EPIRUS Biopharmaceuticals, Inc. - FORM 10-Q

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EXCEL - IDEA: XBRL DOCUMENT - EPIRUS Biopharmaceuticals, Inc.	Financial_Report.xls
EX-31.1 - EX-31.1 - EPIRUS Biopharmaceuticals, Inc.	d705474dex311.htm
EX-31.2 - EX-31.2 - EPIRUS Biopharmaceuticals, Inc.	d705474dex312.htm
EX-32.1 - EX-32.1 - EPIRUS Biopharmaceuticals, Inc.	d705474dex321.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2014.

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File Number 000-51171

ZALICUS INC.

(Exact name of registrant as specified in its charter)


Delaware		04-3514457
(State or other jurisdiction of Incorporation or organization)		(IRS Employer Identification Number)

245 First Street Third Floor Cambridge, Massachusetts		02142
(Address of Principal Executive Offices)		(Zip Code)

(617) 301-7000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	¨	Accelerated filer	x

Non-accelerated filer	¨	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

Number of shares of the registrant’s Common Stock, $0.001 par value per share, outstanding as of May 7, 2014: 26,108,910 shares

ZALICUS INC.

QUARTERLY REPORT

ON FORM 10-Q

INDEX


PART I FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements (Unaudited)	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	16
Item 4.	Controls and Procedures	16

PART II OTHER INFORMATION

Item 1A.	Risk Factors	18
Item 4.	Mine Safety Disclosures	31
Item 6.	Exhibits	31

PART I

FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10-Q includes statements with respect to Zalicus Inc. (“Zalicus”) and its subsidiaries (“we”, “our” or “us”), which constitute “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Words such as “believe,” “anticipate,” “expect,” “estimate,” “intend,” “plan,” “project,” “will be,” “will continue,” “will result,” “seek,” “could,” “may,” “might,” or any variations of such words or other words with similar meanings are intended to identify such forward-looking statements. Forward-looking statements in this quarterly report on Form 10-Q include, without limitation, statements regarding our future expectations; any statements concerning pre-clinical and product candidate research, development and commercialization plans and timelines and related regulatory matters;; any projections of financing needs, revenue, expenses, earnings or losses from operations, or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning product candidate research, development and commercialization plans and timelines; any statements regarding safety and efficacy of product candidates; any statements regarding our plans for the outlicensing of our clinical or pre-clinical product candidates and our seeking of collaborations or other strategic transactions; any statements of expectation or belief; and any statements regarding other matters that involve known and unknown risks, uncertainties and other factors that may cause actual results, levels of activity, performance or achievements to differ materially from results expressed in or implied by this quarterly report on Form 10-Q.

The risks, uncertainties and assumptions referred to above include risks that are described in our annual report on Form 10-K in the section entitled “Risk Factors” and elsewhere and that are otherwise described from time to time in our other Securities and Exchange Commission reports. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this quarterly report on Form 10-Q. We specifically disclaim any obligation to update these forward-looking statements in the future, except as required by law.

On September 18, 2013, our board of directors unanimously approved a 1-for-6 reverse stock split of our common stock, which we effected on October 3, 2013. All share and per share amounts of common stock, options and warrants in this quarterly report on Form 10-Q, including those amounts included in the accompanying financial statements, have been restated for all periods to give retroactive effect to the reverse stock split.

Item 1.

Condensed Consolidated Financial Statements—Unaudited

The financial information set forth below should be read in conjunction with our “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing elsewhere in this Quarterly Report on Form 10-Q.

Zalicus Inc.

Condensed Consolidated Balance Sheets

(in thousands, except per share data)

(Unaudited)


	March 31, 2014			December 31, 2013
Assets
Current assets:
Cash and cash equivalents	$	11,044		$	17,958
Restricted cash		50			50
Accounts receivable		584			2,511
Prepaid expenses and other current assets		511			223

Total current assets		12,189			20,742
Property and equipment, net		2,132			2,363
Intangible asset, net		—			7,200
Restricted cash and other assets		1,800			1,801

Total assets	$	16,121		$	32,106

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	1,472		$	2,237
Accrued expenses and other current liabilities		1,300			3,339
Deferred revenue		1,617			2,392
Current portion of term loan payable		—			6,640
Current portion of lease incentive obligation		284			284

Total current liabilities		4,673			14,892
Term loan payable, net of current portion		0			2,132
Deferred rent, net of current portion		272			309
Lease incentive obligation, net of current portion		520			591

Stockholders’ equity:
Preferred stock, $0.001 par value; 5,000 shares authorized; no shares issued and outstanding		—			—
Common stock, $0.001 par value; 200,000 shares authorized; 26,109 and 26,090 shares issued and outstanding at March 31, 2014 and December 31, 2013, respectively		26			26
Additional paid-in capital		394,060			393,796
Accumulated deficit		(383,430	)		(379,640	)

Stockholders’ equity		10,656			14,182

Total liabilities and stockholders’ equity	$	16,121		$	32,106

The accompanying notes are an integral part of the condensed consolidated financial statements.

Zalicus Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share amounts)

(Unaudited)


	Three months ended March 31,
	2014			2013
Revenue:
cHTS services and other collaborations	$	1,603		$	2,242
Royalties		—			1,432

Total revenue		1,603			3,674

Operating expenses:
Research and development		3,081			7,079
General and administrative		2,010			2,042
Amortization of intangible		—			2,181

Total operating expenses		5,091			11,302

Loss from operations		(3,488	)		(7,628	)
Interest income		1			23
Interest expense		(85	)		(440	)
Loss on early extinguishment of debt		(217	)		—
Other expense		(1	)		(2	)

Net loss	$	(3,790	)	$	(8,047	)

Net loss per share—basic and diluted	$	(0.15	)	$	(0.38	)

Weighted average number of common shares used in net loss per share calculation – basic and diluted		26,106,731			21,204,220

Comprehensive loss	$	(3,790	)	$	(8,053	)

The accompanying notes are an integral part of the condensed consolidated financial statements.

Zalicus Inc.

Condensed Consolidated Statements of Cash Flow

(in thousands)

(Unaudited)


	Three Months Ended March 31.
	2014			2013
Operating activities
Net loss	$	(3,790	)	$	(8,047	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		231			2,516
Loss on extinguishment of term loan		67			—
Noncash interest expense		9			53
Noncash rent expense		(71	)		(71	)
Stock-based compensation expense		305			531
Foreign exchange gain		—			(3	)
Decrease in deferred rent		(37	)		(37	)
Changes in assets and liabilities:
Decrease in accounts receivable		1,927			513
Increase in prepaid expenses and other assets		(286	)		(139	)
Decrease in accounts payable		(765	)		(1,835	)
Decrease in accrued restructuring		—			(34	)
Decrease in accrued expenses and other long-term liabilities		(2,039	)		(1,302	)
Decrease in deferred revenue		(775	)		(860	)

Net cash used in operating activities		(5,224	)		(8,715	)

Investing activities
Proceeds from sale of intangible asset		7,200			—
Purchases of property and equipment		—			(12	)
Purchases of short-term investments		—			(7,976	)
Sales and maturities of short-term investments		—			16,958

Net cash provided by investing activities		7,200			8,970

Financing activities
Repayment of term loan		(8,848	)		(1,562	)
Repurchases of common stock		(41	)		—

Net cash used in financing activities		(8,889	)		(1,562	)

Effect of exchange rate changes on cash and cash equivalents		(1	)		(3	)

Net decrease in cash and cash equivalents		(6,914	)		(1,310	)
Cash and cash equivalents at beginning of the period		17,958			4,531

Cash and cash equivalents at end of the period	$	11,044		$	3,221

Cash paid for interest	$	148		$	385

The accompanying notes are an integral part of the condensed consolidated financial statements.

Zalicus Inc.

Notes to Condensed Consolidated Financial Statements

(all dollar amounts are in thousands, except share and per share amounts)

(Unaudited)

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Zalicus Inc. (“Zalicus” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial reporting and as required by Regulation S-X, Rule 10-01. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (including those which are normal and recurring) considered necessary for a fair presentation of the interim financial information have been included. When preparing financial statements in conformity with GAAP, the Company must make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures at the date of the financial statements. Actual results could differ from those estimates. Additionally, operating results for the three months ended March 31, 2014 are not necessarily indicative of the results that may be expected for any other interim period or for the fiscal year ending December 31, 2014. For further information, refer to the consolidated financial statements and footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013 as filed with the Securities and Exchange Commission (“SEC”) on March 14, 2014.

Reverse Stock Split

The Company effected a 1-for-6 reverse stock split of its outstanding common stock on October 3, 2013. The accompanying consolidated financial statements and notes to the consolidated financial statements give retroactive effect to the reverse stock split for all periods presented. The shares of common stock retained a par value of $0.001 per share. Accordingly, stockholders’ equity reflects the reverse stock split by reclassifying from common stock to additional paid-in capital an amount equal to the par value of the decreased shares resulting from the reverse stock split.

2. Significant Accounting Policies

In the three months ended March 31, 2014, there were no changes to the Company’s significant accounting policies identified in the Company’s most recent Annual Report on Form 10-K for the fiscal year ended December 31, 2013.

Recent Accounting Pronouncements

Unrecognized Tax Benefits

In July 2013, the FASB issued ASU No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (ASU 2013-11). ASU 2013-11 amended existing guidance related to the presentation of unrecognized tax benefits and allows for the reduction of a deferred tax asset for a net operating loss (“NOL”) carryforward whenever the NOL or tax credit carryforward would be available to reduce the additional taxable income or tax due if the tax position is disallowed. ASU 2013-11 is effective for annual and interim periods for fiscal years beginning after December 15, 2013, and early adoption is permitted. Because the guidance relates only to the presentation of unrecognized tax benefits, the adoption had no material effect on the Company’s results of operations or financial position.

3. Intangible Asset

The intangible asset relates to rights to receive milestone payments and royalties from Mallinckrodt Inc. for the commercial rights to Exalgo that were acquired as part of the merger with Neuromed Pharmaceuticals Ltd., or Neuromed. The intangible asset was initially recorded on December 21, 2009 at a value of $45,943 with an ongoing useful life of five years, representing the remaining patent life of Exalgo.

On January 31, 2014, Zalicus’s subsidiary Zalicus Pharmaceuticals Ltd., or Zalicus Canada, and Mallinckrodt Medical Imaging – Ireland, an affiliate of Mallinckrodt plc, entered into a Royalty Purchase Agreement (the “Royalty Purchase Agreement”) relating to the asset purchase agreement, dated as of June 11, 2009, between Zalicus and Mallinckrodt Inc. (collectively with Mallinckrodt Medical Imaging – Ireland and Mallinckrodt plc, “Mallinckrodt”), as amended (the “Asset Purchase Agreement”). Under the terms of the Royalty Purchase Agreement, in exchange for the payment of $7,200 from Mallinckrodt to the Company on January 31, 2014, the Company terminated any further rights it has to the payment of royalties on net sales of Exalgo by Mallinckrodt for any period subsequent to December 31, 2013.

As of December 31, 2013, the Company concluded that facts and circumstances existed which indicated that the carrying value of the intangible asset exceeded its estimated fair value. The Company determined the estimated fair value of the intangible asset as of December 31, 2013 based on the $7,200 in proceeds from the Royalty Purchase Agreement. As a result, during the year ended December 31, 2013, the Company recorded an impairment charge of $1,732 in the consolidated statements of operations and comprehensive loss.

The Company recorded the sale of the intangible asset for proceeds of $7,200, with no gain or loss, in the three months ended March 31, 2014.

4. Accrued Expenses

Accrued expenses consisted of the following:


	March 31, 2014		December 31, 2013
Accrued clinical trial costs	$	117	$	803
Accrued payroll and related benefits		215		656
Accrued professional fees		538		290
Accrued research collaboration expense		—		1,015
Accrued other expenses		430		575

	$	1,300	$	3,339

5. Term Loan Payable

On January 31, 2014, the Company prepaid its outstanding indebtedness of $8,647 to Oxford Finance Corporation (the “Lender”) under the loan and security agreement (the “Loan and Security Agreement”). The proceeds from the Royalty Purchase Agreement of $7,200, along with the royalty payment of approximately $2,006 from Mallinckrodt for royalties earned on net sales of Exalgo for the quarter ended December 31, 2013, were sufficient to prepay the remaining balance of $8,647, including accrued interest and a final payment fee of $300, under the Loan and Security Agreement. As a result, the Loan and Security Agreement was terminated effective January 31, 2014, and the Lender has released all security interests in the Company’s tangible and intangible property. The Company recorded a loss on extinguishment of $217 in the condensed consolidated statement of operations and comprehensive loss for the three months ended March 31, 2014.

6. Net Loss Per Share

Basic and diluted net loss per common share is calculated by dividing net loss applicable to common stockholders by the weighted-average number of common shares outstanding during the period, without consideration for common stock equivalents. The Company’s potentially dilutive shares, which include outstanding stock options, unvested restricted stock units, warrants and stock issuance commitments, 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 following potentially dilutive securities outstanding, prior to the use of the treasury stock method, have been excluded from the computation of diluted weighted-average shares outstanding as of March 31, 2014 and 2013, as they would be anti-dilutive.


	As of March 31,
	2014		2013
Options outstanding		1,774,270		1,798,624
Unvested restricted stock units		527,777		72,916
Warrants outstanding		68,600		68,600

7. Stock-Based Compensation

The Company recognized, for the three months ended March 31, 2014 and 2013, stock-based compensation expense of approximately $305 and $531, in connection with its stock-based payment awards.

Stock Options

A summary of the status of the Company’s stock option plans at March 31, 2014 and changes during the three months then ended is presented in the table and narrative below:


	Options			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (In Years)		Aggregate Intrinsic Value
Outstanding at December 31, 2013		1,681,325		$	7.63
Granted		250,000			1.47
Exercised		—			—
Cancelled		(157,055	)		6.52

Outstanding at March 31, 2014		1,774,270		$	6.86		6.87		—

Vested or expected to vest at March 31, 2014		1,510,376		$	7.29		6.53		—

Exercisable at March 31, 2014		959,468		$	9.01		5.16		—

The aggregate intrinsic value in the table above represents the value (the difference between the Company’s closing common stock price on the last trading day of the three months ended March 31, 2014 and the exercise price of the options, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on March 31, 2014. As of March 31, 2014, there was $1,607 of total unrecognized stock-based compensation expense related to stock options granted under the plans. The expense is expected to be recognized over a weighted-average period of 2.13 years.

The table above includes 238,332 stock options issued on January 3, 2013 with performance-based vesting criteria. The fair value of the options granted was determined using the Black-Scholes pricing model. In November 2013, the Company concluded the vesting criteria would not be achieved with respect to these outstanding performance-based options, as confirmed by the Compensation Committee of the Board of Directors, such that the options would expire July 1, 2014. Accordingly, for the three months ended March 31, 2014, the Company did not recognize any expense related to these stock options.

During the three months ended March 31, 2014 and 2013, respectively, the weighted-average assumptions used in the Black-Scholes pricing model for new grants were as follows:


	Three Months Ended March 31,
	2014			2013
Volatility factor		122.60	%		106.46	%
Risk-free interest rate		2.02	%		1.01	%
Dividend yield		—			—
Expected term (in years)		6.0			6.0

Restricted Stock

A summary of the status of non-vested restricted stock units (RSUs) as of March 31, 2014 and changes during the three months then ended is as follows:


	Restricted Stock Units			Weighted- Average Grant Date Fair Value		Weighted Average Remaining Contractual Term (in Years)		Aggregate Intrinsic Value
Nonvested at December 31, 2013		72,916		$	5.05
Granted		500,000			1.47
Vested		(45,139	)		5.34
Cancelled		—			—

Nonvested at March 31, 2014		527,777		$	1.63		2.81	$	644

As of March 31, 2014, there was $756 of total unrecognized stock-based compensation expense related to non-vested RSUs. The expense is expected to be recognized over a weighted-average period of 2.81 years.

During February 2014, the Company issued 500,000 RSUs to certain employees, which vest with respect to one third (1/3) of the RSUs on the first anniversary of the grant date and an additional one third (1/3) on each anniversary thereafter until the third anniversary of the grant date. In the event of a change of control, as defined in the agreements, 50% of the unvested portion of the RSUs shall immediately vest. In the event of the employee’s termination of employment within 12 months following a change of control without cause or for good reason, each as defined in the agreements, any then unvested RSUs shall immediately vest.

8. Subsequent Event

Agreement and Plan of Merger and Related Litigation

On April 15, 2014, the Company entered into an Agreement and Plan of Merger and Reorganization (the “Agreement”) with Epirus Biopharmaceuticals, Inc., a privately held biopharmaceutical company (“Epirus”) and BRunning, Inc., a wholly owned subsidiary of Zalicus (“Merger Subsidiary”), pursuant to which the Merger Subsidiary will be merged with and into Epirus (the “Merger”) at the effective time of the Merger, with Epirus continuing after the Merger as the surviving corporation and a wholly-owned subsidiary of Zalicus. On May 7, 2014, the Company and Epirus entered into Amendment No. 1 to the Merger Agreement (the “Amendment” and together with the Agreement, collectively, the “Merger Agreement”).

Subject to the terms and conditions of the Merger Agreement, the percentage of the combined company that Zalicus stockholders will own following the closing of the Merger is subject to adjustment based on the level of Zalicus’s net cash as of a certain determination date prior to the effective time of the Merger. On a pro forma basis, based upon the number of shares of Zalicus common stock to be issued in the Merger, following the closing of the Merger (i) current Zalicus stockholders will own approximately 19% of the combined company and current Epirus equityholders will own approximately 81% of the combined company if Zalicus’s net cash as of a certain determination date prior to the effective time of the Merger is equal to or in excess of $12,000, (ii) current Zalicus stockholders will own approximately 17% of the combined company and current Epirus equityholders will own approximately 83% of the combined company if Zalicus’s net cash as of a certain determination date prior to the effective time of the Merger is in excess of $9,000 but less than $12,000, and (iii) current Zalicus stockholders will own approximately 14% of the combined company and current Epirus equityholders will own approximately 86% of the combined company if Zalicus’s net cash as of a certain determination date prior to the effective time of the Merger is equal to or less than $9,000. Zalicus is exploring different alternatives to increase its level of net cash.

The Merger Agreement contains a customary “no-shop” provision pursuant to which neither Zalicus nor Epirus is permitted to (i) solicit any alternative acquisition proposals, (ii) participate in any negotiations or discussions with any person relating to any alternative acquisition proposal, (iii) waive, terminate or release any person from a “standstill” or similar agreement, (iv) approve, endorse or recommend any alternative acquisition proposal, or (iv) enter into any agreement relating to any alternative acquisition proposal. The “no-shop” provision is subject to certain exceptions that permit the board of directors of each of Zalicus and Epirus to comply with its fiduciary duties, which, under certain circumstances, would enable either Zalicus or Epirus to provide information to, and engage in discussions or negotiations with, third parties with respect to alternative acquisition proposals.

The Merger Agreement provides each of Zalicus and Epirus with specified termination rights. If the Merger Agreement is terminated to accept a superior acquisition proposal or under other circumstances specified in the Merger Agreement, Zalicus will be required to pay to Epirus a termination fee of $1,100 or Epirus will be required to pay to Zalicus a termination fee of $2,500, as the case may be.

approval of its stockholders to amend its certificate of incorporation to: (i) effect a reverse split of Zalicus common stock at a ratio mutually agreed to by Zalicus and Epirus, which is intended to ensure that the listing requirements of the Nasdaq Capital Market are satisfied, and (ii) increase the number of authorized shares of Zalicus common stock from 200 million shares to 300 million shares and change the name of Zalicus to “EPIRUS Biopharmaceuticals, Inc.”, subject to the consummation of the Merger. In addition, Zalicus will seek to amend its Amended and Restated 2004 Incentive Plan to increase the number of shares available for issuance by 3 million shares after giving effect to the reverse stock split described above.

Zalicus’s and Epirus’s obligations to consummate the Merger are subject to the satisfaction or waiver of customary closing conditions, including, among others, obtaining the requisite approvals of the stockholders of Zalicus and Epirus, including the approval of the issuance of the shares of common stock of Zalicus to be issued in connection with the Merger and the charter amendments by the stockholders of Zalicus, Zalicus having a minimum level of cash of $3,000 as of a certain determination date prior to the effective time of the Merger, and the effectiveness of a registration statement on Form S-4 relating to the shares of Zalicus common stock to be issued to Epirus stockholders pursuant to the Merger Agreement.

The foregoing description of the Merger Agreement is qualified in its entirety by reference to the full text of the Merger Agreement, which is attached as Exhibit 2.1 to our Current Report on Form 8-K, dated and filed on April 16, 2014, and is incorporated in this report by reference. The Merger Agreement has been incorporated to provide information regarding its terms. It is not intended to provide any other factual information about us, Epirus or the Merger Subsidiary.

Between April 28, 2014 and May 2, 2014, three putative class action lawsuits were filed by purported stockholders of Zalicus in the Business Litigation Session of the Massachusetts Superior Court, Suffolk County, against Zalicus, BRunning, Inc., the members of Zalicus’ board of directors and Epirus. These actions are: Paul Patrick Laky v. Zalicus Inc., et al., Civ. A. No. 14-1380; Michael Ma v. Zalicus Inc., et al., Civ. A. No. 14-1381; Harrypersaud v. Zalicus Inc., et al., Civ. A. No. 14-1455 (collectively, the “Massachusetts Actions”). The Massachusetts Actions allege that the Zalicus board breached its fiduciary duties, and that Epirus, Zalicus and BRunning aided and abetted the purported breaches, in connection with the proposed merger. The Massachusetts Actions seek relief including, among other things, to enjoin defendants from proceeding with the merger, to enjoin defendants from consummating the merger unless additional procedures are implemented, and an award of all costs of the Massachusetts Actions, including reasonable attorneys’ fees and experts’ fees.

On May 1, 2014, another putative class action lawsuit, Harvey Stein v. Zalicus, Inc. et al., Case No. 9602, was filed by a purported stockholder of Zalicus in the Court of Chancery of the State of Delaware against Zalicus, Zalicus’ directors and Epirus (the “Delaware Action”). The Delaware Action alleges that the Zalicus board breached their fiduciary duties, and Epirus and BRunning aided and abetted the purported breaches, in connection with the proposed merger. The Delaware Action seeks relief including, among other things, to preliminary and permanently enjoin the proposed merger, to enjoin consummation of the proposed merger and rescind the merger if consummated (or to award rescissionary damages), and an award of all costs of the Delaware Action, including reasonable attorneys’ fees and experts’ fees.

The defendants deny the allegations in the Massachusetts and Delaware Actions, believe the actions are meritless, and intend to vigorously defend the actions.

As discussed herein, the percentage of the combined company that Zalicus stockholders will own as of the closing of the merger is subject to adjustment at the closing based on the level of Zalicus’ net cash as of a certain determination date prior to closing, as net cash is defined and is to be calculated under the merger agreement. The level of net cash as of that determination date will be reduced by certain specified liabilities, as defined further in the merger agreement, including all out-of-pocket costs in connection with the Massachusetts and Delaware Actions (and any other similar litigation that may be filed), including amounts payable to advisors and attorneys. Thus, the Zalicus parties’ costs in defending the actions insofar as they reduce net cash may reduce the percentage of the combined company that Zalicus stockholders will own as of the closing of the merger.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our financial statements and their notes appearing elsewhere in this quarterly report. The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results and the timing of certain events could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those discussed below and elsewhere in this quarterly report or in our annual report on form 10-K.

Overview

We are a biopharmaceutical company that discovers and develops novel treatments for patients suffering from pain. We have a portfolio of proprietary product candidates targeting pain and have entered into multiple revenue-generating collaborations with large pharmaceutical companies relating to other products, product candidates and drug discovery technologies. We also apply our expertise in the discovery and development of selective ion channel modulators and our combination high throughput screening technology, or cHTS to discover new product candidates for our portfolio or for our collaborators in the areas of pain and oncology.

Our most advanced product candidate is Z944, a novel, oral, state-dependent, selective T-type calcium channel modulator we are seeking to develop for the treatment of pain indications. T-type calcium channels have been recognized as key targets for therapeutic intervention in a broad range of cell functions and have been implicated in pain signaling. During 2013, we completed a Phase 1b clinical trial utilizing Laser-Evoked-Potentials, or LEP, to provide both objective and subjective assessments of the activity of Z944 in induced pain states. On November 1, 2013, we announced positive results from this Phase 1b clinical trial. Based on these results, Zalicus is currently planning to evaluate multiple modified-release formulations of Z944 in a Phase 1 pharmacokinetic and safety study in the first half of 2014, with the goal of advancing a modified-release formulation of Z944 toward Phase 2 clinical development in an appropriate pain indication by late 2014.

We have also been performing discovery research and preclinical development activities on our proprietary selective ion channel modulators targeting the Nav1.7 sodium channel for the treatment of pain. This discovery research and preclinical development was conducted as part of a research collaboration with Hydra Biosciences, Inc., or Hydra, a recognized leader in novel ion channel discovery and development. This collaboration expired in February 2014 in accordance with its terms.

Until November 2013, we had also been advancing the development of Z160, a novel, oral N-type calcium channel modulator we were seeking to develop for the treatment of chronic pain. In December 2012 and August 2012, we initiated Phase 2 clinical trials of Z160 for the treatment of neuropathic pain, including, post-herpetic neuralgia, or PHN, a painful neuropathic condition resulting from an outbreak of the herpes zoster virus, otherwise known as shingles, and lumbosacral radiculopathy, or LSR, a common neuropathic back pain condition resulting from the compression or irritation of the nerves exiting the lumbar region of the spine, respectively. Patient enrollment completed for both studies in September 2013. Results from both Phase 2 trials of Z160 were released on November 11, 2013 and Z160 did not meet the primary endpoint in either of these Phase 2 trials. Based on the results of these trials, we have terminated further development of Z160.

We have also been performing discovery research and preclinical development activities on our proprietary selective ion channel modulators targeting sodium or T-type calcium channels. This discovery research and preclinical development has been conducted as part of a research collaboration with Hydra a recognized leader in novel ion channel discovery and development, which expired in February 2014.

We have also been using our cHTS platform to perform our obligations with our collaboration partners, including Novartis Institutes of Biomedical Research, Inc., or Novartis, and other pharmaceutical companies who have adopted cHTS as an important addition to their oncology discovery efforts.

On December 21, 2009, we completed a merger, which we refer to as the Neuromed Merger, with Neuromed Pharmaceuticals Inc., or Neuromed, pursuant to which Neuromed Pharmaceuticals Ltd. became a wholly-owned subsidiary of Zalicus. On September 8, 2010, we changed our name from CombinatoRx, Incorporated to Zalicus Inc. We also changed the name of our subsidiaries, including Neuromed Pharmaceuticals Ltd., which is now named Zalicus Pharmaceuticals Ltd., and which we refer to herein as Zalicus Canada.

The United States commercial rights to Exalgo^® were acquired by Mallinckrodt Inc., or Mallinckrodt, then a subsidiary of Covidien plc, or Covidien, from Neuromed in June 2009 pursuant to an asset purchase agreement to sell all of the tangible and intangible assets associated with Exalgo, including the rights to develop and commercialize the product candidate in the United States. Exalgo is an extended release formulation of hydromorphone, an opioid analgesic that has been used in an immediate release formulation to treat pain for many years, and is intended for use in the management of moderate to severe pain in opioid tolerant

patients requiring continuous, around-the-clock opioid analgesia for an extended period of time. Under the asset purchase agreement, Mallinckrodt is responsible for all commercialization activities for Exalgo in the United States, including marketing and sales, and for all post-approval regulatory activities. We received a $40.0 million milestone payment following FDA approval of Exalgo in March 2010, and received tiered royalties on net sales of Exalgo by Mallinckrodt following its commercial launch in April 2010. We recognized $16.0 million in revenue related to these royalties through December 31, 2013. Following the settlement of the Exalgo litigation between Mallinckrodt and Watson Pharmaceuticals, Inc., now Actavis Inc., or Actavis, that became effective in January 2012, Actavis was able to introduce a generic version of the 8, 12 and 16 mg dosage strengths of Exalgo starting on November 15, 2013, subject to FDA approval. In August 2012, the FDA approved the 32 mg dosage strength of Exalgo, which is not subject to Mallinckrodt’s settlement with Actavis and on which our royalties for net sales of Exalgo at such dosage will not be reduced as a result of Mallinckrodt’s settlement with Actavis. In February 2013, Mallinckrodt and Actavis entered into a separate settlement agreement that would allow Actavis to introduce a generic version of the 32mg dosage strength of Exalgo starting on May 15, 2014, subject to FDA approval.

On January 31, 2014, we and Mallinckrodt Medical Imaging—Ireland entered into a royalty purchase agreement relating to the asset purchase agreement (“Royalty Purchase Agreement”). Under the terms of the Royalty Purchase Agreement, in exchange for the payment of $7.2 million from Mallinckrodt to Zalicus on January 31, 2014, we terminated any further rights we had to the payment of royalties on net sales of Exalgo by Mallinckrodt for any period subsequent to December 31, 2013. As a result, we recorded an impairment charge of $1.7 million related to the Exalgo intangible asset in the year ended December 31, 2013.

As of March 31, 2014, we had an accumulated deficit of $383.4 million. We had a net loss of $3.8 million and $8.0 million for the three months ended March 31, 2014 and 2013, respectively.

Our management currently uses consolidated financial information in determining how to allocate resources and assess performance. We have determined that we conduct operations in one business segment. For each of the three months ended March 31, 2014 and 2013, all of our revenues were from customers located in the United States. As of March 31, 2014, all of our long-lived assets were located in the United States.

Agreement and Plan of Merger

On April 15, 2014, we entered into an Agreement and Plan of Merger and Reorganization (the “Agreement”) with Epirus Biopharmaceuticals, Inc., a privately held biopharmaceutical company (“Epirus”) and BRunning, Inc., a wholly owned subsidiary of Zalicus (“Merger Subsidiary”), pursuant to which the Merger Subsidiary will be merged with and into Epirus (the “Merger”) at the effective time of the Merger, with Epirus continuing after the Merger as the surviving corporation and a wholly-owned subsidiary of Zalicus. On May 7, 2014, Zalicus and Epirus entered into Amendment No. 1 to the Merger Agreement (the “Amendment” and together with the Agreement, collectively, the “Merger Agreement”).

Subject to the terms and conditions of the Merger Agreement, the percentage of the combined company that Zalicus stockholders will own following the closing of the Merger is subject to adjustment based on the level of Zalicus’s net cash as of a certain determination date prior to the effective time of the Merger. On a pro forma basis, based upon the number of shares of Zalicus common stock to be issued in the Merger, following the closing of the Merger (i) current Zalicus stockholders will own approximately 19% of the combined company and current Epirus equityholder will own approximately 81% of the combined company if Zalicus’s net cash as of a certain determination date prior to the effective time of the Merger is equal to or in excess of $12.0 million, (ii) current Zalicus stockholders will own approximately 17% of the combined company and current Epirus equityholders will own approximately 83% of the combined company if Zalicus’s net cash as of a certain determination date prior to the effective time of the Merger is in excess of $9.0 million but less than $12.0 million, and (iii) current Zalicus stockholders will own approximately 14% of the combined company and current Epirus stockholders will own approximately 86% of the combined company if Zalicus’s net cash as of a certain determination date prior to the effective time of the Merger is equal to or less than $9.0 million. Zalicus is exploring different alternatives to increase its level of net cash. However, based on Zalicus’s current level of net cash and taking into account Zalicus’s projected expenses in connection with the proposed transaction, if the Merger were to close today, the stockholders of Zalicus would own appropriately 14% of the combined company and current Epirus equityholders would own approximately 86% of the combined company. There can be no assurances that any actions taken by Zalicus to attempt to increase its level of net cash between now and closing will be successful or that any such alternatives will be available to Zalicus.

The Merger Agreement contains a customary “no-shop” provision under which neither Zalicus nor Epirus is permitted to (i) solicit any alternative acquisition proposals, (ii) participate in any negotiations or discussions with any person relating to any alternative acquisition proposal, (iii) waive, terminate or release any person from a “standstill” or similar agreement, (iv) approve, endorse or recommend any alternative acquisition proposal, or (iv) enter into any agreement relating to any alternative acquisition proposal. The “no-shop” provision is subject to certain exceptions that permit the board of directors of each of Zalicus and Epirus to comply with its fiduciary duties, which, under certain circumstances, would enable either Zalicus or Epirus to provide information to, and engage in discussions or negotiations with, third parties with respect to alternative acquisition proposals.

The Merger Agreement provides each of Zalicus and Epirus with specified termination rights. If the Merger Agreement is terminated to accept a superior acquisition proposal or under other circumstances specified in the Merger Agreement, Zalicus will be required to pay to Epirus a termination fee of $1.1 million or Epirus will be required to pay to Zalicus a termination fee of $2.5 million, as the case may be.

The Merger Agreement provides that, immediately following the Effective Time, the board of directors of the combined company will consist of one former director of Zalicus, five former directors of Epirus, and two directors to be designated by Epirus (subject to the reasonable consent of Zalicus) following the completion of a mutually agreeable director search and selection process, provided that such persons shall be named at least seven days prior to the mailing of the proxy statement to the stockholders of Zalicus. In connection with the Merger, Zalicus will seek the approval of its shareholders to amend its certificate of incorporation to: (i) effect a reverse split of Zalicus common stock at a ratio mutually agreed to by Zalicus and Epirus, which is intended to ensure that the listing requirements of the Nasdaq Capital Market are satisfied, and (ii) increase the number of authorized shares of Zalicus common stock from 200 million shares to 300 million shares and change the name of Zalicus to “Epirus Biopharmaceuticals, Inc.”, subject to the consummation of the Merger. In addition, Zalicus will seek to amend its Amended and Restated 2004 Incentive Plan to increase the number of shares available for issuance by 3 million shares after giving effect to the reverse stock split described above.

Zalicus’s and Epirus’s obligations to consummate the Merger are subject to the satisfaction or waiver of customary closing conditions, including, among others, obtaining the requisite approvals of the stockholders of Zalicus and Epirus, including the approval of issuance of the shares of common stock of Zalicus to be issued in connection with the Merger and the charter amendments by the stockholders of Zalicus, Zalicus having a minimum level of cash of $3.0 million as of a certain determination date prior to the effective time of the Merger , and the effectiveness of a registration statement on Form S-4 relating to the shares of Zalicus common stock to be issued to Epirus stockholders pursuant to the Merger Agreement.

Critical Accounting Policies

We believe that several accounting policies are important to understanding our historical and future performance. We refer to these policies as “critical” because these specific areas generally require us to make judgments and estimates about matters that are uncertain at the time we make the estimate, and different estimates—which also would have been reasonable—could have been used, which would have resulted in different financial results.

The critical accounting policies we identified in our most recent Annual Report on Form 10-K for the fiscal year ended December 31, 2013 related to intangible assets, revenue recognition, stock-based compensation, accrued expenses and income taxes. There were no changes to our critical accounting policies in the three months ended March 31, 2014. It is important that the discussion of our operating results that follows be read in conjunction with the critical accounting policies disclosed in our Annual Report on Form 10-K, as filed with the SEC on March 14, 2014.

Results of Operations

Comparison of the Three Months ended March 31, 2014 and March 31, 2013

Revenue. For the three months ended March 31, 2014, we recorded $1.6 million of revenue from cHTS services and other collaborations. For the three months ended March 31, 2013, we recorded $3.7 million of revenue from Exalgo royalties and cHTS services and other collaborations, which comprised royalty revenue from Mallinckrodt on net sales of Exalgo of $1.4 million and revenue from our cHTS services and other collaborations of $2.3 million. The decrease in revenue for the three months ended March 31, 2014 was primarily due to a $1.4 million decrease in revenue from Exalgo royalties as a result of the January 2014 Royalty Purchase Agreement entered into with an affiliate of Mallinckrodt, pursuant to which we terminated any further rights we had to the payment of royalties on net sales of Exalgo, and a $0.6 million decrease in revenue from our cHTS services and other collaborations.

Research and Development Expense. Research and development expense for the three months ended March 31, 2014 was $3.1 million compared to $7.1 million for the three months ended March 31, 2013. The $4.0 million decrease was due primarily to $2.8 million decrease in expenses related to the clinical development of Z160 and a $0.9 million decrease in ion channel discovery costs and other clinical programs. The $2.8 million decrease in expenses related to Z160 is due to termination of all development activities related to Z160 in the fourth quarter of 2013. Accordingly, we expect research and development expense to decrease significantly for the year ending December 31, 2014, compared to the year ended December 31, 2013.

The table below summarizes our allocation of research and development expenses to our internal clinical program, Z944, our discontinued clinical program, Z160, our discontinued clinical program, Synavive, our preclinical programs and our drug discovery platforms for the three months ended March 31, 2014 and 2013. Our internal project costing methodology does not allocate all of the personnel and other indirect costs from all of our research and development departments to specific clinical and preclinical programs, and such unallocated costs are further summarized in the table below. Other clinical program costs consist primarily of the personnel and other expenses for our clinical operations department, the majority of which supported the development of our clinical product candidate,

Z944, Z160 and Synavive. Preclinical program costs consist of the personnel and other expenses allocated to our internally funded preclinical programs. cHTS collaboration discovery costs consist of the personnel and other expenses allocated to all of our cHTS services. Ion channel program discovery costs consist of the personnel and other expenses allocated to our ion channel drug discovery programs, including expenses incurred under our collaboration agreement with Hydra prior to its expiration in February 2014, other than the preclinical development costs associated with preclinical product candidates.

Unallocated clinical and preclinical program costs consist primarily of the personnel and other expenses for our formulations, pharmacology and discovery departments, the majority of which supported the development of our clinical product candidates, including Z160 and Z944, as well as our preclinical product candidates from our ion channel program. Infrastructure and support costs consist of facility costs, depreciation and amortization and costs for research and development support personnel such as our informatics and facilities departments.

Due to the uncertainty in drug development and the stage of development of our pre-clinical and clinical programs, we are unable to predict the nature, specific timing and estimated costs to complete the development of our product candidates or the timing of when material cash inflows may commence.


	Three Months Ended March 31,
	2014		2013
	(in thousands)
Z160	$	493	$	3,257
Z944		361		410
Exalgo and Synavive		—		59
Other clinical program costs		31		241

Total clinical program costs		885		3,967

Preclinical program costs		—		3
cHTS services and other collaboration discovery costs		687		836
Ion channel program discovery costs		345		948
Unallocated clinical and preclinical program costs		471		448
Infrastructure and support costs		635		790
Noncash employee and non-employee stock-based compensation expense		58		87

Total research and development costs	$	3,081	$	7,079

General and Administrative. General and administrative expense for the three months ended March 31, 2014 was $2.0 million compared to $2.0 million for the three months ended March 31, 2013. We expect our general and administrative expenses for the remainder of the year ending December 31, 2014 to increase, compared to the year ended December 31, 2013, due to the planned Merger with Epirus Biopharmaceuticals, Inc.

Amortization of Intangible Asset. For the three months ended March 31, 2014 and 2013, we recorded $0 and $2.2 million, respectively, of amortization expense related to the Exalgo intangible asset acquired in the Neuromed Merger. The decrease in amortization expense relates to the sale of our intangible asset in January 2014 pursuant to the Royalty Purchase Agreement. There will be no amortization expense related to the Exalgo intangible asset for the year ended December 31, 2014.

Interest Income. Interest income for each of the three months ended March 31, 2014 and 2013 was less than $0.1 million

Interest Expense. Interest expense for the three months ended March 31, 2014 and 2013 was $0.1 million and $0.4 million, respectively. This interest expense relates to our term loans with Oxford Finance Corporation, or Oxford. We prepaid our outstanding term loans with Oxford in the amount of approximately $8.6 million on January 31, 2014. As such, we expect our interest expense for the remainder of the year ending December 31, 2014 to be $0.

Loss on early extinguishment of debt. Loss on early extinguishment of debt for the three months ended March 31, 2014 relates to a loss of $0.2 million recognized as a result of the extinguishment of our term loans on January 31, 2014.

Liquidity and Capital Resources

Since our inception in March 2000, we have funded our operations principally through private and public offerings of our equity securities and, to a lesser extent, from debt financing, payments from our collaboration partners and proceeds from litigation. As of March 31, 2014, we had cash and cash equivalents of approximately $12.9 million, which includes $1.9 million of restricted cash. Our funds are comprised of cash and cash equivalents and as such, we do not believe there is significant risk in our investment portfolio as of March 31, 2014.

On December 22, 2010, we entered into a loan and security agreement with Oxford, pursuant to which we borrowed an aggregate of $20.0 million under three separate term loans from Oxford. Our obligations under the loan and security agreement were secured by a first priority security interest in substantially all of our assets, including those of Zalicus Canada, other than intellectual property.On January 31, 2014, we prepaid our outstanding term loans of approximately $8.6 million, including accrued interest, to Oxford under the loan and security agreement. The proceeds from the January 2014 Royalty Purchase Agreement of $7.2 million, along with the royalty payment of approximately $2.0 million from Mallinckrodt for royalties earned on net sales of Exalgo for the quarter ended December 31, 2013, were sufficient to prepay the remaining obligation of approximately $8.6 million under the loan and security agreement. As a result, the loan and security agreement terminated effective January 31, 2014 and Oxford has released all security interests in our tangible and intangible property. As part of the sale of our Exalgo royalty stream pursuant to the royalty purchase agreement, we terminated any further rights we had to the payment of royalties on net sales of Exalgo by Mallinckrodt.

We expect our resources to be sufficient to fund our planned operations into the first half of 2015. However, we may require significant additional funds earlier than we currently expect if our research and development expenses exceed our current expectations or our collaboration funding is less than our current expectations. We may seek additional funding through collaboration agreements and public or private financings of debt or equity capital. However, funding may not be available to us on acceptable terms or at all. If we are unable to obtain funding on a timely basis, we may be required to significantly curtail one or more of our research or development programs or our operations. We also could be required to seek funds through arrangements with collaborators or others that may require us to relinquish rights to some of our technologies or product candidates which we would otherwise pursue on our own.

Cash Flows

Operating Activities. Our operating activities used cash of $5.2 million and $8.7 million for the three months ended March 31, 2014 and 2013, respectively. The decrease in the net cash used in operating activities is primarily attributable to a $4.0 million decrease in research and development expense, including a $2.8 million decrease from terminating all development activities related to Z160.

Investing Activities. Our investing activities provided cash of $7.2 million and $9.0 million for the three months ended March 31, 2014 and 2013, respectively. The cash provided by investing activities for the three months ended March 31, 2014 is due to the $7.2 million of cash proceeds received from the sale of our Exalgo intangible asset. The cash provided by investing activities for the three months ended March 31, 2013 was primarily due to the timing of purchases and maturities of our short-term investments.

Financing Activities. Our financing activities used cash of $8.9 million and $1.6 million for the three months ended March 31, 2014 and 2013, respectively. The cash used by financing activities for both the three months ended March 31, 2014 and 2013 was primarily related to the repayment of our term loans.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements or any relationships with unconsolidated entities of financial partnerships, such as entities often referred to as structured finance or special purpose entities.

Item 3.

Quantitative and Qualitative Disclosure about Market Risk

We are exposed to market risk related to changes in interest rates and changes in the exchange rate of the United States dollar to the Canadian dollar. As of March 31, 2014, we had unrestricted cash and cash equivalents of $11.0 million. Our cash is deposited in and invested through highly rated financial institutions in the United States and Canada.

Transactions by our subsidiary, Zalicus Canada, may be denominated in Canadian dollars, however, the entity’s functional currency is the United States dollar. Exchange gains or losses resulting from the translation between the currency in which a transaction is denominated and functional currency of Zalicus Canada are included in net loss for our consolidated financial statements. Fluctuations in exchange rates, primarily between the United States dollar and the Canadian dollar, may adversely affect our results of operations, financial position and cash flows. We do not hedge this exposure.

Item 4.

Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a–15(b) of the Securities Exchange Act of 1934, as amended (the “1934 Act”), the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, the Company’s principal executive officer and principal financial officer, respectively, conducted an evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective at the reasonable assurance level in ensuring that information required to be disclosed by the Company in the

reports that it files or submits under the 1934 Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

Changes in Internal Control

As required by Rule 13a-15(d) of the 1934 Act, the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, conducted an evaluation of the internal control over financial reporting to determine whether any changes occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded no such changes during the fiscal quarter covered by this Quarterly Report on Form 10-Q materially affected, or were reasonably likely to materially affect, the Company’s internal control over financial reporting.

Item 1A.

Risk Factors

We have marked with an asterisk (*) those risks described below that reflect substantive changes from, or additions to, the risks described in our Annual Report on Form 10-K for the year ended December 31, 2013.

Risks Relating to the Proposed Merger*

Failure to complete the Merger could adversely affect the price of Zalicus common stock and Zalicus’ future business and operations.*

The Merger is subject to the satisfaction of various closing conditions, including the approval by both Zalicus and Epirus stockholders of various proposals related to the Merger, including the charter amendments, as applicable, and neither Zalicus nor Epirus can guarantee that the Merger will be successfully completed. In the event that the Merger is not consummated for any reason, Zalicus and Epirus will be subject to many risks, including the costs related to the Merger, such as legal, accounting and advisory fees, which must be paid even if the Merger is not completed, and, potentially, the payment of a termination fee by either Zalicus or Epirus under certain circumstances. If the Merger is not consummated, the market price of Zalicus common stock could decline. Zalicus and Epirus also could be subject to litigation related to any failure to complete the Merger or related to any enforcement proceeding commenced against Zalicus or Epirus to perform their respective obligations under the Merger Agreement. Finally, if the Merger Agreement is terminated, Zalicus or Epirus may be unable to find another party willing to engage in a similar transaction on terms as favorable as those set forth in the Merger Agreement, or at all. This could limit each company’s ability to pursue its strategic goals in the event the Merger is not consummated.

Lawsuits have been filed and additional lawsuits may be filed against us and the members of our Board of Directors arising out of the proposed Merger, which may delay or prevent the proposed transaction.*

Between April 28, 2014 and May 2, 2014, three putative class action lawsuits were filed in the Business Litigation Session of the Massachusetts Superior Court, Suffolk County by purported stockholders of Zalicus. These actions are: Paul Patrick Laky v. Zalicus Inc., et al., Civ. A. No. 14-1380; Michael Ma v. Zalicus Inc., et al., Civ. A. No. 14-1381; and Harrypersaud v. Zalicus Inc., et al., Civ. A. No. 14-1455 (collectively, the “Massachusetts Actions”). The Massachusetts Actions name as defendants Zalicus, Epirus Pharmaceuticals, Inc., the Merger Subsidiary and members of Zalicus’s board of directors. The Massachusetts Actions allege, among other things, that members of Zalicus’s board breached their fiduciary duties, and that Zalicus, Epirus, and the Merger Subsidiary aided and abetted these purported breaches, in connection with the proposed Merger. The Massachusetts Actions seek, among other relief, to enjoin defendants from proceeding with the Merger, to enjoin defendants from consummating the Merger unless additional procedures are implemented, and an award of attorneys’ fees and costs.

On May 1, 2014, a putative class action lawsuit titled Harvey Stein, et al. v. Zalicus, Inc. et al., Case No. 9602, was filed in the Court of Chancery of the State of Delaware by a purported shareholder of Zalicus (the “Delaware Action”). The Delaware Action names as defendants Zalicus, Epirus, and members of Zalicus’s board of directors. The Delaware Action alleges, among other things, that members of Zalicus’s board breached their fiduciary duties by failing to maximize shareholder value, and Epirus aided and abetted the purported breaches, in connection with the proposed Merger. The Delaware Action seeks, among other things, to enjoin the proposed Merger, to enjoin consummation of the proposed Merger and rescind the Merger if consummated (or to award rescissory damages), and an award of attorneys’ fees and costs.

As a result of the Merger Agreement and the Merger, we may become subject to additional putative class action lawsuits on behalf of shareholders challenging the fairness of the merger consideration or making other claims regarding the merger consideration, the sale process or disclosures relating to the Merger. Such lawsuits may seek to prevent consummation of the Merger or to rescind any such transaction that has occurred.

We intend to vigorously defend against these claims; however, the outcome of all litigation is uncertain and we may not be successful in defending against such claims. Regardless of the outcome of any such lawsuit, it could delay or prevent the Merger, divert the attention of our management and employees from our day-to-day business and otherwise adversely affect us financially, including as a result of incurring expenses to defend or resolve any such lawsuit.

Risks Related to Discovery, Development and Commercialization of Drug Products

Zalicus’s approach to the discovery and clinical development of drugs is unproven and may never lead to commercially viable products.

Zalicus’s various approaches to drug discovery and development using our ion channel expertise or our cHTS technology platform are complex and unproven. Previously unrecognized or unexpected defects in or limitations to Zalicus’s drug discovery technologies or drug development strategies may emerge, which we may also be unable to overcome or mitigate. None of the product candidates identified or developed to date through the application of Zalicus’s business model and drug discovery technologies, has been effective in Phase 2 clinical trials, been approved by any regulatory agency for commercial sale or been commercialized.

All of our product candidates are in an early stage of development and their risk of failure is high. The data supporting Zalicus’s drug discovery and development programs, including the product candidate Z944, is derived from either laboratory and pre-clinical studies and limited early stage clinical trials that were not designed to be statistically significant. We cannot predict when or if any one of Zalicus’s product candidates will prove effective or safe in humans or will receive regulatory approval. If we are unable to discover or successfully develop drugs that are effective and safe in humans, we will not have a viable business.

Our future success depends on the successful development of product candidates, such as Z944, identified by our ion channel drug discovery technology. The scientific evidence to support the feasibility of developing drugs that modulate ion channels to treat pain conditions is limited, and many companies with more resources than us have not been able to successfully develop drugs that modulate ion channels to treat pain conditions.

For these and other reasons, Zalicus’s approach to drug discovery and development may not be successful and Zalicus’s current business model may not generate viable products or revenue. Even if Zalicus’s approach is theoretically viable, we may not complete the significant research and development or obtain the financial resources and personnel required to further develop and apply Zalicus’s discovery technology, advance promising product candidates into and through clinical trials, and obtain the regulatory approvals required for commercialization around the world.

We depend almost entirely on the success of one product candidate, Z944, which is still in Phase 1 clinical development. We cannot be certain that we will be able to obtain regulatory approval for, or successfully commercialize, Z944 or any of our other product candidates.

We currently have only one product candidate, Z944, in clinical development, and our business depends almost entirely on its successful clinical development, regulatory approval and commercialization. We currently have no drug products for sale and may never be able to develop marketable drug products. Z944, which we currently plan to evaluate a modified-release formation of in a Phase 1 pharmacokinetic and safety study in the first half of 2014, will require substantial additional clinical development, testing, and regulatory approval before we are permitted to commence its commercialization. Our other product candidates are still in pre-clinical development stages. None of our product candidates have advanced into a pivotal study, and it may be years before such a study is initiated, if ever. The clinical trials of our product candidates are, and the manufacturing and marketing of our product candidates will be, subject to extensive and rigorous review and regulation by numerous government authorities in the United States and in other countries where we intend to test and, if approved, market any product candidate. Before obtaining regulatory approvals for the commercial sale of any product candidate, we must successfully meet a number of critical developmental milestones, including:

•

demonstrating through clinical trials that the product candidate is safe and effective in patients for the intended indication;

•

developing dosages that will be tolerated, safe and effective;

•

determining the appropriate delivery mechanism;

•

demonstrating that the product candidate formulation will be stable for commercially reasonable time periods; and

•

completing the development and scale-up to permit manufacture of our product candidates in commercial quantities and at acceptable prices.

The time necessary to achieve these developmental milestones for any individual product candidate is long and uncertain, and we may not successfully complete these milestones for Z944 or any other product candidates that we may develop. We have not yet completed development of any product. We may not be able to finalize the design or formulation of any product candidate. In addition, we may select components, solvents, excipients or other ingredients to include in our product candidates that have not been previously approved for use in pharmaceutical products, which may require us to perform additional studies and may delay clinical testing and regulatory approval of our product candidates.

We are continuing to test and develop our product candidates and may explore possible design or formulation changes to address safety, efficacy, manufacturing efficiency and performance issues. We may not be able to complete development of any product candidates that will be safe and effective and that will have a commercially reasonable treatment and storage period. If we are unable to complete development of Z944, or any other product candidates that we may develop, we will not be able to commercialize and earn revenue from them.

Negative or inconclusive results from our product candidates may adversely affect our business and financial prospects.

We are planning to advance clinical development of our most advanced product candidate Z944 in a Phase 2 clinical study. Positive results from our prior preclinical assessments of Z944 and Phase 1b clinical trials of Z944 may not necessarily be predictive of the

results from future Phase 2 clinical trials of Z944. Many companies in the pharmaceutical and biotechnology industries, including Zalicus, have suffered significant setbacks in clinical trials after achieving positive results in early stage development, and we cannot be certain that we will not face similar setbacks. These setbacks have been caused by, among other things, failure to achieve clinical trial endpoints with statistical significance or at all due to greater than expected placebo effects, insufficient statistical powering of clinical trials, selection of incorrect dosages of a product candidate to study, or selection of inappropriate indications or patient populations to study. Moreover, pre-clinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that believed their product candidates performed satisfactorily in pre-clinical studies and clinical trials nonetheless failed to obtain FDA approval for those product candidates. If we fail to produce positive results in our planned clinical trials of Z944, the development timeline and regulatory approval and commercialization prospects for our most advanced product candidate, and, correspondingly, our business and financial prospects, may be materially adversely affected.

We may not be able to initiate and complete clinical trials for our product candidates.

Conducting clinical studies for any of our product candidates requires finding appropriate clinical sites and clinical investigators, securing approvals for such studies from the independent review board at each such site and local regulatory authorities and enrolling sufficient numbers of patients on a timely basis. We may not be able to arrange for appropriate clinical trials for our product candidates, secure the necessary approvals or enroll the necessary number of participants on a timely basis. We cannot guarantee that outside clinical investigators conducting clinical trials will conduct them in compliance with applicable United States or foreign regulations or the relevant clinical trial protocol. Clinical sites may fail the FDA’s or other regulatory agencies’ inspections or reviews, and our trials could be halted for these or other reasons. Zalicus contracts with third-party clinical research organizations and other parties to conduct virtually all aspects of Zalicus’s Phase 2 and other Phase 1 clinical trials for Zalicus’s product candidates, including Z944. These organizations may not adequately or completely perform their contractual obligations regarding the clinical trials, or may not diligently or completely perform their tasks with respect to clinical trials under their supervision. As a result of these risks, our clinical trials may be extended, delayed or terminated, which could delay the receipt of clinical results for our product candidates, which could delay, impede or stop the development, regulatory approval or successful commercialization of our product candidates.

We may not be able to create commercially viable pharmaceutical formulations of our product candidates.

We have developed or are developing proprietary formulations of our product candidate Z944. Developing such proprietary formulations is costly and difficult, and we have limited experience in developing formulations ourselves. We are relying on and expect to rely on third-party suppliers to develop and test the pharmaceutical formulations of Zalicus’s product candidates as well as manufacture materials for clinical trials of our product candidates. These third parties may not be successful in developing or manufacturing these novel formulations of our product candidates or may experience delays in doing so that could delay clinical trials, and ultimately our ability to obtain approval of Zalicus’s product candidates, including our product candidate and Z944. Defects in the formulation, delivery method or packaging of any of Zalicus’s product candidates could delay our ability to conduct clinical trials or require us to repeat clinical trials using a revised formulation, delivery method or packaging. If we are unsuccessful in creating commercially viable formulations, delivery methods or packaging, we may never generate product revenue or be profitable.

We may be unable to find safe and effective doses for Zalicus’s product candidates without extensive clinical trials and substantial additional costs, if at all.

We must select the doses, including the amount, frequency and duration, of the active pharmaceutical ingredients included in Zalicus’s product candidates. Our clinical trials in humans may show that the doses we select based on Zalicus’s in vitro screening, animal testing or early clinical trials do not achieve the desired therapeutic effect in humans, or achieve this effect only in a small part of the population. Even if the doses we select show efficacy in humans, the resulting doses of active pharmaceutical ingredients may not have acceptable safety profiles for targeted indications. Furthermore, even if we believe that pre-clinical and clinical studies adequately demonstrate that the doses we select for Zalicus’s product candidates are safe and effective in humans, the FDA or other regulatory agencies in foreign jurisdictions may conclude that the clinical trials do not support this conclusion. We may be required to conduct additional clinical studies and provide more evidence substantiating the safety and effectiveness of the doses selected in a significant patient population. If we need to adjust the doses of our product candidates, we may need to conduct additional clinical trials. We may also be required to make different doses available for different types of patients. All of this may result in significant delays and additional costs or prevent commercialization of Zalicus’s product candidates.

We may fail to select or capitalize on the most scientifically, clinically or commercially promising or profitable product candidates.

We may make incorrect determinations as to which product candidates should proceed to initial clinical trials, later stage clinical development and potential commercialization. Our decisions to allocate finite research, management and financial resources toward particular product candidates or therapeutic areas may not lead to the development of viable commercial products and may divert resources from better opportunities. Similarly, our decisions to delay or terminate drug development programs may also be incorrect and could cause us to miss valuable opportunities.

If we undertake business combinations, acquisitions or similar strategic transactions, they may dilute stockholder value, cause us to incur increased transaction costs, disrupt our business, divert management’s attention or be difficult to integrate.

On a regular basis, we consider various business combination transactions, collaborations, license agreements and strategic transactions with third parties, including transactions which may result in us acquiring, or being acquired by, a third party. The consummation or performance of any future business combination, collaboration or strategic transaction may involve risks, such as:

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a change of control of our company if a transaction results in us being acquired by a third party;

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additional dilution to our existing stockholders if we use our common stock as consideration for any acquisitions;

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higher than expected transaction costs;

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diversion of managerial resources from day-to-day operations;

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challenges associated with integrating acquired technologies and operations of acquired companies;

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exposure to unforeseen liabilities;

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misjudgment with respect to value, return on investment or strategic fit; and

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difficulties in the assimilation of different cultures and practices, as well as in the assimilation and retention of broad and geographically dispersed personnel and operations;.

As a result of these risks, we may not be able to achieve the expected benefits of any such strategic transaction. If we are unsuccessful in completing, including because we are unable to obtain any required stockholder approval, or integrating any acquisition, we may be required to reevaluate that component of our strategy only after we have incurred substantial expenses and devoted significant management time and resources in seeking to complete and integrate the acquisition. In addition, even if we successfully divest some or all of our assets in a strategic transaction with a third party, the price paid by the third party for those assets may be at a significant discount compared to their potential value if we had instead developed and commercialized such assets ourselves.

A material component of our business strategy is to establish and maintain collaborative relationships to fund research, development and commercialization of product candidates by us or by our collaborators. If we or any collaborator terminates or fails to perform any obligations under our collaboration agreements, the development and commercialization of product candidates under these agreements could be delayed or terminated.

A material component of our business strategy is to establish and maintain collaborative arrangements with pharmaceutical and biotechnology companies and to fund research development and commercialization of drug products for the treatment of diseases. We have established collaborative royalty and milestone-based agreements with Sanofi for Prednisporin and funded discovery research agreements with Novartis and others. If any of our product candidates continue to advance through preclinical or clinical development, we intend to continue to seek collaborative relationships to obtain discovery or clinical development funding and expertise, as well as domestic or international sales, marketing and distribution capabilities.

The process of establishing collaborative relationships is difficult, time-consuming and involves significant uncertainty. Moreover, it may be difficult to maintain or perform under collaboration arrangements, as our funding resources may be limited or our collaborators may seek to renegotiate or terminate their relationships due to unsatisfactory research or clinical results, changes in the competitive landscape for a particular therapeutic area, a change in business strategy, a change of control or other reasons.

If we or any collaborator fails to fulfill any responsibilities in a timely manner, or at all, our research, clinical development or commercialization efforts related to that collaboration could be delayed or terminated. Additionally it may become necessary for us to assume responsibility for activities that would otherwise have been the responsibility of our collaborator. Further, if we are unable to establish and maintain collaborative relationships on acceptable terms, we may have to delay or discontinue further development of one or more of our product candidates, undertake development and commercialization activities at our own expense or find alternative sources of funding.

Our collaborations typically involve a complex allocation of responsibilities, costs and benefits and provide for milestone payments to us upon the achievement of specified clinical and regulatory milestones. Our collaborations also may provide us with royalty-based revenue if product candidates are successfully commercialized. Under the Sanofi, Novartis and other collaborations, we will rely on our collaborators to provide resources to develop new product candidates and to potentially achieve these milestones and commercialize any new products. We may not be able to achieve any of the milestones provided in the Novartis, Sanofi or other collaboration agreements or derive any license or royalty revenue with respect to our collaborations.

We have no sales or distribution capabilities and may not obtain the collaboration, development, commercialization, manufacturing or other third-party relationships required to develop, commercialize and manufacture some or all of our product candidates.

We have no sales or distribution capabilities and lack many of the internal resources, capabilities and experience necessary to clinically develop, formulate, manufacture, test, market and sell pharmaceuticals. As a result, to succeed in our business plan, we will be dependent on the efforts of third parties. We depend on collaborators, licensees, clinical research organizations and other third parties to formulate product candidates and to conduct clinical trials for all of our product candidates. We also rely on third-party manufacturers to manufacture all clinical trial supplies of our product candidates.

Our third-party manufacturers may encounter difficulties performing their obligations in a timely manner and in accordance with applicable governmental regulations, including problems involving: inconsistent production yields; poor quality control and assurance or inadequate process controls; and lack of compliance with regulations set forth by the FDA or other foreign regulatory agencies. We typically engage only a single contract manufacturer to make any product candidate which can exacerbate the impact of any such difficulties.

We expect to be able to develop and commercialize many of our product candidates only with the participation of pharmaceutical or biotechnology company collaborators or by out-licensing rights to the product candidates. Pharmaceutical and biotechnology companies and others may be reluctant to collaborate with Zalicus or to license rights to Zalicus’s product candidates due to the unproven nature of Zalicus’s drug discovery and development approach, concerns regarding the pricing of and reimbursement for Zalicus’s product candidates if they are successfully developed, or other factors.

We cannot guarantee that we will be able to successfully negotiate agreements for relationships with collaborators, partners, licensees, clinical investigators, manufacturers and other third parties on favorable terms, if at all. If we are unable to obtain these agreements, we may not be able to clinically develop, formulate, manufacture, test, obtain regulatory approvals for or commercialize our product candidates. We expect to expend substantial funds and management time and effort to enter into relationships with these third parties and, if we successfully enter into such relationships, to manage these relationships. However, we cannot control the amount or timing of resources our contract partners will devote to our research and development programs, product candidates or potential product candidates, and we cannot guarantee that these parties will succeed in a timely fashion, if at all.

We may not be able to gain market acceptance of our product candidates, which would prevent us from becoming profitable.

We cannot be certain that any of our product candidates, if approved, will gain market acceptance among physicians, patients, healthcare payors, pharmaceutical companies or others. Demonstrating the safety and efficacy of our product candidates and obtaining regulatory approvals will not guarantee future revenue. Sales of medical products largely depend on the reimbursement of patients’ medical expenses by government healthcare programs and private health insurers. Governments and private insurers closely examine medical products to determine whether they should be covered by reimbursement and if so, the level of reimbursement that will apply. We cannot be certain that third-party payors will sufficiently reimburse sales of our products, or enable us to sell our products, if approved, at profitable prices. Sales of medical products also depend on physicians’ willingness to prescribe the treatment, which is likely to be based on a determination by these physicians that the products are safe, therapeutically effective and cost-effective. We cannot predict whether physicians, other healthcare providers, government agencies or private insurers will determine our products are safe, therapeutically effective and cost effective relative to competing treatments.

Disputes under key agreements could delay or prevent development or commercialization of our product candidates.

Any agreements we have or may enter into with third parties, such as collaboration, license, formulation supplier, manufacturing, testing, clinical research organization or clinical trial agreements, may give rise to disputes regarding the rights and obligations of the parties to such agreements. Disagreements could develop over rights to ownership or use of intellectual property, the scope and direction of research and development, the approach for regulatory approvals or commercialization strategy. We intend to conduct research programs in a range of therapeutic areas, but our pursuit of these opportunities could result in conflicts with the other parties to these agreements who may be developing or selling pharmaceuticals or conducting other activities in these same therapeutic areas. Any disputes or commercial conflicts could lead to the termination of these agreements, delay progress of our product development programs, compromise our ability to renew agreements or obtain future agreements, lead to the loss of intellectual property rights or result in costly litigation.

Risks Related to Financial Results, Need for Additional Financing and Debt Arrangements

We may be unable to raise the substantial additional capital that we will need to sustain our operations.

We will need substantial additional funds to support our planned operations. Based on current operating plans, we expect our resources to be sufficient to fund our operations into the first half of 2015. We may, however, raise additional funds before that time if our research and development expenses exceed current expectations or our collaboration funding is less than current assumptions or expectations. This could occur for many reasons, including:

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our product candidates require more extensive clinical or pre-clinical testing, clinical trials take longer to complete than we currently expect or our clinical trials are not successful;

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we advance more of our product candidates than expected into costly later stage clinical trials;

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we advance more of our pre-clinical product candidates than expected into early stage clinical trials;

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our revenue generating collaboration agreements are terminated;

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we determine or are required to conduct more discovery research than expected to develop additional product candidates;

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some or all of our product candidates fail in clinical or pre-clinical studies or prove to be less commercially promising than we expect or we are forced to seek additional product candidates;

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we are required, or consider it advisable, to acquire or license rights from one or more third parties;

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we determine to enter into a business combination or acquire or license rights to additional product candidates or new technologies.

While we expect to seek additional funding through public or private financings, we may not be able to obtain financing on acceptable terms, or at all. In addition, the terms of any financings may be dilutive to, or otherwise adversely affect, holders of Zalicus common stock. We may also seek additional funds through arrangements with collaborators or others. These arrangements would generally require us to relinquish rights to some of our technologies, product candidates or products, and we may not be able to enter into such agreements on acceptable terms, if at all. The arrangements also may include issuances of equity, which may also be dilutive to, or otherwise adversely affect, holders of Zalicus common stock. There can be no assurance that we will be able to access equity or credit markets in order to finance our operations or expand development programs for any of our product candidates, or that there will not be a further deterioration in financial markets and confidence in economies. We may also have to scale back or further restructure our operations. If we are unable to obtain additional funding on a timely basis, we may be required to curtail or terminate some or all of our research or development programs.

Zalicus has a history of operating losses. We expect to incur significant operating losses and may never be profitable. Zalicus common stock is a highly speculative investment.

Zalicus commenced operations in March 2000 and has no approved products of its own and has generated no direct product revenue. Zalicus has incurred operating losses since Zalicus’s inception in 2000. As of March 31, 2014, Zalicus had an accumulated deficit of $383.4 million. Our cash and cash equivalents are sufficient to fund operations into the first half of 2015. We have spent, and expect to continue to spend, significant resources to fund research and development of our product candidates and to enhance our drug discovery technologies. We expect to incur substantial operating losses over the next several years due to our ongoing research, development, pre-clinical testing, and clinical trial activities. As a result, our accumulated deficit will continue to increase.

Our product candidates are in the early stages of development and may never result in any revenue. We will not be able to generate product revenue unless and until one of our product candidates successfully completes clinical trials and receives regulatory approval. We may seek to obtain revenue from collaboration or licensing agreements with third parties. Our current collaboration and license agreements may not provide us with material, sustainable ongoing future revenue, and we may not be able to enter into additional collaboration agreements. Even if we eventually generate product revenues, we may never be profitable, and if we ever achieve profitability, we may not be able to sustain it.

Risks Related to Regulatory Approvals

The regulatory approval process is costly and lengthy and we may not be able to successfully obtain all required regulatory approvals.

The pre-clinical development, clinical trials, manufacturing, marketing, testing and labeling of pharmaceuticals and medical devices are all subject to extensive regulation by numerous governmental authorities and agencies in the United States and other countries. We or our collaborators must obtain regulatory approval for product candidates before marketing or selling any of them. The approval process is typically lengthy and expensive, and approval is never certain. It is not possible to predict how long the approval processes of the FDA or any other applicable federal or foreign regulatory authority or agency for any of our products will take or whether any such approvals ultimately will be granted. The FDA and foreign regulatory agencies have substantial discretion in the drug approval process, and positive results in pre-clinical testing or early phases of clinical studies offer no assurance of success in later phases of the approval process. Generally, pre-clinical and clinical testing of products can take many years and require the expenditure of substantial resources, and the data obtained from these tests and trials can be susceptible to varying interpretations that could delay, limit or prevent regulatory approval. Any delay in obtaining, or failure to obtain, approvals could prevent or adversely affect the marketing of our products or our collaborator’s products and our ability to generate product revenue. The risks associated with the approval process include delays or rejections in the regulatory approval process based on the failure of clinical or other data to meet expectations, or the failure of the product or medical device to meet a regulatory agency’s requirements for safety, efficacy and quality. In addition, regulatory approval, if obtained, may significantly limit the indicated uses for which a product may be marketed.

We or our collaborators may delay, suspend or terminate clinical trials to obtain marketing authorization of any of our product candidates or products at any time for reasons including:

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ongoing discussions with the FDA or comparable foreign authorities regarding the scope or design of clinical trials;

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delays or the inability to obtain required approvals from institutional review boards or other governing entities at clinical sites selected for participation in our clinical trials;

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delays in enrolling patients and volunteers into clinical trials;

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lower than anticipated retention rates of patients and volunteers in clinical trials;

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the need to repeat clinical trials as a result of inconclusive or negative results or poorly executed testing;

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lack of effectiveness of a product candidate in other clinical trials;

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lack of sufficient funds for further clinical development;

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insufficient supply or deficient quality of product candidate materials or other materials necessary to conduct clinical trials;

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unfavorable regulatory inspection of a manufacturing, testing, labeling or packaging facility for drug substance or drug product;

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unfavorable regulatory inspection and review of a clinical or pre-clinical trial site or records of any clinical or pre-clinical investigation;

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serious and unexpected drug-related side effects or serious adverse safety events experienced by participants in clinical trials or by patients following commercialization; or

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the placement of a clinical hold on a product candidate in an ongoing clinical trial.

Positive or timely results from pre-clinical studies and early clinical trials do not ensure positive or timely results in late stage clinical trials or product approval by the FDA or any other regulatory authority. Product candidates that show positive pre-clinical or early clinical results often fail in later stage clinical trials. Data obtained from pre-clinical and clinical activities is susceptible to varying interpretations, which could delay, limit, or prevent regulatory approvals.

We may not be able to conduct clinical trials at preferred sites, enlist clinical investigators, enroll sufficient numbers of patients, or begin or successfully complete clinical trials in a timely fashion, if at all. Any failure to perform may delay or terminate the trials. Our current clinical trials may be insufficient to demonstrate that our potential products are active, safe, or effective and as a result we may decide to abandon further development of such product candidates. Additional clinical trials may be required if clinical trial results are negative or inconclusive, which will require us to incur additional costs and significant delays. If we do not receive the necessary regulatory approvals, we will not be able to generate product revenues and will not become profitable. We may encounter significant delays in the regulatory process that could result in excessive costs that may prevent us from continuing to develop our product candidates. In addition, the failure to comply with applicable regulatory requirements may result in criminal prosecution, civil penalties, product recalls, withdrawal of product approval, mandatory restrictions or other actions that could impair our ability to conduct our business.

Even if we receive regulatory approvals for marketing Zalicus’s product candidates, if we fail to comply with continuing regulatory requirements, we could lose regulatory approvals, and our business would be adversely affected.

The FDA and other regulatory authorities continue to review therapeutic products even after they receive initial approval. If we or our collaborators receive approval to commercialize any product candidates, the manufacturing, testing, marketing, sale and distribution of these drugs will be subject to continuing regulation, including compliance with quality systems regulations, good manufacturing practices, adverse event reporting requirements and prohibitions on promoting a product for unapproved uses. Furthermore, heightened Congressional scrutiny on the adequacy of the FDA’s drug approval process and the agency’s efforts to assure the safety of marketed drugs has resulted in the enactment of legislation, the FDA Amendments Act of 2007, addressing, among other things, drug safety issues. This law provides the FDA with expanded authority over drug products after approval, including the authority to require post-approval studies and clinical trials, labeling changes based on new safety information, and compliance with Risk Evaluation and Mitigation Strategies, or REMS, approved by the FDA. The FDA’s exercise of this authority could result in delays or increased costs during the period of product candidate development, clinical trials and regulatory review and approval, increased costs to assure compliance with new post-approval regulatory requirements, and potential restrictions on the sale of approved products, which could lead to lower product revenues to us or our collaborators. Enforcement actions resulting from failure to comply with government requirements could result in fines, suspension of approvals, withdrawal of approvals, recalls of products, product seizures, operating restrictions, and civil or criminal penalties. These enforcement actions could affect the manufacturing, testing, marketing, sale and distribution of our products.

FDA approval of our drug candidates would subject Zalicus and our collaborators to ongoing FDA obligations and continued regulatory review, such as continued safety reporting requirements, and we and our collaborators may also be subject to additional FDA post-marketing obligations or new regulations, all of which may result in significant expense and limit our ability to commercialize our drug candidates.

Any regulatory approvals that we or our collaborators receive for our drug candidates may be subject to limitations on the indicated uses for which the drug may be marketed or contain requirements for potentially costly post-marketing follow-up studies. In addition, the labeling, packaging, adverse event reporting, storage, advertising, promotion and record keeping for any drug candidate the FDA may approve, is subject to extensive regulatory requirements. The subsequent discovery of previously unknown problems with a drug, including but not limited to adverse events of unanticipated severity or frequency, or the discovery that adverse events previously observed in pre-clinical research or clinical trials that were believed to be minor actually constitute much more serious problems, may result in restrictions on the marketing of the drug, and could include withdrawal of the drug from the market.

The FDA’s policies may change, and additional government regulations may be enacted that could prevent or delay regulatory approval of our drug candidates or may adversely impact the commercialization of our product candidates. If we are not able to maintain regulatory compliance, including compliance with a required REMS program, we may be subject to fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions and criminal prosecution. Any of these events could prevent us from marketing our drug candidates and our business could suffer accordingly. We cannot predict the likelihood, nature or extent of adverse government regulation that may arise from future legislation or administrative action, either in the United States or abroad.

Legislative or regulatory reform of the health care system in the United States and foreign jurisdictions may affect our ability to profitably sell our products, if approved.

Our and our collaborators’ ability to commercialize our future products successfully will depend in part on the extent to which reimbursement for the products will be available from government and health administration authorities, private health insurers and other third-party payors. The continuing efforts of the United States and foreign governments, insurance companies, managed care organizations and other payors of health care services to contain or reduce health care costs may adversely affect our ability to set prices for our products which we believe are fair, and our ability to generate revenues and achieve and maintain profitability.

Specifically, in both the United States and some foreign jurisdictions, there have been a number of legislative and regulatory proposals to change the health care system in ways that could affect our ability to sell our products profitably. The Affordable Health Choices Act was enacted in 2009 and Congress is considering a number of proposals that are intended to reduce or limit the growth of health care costs and which could significantly transform the market for pharmaceuticals products. We expect further federal and state proposals and health care reforms to continue to be proposed by legislators, which could limit the prices that can be charged for the products we develop and may limit our commercial opportunity. In the United States, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, also called the Medicare Modernization Act, or MMA, changed the way Medicare covers and pays for pharmaceutical products. The legislation expanded Medicare coverage for drug purchases by the elderly and introduced a new reimbursement methodology based on average sales prices for drugs. In addition, this legislation provided authority for limiting the number of drugs that will be covered in any therapeutic class. As a result of this legislation and the expansion of federal coverage of drug products, we expect that there will be additional pressure to contain and reduce costs. These cost reduction initiatives and other provisions of this legislation could decrease the coverage and price that we receive for any approved products and could seriously harm

our business. While the MMA applies only to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policy and payment limitations in setting their own reimbursement rates, and any reduction in reimbursement that results from the MMA may result in a similar reduction in payments from private payors.

The continuing efforts of government and other third-party payors to contain or reduce the costs of health care through various means may limit our commercial opportunity. It will be time consuming and expensive for us or our partners to go through the process of seeking reimbursement from Medicare and private payors. Our product candidates may not be considered cost effective, and government and third-party private health insurance coverage and reimbursement may not be available to patients for any of our future products or sufficient to allow us or our collaborators to sell our products on a competitive and profitable basis. Our results of operations could be adversely affected by the MMA and additional prescription drug coverage legislation, by the possible effect of this legislation on amounts that private insurers will pay and by other health care reforms that may be enacted or adopted in the future. In addition, increasing emphasis on managed care in the United States will continue to put pressure on the pricing of pharmaceutical products. Cost control initiatives could decrease the price that we or any potential collaborators could receive for any of our future products and could adversely affect our profitability.

In some foreign countries, including major markets in the European Union and Japan, the pricing of prescription pharmaceuticals is subject to governmental control. In these countries, pricing negotiations with governmental authorities can take 6 to 12 months or longer after the receipt of regulatory marketing approval for a product. To obtain reimbursement or pricing approval in some countries, we or our collaborators may be required to conduct a clinical study that compares the cost-effectiveness of our product candidates to other available therapies. Such pharmacoeconomic studies can be costly and the results uncertain. Our business could be harmed if reimbursement of our or our collaborators’ products are unavailable or limited in scope or amount or if pricing is set at unsatisfactory levels.

Federal laws or regulations on drug importation could make lower cost versions of our future products available, which could adversely affect our revenues, if any.

The prices of some drugs are lower in other countries than in the United States because of government regulation and market conditions. Under current law, importation of drugs into the United States is generally not permitted unless the drugs are approved in the United States and the entity that holds that approval consents to the importation. Various proposals have been advanced to permit the importation of drugs from other countries to provide lower cost alternatives to the products available in the United States. In addition, the MMA requires the Secretary of Health and Human Services to promulgate regulations for drug reimportation from Canada into the United States under some circumstances, including when the drugs are sold at a lower price in Canada than in the United States.

If the laws or regulations are changed to permit the importation of drugs into the United States in circumstances not now permitted, such a change could have an adverse effect on our business by making available lower priced alternatives to our future products. Failure to obtain regulatory and pricing approvals in foreign jurisdictions could delay or prevent commercialization of our products abroad.

If we succeed in developing any products, we intend to market them in the European Union and other foreign jurisdictions. In order to do so, we must obtain separate regulatory approvals and comply with numerous and varying regulatory requirements. The approval procedure varies among countries and can involve additional testing. The time required to obtain approval abroad may differ from that required to obtain FDA approval. The foreign regulatory approval process may include all of the risks associated with obtaining FDA approval. We may not obtain foreign regulatory approvals on a timely basis, if at all. Approval by the FDA does not ensure approval by regulatory authorities in other countries, and approval by one foreign regulatory authority does not ensure approval by regulatory authorities in other foreign countries or by the FDA. We and our collaborators may not be able to file for regulatory approvals and may not receive necessary approvals to commercialize our products in any market outside the United States. The failure to obtain these approvals could materially adversely affect our business, financial condition and results of operations. Even if we are successful at obtaining these approvals, regulatory agencies in foreign countries, where the pricing of prescription drugs is controlled by the government, could determine pricing for Zalicus’s products in a manner adverse to us.

Risks Related to Intellectual Property

Our success depends upon our ability to obtain and maintain intellectual property protection for our products and technologies.

Our success will depend on our ability to obtain and maintain adequate protection of our intellectual property, including our proprietary products or product candidates. We intend to apply for patents with claims covering our products, product candidates, technologies and processes, when and where we deem it appropriate to do so and plan to take other steps to protect our intellectual property. We have applied for patent protection covering our clinical and pre-clinical product candidates in the United States, and some, but not all, foreign countries. In countries where we have not and do not seek patent protection, third parties may be able to manufacture and sell our products without our permission, and we may be unable to stop them from doing so.

Similar to other biotechnology companies, our patent position is generally uncertain and involves complex legal and factual questions. In addition, the laws of some countries do not protect proprietary rights to the same extent as the laws of the United States, and other biotechnology companies have encountered significant problems in protecting and defending their proprietary rights in non-United States jurisdictions. Whether filed in the United States or abroad, our patent applications may be challenged or may fail to result in issued patents. In addition, our existing patents and any future patents may not be sufficiently broad to prevent others from practicing our technologies or from developing or commercializing competing products. Furthermore, others may independently develop or commercialize similar or alternative technologies or drugs, or design around our patents. Our patents may be challenged, invalidated or fail to provide any competitive advantages.

The United States Patent and Trademark Office and similar agencies in foreign jurisdictions may not agree with our view that our combination product candidates are patentable or novel and non-obvious, and on this basis may deny patent protection. Even if we receive patent protection, others, may attempt to invalidate our patent or trade secret rights. Even if our patent or trade secret rights are not directly challenged, disputes among third parties could lead to the weakening or invalidation of intellectual property rights.

If we do not obtain or are unable to maintain adequate patent or trade secret protection for products in the United States, competitors could duplicate them without repeating the extensive testing that we will be required to undertake to obtain approval of the products by the FDA and other regulatory authorities. Regardless of any patent protection, under the current statutory framework the FDA is prohibited by law from approving any generic version of any of Zalicus’s product candidates for five years after it has approved Zalicus’s product candidates. Upon the expiration of that period, or if that time period is altered, the FDA could approve a generic version of Zalicus’s product unless we have patent protection sufficient to enforce our rights. Without sufficient patent protection, the applicant for a generic version of Zalicus’s product would be required only to conduct a relatively inexpensive study to show that its product is bioequivalent to Zalicus’s product and would not have to repeat the studies that we conducted to demonstrate that the product is safe and effective. In the absence of adequate patent protection in other countries, competitors may similarly be able to obtain regulatory approval of products that duplicate Zalicus’s products.

We may not be able to develop or commercialize our product candidates due to intellectual property rights held by third parties.

If a third party holds a patent to a formulation technology related to Zalicus’s planned formulation of a product candidate, we may not be able to develop or commercialize such product candidates without first obtaining a license to such patent, or waiting for the patent to expire. Our business will be harmed if we are unable to use the optimal formulation of our product candidates. This may occur because the formulations or methods of use are covered by one or more third-party patents, and a license to such patents is unavailable or is only available on terms that are unacceptable.

Confidentiality agreements with employees and others may not adequately prevent disclosure of trade secrets and other proprietary information.

In our activities, we rely substantially upon proprietary materials, information, trade secrets and know-how to conduct our research and development activities, and to attract and retain collaborators, licensees and customers. We take steps to protect our proprietary rights and information, including the use of confidentiality and other agreements with our employees and consultants and in our academic and commercial relationships.

However, these steps may be inadequate, agreements may be violated, or there may be no adequate remedy available for a violation of an agreement. Our proprietary information may be inadvertently disclosed or we may lose the protection of our trade secrets. Our competitors may independently develop substantially equivalent proprietary information or may otherwise gain access to our trade secrets, which could adversely affect our ability to compete in the market.

Litigation or third-party claims of intellectual property infringement could require substantial time and money to resolve. Unfavorable outcomes in these proceedings could limit our intellectual property rights and our activities.

We may need to resort to litigation to enforce or defend our intellectual property rights, including any patents issued to us. If a competitor or collaborator files a patent application claiming technology also invented by us, in order to protect our rights, we may have to participate in an expensive and time consuming interference proceeding before the United States Patent and Trademark Office. We cannot guarantee that our product candidates will be free of claims by third parties alleging that we have infringed their intellectual property rights. Third parties may assert that we are employing their proprietary technologies without authorization and they may resort to litigation to attempt to enforce their rights. Third parties may have or obtain patents in the future and claim that the use of our technology or any of our product candidates infringes their patents. We may not be able to develop or commercialize product candidates because of patent protection others have. Our business will be harmed if we cannot obtain a necessary or desirable license, can obtain such a license only on terms we consider to be unattractive or unacceptable, or if we are unable to redesign our product candidates or processes to avoid actual or potential patent or other intellectual property infringement.

Our efforts to obtain, protect and defend our patent and other intellectual property rights, whether we are successful or not, may require us to incur substantial costs, including the diversion of management and technical personnel. An unfavorable ruling in patent or intellectual property litigation could subject us to significant liabilities to third parties, require us to cease developing, manufacturing or selling the affected products or using the affected processes, require us to license the disputed rights from third parties, or result in awards of substantial damages against us. In addition, defending patent or other intellectual property litigation, whether we are successful or not, can be very expensive and may require us to incur substantial costs, including the diversion of management and technical personnel. During the course of any patent litigation, there may be public announcements of the results of hearings, motions, and other interim proceedings or developments in the litigation. If securities analysts or investors regard these announcements as negative, the market price of Zalicus common stock may decline. General proclamations or statements by key public figures may also have a negative impact on the perceived value of our intellectual property.

There can be no assurance that we would prevail in any intellectual property infringement action, will be able to obtain a license to any third-party intellectual property on commercially reasonable terms, successfully develop non-infringing alternatives on a timely basis, or license non-infringing alternatives, if any exist, on commercially reasonable terms. Any significant intellectual property impediment to our ability to develop and commercialize our products could seriously harm our business and prospects.

Risks Related to the Biotechnology and Pharmaceutical Industry

Our industry is highly competitive and our competitors and potential competitors may develop products and technologies that make ours less attractive or obsolete.

The development and commercialization of pharmaceutical products is highly competitive. Many companies, universities, and research organizations developing competing product candidates have greater resources and significantly greater experience in research and development, formulation, manufacturing, marketing, sales, distribution, financial and technical regulatory matters than we have. In addition, many competitors have greater name recognition and more extensive collaborative relationships. Our competitors could commence and complete clinical testing of their product candidates, obtain regulatory approvals, and begin commercial-scale manufacturing of their products faster than we are able to for our products. They could develop drug discovery technologies or products that would render Zalicus’s drug discovery technologies and our product candidates, and those of our collaborators, obsolete and noncompetitive.

Zalicus’s drug discovery technologies compete against well-established techniques to discover new drugs. If we are unable to compete effectively against these existing techniques and the companies that support them, then we may not be able to commercialize our product candidates or achieve a competitive position in the market. In addition, any product candidates that we do discover will face competition from existing pharmaceuticals. Our competitors’ success is discovering new drugs and marketing existing drugs which compete with our product candidates would adversely affect our ability to generate revenues.

Our competitors and our cHTS collaborators already have high throughput screening technologies and if they employ these technologies to discover combination drugs, they may render Zalicus’s technologies or Zalicus’s approach to combination drug discovery and development obsolete or noncompetitive, which could materially affect the revenue generated by our cHTS business.

We may have significant product liability exposure which may harm our business and our reputation.

We face exposure to product liability and other claims if our product candidates, products or processes are alleged to have caused harm. These risks are inherent in the testing, manufacturing, and marketing of human therapeutic products and medical devices. We maintain product liability insurance covering our clinical trials of our product candidates. We may not have sufficient insurance coverage, and we may not be able to obtain sufficient coverage at a reasonable cost, if at all. Our inability to obtain product liability insurance at an acceptable cost or to otherwise protect against potential product liability claims could prevent or inhibit the commercialization of any products or product candidates that we develop. If we are sued for any injury caused by our products, product candidates or processes, our liability could exceed our product liability insurance coverage and our total assets. Claims against us, regardless of their merit or potential outcome, may also divert significant management time and resources, generate negative publicity or hurt our ability to obtain physician endorsement of our products or expand our business.

We use and generate materials that may expose us to expensive and time-consuming legal claims.

Our development programs involve the use of hazardous materials, chemicals, and biological materials. We are subject to foreign, federal, state and local laws and regulations governing the use, manufacture, storage, and disposal of materials and waste products. We believe that our safety procedures for handling these materials comply with the standards prescribed by laws and regulations. However, we may incur significant costs to comply with current or future environmental laws and regulations. In addition, we cannot completely eliminate the risk of contamination or injury from hazardous materials. In the event of an accident, an injured party may seek to hold us liable for any damages that result. Any liability could exceed the limits or fall outside the coverage of our insurance, and we may not be able to maintain insurance on acceptable terms, if at all.

Risks Related to an Investment in Our Common Stock

Our recently completed 1-for-6 stock split could adversely impact our company and the trading of our common stock.

On October 3, 2013, we filed a certificate of amendment to our Sixth Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware to effect a 1-for-6 reverse stock split of our common stock. While the reverse stock split enabled us to regain compliance with The NASDAQ Capital Market’s minimum bid price listing requirement, it may also result in certain adverse impacts to our company and the trading of our common stock. Additionally, the liquidity of our common stock could be adversely affected by the reduced number of shares resulting from the reverse stock split, which, in turn, could result in greater volatility in the price per share of our common stock. As a result and notwithstanding our reverse stock split and our regained compliance with the NASDAQ Capital Market’s minimum bid price listing requirement, we may not be able to maintain a price per share of our common stock in excess of $1.00 per share or the additional criteria for continued listing of our common stock set forth by The NASDAQ Capital Market. The occurrence of any future non-compliance with the NASDAQ Capital Market’s minimum bid price or other listing requirements may have a material adverse effect on our stock price, our business and our prospects.

Our common stock has a volatile public trading price.

The market price for our common stock has been volatile, and market prices for securities of companies comparable to us have been highly volatile. In addition, the stock market as a whole and biotechnology and other life science stocks in particular have experienced significant recent price volatility. Like our common stock, these stocks have experienced significant price and volume fluctuations for reasons unrelated to the operating performance of the individual companies. Factors giving rise to this volatility may include:

•

disclosure of actual or potential clinical or preclinical results with respect to product candidates we are developing, including Z944;

•

disclosure by our collaboration partners, including Sanofi and Novartis regarding our collaborations and the related product candidates, including Prednisporin;

•

regulatory developments in both the United States and abroad;

•

developments concerning proprietary rights, including patents and litigation matters;

•

disclosure of new collaborations or other strategic transactions;

•

public concern about the safety or efficacy of our product candidates or technology, their components, or related technology or new technologies generally;

•

public announcements by our competitors or others regarding new products or new product candidates;

•

general market conditions and comments by securities analysts and investors; and

•

our recent 1-for-6 reverse stock split.

Fluctuations in our operating losses could adversely affect the price of our common stock.

Our operating losses may fluctuate significantly on a quarterly basis. Some of the factors that may cause our operating losses to fluctuate on a period-to-period basis include the status of our clinical and pre-clinical development programs, level of expenses incurred in connection with our clinical and pre-clinical development programs, restructuring costs, implementation or termination of collaboration, licensing, manufacturing or other material agreements with third parties, non-recurring revenue or expenses under any such agreement, and compliance with regulatory requirements. Period-to-period comparisons of our historical and future financial results may not be meaningful, and investors should not rely on them as an indication of future performance. Our fluctuating losses may fail to meet the expectations of securities analysts or investors. Our failure to meet these expectations may cause the price of our common stock to decline.

Anti-takeover provisions in our charter documents and provisions of Delaware law may make an acquisition more difficult and could result in the entrenchment of management.

We are incorporated in Delaware. Anti-takeover provisions of Delaware law and our charter documents may make a change in control or efforts to remove management more difficult. Also, under Delaware law, our board of directors may adopt additional anti-takeover measures. The existence of the following provisions of Delaware law and our sixth amended and restated charter, as amended, or our amended and restated bylaws could limit the price that investors might be willing to pay in the future for shares of our common stock.

Our charter authorizes our board of directors to issue up to 5,000,000 shares of preferred stock and to determine the terms of those shares of stock without any further action by our stockholders. If the board of directors exercises this power to issue preferred stock, it could be more difficult for a third party to acquire a majority of our outstanding voting stock and vote the stock they acquire to remove management or directors.

Our charter also provides staggered terms for the members of our board of directors. Under Section 141 of the Delaware General Corporation Law and our charter, our directors may be removed by stockholders only for cause and only by vote of the holders of 75% of voting shares then outstanding. These provisions may prevent stockholders from replacing the entire board in a single proxy contest, making it more difficult for a third party to acquire control without the consent of our board of directors. These provisions could also delay the removal of management by the board of directors with or without cause. In addition our amended and restated bylaws limit the ability our stockholders to call special meetings of stockholders.

Our equity incentive plans generally permit our board of directors to provide for acceleration of vesting of options granted under these plans in the event of certain transactions that result in a change of control. If our board of directors uses its authority to accelerate vesting of options, this action could make an acquisition more costly, and it could prevent an acquisition from going forward.

Under Section 203 of the Delaware General Corporation Law, a corporation may not engage in a business combination with any holder of 15% or more of its capital stock until the holder has held the stock for three years unless, among other possibilities, the board of directors approves the transaction in advance.

PART II

Item 4.

Mine Safety Disclosures

Not applicable.

Item 6.

Exhibits

The Exhibits listed in the Exhibit Index immediately preceding the Exhibits are filed as a part of this Quarterly Report on Form 10-Q.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


ZALICUS INC.

By:		/S/ JUSTIN A. RENZ
		Justin A. Renz
		Executive Vice President and Chief Financial Officer (Authorized Officer and Principal Financial Officer)

Date: May 9, 2014

EXHIBIT INDEX


		Incorporated by Reference to:
Exhibit No.	Description	Form or Schedule		Exhibit No.		Filing Date with SEC	SEC File Number

2.1	Agreement and Plan of Merger, dated as of June 30, 2009, by and among the Registrant, PawSox, Inc., Neuromed Pharmaceuticals Inc., Neuromed Pharmaceuticals Ltd. and the Stockholder Representative named therein.		8-K		2.1	07/01/2009	000-51171

2.2	Escrow Agreement, dated as of June 30, 2009, by and among the Registrant, Computershare Trust Company, N.A. and the Stockholder Representative.		8-K		2.2	07/01/2009	000-51171

2.3	Agreement and Plan Merger and Reorganization, dated as of April 15, 2014, by and among Zalicus Inc., Epirus Biopharmaceuticals, Inc. and BRunning, Inc.		8-K		2.1	04/16/2014	000-51171

3.1	Sixth Amended and Restated Certificate of Incorporation of the Registrant.		S-1/A		3.2	11/04/2005	333-121173

3.2	Certificate of Amendment to the Registrant’s Sixth Amended and Restated Certificate of Incorporation.		8-K		3.1	12/21/2009	000-51171

3.3	Certificate of Amendment to the Registrant’s Sixth Amended and Restated Certificate of Incorporation.		8-K		3.1	09/09/2010	000-51171

3.4	Certificate of Amendment to the Registrant’s Sixth Amended and Restated Certificate of Incorporation.		8-K		3.1	10/02/2013	000-51171

3.5	Amended and Restated By-Laws of the Registrant.		8-K		3.2	09/09/2010	000-51171

4.1	Specimen Common Stock Certificate of the Registrant.		10-Q		4.1	11/10/2010	000-51171

4.2	Warrant issued to General Electric Capital Corporation on September 15, 2004, to purchase up to 1,482 shares of the Registrant’s Common Stock.		S-1		10.7	12/10/2004	333-121173

4.3	Warrant issued to General Electric Capital Corporation on June 28, 2005, to purchase 78.5 shares of the Registrant’s Common Stock.		10-K		4.5	03/20/2006	000-51171

4.4	Form of Warrant issued to Oxford Finance Corporation on December 22, 2010.		8-K		4.1	12/22/2010	000-51171

#10.1	2000 Stock Option Plan, as amended.		S-1		10.1	12/10/2004	333-121173

#10.2	Amended and Restated 2004 Incentive Plan.		S-8		4.1	04/16/2010	333-166118

#10.3	Form Incentive Stock Option Agreement under the 2004 Incentive Plan.		10-K		10.3	03/20/2006	000-51171

#10.4	Form Non-Qualified Option Agreement under the 2004 Incentive Plan.		10-K		10.4	03/20/2006	000-51171

#10.5	Nonqualified Deferred Compensation Plan, effective December 1, 2007.		S-8		4.1	11/30/2007	333-147745

#10.6	Employment Letter Agreement with Justin Renz, dated as of August 31, 2006.		S-4		10.14	08/07/2009	333-161146

#10.7	Letter Agreement Re: Severance Arrangements with Justin Renz, dated December 12, 2008.		S-4		10.16	08/07/2009	333-161146

#10.8	Letter Agreement Re: Severance Arrangements with Justin Renz, dated January 4, 2013.		8-K		10.1	01/09/2013	000-51171

#10.9	Employment Agreement with Mark H. N. Corrigan, dated as of March 8, 2010.		8-K		10.1	03/08/2010	000-51171

Incorporated by Reference to:

Exhibit
No.

Description

Form or
Schedule

Exhibit
No.

Filing
Date with
SEC

SEC File
Number

#10.10

Form Incentive Stock Option Agreement with Mark H. N. Corrigan, dated as of January 15, 2010.

8-K

10.1

01/20/2010

000-51171

#10.11

Form Nonstatutory Stock Option Agreement with Mark H. N. Corrigan, dated as of January 15, 2010.

8-K

10.2

01/20/2010

000-51171

#10.12

Form Restricted Stock Unit Agreement between the Registrant and Mark Corrigan, dated as of January 15, 2010.

8-K

10.3

01/20/2010

000-51171

#10.13

Restricted Stock Unit Agreement between the Registrant and Mark Corrigan, dated as of January 3, 2013.

10-K

10.17

03/07/2013

000-51171

#10.14

Revised Offer Letter from Neuromed Pharmaceuticals accepted by Christopher C. Gallen, dated May 27, 2004.

S-4

10.45

08/07/2009

333-161146

#10.15

Separation Agreement, dated as of February 22, 2012 between the Registrant and Christopher C. Gallen

10-K

10.20

03/09/2012

000-51171

#10.16

Neuromed Pharmaceuticals Inc. Special Equity Incentive Plan.

S-4/A

10.51

09/16/2009

333-161146

#10.17

The Registrant’s Form of Restricted Stock Unit Agreement for awards granted under the Neuromed Pharmaceuticals Inc. Special Equity Incentive Plan (Directors).

S-4/A

10.52

09/16/2009

333-161146

#10.18

The Registrant’s Form of Restricted Stock Unit Agreement for awards granted under the Neuromed Pharmaceuticals Inc. Special Equity Incentive Plan (Executives).

S-4/A

10.53

09/16/2009

333-161146

#10.19

The Registrant’s Form Stock Option Agreement for performance-based stock options, dated as of February 8, 2011.

10-Q

10.24

05/05/2011

000-51171

#10.20

The Registrant’s Form Stock Option Agreement for performance-based stock options, dated as of February 8, 2011.

10-Q

10.25

05/05/2011

000-51171

#10.21

The Registrant’s Form Stock Option Agreement for performance-based stock options, dated January 3, 2013.

10-K

10.25

03/07/2013

000-51171


			Incorporated by Reference to:
Exhibit No.		Description	Form or Schedule		Exhibit No.		Filing Date with SEC		SEC File Number

	10.22	Form of Indemnification Agreement for Directors.		8-K		10.1		12/21/2009		000-51171

	10.23	Second Amended and Restated Research and License Agreement, dated July 22, 2009, between Fovea Pharmaceuticals SA and the Registrant.		8-K		10.1		07/23/2009		000-51171

	†10.24	Research Collaboration and License Agreement, dated as of May 1, 2009, by and between the Registrant and Novartis Institutes for BioMedical Research, Inc.		10-Q		10.43		05/11/2009		000-51171

	10.25	Amendment to Research Collaboration and License Agreement, dated April 12, 2012, by and between Registrant and Novartis Institutes for BioMedical Research, Inc.		10-Q		10.30		05/04/2012		000-51171

	10.26	Amendment No. 2 to Research Collaboration and License Agreement, dated April 30, 2013, by and between Registrant and Novartis Institutes for BioMedical Research, Inc.		8-K		10.1		05/01/2013		000-51171

	10.27	Software License Agreement, dated as of May 1, 2009, by and between the Registrant and Novartis Institutes for BioMedical Research, Inc.		10-Q		10.44		05/11/2009		000-51171

	10.28	Amendment No. 1 to Software License Agreement, dated as of April 30, 2013, by and between the Registrant and Novartis Institutes for BioMedical Research, Inc.		8-K		10.2		05/01/2013		000-51171

	†10.29	Asset Purchase Agreement, dated as of June 11, 2009, between Neuromed Development Inc. and Mallinckrodt Inc. and amendments thereto.		S-4/A		10.35		10/13/2009		333-161146

	†10.30	Development and Transition Services Agreement, dated as of June 11, 2009, by and among Neuromed Development Inc., Neuromed Pharmaceuticals Ltd. and Mallinckrodt Inc.		S-4/A		10.40		10/13/2009		333-161146

	10.31	Office and Laboratory Lease Agreement, dated as of October 18, 2005, by and between MA-Riverview, 245 First Street, L.L.C. and the Registrant.		S-1/A		10.48		10/24/2005		333-121173

	10.32	First Amendment to Office and Laboratory Lease Agreement, dated as of March 9, 2006, by and between MA-Riverview, 245 First Street, L.L.C. and the Registrant.		10-K		10.44		03/20/2006		000-51171

	10.33	Second Amendment to Office and Laboratory Lease Agreement, dated as of August 3, 2009, by and between MA-Riverview, 245 First Street, L.L.C. and the Registrant.		8-K		10.1		08/04/2009		000-51171

	10.34	Sub-Lease Agreement between Neuromed Pharmaceuticals Inc. and Discovery Parks, Inc.		S-4/A		10.56		10/09/2009		333-161146

Incorporated by Reference to:

Exhibit
No.

Description

Form or
Schedule

Exhibit
No.

Filing
Date with
SEC

SEC File
Number

10.35

Sub-Lease Renewal and Amendment Agreement between Neuromed Pharmaceuticals Ltd. and Discovery Parks, Inc., dated as of November 2, 2009.

10-K

10.54

03/26/2010

000-51171

10.36

Sub-Lease Renewal Agreement between Zalicus Pharmaceuticals Ltd. and Discovery Parks, Inc., dated as of September 16, 2010.

10-Q

10.45

11/10/2010

000-51171

10.37

Loan and Security Agreement dated as of December 22, 2010, by and among the Registrant and Oxford Finance Corporation.

8-K

10.1

12/22/2010

000-51171

10.38

Consent and First Loan Modification Agreement dated as of February 15, 2012, by and among the Registrant and Oxford Finance LLC.

10-K

10.41

03/02/2012

000-51171

10.39

Equity Distribution Agreement dated as of February 9, 2011 between the Registrant and Wedbush Securities Inc.

8-K

10.1

02/09/2011

000-51171

10.40

Equity Distribution Agreement dated as of January 10, 2012 between the Registrant and Wedbush Securities Inc.

8-K

10.1

01/11/2012

000-51171

10.41

Equity Distribution Agreement dated as of June 29, 2012 between the Registrant and Wedbush Securities Inc.

8-K

10.1

06/20/2012

000-51171

10.42

Purchase Agreement dated as of May 8, 2013 between the Registrant and Lincoln Park Capital Fund, LLC.

8-K

10.1

05/08/2013

000-51171

10.43

Royalty Purchase Agreement dated as of January 31, 2014 between Zalicus Pharmaceuticals Ltd. and Mallinckrodt Medical Imaging - Ireland.

8-K

10.1

02/03/2014

000-51171

*31.1

Certification of Chief Executive Officer pursuant to Exchange Act rules 13a-14 or 15d-14.

*31.2

Certification of Chief Financial Officer pursuant to Exchange Act rules 13a-14 or 15d-14.

*32.1

Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Exchange Act rules 13a-14(b) or 15d-14(b) and 18 U.S.C. Section 1350.

*101.INS

XBRL Instance Document

*101.SCH

XBRL Taxonomy Extension Schema Document

*101.CAL

XBRL Taxonomy Extension Calculation Document

*101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

*101.LAB

XBRL Taxonomy Extension Labels Linkbase Document

*101.PRE

XBRL Taxonomy Extension Presentation Link Document

*	Filed herewith.

†	Confidential treatment requested as to certain portions, which portions are omitted and filed separately with the Securities and Exchange Commission.

#	Management contract or compensatory plan or arrangement.

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