters purchase common stock in the open market in
stabilizing transactions or to cover short sales, the
representatives can require the underwriters that sold those
shares as part of this offering to repay the underwriting
discount received by them.
These activities may have the effect of raising or maintaining
the market price of the common stock or preventing or retarding
a decline in the market price of the common stock, and, as a
result, the price of the common stock may be higher than the
price that otherwise might exist in the open market. If the
underwriters commence these activities, they may discontinue
them at any time. The underwriters may carry out these
transactions on the NASDAQ Global Market, in the
over-the-counter
market or otherwise.
Prior to this offering, there has been no public market for our
common stock. The initial public offering price will be
determined by negotiations between us and the representatives of
the underwriters. In determining the initial public offering
price, we and the representatives of the underwriters expect to
consider a number of factors including:
|
|
|
|
|
the information set forth in this prospectus and otherwise
available to the representatives;
|
|
|
|
our prospects and the history and prospects for the industry in
which we compete;
|
|
|
|
an assessment of our management;
|
|
|
|
our prospects for future earnings;
|
|
|
|
the general condition of the securities markets at the time of
this offering;
|
|
|
|
the recent market prices of, and demand for, publicly traded
common stock of generally comparable companies; and
|
|
|
|
other factors deemed relevant by the underwriters and us.
|
Neither we nor the underwriters can assure investors that an
active trading market will develop for shares of our common
stock, or that the shares will trade in the public market at or
above the initial public offering price.
Other than in the United States, no action has been taken by us
or the underwriters that would permit a public offering of the
securities offered by this prospectus in any jurisdiction where
action for that purpose is required. The securities offered by
this prospectus may not be offered or sold, directly or
indirectly, nor may this prospectus or any other offering
material or advertisements in connection with the offer and sale
of any such securities be distributed or published in any
jurisdiction, except under circumstances that will result in
compliance with the applicable rules
129
and regulations of that jurisdiction. Persons into whose
possession this prospectus comes are advised to inform
themselves about and to observe any restrictions relating to the
offering and the distribution of this prospectus. This
prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any securities offered by this
prospectus in any jurisdiction in which such an offer or a
solicitation is unlawful.
This document is only being distributed to and is only directed
at: (i) persons who are outside the United Kingdom or
(ii) to investment professionals falling within
Article 19(5) of the Financial Services and Markets Act
2000 (Financial Promotion) Order 2005 (the Order) or
(iii) high net worth entities, and other persons to whom it
may lawfully be communicated, falling with Article 49(2)(a)
to (d) of the Order (all such persons together being
referred to as relevant persons). The securities are
only available to, and any invitation, offer or agreement to
subscribe, purchase or otherwise acquire such securities will be
engaged in only with, relevant persons. Any person who is not a
relevant person should not act or rely on this document or any
of its contents.
In relation to each Member State of the European Economic Area
which has implemented the Prospectus Directive, each, a Relevant
Member State, from and including the date on which the European
Union Prospectus Directive, the E.U. Prospectus Directive, is
implemented in that Relevant Member State, the Relevant
Implementation Date, an offer of securities described in this
prospectus may not be made to the public in that Relevant Member
State prior to the publication of a prospectus in relation to
the shares which has been approved by the competent authority in
that Relevant Member State or, where appropriate, approved in
another Relevant Member State and notified to the competent
authority in that Relevant Member State, all in accordance with
the E.U. Prospectus Directive, except that it may, with effect
from and including the Relevant Implementation Date, make an
offer of shares to the public in that Relevant Member State at
any time:
|
|
|
|
|
to legal entities which are authorized or regulated to operate
in the financial markets or, if not so authorized or regulated,
whose corporate purpose is solely to invest in securities;
|
|
|
|
to any legal entity which has two or more of (1) an average
of at least 250 employees during the last financial year;
(2) a total balance sheet of more than 43,000,000 and
(3) an annual net turnover of more than 50,000,000,
as shown in its last annual or consolidated accounts;
|
|
|
|
to fewer than 100 natural or legal persons (other than qualified
investors as defined in the E.U. Prospectus Directive) subject
to obtaining the prior consent of the book-running managers for
any such offer; or
|
|
|
|
in any other circumstances which do not require the publication
by the Issuer of a prospectus pursuant to Article 3 of the
Prospectus Directive.
|
For the purposes of this provision, the expression an
offer of securities to the public in relation to any
securities in any Relevant Member State means the communication
in any form and by any means of sufficient information on the
terms of the offer and the securities to be offered so as to
enable an investor to decide to purchase or subscribe for the
securities, as the same may be varied in that Member State by
any measure implementing the E.U. Prospectus Directive in that
Member State and the expression E.U. Prospectus Directive means
Directive 2003/71/EC and includes any relevant implementing
measure in each Relevant Member State.
Certain of the underwriters and their affiliates have provided
in the past to us and our affiliates and may provide from time
to time in the future certain commercial banking, financial
advisory, investment banking and other services for us and such
affiliates in the ordinary course of their business, for which
they have received and may continue to receive customary fees
and commissions. In addition, from time to time, certain of the
underwriters and their affiliates may effect transactions for
their own account or the account of customers, and may hold on
behalf of themselves or their customers, long or short positions
in our debt or equity securities or loans, now and in the future.
130
LEGAL
MATTERS
The validity of our common stock offered by this prospectus will
be passed upon for us by our counsel, Willkie Farr &
Gallagher LLP, New York, New York. Certain legal matters in
connection with this offering will be passed upon for the
underwriters by Latham & Watkins LLP, San Diego,
California.
EXPERTS
Ernst & Young LLP, independent registered public
accounting firm, has audited our financial statements at
December 31, 2010 and 2009, and for the year ended
December 31, 2010 and the period from April 20, 2009
(Inception) to December 31, 2009, as set forth in their
report (which contains an explanatory paragraph describing
conditions that raise substantial doubt about our ability to
continue as a going concern as described in Note 1 to the
financial statements). We have included our financial statements
in the prospectus and elsewhere in the registration statement in
reliance on Ernst & Young LLPs report, given on
their authority as experts in accounting and auditing.
WHERE YOU
CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on
Form S-1
under the Securities Act relating to the shares of our common
stock being offered by this prospectus. This prospectus, which
constitutes part of that registration statement, does not
contain all of the information set forth in the registration
statement or the exhibits and schedules which are part of the
registration statement. For further information about us and the
common stock offered, see the registration statement and the
exhibits and schedules thereto. Statements contained in this
prospectus regarding the contents of any contract or any other
document to which reference is made are not necessarily
complete, and, in each instance where a copy of a contract or
other document has been filed as an exhibit to the registration
statement, reference is made to the copy so filed, each of those
statements being qualified in all respects by the reference.
A copy of the registration statement, the exhibits and schedules
thereto and any other document we file may be inspected without
charge at the public reference facilities maintained by the SEC
in 100 F Street, N.E., Washington, D.C. 20549 and
copies of all or any part of the registration statement may be
obtained from this office upon the payment of the fees
prescribed by the SEC. The public may obtain information on the
operation of the public reference facilities in
Washington, D.C. by calling the SEC at
1-800-SEC-0330.
Our filings with the SEC are available to the public from the
SECs website at www.sec.gov.
Upon the closing of this offering, we will be subject to the
information and periodic reporting requirements of the Exchange
Act applicable to a company with securities registered pursuant
to Section 12 of the Exchange Act. In accordance therewith,
we will file proxy statements and other information with the
SEC. All documents filed with the SEC are available for
inspection and copying at the public reference room and website
of the SEC referred to above. We maintain a website at
www.clovisoncology.com. You may access our reports, proxy
statements and other information free of charge at this website
as soon as reasonably practicable after such material is
electronically filed with, or furnished to, the SEC. The
information on such website is not incorporated by reference and
is not a part of this prospectus.
131
Report of
Independent Registered Public Accounting Firm
The Board of Directors
Clovis Oncology, Inc.
We have audited the accompanying balance sheets of Clovis
Oncology, Inc. (the Company), a corporation in the development
stage, as of December 31, 2010 and 2009, and the related
statements of operations, convertible preferred stock and
stockholders deficit, and cash flows for the year ended
December 31, 2010 and the period from April 20, 2009
(Inception) to December 31, 2009. These financial
statements are the responsibility of the Companys
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. We were not engaged to perform an
audit of the Companys internal control over financial
reporting. Our audits included consideration of internal control
over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of
the Companys internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of the Company as of December 31, 2010 and 2009, and the
consolidated results of its operations and its cash flows for
the year ended December 31, 2010 and the period from
April 20, 2009 (Inception) to December 31, 2009 in
conformity with U.S. generally accepted accounting
principles.
As discussed in Note 1 to the financial statements, the
Companys recurring losses from operations raise
substantial doubt about its ability to continue as a going
concern (managements plans as to these matters are also
described in Note 1). The financial statements as of and
for the year ended December 31, 2010 do not include any
adjustments that might result from the outcome of this
uncertainty.
Denver, Colorado
April 29, 2011, except for Notes 1, 2, 6, 7, 8 and
11, as to which the date is
October 28, 2011
F-2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative
|
|
|
|
|
|
|
Period from
|
|
|
|
|
|
|
|
|
from
|
|
|
|
For the Year
|
|
|
April 20, 2009
|
|
|
|
|
|
|
|
|
April 20, 2009
|
|
|
|
Ended
|
|
|
(Inception) to
|
|
|
|
|
|
|
|
|
(Inception) to
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
Nine Months Ended September 30,
|
|
|
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
|
(in thousands, except per share amounts)
|
|
|
Revenues
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
22,323
|
|
|
|
1,762
|
|
|
|
28,286
|
|
|
|
13,672
|
|
|
|
52,371
|
|
General and administrative
|
|
|
4,302
|
|
|
|
2,209
|
|
|
|
4,824
|
|
|
|
3,065
|
|
|
|
11,335
|
|
Acquired in-process research and development
|
|
|
12,000
|
|
|
|
13,085
|
|
|
|
7,000
|
|
|
|
2,000
|
|
|
|
32,085
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(38,625
|
)
|
|
|
(17,056
|
)
|
|
|
(40,110
|
)
|
|
|
(18,737
|
)
|
|
|
(95,791
|
)
|
Other income (expense), net
|
|
|
795
|
|
|
|
(43
|
)
|
|
|
(552
|
)
|
|
|
340
|
|
|
|
200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(37,830
|
)
|
|
$
|
(17,099
|
)
|
|
$
|
(40,662
|
)
|
|
$
|
(18,397
|
)
|
|
$
|
(95,591
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per common share
|
|
$
|
(28.55
|
)
|
|
$
|
(15.38
|
)
|
|
$
|
(26.80
|
)
|
|
$
|
(13.91
|
)
|
|
$
|
(72.25
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average common shares outstanding
|
|
|
1,325
|
|
|
|
1,112
|
|
|
|
1,517
|
|
|
|
1,323
|
|
|
|
1,323
|
|
Pro forma basic and diluted net loss per common share (unaudited)
|
|
$
|
(4.41
|
)
|
|
|
|
|
|
$
|
(4.09
|
)
|
|
|
|
|
|
$
|
(12.58
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma basic and diluted weighted average common shares
outstanding (unaudited)
|
|
|
8,570
|
|
|
|
|
|
|
|
9,939
|
|
|
|
|
|
|
|
7,598
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
F-3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
September 30, 2011
|
|
|
|
2010
|
|
|
2009
|
|
|
September 30, 2011
|
|
|
Pro Forma
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
|
(in thousands, except for share amounts)
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
10,508
|
|
|
$
|
57,311
|
|
|
$
|
19,992
|
|
|
$
|
19,992
|
|
Available for sale securities
|
|
|
11,791
|
|
|
|
|
|
|
|
2,036
|
|
|
|
2,036
|
|
Prepaid research and development expenses
|
|
|
1,826
|
|
|
|
1,105
|
|
|
|
401
|
|
|
|
401
|
|
Other current assets
|
|
|
1,096
|
|
|
|
66
|
|
|
|
2,662
|
|
|
|
2,662
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
25,221
|
|
|
|
58,482
|
|
|
|
25,091
|
|
|
|
25,091
|
|
Property and equipment, net
|
|
|
951
|
|
|
|
264
|
|
|
|
1,263
|
|
|
|
1,263
|
|
Prepaid research and development expenses
|
|
|
|
|
|
|
810
|
|
|
|
|
|
|
|
|
|
Other assets
|
|
|
28
|
|
|
|
18
|
|
|
|
34
|
|
|
|
34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
26,200
|
|
|
$
|
59,574
|
|
|
$
|
26,388
|
|
|
$
|
26,388
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and stockholders deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
1,400
|
|
|
$
|
534
|
|
|
$
|
2,938
|
|
|
$
|
2,938
|
|
Accrued research and development expenses
|
|
|
3,195
|
|
|
|
388
|
|
|
|
4,273
|
|
|
|
4,273
|
|
Other accrued expenses
|
|
|
740
|
|
|
|
211
|
|
|
|
1,495
|
|
|
|
1,495
|
|
Convertible promissory notes and accrued interest
|
|
|
|
|
|
|
|
|
|
|
35,602
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
5,335
|
|
|
|
1,133
|
|
|
|
44,308
|
|
|
|
8,706
|
|
Non-current liabilities
|
|
|
115
|
|
|
|
|
|
|
|
133
|
|
|
|
133
|
|
Commitments and contingencies (Note 8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible preferred stock, $0.001 par value per share,
36,296,552 shares authorized at December 31, 2010 and
2009 and 39,922,093 shares authorized at September 30,
2011;
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A-1
convertible preferred stock, 5,044,828 shares authorized,
issued and outstanding at December 31, 2010 and 2009 and
September 30, 2011, and no shares at September 30,
2011 (proforma); liquidation preference of $10,090
|
|
|
9,916
|
|
|
|
9,916
|
|
|
|
9,916
|
|
|
|
|
|
Series A-2
convertible preferred stock, 5,044,828 shares authorized,
issued and outstanding at December 31, 2010 and 2009 and
September 30, 2011, and no shares at September 30,
2011 (proforma); liquidation preference of $15,135
|
|
|
15,135
|
|
|
|
15,135
|
|
|
|
15,135
|
|
|
|
|
|
Series B convertible preferred stock,
10,919,540 shares authorized, issued and outstanding at
December 31, 2010 and 2009 and September 30, 2011, and
no shares at September 30, 2011 (proforma); liquidation
equity (deficit) preference of $50,448
|
|
|
50,448
|
|
|
|
50,448
|
|
|
|
50,448
|
|
|
|
|
|
Stockholders equity (deficit):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $0.001 par value per share,
55,000,000 shares authorized at December 31, 2010 and
2009, 58,000,000 shares authorized at September 30,
2011 and 100,000,000 shares authorized (pro forma); 1,337,076,
1,321,558, and 1,661,293 issued and outstanding at
December 31, 2010 and 2009 and September 30, 2011,
respectively, and 11,465,590 at September 30, 2011 (pro
forma)
|
|
|
1
|
|
|
|
1
|
|
|
|
2
|
|
|
|
11
|
|
Preferred Stock, par value $0.001 per share; no shares
authorized, issued or outstanding, actual; 10,000,000 shares
authorized and no shares issued and outstanding (pro forma)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional paid-in capital
|
|
|
137
|
|
|
|
40
|
|
|
|
1,989
|
|
|
|
113,316
|
|
Accumulated other comprehensive income
|
|
|
42
|
|
|
|
|
|
|
|
48
|
|
|
|
48
|
|
Deficit accumulated during development stage
|
|
|
(54,929
|
)
|
|
|
(17,099
|
)
|
|
|
(95,591
|
)
|
|
|
(95,826
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity (deficit)
|
|
|
(54,749
|
)
|
|
|
(17,058
|
)
|
|
|
(93,552
|
)
|
|
|
17,549
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities, convertible preferred stock and
stockholders equity (deficit)
|
|
$
|
26,200
|
|
|
$
|
59,574
|
|
|
$
|
26,388
|
|
|
$
|
26,388
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
F-4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
Convertible
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Other
|
|
|
During
|
|
|
Total
|
|
|
|
|
|
|
Preferred Stock
|
|
|
|
Common Stock
|
|
|
Paid-In
|
|
|
Comprehensive
|
|
|
Development
|
|
|
Stockholders
|
|
|
Comprehensive
|
|
|
|
Shares
|
|
|
Amount
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Income
|
|
|
Stage
|
|
|
Deficit
|
|
|
Loss
|
|
|
|
(in thousands, except for share amounts)
|
|
Balance at April 20, 2009 (inception)
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
Issuance of common stock to founders at $.001 per share
|
|
|
|
|
|
|
|
|
|
|
|
1,206,899
|
|
|
|
1
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
Issuance of convertible preferred stock; $2.00, $3.00 and $4.62
per share for
series A-1,
A-2 and B,
respectively, net of issuance costs of $174
|
|
|
21,009,196
|
|
|
|
75,499
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of stock options
|
|
|
|
|
|
|
|
|
|
|
|
114,659
|
|
|
|
|
|
|
|
33
|
|
|
|
|
|
|
|
|
|
|
|
33
|
|
|
|
|
|
Share-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(17,099
|
)
|
|
|
(17,099
|
)
|
|
$
|
(17,099
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009
|
|
|
21,009,196
|
|
|
|
75,499
|
|
|
|
|
1,321,558
|
|
|
|
1
|
|
|
|
39
|
|
|
|
|
|
|
|
(17,099
|
)
|
|
|
(17,059
|
)
|
|
$
|
(17,099
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of stock options
|
|
|
|
|
|
|
|
|
|
|
|
15,518
|
|
|
|
|
|
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
29
|
|
|
|
|
|
Share-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
68
|
|
|
|
|
|
|
|
|
|
|
|
68
|
|
|
|
|
|
Net unrealized gain on available for sale securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42
|
|
|
|
|
|
|
|
42
|
|
|
$
|
42
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(37,830
|
)
|
|
|
(37,830
|
)
|
|
|
(37,830
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2010
|
|
|
21,009,196
|
|
|
|
75,499
|
|
|
|
|
1,337,076
|
|
|
|
1
|
|
|
|
136
|
|
|
|
42
|
|
|
|
(54,929
|
)
|
|
$
|
(54,750
|
)
|
|
$
|
(37,788
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of stock options (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
324,217
|
|
|
|
1
|
|
|
|
1,051
|
|
|
|
|
|
|
|
|
|
|
|
1,052
|
|
|
|
|
|
Share-based compensation expense (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
802
|
|
|
|
|
|
|
|
|
|
|
|
802
|
|
|
|
|
|
Net unrealized loss on available for sale securities (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(36
|
)
|
|
|
|
|
|
|
(36
|
)
|
|
$
|
(36
|
)
|
Currency translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42
|
|
|
|
|
|
|
|
42
|
|
|
|
42
|
|
Net loss (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(40,662
|
)
|
|
|
(40,662
|
)
|
|
|
(40,662
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2011 (unaudited)
|
|
|
21,009,196
|
|
|
$
|
75,499
|
|
|
|
|
1,661,293
|
|
|
$
|
2
|
|
|
$
|
1,989
|
|
|
$
|
48
|
|
|
$
|
(95,591
|
)
|
|
$
|
(93,552
|
)
|
|
$
|
(40,656
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proforma conversion of convertible promissory notes into common
stock
|
|
|
|
|
|
|
|
|
|
|
|
2,559,774
|
|
|
|
2
|
|
|
|
35,835
|
|
|
|
|
|
|
|
(235
|
)
|
|
|
35,602
|
|
|
|
(235
|
)
|
Proforma conversion of convertible preferred stock into common
stock
|
|
|
(21,009,196
|
)
|
|
|
(75,499
|
)
|
|
|
|
7,244,523
|
|
|
|
7
|
|
|
|
75,492
|
|
|
|
|
|
|
|
|
|
|
|
75,499
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proforma at September 30, 2011 (unaudited)
|
|
|
|
|
|
$
|
|
|
|
|
|
11,465,590
|
|
|
$
|
11
|
|
|
$
|
113,316
|
|
|
$
|
48
|
|
|
$
|
(95,826
|
)
|
|
$
|
17,549
|
|
|
$
|
(40,891
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
F-5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative
|
|
|
|
|
|
|
Period from
|
|
|
|
|
|
|
|
|
|
from
|
|
|
|
For the
|
|
|
April 20, 2009
|
|
|
|
|
|
|
|
|
|
April 20, 2009
|
|
|
|
Year Ended
|
|
|
(Inception) to
|
|
|
|
Nine Months
|
|
|
(Inception) to
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
Ended September 30,
|
|
|
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
|
(in thousands)
|
|
|
Operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(37,830
|
)
|
|
$
|
(17,099
|
)
|
|
|
$
|
(40,662
|
)
|
|
$
|
(18,397
|
)
|
|
$
|
(95,591
|
)
|
Adjustments to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
83
|
|
|
|
6
|
|
|
|
|
133
|
|
|
|
55
|
|
|
|
222
|
|
Share-based compensation expense
|
|
|
68
|
|
|
|
4
|
|
|
|
|
802
|
|
|
|
42
|
|
|
|
874
|
|
Amortization of premiums and discounts on available for sale
securities
|
|
|
320
|
|
|
|
|
|
|
|
|
121
|
|
|
|
212
|
|
|
|
441
|
|
Gain on sale of available for sale securities
|
|
|
(18
|
)
|
|
|
|
|
|
|
|
(16
|
)
|
|
|
(16
|
)
|
|
|
(34
|
)
|
Non cash acquired in-process research and development
|
|
|
|
|
|
|
|
|
|
|
|
7,000
|
|
|
|
|
|
|
|
7,000
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid and accrued research and development expenses
|
|
|
2,896
|
|
|
|
(1,527
|
)
|
|
|
|
2,503
|
|
|
|
1,293
|
|
|
|
3,872
|
|
Other operating assets
|
|
|
(1,040
|
)
|
|
|
(84
|
)
|
|
|
|
25
|
|
|
|
(283
|
)
|
|
|
(1,099
|
)
|
Accounts payable
|
|
|
866
|
|
|
|
534
|
|
|
|
|
1,550
|
|
|
|
352
|
|
|
|
2,950
|
|
Other accrued expenses
|
|
|
644
|
|
|
|
211
|
|
|
|
|
1,379
|
|
|
|
568
|
|
|
|
2,234
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
|
(34,011
|
)
|
|
|
(17,955
|
)
|
|
|
|
(27,165
|
)
|
|
|
(16,174
|
)
|
|
|
(79,131
|
)
|
Investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
(770
|
)
|
|
|
(270
|
)
|
|
|
|
(445
|
)
|
|
|
(417
|
)
|
|
|
(1,485
|
)
|
Purchases of available for sale securities
|
|
|
(27,008
|
)
|
|
|
|
|
|
|
|
|
|
|
|
(27,090
|
)
|
|
|
(27,008
|
)
|
Maturities and sales of available for sale securities
|
|
|
14,957
|
|
|
|
|
|
|
|
|
9,614
|
|
|
|
10,585
|
|
|
|
24,571
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by investing activities
|
|
|
(12,821
|
)
|
|
|
(270
|
)
|
|
|
|
9,169
|
|
|
|
(16,922
|
)
|
|
|
(3,922
|
)
|
Financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sale of convertible preferred and common stock,
net of issuance costs
|
|
|
|
|
|
|
75,503
|
|
|
|
|
|
|
|
|
|
|
|
|
75,503
|
|
Accumulated issuance costs of planned initial public offering.
|
|
|
|
|
|
|
|
|
|
|
|
(1,514
|
)
|
|
|
|
|
|
|
(1,514
|
)
|
Proceeds from stock option exercises
|
|
|
29
|
|
|
|
33
|
|
|
|
|
1,052
|
|
|
|
2
|
|
|
|
1,114
|
|
Proceeds from issuance of convertible promissory notes, net of
issuance costs
|
|
|
|
|
|
|
|
|
|
|
|
27,903
|
|
|
|
|
|
|
|
27,903
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
29
|
|
|
|
75,536
|
|
|
|
|
27,441
|
|
|
|
2
|
|
|
|
103,006
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
|
39
|
|
|
|
|
|
|
|
39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Decrease) increase in cash and cash equivalents
|
|
|
(46,803
|
)
|
|
|
57,311
|
|
|
|
|
9,484
|
|
|
|
(33,094
|
)
|
|
|
19,992
|
|
Cash and cash equivalents at beginning of period
|
|
|
57,311
|
|
|
|
|
|
|
|
|
10,508
|
|
|
|
57,311
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
10,508
|
|
|
$
|
57,311
|
|
|
|
$
|
19,992
|
|
|
$
|
24,217
|
|
|
$
|
19,992
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
F-6
(INFORMATION
AS OF SEPTEMBER 30, 2011, FOR THE NINE MONTHS ENDED SEPTEMBER
30, 2011 AND 2010 AND THE PERIOD FROM APRIL 20, 2009 TO
SEPTEMBER 30, 2011 IS UNAUDITED)
Clovis Oncology, Inc. (the Company), a corporation
in the development stage, was incorporated in Delaware on
April 20, 2009, and commenced operations in May 2009. The
Company is a biopharmaceutical company focused on acquiring,
developing and commercializing innovative anti-cancer agents in
the United States, Europe and other international markets. The
Company has and intends to continue to license or acquire rights
to oncology compounds in all stages of clinical development. In
exchange for the right to develop and commercialize these
compounds, the Company generally expects to provide the licensor
with a combination of up-front payments, milestone payments and
royalties on future sales. In addition, the Company generally
expects to assume the responsibility for future drug development
and commercialization costs. The Company currently operates in
one segment. Since inception, the Companys operations have
consisted primarily of developing three in-licensed compounds
and their companion diagnostics, evaluating new product
acquisition candidates, raising capital and corporate
organization activities. The Company has never earned revenue
from these activities, and accordingly, the Company is
considered to be in the development stage as of
September 30, 2011.
On September 22, 2011, the Board of Directors and
stockholders of the Company effectuated a 1 for 2.9 reverse
split of the Companys common stock. The historical
financial statements and related notes have been retrospectively
adjusted to give effect to this change.
Liquidity
The Company has incurred significant net losses since inception
and has relied on its ability to fund its operations through
private equity financings, and management expects operating
losses and negative cash flows to continue for at least the next
several years. As the Company continues to incur losses,
transition to profitability is dependent upon the successful
development, approval, and commercialization of its product
candidates and achieving a level of revenues adequate to support
the Companys cost structure. The Company may never achieve
profitability, and unless and until it does, the Company will
continue to need to raise additional cash. Management intends to
fund future operations through additional private or public debt
or equity offerings, and may seek additional capital through
arrangements with strategic partners or from other sources.
Based on the Companys operating plan, existing working
capital at December 31, 2010 was not sufficient to meet the
cash requirements to fund planned operations through
December 31, 2011 without additional sources of cash. These
conditions raise substantial doubt about the Companys
ability to continue as a going concern. The accompanying
financial statements have been prepared assuming that the
Company will continue as a going concern and do not include
adjustments that might result from the outcome of this
uncertainty. This basis of accounting contemplates the recovery
of the Companys assets and the satisfaction of liabilities
in the normal course of business.
|
|
2.
|
Summary
of Significant Accounting Policies
|
Unaudited
Interim Financial Data
The accompanying unaudited September 30, 2011 balance
sheet, the statements of operations and cash flows for the nine
months ended September 30, 2011 and 2010, and the
statements of convertible preferred stock and stockholders
deficit for the nine months ended September 30, 2011 and
the related interim information contained within the notes to
the financial statements have been prepared in accordance with
the rules and regulations of the Securities and Exchange
Commission (SEC) for interim financial information.
Accordingly, they do not include all of the information and the
notes required by U.S. generally accepted accounting
principles for complete financial statements. In the opinion of
management, the unaudited interim financial statements reflect
all adjustments, consisting of normal and recurring adjustments,
necessary for the fair presentation of the
F-7
CLOVIS
ONCOLOGY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(INFORMATION
AS OF SEPTEMBER 30, 2011, FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2011 AND 2010 AND THE PERIOD FROM
APRIL 20, 2009 TO SEPTEMBER 30, 2011 IS
UNAUDITED)
|
|
2.
|
Summary
of Significant Accounting Policies (Continued)
|
Companys financial position at September 30, 2011 and
results of its operations and its cash flows for the nine months
ended September 30, 2011 and 2010 and the period from
April 20, 2009 (inception) to September 30, 2011. The
results for the nine months ended September 30, 2011 are
not necessarily indicative of future results.
Unaudited
Pro Forma Balance Sheet and Pro Forma Loss per Common
Share
In June 2011, the Companys Board of Directors (the
Board) authorized management of the Company to file
a registration statement with the SEC permitting the Company to
sell shares of its common stock to the public. The unaudited pro
forma deficit as of September 30, 2011 reflects the
conversion of all
Series A-1,
Series A-2
and Series B convertible preferred stock outstanding as of
that date into 7,244,523 shares of common stock and the
conversion of the outstanding principal and accrued interest of
the Companys convertible promissory notes into
2,559,774 shares of common stock, assuming conversion
occurs on November 18, 2011. The consent of the holders of
55% of the Companys convertible preferred stock will be
required for the conversion of the Companys convertible
preferred stock into shares of the Companys common stock
immediately prior to the closing of the Companys proposed
initial public offering. If such consent of holders of the
Companys convertible preferred stock is obtained, the
Companys convertible promissory notes will automatically
convert into shares of the Companys common stock
immediately prior to the closing of the Companys proposed
initial public offering.
Our Board and stockholders have approved amendments to our
certificate of incorporation, which amendments will become
effective upon the closing of the initial public offering, to
change the number of shares that we are authorized to issue up
to 100,000,000 shares of common stock and
10,000,000 shares of preferred stock. The pro forma
information on the face of the consolidated balance sheet gives
effect to the filing of such amendments and the corresponding
change in authorized shares.
Unaudited pro forma net loss per share is computed using the
weighted-average number of common shares outstanding after
giving effect to the pro forma conversion of all convertible
preferred stock outstanding during the year ended
December 31, 2010, the nine months ended September 30,
2011 and the cumulative period from April 20, 2009
(inception) to September 30, 2011 into 7,244,523,
7,244,523, and 5,914,585 shares, respectively, of the
Companys common stock, and the conversion of the
outstanding principal and accrued interest of the Companys
convertible promissory notes for the nine months ended
September 30, 2011 and the cumulative period from
April 20, 2009 (inception) to September 30, 2011 into
1,177,435 and 359,955 shares, respectively, of the
Companys common stock as if such conversion had occurred
at the beginning of the period presented, or the date of
original issuance, if later.
Basis of
Presentation
The information reported within the Companys financial
statements from April 20, 2009 to December 31, 2010
was based solely on the accounts of Clovis Oncology, Inc.
Effective January 1, 2011, Clovis Oncology UK Limited, a
wholly owned subsidiary of the Company, commenced operations.
All financial information presented after December 31, 2010
was consolidated and includes the accounts of the Company and
its wholly owned subsidiary. All significant intercompany
balances and transactions have been eliminated in consolidation.
The financial statements are prepared in conformity with
U.S. generally accepted accounting principles
(GAAP). Subsequent events have been evaluated
through April 29, 2011, the issuance date of the financial
statements, and through the reissuance of the financial
statements on the filing date of the Companys registration
statement with the SEC.
The Companys convertible preferred stock has been
reclassified outside of stockholders deficit to conform to
SEC reporting requirements.
F-8
CLOVIS
ONCOLOGY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(INFORMATION
AS OF SEPTEMBER 30, 2011, FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2011 AND 2010 AND THE PERIOD FROM
APRIL 20, 2009 TO SEPTEMBER 30, 2011 IS
UNAUDITED)
|
|
2.
|
Summary
of Significant Accounting Policies (Continued)
|
Use of
Estimates
The preparation of financial statements in conformity with
U.S. generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets, liabilities, expenses, other
comprehensive income and related disclosures. On an ongoing
basis, management evaluates its estimates, including estimates
related to clinical trial accruals and stock-based compensation
expense. The Company bases its estimates on historical
experience and other market-specific or other relevant
assumptions that it believes to be reasonable under the
circumstances. Actual results may differ from those estimates or
assumptions.
Fair
Value of Financial Instruments
Cash, cash equivalents and available for sale securities are
carried at fair value (see Note 4). Financial instruments,
including accounts payable and accrued liabilities, are carried
at cost, which approximates fair value given their short-term
nature.
Cash,
Cash Equivalents and Available for Sale Securities
The Company considers all highly liquid investments with
original maturities at the date of purchase of three months or
less to be cash equivalents. Cash and cash equivalents include
bank demand deposits, marketable securities with maturities of
three months or less at purchase, and money market funds that
invest primarily in certificate of deposits, commercial paper
and U.S. government and U.S. government agency
obligations. Cash equivalents are reported at fair value.
Marketable securities with original maturities greater than
three months are considered to be available for sale securities
and consist of U.S. agency obligations,
U.S. government obligations and corporate debt obligations.
Available for sale securities are reported at fair market value
and unrealized gains and losses are included as a separate
component of stockholders equity (deficit). Realized
gains, realized losses, the amortization of premiums and
discounts, interest earned and dividends earned are included in
other income (expense). The cost of investments for purposes of
computing realized and unrealized gains and losses is based on
the specific identification method. Investments with maturities
beyond one year are classified as short-term based on
managements intent to fund current operations with these
securities or to make them available for current operations. A
decline in the market value of a security below its cost value
that is deemed to be other than temporary is charged to
earnings, and results in the establishment of a new cost basis
for the security.
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 useful lives of the
assets. Leasehold improvements are amortized over the economic
life of the asset or the lease term, whichever is shorter.
Maintenance and repairs are expensed as incurred. The following
estimated useful lives were used to depreciate the
Companys assets:
|
|
|
|
|
|
|
Estimated
|
|
|
Useful Life
|
|
Computer hardware and software
|
|
|
3 years
|
|
Leasehold improvements
|
|
|
6 years
|
|
Laboratory, manufacturing and office equipment
|
|
|
7 years
|
|
Furniture and fixtures
|
|
|
10 years
|
|
F-9
CLOVIS
ONCOLOGY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(INFORMATION
AS OF SEPTEMBER 30, 2011, FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2011 AND 2010 AND THE PERIOD FROM
APRIL 20, 2009 TO SEPTEMBER 30, 2011 IS
UNAUDITED)
|
|
2.
|
Summary
of Significant Accounting Policies (Continued)
|
Long-Lived
Assets
The Company reviews long-lived assets when events or changes in
circumstances indicate the carrying value of the assets may not
be recoverable. Recoverability is measured by comparison of the
assets book value to future net undiscounted cash flows
that the assets are expected to generate. If such assets are
considered to be impaired, the impairment to be recognized is
measured by the amount by which the book value of the assets
exceed their fair value, which is measured based on the
projected discounted future net cash flows arising from the
assets. No impairment losses have been recorded through
December 31, 2010.
Research
and Development Expense
Research and development costs are charged to expense as
incurred and include, but are not limited to, salary and
benefits, clinical trial activities, drug development and
manufacturing, and third-party service fees, including to
clinical research organizations and investigative sites. Costs
for certain development activities, such as clinical trials, are
recognized based on an evaluation of the progress to completion
of specific tasks using data such as patient enrollment,
clinical site activations, or information provided to us by our
vendors on their actual costs incurred. Payments for these
activities are based on the terms of the individual
arrangements, which may differ from the pattern of costs
incurred, and are reflected in the financial statements as
prepaid or accrued research and development.
Acquired
In-Process Research and Development Expense
The Company has acquired and expects to continue to acquire the
rights to develop and commercialize new drug candidates. The
up-front payments to acquire a new drug compound, as well as
future milestone payments, are immediately expensed as acquired
in-process research and development provided that the drug has
not achieved regulatory approval for marketing and, absent
obtaining such approval, has no alternative future use.
Share-Based
Compensation Expense
Share-based compensation is recognized as expense for all
share-based awards made to employees and directors and is based
on estimated fair values. The Company determines equity-based
compensation at the grant date using the Black-Scholes option
pricing model. The value of the award that is ultimately
expected to vest is recognized as expense on a straight-line
basis over the requisite service period. Any changes to the
estimated forfeiture rates are accounted for prospectively.
Concentration
of Credit Risk
Financial instruments that potentially subject the Company to
concentrations of credit risk are primarily cash, cash
equivalents and available for sale securities. The Company
maintains its cash and cash equivalent balances in the form of
money market accounts with financial institutions that
management believes are creditworthy. Available for sale
securities are invested in accordance with the Companys
investment policy. The investment policy includes guidelines on
the quality of the institutions and financial instruments and
defines allowable investments that the Company believes
minimizes the exposure to concentration of credit risk. The
Company has no financial instruments with off-balance-sheet risk
of accounting loss.
Foreign
Currency
Transactions denominated in currencies other than the functional
currency are recorded based on exchange rates at the time such
transactions arise. Transaction gains and losses are recorded to
other income (expense), net in the Consolidated Statements of
Operations. As of September 30, 2011 and December 31,
2010, approximately 24%
F-10
CLOVIS
ONCOLOGY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(INFORMATION
AS OF SEPTEMBER 30, 2011, FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2011 AND 2010 AND THE PERIOD FROM
APRIL 20, 2009 TO SEPTEMBER 30, 2011 IS
UNAUDITED)
|
|
2.
|
Summary
of Significant Accounting Policies (Continued)
|
and 23% of the Companys total liabilities, excluding
convertible promissory notes, respectively, were denominated in
currencies other than the functional currency.
Income
Taxes
The Company accounts for income taxes under the asset and
liability method. Deferred tax assets and liabilities are
recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases
using enacted tax rates in effect for the year in which the
differences are expected to affect taxable income. Tax benefits
are recognized when it is more likely than not that a tax
position will be sustained during an audit. Deferred tax assets
are reduced by a valuation allowance if current evidence
indicates that it is considered more likely than not that these
benefits will not be realized.
Recently
Adopted and Issued Accounting Standards
The Company has not recently adopted any new accounting
standards. There are no recently issued accounting standards
that are expected to have a material impact to the Company.
|
|
3.
|
Property
and Equipment
|
Property and equipment consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
Furniture and fixtures
|
|
$
|
437
|
|
|
$
|
419
|
|
|
$
|
170
|
|
Laboratory equipment
|
|
|
403
|
|
|
|
287
|
|
|
|
|
|
Leasehold improvements
|
|
|
140
|
|
|
|
139
|
|
|
|
49
|
|
Computer equipment and software
|
|
|
313
|
|
|
|
116
|
|
|
|
45
|
|
Manufacturing equipment
|
|
|
109
|
|
|
|
|
|
|
|
|
|
Office equipment
|
|
|
83
|
|
|
|
79
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total property and equipment
|
|
|
1,485
|
|
|
|
1,040
|
|
|
|
270
|
|
Less: accumulated depreciation
|
|
|
(222
|
)
|
|
|
(89
|
)
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
$
|
1,263
|
|
|
$
|
951
|
|
|
$
|
264
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation expense related to property and equipment was
$83,000, $6,000, $133,000, $55,000 and $222,000 for the year
ended December 31, 2010, the period from April 20,
2009 (inception) to December 31, 2009, the nine months
ended September 30, 2011 and 2010 and the period from
April 20, 2009 (inception) to September 30, 2011,
respectively.
|
|
4.
|
Fair
Value Measurements
|
Fair value is defined as the exchange price that would be
received to sell an asset or paid to transfer a liability (at
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. The three levels of inputs
that may be used to measure fair value include:
|
|
|
|
Level 1:
|
Quoted prices in active markets for identical assets or
liabilities. The Companys Level 1 assets and
liabilities consist of money market investments.
|
|
|
Level 2:
|
Observable inputs other than Level 1 prices, such as quoted
prices for similar assets or liabilities in active markets or
other inputs that are observable or can be corroborated by
observable market data
|
F-11
CLOVIS
ONCOLOGY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(INFORMATION
AS OF SEPTEMBER 30, 2011, FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2011 AND 2010 AND THE PERIOD FROM
APRIL 20, 2009 TO SEPTEMBER 30, 2011 IS
UNAUDITED)
|
|
4.
|
Fair
Value Measurements (Continued)
|
|
|
|
|
|
for substantially the full term of the assets or liabilities.
The Companys Level 2 assets and liabilities include
U.S. government obligations, U.S. government agency
obligations and corporate debt securities.
|
|
|
|
|
Level 3:
|
Unobservable inputs that are supported by little or no market
activity.
|
The following table indentifies the Companys assets that
were measured at fair value on a recurring basis (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Description
|
|
Balance
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
September 30, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market
|
|
$
|
18,311
|
|
|
$
|
18,311
|
|
|
$
|
|
|
|
$
|
|
|
U.S. agency obligations
|
|
|
2,036
|
|
|
|
|
|
|
|
2,036
|
|
|
|
|
|
Corporate debt securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets at fair value
|
|
$
|
20,347
|
|
|
$
|
18,311
|
|
|
$
|
2,036
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market
|
|
$
|
7,010
|
|
|
$
|
7,010
|
|
|
$
|
|
|
|
$
|
|
|
U.S. agency obligations
|
|
|
4,109
|
|
|
|
|
|
|
|
4,109
|
|
|
|
|
|
Corporate debt securities
|
|
|
3,656
|
|
|
|
|
|
|
|
3,656
|
|
|
|
|
|
U.S. government obligations
|
|
|
4,026
|
|
|
|
|
|
|
|
4,026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets at fair value
|
|
$
|
18,801
|
|
|
$
|
7,010
|
|
|
$
|
11,791
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market
|
|
$
|
57,000
|
|
|
$
|
57,000
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets at fair value
|
|
$
|
57,000
|
|
|
$
|
57,000
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.
|
Available
for Sale Securities
|
The Companys available for sale securities at cost or
amortized cost value and fair market value by contractual
maturity were (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Cost or
|
|
|
|
|
|
|
Amortized
|
|
|
Fair Market
|
|
|
|
Cost Value
|
|
|
Value
|
|
|
September 30, 2011
|
|
|
|
|
|
|
|
|
Due in one year or less
|
|
$
|
2,030
|
|
|
$
|
2,036
|
|
Due after one year through two years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,030
|
|
|
$
|
2,036
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
|
|
|
|
|
|
Due in one year or less
|
|
$
|
7,663
|
|
|
$
|
7,675
|
|
Due after one year through two years
|
|
|
4,087
|
|
|
|
4,116
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
11,750
|
|
|
$
|
11,791
|
|
|
|
|
|
|
|
|
|
|
F-12
CLOVIS
ONCOLOGY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(INFORMATION
AS OF SEPTEMBER 30, 2011, FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2011 AND 2010 AND THE PERIOD FROM
APRIL 20, 2009 TO SEPTEMBER 30, 2011 IS
UNAUDITED)
|
|
5.
|
Available
for Sale Securities (Continued)
|
The types of securities included in the Companys available
for sale investments were (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost or
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair Market
|
|
|
|
Cost Value
|
|
|
Gains
|
|
|
(Losses)
|
|
|
Value
|
|
|
September 30, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government agencies
|
|
$
|
2,030
|
|
|
$
|
6
|
|
|
$
|
|
|
|
$
|
2,036
|
|
December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government agencies
|
|
$
|
4,095
|
|
|
$
|
14
|
|
|
$
|
|
|
|
$
|
4,109
|
|
U.S. government obligations
|
|
|
4,002
|
|
|
|
24
|
|
|
|
|
|
|
|
4,026
|
|
Corporate debt securities
|
|
|
3,653
|
|
|
|
4
|
|
|
|
(1
|
)
|
|
|
3,656
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
11,750
|
|
|
$
|
42
|
|
|
$
|
(1
|
)
|
|
$
|
11,791
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
No securities have been in a continuous unrealized loss position
for more than 12 months at December 31, 2010 and
September 30, 2011.
|
|
6.
|
Convertible
Promissory Notes
|
Subsequent to December 31, 2010, the Company completed the
following transactions:
In May 2011, the Company issued $20.0 million of
5% Convertible Promissory Notes to existing investors for
cash. In June 2011, the Company issued $15.0 million of 5%
Convertible Promissory Notes to Pfizer, which was comprised of a
$7.0 million note issued to acquire the global rights to
develop and market
CO-338 and
an $8.0 note issued for cash (the Notes). The
Notes accrue interest at an annual rate of 5% and mature on
May 25, 2012. The principal balance and all accrued and
unpaid interest due on the Notes will be converted into shares
of our capital stock upon the earliest to occur of the following:
|
|
|
|
|
Immediately prior to the closing of a Qualified IPO (as defined
below) the Notes shall automatically convert into shares of our
common stock at a per share price equal to the price to the
public for common stock issued in the Qualified IPO. A
Qualified IPO is defined as an initial public
offering with gross proceeds of at least $50 million with a
per share price of at least $26.80 deemed to occur by the
consent of the holders of 55% of the Companys convertible
preferred stock.
|
|
|
|
|
|
Upon the completion of an equity financing other than a
Qualified IPO and at the election of holders of at least 55% of
the outstanding principal amount of the Notes, the Notes will
convert into shares of the securities issued in the equity
financing at the per share price of the securities issued in
such equity financing.
|
|
|
|
|
|
Upon the maturity date of the Notes, they will automatically
convert into either (1) shares of our Series C
convertible preferred stock at $4.62 per share, or
(2) shares of the most recent class of securities issued by
the Company, if the Company has undertaken an offering of such
securities for cash after the issuance of Series C
convertible preferred stock at the price per share to the
purchasers of the new securities.
|
|
|
|
|
|
Upon an event of default, as defined in the agreements governing
the Notes, and at the election of holders of at least 55% of the
outstanding principal amount of the Notes, the Notes will
convert into Series C convertible preferred stock or into a
more recent class of securities issued by the Company for cash
as described in the preceding bullet point.
|
F-13
CLOVIS
ONCOLOGY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(INFORMATION
AS OF SEPTEMBER 30, 2011, FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2011 AND 2010 AND THE PERIOD FROM
APRIL 20, 2009 TO SEPTEMBER 30, 2011 IS
UNAUDITED)
|
|
7.
|
Convertible
Preferred Stock and Stockholders Deficit
|
Common
Stock
In May 2009, the Company issued 1,206,899 shares of its
common stock to the original founders at a purchase price of
$.0029 per share. The shares were issued under restricted stock
purchase agreements, which allow the Company, at its discretion,
to repurchase unvested shares if the founders terminate their
employment with the Company. In addition, if the founders
employment is terminated by the Company without
cause within six months following a change in
control, 100% of the unvested shares of the restricted stock
will immediately vest upon termination. Upon execution of the
restricted stock purchase agreements, 25% of the shares vested
immediately and the remaining shares vest ratably on a monthly
basis over a four-year term. As of September 30, 2011,
December 31, 2010 and 2009, 377,155, 546,876 and
773,168 shares remained unvested, respectively.
The holders of common stock are entitled to one vote per share
on all matters to be voted upon by the stockholders of the
Company. Subject to the preferences that may be applicable to
any outstanding shares of preferred stock, the holders of common
stock are entitled to receive ratably such dividends, if any, as
may be declared by the Companys Board of Directors.
Preferred
Stock
In May 2009, the Company entered into the
Series A-1,
A-2, B and C
Preferred Stock Purchase Agreement with various investors (the
Preferred Stock Purchase Agreement). The Preferred
Stock Purchase Agreement provides for the issuance of up to
$146.3 million of the Companys convertible preferred
stock, subject to various terms and conditions. During 2009, the
Company issued shares of
Series A-1,
Series A-2
and Series B convertible preferred stock. The total number
of shares of
Series A-1,
A-2 and B
convertible preferred stock was 5,044,828, 5,044,828 and
10,919,540, respectively, each with a par value of $0.001 and an
issuance price per share of $2.00, $3.00 and $4.62,
respectively. The price per share for each series of our
convertible preferred stock issued to investors was agreed to
between us and the investors in the Preferred Stock Purchase
Agreement and thus there was no further evaluation as to the
price of our convertible preferred stock at the time of each
issuance. The total cash proceeds received from the three
convertible preferred stock issuances was $75.5 million,
net of $174,000 of costs related to stock issuance.
The Preferred Stock Purchase Agreement provides for the
potential issuance of Series C convertible preferred
shares. Upon the approval of the Companys Board of
Directors and of holders of 55% of the outstanding shares of the
Companys convertible preferred stock, the Company will
sell to the existing preferred stock investors 15.3 million
shares of Series C convertible preferred stock at a price
of $4.62 per share. However, the Company has a right to solicit
a financing proposal from any arms length investors to purchase
an equal or greater amount of Series C convertible
preferred shares. If such a proposal is received by the Company,
and a majority of the disinterested members of the
Companys Board of Directors deems the proposal to be
superior to the terms of the Series C convertible preferred
stock set forth in the Preferred Stock Purchase Agreement (a
Superior Financing Proposal), then the Company may
enter into a transaction contemplated by the Superior Financing
Proposal.
F-14
CLOVIS
ONCOLOGY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(INFORMATION
AS OF SEPTEMBER 30, 2011, FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2011 AND 2010 AND THE PERIOD FROM
APRIL 20, 2009 TO SEPTEMBER 30, 2011 IS
UNAUDITED)
|
|
7.
|
Convertible
Preferred Stock and Stockholders Deficit
(Continued)
|
The holders of the
Series A-1,
A-2 and B
convertible preferred stock have the following rights and
preferences:
Voting
Rights
The holders of the
Series A-1,
A-2 and B
convertible preferred stock are entitled to vote, together with
the holders of the common stock, on all matters submitted to
stockholders for a vote. Each holder of convertible preferred
stock is entitled to the number of votes equal to the number of
shares of common stock into which the shares of preferred stock
is convertible.
Dividends
The holders of
Series A-1,
A-2 and B
convertible preferred stock are entitled to receive
noncumulative dividends in preference to any dividend on common
stock at the annual rate per share of $0.16, $0.24 and $0.37,
respectively, when and as declared by the Companys Board
of Directors. The holders of the
Series A-1,
A-2 and B
convertible preferred stock are also entitled to participate pro
rata in any dividends paid on the common stock on an as if
converted to common stock basis. No dividends have been declared
by the Company since inception.
Liquidation
In the event of any liquidation or winding up of the Company (a
liquidation event), the holders of the
Series A-1,
A-2 and B
convertible preferred stock are entitled to receive, in
preference to the holders of the common stock, a per share
amount equal to the issuance price for each series owned plus
any accrued but unpaid declared dividends (the liquidation
preference). After the payment of the liquidation
preference to the holders of the convertible preferred stock,
the remaining assets of the Company, if any, will be distributed
ratably to the holders of the common stock and the convertible
preferred stock on an as if converted to common stock basis
until such time as the holders of the
Series A-1,
A-2 and B
convertible preferred stock have received a total liquidation
amount (including the liquidation preference) per as if
converted share of $11.60, $17.40 and $26.80, respectively (as
adjusted for stock splits, dividends and the like). Any
remaining assets of the Company above the defined liquidation
ceiling for the holders of convertible preferred stock will be
distributed ratably to the holders of the common stock.
If the liquidation value is greater for the holders of
Series A-1,
A-2 and B
convertible preferred stock, assuming that the preferred stock
is converted to common stock immediately prior to the
liquidation event, the liquidation distribution for the holders
of convertible preferred stock will be based on the as if
converted to common stock ownership and not the liquidation
preferences described in the previous paragraph.
Each of the following events will be deemed a liquidation event:
(i) a merger, acquisition or sale of voting control in
which the stockholders of the Company do not own a majority of
the outstanding shares of the surviving corporation, (ii) a
sale of all or substantially all of the assets of the Company,
or (iii) a voluntary or involuntary liquidation or
dissolution of the Company.
Conversion
The holders of the
Series A-1,
A-2 and B
convertible preferred stock have the right to convert the
convertible preferred stock, at any time, into shares of common
stock. The current conversion rate is 2.9 for 1 but, subject to
certain exceptions, is subject to adjustment in the event that
the Company issues additional equity securities at a purchase
price less than the then applicable conversion price for the
convertible preferred stock. The conversion rate will also be
subject to proportional adjustment for stock splits.
F-15
CLOVIS
ONCOLOGY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(INFORMATION
AS OF SEPTEMBER 30, 2011, FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2011 AND 2010 AND THE PERIOD FROM
APRIL 20, 2009 TO SEPTEMBER 30, 2011 IS
UNAUDITED)
|
|
7.
|
Convertible
Preferred Stock and Stockholders Deficit
(Continued)
|
The
Series A-1,
A-2 and B
convertible preferred stock will be automatically converted into
common stock, at the then applicable conversion rate:
(i) upon the election of the holders of at least 55% of the
outstanding convertible preferred stock, or (ii) upon the
closing of a public offering of shares of common stock of the
Company at a per share price not less than two times the
original issue price of the last series of convertible preferred
stock issued and outstanding (as adjusted for stock splits,
dividends and the like) and for total offering proceeds greater
than $50 million.
|
|
8.
|
Share-Based
Compensation
|
The Companys 2009 Equity Incentive Plan (the
Plan), provides for the granting of stock options
and other stock-based awards, including restricted stock, stock
appreciation rights and restricted stock units to its employees,
directors and consultants. Common shares authorized for issuance
under the Plan were 1,508,621 and 1,034,483 at
September 30, 2011 and December 31, 2010,
respectively. Options to purchase common stock under the Plan
may be designated as incentive stock options or non-statutory
stock options. Stock options granted to date vest over a
three-year period for Board of Director grants and over a
four-year period for employee grants and expire 10 years
from the date of grant.
The following table summarizes the activity relating to the
Companys options to purchase common stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Option Shares
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
Outstanding
|
|
|
Price
|
|
|
Term (Years)
|
|
|
Value
|
|
|
Balance at April 20, 2009 (inception)
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
311,210
|
|
|
|
0.29
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(114,659
|
)
|
|
|
0.29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009
|
|
|
196,551
|
|
|
|
0.29
|
|
|
|
9.69
|
|
|
|
|
|
Granted
|
|
|
241,201
|
|
|
|
3.08
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(15,518
|
)
|
|
|
1.84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2010
|
|
|
422,234
|
|
|
$
|
1.83
|
|
|
|
9.14
|
|
|
$
|
612,320
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and expected to vest at December 31, 2010
|
|
|
366,750
|
|
|
$
|
1.74
|
|
|
|
9.12
|
|
|
$
|
562,522
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested at December 31, 2010
|
|
|
105,753
|
|
|
$
|
0.77
|
|
|
|
8.85
|
|
|
$
|
265,377
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Option Shares
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
Outstanding
|
|
|
Price
|
|
|
Term (Years)
|
|
|
Value
|
|
|
Balance at December 31, 2010
|
|
|
422,234
|
|
|
$
|
1.83
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
800,127
|
|
|
|
5.21
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(324,217
|
)
|
|
|
3.24
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(14,191
|
)
|
|
|
3.08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2011
|
|
|
883,953
|
|
|
$
|
4.35
|
|
|
|
9.12
|
|
|
$
|
5,894,551
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and expected to vest at September 30, 2011
|
|
|
760,290
|
|
|
$
|
4.22
|
|
|
|
9.07
|
|
|
$
|
5,170,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested at September 30, 2011
|
|
|
187,714
|
|
|
$
|
1.10
|
|
|
|
8.18
|
|
|
$
|
1,861,273
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-16
CLOVIS
ONCOLOGY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(INFORMATION
AS OF SEPTEMBER 30, 2011, FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2011 AND 2010 AND THE PERIOD FROM
APRIL 20, 2009 TO SEPTEMBER 30, 2011 IS
UNAUDITED)
|
|
8.
|
Share-Based
Compensation (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period from
|
|
|
|
|
|
|
April 20, 2009
|
|
|
Nine Months Ended
|
|
Year Ended
|
|
(Inception) to
|
|
|
September 30, 2011
|
|
December 31, 2010
|
|
December 31, 2009
|
|
Weighted-average fair value of options granted per share
|
|
$
|
8.71
|
|
|
$
|
2.10
|
|
|
$
|
0.20
|
|
Intrinsic value of options exercised
|
|
$
|
226,800
|
|
|
$
|
19,100
|
|
|
$
|
|
|
Cash received from stock option exercises
|
|
$
|
1,050,873
|
|
|
$
|
28,500
|
|
|
$
|
33,250
|
|
The Plan allows for the option holder to exercise stock option
shares prior to the vesting of the option. The shares acquired
from an early exercise are subject to repurchase if the option
holder terminates employment or service with the Company. The
number of unvested common shares at the point of termination
will be repurchased by the Company at the stated exercise price
of the option. The number of common shares exercised prior to
vesting was 375,532 and 86,461 at September 30, 2011 and
December 31, 2010, respectively. The number of early
exercised shares expected to vest using estimated forfeiture
rates over the remaining service period of the option term was
305,189 and 71,807 at September 30, 2011 and
December 31, 2010, respectively.
The fair value of each stock-based award is estimated on the
grant date using the Black-Scholes option pricing model using
the weighted-average assumptions provided in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
Year Ended December 31,
|
|
|
September 30, 2011
|
|
2010
|
|
2009
|
|
Risk-free interest rate(a)
|
|
|
2.21
|
%
|
|
|
2.10
|
%
|
|
|
2.33
|
%
|
Dividend yield
|
|
|
|
|
|
|
|
|
|
|
|
|
Volatility(b)
|
|
|
74
|
%
|
|
|
80
|
%
|
|
|
80
|
%
|
Expected term (years)(c)
|
|
|
6.0
|
|
|
|
5.6
|
|
|
|
5.3
|
|
|
|
|
(a) |
|
Risk-free interest rate: The rate is based on the yield
on the grant date of a zero-coupon U.S. Treasury bond whose
maturity period approximates the options expected term. |
|
(b) |
|
Volatility: The expected volatility was estimated using
peer data of companies in the biopharmaceutical industry with
similar equity plans. |
|
(c) |
|
Expected life: The expected life of the award was
estimated using peer data of companies in the biopharmaceutical
industry with similar equity plans. |
Unrecognized stock-based compensation expense related to
nonvested options, adjusted for expected forfeitures, was
$6.2 million and $0.4 million at September 30,
2011 and December 31, 2010, respectively. The unrecognized
stock-based compensation expense is expected to be recognized
over the weighted-average remaining vesting period of
3.2 years and 3.2 years at September 30, 2011 and
December 31, 2010, respectively.
F-17
CLOVIS
ONCOLOGY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(INFORMATION
AS OF SEPTEMBER 30, 2011, FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2011 AND 2010 AND THE PERIOD FROM
APRIL 20, 2009 TO SEPTEMBER 30, 2011 IS
UNAUDITED)
|
|
8.
|
Share-Based
Compensation (Continued)
|
As of December 31, 2010, the Company reserved shares of
common stock for future issuance as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
Available
|
|
|
Shares of
|
|
|
|
Shares or
|
|
|
for Grant or
|
|
|
Common
|
|
|
|
Options
|
|
|
Future
|
|
|
Stock
|
|
|
|
Outstanding
|
|
|
Issuance
|
|
|
Reserved
|
|
|
2009 Equity Incentive Plan
|
|
|
422,234
|
|
|
|
482,046
|
|
|
|
904,280
|
|
Series A-1
convertible preferred stock
|
|
|
5,044,828
|
|
|
|
|
|
|
|
5,044,828
|
|
Series A-2
convertible preferred stock
|
|
|
5,044,828
|
|
|
|
|
|
|
|
5,044,828
|
|
Series B convertible preferred stock
|
|
|
10,919,540
|
|
|
|
|
|
|
|
10,919,540
|
|
Series C convertible preferred stock
|
|
|
|
|
|
|
15,287,356
|
|
|
|
15,287,356
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,431,430
|
|
|
|
15,769,402
|
|
|
|
37,200,832
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2011, the Company reserved shares of
common stock for future issuance as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
Available
|
|
|
Shares of
|
|
|
|
Shares or
|
|
|
for Grant or
|
|
|
Common
|
|
|
|
Options
|
|
|
Future
|
|
|
Stock
|
|
|
|
Outstanding
|
|
|
Issuance
|
|
|
Reserved
|
|
|
2009 Equity Incentive Plan
|
|
|
883,953
|
|
|
|
170,274
|
|
|
|
1,054,227
|
|
Series A-1
convertible preferred stock
|
|
|
5,044,828
|
|
|
|
|
|
|
|
5,044,828
|
|
Series A-2
convertible preferred stock
|
|
|
5,044,828
|
|
|
|
|
|
|
|
5,044,828
|
|
Series B convertible preferred stock
|
|
|
10,919,540
|
|
|
|
|
|
|
|
10,919,540
|
|
Series C convertible preferred stock
|
|
|
|
|
|
|
15,287,356
|
|
|
|
15,287,356
|
|
Convertible promissory notes
|
|
|
|
|
|
|
7,954,545
|
|
|
|
7,954,545
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,893,149
|
|
|
|
23,412,175
|
|
|
|
45,305,324
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company leases office space in Boulder, Colorado,
San Francisco, California and Cambridge, U.K. under
non-cancelable operating lease agreements. The lease agreements
contain periodic rent increases that result in the Company
recording deferred rent over the term of certain leases. Rental
expense under these leases was approximately $609,000 for the
year ended December 31, 2010, $39,000 from April 20,
2009 (inception) to December 31, 2009 and $576,000 and
$427,000 for the nine months ended September 30, 2011 and
2010, respectively. Future minimum rental commitments, by fiscal
year and in the aggregate, for the Companys operating
leases are provided below (in thousands):
|
|
|
|
|
|
|
December 31, 2010
|
|
|
2011
|
|
$
|
665
|
|
2012
|
|
|
751
|
|
2013
|
|
|
389
|
|
2014
|
|
|
203
|
|
2015
|
|
|
190
|
|
Thereafter
|
|
|
|
|
|
|
|
|
|
Total minimum lease payments
|
|
$
|
2,198
|
|
|
|
|
|
|
F-18
CLOVIS
ONCOLOGY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(INFORMATION
AS OF SEPTEMBER 30, 2011, FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2011 AND 2010 AND THE PERIOD FROM
APRIL 20, 2009 TO SEPTEMBER 30, 2011 IS
UNAUDITED)
CO-101
In November 2009, the Company entered into a license agreement
with Clavis Pharma ASA (Clavis) to develop and
commercialize CO-101 in North America, Central America, South
America and Europe. Under terms of the license agreement, the
Company made an up-front payment to Clavis in the amount
$15.0 million, which was comprised of $13.1 million
for development costs incurred prior to the execution of the
agreement that was recognized as acquired in-process research
and development and $1.9 million for the prepayment of
preclinical activities to be performed by Clavis. In November
2010, the license agreement was amended to expand the license
territory to include Asia and other international markets. The
Company made a payment of $10.0 million to Clavis for the
territory expansion and recognized the payment as acquired
in-process research and development. As part of the amended
license agreement, Clavis has also agreed to reimburse up to
$3.0 million of the Companys research and development
costs for certain CO-101 development activities subject to the
Company incurring such costs. For the nine months ended
September 30, 2011 and the year ended December 31,
2010, the Company incurred expenses for reimbursement of
approximately $2.7 million and $0.3 million,
respectively. The Company is responsible for all remaining
development and commercialization costs of the compound and, if
approved, Clavis will be eligible to receive royalties based on
the volume of annual net sales achieved. The Company may be
required to pay Clavis up to an aggregate of $115.0 million
in development and regulatory milestone payments if certain
clinical study objectives and regulatory filings, acceptances
and approvals are achieved. In addition, the Company may be
required to pay Clavis up to an aggregate of $445.0 million
in sales milestone payments if certain annual sales targets are
met for the CO-101 compound.
Subject to certain conditions set forth in the license
agreement, Clavis may elect to co-develop and co-promote CO-101
in Europe. If Clavis were to make this election, it would be
required to reimburse the Company for a portion of both past and
future development costs. In addition, the milestone payments
described above would be reduced, and Clavis would not be
entitled to royalties on the net sales in Europe, but would
instead share equally in the pretax profits or losses resulting
from commercialization activities in Europe.
CO-1686
In May 2010, the Company entered into a worldwide license
agreement with Avila Therapeutics, Inc. (Avila) to
discover, develop and commercialize preclinical covalent
inhibitors of mutant forms of the epidermal growth factor
receptor gene. CO-1686 was identified as the lead inhibitor
candidate developed by Avila under the license agreement. The
Company is responsible for all preclinical, clinical, regulatory
and other activities necessary to develop and commercialize
CO-1686. The Company made an up-front payment of
$2.0 million to Avila upon execution of the license
agreement which was recognized as acquired in-process research
and development expense. The Company is obligated to pay Avila
royalties on net sales of CO-1686, based on the volume of annual
net sales achieved. Avila has the option to increase royalty
rates by electing to reimburse a portion of the development
expenses incurred by the Company. This option must be exercised
within a limited period of time of Avilas being notified
of our intent to pursue regulatory approval of CO-1686 in the
United States or European Union as a first line therapy.
The Company may be required to pay to Avila up to an aggregate
of $119.0 million in development and regulatory milestone
payments if certain clinical study objectives and regulatory
filings, acceptances and approvals are achieved. In addition,
the Company may be required to pay Avila up to an aggregate of
$120.0 million in sales milestones if certain annual sales
targets are achieved.
F-19
CLOVIS
ONCOLOGY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(INFORMATION
AS OF SEPTEMBER 30, 2011, FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2011 AND 2010 AND THE PERIOD FROM
APRIL 20, 2009 TO SEPTEMBER 30, 2011 IS
UNAUDITED)
|
|
10.
|
License
Agreements (Continued)
|
CO-338
In June 2011, the Company entered into a license agreement with
Pfizer Inc. to acquire exclusive global development and
commercialization rights to Pfizers drug candidate
PF-01367338, which the Company has renamed
CO-338. This
drug candidate is a small molecule inhibitor of poly
(ADP-ribose) polymerase, or PARP, which the Company is
developing for the treatment of selected solid tumors. Pursuant
to the terms of the license agreement, the Company made an
up-front payment by issuing to Pfizer a $7.0 million
convertible promissory note with a 5% annual interest rate, due
in 2012. The Company is responsible for all development and
commercialization costs of CO-338 and, if approved, Pfizer will
receive royalties on the net sales of the product. In addition,
Pfizer is eligible to receive up to $259 million of further
payments, in aggregate, if certain development, regulatory and
sales milestones are achieved.
|
|
11.
|
Net Loss
Per Common Share
|
Basic net loss per share is calculated by dividing net loss by
the weighted-average number of common shares outstanding during
the period, without consideration for common stock equivalents.
Diluted net loss per share is computed by dividing net loss by
the weighted-average number of common share equivalents
outstanding for the period determined using the treasury-stock
method. For purposes of this calculation, convertible preferred
stock and stock options are considered to be common stock
equivalents and are only included in the calculation of diluted
net loss per share when their effect is dilutive.
The shares outstanding at the end of the respective periods
presented in the table below were excluded from the calculation
of diluted net loss per share due to their anti-dilutive effect
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the
|
|
|
Period
|
|
|
|
|
|
|
|
|
Cumulative
|
|
|
|
Year Ended
|
|
|
from April 20, 2009
|
|
|
Nine Months
|
|
|
from April 20, 2009
|
|
|
|
December 31,
|
|
|
(Inception) to
|
|
|
Ended September 30,
|
|
|
(Inception) to
|
|
|
|
2010
|
|
|
December 31, 2009
|
|
|
2011
|
|
|
2010
|
|
|
September 30, 2011
|
|
|
Common shares under option
|
|
|
422
|
|
|
|
197
|
|
|
|
884
|
|
|
|
346
|
|
|
|
884
|
|
Convertible preferred stock
|
|
|
7,245
|
|
|
|
7,245
|
|
|
|
7,245
|
|
|
|
7,245
|
|
|
|
7,245
|
|
Convertible promissory notes and accrued interest
|
|
|
|
|
|
|
|
|
|
|
2,657
|
|
|
|
|
|
|
|
2,657
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total potential dilutive shares
|
|
|
7,667
|
|
|
|
7,442
|
|
|
|
10,786
|
|
|
|
7,591
|
|
|
|
10,786
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As a result of the net loss incurred since inception and the
Companys determination that it is more likely than not
that the current tax benefits will not be realized, there is no
provision for income taxes.
A reconciliation of the U.S. statutory income tax rate to
the Companys effective tax rate is as follows:
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
Federal income tax (benefit) at statutory rate
|
|
|
(34.0
|
)%
|
|
|
(34.0
|
)%
|
State income tax benefit, net of federal benefit
|
|
|
(3.6
|
)
|
|
|
(4.4
|
)
|
Tax credits
|
|
|
(12.9
|
)
|
|
|
|
|
Other
|
|
|
0.3
|
|
|
|
|
|
Increase to valuation allowance
|
|
|
50.2
|
|
|
|
38.4
|
|
|
|
|
|
|
|
|
|
|
Effective income tax rate
|
|
|
|
%
|
|
|
|
%
|
|
|
|
|
|
|
|
|
|
F-20
CLOVIS
ONCOLOGY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(INFORMATION
AS OF SEPTEMBER 30, 2011, FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2011 AND 2010 AND THE PERIOD FROM
APRIL 20, 2009 TO SEPTEMBER 30, 2011 IS
UNAUDITED)
|
|
12.
|
Income
Taxes (Continued)
|
The components of the Companys deferred tax assets and
liabilities are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Net operating loss carryforward
|
|
$
|
9,386
|
|
|
$
|
1,562
|
|
Product acquisition costs
|
|
|
9,229
|
|
|
|
5,003
|
|
Tax credit carryforwards
|
|
|
7,186
|
|
|
|
|
|
Accrued liabilities and other
|
|
|
57
|
|
|
|
6
|
|
Total deferred tax assets
|
|
|
25,858
|
|
|
|
6,571
|
|
|
|
|
|
|
|
|
|
|
Valuation allowance
|
|
|
(25,510
|
)
|
|
|
(6,541
|
)
|
|
|
|
|
|
|
|
|
|
Deferred tax assets, net of valuation allowance
|
|
|
348
|
|
|
|
30
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Prepaid expenses
|
|
|
(321
|
)
|
|
|
(19
|
)
|
Depreciation
|
|
|
(27
|
)
|
|
|
(11
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
(348
|
)
|
|
|
(30
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
The realization of deferred tax assets is dependent upon future
earnings, and the timing and amount of these future earnings is
uncertain. A valuation allowance was established for the net
deferred tax asset balance due to managements belief that
the realization of these assets is not likely to occur. At
December 31, 2010, the Company had $24.4 million of
U.S. federal net operating loss carryforwards, which will
expire from 2029 to 2030 if not utilized and research and
development tax credit carryforwards of $7.2 million that
will expire from 2029 through 2030 if not utilized. The
utilization of the net operating loss carryforwards may be
subject to certain IRS limitations, which may limit the
Companys ability to use its net operating loss
carryforwards in the future and such limitations could be
significant. The Companys federal and state income taxes
for the period from inception to December 31, 2010 remain
open to an audit.
The Company recorded an increase to the valuation allowance of
$19.0 million, $6.5 million and $25.5 million
during the year ended December 31, 2010, and the periods
from April 20, 2009 (inception) to December 31, 2009
and 2010, respectively.
Interest and penalties related to the settlement of uncertain
tax positions, if any, will be reflected in income tax expense.
During 2010, the Company was awarded $489,000 under the
Qualifying Therapeutic Discovery Project Program
(section 48D of the internal revenue code), which the
Company elected to receive in the form of a grant. This award
has been reflected as other income in the consolidated statement
of operations for the year ended December 31, 2010.
|
|
13.
|
Employee
Benefit Plan
|
In 2010, the Company created a retirement plan, which is
qualified under section 401(k) of the Internal Revenue Code
for its U.S. employees. The plan allows eligible employees
to defer, at the employees discretion, pretax compensation
up to the IRS annual limits. The Company matches contributions
up to 4% of the eligible employees compensation or the
maximum amount permitted by law. Total expense for contributions
made to U.S. employees was $104,000 for the year ended
December 31, 2010. The Companys international
employees participate in retirement plans governed by the local
laws in effect for the country in which they reside. The Company
made matching contributions to international employees of
$41,000 for the year ended December 31, 2010.
F-21
9,300,000 Shares
Common stock
Prospectus
|
|
J.P.
Morgan |
Credit Suisse |
,
2011
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
|
|
Item 13.
|
Other
expenses of issuance and distribution.
|
The following table sets forth the costs and expenses, other
than underwriting discounts and commissions, payable by Clovis
in connection with the sale of common stock being registered.
All amounts shown are estimates, except the Securities and
Exchange Commission registration fee, the Financial Industry
Regulatory Authority filing fee and the NASDAQ Global Market
application listing fee.
|
|
|
|
|
|
|
Amount
|
|
Item
|
|
to be Paid
|
|
|
Securities and Exchange Commission registration fee
|
|
$
|
18,626
|
|
Financial Industry Regulatory Authority filing fee
|
|
|
16,543
|
|
NASDAQ Global Market listing fee
|
|
|
125,000
|
|
Legal fees and expenses
|
|
|
1,330,000
|
|
Accountants fees and expenses
|
|
|
551,331
|
|
Printing expenses
|
|
|
300,000
|
|
Transfer agent and registrar fees and expenses
|
|
|
3,500
|
|
Blue Sky fees and expenses
|
|
|
5,000
|
|
Miscellaneous
|
|
|
30,000
|
|
|
|
|
|
|
Total
|
|
$
|
2,380,000
|
|
|
|
|
|
|
|
|
Item 14.
|
Indemnification
of directors and officers.
|
Limitation
on liability and indemnification of directors and
officers
Section 102 of the Delaware General Corporation Law permits
a corporation to eliminate the personal liability of its
directors to the corporation or its stockholders for monetary
damages for a breach of fiduciary duty as a director, except
where the director breached his or her duty of loyalty, failed
to act in good faith, engaged in intentional misconduct or
knowingly violated a law, authorized the payment of a dividend
or approved a stock repurchase in violation of Delaware
corporate law or obtained an improper personal benefit. Our
certificate of incorporation provides that no director shall be
personally liable to us or our stockholders for monetary damages
for any breach of fiduciary duty as a director, notwithstanding
any provision of law imposing such liability, except to the
extent that the Delaware General Corporation Law prohibits the
elimination or limitation of liability of directors for breaches
of fiduciary duty.
Section 145 of the Delaware General Corporation Law
provides that a corporation has the power to indemnify a
director, officer, employee or agent of the corporation and
certain other persons serving at the request of the corporation
for another corporation, partnership, joint venture, trust or
other enterprise in related capacities against expenses
(including attorneys fees), judgments, fines and amounts
paid in settlements actually and reasonably incurred by the
person in connection with an action, suit or proceeding to which
he or she is or is threatened to be made a party by reason of
such position, if such person acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to
the best interests of the corporation, and, in any criminal
action or proceeding, had no reasonable cause to believe his or
her conduct was unlawful, except that, in the case of actions
brought by or in the right of the corporation, no
indemnification shall be made with respect to any claim, issue
or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the
Court of Chancery or other adjudicating court determines that,
despite the adjudication of liability but in view of all of the
circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
Our certificate of incorporation that will be in effect upon the
closing of this offering provides that we will indemnify each
person who was or is a party or threatened to be made a party to
any threatened, pending or completed action, suit or proceeding
whether civil, criminal, administrative or investigative (other
than an action by or in the right of us) by reason of the fact
that he or she is or was, or has agreed to become, our director
or officer, or is or was serving, or has agreed to serve, at our
request as a director, officer or trustee of, or in a similar
capacity
II-1
with, another corporation, partnership, joint venture, trust or
other enterprise (all such persons being referred to as an
Indemnitee), or by reason of any action alleged to
have been taken or omitted in such capacity, against all
expenses (including attorneys fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by
the Indemnitee or on his or her behalf in connection with such
action, suit or proceeding and any appeal therefrom, if such
Indemnitee acted in good faith and in a manner he or she
reasonably believed to be in, or not opposed to, our best
interests, and, with respect to any criminal action or
proceeding, he or she had no reasonable cause to believe his or
her conduct was unlawful.
Our certificate of incorporation that will be in effect upon the
closing of this offering also provides that we will indemnify
any Indemnitee who was or is a party to an action or suit by or
in the right of us to procure a judgment in our favor by reason
of the fact that the Indemnitee is or was, or has agreed to
become, our director or officer, or is or was serving, or has
agreed to serve, at our request as a director, officer or
trustee of, or in a similar capacity with, another corporation,
partnership, joint venture, trust or other enterprise, or by
reason of any action alleged to have been taken or omitted in
such capacity, against all expenses (including attorneys
fees) and, to the extent permitted by law, amounts paid in
settlement actually and reasonably incurred in connection with
such action, suit or proceeding, and any appeal therefrom, if
the Indemnitee acted in good faith and in a manner he or she
reasonably believed to be in, or not opposed to, our best
interests, except that no indemnification shall be made with
respect to any claim, issue or matter as to which such person
shall have been adjudged to be liable to us, unless and only to
the extent that a court determines that, despite such
adjudication but in view of all of the circumstances, he or she
is entitled to indemnification for such expenses.
Notwithstanding the foregoing, to the extent that any Indemnitee
has been successful, on the merits or otherwise, he or she will
be indemnified by us against all expenses (including
attorneys fees) actually and reasonably incurred by him or
her or on his or her behalf in connection therewith. If we
dont assume the defense, expenses must be advanced to an
Indemnitee under certain circumstances.
In addition, we have entered into indemnification agreements
with each of our directors and named executive officers and
intend to enter into indemnification agreements with any new
director and executive officer in the future.
We maintain a general liability insurance policy which covers
certain liabilities of our directors and officers arising out of
claims based on acts or omissions in their capacities as
directors or officers.
Certain of our non-employee directors may, through their
relationships with their employers, be insured
and/or
indemnified against certain liabilities in their capacity as
members of our board of directors.
The underwriting agreement we will enter into in connection with
the offering of common stock being registered hereby provides
that the underwriters will indemnify, under certain conditions,
our directors and officers (as well as certain other persons)
against certain liabilities arising in connection with such
offering.
See also the undertakings set out in response to Item 17
herein.
|
|
Item 15.
|
Recent
sales of unregistered securities.
|
Set forth below is information regarding shares of common stock,
convertible preferred stock and convertible promissory notes
issued and options granted by us within the past three years
that were not registered under the Securities Act. Also included
is the consideration, if any, received by us for such shares,
notes and options and information relating to the section of the
Securities Act, or rule of the SEC, under which exemption from
registration was claimed.
(a) Issuances of Capital Stock and Convertible Promissory
Notes.
|
|
|
|
(1)
|
On May 12, 2009, we sold an aggregate of
1,206,899 shares of our common stock at a price per share
of $0.0029 to accredited investors, for an aggregate purchase
price of $3,500.
|
|
|
|
|
(2)
|
On May 15, 2009, we sold an aggregate of
5,044,828 shares of our
series A-1
convertible preferred stock at a price per share of $2.00
(conversion price of $5.80 per share) to accredited investors,
for an aggregate purchase price of $10,089,656.
|
II-2
|
|
|
|
(3)
|
On November 9, 2009, we sold an aggregate of
5,044,828 shares of our
series A-2
convertible preferred stock at a price per share of $3.00
(conversion price of $8.70 per share) to accredited investors,
for an aggregate purchase price of $15,134,484.
|
|
|
(4)
|
On November 18, 2009, we sold an aggregate of
10,919,540 shares of our series B convertible
preferred stock at a price per share of $4.62 (conversion price
of $13.40 per share) to accredited investors, for an aggregate
purchase price of $50,448,275.
|
|
|
(5)
|
On May 25, 2011, we sold $20,000,000 aggregate principal
amount of our 5% convertible promissory notes due 2012 to
accredited investors, for an aggregate purchase price of
$20,000,000.
|
|
|
(6)
|
On June 2, 2011, we sold $15,000,000 aggregate principal
amount of our 5% convertible promissory notes due 2012 to Pfizer
Inc., an accredited investor, $7.0 million of which were
issued as consideration for the execution of our license
agreement with Pfizer Inc. for
CO-338 and
$8.0 million of which were issued for an investment of
$8.0 million of cash by Pfizer Inc.
|
|
|
(7)
|
From April 20, 2009 through October 28, 2011, we
issued an aggregate of 456,041 shares of our common stock
at prices ranging from $0.29 to $3.28 per share to certain of
our employees and directors pursuant to the exercise of stock
options under the Clovis Oncology, Inc. 2009 Equity Incentive
Plan (the 2009 Plan) for an aggregate purchase price
of $1,127,622.
|
(b) Grants of Stock Options.
|
|
|
|
(1)
|
From April 20, 2009 through October 28, 2011, we
granted stock options to purchase an aggregate of
1,358,054 shares of our common stock with exercise prices
ranging from $0.29 to $11.02 per share, to certain of our
employees and directors under our 2009 Plan in connection with
services provided by such parties to us.
|
No underwriters were involved in the foregoing issuances of
securities. The securities described in paragraphs (a)(1)
through (6) of this Item 15 were issued to accredited
investors in reliance upon the exemption from the registration
requirements of the Securities Act, as set forth in
Section 4(2) under the Securities Act, and, in certain
cases, in reliance on Regulation D promulgated thereunder,
relative to transactions by an issuer not involving any public
offering, to the extent an exemption from such registration was
required. The securities described in paragraph (a)(7) of this
Item 15 were issued pursuant to written compensatory plans
or arrangements with our employees, directors and consultants in
reliance on the exemption provided by Rule 701 promulgated
under Section 3(b) of the Securities Act, or pursuant to
Section 4(2) under the Securities Act, relative to
transactions by an issuer not involving any public offering, to
the extent an exemption from such registration was required. The
securities described in paragraph (b)(1) of this Item 15
were made pursuant to written compensatory plans or arrangements
with our employees, directors and consultants, in reliance on
the exemption provided by Rule 701 promulgated under
Section 3(b) of the Securities Act, or pursuant to
Section 4(2) under the Securities Act, relative to
transactions by an issuer not involving any public offering, to
the extent an exemption from such registration was required.
All of the purchasers of shares of our common stock, convertible
preferred stock and convertible promissory notes described above
represented to us in connection with their respective
acquisitions described above that they were accredited investors
and that they were acquiring the applicable securities for
investment and not distribution and to the effect that they
could bear the risks of the investment. Such parties received
written disclosures that the applicable securities had not been
registered under the Securities Act and that any resale must be
made pursuant to a registration or an available exemption from
such registration.
All of the foregoing securities are deemed restricted securities
for purposes of the Securities Act. The certificates
representing the issued shares of capital stock and notes
described in this Item 15 included appropriate legends
setting forth that the applicable securities have not been
registered and the applicable restrictions on transfer.
|
|
Item 16.
|
Exhibits
and financial statement schedules.
|
(a) Exhibits
See Exhibit Index attached to this registration statement,
which is incorporated by reference herein.
II-3
(b) Financial Statement Schedules
Schedules not listed above have been omitted because the
information required to be set forth therein is not applicable
or is shown in the financial statements or the notes thereto.
|
|
|
|
(a)
|
The undersigned registrant hereby undertakes to provide to the
underwriters at the closing specified in the underwriting
agreement certificates in such denominations and registered in
such names as required by the underwriters to permit prompt
delivery to each purchaser.
|
|
|
|
|
(b)
|
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the registrant pursuant to
our amended and restated certificate of incorporation or bylaws,
or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid
by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final
adjudication of such issue.
|
|
|
|
|
(c)
|
The undersigned registrant hereby undertakes that:
|
|
|
|
|
(1)
|
For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon
Rule 430A and contained in a form of prospectus filed by
the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of
this registration statement as of the time it was declared
effective; and
|
|
|
(2)
|
For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that
contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
|
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this Amendment No. 3 to the
Registration Statement on
Form S-1
to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Boulder, in the State of Colorado, on
this October 31, 2011.
CLOVIS ONCOLOGY, INC.
|
|
|
|
By:
|
/s/ Patrick
J. Mahaffy
|
Name: Patrick J. Mahaffy
|
|
|
|
Title:
|
President and Chief Executive Officer
|
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 3 to the Registration Statement on
Form S-1
has been signed by the following persons in the capacities and
on the dates indicated.
|
|
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
/s/ Patrick
J. Mahaffy
Patrick
J. Mahaffy
|
|
President and Chief Executive Officer; Director
(Principal Executive Officer)
|
|
October 31, 2011
|
/s/ Erle
T. Mast
Erle
T. Mast
|
|
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer
and Principal Accounting Officer)
|
|
October 31, 2011
|
*
Brian
G. Atwood
|
|
Director
|
|
October 31, 2011
|
*
M.
James Barrett
|
|
Director
|
|
October 31, 2011
|
*
James
C. Blair
|
|
Director
|
|
October 31, 2011
|
*
Paul
Klingenstein
|
|
Director
|
|
October 31, 2011
|
*
Edward
J. McKinley
|
|
Director
|
|
October 31, 2011
|
*
John
C. Reed
|
|
Director
|
|
October 31, 2011
|
*
Thorlef
Spickschen
|
|
Director
|
|
October 31, 2011
|
Patrick J. Mahaffy by signing his name below, signs this
document on behalf of each of the above named persons specified
by an asterisk (*), pursuant to a power of attorney duly
executed by such persons and filed with the Securities and
Exchange Commission in the Registrants Registration
Statement on June 23, 2011.
|
|
|
|
By:
|
/s/ Patrick
J. Mahaffy
|
Attorney-in-fact
Patrick J. Mahaffy
II-5
INDEX TO
EXHIBITS
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Exhibit Description
|
|
|
1
|
.1
|
|
Form of Underwriting Agreement (including form of
lock-up
agreement).
|
|
3
|
.1
|
|
Amended and Restated Certificate of Incorporation of Clovis
Oncology, Inc., as amended, as currently in effect.
|
|
3
|
.2
|
|
Bylaws of Clovis Oncology, Inc., as currently in effect.
|
|
3
|
.3
|
|
Form of Amended and Restated Certificate of Incorporation of
Clovis Oncology, Inc., to be effective upon the closing of this
offering.
|
|
3
|
.4
|
|
Form of Amended and Restated Bylaws of Clovis Oncology, Inc., to
be effective upon the closing of this offering.
|
|
4
|
.1
|
|
Form of Common Stock Certificate of Clovis Oncology, Inc.
|
|
4
|
.2
|
|
Clovis Oncology Inc. Investor Rights Agreement, dated as of
May 15, 2009, between Clovis Oncology, Inc., certain
investors named therein.
|
|
5
|
.1
|
|
Opinion of Willkie Farr & Gallagher LLP regarding the
validity of the securities being registered.
|
|
10
|
.1*
|
|
Amended and Restated License Agreement, dated as of
November 10, 2010, by and between Clovis Oncology, Inc. and
Clavis Pharma ASA.
|
|
10
|
.2*
|
|
Amended and Restated Strategic License Agreement, dated as of
June 16, 2011, by and between Clovis Oncology, Inc. and
Avila Therapeutics, Inc.
|
|
10
|
.3*
|
|
License Agreement, dated as of June 2, 2011, by and between
Clovis Oncology, Inc. and Pfizer Inc.
|
|
10
|
.4+
|
|
Clovis Oncology, Inc. 2009 Equity Incentive Plan.
|
|
10
|
.5+
|
|
Clovis Oncology, Inc. 2011 Equity Incentive Plan.
|
|
10
|
.6+
|
|
Form of Clovis Oncology, Inc. 2009 Equity Incentive Plan Stock
Option Agreement.
|
|
10
|
.7+
|
|
Form of Clovis Oncology, Inc. 2011 Equity Incentive Plan Stock
Option Agreement.
|
|
10
|
.8+
|
|
Employment Agreement, dated as of August 24, 2011, between
Clovis Oncology, Inc. and Patrick J. Mahaffy.
|
|
10
|
.9+
|
|
Employment Agreement, dated as of August 24, 2011, between
Clovis Oncology, Inc. and Erle T. Mast.
|
|
10
|
.10+
|
|
Employment Agreement, dated as of August 24, 2011, between
Clovis Oncology, Inc. and Gillian C. Ivers-Read.
|
|
10
|
.11+
|
|
Employment Agreement, dated as of August 24, 2011, between
Clovis Oncology, Inc. and Andrew R. Allen.
|
|
10
|
.12+
|
|
Indemnification Agreement, dated as of May 15, 2009,
between Clovis Oncology, Inc. and John C. Reed.
|
|
10
|
.13+
|
|
Indemnification Agreement, dated as of May 15, 2009,
between Clovis Oncology, Inc. and Paul Klingenstein.
|
|
10
|
.14+
|
|
Indemnification Agreement, dated as of May 15, 2009,
between Clovis Oncology, Inc. and James C. Blair.
|
|
10
|
.15+
|
|
Indemnification Agreement, dated as of May 15, 2009,
between Clovis Oncology, Inc. and Edward J. McKinley.
|
|
10
|
.16+
|
|
Indemnification Agreement, dated as of May 15, 2009,
between Clovis Oncology, Inc. and Thorlef Spickschen.
|
|
10
|
.17+
|
|
Indemnification Agreement, dated as of May 15, 2009,
between Clovis Oncology, Inc. and M. James Barrett.
|
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Exhibit Description
|
|
|
10
|
.18+
|
|
Indemnification Agreement, dated as of May 15, 2009,
between Clovis Oncology, Inc. and Brian G. Atwood.
|
|
10
|
.19+
|
|
Indemnification Agreement, dated as of May 12, 2009,
between Clovis Oncology, Inc. and Patrick J. Mahaffy.
|
|
10
|
.20+
|
|
Indemnification Agreement, dated as of May 12, 2009,
between Clovis Oncology, Inc. and Erle T. Mast.
|
|
10
|
.21+
|
|
Indemnification Agreement, dated as of May 12, 2009,
between Clovis Oncology, Inc. and Gillian C. Ivers-Read.
|
|
10
|
.22+
|
|
Indemnification Agreement, dated as of May 13, 2009,
between Clovis Oncology, Inc. and Andrew R. Allen.
|
|
10
|
.23+
|
|
Restricted Stock Purchase Agreement, dated as of May 12,
2009, between Clovis Oncology, Inc. and Patrick J. Mahaffy.
|
|
10
|
.24+
|
|
Restricted Stock Purchase Agreement, dated as of May 12,
2009, between Clovis Oncology, Inc. and Erle T. Mast.
|
|
10
|
.25+
|
|
Restricted Stock Purchase Agreement, dated as of May 12,
2009, between Clovis Oncology, Inc. and Gillian C. Ivers-Read.
|
|
10
|
.26+
|
|
Restricted Stock Purchase Agreement, dated as of May 12,
2009, between Clovis Oncology, Inc. and Andrew R. Allen.
|
|
10
|
.27*
|
|
Companion Diagnostics Agreement, dated as of April 19,
2011, by and between Clovis Oncology, Inc. and Roche Molecular
Systems, Inc.
|
|
10
|
.28*
|
|
Master Service Agreement, dated as of March 23, 2010, by
and between Clovis Oncology, Inc. and Ventana Medical Systems,
Inc., together with the related Individual Project Agreement,
dated as of March 25, 2010.
|
|
10
|
.29+
|
|
Clovis Oncology, Inc. 2011 Employee Stock Purchase Plan.
|
|
10
|
.30+
|
|
Clovis Oncology, Inc. 2011 Cash Bonus Plan.
|
|
10
|
.31+
|
|
Offer of Employment Letter, dated August 5, 2011, by and
between Clovis Oncology, Inc. and Steven L. Hoerter.
|
|
21
|
.1
|
|
List of Subsidiaries of Clovis Oncology, Inc.
|
|
23
|
.1
|
|
Consent of Ernst & Young LLP.
|
|
23
|
.2
|
|
Consent of Willkie Farr & Gallagher LLP (included in
Exhibit 5.1).
|
|
24
|
.1
|
|
Power of Attorney.
|
|
|
|
+ |
|
Indicates management contract or compensatory plan. |
|
|
|
* |
|
Confidential treatment has been requested with respect to
certain portions of this exhibit. Omitted portions have been
filed separately with the Securities and Exchange Commission. |