Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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For the Fiscal Year Ended December 31, 2016
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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For the Transition period from
to .
Commission file number: 0-31265
MABVAX THERAPEUTICS HOLDINGS, INC.
(Exact name of Registrant as specified in its charter)
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Delaware
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93-0987903
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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11535 Sorrento Valley Rd., Suite 400, San Diego,
CA
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92121
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(Address of principal executive offices)
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(Zip Code)
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Registrant’s telephone number, including area code:
(858) 259-9405
Securities registered pursuant to Section 12(b) of the Act:
None
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Title of Each Class
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Name of Each Exchange on Which Registered
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None
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Securities registered pursuant to Section 12(g) of the
Act:
Common Stock, $0.01 par value per share
Indicate by check mark if the registrant is a well-known seasoned
issuer, as defined in Rule 405 of the Securities
Act. YES ☐ NO ☒
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. YES ☐ NO ☒
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 ☒ NO ☐
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T (Sec. 232.405 of this chapter) during
the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such
files). YES ☒ NO ☐
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K (Sec.229.405 of this Chapter) is
not contained herein, and will not be contained to the best of
Registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.
☒
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer,
or a smaller reporting company. See the definitions of “large
accelerated filer,” “accelerated filer” and
“smaller reporting company” in Rule 12b-2 of the
Exchange Act. (Check one):
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Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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Smaller reporting company
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Indicate by check mark whether the registrant is a
shell company (as defined in Rule 12b-2 of the
Act.). YES ☐ NO ☒
The aggregate market value of the voting common stock held by
non-affiliates of the Registrant was approximately $15,865,000 as
of June 30, 2016, based upon the closing sale price on the
OTCQB Market of $4.07 per share reported on such date.
As of March 1, 2017, there were 6,296,110 shares of the
registrant’s common stock outstanding.
MABVAX THERAPEUTICS HOLDINGS, INC.
2016 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
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Page
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PART I
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PART II
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PART III
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PART IV
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Disclosure Regarding Forward-Looking Statements
This Annual Report on Form 10-K, including the documents that we
incorporate by reference, contains statements indicating
expectations about future performance and other forward-looking
statements. Forward-looking statements relate to future events or
our future financial performance. We generally identify
forward-looking statements by terminology such as
“may,” “will,” “should,”
“expects,” “plans,”
“anticipates,” “could,”
“intends,” “target,”
“projects,” “contemplates,”
“believes,” “estimates,”
“predicts,” “potential” or
“continue” or the negative of these terms or other
similar words, although not all forward-looking statements contain
these words. Forward-looking statements include, but are not
limited to, statements regarding our or our management’s
expectations, hopes, beliefs, intentions or strategies regarding
the future, such as our estimates regarding anticipated operating
losses, future performance, future revenues and projected expenses;
our liquidity and our expectations regarding our needs for and
ability to raise additional capital; our ability to manage our
expenses effectively and raise the funds needed to continue our
business; our ability to retain the services of our current
executive officers, directors and principal consultants; our
ability to obtain and maintain regulatory approval of our existing
products and any future products we may develop; the initiation,
timing, progress and results of our preclinical and clinical
trials, research and development programs; regulatory and
legislative developments in the United States and foreign
countries; the timing, costs and other limitations involved in
obtaining regulatory approval for any product; the further
preclinical or clinical development and commercialization of our
product candidates; the potential benefits of our product
candidates over other therapies; our ability to enter into any
collaboration with respect to product candidates; the performance
of our third-party manufacturers; our ability to obtain and
maintain intellectual property protection for our products and
operate our business without infringing upon the intellectual
property rights of others; the successful development of our sales
and marketing capabilities; the size and growth of the potential
markets for our products and our ability to serve those markets;
the rate and degree of market acceptance of any future products;
our reliance on key scientific management or personnel; the payment
and reimbursement methods used by private or governmental
third-party payers; and other factors discussed elsewhere in this
report or any document incorporated by reference herein or
therein.
The words “believe,” “may,”
“will,” “estimate,” “continue,”
“anticipate,” “intend,”
“expect,” “plan” and similar expressions
may identify forward-looking statements, but the absence of these
words does not mean that a statement is not forward-looking. The
forward-looking statements contained in this report are based on
our current expectations and beliefs concerning future developments
and their potential effects on us. There can be no assurance that
future developments affecting us will be those that we have
anticipated. These forward-looking statements involve a number of
risks, uncertainties (many of which are beyond our control) or
other assumptions that may cause actual results or performance to
be materially different from those expressed or implied by these
forward-looking statements. These risks and uncertainties include,
but are not limited to, those factors described in the section
titled “Risk Factors.” Should one or more of these
risks or uncertainties materialize, or should any of our
assumptions prove incorrect, actual results may vary from those
projected in these forward-looking statements. We undertake no
obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise,
except as may be required under applicable securities laws. The
section entitled “Risk Factors,” as well as other
sections in this report or incorporated by reference into this
report, discuss some of the factors that could contribute to these
differences.
The forward-looking statements made in this report relate only to
events as of the date on which the statements are made. We
undertake no obligation to update any forward-looking statement to
reflect events or circumstances after the date on which the
statement is made or to reflect the occurrence of unanticipated
events.
This report also contains market data related to our business and
industry. These market data include projections that are based on a
number of assumptions. While we believe these assumptions to be
reasonable and sound as of the date of this report, if these
assumptions turn out to be incorrect, actual results may differ
from the projections based on these assumptions. As a result, our
markets may not grow at the rates projected by these data, or at
all. The failure of these markets to grow at these projected rates
may have a material adverse effect on our business, results of
operations, financial condition and the market price of our common
stock.
MabVax(R),
MabVax Therapeutics(R)
and our corporate logo are trademarks
or registered trademarks of MabVax Therapeutics Holdings, Inc. All
other brand names or trademarks appearing in this Annual Report are
the property of their respective holders.
PART I
Item 1.
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Business.
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Company Background
We are a Delaware corporation, originally incorporated in 1988
under the name Terrapin Diagnostics, Inc. in the state of Delaware,
and subsequently renamed “Telik, Inc.” in 1998, and
thereafter renamed MabVax Therapeutics Holdings, Inc. in September
2014. Our principal corporate office is located at 11535 Sorrento
Valley Road, Suite 400, San Diego, CA 92121 and our telephone
number is (858) 259-9405. On July 8, 2014, we consummated a merger
with MabVax Therapeutics, pursuant to which our subsidiary Tacoma
Acquisition Corp. merged with and into MabVax Therapeutics, with
MabVax Therapeutics surviving as our wholly owned subsidiary. This
transaction is referred to as the “Merger.” Our
internet address is www.mabvax.com.
Information on our website is not incorporated into this
report.
Listing
Reverse Split
On June
29, 2016, our stockholders approved a reverse stock split of our
issued and outstanding shares of common stock at a range of between
1-for-2 and 1-for-15, with the specific ratio and effective time of
the reverse stock split to be determined by our Board of Directors,
or our Board. On August 2, 2016, the Board approved a 1-for-7.4
reverse stock split, or the Listing Reverse Split. The Listing
Reverse Split was intended to allow us to meet the minimum share
price requirement of The NASDAQ Capital Market, or NASDAQ. On
August 11, 2016, we received approval from The NASDAQ Capital
Market for the listing of our common stock under the symbol
“MBVX”, subject to implementation of the Listing
Reverse Split and closing of our August 2016 public offering (the
“August 2016 Public Offering”). On August 16, 2016,
we implemented the Listing Reverse Split, closed on the August
2016 Public Offering and began trading on The NASDAQ Capital Market
at the open of business on August 17, 2016.
Overview
We are
a clinical-stage biotechnology company focused on the development
of antibody-based products to address unmet medical needs in the
treatment of cancer. MabVax has discovered a pipeline of
human monoclonal antibody products based on the protective immune
responses generated by patients who have been vaccinated against
targeted cancers with our proprietary vaccines. MabVax's lead
development program is centered around our HuMab-5B1 antibody,
which is fully human and discovered from the immune response of
cancer patients vaccinated with an antigen-specific vaccine during
a Phase I trial at Memorial Sloan Kettering Cancer Center, or
MSK. The antigen the antibody targets is expressed on
more than 90% of pancreatic cancers, and also expressed in
significant percentages on small cell lung cancer, stomach, colon
and other cancers, making the antibody potentially broadly
applicable to many types of cancers. We have other antibody
candidates that are also in preclinical development.
Monoclonal
antibodies are produced from a single DNA sequence encoded into
multiple cells that all produce the same single antibody. We
generate our pipeline of antibody-based product candidates from
patients who have been vaccinated with propriety vaccines licensed
from MSK. Our approach involves surveying the protective immune
response from many patients to identify a monoclonal antibody
candidate against a specific target on the surface of a cancer
cell. We believe this approach provides us with a novel
next-generation human antibody technology platform. We believe our
approach to antibody discovery allows us to identify antibody
candidates with superior performance characteristics while
minimizing many of the toxicity and off target binding drawbacks
(phenomenon occurring when antibodies bind to non-cancer cells) of
other discovery technologies.
Our
Growth and Core Business Strategy
Our
primary business strategy is to develop our early antibody product
candidates through proof of concept clinical trials, which may
represent either phase I or phase II clinical trials depending on
the program and extent of progress. We intend to then partner those
product candidates having the highest clinical and commercial
potential from our discovery library of antibody
candidates.
Recent Developments
In
November 2016 we reported on interim results of our two HuMab-5B1
antibody phase I clinical development programs evaluating the use
of our therapeutic antibody we designate as MVT-5873, and our
immuno-PET imaging agent we designate as MVT-2163, comprised of
MVT-5873 conjugated to a radio label. In December 2016 we submitted
an investigational new drug application, or IND, to the U.S. Food
and Drug Administration, or FDA, for our radioimmunotherapy product
candidate we designate as MVT-1075, comprised of MVT-5873
conjugated to a low-energy radiation emitter. These three product
candidates are intended for use in patients with locally advanced
and metastatic pancreatic cancer or other malignancies expressing
the same cancer antigen known as CA19.9.
MVT-5873 Clinical Development Program Progress in Treating
Pancreatic Cancer, and Near-term Plan
In our
progress report released in November 2016, we stated that the
safety of MVT-5873 had been established at three incremental dose
levels by treating 16 patients at three clinical sites. The purpose
of this phase I clinical trial, initiated in February 2016, is to
establish safety and tolerability, and to determine the recommended
phase II dose. Patients entering this part of the trial have
progressive locally advanced or metastatic disease and have failed
all previous treatments.
As of
mid-November 2016, we reported that 28 subjects had consented to
treatment, of which 16 subjects had been treated. Of the remaining
subjects, nine had failed the screening tests, and three were still
in the screening process. Of the 16 patients that had been treated
as of that date, six were continuing to receive treatment beyond
the study design of a 28-day treatment cycle. Patients are able to
remain on therapy beyond the initial 28-day treatment and safety
assessment cycle based on acceptable dose tolerability and
investigator assessment of continued benefit from the treatment.
Every second treatment cycle the investigator assesses disease
status using RECIST 1.1 measurement criteria to evaluate tumor
response rate and duration of response. Investigators report that
seven of the 16 patient patients converted from progressive disease
to stable disease lasting from three months to eight months. We
plan to continue to recruit patients in Part 1 of the study of
MVT-5873, which is intended to establish the recommended phase II
dose as a monotherapy.
In
early February 2017, we reported that out of the total of 22
patients treated to date, eight had stable disease after at least
two treatment cycles, or two months, seven continued to
have stable disease after at least four treatment cycles, or
four months; and three continued to have stable disease after at
least six treatment cycles, or six months.
As a
consequence of establishing the current dosage safety level for
MVT-5873 in Part 1 of the trial, we have established a sufficient
dosage safety margin to initiate part 2 of our phase I study. Part
2 combines our MVT-5873 with a standard of care chemotherapy
regimen in new diagnosed treatment naïve patients. The dosage
levels established in our MVT-5873 monotherapy trial have cleared
all subsequent dose levels utilized in our Phase I clinical study
of MVT-2163 as an immuno-PET imaging agent as well as the dose
levels planned for our clinical study of MVT-1075 that combines the
antibody with a radioactive metal as a radioimmunotherapy product.
We filed an IND with the FDA in late December 2016 and received an
authorization from the FDA on January 27, 2017 to proceed with our
phase I clinical trial in the first half of 2017.
MVT-2163 Clinical Development Program Progress in Imaging
Pancreatic Cancer, and Near-term Plan
In our
progress report released in November 2016, we stated that we had
established interim safety, and acceptable pharmacokinetics and
biodistribution of MVT-2163 in our phase I clinical trial. We have
completed the initial two cohorts of patients as specified in our
protocol. In the first cohort we administered MVT-2163 alone and in
the second cohort we administered MVT-2163 following a blocking
dose of MVT-5873. We reported that the initial PET images
demonstrated target specificity by correlation with lesions
identified by conventional computerized tomography (CT) scans. The
biodistribution data obtained in the first two cohorts demonstrated
improvement in PET images by pre-administration of MVT-5873, as has
been observed with other antibody based PET agents. We initiated
the MVT-2163 phase I trial in June 2016 to evaluate a next
generation diagnostic PET imaging agent in patients with locally
advanced or metastatic adenocarcinoma of the pancreas (PDAC) or
other CA19-9 positive malignancies. MVT-2163 (89Zr-HuMab-5B1) combines the
well-established PET imaging radiolabel Zirconium [89Zr] with the targeting specificity of
MVT-5873. We designed the trial to establish safety,
pharmacokinetics, biodistribution, optimal time to obtain the PET
image, and the amount of MVT-5873 to be used in co-administration
to obtain optimized PET scan images. We continue to actively
recruit patients and expect to establish the optimal
co-administration dose of MVT-5873 early in 2017.
MVT-1075 Clinical Development Plan
We are
developing HuMab-5B1 into a third potential product for use as a
radioimmunotherapy that we have designated as MVT-1075. MVT-1075
represents a unique product opportunity for MabVax by conjugating
MVT-5873 with a low-energy radiation emitter, 177Lu, which has a
relatively short tissue penetration range to minimize potential
side effects of the radiation. MVT-5873 provides the opportunity
for tumor-specific targeting of a more potent analog of MVT-5873.
We submitted our IND in late December 2016, and the IND was
authorized to proceed on January 27, 2017. We plan to initiate the
phase I trial of MVT-1075 in the first half of
2017.
Financing Activities
August Public Offering
– On August 22, 2016, we closed
a public offering of 1,297,038 shares of common stock and 665,281
shares of Series F Convertible Preferred Stock (“Series F
Preferred Stock”), and warrants to purchase 1,962,319 shares
of common stock at $5.55 per share and warrants to purchase
1,962,319 shares of common stock at $6.29 per share, at an offering
price of $4.81 per share. For every one share of common stock
or Series F Preferred Stock sold, we issued one warrant to purchase
one share of common stock at $5.55 per share and one warrant to
purchase one share of common stock at $6.29 per share. We
received $9,438,753 in gross proceeds, before underwriting
discounts and commissions and offering expenses totaling
$871,305.
Oxford Loan – On January 15, 2016, we entered into a
loan and security agreement with Oxford Finance LLC (the
“Load and Security Agreement”) providing for senior
secured term loans to us in the aggregate principal amount of up to
$10,000,000. On January 15, 2016, we received
an initial loan of $5,000,000 under the Loan and Security
Agreement. The option to draw the second $5,000,000 expired on
September 30, 2016.
Underwritten Offering
– On September 30, 2015,
we entered into an underwriting agreement with Laidlaw &
Company (UK) Ltd. relating to the issuance and sale in a public
offering of 337,838 shares of our common stock and 168,919
three-year warrants to purchase 168,919 shares of our common stock
at an initial exercise price of $9.77 per share (all numbers
adjusted for the Listing Reverse Split). The shares of common stock
were sold at a public offering price of $8.14 per share and the
warrants were sold at a price of $0.01 per warrant (adjusted for
the Listing Reverse Split). The offering closed on October 5, 2015
with total gross proceeds to us
of $2,750,000.
April Private Placement
– On March 31, 2015 and
April 10, 2015, we entered into separate subscription
agreements with accredited investors relating to the issuance and
sale of $11,714,498 of units at a purchase price of $5.55 per unit
(adjusted for the Listing Reverse Split), with each unit consisting
of one share of common stock (or, at the election of any
investor who, as a result of receiving common stock would hold in
excess of 4.99% of our issued and outstanding common stock, shares
of our newly designated Series E Convertible Preferred Stock
(“Series E Preferred Stock”)) and a thirty-month
warrant to purchase one half of one share of common stock at an
initial exercise price of $11.10 per share (adjusted for the
Listing Reverse Split), such sale and issuance, the “April
Private Placement,” or the “Private Placement”).
We conducted an initial closing of the April Private Placement on
March 31, 2015, in which we sold an aggregate of $4,995,750 of
units. Following the initial closing we entered into separate
reconfirmation agreements with the investors in order to extend the
initial closing date, increase the offering amount, and adopt a
lockup agreement which was entered into by all investors who
elected to continue their investment. A second closing was held on
April 10, 2015 in which we entered into separate subscription
agreements for the sale of an additional $6,718,751 of
units.
On
April 14, 2015, as a condition to participation by OPKO Health,
Inc. (“OPKO”) and Frost Gamma Investments Trust
(“FGIT”) in the April Private Placement, we entered
into an Escrow Deposit Agreement with Signature Bank N.A. and OPKO,
as amended on June 22, 2015, pursuant to which $3.5 million from
the April Private Placement was deposited into and held at
Signature Bank. The escrowed funds were released to us
on June 30, 2015, as part of a letter agreement giving OPKO the
right, but not the obligation until June 30, 2016, to nominate and
have appointed up to two additional members of our Board of
Directors, or to approve the person(s) nominated by the
Company. The nominees selected were required to meet
certain standard corporate governance practices and applicable
national securities exchange requirements.
Preferred and Warrant Holders
Common Stock Exchange Agreements – On March 25, 2015, we entered into separate
exchange agreements (collectively, the “Exchange
Agreements”) with certain holders of our Series A-1
Convertible Preferred Stock (“Series A-1 Preferred
Stock”) and A-1 Warrants and holders of our Series B
Convertible Preferred Stock (“Series B Preferred
Stock”) and Series B Warrants, all previously issued by us.
Pursuant to the Exchange Agreements, the holders exchanged their
respective preferred shares and warrants and relinquished any and
all other rights they may have pursuant to such securities, their
respective governing agreements and certificates of designation,
including any related registration rights, in exchange for an
aggregate of 342,906 shares of our common stock (adjusted for
the Listing Reverse Split) and an aggregate of 238,156 shares of
our newly designated Series D Convertible Preferred
Stock (“Series D Preferred Stock” and,
collectively, the “Exchange
Securities”).
Antibody Market Opportunity
The global monoclonal antibodies market was valued
at $85 billion in 2015 and is expected to reach a value of $138
billion by 2024 (The Pharma
Letter, February 11, 2016).
Over the past couple of decades, the US FDA has approved more than
a dozen monoclonal antibodies to treat certain cancers
(cancer.org). Focused development of new monoclonal antibody based
drugs is expected to continue for multiple reasons. Over
the last few years much has been learned about using the human
immune system to treat cancer. Several recently approved
antibody therapies have demonstrated efficacy in stimulating the
human immune system to attack certain cancers. Targeted therapies
can attack cancer cells while minimizing damage to normal cells in
the patient. Antibodies are complex molecules and are difficult and
expensive to duplicate with biosimilars and therefore have a
potentially longer commercial life. Currently approved monoclonal
antibodies are reimbursed at favorable levels from federal, state,
and private insurance providers.
Our
lead antibody candidate targets an antigen that is over expressed
on many metastatic pancreatic, colon, breast, and small cell lung
cancers. The term "over expressed" refers to the antigen being
present on the surface of the cancer cell in very large
numbers. The amount of antigen present in blood samples is
used to monitor patients as elevated levels occur in the blood due
to shedding into the blood from these cancer cells. Patients who
develop metastatic disease have a significantly poorer prognosis
for survival.
We believe there is a critical unmet medical need for new and
better treatment for metastatic pancreatic and colon cancer.
According to NCI’s SEER database (seer.cancer.gov), the
five-year survival rate for patients with pancreatic cancer is just
7.7%. There are 53,000 new patients with pancreatic cancer
diagnosed per year and more than half of these patients present at
initial diagnosis with metastatic disease (Pancreatic Cancer
Network’s Pancreatic Facts 2016). In 2016 pancreatic cancer
moved from the fourth leading cause of cancer related death in the
U.S. to third, surpassing breast cancer (American Cancer Society
Cancer statistics 2016 report,). According to the SEER database,
there are about 134,000 patients diagnosed with cancer of the colon
and rectum per year in the US. The five-year survival rate for the
35% of patients with metastatic colon cancer that is locally spread
is 71% and the five-year survival of the 35% of patients that have
regional spread is only 13.5%.
Pancreatic Cancer Imaging and Diagnosis
We believe that our radiolabeled HuMab-5B1 PET imaging antibody
represents the only human derived agent in development specifically
aimed at improving imaging in pancreatic cancer diagnosis over the
standard of care (FDG-PET). Since the antigen targeted by the
HuMab-5B1 antibody is over expressed on metastatic pancreatic
cancer cells, this development effort represents a potentially
important step forward in the diagnosis, staging, and assessment of
the majority of patients newly diagnosed with pancreatic cancers.
We believe that the market opportunity for
a HuMab-5B1antibody-based radiopharmaceutical is
significant in multiple ways. The ability of physicians to
accurately diagnose, stage, and assess treatment outcomes in
pancreatic cancer would be very important. Accurate determinations
on the extent of disease and resectability are essential to improve
outcomes in this cancer. We believe that limitations in FDG-PET
imaging offers significant room for improvement in diagnostic
technique and that accurate determinations on extent of disease and
resectability are essential to improving outcomes in this cancer.
Improvements in the sensitivity and specificity over FDG-PET could
have a significant impact on improving diagnosis and clinical
outcome.
Radioimmunotherapy: Therapeutic Treatment Product
In addition to developing our HuMab-5B1 as a stand-alone
therapeutic agent as well as a PET imaging agent, we are developing
a HuMab-5B1 based radioimmunotherapy, or RIT, product candidate as
a potential treatment for pancreatic cancer and other CA19-9
positive tumors. Our preclinical animal studies have
demonstrated the potential feasibility and experimental proof of
concept for this new product candidate. We have learned from our
89Zr-HuMab-5B1 PET imaging clinical development program that we
have sufficient safety and specificity of the product to proceed
with clinical development of our RIT program. We submitted an IND
to FDA for this product in December of 2016 and received FDA
authorization in January 2017 to proceed with our proposed clinical
trial. We anticipate initiating our clinical trial in the first
half of 2017.
License and Development Agreements
Memorial Sloan Kettering
We
have licensed from MSK the exclusive world-wide developmental and
commercial rights to receive biological materials from vaccinated
clinical trial participants enrolled in any of the clinical trials
involving the vaccines licensed to us, allowing us to discover
human monoclonal antibody-based therapeutics. MSK has issued
patents or has pending patent applications on the vaccine antigen
conjugates, mixtures of vaccine antigen conjugates and methods of
use. This patent portfolio includes 20 issued patents in the US and
the rest of world. We own all monoclonal antibodies
produced by the antibody discovery program and we generally file
patent applications directed to these antibodies once their
potential therapeutic utility has been sufficiently demonstrated in
animal models. A United States and an international patent
application for each of the anti-sLea antibodies and the anti GD2
antibodies described in this document has been filed.
We
have licensed exclusive rights from MSK to exploit key aspects of
the work of Dr. Livingston (who is also a member of our board
of directors) and colleagues, who over the last 30 years have
developed a series of monovalent (targeting a single tumor cell
surface antigen) cancer vaccines against cancers of neuroectodermal
and epithelial (breast, ovarian colon, pancreatic) origin as well
as small cell lung cancer, or SCLC. These target molecules on
malignant cells, known as carbohydrate antigens, are the most
extensively expressed antigenic targets on the cell surface of
these types of cancers and play a key role in tissue
invasion and metastasis. We expect to benefit from the years
of work and significant expense already invested in the development
and testing of the vaccines incorporating these antigens.
Researchers at MSK have progressively developed highly immunogenic
monovalent vaccines to each of the 11 validated target antigens
that comprise the licensed vaccines. These monovalent vaccines or
the combination of the monovalent forms into polyvalent vaccines
(targeting multiple antigens) have been tested and refined not only
in animal models but also in multiple clinical trials establishing
immunogenicity, tolerability, and therapeutic utility. Our license
agreement with MSK calls for MSK to complete all preclinical and
Phase I clinical trial work at MSK’s expense at which point
the IND would be transferred to us for continued
development.
Our
lead cancer vaccines targeting recurrent sarcoma and ovarian cancer
are currently in proof of concept Phase II multi-center clinical
trials. Both trials are fully enrolled, and have received
substantial federal grant monies to support their
development.
Life Technologies Licensing Agreement
On
September 24, 2015, we entered into a licensing agreement with Life
Technologies Corporation, a subsidiary of ThermoFisher Scientific
(“Life Technologies”). Under the agreement
we agreed to license certain cell lines from Life Technologies to
be used in the production of recombinant proteins for our clinical
trials. The amount of the contract is for $450,000 and
was fully expensed during 2015. We paid $225,000 during
2015 related to this contract with the remaining amount paid in
2016.
Rockefeller University Collaboration
In July
2015, we entered into a research collaboration agreement with
Rockefeller University's Laboratory of Molecular Genetics and
Immunology (“Rockefeller”). We provided antibody
material to Rockefeller, which is exploring the mechanism of action
of constant region (Fc) variants of the HuMab 5B1 in the role of
tumor clearance. We will supply additional research materials as
requested by the university, which is evaluating ways to optimize
the function. Rockefeller is using that material to explore
the mechanism of action of constant region (Fc) variants of the
HuMab-5B1 in the role of tumor clearance and to seek to optimize
the therapeutic effect. The current agreement
allows researchers at Rockefeller to conduct research on antibodies
discovered by us with the objective of improving their ability to
kill cancer cells. If a viable drug candidate emerges
from this collaboration, we have the right to enter into
negotiations with Rockefeller for the right to exclusively license
the technology used to improve our antibody for clinical and
commercial development. If we and Rockefeller fail to
reach agreement on terms for a license to the drug candidate that
contains the combined technologies, Rockefeller does not have the
right to license the drug candidate to a third party without our
consent because the drug candidate contains our intellectual
property embodied in the antibody.
Juno Option Agreement
On
August 29, 2014, we entered into an Option Agreement with Juno
Therapeutics, Inc. (“Juno”) in exchange for a one-time
up-front option fee in the low five figures. Pursuant to the option
agreement, we granted Juno the option to obtain an exclusive,
world-wide, royalty-bearing license authorizing Juno to develop,
make, have made, use, import, have imported, sell, have sold, offer
for sale and otherwise exploit certain patents we developed with
respect to fully human antibodies with binding specificity against
human GD2 or sialyl-Lewis A antigens and certain of our controlled
biologic materials. As of June 30, 2016, the option agreement
expired and Juno no longer has a contractual right for use of our
binding domains for use in the construction of CAR
T-cells.
Patents
We strive to protect the proprietary technology that we believe is
important to our business, including seeking and maintaining
patents intended to cover our vaccines and monoclonal
antibody-based candidates, their methods of use and processes for
their manufacture and any other inventions that are commercially
important to the development of our business. We also rely on trade
secrets to protect aspects of our business that are not amenable
to, or that we do not consider appropriate for, patent
protection.
We are the exclusive licensee, sole assignee or co-assignee of 14
granted United States patents, 2 pending United States patent
applications, 7 international patents and 19 pending international
patent applications. The patents and patent applications
include claims to vaccine antigen conjugates, mixtures of vaccine
antigen conjugates that makeup polyvalent vaccine candidates,
processes for their preparation and their use as a
vaccine. Two of the pending patent applications in the
United States and 2 international patent applications have claims
to human anti-sLea and anti-GD2 monoclonal antibodies, nucleic
acids encoding the human anti-sLea and anti-GD2 monoclonal antibodies,
processes for their preparation and their use as therapeutic
agents.
Our success will depend significantly on our ability to obtain and
maintain patents and other proprietary protection for commercially
important technology, inventions and know-how related to our
business, defend and enforce our patents, maintain our licenses to
use intellectual property owned by third parties, preserve the
confidentiality of our trade secrets and operate without infringing
the valid and enforceable patents and other proprietary rights of
third parties. We also rely on know-how, continuing technological
innovation and in-licensing opportunities to develop, strengthen,
and maintain our proprietary position in the field of anti-fungal
agents.
We believe that we have a sufficient intellectual property position
and substantial know-how relating to the development and
commercialization of our vaccine and monoclonal antibody-based
candidates in the markets described herein, consisting of patents
or patent applications that we have licensed from MSK or that we
have filed ourselves. We cannot be sure that patents will be
granted with respect to any of our pending patent applications or
with respect to any patent applications filed by us in the future,
nor can we be sure that any of our existing patents or any patents
that may be granted to us in the future will be commercially useful
in protecting our technology.
Our objective is to continue to expand our intellectual property
estate by filing patent applications directed to our vaccine and
monoclonal antibody programs. We intend to pursue, maintain, and
defend patent rights, whether developed internally or licensed from
third parties, and to protect the technology, inventions, and
improvements that are commercially important to the development of
our business.
Marketing and Sales
We
currently do not have an internal sales force and do not intend to
commercialize on our own any of our product candidates that receive
FDA approval. We intend to license, or enter into
strategic alliances with, larger companies in the biopharmaceutical
businesses, which are equipped to manufacture, market and/or sell
our products, if any, through their well-developed manufacturing
capabilities and distribution networks. We intend to license some
or all of our worldwide patent rights to more than one third party
to achieve the fullest development, marketing and distribution of
any products we develop.
Manufacturing and Raw Materials
We
currently use, and expect to continue the use of, contract
manufacturers for the manufacture of our product candidates. Our
contract manufacturers are subject to extensive governmental
regulation. Regulatory authorities in our markets require that
pharmaceutical products be manufactured, packaged and labeled in
conformity with current cGMPs. We intend to establish a quality
control and quality assurance program, which will include a set of
standard operating procedures and specifications designed to ensure
that our products are manufactured in accordance with cGMPs, and
other applicable domestic and foreign regulations.
We
currently do not have any clinical or commercial antibody-based
therapeutic manufacturing capabilities. We may or may not
manufacture the products we develop, if any. We intend to use
contract manufacturers for the manufacture of our product
candidates.
Competition
The
drug development and medical diagnostic industries are
characterized by rapidly evolving technology and intense
competition. Our competitors include development and
diagnostic companies that have significantly more financial,
technical, and marketing resources. In addition,
there are a significant number of biotechnology companies working
on evolving technologies that may supplant our technology or make
it obsolete. Academic institutions, government agencies, and
other public and private research organizations are also conducting
research activities and may commercialize product candidates either
on their own or through joint ventures that compete with one or
more of our product candidates. We are aware of certain
development projects for products to prevent or treat certain
diseases targeted by us. The existence of these potential
products or other products or treatments of which we are not aware,
or products or treatments that may be developed in the future, may
adversely affect the desirability and commercial success of any
product candidate for which we receive FDA approval.
There
are a number of companies working in the area of human antibody
development and imaging that could compete in similar clinical
areas, including disease detection, therapeutic response monitoring
and minimal disease detection. These companies include
AbCellera Biologics, Inc., Agenus Inc., Atreca, Inc., Immunomedics,
Inc., Theraclone Sciences Inc., and Trellis
Bioscience.
Government Regulation
In the United States, pharmaceutical products are subject to
extensive regulation by the FDA. The Federal Drug and Cosmetic Act
and other federal and state statutes and regulations, govern, among
other things, the research, development, testing, manufacture,
storage, recordkeeping, approval, labeling, promotion and
marketing, distribution, post-approval monitoring and reporting,
sampling, and import and export of pharmaceutical products. The FDA
has very broad enforcement authority and failure to abide by
applicable regulatory requirements can result in administrative or
judicial sanctions being imposed on us, including warning letters,
refusals of government contracts, clinical holds, civil penalties,
injunctions, restitution, disgorgement of profits, recall or
seizure of products, total or partial suspension of production or
distribution, withdrawal of approval, refusal to approve pending
applications, and criminal prosecution.
FDA Approval Process
We believe that our product candidates will be regulated by the FDA
as drugs. No manufacturer may market a new drug until it has
submitted a New Drug Application, or NDA, to the FDA, and the FDA
has approved it. The steps required before the FDA may approve an
NDA generally include:
●
preclinical
laboratory tests and animal tests conducted in compliance with
FDA’s good laboratory practice requirements;
●
development,
manufacture and testing of active pharmaceutical product and dosage
forms suitable for human use in compliance with current good
manufacturing practices, or GMP;
●
the
submission to the FDA of an investigational new drug application,
or IND, for human clinical testing, which must become effective
before human clinical trials may begin;
●
adequate
and well-controlled human clinical trials to establish the safety
and efficacy of the product for its specific intended
use(s);
●
the
submission to the FDA of a New Drug Application, or NDA;
and
●
FDA
review and approval of the NDA.
Preclinical tests include laboratory evaluation of the product
candidate, as well as animal studies to assess the potential safety
and efficacy of the product candidate. The conduct of the
pre-clinical tests must comply with federal regulations and
requirements including good laboratory practices. We must submit
the results of the preclinical tests, together with manufacturing
information, analytical data and a proposed clinical trial protocol
to the FDA as part of an IND, which must become effective before we
may commence human clinical trials. The IND will automatically
become effective 30 days after its receipt by the FDA, unless
the FDA raises concerns or questions before that time about the
conduct of the proposed trials. In such a case, we must work with
the FDA to resolve any outstanding concerns before clinical trials
can proceed. We cannot be sure that submission of an IND will
result in the FDA allowing clinical trials to begin, or that, once
begun, issues will not arise that suspend or terminate such trials.
The study protocol and informed consent information for patients in
clinical trials must also be submitted to an institutional review
board for approval. An institutional review board may also require
the clinical trial at the site to be halted, either temporarily or
permanently, for failure to comply with the institutional review
board’s requirements or may impose other
conditions.
Clinical trials involve the administration of the product candidate
to humans under the supervision of qualified investigators,
generally physicians not employed by or under the trial
sponsor’s control. Clinical trials are typically conducted in
three sequential phases, though the phases may overlap or be
combined. In Phase 1, the initial introduction of the drug
into healthy human subjects, the drug is usually tested for safety
(adverse effects), dosage tolerance and pharmacologic action, as
well as to understand how the drug is taken up by and distributed
within the body. Phase 2 usually involves studies in a limited
patient population (individuals with the disease under study)
to:
●
evaluate
preliminarily the efficacy of the drug for specific, targeted
conditions;
●
determine
dosage tolerance and appropriate dosage as well as other important
information about how to design larger Phase 3 trials;
and
●
identify
possible adverse effects and safety risks.
Phase 3 trials generally further evaluate clinical efficacy
and test for safety within an expanded patient population. The
conduct of the clinical trials is subject to extensive regulation,
including compliance with good clinical practice regulations and
guidance.
The FDA may order the temporary or permanent discontinuation of a
clinical trial at any time or impose other sanctions if it believes
that the clinical trial is not being conducted in accordance with
FDA requirements or presents an unacceptable risk to the clinical
trial patients. We may also suspend clinical trials at any time on
various grounds.
The results of the preclinical and clinical studies, together with
other detailed information, including the manufacture and
composition of the product candidate, are submitted to the FDA in
the form of an NDA requesting approval to market the drug. FDA
approval of the NDA is required before marketing of the product may
begin in the U.S. If the NDA contains all pertinent information and
data, the FDA will “file” the application and begin
review. The FDA may “refuse to file” the NDA if it does
not contain all pertinent information and data. In that case, the
applicant may resubmit the NDA when it contains the missing
information and data. Once the submission is accepted for filing,
the FDA begins an in-depth review. The FDA has agreed to certain
performance goals in the review of new drug applications. Most such
applications for non-priority drug products are reviewed within
10 months. The review process, however, may be extended by FDA
requests for additional information, preclinical or clinical
studies, clarification regarding information already provided in
the submission, or submission of a risk evaluation and mitigation
strategy. The FDA may refer an application to an advisory committee
for review, evaluation and recommendation as to whether the
application should be approved. The FDA is not bound by the
recommendations of an advisory committee, but it considers such
recommendations carefully when making decisions. Before approving
an NDA, the FDA will typically inspect the facilities at which the
product candidate is manufactured and will not approve the product
candidate unless GMP compliance is satisfactory. FDA also typically
inspects facilities responsible for performing animal testing, as
well as clinical investigators who participate in clinical trials.
The FDA may refuse to approve an NDA if applicable regulatory
criteria are not satisfied, or may require additional testing or
information. The FDA may also limit the indications for use and/or
require post-marketing testing and surveillance to monitor the
safety or efficacy of a product. Once granted, product approvals
may be withdrawn if compliance with regulatory standards is not
maintained or problems are identified following initial
marketing.
The testing and approval process requires substantial time, effort
and financial resources, and our product candidates may not be
approved on a timely basis, if at all. The time and expense
required to perform the clinical testing necessary to obtain FDA
approval for regulated products can frequently exceed the time and
expense of the research and development initially required to
create the product. The results of preclinical studies and initial
clinical trials of our product candidates are not necessarily
predictive of the results from large-scale clinical trials, and
clinical trials may be subject to additional costs, delays or
modifications due to a number of factors, including difficulty in
obtaining enough patients, investigators or product candidate
supply. Failure by us to obtain, or any delay in obtaining,
regulatory approvals or in complying with requirements could
adversely affect the commercialization of product candidates and
our ability to receive product or royalty revenues.
Other Regulatory Requirements
After approval, drug products are subject to extensive continuing
regulation by the FDA, which include company obligations to
manufacture products in accordance with Good Manufacturing
Practice, or GMP, maintain and provide to the FDA updated safety
and efficacy information, report adverse experiences with the
product, keep certain records and submit periodic reports, obtain
FDA approval of certain manufacturing or labeling changes, and
comply with FDA promotion and advertising requirements and
restrictions. Failure to meet these obligations can result in
various adverse consequences, both voluntary and FDA-imposed,
including product recalls, withdrawal of approval, restrictions on
marketing, and the imposition of civil fines and criminal penalties
against the NDA holder. In addition, later discovery of previously
unknown safety or efficacy issues may result in restrictions on the
product, manufacturer or NDA holder.
We and any manufacturers of our products are required to comply
with applicable FDA manufacturing requirements contained in the
FDA’s GMP regulations. GMP regulations require among other
things, quality control and quality assurance as well as the
corresponding maintenance of records and documentation. The
manufacturing facilities for our products must meet GMP
requirements to the satisfaction of the FDA pursuant to a
pre-approval inspection before we can use them to manufacture our
products. We and any third-party manufacturers are also subject to
periodic inspections of facilities by the FDA and other
authorities, including procedures and operations used in the
testing and manufacture of our products to assess our compliance
with applicable regulations.
With respect to post-market product advertising and promotion, the
FDA imposes a number of complex regulations on entities that
advertise and promote pharmaceuticals, which include, among others,
standards for direct-to-consumer advertising, promoting drugs for
uses or in patient populations that are not described in the
drug’s approved labeling (known as “off-label
use”), industry-sponsored scientific and educational
activities, and promotional activities involving the internet.
Failure to comply with FDA requirements can have negative
consequences, including adverse publicity, enforcement letters from
the FDA, mandated corrective advertising or communications with
doctors, and civil or criminal penalties. Although physicians may
prescribe legally available drugs for off-label uses, manufacturers
may not market or promote such off-label uses.
Changes to some of the conditions established in an approved
application, including changes in indications, labeling, or
manufacturing processes or facilities, require submission and FDA
approval of a new NDA or NDA supplement before the change can be
implemented. An NDA supplement for a new indication typically
requires clinical data similar to that in the original application,
and the FDA uses the same procedures and actions in reviewing NDA
supplements as it does in reviewing NDAs.
Adverse event reporting and submission of periodic reports is
required following FDA approval of an NDA. The FDA also may require
post-marketing testing, known as Phase 4 testing, risk
minimization action plans and surveillance to monitor the effects
of an approved product or place conditions on an approval that
could restrict the distribution or use of the product.
Outside the United States, our ability to market a product is
contingent upon receiving marketing authorization from the
appropriate regulatory authorities. The requirements governing
marketing authorization, pricing and reimbursement vary widely from
jurisdiction to jurisdiction. At present, foreign marketing
authorizations are applied for at a national level, although within
the European Union registration procedures are available to
companies wishing to market a product in more than one European
Union member state.
We are also subject to various environmental, health and safety
regulations including those governing laboratory procedures and the
handling, use, storage, treatment, and disposal of hazardous
materials. From time to time, and in the future, our operations may
involve the use of hazardous materials.
Orphan Drugs
Under the Orphan Drug Act of 1983, the FDA may grant orphan drug
designation to drugs or biologics intended to treat a rare disease
or condition, which is generally defined as a disease or condition
that affects fewer than 200,000 individuals in the United States.
Orphan drug designation must be requested before submitting an NDA.
After the FDA grants orphan drug designation, the generic identity
of the drug and its potential orphan use are disclosed publicly by
the FDA. Orphan drug designation does not convey any advantage in,
or shorten the duration of, the regulatory review and approval
process. The first applicant to receive FDA approval for a
particular active ingredient to treat a particular disease with FDA
orphan drug designation is entitled to a seven-year exclusive
marketing period in the United States for that product, for that
indication. During the seven-year exclusivity period, the FDA may
not approve any other applications to market the same drug or
biologic for the same disease, except in limited circumstances,
such as a showing of clinical superiority to the product with
orphan drug exclusivity. Orphan drug exclusivity does not prevent
the FDA from approving a different drug or biologic for the same
disease or condition, or the same drug or biologic for a different
disease or condition. Among the other benefits of orphan drug
designation are tax credits for certain research and a waiver of
the NDA application user fee.
Non-U.S. Regulation
Before our products can be marketed outside of the United States,
they are subject to regulatory approval of the respective
authorities in the country in which the product should be marketed.
The requirements governing the conduct of clinical trials, product
licensing, pricing and reimbursement vary widely from country to
country. No action can be taken to market any product in a country
until an appropriate application has been approved by the
regulatory authorities in that country. The current approval
process varies from country to country, and the time spent in
gaining approval varies from that required for FDA approval. In
certain countries, the sales price of a product must also be
approved. The pricing review period often begins after market
approval is granted. Even if a product is approved by a regulatory
authority, satisfactory prices might not be approved for such
product.
In
Europe, marketing authorizations may be submitted at a centralized,
a decentralized or national level; however, the centralized
procedure is mandatory for the approval of biotechnology products
and provides for the grant of a single marketing authorization that
is valid in all European Union member states. There can be no
assurance that the chosen regulatory strategy will secure
regulatory approval on a timely basis or at all.
While
we intend to market our products outside the United States in
compliance with our respective license agreements, we have not made
any applications with non-U.S. authorities and have no timeline for
such applications or marketing.
Item 1A.
|
Risk Factors.
|
Our business faces significant risks, some of which are set forth
below to enable readers to assess, and be appropriately apprised
of, many of the risks and uncertainties applicable to the
forward-looking statements made in this Annual Report. You should
carefully consider these risk factors as each of these risks could
adversely affect our business, operating results and financial
condition. If any of the events or circumstances described in the
following risks actually occurs, our business may suffer, the
trading price of our common stock could decline and our financial
condition or results of operations could be harmed. Given these
risks and uncertainties, you are cautioned not to place undue
reliance on forward-looking statements. These risks should be read
in conjunction with the other information set forth in this Annual
Report. There may be additional risks faced by our business, though
we do believe that the risks set forth below reflect the more
important ones.
We will be required to raise additional funds to finance our
operations and remain a going concern; we may not be able to do so
when necessary, and/or the terms of any financings may not be
advantageous to us.
Our operations to date have consumed substantial amounts of cash.
Negative cash flows from our operations are expected to continue
over at least the next several years. Our cash utilization amount
is highly dependent on the progress of our product development
programs, particularly, the results of our preclinical and clinical
studies and those of our partners, the cost, timing and outcomes of
regulatory approval for our product candidates, and the rate of
recruitment of patients in our human clinical trials. In addition,
the further development of our ongoing clinical trials will depend
on upcoming analysis and results of those studies and our financial
resources at that time.
We will require future additional capital infusions including
public or private financing, strategic partnerships or other
arrangements with organizations that have capabilities and/or
products that are complementary to our own capabilities and/or
products, in order to continue the development of our product
candidates. However, there can be no assurances that we will
complete any financings, strategic alliances or collaborative
development agreements, and the terms of such arrangements may not
be advantageous to us. Any additional equity financing will be
dilutive to our current stockholders and debt financing, if
available, may involve restrictive covenants. If we raise funds
through collaborative or licensing arrangements, we may be required
to relinquish, on terms that are not favorable to us, rights to
some of our technologies or product candidates that we would
otherwise seek to develop or commercialize. Our failure to raise
capital when needed could materially harm our business, financial
condition and results of operations.
Additionally, we granted certain rights to approve future
(i) issuances of our securities, (ii) equity or debt
financings and (iii) sales of any development product assets
currently held by us, subject to certain exceptions, for as long as
any lead investor in the August 2016 Public Offering holds 50% or
more of the shares of common stock (or Series F Preferred
Stock) purchased by a lead investor in the August 2016 Public
Offering or until a financing with net proceeds to us of at least
$7.5 million in which we are able to sell our securities
at a minimum per share price of $7.40 or greater. There
can be no assurance that such lead investor will provide consent
and this requirement may make it difficult for us to raise capital,
refinance indebtedness or borrow additional funds.
Our ongoing capital requirements will depend on numerous factors,
including: the progress and results of preclinical testing and
clinical trials of our product candidates under development; the
costs of complying with the FDA and other domestic and foreign
regulatory agency requirements, the progress of our research and
development programs and those of our partners; the time and costs
expended and required to obtain any necessary or desired regulatory
approvals; the resources that we devote to manufacturing
expenditures; our ability to enter into licensing arrangements,
including any unanticipated licensing arrangements that may be
necessary to enable us to continue our development and clinical
trial programs; the costs and expenses of filing, prosecuting and,
if necessary, enforcing our patent claims, or defending against
possible claims of infringement by third-party patent or other
technology rights; the cost of commercialization activities and
arrangements, if any, that we undertake; and, if and when approved,
the demand for our products, which demand depends in turn on
circumstances and uncertainties that cannot be fully known,
understood or quantified unless and until the time of approval,
including the range of indications for which any product is granted
approval.
The terms of our secured debt facility require us to meet certain
operating and financial covenants and place restrictions on our
operating and financial flexibility. If we raise additional capital
through debt financing, the terms of any new debt could further
restrict our ability to operate our business.
Effective
in January 2016, we entered into a $10 million loan and
security agreement with Oxford Finance LLC, or Oxford Finance, that
is secured by a lien covering substantially all of our assets,
excluding intellectual property. As of December 31, 2016, we had an
outstanding principal balance of $5 million.
The option to draw the second $5,000,000 expired
on September 30, 2016. The loan and security
agreement contains customary affirmative and negative covenants and
events of default. The affirmative covenants include, among others,
covenants requiring us to maintain our legal existence and
governmental approvals, deliver certain financial reports and
maintain insurance coverage. The negative covenants include, among
others, restrictions on transferring collateral, changing our
business, incurring additional indebtedness, engaging in mergers or
acquisitions, paying dividends or making other distributions,
making investments and creating other liens on our assets, in each
case subject to customary exceptions. If we default under the loan
agreement, the lenders may accelerate all of our repayment
obligations and take control of our pledged assets, potentially
requiring us to renegotiate our agreement on terms less favorable
to us or to immediately cease operations. Further, if we are
liquidated, the lender’s right to repayment would be senior
to the rights of the holders of our common stock and preferred
stock to receive any proceeds from the liquidation. The lenders
could declare a default upon the occurrence of any event that they
interpret as a material adverse change as defined under the loan
agreement, thereby requiring us to repay the loan immediately or to
attempt to reverse the declaration of default through negotiation
or litigation. Any declaration by the lenders of an event of
default could significantly harm our business and prospects and
could cause the price of our common stock to decline. If we raise
any additional debt financing, the terms of such additional debt
could further restrict our operating and financial
flexibility.
We have a history of losses, and we anticipate that we will
continue to incur losses in the future; our auditors have included
in their audit report an explanatory paragraph as to substantial
doubt as to our ability to continue as a going
concern.
We have experienced net losses every year since our inception and,
as of December 31, 2016, had an accumulated deficit of
$78,262,261. Our auditors have included in their audit report a
“going concern” explanatory paragraph as to substantial
doubt as to our ability to continue as a going concern that assumes
the realization of our assets and the satisfaction of our
liabilities and commitments in the normal course of business. We
anticipate continuing to incur substantial additional losses over
at least the next several years due to, among other factors,
expenses related to the following: conducting Phase I clinical
trials with the HuMab-5B1 antibody, preclinical testing of
follow-on antibody candidates, investor and public relations, SEC
compliance efforts, anticipated research and development activities
and the general and administrative expenses associated with each of
these activities. We have not yet commercialized any product
candidates. Our ability to attain profitability will depend upon
our ability to develop and commercialize products that are
effective and commercially viable, to obtain regulatory approval
for the manufacture and sale of our products and to license or
otherwise market our products successfully. We may never achieve
profitability, and even if we do, we may not be able to sustain
being profitable. If we are unable to obtain additional
capital we may be forced to license, sell or terminate our
activities with respect to promising technologies which may require
us to agree to disadvantageous terms that will prevent us from
realizing the potential value from the results of our efforts and
expenditures.
If we are unable to obtain required regulatory approvals, we will
be unable to market and sell our product candidates.
Our product candidates are subject to extensive governmental
regulations relating to development, clinical trials,
manufacturing, oversight of clinical investigators, recordkeeping
and commercialization. Rigorous preclinical testing and clinical
trials and an extensive regulatory review and approval process are
required to be successfully completed in the United States and in
each foreign jurisdiction in which we offer our products before a
new drug or other product can be sold in such jurisdictions.
Satisfaction of these and other regulatory requirements is costly,
time consuming, uncertain, and subject to unanticipated delays. The
time required to obtain approval by the FDA, or the regulatory
authority in such other jurisdictions is unpredictable and often
exceeds five years following the commencement of clinical trials,
depending upon the complexity of the product candidate and the
requirements of the applicable regulatory agency.
In connection with the clinical development of our product
candidates, we face risks that:
●
the
product candidate may not prove to be safe and
efficacious;
●
patients may die
or suffer serious adverse effects for reasons that may or may not
be related to the product candidate being tested;
●
we may
fail to maintain adequate records of observations and data from our
clinical trials, to establish and maintain sufficient procedures to
oversee, collect data from, and manage clinical trials, or to
monitor clinical trial sites and investigators to the satisfaction
of the FDA or other regulatory agencies;
●
the
results of later-phase clinical trials may not confirm the results
of earlier clinical trials; and
●
the
results from clinical trials may not meet the level of statistical
significance or clinical benefit-to-risk ratio required by the FDA
or other regulatory agencies for marketing approval.
Only a small percentage of product candidates for which clinical
trials are initiated receive approval for commercialization.
Furthermore, even if we do receive regulatory approval to market a
product candidate, any such approval may be subject to limitations
such as those on the indicated uses for which we may market a
particular product candidate.
Our product candidates have not completed clinical trials, and may
never demonstrate sufficient safety and efficacy in order to do
so.
Our product candidates are in the clinical and pre-clinical stages
of development. In order to achieve profitable operations, we
alone, or in collaboration with others, must successfully develop,
manufacture, introduce and market our products. The time frame
necessary to achieve market success for any individual product is
long and uncertain. The products we are currently developing will
require significant additional research, development and
preclinical and clinical testing prior to application for
commercial use or sale. A number of companies in the biotechnology
and pharmaceutical industries have suffered significant setbacks in
clinical trials, even after showing promising results in early or
later-stage studies or clinical trials. Although we have obtained
some favorable results to-date in preclinical studies and clinical
trials of certain of our potential products, such results may not
be indicative of results that will ultimately be obtained in or
throughout such clinical trials, and clinical trials may not show
any of our products to be safe or capable of producing a desired
result. Additionally, we may encounter problems in our clinical
trials that may cause us to delay, suspend or terminate those
clinical trials.
Further, our research or product development efforts may not be
successfully completed, any compounds we currently have under
development may not be successfully developed into drugs, may not
receive regulatory approval on a timely basis, if at all, and
competitors may develop and bring to market products or
technologies that render our potential products obsolete. If any of
these events occur, our business would be materially and adversely
affected.
If clinical trials or regulatory approval processes for our product
candidates are prolonged, delayed or suspended, we may be unable to
commercialize our product candidates on a timely basis, which would
require us to incur additional costs and delay our receipt of any
revenue from potential product sales.
We cannot predict whether we will encounter problems with any of
our completed, ongoing or planned clinical trials that will cause
us or any regulatory authority to delay or suspend those clinical
trials or delay the analysis of data derived from them. A number of
events, including any of the following, could delay the completion
of our ongoing and planned clinical trials and negatively impact
our ability to obtain regulatory approval for, and to market and
sell, a particular product candidate:
●
conditions imposed
on us by the FDA or another foreign regulatory authority regarding
the scope or design of our clinical trials;
●
delays
in obtaining, or our inability to obtain, required approvals from
institutional review boards or other reviewing entities at clinical
sites selected for participation in our clinical
trials;
●
insufficient
supply of our product candidates or other materials necessary to
conduct and complete our clinical trials;
●
slow
enrollment and retention rate of subjects in our clinical
trials;
●
serious and
unexpected drug-related side effects related to the product
candidate being tested; and
●
delays
in meeting manufacturing and testing standards required for
production of clinical trial supplies.
Commercialization of our product candidates may be delayed by the
imposition of additional conditions on our clinical trials by the
FDA or any other applicable foreign regulatory authority or the
requirement of additional supportive studies by the FDA or such
foreign regulatory authority. In addition, clinical trials require
sufficient patient enrollment, which is a function of many factors,
including the size of the patient population, the nature of the
trial protocol, the proximity of patients to clinical sites, the
availability of effective treatments for the relevant disease, the
conduct of other clinical trials that compete for the same patients
as our clinical trials, and the eligibility criteria for our
clinical trials. Our failure to enroll patients in our clinical
trials could delay the completion of the clinical trial beyond its
expectations. In addition, the FDA could require us to conduct
clinical trials with a larger number of subjects than we may have
projected for any of our product candidates. We may not be able to
enroll a sufficient number of patients in a timely or
cost-effective manner. Furthermore, enrolled patients may drop out
of our clinical trials, which could impair the validity or
statistical significance of the clinical trials.
We do not know whether our clinical trials will begin as planned,
will need to be restructured, or will be completed on schedule, if
at all. Delays in our clinical trials will result in increased
development costs for our product candidates, and our financial
resources may be insufficient to fund any incremental costs. In
addition, if our clinical trials are delayed, our competitors may
be able to bring products to market before we do and the commercial
viability of our product candidates could be limited. In cases
where an outside party, such as the NCI conducts a clinical trial
on our behalf, we may not have direct involvement in discussions
with the FDA regarding the factors discussed above.
We are substantially dependent on the success of our product
candidates, MVT-5873, MVT-2163 and
MVT-1075, and we cannot provide any assurance that any of
our product candidates will be commercialized.
To date, our main focus and the investment of a
significant portion of our efforts and financial resources has been
in the development of our product candidates, MVT-5873, MVT-2163,
and MVT-1075, which are in clinical development. Our future success
depends heavily on our ability to successfully manufacture,
develop, obtain regulatory approval, and commercialize these
product candidates, which may never occur. Before
commercializing either product candidate, we will require
additional clinical trials and regulatory approvals for which there
can be no guarantee that we will be successful. We currently
generate no revenues from our product candidates, and we may never
be able to develop or commercialize a marketable
drug.
Our product candidates will remain subject to ongoing regulatory
review even if they receive marketing approval, and if we fail to
comply with continuing regulations, we could lose these approvals
and the sale of any of our approved commercial products could be
suspended.
Even if we receive regulatory approval to market a particular
product candidate, the manufacturing, labeling, packaging, adverse
event reporting, storage, advertising, promotion, and record
keeping related to the product will remain subject to extensive
regulatory requirements. If we fail to comply with the regulatory
requirements of the FDA and other applicable domestic and foreign
regulatory authorities or discover any previously unknown problems
with any approved product, manufacturer, or manufacturing process,
we could be subject to administrative or judicially imposed
sanctions, including:
●
restrictions on the products, manufacturers, or manufacturing
processes;
●
warning letters;
●
civil or criminal penalties;
●
fines;
●
injunctions;
●
product seizures or detentions;
●
pressure to initiate voluntary product recalls;
●
suspension or withdrawal of regulatory approvals; and
●
refusal to approve pending applications for marketing approval of
new products or supplements to approved applications.
Our industry is highly competitive, and our product candidates may
become obsolete.
We are engaged in a rapidly evolving field. Competition from other
pharmaceutical companies, biotechnology companies and research and
academic institutions is intense and likely to increase. Many of
those companies and institutions have substantially greater
financial, technical and human resources than we do. Those
companies and institutions also have substantially greater
experience in developing products, conducting clinical trials,
obtaining regulatory approval and in manufacturing and marketing
pharmaceutical products. Our competitors may succeed in obtaining
regulatory approval for their products more rapidly than we do.
Competitors have developed or are in the process of developing
technologies that are, or in the future may be, the basis for
competitive products. We are aware of potential competitors
developing products similar to our sarcoma vaccine, ovarian cancer
vaccine and pancreatic cancer antibodies product candidates. Our
competitors may succeed in developing products that are more
effective and/or cost competitive than those we are developing, or
that would render our product candidates less competitive or even
obsolete. In addition, one or more of our competitors may achieve
product commercialization or patent protection earlier than we do,
which could materially adversely affect our business.
If physicians and patients do not accept our future products or if
the market for indications for which any product candidate is
approved is smaller than expected, we may be unable to generate
significant revenue, if any.
Even if any of our product candidates obtain regulatory approval,
they may not gain market acceptance among physicians, patients, and
third-party payers. Physicians may decide not to recommend our
treatments for a variety of reasons including:
●
timing of market introduction of competitive products;
●
demonstration of clinical safety and efficacy compared to other
products;
●
cost-effectiveness;
●
limited or no coverage by third-party payers;
●
convenience and ease of administration;
●
prevalence and severity of adverse side effects;
●
restrictions in the label of the drug;
●
other potential advantages of alternative treatment methods;
and
●
ineffective marketing and distribution support of its
products.
If any of our product candidates are approved, but fail to achieve
market acceptance or such market is smaller than anticipated, we
may not be able to generate significant revenue and our business
would suffer.
As we evolve from a company that is primarily involved in clinical
development to a company that is also involved in
commercialization, we may encounter difficulties in expanding our
operations successfully.
As we advance our product candidates through clinical trials, we
will need to expand our development, regulatory, manufacturing,
marketing and sales capabilities and may need to further contract
with third parties to provide these capabilities. As our operations
expand, we likely will need to manage additional relationships with
such third parties, as well as additional collaborators,
distributors, marketers and suppliers.
Maintaining third party relationships for these purposes will
impose significant added responsibilities on members of our
management and other personnel. We must be able to: manage our
development efforts effectively; recruit and train sales and
marketing personnel; manage our participation in the clinical
trials in which our product candidates are involved effectively;
and improve our managerial, development, operational and finance
systems, all of which may impose a strain on our administrative and
operational infrastructure.
If we enter into arrangements with third parties to perform sales,
marketing or distribution services, any product revenues that we
receive, or the profitability of these product revenues to us, are
likely to be lower than if we were to market and sell any products
that we develop without the involvement of these third parties. In
addition, we may not be successful in entering into arrangements
with third parties to sell and market our products or in doing so
on terms that are favorable to us. We likely will have little
control over such third parties, and any of them may fail to devote
the necessary resources and attention to sell and market our
products effectively. If we do not establish sales and marketing
capabilities successfully, either on our own or in collaboration
with third parties, we will not be successful in commercializing
our products.
The uncertainty associated with pharmaceutical reimbursement and
related matters may adversely affect our business.
Market acceptance and sales of any one or more of our product
candidates will depend on reimbursement policies and may be
affected by future healthcare reform measures in the United States
and in foreign jurisdictions. Government authorities and
third-party payers, such as private health insurers and health
maintenance organizations, decide which drugs they will cover and
establish payment levels. We cannot be certain that reimbursement
will be available for any of our product candidates. Also, we
cannot be certain that reimbursement policies will not reduce the
demand for, or the price paid for, our products. If reimbursement
is not available or is available on a limited basis, we may not be
able to successfully commercialize any product candidates that we
develop.
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 established Medicare
Part D, which expanded Medicare coverage for outpatient
prescription drug purchases by the elderly but provided authority
for limiting the number of drugs that will be covered in any
therapeutic class. The MMA also introduced a new reimbursement
methodology based on average sales prices for
physician-administered drugs.
The United States and several foreign jurisdictions are
considering, or have already enacted, a number of legislative and
regulatory proposals to change the healthcare system in ways that
could affect our ability to sell our products profitably. Among
policy makers and payers in the United States and elsewhere, there
is significant interest in promoting changes in healthcare systems
with the stated goals of containing healthcare costs, improving
quality and/or expanding access to healthcare. In the United
States, the pharmaceutical industry has been a particular focus of
these efforts and has been significantly affected by major
legislative initiatives. We expect to experience pricing pressures
in connection with the sale of any products that it develops due to
the trend toward managed healthcare, the increasing influence of
health maintenance organizations and additional legislative
proposals.
Moreover,
the Patient Protection and Affordable Care Act, as amended by the
Health Care and Education Affordability Reconciliation Act, or
collectively, ACA, is intended to reduce the cost of health care
and substantially change the way health care is financed by both
government and private insurers. While we cannot predict what
impact on federal reimbursement policies this legislation will have
in general or on our business specifically, the ACA may result in
downward pressure on pharmaceutical reimbursement, which could
negatively affect market acceptance of, and the price we charge
for, any products we develop that receive regulatory
approval.
Our ability to generate product
revenues will be diminished if our therapies sell for inadequate
prices or patients are unable to obtain adequate levels of
reimbursement.
Our
ability to commercialize our therapies, alone or with
collaborators, will depend in part on the extent to which
reimbursement will be available from private health maintenance
organizations and health insurers and other healthcare payers.
Significant uncertainty exists as to the reimbursement status of
newly approved healthcare products. Healthcare payers are
challenging the prices charged for medical products and services.
Cost control initiatives could decrease the price that we would
receive for any products in the future, which would limit our
revenue and profitability. Government and other healthcare payers
increasingly attempt to contain healthcare costs by limiting both
coverage and the level of reimbursement for drugs and therapeutics.
We might need to conduct post-marketing studies in order to
demonstrate the cost-effectiveness of any future products to such
payers’ satisfaction. Such studies might require us to commit
a significant amount of management time and financial and other
resources. Our future products might not ultimately be considered
cost-effective. Even if one of our product candidates is approved
by the FDA, insurance coverage may not be available, and
reimbursement levels may be inadequate, to cover such therapies. If
government and other healthcare payers do not provide adequate
coverage and reimbursement levels for one of our products, once
approved, market acceptance of such product could be
reduced.
We only have a limited number of employees to manage and operate
our business.
We have a total of 24 full-time employees and two part-time
employees. Our focus on limiting cash utilization requires us to
manage and operate our business in a highly efficient manner. We
cannot assure you that we will be able to retain adequate staffing
levels to run our operations and/or to accomplish all of the
objectives that we otherwise would seek to accomplish.
We depend heavily on our executive officers, directors, and
principal consultants and the loss of their services would
materially harm our business.
We believe that our success depends, and will likely continue to
depend, upon our ability to retain the services of our current
executive officers, directors, principal consultants and others. In
addition, we have established relationships with universities,
hospitals and research institutions, which have historically
provided, and continue to provide, us with access to research
laboratories, clinical trials, facilities and patients. The loss of
the services of any of these individuals or institutions would have
a material adverse effect on our business.
Our internal computer systems, or those of our third-party service
providers, licensees, licensors, collaborators or other contractors
or consultants, may fail or suffer security breaches, which could
result in a material disruption in our business and
operations.
Despite
the implementation of security measures, our internal computer
systems and those of our current and future service providers,
licensees, licensors, collaborators and other contractors and
consultants are vulnerable to damage from computer viruses,
unauthorized access, natural disasters, terrorism, war and
telecommunication and electrical failures. While we are not aware
of any such material system failure, accident or security breach to
date, if such an event were to occur and cause interruptions in our
operations, it could result in a material disruption of our
development programs and our business operations. For example, the
loss of clinical trial data from completed, on-going or future
clinical trials could result in delays in our regulatory approval
efforts and significant costs to recover or reproduce the data.
Likewise, we rely on third parties to manufacture our drug
candidates and conduct clinical trials, and similar events relating
to their computer systems could also have a material adverse effect
on our business. To the extent that any disruption or security
breach were to result in a loss of, or damage to, our data or
applications, or inappropriate disclosure of confidential or
proprietary information, we could incur liabilities and the further
development and commercialization of our product candidates could
be delayed.
Due in part to our limited financial resources, we may fail to
select or capitalize on the most scientifically, clinically or
commercially promising or profitable indications or therapeutic
areas for our product candidates or those that are in-licensed,
and/or we may be unable to pursue the clinical trials that we would
like to pursue.
We have limited technical, managerial and financial resources to
determine the indications on which we should focus the development
efforts related to our product candidates. Due to our limited
available financial resources, we may have curtailed clinical
development programs and activities that might otherwise have led
to more rapid progress of our product candidates through the
regulatory and development processes.
We may make incorrect determinations with regard to the indications
and clinical trials on which to focus the available resources that
we do have. Furthermore, we cannot assure you that we will be able
to retain adequate staffing levels to run our operations and/or to
accomplish all of the objectives that we otherwise would seek to
accomplish. Our decisions to allocate our research, management and
financial resources toward particular indications or therapeutic
areas for our product candidates 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 cause us to miss valuable
opportunities.
If the third parties on which we rely for the conduct of our
clinical trials and results do not perform our clinical trial
activities in accordance with good clinical practices and related
regulatory requirements, we may be unable to obtain regulatory
approval for or commercialize our product candidates.
We use independent clinical investigators and other third-party
service providers to conduct and/or oversee the clinical trials of
our product candidates and expect to continue to do so for the
foreseeable future. We rely heavily on these parties for successful
execution of our clinical trials. Nonetheless, we are responsible
for confirming that each of our clinical trials is conducted in
accordance with the FDA’s requirements and our general
investigational plan and protocol.
The FDA requires us and our clinical investigators to comply with
regulations and standards, commonly referred to as good clinical
practices, for conducting and recording and reporting the results
of clinical trials to assure that data and reported results are
credible and accurate and that the trial participants are
adequately protected. Our reliance on third parties that we do not
control does not relieve us of these responsibilities and
requirements. Third parties may not complete activities on schedule
or may not conduct our clinical trials in accordance with
regulatory requirements or the respective trial plans and
protocols. The failure of these third parties to carry out their
obligations could delay or prevent the development, approval and
commercialization of our product candidates or result in
enforcement action against us.
We have limited manufacturing capacity and have relied on, and
expect to continue to rely on, third-party manufacturers to produce
our product candidates.
We do not own or operate manufacturing facilities for the
production of clinical or commercial quantities of our product
candidates, and we lack the resources and the capabilities to do
so. As a result, we currently rely, and expect to rely for the
foreseeable future, on third-party manufacturers to supply our
product candidates. Reliance on third-party manufacturers entails
risks to which we would not be subject if we manufactured our
product candidates or products ourselves, including:
●
reliance on
third-parties for manufacturing process development, regulatory
compliance and quality assurance;
●
limitations on
supply availability resulting from capacity and scheduling
constraints of third-parties;
●
the
possible breach of manufacturing agreements by third-parties
because of factors beyond our control; and
●
the
possible termination or non-renewal of the manufacturing agreements
by the third-party, at a time that is costly or inconvenient to
us.
If we do not maintain our key manufacturing relationships, we may
fail to find replacement manufacturers or develop our own
manufacturing capabilities, which could delay or impair our ability
to obtain regulatory approval for our products and substantially
increases our costs or deplete profit margins, if any. If we do
find replacement manufacturers, we may not be able to enter into
agreements with them on terms and conditions favorable to us and
there could be a substantial delay before new facilities could be
qualified and registered with the FDA and other foreign regulatory
authorities.
The FDA and other foreign regulatory authorities require
manufacturers to register manufacturing facilities. The FDA and
corresponding foreign regulators also inspect these facilities to
confirm compliance with current cGMPs. Contract manufacturers may
face manufacturing or quality control problems causing drug
substance production and shipment delays or a situation where the
contractor may not be able to maintain compliance with the
applicable cGMP requirements. Any failure to comply with cGMP
requirements or other FDA, EMA and comparable foreign regulatory
requirements could adversely affect our clinical research
activities and our ability to develop our product candidates and
market our products following approval.
Our current and anticipated future dependence upon others for the
manufacture of our product candidates may adversely affect our
future profit margins and our ability to develop our product
candidates and commercialize any products that receive regulatory
approval on a timely basis.
It is difficult and costly to protect our proprietary rights, and
we may not be able to ensure their protection.
We have
been issued patents, applied for other patents, and intend on
continuing to seek additional patent protection for our families of
antibodies from our antibody development program, our vaccines,
methods of use and other compounds that we
discover. However, any or all of such compounds, methods
or new uses of known compounds may not be subject to effective
patent protection. Further, the development of regimens for the
administration of our vaccines, which involve specifications for
the frequency, timing and amount of dosages, has been, and we
believe may continue to be, important to our efforts, although
those processes, as such, may not be patentable. In addition, our
issued patents may be declared invalid or our competitors may find
ways to avoid the claims in the patents.
Our
commercial success will depend, in part, on our ability to obtain
and maintain patent protection, protect our trade secrets and
operate without infringing on the proprietary rights of others. Our
commercial success will also depend, in part, on our ability to
market our product candidates during the term of our patent
protection. For example, certain patents primarily in
foreign countries within our portfolio expired in 2014 and can no
longer be relied on for protection in those countries. As
of February 28, 2017, we were the exclusive licensee, sole
assignee or co-assignee of 14 granted United States patents, 2
pending United States patent applications, 7 international patents
and 19 pending international patent applications. The
patent position of pharmaceutical and biotechnology firms like us
are generally highly uncertain and involves complex legal and
factual questions, resulting in both an apparent inconsistency
regarding the breadth of claims allowed in United States patents
and general uncertainty as to their legal interpretation and
enforceability. No absolute policy regarding the breadth
of claims allowed in biopharmaceutical patents has emerged to date
in the United States or in many foreign jurisdictions. Changes in
either the patent laws or in interpretations of patent laws in the
United States and foreign jurisdictions may diminish the value of
our intellectual property. Accordingly, we cannot predict the
breadth of claims that may be enforced in the patents that we
currently own or that may be issued from the applications we have
filed or may file in the future or that we have licensed or may
license from third parties, including MSK for the vaccine antigen
patents. Further, if any patents we obtain or license are deemed
invalid or unenforceable, it could impact our ability to
commercialize or license our technology. Thus, patent
applications assigned or exclusively licensed to us may not result
in patents being issued, any issued patents assigned or exclusively
licensed to us may not provide us with competitive protection or
may be challenged by others, and the current or future granted
patents of others may have an adverse effect on our ability to do
business and achieve profitability.
One
of our issued US patents is directed to a candidate antibody
product that will expire in 2034. Other previously filed antibody
patent applications will, if issued, have patent expiration dates
depending on country and filing date between 2034 and
2035. It is possible that the term of the antibody
patent and certain patents issuing from the antibody patent
applications may be extended for a portion of the time the
candidate product was under regulatory review. Patents covering
components of the sarcoma vaccine will expire in
2022. Patents covering the polyvalent ovarian vaccine
will expire between 2018 and 2025. We believe that our
product candidates are eligible for Orphan Drug designation from
FDA depending on the indication for which it is approved by
FDA. Each product that receives an Orphan Drug
designation would be eligible for up to 7 additional years of
patent protection.
The degree of future protection for our proprietary rights is
uncertain because legal means afford only limited protection and
may not adequately protect our rights or permit us to gain or keep
our competitive advantage. For example:
●
others
may be able to make compounds that are similar to our vaccines and
monoclonal antibody-based candidates and any future product
candidates we may seek to develop but that are not covered by the
claims of our patents;
●
if we
encounter delays in our clinical trials, the period of time during
which we could market our vaccines and monoclonal antibody-based
candidates under patent protection would be reduced;
●
we
might not have been the first to conceive, make or disclose the
inventions covered by our patents or pending patent
applications;
●
we
might not have been the first to file patent applications for these
inventions;
●
any
patents that we obtain may be invalid or unenforceable or otherwise
may not provide us with any competitive advantages; or
●
the
patents of others may have a material adverse effect on our
business.
Due to the patent laws of a country, or the decisions of a patent
examiner in a country, or our own filing strategies, we may not
obtain patent coverage for all of the product candidates that may
be disclosed or methods involving these candidates that may be
disclosed in the parent patent application. We plan to pursue
divisional patent applications and/or continuation patent
applications in the United States and many other countries to
obtain claim coverage for inventions that were disclosed but not
claimed in the parent patent application, but may not succeed in
these efforts.
Composition of matter patents on the active biological component
are generally considered to be the strongest form of intellectual
property protection for biopharmaceutical products, as such patents
generally provide protection without regard to any method of use.
We cannot be certain that the claims in our patent applications
covering composition-of-matter of our candidates will be considered
patentable by the U.S. Patent and Trademark Office, or USPTO,
courts in the United States or by the patent offices and courts in
foreign countries. Method of use patents protect the use of a
product for the method recited in the claims. This type of patent
does not prevent a competitor from making and marketing a product
that is identical to our product for an indication that is outside
the scope of the patented method. Moreover, even if competitors do
not actively promote their product for our targeted indications,
physicians may prescribe these products “off-label.”
Although off-label prescriptions may infringe or contribute to or
induce the infringement of method of use patents, the practice is
common and such infringement is difficult to prevent or prosecute.
Interference proceedings provoked by third parties or brought by
the USPTO may be necessary to determine the priority of inventions
with respect to our patents or patent applications or those of our
collaborators or licensors. An unfavorable outcome could require us
to cease using the related technology or to attempt to license
rights to it from the prevailing party. Our business could be
harmed if the prevailing party does not offer us a license on
commercially reasonable terms. Litigation or interference
proceedings may fail, resulting in harm to our business, and, even
if successful, may result in substantial costs and distract our
management and other employees.
There have been numerous changes to the patent laws and proposed
changes to the rules of the USPTO, which may have a significant
impact on our ability to protect our technology and enforce our
intellectual property rights. For example, in September 2011,
President Obama signed the America Invents Act that codifies
several significant changes to the U.S. patent laws, including,
among other things, changing from a “first to invent”
to a “first inventor to file” system, limiting where a
patent holder may file a patent suit, replacing interference or
“first to invent” proceedings with derivation
proceedings and creating inter partes review and post-grant
opposition proceedings to challenge the validity of patents after
they have been issued. The effects of these changes are currently
unclear as the USPTO only recently has adopted regulations
implementing the changes, the courts have yet to address most of
these provisions, and the applicability of the act and new
regulations on specific patents and patent applications discussed
herein have not been determined and would need to be
reviewed.
Periodic maintenance fees on any issued patent are due to be paid
to the USPTO and foreign patent agencies in several stages over the
lifetime of the patent. The USPTO and various foreign governmental
patent agencies require compliance with a number of procedural,
documentary, fee payment and other similar provisions during the
patent application process. While an inadvertent lapse can in many
cases be cured by payment of a late fee or by other means in
accordance with the applicable rules, there are situations in which
noncompliance can result in abandonment or lapse of the patent or
patent application, resulting in partial or complete loss of patent
rights in the relevant jurisdiction. Noncompliance events that
could result in abandonment or lapse of a patent or patent
application include, but are not limited to, failure to respond to
official actions within prescribed time limits, non-payment of fees
and failure to properly legalize and submit formal documents. In
such an event, our competitors might be able to enter the market,
which would have a material adverse effect on our
business.
We also rely on trade secrets to protect our technology, especially
where we do not believe patent protection is appropriate or
obtainable. However, trade secrets are difficult to protect.
Although we use reasonable efforts to protect our trade secrets,
our employees, consultants, contractors, licensees, licensors,
outside scientific collaborators and other advisors may
unintentionally or willfully disclose our information such that our
competitors may obtain it. Enforcing a claim that a third party
illegally obtained and is using any of our trade secrets is
expensive and time consuming, and the outcome is unpredictable.
Moreover, our competitors may independently develop equivalent
knowledge, methods and know-how, such as new therapies, including
therapies for the indications we are targeting. If others seek to
develop similar therapies, their research and development efforts
may inhibit our ability to conduct research in certain areas and to
expand our intellectual property portfolio, and also have a
material adverse effect on our business.
Moreover, because some of the basic research relating to one or
more of our patent applications and/or patents were performed at
various universities and/or funded by grants, one or more
universities, employees of such universities and/or grantors could
assert that they have certain rights in such research and any
resulting products. Further, others may independently develop
similar products, may duplicate our products, or may design around
our patent rights. In addition, as a result of the assertion of
rights by a third-party or otherwise, we may be required to obtain
licenses to patents or other proprietary rights of others in or
outside of the United States. Any licenses required under any such
patents or proprietary rights may not be made available on terms
acceptable to us, if at all. If we do not obtain such licenses, we
could encounter delays in product market introductions during our
attempts to design around such patents or could find that the
development, manufacture or sale of products requiring such
licenses is foreclosed. In addition, we could incur substantial
costs in defending suits brought against us or in connection with
patents to which we hold licenses or in bringing suit to protect
our own patents against infringement.
We require employees and the institutions that perform our
preclinical and clinical trials to enter into confidentiality
agreements with us. Those agreements provide that all confidential
information developed or made known to a party to any such
agreement during the course of the relationship with us be kept
confidential and not be disclosed to third-parties, except in
specific circumstances. Any such agreement may not provide
meaningful protection for our trade secrets or other confidential
information in the event of unauthorized use or disclosure of such
information.
With respect to our vaccine programs we have in-licensed rights
from third parties. If these license agreements terminate or
expire, we may lose the licensed rights to some or all of our
vaccine product candidates. We may not be able to continue to
develop them or, if they are approved, market or commercialize
them.
We depend on license agreements with third-parties for certain
intellectual property rights relating to our product candidates,
including, but not limited to, the license of certain intellectual
property rights from MSK. In general, our license agreements
require us to make payments and satisfy performance obligations in
order to keep these agreements in effect and retain our rights
under them. These payment obligations can include upfront fees,
maintenance fees, milestones, royalties, patent prosecution
expenses, and other fees. These performance obligations typically
include diligence obligations. If we fail to pay, be diligent or
otherwise perform as required under our license agreements, we
could lose the rights under the patents and other intellectual
property rights covered by these agreements. If disputes arise
under any of our license agreements, including our license
agreement with MSK, we could lose our rights under these
agreements. Any such dispute may not be resolvable on favorable
terms, or at all. Whether or not any disputes of this kind are
favorably resolved, our management’s time and attention and
our other resources could be consumed by the need to attend to
these disputes and our business could be harmed by the emergence of
such a dispute.
If we lose our rights under these agreements, we might not be able
to develop any related product candidates further, or following
regulatory approval, if any, we might be prohibited from marketing
or commercializing these product candidates. In particular, patents
previously licensed to us might, after termination of an agreement,
be used to stop us from conducting these activities.
We are dependent on MSK for the establishment of our intellectual
property rights related to the vaccine program, and if MSK has not
established our intellectual property rights with sufficient scope
to protect our vaccine candidates, we may have limited or no
ability to assert intellectual property rights to our vaccine
candidates.
Under our agreement with MSK, MSK was responsible for establishing
the intellectual property rights to the vaccine antigen conjugates,
mixtures of vaccine antigen conjugates that make up polyvalent
vaccine candidates and methods of use. As we were not responsible
for the establishment of our intellectual property rights to these
vaccine antigen conjugates, mixtures of vaccine antigen conjugates
and methods of use, we have less visibility into the strength of
our intellectual property rights to our vaccine candidates than if
we had been responsible for the establishment of these rights. If
MSK did not establish those rights so they are of sufficient scope
to protect the vaccine candidates, then we may not be able to
prevent others from using or commercializing some or all of our
vaccine candidates, and others may be able to assert intellectual
property rights in our vaccine candidates and prevent us from
further pursuing the development and commercialization of our
vaccine candidates.
We may not obtain exclusive rights to intellectual property created
as a result of our strategic collaborative agreements.
We are party to collaborative research agreements, such as with
Rockefeller University and MSK, and expect to enter into agreements
with other parties in the future, each of which involve research
and development efforts. Under certain circumstances we
may not have exclusive rights to jointly developed intellectual
property and would have to license the collaborative
partner’s interest in the jointly developed intellectual
property to obtain exclusive rights. We may not be able
to license our collaborative partner’s interest or license
their interest at reasonable terms. If we are unable to
license their interest we would not have exclusive rights to the
jointly developed intellectual property and, in some
collaborations, the collaborative partner may be free to license
their interest in the jointly developed intellectual property to a
competitor. In other collaborations, if we are unable to
license the collaborative partner’s interest we may not have
sufficient rights to practice the jointly developed intellectual
property. Such provisions to the jointly developed
intellectual property may limit our ability to gain commercial
benefit from some of or all of the intellectual property we jointly
develop with our collaborative partners and may lead to costly or
time-consuming disputes with parties with whom we have
collaborative relationships over rights to certain innovations or
with other third parties that may result from the activities of the
collaborative arrangements.
We may incur substantial costs as a result of litigation or other
proceedings relating to patent and other intellectual property
rights and we may be unable to enforce or protect our rights to, or
use, our technology.
If we choose to go to court to stop another party from using the
inventions claimed in any patents we obtain, that individual or
company has the right to ask the court to rule that such patents
are invalid or should not be enforced. These lawsuits are expensive
and would consume time and resources and divert the attention of
managerial and scientific personnel even if we were successful in
stopping the infringement of such patents or sustaining their
validity and enforceability. In addition, there is a risk that the
court will decide that such patents are not valid and that we do
not have the right to enforce them. There is also the risk that,
even if the validity of such patents is upheld, the court will
refuse to stop the other party on the grounds that such other
party’s activities do not infringe such patents. In addition,
the United States Court of Appeals for the Federal Circuit and the
Supreme Court of the United States continue to address issues under
the United States patent laws, and the decisions of those and other
courts could adversely affect our ability to sustain the validity
of our issued or licensed patents and obtain new
patents.
Furthermore, a third party may claim that we or our manufacturing
or commercialization partners or customers are using inventions
covered by the third party’s patent rights and may go to
court to stop us or our partners and/or customers from engaging in
our operations and activities, including making or selling our
vaccine and monoclonal antibody-based candidates and any future
product candidates we may seek to develop. These lawsuits are
costly and could affect our results of operations and divert the
attention of managerial and scientific personnel. There is a risk
that a court would decide that we or our commercialization partners
or customers are infringing the third party’s patents and
would order us or our partners or customers to stop the activities
covered by the patents. In that event, we or our commercialization
partners or customers may not have a viable way around the patent
and may need to halt commercialization or use of the relevant
product. In addition, there is a risk that a court will order us or
our partners or customers to pay the other party damages for having
violated the other party’s patents or obtain one or more
licenses from third parties, which may be impossible or require
substantial time and expense. We cannot predict whether any license
would be available at all or whether it would be available on
commercially reasonable terms. Furthermore, even in the absence of
litigation, we may need to obtain licenses from third parties to
advance our research or allow commercialization of our candidates,
and we have done so from time to time. We may fail to obtain any of
these licenses at a reasonable cost or on reasonable terms, if at
all. In such events, we would be unable to further develop and
commercialize one or more of our drug candidates, which could harm
our business significantly. In the future, we may agree to
indemnify our commercial partners and/or customers against certain
intellectual property infringement claims brought by third parties
which could increase our financial expense, increase our
involvement in litigation and/or otherwise materially adversely
affect our business.
Because of the substantial amount of discovery required in
connection with intellectual property litigation, there is a risk
that some of our confidential information could be compromised by
disclosure during this type of litigation, which could adversely
affect our intellectual property rights and our business. In
addition, there could be public announcements of the results of
hearings, motions or other interim proceedings or developments. If
securities analysts or investors perceive these results to be
negative, it could have a substantial adverse effect on the price
of our common stock.
The pharmaceutical and biotechnology industries have produced a
proliferation of patents, and it is not always clear to industry
participants, including us, which patents cover various types of
products or methods of use. The coverage of patents is subject to
interpretation by the courts, and the interpretation is not always
uniform. If we are sued for patent infringement, we would need to
demonstrate that our products or methods either do not infringe the
patent claims of the relevant patent or that the patent claims are
invalid or unenforceable, and we may not be able to do this.
Proving invalidity or unenforceability is difficult. For example,
in the United States, proving invalidity requires a showing of
clear and convincing evidence to overcome the presumption of
validity enjoyed by issued patents.
Because some patent applications in the United States may be
maintained in secrecy until the patents are issued, because patent
applications in the United States and many foreign jurisdictions
are typically not published until eighteen months after filing,
because searches and examinations of patent applications by the
USPTO and other patent offices may not be comprehensive, and
because publications in the scientific literature often lag behind
actual discoveries, we cannot be certain that others have not filed
patent applications for technology covered by our patents or
pending applications. Our competitors may have filed, and may in
the future file, patent applications and may have obtained patents
covering technology similar to ours. Any such patents or patent
application may have priority over our patent applications, which
could further require us to obtain or license rights to issued
patents covering such technologies. If another party has obtained a
U.S. patent or filed a U.S. patent application on inventions
similar to ours, we may have to participate in a proceeding before
the USPTO or in the courts to determine which patent or application
has priority. The costs of these proceedings could be substantial,
and it is possible that our application or patent could be
determined not to have priority, which could adversely affect our
intellectual property rights and business.
We have received confidential and proprietary information from
collaborators, prospective licensees and other third parties. In
addition, we employ individuals who were previously employed at
other biotechnology or pharmaceutical companies. We may be subject
to claims that we or our employees, consultants or independent
contractors have improperly used or disclosed confidential
information of these third parties or our employees’ former
employers. Litigation may be necessary to defend against these
claims. Even if we are successful in defending against these
claims, litigation could result in substantial cost and be a
distraction to our management and employees. If we are not
successful, our ability to continue our operations and our business
could be materially, adversely affected.
Some of our competitors may be able to sustain the costs of complex
intellectual property litigation more effectively than we can
because they have substantially greater resources. In addition, any
uncertainties resulting from the initiation and continuation of any
litigation could have a material adverse effect on our ability to
raise the funds necessary to continue our operations, on our
ability to hire or retain employees, or otherwise on our
business.
If product liability lawsuits are successfully brought against us,
we may incur substantial liabilities and may be required to limit
commercialization of our product candidates and any products that
we may develop.
The testing and marketing of medical products entail an inherent
risk of product liability. Although we are not aware of any
historical or anticipated product liability claims or specific
causes for concern, if we cannot successfully defend ourselves
against product liability claims, we may incur substantial
liabilities or be required to limit commercialization of our
product candidates and any products that we may develop. In
addition, product liability claims may also result in withdrawal of
clinical trial volunteers, injury to our reputation and decreased
demand for any products that we may commercialize. We currently
carry product liability insurance that covers our clinical trials
up to a $5.0 million annual aggregate limit. We will need to
increase the amount of coverage if and when we have a product that
is commercially available. If we are unable to obtain sufficient
product liability insurance at an acceptable cost, potential
product liability claims could prevent or inhibit the
commercialization of any products that we may develop, alone or
with corporate partners.
Our restated certificate of incorporation, our amended and restated
by-laws and Delaware law could deter a change of our management
which could discourage or delay offers to acquire us; certain
restrictions in our agreements with existing stockholders could
also discourage or delay offers to acquire us.
Certain provisions of Delaware law and of our restated certificate
of incorporation, as amended, and amended and restated by-laws,
could discourage or make it more difficult to accomplish a proxy
contest or other change in our management or the acquisition of
control by a holder of a substantial amount of our voting stock. It
is possible that these provisions could make it more difficult to
accomplish, or could deter, transactions that stockholders may
otherwise consider to be in their best interests or in our best
interests. These provisions include:
●
establishing a
classified board of directors requiring that members of the board
be elected in different years, which lengthens the time needed to
elect a new majority of the board;
●
authorizing the
issuance of “blank check” preferred stock that could be
issued by our board of directors to increase the number of
outstanding shares or change the balance of voting control and
thwart a takeover attempt;
●
prohibiting
cumulative voting in the election of directors, which would
otherwise allow for less than a majority of stockholders to elect
director candidates;
●
limiting the
ability of stockholders to call special meetings of the
stockholders;
●
prohibiting
stockholder action by written consent and requiring all stockholder
actions to be taken at a meeting of our stockholders;
and
●
establishing 90 to
120-day advance notice requirements for nominations for election to
the board of directors and for proposing matters that can be acted
upon by stockholders at stockholder meetings.
Additionally, we granted certain rights to approve future
(i) issuances of our securities, (ii) equity or debt
financings and (iii) sales of any development product assets
currently held by us, subject to certain exceptions, for as long as
any lead investor in the August 2016 Public Offering holds 50% or
more of the shares of common stock (or Series F Preferred
Stock) purchased by a lead investor in the August 2016 Public
Offering or until a financing with net proceeds to us of at least
$7.5 million in which we are able to sell our securities at a
minimum per share price of $7.40 or greater. There can
be no assurance that such lead investor will provide consent, and
this requirement may make it difficult for us to raise capital,
refinance indebtedness or borrow additional funds.
Unless our common stock is listed on The NASDAQ Capital Market or
other national securities exchange, it will be deemed a
“penny stock,” which would make it more difficult for
our investors to sell their shares.
On
August 17, 2016, we began trading on The NASDAQ Capital Market. If
we fail to maintain our listing on The NASDAQ Capital Market or
other national securities exchange, our common stock will be
subject to the “penny stock” rules adopted under
Section 15(g) of the Exchange Act. The penny stock
rules generally apply to companies whose common stock is not
listed on the NASDAQ Capital Market or other national securities
exchange and trades at less than $4.00 per share, other than
companies that have had average revenue of at least $6,000,000 for
the last three years or that have tangible net worth of at least
$5,000,000 ($2,000,000 if the company has been operating for three
or more years). These rules require, among other things, that
brokers who trade penny stock to persons other than
“established customers” complete certain documentation,
make suitability inquiries of investors and provide investors with
certain information concerning trading in the security, including a
risk disclosure document and quote information under certain
circumstances. Many brokers have decided not to trade penny stocks
because of the requirements of the penny stock rules and, as a
result, the number of broker-dealers willing to act as market
makers in such securities is limited. If we remain subject to the
penny stock rules for any significant period, it could have an
adverse effect on the market, if any, for our securities. If our
securities are subject to the penny stock rules, investors will
find it more difficult to dispose of our securities.
Substantial future sales of our common stock by us or by our
existing stockholders could cause our stock price to
fall.
Additional equity
financings or other share issuances by us, including shares issued
in connection with strategic alliances and corporate partnering
transactions, could adversely affect the market price of our common
stock. Sales by existing stockholders of a large number of shares
of our common stock in the public market or the perception that
additional sales could occur could cause the market price of our
common stock to drop.
The price of our common stock is volatile, and is likely to
continue to fluctuate due to reasons beyond our
control.
The market price of our common stock has been, and likely will
continue to be, highly volatile. Factors, including our financial
results or our competitors’ financial results, clinical trial
and research development announcements and government regulatory
action affecting our potential products in both the United States
and foreign countries, have had, and may continue to have, a
significant effect on our results of operations and on the market
price of our common stock. We cannot assure you that any investment
in our common stock will not fluctuate significantly. One or more
of these factors could significantly harm our business and cause a
decline in the price of our common stock in the public market.
Sales of shares of common stock registered for resale or eligible
for resale pursuant to Rule 144 under the Securities Act as
amended, as well as future sales of our common stock by existing
stockholders, or the perception that sales may occur at any time,
could adversely affect the market price of our common
stock.
If we do not progress in our programs as anticipated, our stock
price could decrease.
For planning purposes, we estimate the timing of a variety of
clinical, regulatory and other milestones, such as when a certain
product candidate will enter clinical development, when a clinical
trial will be completed or when an application for regulatory
approval will be filed. Our estimates are based on present facts
and a variety of assumptions. Many of the underlying assumptions
are outside of our control. If milestones are not achieved when we
estimated that they would be, investors could be disappointed, and
our stock price may decrease.
Our stock price may be volatile; you may not be able to resell your
shares at or above your purchase price.
Our
stock prices and the market prices for securities of biotechnology
companies in general have been highly volatile, with recent
significant price and volume fluctuations, and may continue to be
highly volatile in the future. For example, during the year ended
December 31, 2016, our common stock traded between $3.03 per
share and $6.51 per share. The following factors, in addition to
other risk factors described in this section, may have a
significant impact on the market price of our common stock, some of
which are beyond our control:
●
developments
regarding, or the results of, our clinical trials;
●
announcements of
technological innovations or new commercial products by our
competitors or us;
●
our
issuance of equity or debt securities, or disclosure or
announcements relating thereto;
●
developments
concerning proprietary rights, including patents;
●
developments
concerning our collaborations;
●
publicity
regarding actual or potential medical results relating to products
under development by our competitors or us;
●
regulatory
developments in the United States and foreign
countries;
●
litigation;
●
economic and other
external factors or other disaster or crisis; or
●
period-to-period
fluctuations in our financial results.
We have been, and in the future may be, subject to securities class
action lawsuits and shareholder derivative actions. These, and
potential similar or related litigation, could result in
substantial damages and may divert management’s time and
attention from our business.
We have been, and may in the future be, the target of securities
class actions or shareholder derivative claims. Any such actions or
claims could result in substantial damages and may divert
management’s time and attention from our
business.
The rights of our common stockholders are limited by and
subordinate to the rights of the holders
of Series D Preferred Stock, Series E Preferred
Stock and Series F Preferred Stock; these rights may have a
negative effect on the value of shares of our common
stock.
The holders of our Series D Preferred Stock, Series E Preferred
Stock and Series F Preferred Stock have rights and preferences
generally superior to those of the holders of common stock. The
existence of these superior rights and preferences may have a
negative effect on the value of shares of our common stock. These
rights are more fully set forth in the Series D certificate of
designations, Series E Preferred Stock certificate of designations
and Series F Preferred Stock certificate of designations,
respectively, and include, but are not limited to the right to
receive a liquidation preference, prior to any distribution of our
assets to the holders of our common stock, in an amount equal to
$0.01 per share or $1,325 for the Series D Preferred Stock,
$0.01 per share or $333 for the Series E Preferred Stock and $0.01
per share or $6,653 for the Series F Preferred Stock.
A limited public trading market may cause volatility in the price
of our common stock.
On
August 17, 2016, we began trading on The NASDAQ Capital Market. If
we fail to maintain the listing of our common stock on The NASDAQ
Capital Market, our common stock will be quoted on the OTCQB
marketplace. The quotation of our common stock on the
OTCQB marketplace does not assure that a meaningful, consistent and
liquid trading market currently exists, and in recent years such
market has experienced extreme price and volume fluctuations that
have particularly affected the market prices of many smaller
companies like us. Our common stock is subject to this volatility.
Sales of substantial amounts of common stock, or the perception
that such sales might occur, could adversely affect prevailing
market prices of our common stock and our stock price may decline
substantially in a short time and our stockholders could suffer
losses or be unable to liquidate their holdings. If our common
stock does not trade on a national securities exchange in the
future, our common stock will be subject to the securities laws of
the various states and jurisdictions of the United States in
addition to federal securities law. While we may register our
common stock or qualify for exemptions for our common stock in one
of more states, if we fail to do so the investors in those states
where we have not taken such steps may not be allowed to purchase
our stock or those who presently hold our stock may not be able to
resell their shares without substantial effort and expense. These
restrictions and potential costs could be significant burdens on
our stockholders.
The number of shares of issued and outstanding common stock
represents approximately 39% of our fully diluted shares of common
stock. Additional issuances of shares of common stock
upon conversion and/or exercise of preferred stock, options to
purchase common stock and warrants to purchase common stock will
cause substantial dilution to existing stockholders.
At
February 28, 2017, we had 6,296,110 shares of common stock issued
and outstanding. Up to an additional 2,975,424 shares
may be issued upon conversion of our Series D Preferred Stock,
Series E Preferred Stock and Series F Preferred Stock; 5,125,391
shares issuable upon exercise of warrants at a weighted average
price of $6.84; 1,587,971 shares upon exercise of all outstanding
options to purchase our common stock at a weighted average price of
$7.29; and 205,478 shares issuable upon vesting of restricted stock
units granted, resulting in a total of up to 16,190,374 shares that
may be issued and outstanding. The issuance of any and all of
the 9,894,264 shares issuable upon exercise or conversion of
our outstanding convertible securities will cause substantial
dilution to existing stockholders and may depress the market price
of our common stock.
You may experience future dilution in the event of future equity
offerings
We may in the future offer shares of our common stock or other
securities convertible into or exchangeable for our common
stock. Although no assurances can be given that we will
consummate a financing, in the event we do, or in the event we sell
shares of common stock or other securities convertible into shares
of our common stock in the future, additional and substantial
dilution will occur. In addition, investors purchasing
shares or other securities in the future could have rights superior
to our current shareholders.
Item 1B.
|
Unresolved Staff
Comments.
|
None
Item 2.
|
Properties.
|
In September 2015 we entered into a lease agreement with AGP
Sorrento Business Complex, L.P. (the “Lease”) for a
lease of approximately 14,971 rentable square feet of office and
research facilities located at 11535 Sorrento Valley Road, San
Diego, California 92121 to serve as our corporate offices and
laboratories. Due to the fact that certain tenant
improvements needed to be made to the premises before we could take
occupancy, the facilities were not ready until early 2016. We
moved from our previous facility at 11588 Sorrento Valley Road,
into our new space in early February 2016. Monthly rent
commenced upon occupancy at $2.38 per square foot, totaling
$35,631, and will escalate at an annual rate of 3% a year over the
six-year term of the lease as set forth in the Lease.
Item 3.
|
Legal
Proceedings.
|
None
Item 4.
|
Mine Safety Disclosures.
|
Not applicable.
PART II
Item 5.
|
Market for Registrant’s Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities.
|
Our common stock trades on the NASDAQ Capital Market under the
symbol “MBVX”. The following table sets forth the high
and low sales prices for our common stock for each quarterly period
within the two most recent fiscal years. All stock prices included
in the following table are adjusted for the 1 for 7.4 reverse stock
split which occurred on August 16, 2016.
|
High
|
Low
|
2016
|
|
|
Quarter
ended March 31, 2016
|
$6.51
|
$3.03
|
Quarter
ended June 30, 2016
|
$6.44
|
$3.48
|
Quarter
ended September 30, 2016
|
$6.05
|
$3.63
|
Quarter
ended December 31, 2016
|
$4.50
|
$3.10
|
|
|
|
2015
|
|
|
Quarter
ended March 31, 2015
|
$19.76
|
$6.14
|
Quarter
ended June 30, 2015
|
$36.56
|
$13.32
|
Quarter
ended September 30, 2015
|
$20.87
|
$7.77
|
Quarter
ended December 31, 2015
|
$8.29
|
$4.51
|
Holders
There are approximately 92 stockholders of record of our common
stock, one of which is Cede & Co., a nominee for
Depository Trust Company, or DTC. Shares of common stock that are
held by financial institutions as nominees for beneficial owners
are deposited into participant accounts at DTC, and are considered
to be held of record by Cede & Co. as one
stockholder.
Dividends
We have never paid our stockholders cash dividends, and we do not
anticipate paying any cash dividends in the foreseeable future as
we intend to retain any earnings for use in our business. Any
future determination to pay dividends will be at the discretion of
our board of directors.
Securities Authorized for Issuance under Equity Compensation
Plans
The following table provides certain information with respect to
all of the Company’s equity compensation plans in effect as
of December 31, 2016.
|
(a)
|
(b)
|
(c)
|
Plan Category
|
Number of
Securities
to be Issued
Upon Exercise
of Outstanding
Options,
Warrants and Rights
|
Weighted-average
Exercise
Price of
Outstanding
Options,
Warrants and Rights
|
Number of
Securities
Remaining
Available
for Future
Issuance Under
Equity
Compensation Plans
(Excluding Securities
Reflected in Column (a)
|
Equity
compensation plans approved by security holders
|
851,376
|
$10.94
|
66,693
|
Equity
compensation plans not approved by security holders
|
—
|
N/A
|
—
|
Total
|
851,376
|
|
66,693
|
Item 6.
|
Selected Financial
Data.
|
The information under this Item is not required to be provided by
smaller reporting companies.
Item 7.
|
Management’s Discussion and Analysis of Financial Condition
and Results of Operations.
|
You should read the following discussion and analysis in
conjunction with “Item 8. Financial Statements and
Supplementary Data” included in this Annual Report on
Form 10-K, or Annual Report. Operating results are not
necessarily indicative of results that may occur in future
periods.
This discussion and analysis contains forward-looking statements
that involve a number of risks, uncertainties and assumptions.
Actual events or results may differ materially from our
expectations. Important factors that could cause actual results to
differ materially from those stated or implied by our
forward-looking statements include, but are not limited to, those
set forth in “Item 1A. Risk Factors” in this
Annual Report. All forward-looking statements included in this
Annual Report are based on information available to us as of the
time we file this Annual Report and, except as required by law, we
undertake no obligation to update publicly or revise any
forward-looking statements.
Overview
We
have been engaged in the discovery and development of proprietary
human monoclonal antibody products for the diagnosis and treatment
of a variety of cancers. We have discovered a pipeline of human
monoclonal antibody products based on the protective immune
responses generated by patients who have been immunized against
targeted cancers. Therapeutic vaccines under development were
discovered at Memorial Sloan Kettering Cancer Center, or MSK, and
are exclusively licensed to MabVax Therapeutics. We operate in only
one business segment. We have incurred substantial losses since
inception, and we expect to incur additional substantial losses for
the foreseeable future as we continue our research and development
activities. To date, we have funded our operations primarily
through government grants, proceeds from the sale of common and
preferred stock, the issuance of debt, the issuance of common stock
in lieu of cash for services, payments from collaborators and
interest income. The process of developing our product
candidates will require significant additional research and
development, preclinical testing and clinical trials, as well as
regulatory approval. We expect these activities, together with
general and administrative expenses, to result in substantial
operating losses for the foreseeable future. We will not receive
product revenue unless we, or our collaborative partners, complete
clinical trials, obtain regulatory approval and successfully
commercialize one or more of our products. We cannot
provide assurance that we will ever generate revenues or achieve
and sustain profitability in the future or obtain the necessary
working capital for our operations.
During the year ended December 31, 2016, our loss from
operations was $16,663,119 and our net loss was $17,660,483. Net
cash used in operating activities for the year ended
December 31, 2016 was $12,363,411 and cash and cash
equivalents at December 31, 2016 were $3,979,290. As of
December 31, 2016, we had an accumulated deficit of
$78,262,261.
We are subject to risks common to biopharmaceutical companies,
including the need for capital, risks inherent in our research,
development and commercialization efforts, preclinical testing,
clinical trials, uncertainty of regulatory and marketing approvals,
enforcement of patent and proprietary rights, potential competition
and retention of key employees. In order for a product to be
commercialized, it will be necessary for us to conduct preclinical
tests and clinical trials, demonstrate efficacy and safety of our
product candidates to the satisfaction of regulatory authorities,
obtain marketing approval, enter into manufacturing, distribution
and marketing arrangements, obtain market acceptance and, in many
cases, obtain adequate reimbursement from government and private
insurers. We cannot provide assurance that we will ever generate
revenues or achieve and sustain profitability in the future or
obtain the necessary working capital for our
operations.
Reverse Stock Split and Listing on NASDAQ
On
August 16, 2016, we filed a certificate of amendment to our Amended
and Restated Certificate of Incorporation with the Secretary of
State of the State of Delaware in order to effectuate a reverse
stock split of our issued and outstanding common stock on a 1 for
7.4 basis, effective on August 16, 2016 (the “Reverse Stock
Split”). The Reverse Stock Split was effective with The
Financial Industry Regulatory Authority (FINRA), and the
Company’s common stock began trading on The NASDAQ Capital
Market at the open of business on August 17, 2016. All share and per share amounts, and number of
shares of common stock into which each share of preferred stock
will convert, in the financial statements and notes thereto have
been retroactively adjusted for all periods presented to give
effect to the Reverse Stock Split, including reclassifying an
amount equal to the reduction in par value of common stock to
additional paid-in capital.
Clinical Product Development – Recent Updates
MVT-5873
Interim Phase I Data in Pancreatic Cancer – The MVT-5873 phase I clinical trial
initiated in February 2016 is designed to establish safety and
tolerability, and to determine the recommended phase II dose (RP2D)
for MVT-5873 both as monotherapy in patients with locally
advanced or metastatic adenocarcinoma of the pancreas (PDAC) and
other CA19-9 positive malignancies.
Initiation of Part 2 required establishing three safe dose levels
for MVT-5873 as monotherapy in patients with relapsed or refractory
locally advanced or metastatic pancreatic cancer. In November 2016
the Company reported that the safety of MVT-5873 had been
established at three incremental dose levels by treating 16
patients at three clinical sites. While patients continue to be
recruited to establish the RP2D, the Company also initiated Part 2
of the clinical trial to include patients with previously untreated
pancreatic cancer receiving a standard of care chemotherapy as
defined in the protocol.
MVT-2163
Interim Phase I Data in Pancreatic Cancer – The MVT-2163 phase I trial
initiated in June 2016 is designed to evaluate a next generation
diagnostic PET imaging agent in patients with locally advanced or
metastatic adenocarcinoma of the pancreas (PDAC) and other CA19-9
positive malignancies. MVT-2163 (89Zr-HuMab-5B1) combines the
well-established PET imaging radiolabel Zirconium [89Zr] with the
targeting specificity of MVT-5873. This trial is designed to
establish safety, pharmacokinetics, biodistribution, and the amount
of MVT-5873 to be used in co-administration to obtain optimized PET
scan images. In November 2016 we reported that the trial had
demonstrated interim safety, pharmacokinetics, and biodistribution
by completing the initial two cohorts of patients: the first cohort
administered MVT-2163 alone and the second cohort administered
MVT-2163 following a blocking dose of MVT-5873. We also reported
that the initial PET images demonstrated target specificity by
correlation with lesions identified by conventional computerized
tomography (CT) scans. The biodistribution data obtained in the
first two cohorts demonstrates improvement in PET images by
pre-administration of MVT-5873, as has been observed with other
antibody based PET agents. We continue to recruit patients and
expect to establish the optimal co-administration dose of MVT-5873
early in 2017.
MVT-1075
Phase I Clinical Trial Status – On
January 7, 2017, we announced that we had filed an Investigational
New Drug, or IND application with the FDA for MVT-1075
(177Lu-CHX-A″-DTPA-HuMab5B1), our novel fully human antibody
radioimmunotherapy, or RIT, product candidate. In February 2017 we
announced that we had the FDA’s authorization to proceed with
initiation of our clinical trials. Our phase I clinical trial will
be in patients with histologically confirmed, previously treated,
locally-advanced or metastatic CA19-9 positive adenocarcinoma of
the pancreas, or PDAC, or other CA19-9 positive malignancies. We
expect to begin enrolling patients in the first half of 2017. This
is the third IND filed by us that builds on the tumor targeting
characteristics of the HuMab-5B1 antibody discovered from immune
responses of cancer patients vaccinated with the Company’s
proprietary cancer vaccines.
The
MVT-1075 RIT agent combines the targeting specificity of the
HuMab-5B1 antibody for an antigen overexpressed on pancreatic
cancer and other CA19-9 positive cancers with 177 Lutetium to
target delivery of therapeutic radiation to cancer cells.
Preclinical studies have demonstrated marked suppression and in
some instances regression in xenograft animal models of pancreatic
cancer, potentially making it an important new therapeutic agent in
the treatment of pancreatic cancer and other cancers expressing the
same antigen, CA19-9.
In
this initial phase I trial we plan to evaluate the safety,
dosimetry, and pharmacokinetics of MVT-1075. Patients enrolled in
the study will have been diagnosed with recurrent locally advanced
or metastatic pancreatic ductal adenocarcinoma (PDAC) or other
CA19-9 positive malignancies. Patient disease status will be
evaluated based on tumor measurements using RECIST 1.1 measurement
criteria. The investigative sites will include MSK in New York
City.
Historical
Information on Work Conducted on Cancer Vaccines
– From 2010 to 2015 we and our
collaborative partners were engaged in enrolling patients in two
phase II multi-center clinical trials of cancer vaccines that
targeted recurrent sarcoma (soft tissue cancer) and ovarian
cancer. In 2015 all vaccinations in the two studies had
been completed, and since then, we and are partners have been
engaged in the monitoring of patients to assess overall survival,
or OS. Both the sarcoma and ovarian cancer vaccine trials were
randomized, double-blind, multicenter phase II trials that had
enrolled 136 and 164 patients respectively. Both trials
were designed to yield statistically significant evidence that
vaccination of trial subjects can provide 50% improvement in
progression free survival, or PFS, and extend OS. We and our
collaboration partners in these studies are no longer performing
significant work on these studies other than to monitor patients
for OS.
An
independent Drug Safety and Monitoring Board, or DSMB, composed of
experts in the field analyzed the sarcoma clinical trial data in
March of 2013 and determined that the PFS endpoint of a 50%
increase in the time to progression was not reached. At the
suggestion of the DSMB we have continued to monitor patients for OS
and plan to issue a final report on our findings in
2017. The National Institutes of Health, or NIH,
approved a grant of $1.75 million that we received in progress
payments between 2014 and 2016 to help offset the clinical trial
costs for the sarcoma trial. We have no plan at this time to engage
in additional clinical studies for this vaccine.
At
the American Society of Clinical Oncology meeting in June 2016 the
sponsors of the Phase II trial in ovarian cancer, the Gynecologic
Oncology Group, or GOG, a consortium of clinical trial
investigators and sites working in collaboration with the NCI,
reported that the primary endpoint of improvement in PFS was not
reached. We suggested that the GOG continue to monitor the trial
subjects in the ovarian cancer vaccine trial for OS. The ovarian
vaccine trial has been fully funded by a grant from the NIH. We
have no financial obligation for this trial or the follow-on
monitoring. If the OS endpoint were to be achieved, we
would pursue out-licensing the product. We have no plan
at this time to engage in additional clinical studies for this
vaccine.
Results of Operations
Revenues
Revenues
for the years ended December 31, 2016 and 2015 were $148,054
and $1,267,036, respectively, primarily from grant revenues. This
decrease was primarily due to the completion of the current phase
of our contract with the National Institutes of Health, or NIH (the
“NIH Imaging Contract”), during the first quarter of
2016.
|
Years Ended December 31,
|
% change
|
|
|
2016
|
2015
|
2015 to 2016
|
Revenues
|
$148,054
|
$1,267,036
|
(88)%
|
Future revenues will depend upon the extent to which we obtain
approval of new grants or enter into new collaborative research
agreements and the amounts of payments relating to such
agreements.
Research and Development Expenses
Research and development expenses for the years ended
December 31, 2016 and 2015 were $7,800,723 and $9,596,768,
respectively. Our research and development costs consist primarily
of clinical trial site costs, clinical data management and
statistical analysis support, drug manufacture, storage and
distribution, regulatory services and other outside services
related to drug development.
|
Years Ended December 31,
|
% change
|
|
|
2016
|
2015
|
2015 to 2016
|
Research
and development
|
$7,800,723
|
$9,596,768
|
(19)%
|
Total research and development expenses for the year ended
December 31, 2016 decreased by 19%, or $1,796,045, compared to
the same period in 2015. Expenses for the year ended December 31,
2016 were primarily for our clinical trials, and in-house staffing
to support preclinical and clinical development efforts in support
of our programs. Expenses in the same period a year ago
were primarily for GMP manufacturing development of our lead
antibody candidate HuMab 5B1 at Patheon (f.k.a. Gallus
BioPharmaceuticals). In addition, during the current quarter the
Company negotiated a release of approximately $363,000 of
previously accrued manufacturing costs related to failed
manufacturing batches.
Stock-based compensation expense included in research and
development expenses for the years ended December 31, 2016 and
2015 were $1,192,126 and $929,633, respectively.
We expect our total research and development expenditures in the
next twelve months to increase as we continue to fund the clinical
studies of MVT-5873 and MVT-2163 and begin clinical trials
in MVT-1075 in 2017. In the
event we are unable to obtain sufficient funding for clinical
development of our therapies, we will need to defer completion of
clinical trials until such funding is in place. If we are unable to
obtain additional funding for our trials to complete clinical
development, our total research and development expenditures will
decrease substantially until the additional funding is
raised.
The process of conducting the clinical research necessary to obtain
FDA approval is costly and time consuming. Current FDA requirements
for a new human drug to be marketed in the United States
include:
●
the successful conclusion of preclinical laboratory and animal
tests, if appropriate, to gain preliminary information on the
product’s safety;
●
filing with the FDA of an IND, to conduct initial human clinical
trials for drug candidates;
●
the successful completion of adequate and well-controlled human
clinical trials to establish the safety and efficacy of the product
candidate; and
●
filing by the Company and acceptance and approval by the FDA of an
NDA for a product candidate to allow commercial distribution of the
drug, which is beyond the scope of our financial resources. We
intend on licensing or selling the technology prior to filing an
NDA.
We consider the active management and development of our clinical
pipeline to be crucial to our long-term success. The actual
probability of success for each product candidate and clinical
program may be impacted by a variety of factors, including, among
others, the quality of the candidate, the validity of the target
and disease indication, early clinical data, investment in the
program, competition, manufacturing capability and commercial
viability. Due to these and other factors, it is difficult to give
accurate guidance on the anticipated proportion of our research and
development investments or the future cash inflows from these
programs.
General and Administrative Expenses
General and administrative expenses for the years ended
December 31, 2016 and 2015 were $9,010,450 and $9,795,163,
respectively.
|
Years Ended December 31,
|
% change
|
|
|
2016
|
2015
|
2015 to 2016
|
General
and administrative
|
$9,010,450
|
$9,795,163
|
(8)%
|
The decrease in general and administrative expenses of 8%, or
$784,713 in 2016, compared to the same period in 2015, was
primarily due to decreases of approximately $1,614,000 in business
development expenses primarily related to restricted stock grants
to consultants for services and approximately $915,000 in investor
relations expenses primarily related to restricted stock grants to
outside consultants, partially offset by increases of approximately
$516,000 in facility expenses associated with the larger space
starting in February 2016, approximately $797,000 in stock based
compensation costs, and approximately $392,000 in salaries and
wages primarily related to additional headcount in business
development.
Stock-based compensation expense included in general and
administrative expenses for the years ended December 31, 2016
and 2015 was $3,211,152 and $3,534,062, respectively. Stock-based
compensation expense for the year ended December 31, 2016 included
$592,329 in restricted stock for services.
We expect future general and administrative expenses to stay
relatively stable in 2017.
Interest Income and Interest Expense
|
Years Ended December 31,
|
% change
|
|
|
2016
|
2015
|
2015 to 2016
|
Interest
and other income (expense), net
|
$(997,364)
|
$(227)
|
*%
|
*Not
meaningful
Interest
and other income and expense, net was $997,364 and $227 for the
years ended December 31, 2016 and 2015, respectively. Expenses
in 2016 consisted primarily of $603,875 interest expense related to
interest on the Company’s term loan from Oxford Finance LLC,
$174,475 of financing cost amortization, and $219,039 of warrant
amortization partially offset by interest income of
$25.
The
fair value of the warrants issued to Oxford Finance LLC related to
the term loan was recorded as a discount to the value of the note
payable, and is amortized over the term of the loan. In
addition, financing costs incurred related to the term loan are
amortized over the term of the loan.
Warrant Liability
Change in fair value of warrant liability for the year ended
December 31, 2016 and 2015 was $0 and $19,807, respectively.
The decrease was mainly due to the restructuring the
Company’s capital structure resulting in the elimination of
the warrant liability as of December 31, 2015. We calculate the
value of our warrant liability on a quarterly basis, or when other
events and circumstances occur, using the Black-Scholes-Merton
valuation model.
Critical Accounting Policies and Significant Judgments and
Estimates
Our management’s discussion and analysis of our financial
condition and results of operations are based on our consolidated
financial statements, which have been prepared in accordance with
GAAP. The preparation of these consolidated financial statements
requires us to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the consolidated
financial statements as well as the reported revenues and expenses
during the reporting periods. On an on-going basis, we evaluate our
estimates and judgments related to our operating costs. We base our
estimates on historical experience and on various other factors
that we believe are reasonable under the circumstances, the results
of which form the basis for making judgments about the carrying
value of assets and liabilities that are not readily apparent from
other sources. Actual results may differ significantly from these
estimates under different assumptions or conditions.
Our critical accounting policies include:
Revenue recognition. Revenue from grants is based upon internal
and subcontractor costs incurred that are specifically covered by
the grant, including a facilities and administrative rate that
provides funding for overhead expenses. NIH grants are recognized
when MabVax Therapeutics incurs internal expenses that are
specifically related to each grant, in clinical trials at the
clinical trial sites, by subcontractors who manage the clinical
trials, and provided the grant has been approved for payment. U.S.
grant awards are based upon internal research and development costs
incurred that are specifically covered by the grant, and revenues
are recognized when MabVax Therapeutics incurs internal expenses
that are related to the approved grant.
Any amounts received by MabVax Therapeutics pursuant to the NIH
grants prior to satisfying our revenue recognition criteria are
recorded as deferred revenue.
Clinical trial expenses. We accrue clinical trial expenses based on
work performed. In determining the amount to accrue, we rely on
estimates of total costs incurred based on the enrollment of
subjects, the completion of trials and other events defined in
contracts. We follow this method because we believe reasonably
dependable estimates of the costs applicable to various stages of a
clinical trial can be made. However, the actual costs and timing of
clinical trials are highly uncertain, subject to risks, and may
change depending on a number of factors. Differences between the
actual clinical trial costs and the estimated clinical trial costs
that we have accrued in any prior period are recognized in the
subsequent period in which the actual costs become known.
Historically, these differences have not been material; however,
material differences could occur in the future.
Stock-based compensation. Our stock-based compensation programs
include grants of stock options and restricted stock to employees,
non-employee directors and non-employee consultants. Stock-based
compensation cost is measured at the grant date, based on the
calculated fair value of the award, and is recognized as an
expense, under the straight-line method, over the employee,
non-employee director or non-employee consultant’s requisite
service period (generally the vesting period of the equity
grant).
We account for equity instruments, including stock options and
restricted stock, issued to employees and non-employees in
accordance with authoritative guidance for equity based payments.
Stock options issued are accounted for at their estimated fair
value determined using the Black-Scholes-Merton option-pricing
model and restricted stock is accounted for using the grant date
fair value of our common stock granted. The fair value of options
and restricted stock granted to non-employees is re-measured as
they vest, and the resulting increase in value, if any, is
recognized as expense during the period the related services are
rendered.
Warrant liability. We calculate the value of our warrant liability on
a quarterly basis, or when other events and circumstances occur,
using as a first step the Black-Scholes-Merton valuation model,
taking into consideration the warrant exercise price, the
probability of certain exercise price re-pricing scenarios, the
market price for the common stock on the date of measurement, the
risk-free interest rate, the dividend yield, the volatility of a
comparable period in which the warrant may be exercised, and the
remaining life of the warrant, and then as a second step we test
our valuation for reasonableness based on settlement offers we have
received from the holder of the warrant. If the settlement offer is
within a reasonable period of time from when we do our calculation,
and is not materially different from the value we recorded using
the Black-Scholes-Merton model, then we retain the value
established with our model. If the settlement offer were to reflect
a materially different amount near the date of our calculation,
then we would record the settlement offer.
Income taxes. Significant
judgment is required by management to determine our provision for
income taxes, our deferred tax assets and liabilities, and the
valuation allowance to record against our net deferred tax assets,
which are based on complex and evolving tax regulations throughout
the world. Our tax calculation is impacted by tax rates in the
jurisdictions in which we are subject to tax and the relative
amount of income earned in each jurisdiction. Our deferred tax
assets and liabilities are determined using the enacted tax rates
expected to be in effect for the years in which those tax assets
are expected to be realized.
The effect of an uncertain income tax position is recognized as the
largest amount that is “more-likely-than-not” to be
sustained under audit by the taxing authority. An uncertain income
tax position will not be recognized if it has less than a 50%
likelihood of being sustained.
The realization of our deferred tax assets is dependent upon our
ability to generate sufficient future taxable income. We establish
a valuation allowance when it is more-likely-than-not that the
future realization of all or some of the deferred tax assets will
not be achieved. The evaluation of the need for a valuation
allowance is performed on a jurisdiction-by-jurisdiction basis, and
includes a review of all available evidence, both positive and
negative. As of December 31, 2016, MabVax Therapeutics
concluded that it was more-likely-than-not that its deferred tax
assets would not be realized, and a full valuation allowance has
been recorded.
Liquidity and Capital Resources
From inception to December 31, 2016, we have financed our
operations principally through net proceeds received from private
equity and preferred stock financings, debt financings, and grants
through the NIH and SBIR programs. We have experienced negative
cash flows from operations each year since our inception. As of
December 31, 2016, we had an accumulated deficit of
$78,262,261. We expect to continue to incur increased expenses,
resulting in losses, over at least the next several years due to,
among other factors, our continuing and planned clinical trials and
anticipated research and development activities.
|
2016
|
2015
|
December 31:
|
|
|
Cash
and cash equivalents
|
$3,979,290
|
$4,084,085
|
Working
capital/(deficit)
|
$(1,396,656)
|
$350,621
|
Current
ratio
|
0.75:1
|
1.07:1
|
|
||
December 31:
|
|
|
Cash
provided by (used in):
|
|
|
Operating
activities
|
$(12,363,411)
|
$(10,525,182)
|
Investing
activities
|
$(563,196)
|
$(78,416)
|
Financing
activities
|
$12,821,812
|
$13,210,540
|
Sources
and Uses of Cash
Due to the significant research and development expenditures and
the lack of any approved products to generate revenue, we have not
been profitable and have generated operating losses since we
incorporated in 1988. As such, we have funded our research and
development operations through government grants and contracts,
sales of equity, debt, collaborative arrangements with corporate
partners, and interest earned on investments. At December 31,
2016, we had available cash and cash equivalents of $3,979,290. Our
cash and cash equivalents balances are held primarily in checking
accounts. Cash in excess of immediate requirements is invested with
regard to liquidity and capital preservation. Wherever possible, we
seek to minimize the potential effects of concentration and degrees
of risk.
Cash Flows from Operating Activities. Cash used in operating activities for 2016 was
$12,363,411 compared to $10,525,182 for the same period in 2015.
Net loss of $17,660,483 in 2016 included non-cash charges of
$4,403,278 for stock-based compensation and $96,553 in depreciation
and amortization. Cash used in 2015 resulted from a net loss of
$18,105,315 and included non-cash charges of $4,463,695 for
stock-based compensation and $21,360 in depreciation, partially
offset by a $19,807 reduction in fair value of the Series B
warrants.
Cash Flows from Investing Activities. Cash used in investing activities for 2016 was
$563,196 compared to $78,416 during the same period in 2015. Cash
used in both 2016 and 2015 was primarily used to purchase property
and equipment.
Cash Flows from Financing Activities. Cash provided by financing activities for 2016 was
$12,821,812 compared to $13,210,540 provided in 2015. Cash provided
by financing activities in 2016 included $4,610,324 from net
proceeds from the January 2016 Oxford Finance LLC Term Loan and
$8,567,448 from sale of common stock and warrants in a registered
offering completed in August 2016. Cash provided by financing
activities in 2015 included $10,709,740 from net proceeds from the
sale of common stock and warrants in a private placement completed
in April 2015, as well as a public offering completed in October
2015 for $2,750,000.
Working Capital. Working capital decreased to a working capital
deficit of $1,396,656 at December 31, 2016 compared to a
working capital surplus of $350,621 at December 31, 2015. The
decrease in working capital was primarily due to increased capital
usage during 2016 primarily related to the company’s clinical
development programs.
We believe our cash and cash equivalents as of December 31,
2016 will be sufficient to fund our projected operating
requirements through approximately April 2017. In order to continue
our current and future operations and continue our clinical product
development programs through 2017, we will depend on our ability to
obtain additional funding in a timely manner or if at all. We are
uncertain about our ability to raise sufficient funds to continue
our existing operations after April 2017. We continue to explore
alternatives that could include partnerships involving one or more
of our product candidates, licensing arrangements with one or more
of our product development candidates, merger with or acquisition
by another company, or some other arrangement through which the
value of our assets to stockholders could be enhanced. We may raise
funds through arrangements with collaborators or others that may
require us to relinquish rights to certain product candidates that
we might otherwise seek to develop or commercialize independently.
Our failure to raise capital when needed could materially harm our
business, financial condition and results of operations. See Risk
Factors.
Our future capital uses and requirements depend on numerous
factors, including the following:
●
the progress and success of preclinical studies and clinical trials
of our product candidates;
●
the progress and number of research programs in
development;
●
the costs associated with conducting Phase I and II clinical
trials;
●
the costs and timing of obtaining regulatory
approvals;
●
our ability to establish, and the scope of, any new
collaborations;
●
our ability to meet the milestones identified in our collaborative
agreements that trigger payments;
●
the costs and timing of obtaining, enforcing and defending our
patent and intellectual property rights; and
●
competing technological and market developments.
Future Contractual Obligations
On September 2, 2015, the Company entered into a lease (the
“Lease”) with AGP Sorrento Business Complex, L.P., for
certain premises consisting of a total of approximately 14,971
square feet of office and laboratory space in buildings located at
11535-11585 Sorrento Valley Rd., San Diego, California, to
serve as the Company’s corporate offices and laboratories
(the “New Premises”). Due to the fact that certain
tenant improvements needed to be made to the New Premises before
the Company could occupy the New Premises, the term of the Lease
commenced on February 5, 2015. The Lease terminates six years after
such term commencement date, unless earlier terminated in
accordance with the Lease. Pursuant to the terms of the Lease, the
current monthly base rent paid by the Company is $35,631, subject
to annual increases as set forth in the Lease.
The Company has an option to extend the Lease term for a single,
five-year period. If the Lease term is extended for the optional
five-year period, the monthly base rent will be adjusted based on
fair market rental value. In addition to rent, the Company agreed
to pay a portion of the taxes and utility, maintenance and other
operating costs paid or accrued in connection with the ownership
and operation of the property.
Our master lease and sublease of our facility located at 3165
Porter Drive in Palo Alto, California (the “Porter Drive
Facility”) were terminated on February 28, 2013 and we
entered into a termination agreement with ARE-San Francisco
No. 24 (“ARE”) on February 19, 2013 to voluntarily
surrender its premises. As a result of the termination agreement,
we were relieved of further obligations under the master lease and
further rights to rental income under the sublease and paid a
termination fee of approximately $700,000. In addition to the
termination fee, if we receive $15 million or more in additional
financing in the aggregate, an additional termination fee of
$590,504 will be due to ARE. The additional financing was achieved
in 2015 and the termination fee is reflected on the balance sheet
as an accrued lease contingency fee.
We
anticipate that we will continue to incur substantial net losses
into the foreseeable future as we: (i) continue our Phase I
clinical trial for our stand-alone therapeutic HuMab 5b-1, or
MVT-5873, which was initiated in the first quarter of 2016, (ii)
initiate our Phase I clinical trial of our PET imaging agent
89Zr-HuMab-5B1, or MVT-2163, (iii) continue to conduct preclinical
development activities related to other product development
candidates in our library, and (iv) monitor patients in clinical
trials that have already completed their treatment regimens. Based
on management’s assumptions for continuing to develop its
existing pipeline of products without additional funding, we expect
we will have sufficient funds to meet our obligations through April
2017.
We
plan to continue to fund our research and development and operating
activities through public or private equity financings, debt
financings, strategic partnerships or other arrangements with
organizations that have capabilities and/or products that are
complementary to our own capabilities and/or products, licensing
arrangements, government grants, or other arrangements. However, we
cannot be sure that such additional funds will be available on
reasonable terms, or at all. If we are unable to secure adequate
additional funding, we may be forced to reduce spending, extend
payment terms with suppliers, liquidate assets where possible,
and/or suspend or curtail planned programs. In addition, if we do
not meet our payment obligations to third parties as they come due,
we may be subject to litigation claims. Even if we are successful
in defending against these claims, litigation could result in
substantial costs and be a distraction to our management. Any of
these actions could materially harm our business, results of
operations, and future prospects.
If
we raise additional funds by issuing equity securities, substantial
dilution to our existing stockholders would result. If we raise
additional funds by incurring debt financing, the terms of the debt
may involve significant cash payment obligations as well as
covenants and specific financial ratios that may restrict our
ability to operate our business.
Off-Balance Sheet Arrangements
We have no material off-balance sheet arrangements as defined in
Regulation S-K 303(a)(4)(ii).
Item 7A.
|
Quantitative and Qualitative Disclosures
About Market Risk.
|
We do not hold any derivative financial instruments,
commodity-based instruments or other long-term debt
obligations.
Item 8.
|
Financial Statements and
Supplementary Data.
|
All information required by this item is included in Item 15
of Part IV of this Annual Report and is incorporated into this item
by reference.
Item 9.
|
Changes in and Disagreements
with Accountants on Accounting and Financial
Disclosure.
|
None
Item 9A.
|
Controls and
Procedures.
|
a) Disclosure Controls and Procedures
Our principal executive officer and principal financial officer
evaluated the effectiveness of our disclosure controls and
procedures as of December 31, 2016. The term “disclosure
controls and procedures,” as defined in
Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”),
means controls and other procedures of a company that are designed
to ensure that information required to be disclosed by a company in
the reports that it files or submits under the Exchange Act, is
recorded, processed, summarized and reported, within the time
periods specified in the SEC’s rules and forms.
Management recognizes that any controls and procedures, no matter
how well designed and operated, can provide only reasonable
assurance of achieving their objectives and management necessarily
applies its judgment in evaluating the cost-benefit relationship of
possible controls and procedures. Disclosure controls and
procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed by a
company in the reports that it files or submits under the Exchange
Act is accumulated and communicated to the company’s
management, including our principal executive and principal
financial officer, as appropriate to allow timely decisions
regarding required disclosure. Based on that evaluation, our
principal executive officer and principal financial officer
concluded that our disclosure controls and procedures are
effective, at the reasonable assurance level, in ensuring that
information required to be disclosed by us in the reports that we
file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the
SEC’s rules and forms.
b) Management’s Report on Internal Control over Financial
Reporting
Our management is responsible for establishing and maintaining
adequate internal control over financial reporting for our company.
Internal control over financial reporting is defined in
Rule 13a-15(f) and 15d-15(f) promulgated under the
Exchange Act, as a process designed by, or under the supervision
of, a company’s principal executive and principal financial
officer and effected by the our board of directors, management and
other personnel, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally
accepted accounting principles and includes those policies and
procedures that:
(1)
pertain to the maintenance of
records that, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of the assets of the
company;
(2)
provide reasonable assurance that
transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the
company are being made in accordance with authorizations of
management and directors of the company; and
(3)
provide reasonable assurance
regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the company’s assets that
could have a material effect on the financial
statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate. Management recognizes that
any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving their
objectives and management necessarily applies its judgment in
evaluating the cost-benefit relationship of possible enhancements
to controls and procedures.
We conducted an evaluation of the effectiveness of internal control
over financial reporting based on the framework in Internal Control
— Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission. Based on this
evaluation, our principal executive officer and principal financial
officer conclude that, at December 31, 2016, our internal
controls over financial reporting were effective.
This Annual Report does not include an attestation report of the
Company’s independent registered public accounting firm
regarding internal control over financial reporting.
Management’s report was not subject to attestation by the
Company’s independent registered public accounting firm
pursuant to rules of the Securities and Exchange Commission that
permit the Company to provide only management’s report in
this Annual Report.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
As required by Rule 13a-15(d) of the Exchange Act, our
management, including our principal executive officer and our
principal financial officer conducted an evaluation of the internal
control over financial reporting to determine whether any changes
occurred during the year ended December 31, 2016 that have
materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting. Based on that
evaluation, our principal executive officer and principal financial
officer concluded that, there were no such changes during the year
ended December 31, 2016.
Item 9B.
|
Other Information.
|
None.
Item 10.
|
Directors, Executive Officers and Corporate
Governance.
|
Board of Directors
Name
|
|
Position
|
|
|
|
J. David Hansen
|
|
Chairman of the Board of Directors, President and Chief Executive
Officer
|
|
|
|
Kenneth M. Cohen
|
|
Director (1)(2)(3)(4)
|
|
|
|
Jeffrey F. Eisenberg
|
|
Director (4)
|
|
|
|
Robert E. Hoffman
|
|
Director (1)(2)(3)(4)
|
|
|
|
Philip O. Livingston, M.D.
|
|
Director, Chief Science Officer
|
|
|
|
Paul V. Maier
|
|
Director (1)(3)(4)
|
|
|
|
Jeffrey V. Ravetch, M.D., Ph.D.
|
|
Director
|
|
|
|
Thomas C. Varvaro
|
|
Director (1)(2)(3)(4)
|
(1)
|
Member of our audit committee
|
(2)
|
Member of our compensation committee
|
(3)
(4)
|
Member of our nominating and governance committee
Independent member of the board
|
The
following is a brief summary of the background of each of our
directors.
J. David Hansen, 65,
serves as our President, Chief Executive Officer
(“CEO”), and as Chairman of our Board of Directors and,
prior to the merger with Telik, Inc. on July 8, 2014 (the
“Merger”), served as President, CEO, and Chairman of
the Board of Directors of MabVax Therapeutics, Inc. after
co-founding the Company in 2006. Mr. Hansen is an experienced
biopharmaceutical executive with more than 30 years of industry
experience. He has held senior management roles in both private
start-up companies as well as small to mid-sized public companies.
His senior level experience includes executive management, finance
and accounting, corporate development, sales and marketing. During
his career, Mr. Hansen has executed a wide variety of in and out
licensing agreements, research and development collaborations,
joint ventures, divestitures, and acquisitions. Mr. Hansen has
developed expertise in the therapeutic areas of immunology,
oncology, and infectious disease. Mr. Hansen gained executive
management experience at several life sciences companies prior to
co-founding the Company that make him particularly suited for his
leadership role in the Company. For example, he was a corporate
officer of Avanir Pharmaceuticals where he held the titles of Vice
President of Commercial Development, Senior Vice President of
Corporate Development, and President and Chief Operations Officer
of the Avanir Subsidiary Xenerex Biosciences. Prior to Avanir, Mr.
Hansen served in multiple roles at Dura Pharmaceuticals including
National Sales Director, Director of Marketing, and Director of
Business Development. He has additional management experience with
Merck & Co. (Schering-Plough), Key Pharmaceuticals, and Bristol
Myers Squibb. We believe that Mr. Hansen’s extensive
experience with public and private pharmaceutical companies in a
leadership role qualifies him to serve as the Chairman of our Board
of Directors and as our President and Chief Executive
Officer.
Kenneth M. Cohen,
61, serves as a member of our Board of Directors and, prior
to the Merger, served as a member of the Board of Directors of
MabVax Therapeutics, Inc. since July of 2014. Since
2007, Mr. Cohen has served either as a board member, executive
officer or advisor to various companies, entrepreneurs and
investors in the life sciences area. From January 2011
to August 2014 he served as a member of the Board of Directors of
Adamis Pharmaceuticals Corporation (Nasdaq: ADMP). He was a
co-founder of publicly held Somaxon Pharmaceuticals, and served as
its President and CEO from 2003 through 2007 and continued as a
director until June 2008. Prior to Somaxon Pharmaceuticals, Mr.
Cohen gained executive management and board experience through
various executive positions that make him suitable for membership
on the Board of Directors of the Company. For example,
he was President and CEO of Synbiotics Corporation; Executive Vice
President and Chief Operating Officer for Canji Incorporated, a
human gene-therapy company that was acquired by Schering-Plough
Corporation; Vice President of Business Affairs at Argus
Pharmaceuticals, Inc.; and Vice President of Marketing and Business
Development for LifeCell Corporation. Mr. Cohen began
his career at Eli Lilly and Company where, among many different
responsibilities over ten years, he directed business planning for
the Medical Instrument Systems Division and managed the launch of
Prozac. He received an A.B. in biology and chemistry from Dartmouth
College and an M.B.A. from the Wharton School of the University of
Pennsylvania. We believe that Mr. Cohen’s 20 years of
experience serving as an executive officer including chief
executive officer of several life sciences companies, and serving
as a member of the board of several life sciences companies
qualifies him to serve as a member of the Board of
Directors.
Jeffrey F. Eisenberg,
51, has served as a member of our Board of Directors
since February 2016. Mr. Eisenberg has served
in a variety of senior management positions, and has developed
significant experience in the areas of corporate transactions,
strategic alliances, product development, commercialization,
manufacturing and talent management. From July 2016 to
the present, Mr. Eisenberg has served as a director of Xenetic
Biosciences, Inc., a biotech company based in Lexington, MA, and
from December 2016 to the present, Mr. Eisenberg has served as
Chief Operating Officer of Xenetic. From November 1998 to December
2015 Mr. Eisenberg held various executive management positions
including President, CEO and a board member of Noven
Pharmaceuticals, Inc., the U.S. prescription pharmaceutical
division of Hisamitsu Pharmaceutical Inc., a Japanese
pharmaceutical company and the world's largest manufacturer of
transdermal drug patches. Mr. Eisenberg led the
post-acquisition integration of JDS Pharmaceuticals, a private
specialty pharmaceutical company purchased by Noven in 1997, as
well as the integration of Noven and Hisamitsu following the 2009
acquisition. From 2007 to August 2014 Mr. Eisenberg also
served as President of Novogyne Pharmaceuticals, a Women's Health
commercial joint venture between Noven and Novartis Pharmaceuticals
Corporation. Mr. Eisenberg was appointed President and Chief
Executive Officer of Noven following Hisamitsu's acquisition of
Noven. Prior to Noven Pharmaceuticals, Inc., Mr.
Eisenberg gained extensive legal experience serving as Associate
General Counsel and then as Acting General Counsel of IVAX
Corporation, at the time a publicly-traded pharmaceutical company
with global operations. Prior to serving at IVAX, Mr. Eisenberg was
a lawyer in the corporate securities department of
the Florida law firm of Steel Hector & Davis, where
he began his professional career in 1990.
Mr.
Eisenberg is an expert in corporate governance, having advised the
boards of IVAX, Noven and others through a number of significant
internal and external issues, including mergers and acquisitions,
corporate financings, strategic alliances, CEO transitions,
securities class action lawsuits, FDA warning letters and consent
decrees, and development and implementation of corporate governance
policies. Mr. Eisenberg holds a BS, Economics degree from the
Wharton School of the University of Pennsylvania, and a JD
degree from Columbia University Law School. We
believe that Mr. Eisenberg’s extensive experience in
corporate transactions, product development, corporate governance
and executive leadership, qualifies him to serve as a member of our
Board of Directors.
Robert E. Hoffman,
51, has served as a member of our Board of Directors since
September 2014. Mr. Hoffman is the Executive Vice
President and Chief Financial Officer (“CFO”) of
Innovus Pharmaceuticals, Inc. a position he has held since
September 2016. Mr. Hoffman was CFO of AnaptysBio from July 2015 to
September 2016. He was part of the founding management
team of Arena Pharmaceuticals, Inc. (Nasdaq: ARNA), a
biopharmaceutical company, in 1997, serving as Senior Vice
President, Finance and CFO until July 2015, except for the period
of March 2011 to August 2011, where he served as CFO for Polaris
Group, a biopharmaceutical drug company. Mr. Hoffman is a member of
the board of directors of CombiMatrix Corporation (Nasdaq: CBMX), a
molecular diagnostics company, Kura Oncology, Inc. (Nasdaq: KURA),
a biotechnology company, and MabVax Therapeutics Holdings, Inc.
(Nasdaq: MBVX), a biopharmaceutical company. He also was a member
of the Financial Accounting Standards Board’s Small Business
Advisory Committee until 2015 and is a member of the steering
committee of the Association of Bioscience Financial Officers. Mr.
Hoffman received his B.B.A. from St. Bonaventure University, and is
licensed as a C.P.A. (inactive) in the State of California. We
believe that Mr. Hoffman’s extensive experience in financial
matters as a chief financial officer in the biopharmaceutical
industry qualifies him to serve as a member of our Board of
Directors, and as an Audit Committee financial expert.
Philip O. Livingston,
M.D., 74, serves as a
member of our Board of Directors and our Chief Science Officer and,
prior to the Merger, served as a member of the Board of Directors
and Chief Science Officer of MabVax Therapeutics, Inc. since 2012.
He received his MD degree from Harvard Medical School and was
Professor of Medicine in the Joan and Sanford Weill Medical College
at Cornell University and Attending Physician and Member in
Memorial Sloan-Kettering Cancer Center where he treated melanoma
patients and ran the Cancer Vaccinology Laboratory research lab for
over 30 years until his retirement from MSK October 1, 2011. Dr.
Livingston’s research focused on: identification of suitable
targets for immunotherapy of a variety of cancers, construction of
polyvalent conjugate vaccines specifically designed to augment
antibody responses against these targets, and identification of
optimal immunological adjuvants to further augment the potency of
these vaccines. He has over 108 publications and 4 issued and 3
pending patents concerning cancer vaccines. Recently, Dr.
Livingston helped establish MabVax Therapeutics, Inc., and another
biotech company, Adjuvance Technologies, Inc. MabVax supports two
randomized Phase II trials with these MSK polyvalent vaccines and
establishment of human monoclonal antibodies from the blood of
immunized patients. We believe that Dr. Livingston’s
extensive expertise in immunotherapy qualifies him to serve as a
member of our Board of Directors and our Chief Science
Officer.
Paul
V. Maier, 69, joined
our Board of Directors in July 2014. Since 2007, Mr.
Maier has served as a member of the Board of Directors of
International Stem Cell Corporation (OTCQB: ISCO) and currently
serves as the Chairperson of its Audit Committee and as a member of
its Compensation and Governance Committees. Since 2012 Mr. Maier
has served as Chairman of the Audit Committee and a member of the
Governance Committee of the Board of Directors of Apricus
Biosciences, Inc. (Nasdaq: APRI). Since 2015, Mr. Maier has served
as Chairman of the Audit Committee and member of the Compensation
Committee of the Board of Directors of Ritter Pharmaceuticals
(Nasdaq: RTTR). Mr. Maier also serves as a Director of Biological
Dynamics, a private life science company. From 2009 to
June 2014, Mr. Maier served as the CFO of Sequenom, Inc., (acquired
by Laboratory Corporation of America Holdings). Prior to Sequenom,
Inc., Mr. Maier gained executive management experience
through various management positions that make him suitable for
membership on the Board of Directors of the Company. For
example, Mr. Maier served
as Senior Vice President and CFO of Ligand Pharmaceuticals, Inc.,
where he helped build Ligand from a venture stage company to a
commercial, integrated biopharmaceutical
organization. Prior to Ligand Pharmaceuticals, Inc., he
held various management and finance positions at ICN
Pharmaceuticals. Mr. Maier received his M.B.A. from Harvard
Business School and a B.S. from Pennsylvania State University. We
believe that Mr. Maier’s over 25 years of experience in life
sciences as a chief financial officer and serving on the board of
several life sciences public companies qualifies him to serve as a
member of the Board of Directors and as chair of the Audit
Committee.
Jeffrey V. Ravetch, M.D.,
Ph.D., 65, serves as
a member of our Board of Directors and, prior to the Merger, served
as a member of the Board of Directors of MabVax Therapeutics, Inc.
since March 2014. Dr. Ravetch has served as the Theresa
and Eugene Lang Professor at the Rockefeller University and Head of
the Leonard Wagner Laboratory of Molecular Genetics and Immunology
since 1997. Dr. Ravetch, a native of New York City, received his
undergraduate training in molecular biophysics and biochemistry at
Yale University, earning his B.S. degree in 1973, working with
Donald M. Crothers on the thermodynamic and kinetic properties of
synthetic oligoribonucleotides. Dr. Ravetch continued his training
at the Rockefeller University—Cornell Medical School MD/Ph.D.
program, earning his doctorate in 1978 in genetics with Norton
Zinder and Peter Model, investigating the genetics of viral
replication and gene expression for the single stranded DNA
bacteriophage f1 and in 1979 he earned his M.D. from Cornell
University Medical School. Dr. Ravetch pursued postdoctoral studies
at the NIH with Phil Leder where he identified and characterized
the genes for human antibodies and the DNA elements involved in
switch recombination. From 1982 to 1996 Dr. Ravetch was a member of
the faculty of Memorial Sloan-Kettering Cancer Center and Cornell
Medical College. His laboratory has focused on the mechanisms by
which antibodies mediate their diverse biological activities in
vivo, establishing the pre-eminence of FcR pathways in host
defense, inflammation and tolerance and describing novel inhibitory
signaling pathways to account for the paradoxical roles of
antibodies as promoting and suppressing inflammation. His work
extended into clinical applications for the treatment of
neoplastic, inflammatory and infectious diseases.
Dr.
Ravetch has received numerous awards including the
Burroughs-Wellcome Scholar Award, the Pew Scholar Award, the Boyer
Award, the NIH Merit Award, the Lee C. Howley, Sr. Prize (2004),
the AAI-Huang Foundation Meritorious Career Award (2005), the
William B. Coley Award (2007), the Sanofi-Pasteur Award (2012) and
the Gairdner International Prize (2012). He has presented numerous
named lectures including the Kunkel Lecture, the Ecker Lecture, the
Goidl Lecture, the Grabar Lecture, the Dyer Lecture and the
Heidelberger/Kabat Lecture. He has received an honorary doctorate
from Freidrich-Alexander University, Nuremberg/Erlangen. He is a
member of National Academy of Sciences (2006), the Institute of
Medicine (2007), a Fellow of the American Academy of Arts and
Sciences (2008) and a Fellow of the American Association for the
Advancement of Science (2009).
Dr.
Ravetch has contributed extensively to the scientific community by
serving as a member of the Scientific Advisory Boards of the Cancer
Research Institute, the Irvington Institute for Medical Research
and the Damon Runyon Foundation. He has been active in
biotechnology for the last two decades, having served as a
consultant or member of the Scientific Advisory Boards of
Millennium Pharmaceuticals, Exelexis Pharmaceuticals, Regeneron
Pharmaceuticals, Medimmune, Genentech, Novartis, Merck, Micromet,
Xencor, Suppremol, Igenica, Portola Pharmaceuticals and Momenta
Pharmaceuticals, Inc. We believe Dr. Ravetch’s extensive
scientific knowledge and training qualify him to serve as a member
of our Board of Directors.
Thomas
C. Varvaro, 47, has
served as a member of our Board of Directors since April
2015. Mr. Varvaro has served as the CFO of ChromaDex
Corp. (Nasdaq: CDXC) since January 2004 and as its Secretary since
March 2006. He also has served as a director of ChromaDex
Corporation from March 2006 until May 2010. Mr. Varvaro is
responsible for overseeing all aspects of ChromaDex’s
accounting, information technology, intellectual property
management and human resources management. Mr. Varvaro has
extensive process-mapping and business process improvement skills,
along with a solid information technology background that includes
management and implementation experiences ranging from custom
application design to enterprise wide system deployment. Mr.
Varvaro also has hands-on experience in integrating acquisitions
and in new facility startups. In working with manufacturing
organizations, Mr. Varvaro has overseen plant automation, reporting
and bar code tracking implementations. Mr. Varvaro also has broad
legal experience in intellectual property, contract and employment
law. Prior to ChromaDex, Mr. Varvaro gained substantial management
experience in a number of positions that make him suitable
for membership on the Board of Directors of the
Company. For example, he was employed by Fast Heat Inc., a
Chicago, Illinois based Global supplier to the plastics, HVAC,
packaging, and food processing industries, where he began as
controller and was promoted to chief information officer and then
chief financial officer during his tenure. During his time there
Mr. Varvaro was responsible for all financial matters including
accounting, risk management and human resources. Earlier in his
career Mr. Varvaro gained additional experience in other areas of
information technology and accounting roles. For
example, Mr. Varvaro was employed by Maple Leaf Bakery, Inc.,
Chicago, Illinois, during its rise to becoming a national leader in
specialty bakery products. During his tenure, Mr. Varvaro served in
information technology and accounting roles, helping to shepherd
the company from a single facility to national leader in specialty
food products. Mr. Varvaro has a B.S. in Accounting from University
of Illinois, Urbana-Champaign and is a Certified Public
Accountant. We believe Mr. Varvaro’s extensive
industry experience as an officer and director, as well as his
extensive financial and accounting training and management
experience qualify him to serve as a member of our Board of
Directors, and as an Audit Committee financial
expert.
Family Relationships
None
of our Directors are related by blood, marriage, or adoption to any
other Director, executive officer, or other key
employees.
Other Directorships
Other
than as disclosed above, none of the Directors of the Company are
also directors of issuers with a class of securities registered
under Section 12 of the Exchange Act (or which otherwise are
required to file periodic reports under the Exchange
Act).
Legal Proceedings
We
are not aware of any of our directors or officers being involved in
any legal proceedings in the past ten years relating to any matters
in bankruptcy, insolvency, criminal proceedings (other than traffic
and other minor offenses) or being subject to any of the items set
forth under Item 401(f) of Regulation S-K.
BOARD OF DIRECTORS COMMITTEES AND MEETINGS
BOARD LEADERSHIP STRUCTURE
The
Board of Directors is currently chaired by the President and Chief
Executive Officer of the Company, Mr. Hansen. The Company believes
that combining the positions of Chief Executive Officer and
Chairman of the Board of Directors helps to ensure that the Board
of Directors and management act with a common purpose. Integrating
the positions of Chief Executive Officer and Chairman can provide a
clear chain of command to execute the Company’s strategic
initiatives. The Company also believes that it is advantageous to
have a Chairman with an extensive history with and knowledge of the
Company, and extensive technical and industry experience.
Notwithstanding the combined role of Chief Executive Officer and
Chairman, key strategic initiatives and decisions involving the
Company are discussed and approved by the entire Board of
Directors. In addition, meetings of the independent directors of
the Company are regularly held, which Mr. Hansen does not attend.
The Company believes that the current leadership structure and
processes maintains an effective oversight of management and
independence of the Board of Directors as a whole without separate
designation of a lead independent director. However, the Board of
Directors will continue to monitor its functioning and will
consider appropriate changes to ensure the effective independent
function of the Board of Directors in its oversight
responsibilities.
ROLE OF THE BOARD IN RISK OVERSIGHT
One
of the Board of Director’s key functions is informed
oversight of the Company’s risk management process. The Board
of Directors does not have a standing risk management committee,
but rather administers this oversight function directly through the
Board of Directors as a whole, as well as through various Board of
Directors standing committees that address risks inherent in their
respective areas of oversight. In particular, our Board of
Directors is responsible for monitoring and assessing strategic
risk exposure, including a determination of the nature and level of
risk appropriate for the Company. The Audit Committee considers and
discusses with management the Company’s major financial risk
exposures and related monitoring and control of such exposures as
well as compliance with legal and regulatory requirements. The
Nominating & Governance Committee monitors the effectiveness of
our corporate governance guidelines. The Compensation Committee
assesses and monitors whether our compensation policies and
programs have the potential to encourage excessive risk-taking. Any
findings regarding material risk exposure to the Company are
reported to and discussed with the Board of Directors.
INDEPENDENCE OF THE BOARD OF DIRECTORS AND ITS
COMMITTEES
After review of all relevant transactions or
relationships between each director, or any of his or her family
members, and the Company, its senior management and its Independent
Registered Public Accounting Firm, the Board of Directors has
determined that all of the Company’s directors are
independent within the meaning of the applicable NASDAQ listing
standards, except Mr. Hansen, the Chairman of the Board of
Directors, Chief Executive Officer and President, of the Company,
Dr. Livingston, Chief Science Officer; and Dr. Ravetch. As required
under the NASDAQ listing standards, the Company’s independent
directors meet in regularly scheduled executive sessions at which
only independent directors are present. The Board of Directors met
6 times and acted by unanimous
written consent 11 times during
the fiscal year ended December 31, 2016. Each member of
the Board of Directors attended 75% or more of the aggregate of the
meetings of the Board of Directors held in the last fiscal year
during the period for which he was a director and of the meetings
of the committees on which he served held in the last fiscal year
during the period for which he was a committee member, except
Philip Livingston who was
unable to attend certain meetings due to travel and other
commitments.
The
Board of Directors has three committees: the Audit Committee, the
Compensation Committee and the Nominating & Governance
Committee. Below is a description of each committee of the Board of
Directors. The Board of Directors has determined that each member
of each committee meets the applicable rules and regulations
regarding “independence” and that each member is free
of any relationship that would interfere with his individual
exercise of independent judgment with regard to the
Company.
AUDIT COMMITTEE
The
Audit Committee of the Board of Directors oversees the
Company’s corporate accounting and financial reporting
process. For this purpose, the Audit Committee performs several
functions. The Audit Committee, among other things: evaluates the
performance, and assesses the qualifications, of the Independent
Registered Public Accounting Firm; determines and pre-approves the
engagement of the Independent Registered Public Accounting Firm to
perform all proposed audit, review and attest services; reviews and
pre-approves the retention of the Independent Registered Public
Accounting Firm to perform any proposed, permissible non-audit
services; determines whether to retain or terminate the existing
Independent Registered Public Accounting Firm or to appoint and
engage a new Independent Registered Public Accounting Firm for the
ensuing year; confers with management and the Independent
Registered Public Accounting Firm regarding the effectiveness of
internal controls over financial reporting; establishes procedures,
as required under applicable law, for the receipt, retention and
treatment of complaints received by the Company regarding
accounting, internal accounting controls or auditing matters and
the confidential and anonymous submission by employees of concerns
regarding questionable accounting or auditing matters; reviews the
financial statements to be included in the Company’s Annual
Report on Form 10-K and recommends whether or not such financial
statements should be so included; and discusses with management and
the Independent Registered Public Accounting Firm the results of
the annual audit and review of the Company’s quarterly
financial statements.
The Audit Committee is currently composed of four
outside directors: Mr. Maier, Mr. Cohen, Mr. Hoffman and Mr.
Varvaro, as of December 31, 2016. The Audit Committee met 5
times during the fiscal year ended December 31, 2016.
The Audit Committee Charter was last amended in March 2015 and is
available on the Company’s website,
www.mabvax.com.
The
Board of Directors periodically reviews the NASDAQ listing
standards’ definition of independence for Audit Committee
members and has determined that all members of the Company’s
Audit Committee are independent (as independence is currently
defined in Rule 5605(c)(2)(A) of the NASDAQ listing standards and
Rule 10A-3(b)(1) of the Securities Exchange Act of 1934, as
amended). The Board of Directors has determined that Mr. Maier
qualifies as an “audit committee financial expert,” as
defined in applicable SEC rules. The Board of Directors made a
qualitative assessment of Mr. Maier’s level of knowledge and
experience based on a number of factors, including his formal
education and his service in executive capacities having financial
oversight responsibilities. These positions include Chief Financial
Officer, Senior Vice President, and member of the boards of
directors and audit committees of, a number of biotechnology and
genomics companies, pursuant to which he has experience preparing,
reviewing and supervising the preparation of financial reports. In
addition, Mr. Maier holds an M.B.A from Harvard Business School.
For further information on Mr. Maier’s experience, please see
his biography above.
COMPENSATION COMMITTEE
The
Compensation Committee of the Board of Directors reviews, modifies
and approves the overall compensation strategy and policies for the
Company. The Compensation Committee, among other things: reviews
and approves corporate performance goals and objectives relevant to
the compensation of the Company’s officers; determines and
approves the compensation and other terms of employment of the
Company’s Chief Executive Officer; determines and approves
the compensation and other terms of employment of the other
officers of the Company; and administers the Company’s stock
option and purchase plans, pension and profit sharing plans and
other similar programs.
As of December 31, 2016, the Compensation
Committee was composed of four outside directors: Mr. Cohen, Mr.
Eisenberg, Mr. Hoffman, and Mr. Varvaro. On May 6, 2016,
Mr. Eisenberg was appointed to the Compensation
Committee. All members of the Compensation Committee are
independent (as independence is currently defined in Rule
5605(a)(2) of the NASDAQ listing standards). The Compensation
Committee met 4 times and acted
3 times by written consent
during the fiscal year ended December 31, 2016. The Compensation
Committee Charter was last amended in March 2015 and is available
on the Company’s website, www.mabvax.com.
Compensation Committee Interlocks and Insider
Participation
No
member of our compensation committee has at any time been an
employee of ours. None of our executive officers serves as a member
of the board of directors or compensation committee of any entity
that has one or more executive officers serving as a member of our
board of directors or compensation committee.
NOMINATING & GOVERNANCE COMMITTEE
The
Nominating & Governance Committee of the Board of Directors is
responsible for, among other things: identifying, reviewing and
evaluating candidates to serve as directors of the Company;
reviewing, evaluating and considering incumbent directors;
recommending to the Board of Directors for selection candidates for
election to the Board of Directors; making recommendations to the
Board of Directors regarding the membership of the committees of
the Board of Directors; and assessing the performance of the Board
of Directors.
The Nominating & Governance Committee is
currently composed of five outside directors: Messrs. Cohen,
Eisenberg, Hoffman, Maier and Varvaro, as of December 31,
2016. On May 6, 2016, Mr. Eisenberg was appointed to the
Nominating & Governance Committee. All members
of the Nominating & Governance Committee are independent (as
independence is currently defined in Rule 5605(a)(2) of the NASDAQ
listing standards). The Nominating & Governance Committee met
3 times during the fiscal year
ended December 31, 2016. The Nominating & Governance Committee
Charter was last amended in March 2015 and is available on the
Company’s website, www.mabvax.com.
The
Nominating & Governance Committee has not established any
specific minimum qualifications that must be met for recommendation
for a position on the Board of Directors. Instead, in considering
candidates for director the Nominating & Governance Committee
will generally consider all relevant factors, including among
others the candidate’s applicable education, expertise and
demonstrated excellence in his or her field, the usefulness of the
expertise to the Company, the availability of the candidate to
devote sufficient time and attention to the affairs of the Company,
the candidate’s reputation for personal integrity and ethics
and the candidate’s ability to exercise sound business
judgment. Other relevant factors, including diversity, experience
and skills, will also be considered. Candidates for director are
reviewed in the context of the existing membership of the Board of
Directors (including the qualities and skills of the existing
directors), the operating requirements of the Company and the
long-term interests of its stockholders.
The
Nominating & Governance Committee considers each
director’s executive experience leading biopharmaceutical
companies, his familiarity and experience with the various
operational, scientific and/or financial aspects of managing
companies in our industry, and his involvement in building
collaborative biopharmaceutical development and commercialization
relationships.
With
respect to diversity, the Nominating & Governance Committee
seeks a diverse group of individuals who have executive leadership
experience in life sciences companies, and a complementary mix of
backgrounds and skills necessary to provide meaningful oversight of
the Company’s activities. As a clinical stage drug
development company focused on discovering and developing small
molecule drugs, we seek directors who have experience in the
medical, regulatory and pharmaceutical industries in general, and
also look for individuals who have experience with the operational
issues that we face in our dealings with clinical and pre-clinical
drug development, collaborations with third parties and
commercialization and manufacturing issues. Some of our directors
have strong financial backgrounds and experience in dealing with
public companies, to help us in our evaluation of our operations
and our financial model. We also face unique challenges as we
implement our strategy to develop, manufacture and commercialize
our products by entering into relationships with pharmaceutical
companies. The Nominating & Governance Committee annually
reviews the Board’s composition in light of the
Company’s changing requirements. The Nominating &
Governance Committee uses the Board of Director’s network of
contacts when compiling a list of potential director candidates and
may also engage outside consultants. Pursuant to its charter, the
Nominating & Governance Committee will consider, but not
necessarily recommend to the Board of Directors, potential director
candidates recommended by stockholders. All potential director
candidates are evaluated based on the factors set forth above, and
the Nominating & Governance Committee has established no
special procedure for the consideration of director candidates
recommended by stockholders.
Director Nominations
There
have been no material changes to the procedures by which a
stockholder may recommend nominees to the Board of Directors since
our last disclosure of these procedures.
STOCKHOLDER COMMUNICATIONS WITH THE BOARD OF DIRECTORS
The
Nominating & Governance Committee of the Board of Directors has
adopted a process by which stockholders may communicate with the
Board of Directors or any of its individual directors. Stockholders
who wish to communicate with the Board of Directors may do so by
sending a written communication addressed as follows: Board
Communication, MabVax Therapeutics Holdings, Inc., 11535 Sorrento
Valley Rd., Suite 400, San Diego, CA 92121. All communications must
state the number and class(es) of shares owned by the stockholder
making the communication. The Company’s Secretary
or other officer will review each communication and forward the
communication to the Board of Directors, to any individual director
to whom the communication is addressed, and/or to any other officer
of the Company considered to be necessary or
appropriate.
EXECUTIVE OFFICERS
The following table sets forth information regarding the
Company’s executive officers and key personnel.
Executive Officers:
Name
|
|
Position
|
J. David Hansen
|
|
Chairman of the Board of Directors, President and Chief Executive
Officer
|
|
|
|
Gregory P. Hanson, CMA, MBA
|
|
Chief Financial Officer
|
|
|
|
Paul W. Maffuid, Ph.D.
|
|
Executive Vice President of Research and Development
|
|
|
|
Paul Resnick, M.D., MBA
|
|
Vice President and Chief Business Officer
|
The following is a brief summary of the background of each of our
executive officers.
J. David Hansen. Biographical information regarding Mr. Hansen is
provided above under Board of Directors.
Gregory P. Hanson, CMA, MBA, 70, serves as our CFO, and
prior to the Merger served as CFO of MabVax Therapeutics, Inc.
since February of 2014. Mr. Hanson has over 30 years serving as
CFO/financial executive/board member of public and private life
sciences and hi tech companies. From January 2008 to
February 2014 Mr. Hanson was Managing Director of First
Cornerstone, a board and management advisory service to companies
and executives. From November 2009 to November 2016, Mr.
Hanson served as Advisory Board Member of Menon International,
Inc., and from October 2011 to September 2016, served on the Life
Sciences Advisory Board of Brinson Patrick Securities, a boutique
investment bank. He also serves either as a board
member, mentor or confidential advisor to several other tech and
life sciences companies. Mr. Hanson is Past-President and 10-year
Member of the Board of Directors of San Diego Financial Executives
International (FEI), and a member of the Capital Formation
Committee at BIOCOM since 2011. Earlier in his career Mr. Hanson
was able to gain substantial executive management experience that
help qualify him in his role as CFO. For example, he
served as Senior Vice President of Brinson Patrick Securities,
where he opened up the San Diego branch and introduced
at-the-market financing strategies to public life sciences
companies. Prior to Brinson Patrick Securities, Mr. Hanson served
as Senior Vice President and CFO of Mast Therapeutics
(MSTX—NYSE MKT), and prior to Mast Therapeutics was Vice
President and CFO, Chief Accounting Officer, Compliance Officer and
Corporate Secretary of Avanir Pharmaceuticals, Inc. (acquired by
Otsuka Holdings Co., Ltd.), the developer of the cold sore product
Abreva™, and Neudexta™, for the treatment of
Pseudobulbar Affect, a central nervous system disorder. During the
course of his career, Mr. Hanson has completed approximately $1
billion in financing, licensing and partnering arrangements. Mr.
Hanson was a founding and 6-year member of the Small Business
Advisory Committee to the Financial Accounting Standards Board, and
has spoken at various national conferences, industry organizations
and panels on financing strategy and mergers and acquisitions, and
twice spoken to the SEC’s Committee on Improvements to
Financial Reporting.
Mr.
Hanson has passed the examination for Certified Public Accountants
and is a Certified Management Accountant. He has an MBA
with distinction from the University of Michigan, and a BS in
Mechanical Engineering from Kansas State
University. From 2008 to September 2016 Mr. Hanson
maintained Series 7 & Series 63 securities
licenses.
Paul W. Maffuid, Ph.D., 61, serves as Executive Vice
President of Research and Development. Dr. Maffuid joined the
Company in July 2014. From 2011 to June 2014, he worked
for AAIPHARMA Services Corporation where he held various management
positions including Executive Vice President, Pharma Operations.
His responsibilities included formulation, process development,
technology transfer, stability and analytical services for clients
developing biologic and small molecule therapeutics. He was a
member of the Executive Team that transformed a declining business
into one of the world’s leading providers of integrated
development services for the biopharmaceutical
sector. Dr. Maffuid has been able to gain extensive
experience to qualify him in his executive leadership role over
research and development at the Company. For example,
prior to joining AAIPHARMA he was the founder of Biopharmalogics,
Inc. a consulting service providing Chemistry Manufacturing and
Controls (CMC) as well as Drug Metabolism-Pharmacokinetics (DMPK)
services for the development of pharmaceutical products which he
operated from 2008 to 2011. Earlier in his career Dr. Maffuid was
Senior Vice President of Irvine Pharmaceutical Services, Inc., and
Vice President of Pharmaceutical Development for Arena
Pharmaceuticals. While at Arena Pharmaceuticals Dr. Maffuid was a
member of the Executive Management team responsible for all CMC and
DMPK in support of discovery, development, and commercial
operations. He led the design and construction of a 40,000 sq. ft.
cGMP compliant pilot manufacturing facility. Dr. Maffuid had
management roles at Magellan Laboratories, Cabrillo Laboratories,
and Amylin Pharmaceuticals.
Paul F. Resnick, M.D., MBA, 59, serves as Vice President and
Chief Business Officer. Dr. Resnick joined the Company
in March 2016. From January 2013 to March 2016 Dr.
Resnick was Senior Vice President, Business Development for
Juventas Therapeutics, where he was responsible for business and
commercial strategy and working with executive management
overseeing corporate clinical development, and financial and
business strategies. From February 2012 to December
2012, Dr. Resnick was an advisor to several companies in the life
sciences area. From January 2008 to January 2012 he was
Vice President, Business Development for Intellikine, Inc.
(acquired by Takeda Pharmaceuticals), responsible for managing
alliances and leading the business development strategy that
resulted in securing an acquisition by Takeda
Pharmaceuticals. During the course of Dr.
Resnick’s career, he has been able to gain extensive
experience to qualify him in his executive leadership role for
business development for the Company. For example, Dr.
Resnick held Senior Director positions for Worldwide Business
Development, and for Strategic Alliances, at Pfizer Inc., where he
was responsible for networking with leaders from biotechnology
companies, universities, and research institutions to gain early
insights into emerging technologies, and for leading technical and
business diligence, negotiations, and alliance management of
science and technology initiatives for Pfizer’s Biotechnology
and Bio-innovation Center. Prior to Pfizer Dr. Resnick
held Director and Senior Director positions at Rinat Neuroscience
(acquired by Pfizer), Intermune, Inc. and Roche
Pharmaceuticals. Dr. Resnick has an M.D. from The
Medical College of Wisconsin and an MBA from The Wharton School of
the University of Pennsylvania.
Code of Conduct
We have adopted the MabVax Therapeutic Holdings, Inc. Code of
Conduct, a code of ethics with which every person who works for us
is expected to comply, including without limitation our principal
executive officer, principal financial officer, principal
accounting officer or controller or persons performing similar
functions.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires our directors and executive officers, and persons who own
more than ten percent of a registered class of our equity
securities, to file with the SEC initial reports of ownership and
reports of changes in ownership of our common stock and our other
equity securities. Officers, directors and greater than ten percent
stockholders are required by SEC regulations to furnish us with
copies of all Section 16(a) forms they file.
Based solely on a review of the copies of such forms furnished to
us during 2016, SEC filings and certain written representations
that no other reports were required during the fiscal year ended
December 31, 2016, our officers, directors and greater than ten
percent stockholders complied with all applicable Section 16(a)
filing requirement, except for Kenneth M. Cohen, Jeffrey F.
Eisenberg, Robert E. Hoffman, Paul V. Maier, Jeffrey V.
Ravetch, and Thomas C.
Varvaro who were late on a
Section 16(a) filing that took place on July 28,
2016.
Item 11.
|
Executive Compensation.
|
2016 Summary Compensation Table
The following table sets forth, for the fiscal years 2016 and 2015,
compensation awarded or paid to, or earned by, our Chief Executive
Officers, our Chief Financial Officer and our other two executive
officers at December 31, 2016 (the “Named Executive
Officers” or “NEOs”).
Name and Principal Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Restricted Stock Unit
Awards
($)(3)
|
Option Awards
($)(4)
|
All Other Compensation
($)
|
Total
($)
|
J.
David Hansen
|
2016
|
418,438
|
141,400
|
—
|
393,702
|
35,717
|
989,257
|
President,
Chief Executive Officer and Chairman
|
2015
|
375,601
|
149,625
|
2,077,475
|
1,493,194
|
87,770
|
4,183,665
|
Gregory
P. Hanson
|
2016
|
276,014
|
62,790
|
—
|
99,743
|
15,055
|
453,602
|
Chief
Financial Officer
|
2015
|
271,819
|
77,175
|
1,075,480
|
773,006
|
19,742
|
2,217,222
|
Wolfgang
W. Scholz, Ph.D.
|
|
|
|
|
|
|
|
Vice
President, Antibody Discovery (1)
|
2015
|
225,443
|
43,125
|
700,925
|
503,793
|
13,950
|
1,487,236
|
Paul
W. Maffuid
|
2016
|
278,737
|
61,950
|
—
|
91,213
|
34,121
|
466,021
|
Vice
President, Pharmaceutical Development and Operations
|
2015
|
268,154
|
53,438
|
768,200
|
552,147
|
33,476
|
1,675,415
|
Paul
F. Resnick
|
2016
|
210,781
|
44,094
|
—
|
323,532
|
20,680
|
599,087
|
Vice
President, Chief Business Officer (2)
|
2015
|
—
|
—
|
—
|
—
|
—
|
—
|
(1)
|
Effective as of March 8, 2016, Dr. Scholz is no longer considered a
NEO.
|
(2)
|
Mr. Resnick was appointed as Vice President and Chief Business
Officer of the Company in March 2016.
|
(3)
|
The amounts in this column represent the aggregate full grant date
fair value of restricted stock units (RSUs) granted. Such RSU
awards were granted during 2015 with vesting dates after
2015.
|
(4)
|
The amounts in this column represent the aggregate full grant date
fair values of stock options granted, computed in accordance with
Accounting Standards Codification 718, or ASC 718,
“Compensation—Stock Compensation” using the
Black-Scholes option valuation model.
|
Outstanding Equity Awards at 2016 Fiscal Year-End
The following table summarizes the number of outstanding equity
awards held by each of our Named Executive Officers at December 31,
2016 and after giving effect to the Listing Reverse Split. Each
option grant is shown separately for each Named Executive Officer.
The vesting schedule for each option grant is shown following this
table.
Name and Principal Position
|
Option
Grant
Date
|
Number of Securities Underlying Unexercised Options Exercisable
(#)
|
Number of Securities Underlying Unexercised Options Un-exercisable
(#)
|
Equity Incentive Plan Awards: Number of Securities Underlying
Unexercised Unearned Options (#)
|
Option Exercise Price per Share ($)
|
Option
Expiration
Date
|
Number of Shares or Units of Stock That Have Not Vested
(#)
|
Market Value of Shares or Units of Stock That Have Not Vested
($)
|
J.
David Hansen
|
2/1/2010
|
1,690
|
-0-
|
-0-
|
5.33
|
2/1/2020
|
-0-
|
-0-
|
President,
Chief Executive
|
2/28/2013
|
3,239
|
141
|
-0-
|
10.66
|
2/28/2023
|
-0-
|
-0-
|
Officer
and Chairman
|
4/2/2015
|
40,687
|
81,374
|
-0-
|
17.02
|
4/2/2025
|
81,374
|
275,044
|
|
2/16/2016
|
-0-
|
67,569
|
-0-
|
3.63
|
2/16/2026
|
-0-
|
-0-
|
|
8/29/2016
|
-0-
|
63,400
|
-0-
|
5.00
|
8/29/2026
|
-0-
|
-0-
|
Gregory
P. Hanson
|
3/13/2014
|
1,807
|
822
|
-0-
|
59.91
|
3/13/2024
|
-0-
|
-0-
|
Chief
Financial Officer
|
4/2/2015
|
21,063
|
42,127
|
-0-
|
17.02
|
4/2/2025
|
42,127
|
142,389
|
|
2/16/2016
|
-0-
|
2,703
|
-0-
|
3.63
|
2/16/2026
|
-0-
|
-0-
|
|
8/29/2016
|
-0-
|
26,400
|
-0-
|
5.00
|
8/29/2026
|
-0-
|
-0-
|
Wolfgang
W. Scholz, Ph.D. (1)
|
2/1/2010
|
939
|
-0-
|
-0-
|
5.33
|
2/1/2020
|
-0-
|
-0-
|
Vice
President, Antibody
|
2/28/2013
|
2,160
|
94
|
-0-
|
10.66
|
2/28/2023
|
-0-
|
-0-
|
Discovery
|
4/2/2015
|
13,728
|
27,455
|
-0-
|
17.02
|
4/2/2025
|
27,455
|
92,798
|
|
2/16/2016
|
-0-
|
8,109
|
-0-
|
3.63
|
2/16/2026
|
-0-
|
-0-
|
|
8/29/2016
|
-0-
|
18,800
|
-0-
|
5.00
|
8/29/2026
|
-0-
|
-0-
|
Paul
W. Maffuid
|
9/8/2014
|
1,056
|
822
|
-0-
|
62.75
|
9/8/2024
|
-0-
|
-0-
|
Executive
Vice President,
|
4/2/2015
|
15,045
|
30,091
|
-0-
|
17.02
|
4/2/2025
|
30,091
|
101,708
|
Research and Developement
|
2/16/2016
|
-0-
|
8,109
|
-0-
|
3.63
|
2/16/2026
|
-0-
|
-0-
|
|
8/29/2016
|
-0-
|
20,100
|
-0-
|
5.00
|
8/29/2026
|
-0-
|
-0-
|
Paul
F. Resnick (2)
|
3/16/2016
|
-0-
|
45,406
|
-0-
|
5.48
|
3/16/2026
|
-0-
|
-0-
|
Vice
President,
|
3/16/2016
|
-0-
|
30,271
|
-0-
|
12.95
|
3/16/2026
|
-0-
|
-0-
|
Chief Business
Officer
|
8/29/2016
|
-0-
|
15,200
|
-0-
|
5.00
|
8/29/2026
|
-0-
|
-0-
|
(1)
|
Effective as of March 8, 2016, Mr. Scholz is no longer considered a
NEO.
|
(2)
|
Mr. Resnick was appointed as Vice President and Chief Business
Officer of the Company in March 2016.
|
Retirement Plans
The Company does not maintain any defined benefit or defined
contribution pension or retirement plans, other than a 401(k) Plan
that is offered through our payroll provider. The Company made no
matching contributions to the 401(k) Plan in 2016.
Hansen Employment Agreement
The employment agreement with Mr. Hansen (the “Hansen
Employment Agreement”), which became effective July 1, 2014,
has an initial term of 3 years, with an option to renew or extend
the terms if notice is provided by either Mr. Hansen or the Company
at least 60 days prior to the end of the term. Under the terms of
his agreement, Mr. Hansen received an initial base salary of
$315,660. Mr. Hansen’s base salary may be
increased at the discretion of the Board of Directors or the
Compensation Committee. Mr. Hansen is also entitled to an annual
cash bonus, based on certain performance-based objectives
established by the Compensation Committee of the
Board.
The Hansen Employment Agreement may be terminated upon death,
disability, with or without Cause (as defined by the Hansen
Employment Agreement) by the Company, with Good Reason (as defined
in the Hansen Employment Agreement), and upon a Change in Control
(as defined in the Employment Agreement), by Mr. Hansen or at
either party’s election not to renew the employment
agreement. In the event the Hansen Employment Agreement is
terminated as a result of Mr. Hansen’s death, Mr.
Hansen’s authorized representative shall be entitled to
receive all Accrued Obligations (as defined in the employment
agreement), full acceleration of vesting of all issued and
outstanding stock options, benefits for up to one year, any unpaid
annual bonus amounts and a pro rata bonus payment. In the event the
Hansen Employment Agreement is terminated by the Company for
Disability or without Cause, by Mr. Hansen for Good Reason,
non-renewal by the Company or in connection with a Change in
Control, Mr. Hansen would be entitled to receive all Accrued
Obligations, full acceleration of vesting of all issued and
outstanding stock options, unpaid bonus amounts and a pro rata
bonus payment, benefits for up to one year or until Mr. Hansen
obtains coverage through subsequent employment (whichever is
earlier) and severance payments equal to Mr. Hansen’s annual
base salary payable in 12 equal monthly installments. In the event
the employment agreement is terminated by the Company for Cause,
without Good Reason by Mr. Hansen, or the parties elect not to
renew the agreement, Mr. Hansen will be entitled to payment of any
base salary earned but unpaid through the date of termination and
any other payment or benefit to which he is entitled under the
applicable terms of any applicable company arrangement during the
30-day period following the termination of the Hansen Employment
Agreement.
Hanson Employment Agreement
The employment agreement with Mr. Hanson (the “Hanson
Employment Agreement”), which became effective July 1, 2014,
has an initial term of 3 years, with an option to renew or extend
the terms if notice is provided by either Mr. Hanson or us at least
60 days prior to the end of the term. Under the terms of his
agreement, Mr. Hanson was entitled to receive an initial annual
base salary of $215,000, which may be increased at the discretion
of the Board of Directors or the Compensation Committee. Mr. Hanson
is also entitled to an annual cash bonus, based on certain
performance-based objectives established by the Company. In
addition, prior to the merger MabVax Therapeutics had granted Mr.
Hanson options which are currently exercisable to purchase up to
2,629 shares of the Company common stock at an exercise price of
$59.91 under the terms of the Company 2014 Employee, Director and
Consultant Equity Incentive Plan as assumed by the Company pursuant
to the Merger Agreement.
The Hanson Employment Agreement may be terminated upon death,
disability, with or without Cause (as defined by the Hanson
Employment Agreement) by the Company, with Good Reason (as defined
in the Hanson Employment Agreement), and upon a Change in Control
(as defined in the Employment Agreement), by Mr. Hanson or at
either party’s election not to renew the employment
agreement. In the event the Hanson Employment Agreement is
terminated as a result of Mr. Hanson’s death, Mr.
Hanson’s authorized representative shall be entitled to
receive all Accrued Obligations (as defined in the employment
agreement), full acceleration of vesting of all issued and
outstanding stock options, benefits for up to 1 year, any unpaid
annual bonus amounts and a pro rata bonus payment. In the event the
Hanson Employment Agreement is terminated by the Company for
Disability or without Cause, by Mr. Hanson for Good Reason,
non-renewal by the Company or in connection with a Change in
Control, Mr. Hanson would be entitled to receive all Accrued
Obligations, full acceleration of vesting of all issued and
outstanding stock options, unpaid bonus amounts and a pro rata
bonus payment, benefits for up to one year or until Mr. Hanson
obtains coverage through subsequent employment (whichever is
earlier) and severance payments equal to Mr. Hanson’s annual
base salary payable in 12 equal monthly installments. In the event
the employment agreement is terminated by the Company for Cause,
without Good Reason by Mr. Hanson, or the parties elect not to
renew the agreement, Mr. Hanson will be entitled to payment of any
base salary earned but unpaid through the date of termination and
any other payment or benefit to which he is entitled under the
applicable terms of any applicable company arrangement during the
30-day period following the termination of the Hanson Employment
Agreement.
Maffuid Employment Agreement
On July 21, 2014, we entered into an Employment Agreement with Paul
Maffuid, Ph.D., or the Maffuid Employment Agreement. The Maffuid
Employment Agreement has an initial term of 3 years, with an option
to renew or extend the terms if notice is provided by either Dr.
Maffuid or the Company at least 60 days prior to the end of the
term. Under the terms of his agreement, Dr. Maffuid was entitled to
receive an initial base salary of $225,000 which may be increased
at the discretion of the Board of Directors or the Compensation
Committee. Dr. Maffuid is also entitled to an annual bonus, based
on certain performance-based objectives established by the
Company’s Chief Executive Officer. In addition, the Company
previously granted Dr. Maffuid options to purchase up to 1,878
shares of the Company’s common stock at an exercise price of
$62.75 per share under the terms of the Amended and Restated 2014
Employee, Director and Consultant Equity Incentive Plan which was
assumed by the Company pursuant to the Merger
Agreement.
The Maffuid Employment Agreement may be terminated upon death,
disability, with or without Cause (as defined by the Maffuid
Employment Agreement) by the Company, with Good Reason (as defined
in the Maffuid Employment Agreement and upon a Change in Control
(as defined in the Employment Agreement), by Dr. Maffuid or at
either party’s election not to renew the employment
agreement. In the event the Maffuid Employment Agreement is
terminated as a result of Dr. Maffuid’s death, Dr.
Maffuid’s authorized representative shall be entitled to
receive all Accrued Obligations (as defined in the employment
agreement), full acceleration of vesting of all issued and
outstanding stock options, benefits for up to 1 year, any unpaid
annual bonus amounts and a pro rata bonus payment. In the event the
Maffuid Employment Agreement is terminated by the Company for
Disability or without Cause, by Dr. Maffuid for Good Reason,
non-renewal by the Company or in connection with a Change in
Control, Dr. Maffuid would be entitled to receive all Accrued
Obligations, full acceleration of vesting of all issued and
outstanding stock options, unpaid bonus amounts and a pro rata
bonus payment, benefits for up to one year or until Dr. Maffuid
obtains coverage through subsequent employment (whichever is
earlier) and severance payments equal to Dr. Maffuid’s annual
base salary payable in 12 equal monthly installments. In the event
the employment agreement is terminated by the Company for Cause,
without Good Reason by Dr. Maffuid, or the parties elect not to
renew the agreement, Dr. Maffuid will be entitled to payment of any
base salary earned but unpaid through the date of termination and
any other payment or benefit to which he is entitled under the
applicable terms of any applicable company arrangement during the
30-day period following the termination of the Maffuid Employment
Agreement.
Resnick Employment Agreement
On March 16, 2016, we entered into an Employment Agreement with
Paul F. Resnick, M.D., or the Resnick Employment
Agreement. The Resnick Employment Agreement provides
that Dr. Resnick’s employment is “at-will” and is
not for any specified term or length of time. Under the terms of
his agreement, Dr. Resnick was entitled to receive an initial base
salary of $265,000 which may be increased at the discretion of the
Company. Dr. Resnick is also entitled to an annual bonus of up to
30% of his base salary. In connection with hiring Dr. Resnick, the
Company granted Dr. Resnick options to purchase up to 30,271 shares
of the Company’s common stock at an exercise price of
$12.95 per share and 45,406 shares of the Company’s
common stock at an exercise price of $5.48 per share under the
terms of the Amended and Restated 2014 Employee, Director and
Consultant Equity Incentive Plan.
The Resnick Employment Agreement may be terminated upon death,
disability, with or without Cause (as defined by the Resnick
Employment Agreement) by the Company, with Good Reason (as defined
in the Resnick Employment Agreement), and upon a Change in Control
(as defined in the Employment Agreement) or at either party’s
election to terminate upon 30 days’ prior written notice. In
the event the Resnick Employment Agreement is terminated as a
result of Dr. Resnick’s death, Dr. Resnick’s authorized
representative shall be entitled to receive all Accrued Obligations
(as defined in the employment agreement), full acceleration of
vesting of all issued and outstanding stock options, benefits for
up to 1 year, any unpaid annual bonus amounts and a pro rata bonus
payment. In the event the Resnick Employment Agreement is
terminated by the Company for Disability or without Cause, by Dr.
Resnick for Good Reason, or in connection with a Change in Control,
Dr. Resnick would be entitled to receive all Accrued Obligations,
full acceleration of vesting of all issued and outstanding stock
options, unpaid bonus amounts and a pro rata bonus payment,
benefits for up to one year or until Dr. Resnick obtains coverage
through subsequent employment (whichever is earlier) and severance
payments equal to Dr. Resnick’s annual base salary payable in
12 equal monthly installments.
2015 Management Bonus Plan
On April 2, 2015, our Compensation Committee approved the 2015
Management Bonus Plan outlining maximum target bonuses of the base
salaries of certain of our executive officers. Under the
terms of the 2015 Management Bonus Plan, the Company’s Chief
Executive Officer shall receive a maximum target bonus of up to 50%
of his annual base salary, the Chief Financial Officer shall
receive a maximum target bonus of up to 35% of his annual base
salary and the Company’s Vice President shall receive a
maximum target bonus of up to 25% of his annual base salary.
On February 16, 2016, our Compensation Committee approved a 2016
Management Bonus Plan outlining maximum target bonuses of the base
salaries of certain of our executive officers. Under the terms of
the 2016 Management Plan, the Company's Chief Executive Officer
shall receive a maximum target bonus of up to 50% of his annual
base salary, and the Chief Financial Officer and each of the
Company's Vice Presidents of Discovery and Development shall
receive a maximum target bonus of up to 30% of his annual base
salary.
DIRECTOR
COMPENSATION
Non-employee directors do not receive any separate compensation for
their board of director activities, other than Dr.
Ravetch. In April 2015, Dr. Ravetch received
17,770 shares of fully vested restricted common stock valued
at $302,450 in exchange for future services of at least one
year. On April 1, 2016, we entered into a two-year
consulting agreement with Dr. Ravetch, whereby Dr. Ravetch will
provide key technology, predevelopment, corporate development, and
other consulting services in exchange for $100,000 in cash
compensation each year of the agreement. During the year
ended December 31, 2016, non-named-executive-officer directors
received the compensation described below for their services as
director.
2016 Director Compensation Table
Name of Director
|
Fees Earned or Paid in Cash ($)
|
Option Awards ($) (1)
|
Stock Awards ($) (3)
|
Total ($)
|
Philip
O. Livingston, M.D. (2)
|
—
|
—
|
$—
|
$—
|
Robert
E. Hoffman (4)(7)
|
$31,500
|
$27,778
|
$—
|
$59,278
|
Jeffrey
Ravetch, M.D. (4)(5)(7)
|
$26,000
|
$74,412
|
$—
|
$100,412
|
Paul
V. Maier (4)(7)
|
$38,500
|
$27,778
|
$—
|
$66,278
|
Kenneth
M. Cohen (4)(7)
|
$34,500
|
$27,778
|
$—
|
$62,278
|
Tom
Varvaro (4)(8)
|
$26,000
|
$26,812
|
$—
|
$52,812
|
Jeffrey
F. Eisenberg (6)
|
$16,703
|
$38,939
|
$—
|
$55,642
|
(1)
|
The amounts in this column represent the aggregate full grant date
fair values of stock options granted to each of the non-employee
directors computed in accordance with Accounting Standards
Codification 718, or ASC 718, “Compensation—Stock
Compensation,” excluding the effect of estimated forfeitures.
The amounts reported for these options may not represent the actual
economic values that the Company’s non-employee directors
will realize from these options, as the actual value realized will
depend on the Company’s performance, stock price and their
continued services.
|
(2)
|
Dr. Livingston does not receive any cash compensation as a
director. Dr. Livingston’s employee compensation in
2016 consisted of $60,000 in cash compensation. In addition,
Dr. Livingston received 700 options on August 29, 2016. Dr.
Livingston had 3,705 options outstanding at December 31,
2016.
|
(3)
|
Represents the aggregate grant date fair value of restricted stock
and restricted stock units granted in accordance with Accounting
Standards Codification 718, or ASC 718,
“Compensation—Stock Compensation.”
|
(4)
|
Non-employee directors serving on the board during 2016 were each
granted 4,730 options on June 29, 2016 at an exercise price of
$4.07 per share with a grant date fair value of $13,437 vesting
over one year. In addition, Mr. Cohen, Mr. Hoffman, Mr. Maier and
Dr. Ravetch each were granted 4,100 options. Mr. Varvaro was
granted 3,800 options on August 29, 2016 at an exercise price of
$5.00 with grant date fair values of $14,431, and $13,375,
respectively, vesting over three years.
|
(5)
|
In addition to the options granted to all non-employee directors,
on November 3, 2016, Dr. Ravetch was granted 17,500 options with an
exercise price of $3.75 per share with a grant date fair value of
$46,544 vesting over three years. Dr. Ravetch has 37,192 options
and 3,086 restricted stock units outstanding at December 31,
2016.
|
(6)
|
Mr. Eisenberg was appointed to the board of directors in February
of 2016. In addition to the options granted to all non-employee
directors, he was granted 6,757 options on February 19, 2016 at an
exercise price of $3.70 per share with a grant date fair value of
$17,407 vesting over three years, 4,730 options on June 29, 2016 at
an exercise price of $4.07 per share with a grant date fair value
of $13,347 vesting over one year, and 2,300 options on August 29,
2016 at an exercise price of $5.00 with a grant date fair value of
$8,095 vesting over three years. Mr. Eisenberg had 13,787 awards
outstanding at December 31, 2016.
|
(7)
|
Mr. Hoffman, Mr. Maier and Mr. Cohen each had a total of
19,692 options and 3,086 restricted stock units outstanding at
December 31, 2016.
|
(8)
|
Mr. Varvaro had a total of 17,889 options and 3,086 restricted
stock units outstanding at December 31, 2016.
|
Amended and
Restated Director Compensation Policy
In 2015, under our Non-Employee Director Compensation Policy, or
the Policy, members of the Board of Directors who are not employees
of, or compensated consultants to the Company or any of its
affiliates (an “Outside Director”), were entitled to
receive certain stock option grants.
Under the Policy, each newly appointed or elected Outside Director
was granted a non-qualified stock option to purchase up to 1,502
shares of our common stock on the date of his or her initial
appointment or election to our Board of Directors. These initial
option grants were fully vested on the date of the grant, and had
an exercise price equal to the fair market value of shares of our
common stock as determined in the Stock Plan on the date of
grant.
Under the Policy in 2015, our Outside Directors were entitled to
receive annual cash payments of $12,000 payable on a monthly
pro-rata basis and cash payments of $1,250 per meeting attended in
person and $750 per meeting attended telephonically. On April 3,
2015, the Board ratified the Compensation Committee’s
amendment to the Policy and implementation of the below
compensation for all Outside Directors:
●
Each Non-employee Board member shall receive a cash retainer of
$24,000 per year. Chairmen of each committee shall receive an
additional cash retainer as follows: (i) $12,000 for the Chairman
of the Audit Committee; (ii) $8,000 for the Chairman of the
Compensation Committee; and (iii) $5,000 for the Chairman of the
Nominating Committee. All such retainers will be paid on a
quarterly basis;
●
Each current Board member received a one-time grant, and each new
member going forward shall receive an initial one time grant of:
9,257 shares of common stock, half of which shall be comprised of
restricted stock units and half of which shall be comprised of
stock option with three-year annual vesting; and
●
Each Non-employee Board member will also receive an automatic
annual grant of 4,780 stock options, with one year
vesting.
●
A one-time issuance of 2,703 restricted shares of common
stock;
●
The issuance of all vested options and restricted stock grants held
on such date; and
●
The payment of all earned but unpaid cash compensation for their
services on the Board and its committees, as of such
date.
On February 16, 2016, the Compensation Committee of the Board of
Directors of the Company approved the following
amendments to Company's policy for compensating non-employee
members of the Board:
●
The initial equity grant upon first appointment (or election) of
future non-employee directors to the Board shall be a 10-year
option to purchase 6,757 shares of the Company's common stock,
under the Company's Second Amended and Restated 2014 Equity
Incentive Plan with 3-year annual vesting and a strike price equal
the closing price of the Company's common stock on the effective
date of the appointment (or election);
●
The annual cash retainer for each non-employee director, paid
quarterly, is increased by $1,000 per calendar quarter to a total
of $7,000 per quarter, effective April 1, 2016; and
●
The additional annual cash retainer for the chairperson of each of
the Audit, Compensation, and Nominating and Governance Committees,
paid quarterly, is increased by $1,000 per calendar year, such that
each chairperson retainer shall be as follows, effective April 1,
2016: Audit Committee: $13,000; Compensation Committee: $9,000;
Nominating and Governance Committee: $6,000.
On
August 25, 2016, the Compensation Committee of the Board of
Directors of the Company approved the following amendments to
Company's policy for compensating non-employee members of the
Board:
●
The initial equity
grant upon first appointment (or election) of future non-employee
directors to the Board shall be a 10-year option to purchase 25,000
shares of the Company's common stock, under the Company's Second
Amended and Restated 2014 Equity Incentive Plan with 3-year annual
vesting and a strike price equal the closing price of the Company's
common stock on the effective date of the appointment (or
election).
●
The additional
automatic annual option grant to each non-employee director on the
date of the Company's annual meeting shall be a 10-year option to
purchase 17,500 shares of the Company's common stock, under the
Company's Second Amended and Restated 2014 Equity Incentive Plan
with 1-year vesting and a strike price equal the closing price of
the Company's common stock on the date of the annual
meeting.
On
February 6, 2017, the Compensation Committee of the Board of
Directors of the Company approved the following amendments to
Company's policy for compensating non-employee members of the
Board:
●
The initial equity
grant upon first appointment (or election) of future non-employee
directors to the Board shall be a 10-year option to purchase 30,000
shares of the Company's common stock, under the Company's Second
Amended and Restated 2014 Equity Incentive Plan with 3-year annual
vesting and a strike price equal the closing price of the Company's
common stock on the effective date of the appointment (or
election); and
●
The additional
automatic annual option grant to each non-employee director on the
date of the Company's annual meeting shall be a 10-year option to
purchase 20,000 shares of the Company's common stock, under the
Company's Second Amended and Restated 2014 Equity Incentive Plan
with 1-year vesting and a strike price equal the closing price of
the Company's common stock on the date of the annual
meeting.
Item 12.
|
Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters.
|
The following table sets forth information known to us concerning
the beneficial ownership of our common stock for:
●
each person known by us to beneficially own more than 5% of our
common stock;
●
each of our directors;
●
each of our executive officers; and
●
all of our directors and executive officers as a
group.
Beneficial ownership is determined in accordance with the rules and
regulations of the SEC. In general, a person is deemed to be the
beneficial owner of (i) any shares of the Company’s common
stock over which such person has sole or shared voting power or
investment power, plus (ii) any shares which such person has the
right to acquire beneficial ownership of within 60 days of the
above date, whether through the exercise of options, warrants or
otherwise. Percentage ownership calculations for beneficial
ownership are based on 6,296,110 shares outstanding as of February
28, 2017. Applicable percentages are based on 6,296,110
shares of common stock outstanding as of February 28, 2017 adjusted
as required by rules promulgated by the SEC.
Name and Address of Beneficial Owner
|
Number of Shares of
Common Stock
|
Percentage of
Common Stock
|
5% Stockholders
|
|
|
None
|
—
|
—%
|
|
|
|
Directors and Executive Officers
|
|
|
Philip
O. Livingston, M.D. (1)
|
196,286
|
3.12%
|
Jeffrey
Ravetch, M.D., Ph.D. (2)
|
12,404
|
*
|
J.
David Hansen (3)
|
193,421
|
3.00%
|
Robert
E. Hoffman (4)
|
13,756
|
*
|
Kenneth
M. Cohen (5)
|
23,113
|
*
|
Paul
V. Maier (6)
|
13,080
|
*
|
Gregory
P. Hanson (7)
|
89,100
|
1.40%
|
Paul
W. Maffuid, Ph.D. (8)
|
65,477
|
1.03%
|
Thomas
C. Varvaro (9)
|
10,902
|
*
|
Jeffrey
F. Eisenberg (10)
|
2,253
|
*
|
Paul
Resnick (11)
|
25,226
|
*
|
All executive officers and directors as a group (10
persons)
|
645,018
|
9.67%
|
*
Less than 1%.
(1)
Consists of (i) 176,675 shares held by RTP Venture Fund, (ii)
14,885 shares held by Philip O. Livingston, (iii) 1,721 shares held
by the Joan L. Tweedy 2011 Revocable Trust, or the Tweedy Trust,
and (iv) 3,005 shares subject to options exercisable within 60 days
of February 28, 2017 held by Philip O. Livingston. Voting and
dispositive decisions of RTP Venture Fund, LLC are made by Philip
Livingston, and Philip O. Livingston is a trustee of the Tweedy
Trust. The address for RTP Venture Fund, LLC is 156 E. 79th Street,
Apt. 6C, New York, NY 10075.
(2)
Includes 9,318 shares subject to options exercisable within 60 days
of February 28, 2017, and 1,543 shares of restricted stock units
vesting within 60 days of February 28, 2017.
(3)
Includes 108,967 shares subject to options exercisable within 60
days of February 28, 2017, 6,238 common stock warrants purchased in
the August 2016 financing transaction, and 40,687 shares of
restricted stock units vesting within 60 days of February 28,
2017.
(4)
Includes 9,318 shares subject to options exercisable within 60 days
of February 28, 2017, and 1,543 shares of restricted stock units
vesting within 60 days of February 28, 2017.
(5)
Includes 9,318 shares subject to options exercisable within 60 days
of February 28, 2017, 6,238 common stock warrants purchased in the
August 2016 financing transaction, and 1,543 shares of restricted
stock units vesting within 60 days of February 28,
2017.
(6)
Includes 9,318 shares subject to options exercisable within 60 days
of February 28, 2017, and 1,543 shares of restricted stock units
vesting within 60 days of February 28, 2017.
(7)
Includes 45,054 shares subject to options exercisable within 60
days of February 28, 2017, 6,238 common stock warrants purchased in
the August 2016 financing transaction, and 21,064 shares of
restricted stock units vesting within 60 days of February 28,
2017.
(8)
Includes 34,007 shares subject to options exercisable within 60
days of February 28, 2017, 4,158 common stock warrants purchased by
the executive in the August 2016 financing transaction, and 15,045
shares of restricted stock units vesting within 60 days of February
28, 2017.
(9)
Includes 7,816 shares subject to options exercisable within 60 days
of February 28, 2017 and 1,543 shares of restricted stock units
vesting within 60 days of February 28, 2017.
(10)
Includes 2,253 shares subject to options exercisable within 60 days
of February 28, 2017.
(11)
Includes 25,226 shares subject to options exercisable within 60
days of February 28, 2017
Item 13.
Certain Relationships and Related Transactions, and Director
Independence.
We entered into Separation and Release Agreements and are and were
parties to the employment agreements with each of our officers as
set forth in the section entitled “Executive and Director
Compensation” above. Pursuant to our Audit Committee Charter,
the Audit Committee is responsible for reviewing and approving,
prior to our entry into any such transaction, all transactions in
which we are a participant and in which any parties related to us
have or will have a direct or indirect material
interest.
Ravetch Grant
On April 3, 2015, the Board approved the issuance of an
additional restricted stock award of 17,770 shares to Jeffrey
Ravetch. This award is for future services covering at least a
one-year period. The award was granted in addition to the prior
award to Dr. Ravetch on April 2, 2015 of: (i) 4,629 restricted
shares and (ii) options to purchase 4,629 shares of common stock
with an exercise price of $17.02 per share, for a total grant
of 27,028 restricted shares and options.
Livingston Grant
On March 23, 2015, the Board of Directors approved a restricted
stock award by the Company of 135,135 shares of common stock, to be
negotiated with Phil Livingston, Ph.D. for his continuing service
to the Company. On April 4, 2015, the Company awarded
and issued the shares to Dr. Livingston by virtue of a common stock
purchase agreement, in exchange for Dr. Livingston’s ongoing
services as a member of the Company’s Board of
Directors. On May 13, 2015, the Compensation Committee
of the Board clarified that the award is being granted in
consideration for at least one year of Dr. Livingston’s
services.
Ravetch Agreement
On April 1, 2016 we entered into a consulting agreement with Dr.
Ravetch to provide key technology and product development, as well
as corporate development and consulting services, in addition to
his services as a Board member. The term of the
agreement is 2 years beginning January 1, 2016, and Dr. Ravetch
will receive $100,000 cash compensation per year.
Director Independence
After review of all relevant transactions or relationships between
each director and nominee for director, or any of his or her family
members, and the Company, its senior management and its Independent
Registered Public Accounting Firm, the Board of Directors has
determined that all of the Company’s directors are
independent, as of December 31, 2016 within the meaning of the
applicable SEC rules and the NASDAQ listing standards, except Mr.
Hansen, the Chairman of the Board of Directors and Chief Executive
Officer and President of the Company, Dr. Livingston, Chief Science
Officer of the Company, and Dr. Ravetch.
Item 14.
|
Principal Accounting Fees and Services
|
The following summarizes the fees billed by our independent
registered public accounting firm for audit, tax and other
professional services for the years ended December 31, 2016 and
2015:
|
2016
|
2015
|
|
CohnReznick LLP
|
CohnReznick LLP
|
Audit
and Registration Related Fees(1)
|
$251,213
|
$216,875
|
Audit-Related
Fees
|
—
|
—
|
Tax
Fees(2)
|
—
|
—
|
All
Other Fees(3)
|
—
|
—
|
Total
Fees
|
$251,213
|
$216,875
|
(1)
|
Audit fees
represent professional services provided in connection with the
audit of our financial statements, review of our quarterly
financial statements, and audit service in connection with other
regulatory filings.
|
(2)
|
Tax Fees consist of fees billed for professional services rendered
in connection with tax compliance, tax advice, and tax planning. We
incurred no such fees in the fiscal years ended December 31, 2016
and 2015.
|
(3)
|
Other fees consist of fees for products and services other than the
services reported above. There were no other fees for services by
our independent registered public accounting firms for the fiscal
years ended December 31, 2016 and 2015.
|
Audit Committee Pre-approval Policies and Procedures
Our Audit Committee assists the Board in overseeing and monitoring
the integrity of the Company’s financial reporting process,
its compliance with legal and regulatory requirements and the
quality of its internal and external audit processes. The role and
responsibilities of the Audit Committee are set forth in a written
charter adopted by the Board, which is available on our website at
www.mabvax.com. The Audit Committee is responsible for selecting,
retaining and determining the compensation of our independent
public accountant, approving the services they will perform, and
reviewing the performance of the independent public accountant. The
Audit Committee reviews with management and our independent public
accountant our annual financial statements on Form 10-K and our
quarterly financial statements on Forms 10-Q. The Audit Committee
reviews and reassesses the charter annually and recommends any
changes to the Board for approval. The Audit Committee is
responsible for overseeing our overall financial reporting process.
In fulfilling its responsibilities for the financial statements for
fiscal year 2016, the Audit Committee took the following
actions:
●
reviewed
and discussed the audited financial statements for the fiscal year
ended December 31, 2016 with management and CohnReznick LLP
(“CohnReznick”), our independent public
accountant;
●
discussed
with CohnReznick the matters required to be discussed in accordance
with the rules set forth by the Public Company Accounting Oversight
Board (“PCAOB”), relating to the conduct of the audit;
and
●
received
written disclosures and the letter from CohnReznick regarding its
independence as required by applicable requirements of the PCAOB
regarding CohnReznick's communications with the Audit Committee and
the Audit Committee further discussed with CohnReznick its
independence. The Audit Committee also considered the status of
pending litigation, taxation matters and other areas of oversight
relating to the financial reporting and audit process that the
Audit Committee determined appropriate.
Our Audit Committee approved all services that our independent
accountants provided to us in the past two fiscal
years.
PART IV
Item 15.
|
Exhibits and Financial Statement Schedules.
|
The
following documents are filed as part of this Annual
Report:
1.
Financial
Statements. Our consolidated financial
statements and the Report of Independent Registered Public
Accounting Firm are included in Part IV of this Report on the pages
indicated:
2.
Financial
Statement Schedules. All schedules are omitted
because they are not applicable or the required information is
shown in the consolidated financial statements or the notes
thereto.
3.
Exhibits:
Exhibit
No.
|
|
Description
|
|
Form
|
|
Filing
Date/
Period
End
|
|
Exhibit
Number
|
|
|
|
|
|
||||
1.1
|
|
Form of Underwriting Agreement
|
|
8-K
|
|
8/17/2016
|
|
1.1
|
|
|
|
|
|
|
|
|
|
2.1
|
|
Agreement and Plan of Merger and Reorganization, dated May 12,
2014, between the Company, Tacoma Acquisition Corp., Inc. and
MabVax Therapeutics, Inc.
|
|
8-K
|
|
5/12/2014
|
|
2.1
|
|
|
|
|
|
||||
2.2
|
|
Amendment No.1, dated as of June 30, 2014, by and between the
Company and MabVax Therapeutics, Inc.
|
|
8-K
|
|
7/1/2014
|
|
2.1
|
|
|
|
|
|
||||
2.3
|
|
Amendment No.2 to the Agreement and Plan of Merger, dated July 7,
2014, by and among the Company, Tacoma Acquisition Corp. and MabVax
Therapeutics, Inc.
|
|
8-K
|
|
7/9/2014
|
|
2.1
|
|
|
|
|
|
||||
3.1
|
|
Certificate of Designations, Preferences and Rights of Series C
Convertible Preferred Stock
|
|
8-K
|
|
9/3/2014
|
|
3.1
|
|
|
|
|
|
||||
3.2
|
|
Amended and Restated Certificate of Incorporation
|
|
8-K
|
|
9/9/2014
|
|
3.1
|
|
|
|
|
|
||||
3.3
|
|
Certificate of Amendment of Amended and Restated Certificate of
Incorporation
|
|
8-K
|
|
9/9/2014
|
|
3.2
|
|
|
|
|
|
||||
3.4
|
|
Amended and Restated Bylaws
|
|
8-K
|
|
12/14/2007
|
|
3.2
|
|
|
|
|
|
||||
3.5
|
|
Certificate of Designations, Preferences and Rights of Series D
Convertible Preferred Stock
|
|
8-K
|
|
3/26/2015
|
|
3.1
|
|
|
|
|
|
||||
3.6
|
|
Certificate of Designations, Preferences and Rights of Series E
Convertible Preferred Stock
|
|
10-K
|
|
3/31/2015
|
|
3.8
|
|
|
|
|
|
|
|
|
|
3.7
|
|
Certificate of Designations, Preferences and Rights of Series F
Convertible Preferred Stock
|
|
8-K
|
|
8/17/2016
|
|
3.2
|
|
|
|
|
|
|
|
|
|
3.8
|
|
Certificate of Amendment to Amended and Restated Certificate of
Incorporation
|
|
8-K
|
|
8/17/2016
|
|
3.1
|
|
|
|
|
|
|
|
|
|
3.9
|
|
Certificate of Elimination of Series A-1 Convertible Preferred
Stock
|
|
8-K
|
|
9/23/2016
|
|
3.1
|
|
|
|
|
|
|
|
|
|
3.10
|
|
Certificate of Elimination of Series B Convertible Preferred
Stock
|
|
8-K
|
|
9/23/2016
|
|
3.2
|
|
|
|
|
|
|
|
|
|
3.11
|
|
Certificate of Elimination of Series C Convertible Preferred
Stock
|
|
8-K
|
|
9/23/2016
|
|
3.3
|
|
|
|
|
|
|
|
|
|
3.12
|
|
Certificate of Correction of Amended and Restated Certificate of
Incorporation
|
|
8-K
|
|
9/23/2016
|
|
3.4
|
4.1
|
|
Securities Purchase Agreement, dated as of February 12, 2014,
between MabVax Therapeutics, Inc. and the purchasers set forth on
the signature pages thereto including that certain Amendment No. 1
to Securities Purchase Agreement, dated as of May 12, 2014, between
MabVax Therapeutics, Inc. and the persons and entities identified
on the signature pages thereto
|
|
8-K
|
|
5/12/2014
|
|
10.3
|
|
|
|
|
|
|
|
|
|
4.2
|
|
Registration Rights Agreement, dated as of February 12, 2014,
between MabVax Therapeutics, Inc. and the persons and entities
identified on the signature pages thereto
|
|
8-K
|
|
5/12/2014
|
|
10.2
|
|
|
|
|
|
|
|
|
|
4.3
|
|
Form of Exchange Agreement
|
|
8-K
|
|
9/3/2014
|
|
10.1
|
|
|
|
|
|
|
|
|
|
4.4
|
|
Form of Waiver Letter
|
|
8-K
|
|
9/3/2014
|
10.2
|
|
|
|
|
|
|
|
|
|
|
4.5
|
|
Form of Common Stock Certificate
|
|
S-1
|
|
9/29/2014
|
4.1
|
|
|
|
|
|
|
|
|
|
|
4.6
|
|
Form of Waiver Extension Letter
|
|
8-K
|
|
9/30/2014
|
10.1
|
|
|
|
|
|
|
|
|
|
|
4.7
|
|
Form of Subscription Agreement, dated March 31, 2015, between the
Company and the subscribers set forth on the signature pages
thereto
|
|
10-K
|
|
3/31/2015
|
4.11
|
|
|
|
|
|
|
|
|
|
|
4.8
|
|
Form of Common Stock Purchase Warrant
|
|
10-K
|
|
3/31/2015
|
4.12
|
|
|
|
|
|
|
|
|
|
|
4.9
|
|
Form of Registration Rights Agreement, dated March 31, 2015,
between the Company and the persons and entities identified on the
signature pages thereto
|
|
10-K
|
|
3/31/2015
|
|
4.13
|
|
|
|
|
|
|
|
|
|
4.10
|
|
Form of Secured Promissory Note
|
|
8-K
|
|
1/19/2016
|
|
4.1
|
|
|
|
|
|
|
|
|
|
4.11
|
|
Form of Warrant
|
|
8-K
|
|
1/19/2016
|
|
4.2
|
|
|
|
|
|
|
|
|
|
4.12
|
|
Form of Warrant
|
|
8-K
|
|
8/17/2016
|
4.1
|
|
|
|
|
|
|
|
|
|
|
4.13
|
|
Form of Underwriter Warrant
|
|
8-K
|
|
8/17/2016
|
4.2
|
|
|
|
|
|
|
|
|
|
|
10.1
|
|
Separation Agreement and Release, dated May 12, 2014, between
Michael M. Wick and the Company
|
|
8-K
|
|
5/12/2014
|
|
10.4
|
|
|
|
|
|
|
|
|
|
10.2
|
|
Separation Agreement and Release, dated May 12, 2014, between
William P. Kaplan and the Company
|
|
8-K
|
|
5/12/2014
|
|
10.5
|
|
|
|
|
|
|
|
|
|
10.3
|
|
Separation Agreement and Release, dated May 12, 2014, between
Steven R. Schow and the Company
|
|
8-K
|
|
5/12/2014
|
|
10.6
|
|
|
|
|
|
|
|
|
|
10.4
|
|
Separation Agreement and Release, dated May 12, 2014, between
Wendy K. Wee and the Company
|
|
8-K
|
|
5/12/2014
|
|
10.7
|
|
|
|
|
|
|
|
|
|
10.5
|
|
Michael Wick Resignation Letter, dated July 7, 2014
|
|
8-K
|
|
7/9/2014
|
|
99.1
|
|
|
|
|
|
|
|
|
|
10.6
|
|
Edward W. Cantrall Resignation Letter, dated July 7,
2014
|
|
8-K
|
|
7/9/2014
|
|
99.2
|
|
|
|
|
|
|
|
|
|
10.7
|
|
Steven R. Goldring Resignation Letter, dated July 7,
2014
|
|
8-K
|
|
7/9/2014
|
|
99.3
|
10.9
|
|
Richard B. Newman Resignation Letter, dated July 7,
2014
|
|
8-K
|
|
7/9/2014
|
|
99.4
|
|
|
|
|
|
|
|||
10.10
|
|
Employment Agreement, dated July 1, 2014, by and between MabVax
Therapeutics, Inc. and J. David Hansen
|
|
10-Q
|
|
8/8/2014
|
|
10.9
|
|
|
|
|
|
|
|||
10.11
|
|
Employment Agreement, dated July 1, 2014, by and between MabVax
Therapeutics, Inc. and Gregory P. Hanson
|
|
10-Q
|
|
8/8/2014
|
|
10.10
|
|
|
|
|
|
|
|||
10.12
|
|
Employment Agreement, dated July 1, 2014, by and between MabVax
Therapeutics, Inc. and Wolfgang W. Scholz, Ph.D.
|
|
10-Q
|
|
8/8/2014
|
|
10.11
|
|
|
|
|
|
|
|||
10.13
|
|
Securities Purchase Agreement, dated July 8, 2014, by and between
MabVax Therapeutics, Inc. and certain institutional investors set
forth therein
|
|
10-Q
|
|
8/8/2014
|
|
10.12
|
|
|
|
|
|
|
|||
10.14
|
|
Form of Indemnification Agreement
|
|
8-K
|
|
9/9/2014
|
|
10.1
|
|
|
|
|
|
|
|||
10.15
|
|
Second Amended and Restated MabVax Therapeutics Holdings, Inc. 2014
Employee, Director and Consultant Equity Incentive
Plan
|
|
10-K
|
|
3/31/2015
|
|
10.15
|
|
|
|
|
|
|
|
|
|
10.16
|
|
Non-Employee Director Compensation Policy
|
|
10-Q/A
|
|
8/12/2015
|
|
10.1
|
|
|
|
|
|
|
|||
10.17
|
|
Standard Industrial Net Lease, dated as of May 23, 2008, by
and between MabVax Therapeutics, Inc. and Sorrento
Square
|
|
10-Q/A
|
|
8/12/2015
|
|
10.2
|
|
|
|
|
|
|
|||
10.18
|
|
First Amendment to that Standard Industrial Net Lease, dated May 6,
2010, by and between MabVax Therapeutics, Inc. and Sorrento
Square
|
|
10-Q/A
|
|
8/12/2015
|
|
10.3
|
|
|
|
|
|
|
|||
10.19
|
|
Second Amendment to that Standard Industrial Net Lease, dated
August 1, 2012, by and between the Company and Sorrento
Square
|
|
10-Q/A
|
|
8/12/2015
|
|
10.4
|
|
|
|
|
|
|
|||
10.20
|
|
Employment Agreement, dated July 21, 2014, 2014, by and
between MabVax Therapeutics, Inc. and Paul Maffuid,
Ph.D.
|
|
10-Q/A
|
|
8/12/2015
|
|
10.5
|
|
|
|
|
|
|
|||
10.21
|
|
Development and Manufacturing Services Agreement, dated April 15,
2014, by and between MabVax Therapeutics, Inc. and Gallus
BioPharmaceuticals NJ, LLC
|
|
10-Q/A
|
|
8/12/2015
|
|
10.6
|
|
|
|
|
|
|
|
|
|
10.22
|
|
Exclusive License Agreement for “Polyvalent Conjugate
Vaccines for Cancer” (SK#14491), dated as of June 30,
2008, by and between MabVax Therapeutics, Inc. and Sloan-Kettering
Institute for Cancer Research
|
|
10-Q/A
|
|
8/12/2015
|
|
10.7
|
|
|
|
|
|
|
|
|
|
10.23
|
|
Research and License Agreement, dated as of April 7, 2008, by
and between MabVax Therapeutics, Inc. and Sloan-Kettering Institute
for Cancer Research
|
|
10-Q/A
|
|
8/12/2015
|
|
10.8
|
|
|
|
|
|
|
|
|
|
10.24
|
|
Exclusive License to Unimolecular Antibodies, dated October 13,
2011, by and between MabVax Therapeutics, Inc. and Sloan-Kettering
Institute for Cancer Research
|
|
10-Q/A
|
|
8/12/2015
|
|
10.9
|
|
|
|
|
|
|
|
|
|
10.25
|
|
Option Agreement, dated August 29, 2014, by and between MabVax
Therapeutics, Inc. and Juno Therapeutics, Inc.
|
|
10-Q/A
|
|
8/12/2015
|
|
10.10
|
|
|
|
|
|
|
|
|
|
10.26
|
|
SBIR Contract from National Cancer Institute
|
|
10-Q/A
|
|
8/12/2015
|
|
10.
|
|
|
|
|
|
||||
10.27
|
|
Form of Exchange Agreement (Series A-1 Preferred Stock and Series
A-1 Warrants).
|
|
8-K
|
|
3/26/2015
|
|
10.1
|
|
|
|
|
|
||||
10.28
|
|
Form of Exchange Agreement (Series B Preferred Stock and Series B
Warrants).
|
|
8-K
|
|
3/26/2015
|
|
10.2
|
|
|
|
|
|
||||
10.29
|
|
2008 Equity Incentive Plan
|
|
10-K
|
|
3/31/2015
|
|
10.29
|
|
|
|
|
|
||||
10.30
|
|
Form of Option Agreement, 2008 Equity Incentive Plan
|
|
10-K
|
|
3/31/2015
|
|
10.30
|
|
|
|
|
|
||||
10.31
|
|
Form of Lockup Agreement dated as of April 3, 2015
|
|
8-K
|
|
4/6/2015
|
|
10.3
|
|
|
|
|
|
|
|
|
|
10.32
|
|
Consulting Agreement with The Del Mar Consulting Group, Inc.
and Alex Partners, LLC dated as of April 5, 2015
|
|
8-K
|
|
4/6/2015
|
|
10.4
|
|
|
|
|
|
|
|
|
|
10.33
|
|
Form of Escrow Deposit Agreement dated as of April 14,
2015
|
|
8-K
|
|
4/15/2015
|
|
10.1
|
|
|
|
|
|
|
|
|
|
10.34
|
|
Form of Amendment Agreement to Registration Rights
Agreement
|
|
8-K
|
|
6/10/2015
|
|
10.1
|
|
|
|
|
|
|
|
|
|
10.35
|
|
Amendment to Escrow Deposit Agreement dated June 22,
2015
|
|
8-K
|
|
6/24/2015
|
|
10.1
|
|
|
|
|
|
|
|
|
|
10.36
|
|
Letter Agreement dated June 30, 2015 between MabVax Therapeutics,
Inc. and OPKO Health, Inc.
|
|
8-K
|
|
7/1/205
|
|
10.1
|
|
|
|
|
|
|
|
|
|
10.37
|
|
Form of Proposed Lease Agreement with AGP Sorrento Business
Complex, L.P
|
|
S-1
|
|
8/25/2015
|
|
10.37
|
|
|
|
|
|
|
|
|
|
10.38
|
|
Form of Amendment Agreement No. 2 to Registration Right s
Agreement
|
|
8-K
|
|
8/4/2015
|
|
10.1
|
|
|
|
|
|
|
|
|
|
10.39
|
|
Non-Employee Director Compensation Policy
|
|
10-Q/A
|
|
8/12/2015
|
|
10.1
|
|
|
|
|
|
|
|
|
|
10.41
|
|
Standard Industrial Net Lease, dated as of May 23, 2008, by
and between MabVax Therapeutics, Inc. and Sorrento
Square
|
|
10-Q/A
|
|
8/12/2015
|
|
10.2
|
|
|
|
|
|
|
|
|
|
10.42
|
|
First Amendment to that Standard Industrial Net Lease, dated May 6,
2010, by and between MabVax Therapeutics, Inc. and Sorrento
Square
|
|
10-Q/A
|
|
8/12/2015
|
|
10.3
|
|
|
|
|
|
|
|
|
|
10.43
|
|
Second Amendment to that Standard Industrial Net Lease, dated
August 1, 2012, by and between the Company and Sorrento
Square
|
|
10-Q/A
|
|
8/12/2015
|
|
10.4
|
10.44
|
|
Employment Agreement, dated July 21, 2014, by and between
MabVax Therapeutics, Inc. and Paul Maffuid, Ph.D.
|
|
10-Q/A
|
|
8/12/2015
|
|
10.5
|
|
|
|
|
|
|
|
|
|
10.45
|
|
Development and Manufacturing Services Agreement, dated April 15,
2014, by and between MabVax Therapeutics, Inc. and Gallus
BioPharmaceuticals NJ, LLC
|
|
10-Q/A
|
|
8/12/2015
|
|
10.6
|
|
|
|
|
|
|
|
|
|
10.46
|
|
Exclusive License Agreement for “Polyvalent Conjugate
Vaccines for Cancer” (SK#14491), dated as of June 30,
2008, by and between MabVax Therapeutics, Inc. and Sloan-Kettering
Institute for Cancer Research
|
|
10-Q/A
|
|
8/12/2015
|
|
10.7
|
|
|
|
|
|
|
|
|
|
10.47
|
|
Research and License Agreement, dated as of April 7, 2008, by
and between MabVax Therapeutics, Inc. and Sloan-Kettering Institute
for Cancer Research
|
|
10-Q/A
|
|
8/12/2015
|
|
10.8
|
|
|
|
|
|
|
|
|
|
10.48
|
|
Exclusive License to Unimolecular Antibodies, dated October 13,
2011, by and between MabVax Therapeutics, Inc. and Sloan-Kettering
Institute for Cancer Research
|
|
10-Q/A
|
|
8/12/2015
|
|
10.9
|
|
|
|
|
|
|
|
|
|
10.49
|
|
Option Agreement, dated August 29, 2014, by and between MabVax
Therapeutics, Inc. and Juno Therapeutics, Inc.
|
|
10-Q/A
|
|
8/12/2015
|
|
10.10
|
|
|
|
|
|
|
|
|
|
10.50
|
|
SBIR Contract from National Cancer Institute
|
|
10-Q/A
|
|
8/12/2015
|
|
10.11
|
|
|
|
|
|
|
|
|
|
10.51
|
|
Lease by and between AGP Sorrento Business Complex, L.P., and
MabVax Therapeutics Holdings, Inc., dated as of September 2,
2015
|
|
8-K
|
|
9/3/2015
|
|
10.1
|
|
|
|
|
|
|
|
|
|
10.52
|
|
Form of Amendment Agreement No.3 to Registration Rights
Agreement
|
|
8-K
|
|
10/13/2015
|
|
10.1
|
|
|
|
|
|
|
|
|
|
10.53
|
|
Loan and Security Agreement dated as of January 15,
2016
|
|
8-K
|
|
1/19/2016
|
|
10.1
|
|
|
|
|
|
|
|
|
|
10.54
|
|
Form of Amendment Agreement by and between MabVax Therapeutics,
Inc. and Southern Biotech, Inc.
|
|
10-K
|
|
3/14/2016
|
|
10.54
|
|
|
|
|
|
|
|
|
|
10.55
|
|
Consulting Agreement between MabVax Therapeutics, Inc. and Jeffrey
V. Ravetch, dated as of January 1, 2016
|
|
8-K
|
|
4/7/2016
|
|
10.1
|
|
|
|
|
|
|
|
|
|
10.56
|
|
Employment Agreement between MabVax Therapeutics, Inc. and Paul F.
Resnick dated as of March 16, 2016
|
|
8-K
|
|
4/15/2016
|
|
10.1
|
|
|
|
|
|
|
|
|
|
11.1
|
|
Statement of per share earnings
|
|
S-1
|
|
9/29/2014
|
|
11.1
|
|
|
|
|
|
|
|||
21.1
|
|
Subsidiaries of the Registrant
|
|
S-1
|
|
9/29/2014
|
|
21.1
|
|
|
|
|
|
|
|
|
|
23.1*
|
|
Consent of Independent Registered Public Accounting
Firm
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31.1*
|
|
Certification of Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31.2*
|
|
Certification of Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32.1*
|
|
Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32.2
*
|
|
Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
|
|
|
|
|
|
|
|
|
|
|
|
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101*
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Interactive data file
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* Filed herewith
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: March 1, 2017
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MABVAX THERAPEUTICS HOLDINGS, INC
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By:
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/s/
J. David Hansen
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J. David Hansen
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President and Chief Executive Officer (Principal executive
officer)
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By:
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/s/
Gregory P. Hanson
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Gregory P. Hanson
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Chief Financial Officer (Principal financial and accounting
officer)
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Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated.
Signature
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Title
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Date
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/s/
J. David Hansen
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Chairman of the Board, President and
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March 1, 2017
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J. David Hansen
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(Principal
executive officer)
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/s/
Gregory P. Hanson
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Chief Financial Officer
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March
1, 2017
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Gregory P. Hanson
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(Principal financial and accounting officer)
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/s/
Kenneth M. Cohen
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Director
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March 1, 2017
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Kenneth M. Cohen
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/s/
Jeffrey F. Eisenberg
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Director
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March 1, 2017
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Jeffrey F. Eisenberg
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/s/
Robert E. Hoffman
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Director
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March 1, 2017
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Robert E. Hoffman
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/s/
Philip O. Livingston
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Director
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March 1, 2017
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Philip O. Livingston, M.D.
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/s/
Paul V. Maier
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Director
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March 1, 2017
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Paul V. Maier
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/s/
Jeffrey V. Ravetch
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Director
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March 1, 2017
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Jeffrey V. Ravetch, M.D., Ph.D.
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/s/
Thomas C. Varvaro
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Director
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March 1, 2017
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Thomas C. Varvaro
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MABVAX THERAPEUTICS
HOLDINGS, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
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F-1
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F-2
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F-3
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F-4
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F-8
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F-9
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REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
MabVax Therapeutics Holdings, Inc.
We have audited the accompanying consolidated balance sheets of
MabVax Therapeutics Holdings, Inc. (the “Company”) as
of December 31, 2016 and 2015, and the related consolidated
statements of operations, redeemable convertible preferred stock,
convertible preferred stock and stockholders’ equity, and
cash flows for the years then ended. MabVax Therapeutics Holdings,
Inc.’s management is responsible for these consolidated
financial statements. Our responsibility is to express an opinion
on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. The Company is not required to have,
nor were we engaged to perform, an audit of its internal control
over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing
audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of
the Company’s internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of MabVax Therapeutics Holdings, Inc. as of
December 31, 2016 and 2015, and the results of its operations
and its cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States of
America.
The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going
concern. As discussed in Note 1 to the consolidated financial
statements, the Company has incurred recurring operating losses and
is dependent on additional financing to fund operations. These
conditions raise substantial doubt about the Company’s
ability to continue as a going concern. Management’s plans in
regard to these matters are described in Note 1 to the consolidated
financial statements. The consolidated financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
/s/ CohnReznick LLP
San Diego, California
March 1, 2017
MABVAX THERAPEUTICS HOLDINGS, INC.
Consolidated Balance
Sheets
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December 31,
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2016
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2015
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Assets
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Current
assets:
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Cash
and cash equivalents
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$3,979,290
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$4,084,085
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Grants
receivable
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—
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757,562
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Prepaid
expenses
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281,858
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419,751
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Other
current assets
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32,830
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47,586
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Total
current assets
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4,293,978
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5,308,984
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Property
and equipment, net
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731,712
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135,486
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Goodwill
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6,826,003
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6,826,003
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Other
long-term assets
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168,597
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126,654
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Total
assets
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$12,020,290
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$12,397,127
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Liabilities and Stockholders’ Equity
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Current
liabilities:
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Accounts
payable
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$1,137,903
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$3,002,497
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Accrued
compensation
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770,592
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562,755
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Accrued
clinical operations and site costs
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1,218,641
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391,041
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Accrued
lease contingency fee
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590,504
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590,504
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Other
accrued expenses
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315,034
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411,566
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Interest
payable
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51,295
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—
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Current
portion of notes payable
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1,589,661
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—
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Current
portion of capital lease payable
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17,004
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—
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Total
current liabilities
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5,690,634
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4,958,363
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Long-term
liabilities:
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Long-term
portion of notes payable, net
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2,774,627
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—
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Long-term
portion of capital lease payable
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68,113
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—
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Other
long-term liabilities
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144,394
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—
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Total
long-term liabilities
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2,987,134
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—
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Total
liabilities
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8,677,768
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4,958,363
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Commitments
and contingencies
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Stockholders’
equity:
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Series
D convertible preferred stock, $0.01 par value, 1,000,000 shares
authorized, 132,489 and 191,490 shares issued and outstanding as of
December 31, 2016 and 2015, respectively, with liquidation
preference of $1,325 and $1,915 as of December 31, 2016 and 2015,
respectively
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1,325
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1,915
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Series
E convertible preferred stock, $0.01 par value, 100,000 shares
authorized, 33,333 shares issued and outstanding as of
December 31, 2016 and 2015, with a liquidation preference of
$333 as of December 31, 2016 and 2015
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333
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333
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Series
F convertible preferred stock, $0.01 par value, 1,559,252 shares
authorized, 665,281 shares and none issued and outstanding,
with a liquidation preference of $6,653 and none as of December 31,
2016 and 2015, respectively
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6,653
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—
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Common
stock, $0.01 par value; 150,000,000 shares authorized, 6,296,110
and 3,836,631 shares issued and outstanding as of December 31,
2016 and 2015, respectively
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62,961
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38,366
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Additional
paid-in capital
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81,533,511
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67,999,928
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Accumulated
deficit
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(78,262,261)
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(60,601,778)
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Total
stockholders’ equity
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3,342,522
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7,438,764
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Total
liabilities and stockholders’ equity
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$12,020,290
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$12,397,127
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See Accompanying Notes to Consolidated Financial
Statements.
MABVAX THERAPEUTICS HOLDINGS, INC.
Consolidated Statements of Operations
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For the Years Ended December 31,
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2016
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2015
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Revenues:
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Grants
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$148,054
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$1,267,036
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Total
revenues
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148,054
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1,267,036
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Operating
costs and expenses:
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Research
and development
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7,800,723
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9,596,768
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General
and administrative
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9,010,450
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9,795,163
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Total
operating costs and expenses
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16,811,173
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19,391,931
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Loss
from operations
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(16,663,119)
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(18,124,895)
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Interest
and other expenses, net of income
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(997,364)
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(227)
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Change
in fair value of warrant liability
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—
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19,807
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Net
loss
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(17,660,483)
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(18,105,315)
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Deemed
dividend on Series A-1 preferred stock
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—
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(9,017,512)
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Deemed
dividend on Series A-1 warrant
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—
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(179,411)
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Deemed
dividend on Series B preferred stock
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—
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(8,655,998)
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Accretion
of preferred stock dividends
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—
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(93,234)
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Net
loss allocable to common stockholders
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$(17,660,483)
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$(36,051,470)
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Basic
and diluted net loss per share
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$(3.64)
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$(13.44)
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Shares
used to calculate basic and diluted net loss per share
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4,857,753
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2,681,740
|
See Accompanying Notes to Consolidated Financial
Statements.
MABVAX THERAPEUTICS HOLDINGS, INC.
Consolidated Statements of Redeemable Convertible Preferred Stock,
Convertible Preferred Stock and Stockholders’ Equity
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Redeemable Convertible Preferred Stock
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Convertible Preferred Stock
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|||||
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MabVax Series B
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MabVax Series A-1
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MabVax Series C
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Shares
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Amount
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Total
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Shares
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Amount
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Shares
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Amount
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Balance at December 31, 2014
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$1,250,000
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$1,838,025
|
1,838,025
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1,593,389
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$4,029,576
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96,571
|
$966
|
Conversion
of Series A-1 into common stock on January 10 and February 25,
2015
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—
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—
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—
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(64,019)
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(162,968)
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—
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—
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Conversion
of Series C into common stock on January 10, 2015
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—
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—
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—
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—
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—
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(96,571)
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(966)
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Conversion
of Series B into common stock between March 3 and March 20,
2015
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(106,437)
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(160,380)
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(160,380)
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—
|
—
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—
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Accretion
of redemption value for Series A-1 from January 1 to March 25,
2015
|
—
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—
|
—
|
—
|
47,749
|
|
—
|
Accretion
of redemption value for Series B from January 1 to March 25,
2015
|
—
|
45,485
|
45,485
|
—
|
—
|
|
—
|
Deemed
dividend related to exchange of common stock for Series A-1, Series
A-1 Warrants, and Series B on March 25, 2015
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—
|
8,655,998
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8,655,998
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—
|
9,196.923
|
|
—
|
Exchange
of Series A-1 and Series A-1 Warrants into common and Series D
on March 25, 2015
|
—
|
—
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—
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(1,529,370)
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(13,111,280)
|
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—
|
Exchange
of Series B into Common and Series D on March 25, 2015
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(1,143,563)
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(10,379,128)
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(10,379,128)
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—
|
—
|
|
—
|
Private
Placement Issuance of 900,136 shares at $5.55 per share, net of
issuance costs of $281,023 on March 31, 2015
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—
|
—
|
—
|
—
|
—
|
|
—
|
Issuance
of additional common stock in March 2015 under common stock
Purchase Agreement in relation to financing on July 7,
2014
|
—
|
—
|
—
|
—
|
—
|
|
—
|
Private
Placement Issuance of 760,135 shares at $5.55 per share, net of
issuance costs of $387,127 on April 10, 2015
|
—
|
—
|
—
|
—
|
—
|
|
—
|
Private
Placement Issuance of 33,333 shares at $75 per share of Series E
Preferred Stock on April 10, 2015
|
—
|
—
|
—
|
—
|
—
|
|
—
|
Issuance
of restricted common stock in April 2015 for services
|
—
|
—
|
—
|
—
|
—
|
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—
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Issuance
of restricted common stock to former board member on April 3, 2015
upon termination
|
—
|
—
|
—
|
—
|
—
|
|
—
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Conversion
of Series D Preferred Stock to common stock
|
—
|
—
|
—
|
—
|
—
|
|
—
|
Stock
option exercise
|
—
|
—
|
—
|
—
|
—
|
|
—
|
Shares
issued in connection with exercise of warrants on a cashless
basis
|
—
|
—
|
—
|
—
|
—
|
|
—
|
Elimination
of warrant liability in exchange transaction
|
—
|
—
|
—
|
—
|
—
|
|
—
|
Stock-based
compensation
|
—
|
—
|
—
|
—
|
—
|
|
—
|
Net
loss
|
—
|
—
|
—
|
—
|
—
|
|
—
|
See Accompanying Notes to Consolidated Financial
Statements.
MABVAX THERAPEUTICS HOLDINGS, INC.
Consolidated Statements of Redeemable Convertible Preferred Stock,
Convertible Preferred Stock and Stockholders’
Equity
|
Redeemable Convertible Preferred Stock
|
Convertible Preferred Stock
|
|||||
|
MabVax Series B
|
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MabVax Series A-1
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MabVax Series C
|
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Shares
|
Amount
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Total
|
Shares
|
Amount
|
Shares
|
Amount
|
Balance at December 31, 2015
|
—
|
$—
|
$—
|
—
|
$—
|
—
|
$—
|
Issuance
of warrants in connection with note payable transaction on January
15, 2016
|
—
|
—
|
—
|
—
|
—
|
|
—
|
Issuance
of whole in lieu of fractional shares resulting from reverse split
in August 2016
|
—
|
—
|
—
|
—
|
—
|
|
—
|
Issuance
of Series F convertible preferred stock, warrants and common stock
in August public offering, net of $871,305 in issuance
costs
|
—
|
—
|
—
|
—
|
—
|
|
—
|
Issuance
of additional common stock related to April 2015
financing
|
—
|
—
|
—
|
—
|
—
|
|
—
|
Stock
issued for services
|
—
|
—
|
—
|
—
|
—
|
|
—
|
Conversion of
Series D Preferred Stock to common stock
|
—
|
—
|
—
|
—
|
—
|
|
—
|
Stock
issued upon vesting of restricted stock units in April, July and
August of 2016, net of payroll taxes
|
—
|
—
|
—
|
—
|
—
|
|
—
|
Stock-based
compensation
|
—
|
—
|
—
|
—
|
—
|
|
—
|
Net
loss
|
—
|
—
|
—
|
—
|
—
|
|
—
|
Balance at December 31, 2016
|
—
|
$—
|
—
|
$—
|
—
|
|
$—
|
See Accompanying Notes to Consolidated Financial
Statements.
MABVAX THERAPEUTICS HOLDINGS, INC.
Consolidated Statements of Redeemable Convertible Preferred Stock,
Convertible Preferred Stock and Stockholders’
Equity
Total
Stockholders’
Equity
|
Series D, E & F
Convertible
Preferred
Stock
|
Common
Stock
|
Additional
Paid-in
|
Accumulated
|
Total Stockholders'
|
||
|
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Deficit
|
Equity
|
Balance at December 31, 2014
|
—
|
—
|
378,766
|
3,787
|
24,516,692
|
(24,550,308)
|
4,000,713
|
Conversion
of Series A-1 into common stock on January 10 and February 25,
2015
|
—
|
—
|
5,197
|
52
|
162,916
|
—
|
—
|
Conversion
of Series C into common stock on January 10, 2015
|
—
|
—
|
16,313
|
163
|
803
|
—
|
—
|
Conversion
of Series B into common stock between March 3 and March 20,
2015
|
—
|
—
|
37,416
|
374
|
160,006
|
—
|
160,380
|
Accretion
of redemption value for Series A-1 from January 1 to March 25,
2015
|
—
|
—
|
—
|
—
|
—
|
(47,749)
|
—
|
Accretion
of redemption value for Series B from January 1 to March 25,
2015
|
—
|
—
|
—
|
—
|
—
|
(45,485)
|
(45,485)
|
Deemed
dividend related to exchange of common stock for Series A-1, Series
A-1 Warrants, and Series B on March 25, 2015
|
—
|
—
|
—
|
—
|
—
|
(17,852,921)
|
(8,655,998)
|
Exchange
of Series A-1 and Series A-1 Warrants into common and Series D
on March 25, 2015
|
117,582
|
1,176
|
299,108
|
2,991
|
13,107,113
|
—
|
—
|
Exchange
of Series B into common and Series D on March 25, 2015
|
120,573
|
1,206
|
43,797
|
438
|
10,377,484
|
—
|
10,379,128
|
Private
Placement Issuance of 900,135 shares at $5.55 per share, net of
issuance costs of $281,023 on March 31, 2015
|
—
|
—
|
900,135
|
9,001
|
4,705,525
|
—
|
4,714,726
|
Issuance
of additional common stock in March 2015 under common stock
Purchase Agreement in relation to financing on July 7,
2014
|
—
|
—
|
11,904
|
119
|
(119)
|
—
|
—
|
Private
Placement Issuance of 760,135 shares at $5.55 per share, net of
issuance costs of $387,127 on April 10, 2015
|
—
|
—
|
760,135
|
7,601
|
3,824,021
|
—
|
3,831,622
|
Private
Placement Issuance of 33,333 shares at $75 per share of Series E
Preferred Stock on April 10, 2015
|
33,333
|
333
|
—
|
—
|
2,499,667
|
—
|
2,500,000
|
Issuance
of restricted common stock in April 2015 for services
|
—
|
—
|
247,500
|
2,476
|
1,909,974
|
—
|
1,912,450
|
Issuance
of restricted common stock to former board member on April 3, 2015
upon termination
|
—
|
—
|
2,703
|
27
|
45,973
|
—
|
46,000
|
Conversion
of Series D Preferred Stock to common stock
|
(46,665)
|
(467)
|
630,608
|
6,306
|
(5,839)
|
—
|
—
|
Stock
option exercise
|
—
|
—
|
376
|
4
|
796
|
—
|
800
|
Shares
issued in connection with exercise of warrants on a cashless
basis
|
—
|
—
|
164,835
|
1,648
|
(1,648)
|
—
|
—
|
Elimination
of warrant liability in exchange transaction
|
—
|
—
|
—
|
—
|
72,656
|
—
|
72,656
|
Issuance
of shares in registered offering in October 2015, net of issuance
costs
|
—
|
—
|
337,838
|
3,379
|
2,160,013
|
—
|
2,163,392
|
Stock-based
compensation
|
—
|
—
|
—
|
—
|
4,463,695
|
—
|
4,463,695
|
Net
loss
|
—
|
—
|
—
|
—
|
—
|
(18,105,315)
|
(18,105,315)
|
See Accompanying Notes to Consolidated Financial
Statements.
MABVAX THERAPEUTICS HOLDINGS, INC.
Consolidated Statements of Redeemable Convertible Preferred Stock,
Convertible Preferred Stock and Stockholders’
Equity
|
Series D, E & F
Convertible
Preferred
Stock
|
Common Stock
|
Additional
Paid-in
|
Accumulated
|
Total
Stockholders’
|
||
|
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Deficit
|
Equity
|
Balance at December 31, 2015
|
224,823
|
2,248
|
3,836,631
|
38,366
|
67,999,928
|
(60,601,778)
|
7,438,764
|
Issuance
of warrants in connection with note payable transaction on January
15, 2016
|
—
|
—
|
—
|
—
|
607,338
|
—
|
607,338
|
Issuance
of whole in lieu of fractional shares resulting from reverse split
in August 2016
|
—
|
—
|
2,426
|
24
|
(24)
|
—
|
—
|
Issuance
of Series F convertible preferred stock, warrants and common stock
in August public offering, net of $871,305 in issuance
costs
|
665,281
|
6,653
|
1,297,038
|
12,970
|
8,547,825
|
—
|
8,567,448
|
Issuance
of additional common stock related to April 2015
financing
|
—
|
—
|
255,459
|
2,555
|
(2,555)
|
—
|
—
|
Stock
issued for services
|
—
|
—
|
35,644
|
356
|
163,644
|
—
|
164,000
|
Conversion of
Series D Preferred Stock to common stock
|
(59,001)
|
(590)
|
797,312
|
7,974
|
(7,384)
|
—
|
—
|
Stock
issued upon vesting of restricted stock units in April, July and
August of 2016, net of payroll taxes
|
—
|
—
|
71,600
|
716
|
(178,539)
|
—
|
(177,823)
|
Stock-based
compensation
|
—
|
—
|
—
|
—
|
4,403,278
|
—
|
4,403,278
|
Net
loss
|
—
|
—
|
—
|
—
|
—
|
(17,660,483)
|
(17,660,483)
|
Balance at December 31, 2016
|
831,103
|
$8,311
|
6,296,110
|
$62,961
|
$81,533,511
|
$(78,262,261)
|
$3,342,522
|
See Accompanying Notes to Consolidated Financial
Statements.
MABVAX THERAPEUTICS HOLDINGS, INC.
Consolidated Statements of Cash Flows
|
|
For the Years Ended December 31,
|
|
|||||
|
|
2016
|
|
|
2015
|
|
||
Operating activities
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(17,660,483
|
)
|
|
$
|
(18,105,315
|
)
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
96,553
|
|
|
|
21,360
|
|
Stock-based
compensation
|
|
|
4,403,278
|
|
|
|
4,463,695
|
|
Change
in fair value of warrants
|
|
|
—
|
|
|
|
(19,807
|
)
|
Issuance
of restricted common stock for services
|
|
|
164,000
|
|
|
|
1,958,450
|
|
Amortization
and accretion related to notes payable
|
|
|
413,676
|
|
|
|
—
|
|
Increase
(decrease) in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Grants
receivable
|
|
|
757,562
|
|
|
|
(673,218
|
)
|
Other
receivables
|
|
|
—
|
|
|
|
2,275
|
|
Prepaid
expenses and other
|
|
|
340,187
|
|
|
|
(199,377
|
)
|
Accounts
payable
|
|
|
(1,898,520
|
)
|
|
|
1,631,305
|
|
Accrued
clinical operations and site costs
|
|
|
827,600
|
|
|
|
(103,069
|
)
|
Accrued
compensation
|
|
|
207,837
|
|
|
|
332,374
|
|
Other
accrued expenses
|
|
|
(15,101
|
)
|
|
|
166,145
|
|
Net
cash used in operating activities
|
|
|
(12,363,411
|
)
|
|
|
(10,525,182
|
)
|
Investing activities
|
|
|
|
|
|
|
|
|
Purchases
of property and equipment
|
|
|
(563,196
|
)
|
|
|
(78,416
|
)
|
Net
cash used in investing activities
|
|
|
(563,196
|
)
|
|
|
(78,416
|
)
|
Financing activities
|
|
|
|
|
|
|
|
|
Issuances
of preferred stock, net of issuance costs
|
|
|
—
|
|
|
|
2,500,000
|
|
Proceeds
from exercise of stock options
|
|
|
—
|
|
|
|
800
|
|
Principal
payments on financed insurance policies
|
|
|
(167,597
|
)
|
|
|
—
|
|
Principal
payments on capital lease
|
|
|
(10,540
|
)
|
|
|
—
|
|
Purchase
of vested employee stock in connection with tax withholding
obligation
|
|
|
(177,823
|
)
|
|
|
—
|
|
Cash
receipts from bank loan, net of financing costs
|
|
|
4,610,324
|
|
|
|
—
|
|
Proceeds
from issuance of preferred stock, common stock and warrants, net of
issuance costs
|
|
|
8,567,448
|
|
|
|
10,709,740
|
|
Net
cash provided by financing activities
|
|
|
12,821,812
|
|
|
|
13,210,540
|
|
Net
change in cash and cash equivalents
|
|
|
(104,795
|
)
|
|
|
2,606,942
|
|
Cash
and cash equivalents at beginning of year
|
|
|
4,084,085
|
|
|
|
1,477,143
|
|
Cash
and cash equivalents at end of year
|
|
$
|
3,979,290
|
|
|
$
|
4,084,085
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
Cash
paid during the year for income taxes
|
|
$
|
24,626
|
|
|
$
|
1,600
|
|
Supplemental disclosures of non-cash investing and financing
information:
|
|
|
|
|
|
|
|
|
Deemed
dividend on beneficial conversion feature for preferred
stock
|
|
$
|
—
|
|
|
$
|
17,852,921
|
|
Capital
lease in connection with purchase of equipment
|
|
$
|
95,657
|
|
|
$
|
—
|
|
Fair
value of warrants issued
|
|
$
|
607,338
|
|
|
$
|
—
|
|
Accretion
of redemption value for Series A-1 and B preferred
stock
|
|
$
|
—
|
|
|
$
|
93,234
|
|
Conversion
of Series B redeemable preferred stock into common
stock
|
|
$
|
—
|
|
|
$
|
160,380
|
|
Conversion
of Series D preferred stock into common stock
|
|
$
|
7,974
|
|
|
$
|
6,306
|
|
Conversion
of Series A-1 preferred stock into common stock
|
|
$
|
—
|
|
|
$
|
162,968
|
|
Exchange
of Series A-1 preferred stock and warrants to common stock and
Series D convertible preferred stock
|
|
$
|
—
|
|
|
$
|
13,111,280
|
|
Exchange
of Series B preferred stock and warrants to common stock and Series
D convertible preferred stock
|
|
$
|
—
|
|
|
$
|
10,451,784
|
|
Warrants
exercised to purchase common stock on a cashless basis
|
|
$
|
—
|
|
|
$
|
12,198
|
|
Elimination
of warrant liability in exchange transaction
|
|
$
|
—
|
|
|
$
|
72,656
|
|
Financing
transaction not yet paid
|
|
$
|
—
|
|
|
$
|
36,570
|
|
Conversion
of Series C preferred stock to common stock
|
|
$
|
—
|
|
|
$
|
966
|
|
Property and equipment
accrued in accounts payable
|
|
$
|
33,934
|
|
|
$
|
21,376
|
|
See Accompanying Notes to Consolidated Financial
Statements.
MABVAX THERAPEUTICS HOLDINGS, INC.
Notes to Consolidated Financial
Statements
1. Nature of Operations and Basis of Presentation
MabVax Therapeutics Holdings, Inc. (f.k.a. Telik, Inc. and referred
to herein as “MabVax Therapeutics Holdings” or the
“Company”) (NASDAQ: MBVX) was incorporated in the state
of Delaware on October 20, 1988. On July 8, 2014, Tacoma
Acquisition Corp., a Delaware corporation and wholly owned
subsidiary of MabVax Therapeutics Holdings (“Tacoma
Corp.”) merged with MabVax Therapeutics, Inc., a Delaware
corporation (“MabVax Therapeutics”) pursuant to an
Agreement and Plan of Merger, dated May 12, 2014, by and among
MabVax Therapeutics Holdings, Tacoma Corp. and MabVax Therapeutics,
as amended by that certain Amendment No. 1 to the Merger
Agreement, dated June 30, 2014, by and among the parties
thereto and by that certain Amendment No. 2 to the Merger
Agreement, dated July 7, 2014, by and among the parties
thereto (such agreement as amended, the “Merger
Agreement”; such Merger, the “Merger”). Unless
the context otherwise requires, references to “we,”
“our,” “us,” or the “Company”
in this Annual Report mean MabVax Therapeutics Holdings, Inc. on a
consolidated financial statement basis with our wholly owned
subsidiary following the Merger, MabVax Therapeutics, as
applicable. On October 9, 2014, the Financial Industry
Regulatory Authority (FINRA) approved
the Company’s stock symbol change request and the Company
began trading on the OTCQB under the symbol MBVX on October 10,
2014. On August 17, 2016, our common stock began trading on The
NASDAQ Capital Market under the symbol
“MBVX.”
On
August 16, 2016, we filed a certificate of amendment to our Amended
and Restated Certificate of Incorporation with the Secretary of
State of the State of Delaware in order to effectuate a reverse
stock split of our issued and outstanding common stock on a 1 for
7.4 basis, effective on August 16, 2016 (the “Reverse Stock
Split”). The Reverse Stock Split was effective with FINRA and
the Company’s common stock began trading on The NASDAQ
Capital Market at the open of business on August 17, 2016.
All share and per share amounts, and
number of shares of common stock into which each share of preferred
stock will convert, in the financial statements and notes hereto
have been retroactively adjusted for all periods presented to give
effect to the Reverse Stock Split, including reclassifying an
amount equal to the reduction in par value of common stock to
additional paid-in capital.
The Company is a clinical stage biopharmaceutical company engaged
in the discovery, development and commercialization of proprietary
human monoclonal antibody products and vaccines for the treatment
of a variety of cancers. The Company has discovered a pipeline of
human monoclonal antibody products based on the protective immune
responses generated by patients who have been immunized against
targeted cancers. Therapeutic vaccines under development were
discovered at Memorial Sloan Kettering Cancer Center
(“MSK”) and are exclusively licensed to MabVax
Therapeutics. The Company operates in only one business
segment.
The Company has incurred net losses since inception and expects to
incur substantial losses for the foreseeable future as it continues
its research and development activities. To date, the Company has
funded operations primarily through government grants, the sale of
preferred stock and equity securities, debt financing, non-equity
payments from collaborators and interest income. The process of
developing products will require significant additional research
and development, preclinical testing and clinical trials, as well
as regulatory approvals. The Company expects these activities,
together with general and administrative expenses, to result in
substantial operating losses for the foreseeable future. The
Company will not receive substantial revenue unless the Company or
its collaborative partners complete clinical trials, obtain
regulatory approvals and successfully commercialize one or more
products; or the Company licenses its technology after achieving
one or more milestones of interest to a potential
partner.
The
preparation of consolidated financial statements in conformity with
GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts of
expenses during the reporting period. Management believes that
these estimates are reasonable; however, actual results may differ
from these estimates.
Liquidity and Going Concern
The accompanying consolidated financial statements have been
prepared on the going concern basis, which assumes that the Company
will continue to operate as a going concern and which contemplates
the realization of assets and the satisfaction of liabilities and
commitments in the normal course of business. As reflected in the
accompanying consolidated financial statements, the Company had a
net loss of $17,660,483, net cash used in operating activities of
$12,363,411 and net cash used in investing activities of $563,196
for the year ended December 31, 2016. As of December 31,
2016, the Company had $3,979,290 in cash and cash equivalents and
an accumulated deficit of $78,262,261.
On
January 15, 2016, the Company and Oxford Finance LLC, as collateral
agent and lender, entered into a loan and security agreement (the
“Loan Agreement”) providing for senior secured term
loans to the Company in an aggregate principal amount of up to
$10,000,000, subject to the terms and conditions set forth in the
Loan Agreement (the “January 2016 Term
Loan”). On January 15, 2016, the Company received
an initial loan of $5,000,000 under the Loan Agreement, before fees
and issuance costs of approximately $390,000.
On
August 22, 2016, we closed a public offering of 1,297,038 shares of
common stock and 665,281 shares of Series F Preferred Stock, and
warrants to purchase 1,962,319 shares of common stock at $5.55 per
share and warrants to purchase 1,962,319 shares of common stock at
$6.29 per share, at an offering price of $4.81 per share (the
“August 2016 Public Offering”). For every one
share of common stock or Series F Preferred Stock sold, we issued
one warrant to purchase one share of common stock at $5.55 per
share and one warrant to purchase one share of common stock at
$6.29 per share. We received $9,438,753 in gross proceeds,
before underwriting discounts and commissions and offering expenses
totaling $871,305. The gross proceeds include the
underwriters’ over-allotment option, which they exercised on
the closing date.
We
anticipate that the Company will continue to incur net losses into
the foreseeable future as we: (i) continue our Phase I clinical
trial for our standalone therapeutic HuMab 5b-1, designated as
MVT-5873 that was initiated in the first quarter of 2016; (ii)
continue our Positron Emission Tomography (“PET”)
imaging agent 89Zr-HuMab-5B1, designated as MVT-2163 that was
initiated in July 2016; (iii) initiate our clinical trial for the
development of our HuMab-based radioimmunotherapy product,
designated as MVT-1075; (iv) continue preclinical work on several
other programs; and (iv) continue operations as a public
company. Management believes that the Company has sufficient funds
to meet its obligations through April 2017. These conditions give
rise to substantial doubt as to the Company’s ability to
continue as a going concern. The accompanying consolidated
financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
We
plan to continue to fund the Company’s losses from operations
and capital funding needs through equity or debt financings,
strategic collaborations, licensing arrangements, government grants
or other arrangements. However, we cannot be sure that such
additional funds will be available on reasonable terms, or at all.
If we are unable to secure adequate additional funding, we may be
forced to make reductions in spending, extend payment terms with
suppliers, liquidate assets where possible, and/or suspend or
curtail planned programs. In addition, if the Company does not meet
its payment obligations to third parties as they come due, it may
be subject to litigation claims. Even if we are successful in
defending against these claims, litigation could result in
substantial costs and be a distraction to management. Any of these
actions could materially harm the Company’s business, results
of operations, and future prospects.
If
the Company raises additional funds by issuing equity securities,
substantial dilution to existing stockholders would result. If the
Company raises additional funds by incurring debt financing, the
terms of the debt may involve significant cash payment obligations
as well as covenants and specific financial ratios that may
restrict the Company’s ability to operate its
business.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements reflect all of
our activities, including those of our wholly owned subsidiaries.
All material intercompany accounts and transactions have been
eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America (“GAAP”) requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
expenses during the reporting period. Management believes that
these estimates are reasonable; however, actual results may differ
from these estimates.
Cash and Cash Equivalents
We consider all highly liquid investments purchased with original
maturities of three months or less to be cash equivalents. The
Company minimizes its credit risk associated with cash and cash
equivalents by periodically evaluating the credit quality of its
primary financial institution. The balance at times may exceed
federally insured limits. As of December 31, 2016, cash and cash
equivalents exceeded federally insured limits by approximately $3.7
million. The Company has not experienced any losses on such
accounts.
Fair Value of Financial Instruments
The Company’s financial instruments consist of cash and cash
equivalents, grants receivable, other receivable, accounts payable,
all of which are generally considered to be representative of their
respective fair values because of the short-term nature of those
instruments.
Grants Receivable
Grants receivable at December 31, 2015 represented amounts due
under the NIH Imaging Contract Phase II with the National Cancer
Institute (the “NCI”), a division of the National
Institutes of Health, or NIH (collectively, the “NIH
Grants”). The Company considers the grants receivable to be
fully collectible; accordingly, no allowance for doubtful accounts
has been established. Grants receivable balances may include
unbilled amounts for which work was completed by the Company as of
the balance sheet date. If amounts become uncollectible, they are
charged to operations. There were no grant receivable amounts
outstanding as of December 31, 2016,
Property and Equipment
Property and equipment are carried at cost less accumulated
depreciation. Depreciation of property and equipment is computed
using the straight-line method over the estimated useful lives of
the assets, which are generally three to seven years. Leasehold
improvements are amortized over the lesser of the life of the lease
or the life of the asset.
Impairment of Long-lived Assets
We evaluate the Company’s long-lived assets with definite
lives, such as property and equipment, for impairment. We record
impairment losses on long-lived assets used for operations when
indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the
carrying value of the assets. There have not been any impairment
losses of long-lived assets for the years ended December 31,
2016 and 2015.
Impairment of Goodwill
The
Company applies the GAAP principles related to Intangibles –
Goodwill and Other related to performing a test for
goodwill impairment annually. For the years ended December 31, 2016
and 2015, the Company performed a step 1 analysis and assessed the
market value of the Company to determine whether an impairment had
taken place. Based upon the analysis performed no impairment was
noted, therefore performing step 2 was not required. The Company
has concluded that no impairment of Goodwill has taken place for
the years ended December 31, 2016 and 2015. Further, in performing
a qualitative assessment, the Company concluded no events and
circumstances have taken place that would have indicated that an
impairment had taken place.
Revenue Recognition
Revenue from grants is based upon internal and subcontractor costs
incurred that are specifically covered by the grant, including a
facilities and administrative rate that provides funding for
overhead expenses. NIH Grants are recognized when the Company
incurs internal expenses that are specifically related to each
grant, in clinical trials at the clinical trial sites, by
subcontractors who manage the clinical trials, and provided the
grant has been approved for payment. The Company records revenue
associated with the NIH Grants as the related costs and expenses
are incurred. Any amounts received by the Company pursuant to the
NIH Grants prior to satisfying the Company’s revenue
recognition criteria are recorded as deferred revenue.
Research and Development Costs
Research and development expenses, which consist primarily of
salaries and other personnel costs, clinical trial costs and
preclinical study fees, manufacturing costs for non-commercial
products, and the development of earlier-stage programs and
technologies, are expensed as incurred when these expenditures have
no alternative future uses. A significant portion of the
development activities are outsourced to third parties, including
contract research organizations. In such cases, the Company may be
required to estimate related service fees incurred.
Stock-based Compensation
The Company’s stock-based compensation programs include
grants of common stock and stock options to employees, non-employee
directors and non-employee consultants. Stock-based compensation
cost is measured at the grant date, based on the calculated fair
value of the award, and is recognized as an expense, under the
straight-line method, over the employee’s requisite service
period (generally the vesting period of the equity
grant).
The Company accounts for equity instruments, including common stock
and stock options, issued to non-employees in accordance with
authoritative guidance for equity based payments to non-employees.
Stock options issued to non-employees are accounted for at their
estimated fair value determined using the Black-Scholes-Merton
option-pricing model. The fair value of options granted to
non-employees is re-measured as they vest, and the resulting
increase in value, if any, is recognized as expense during the
period the related services are rendered.
Income Taxes
The Company uses the asset and liability method of accounting for
income taxes. Deferred tax assets and liabilities are recognized
for the estimated future tax consequences attributable to basis
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or
settled. Valuation allowances are established when necessary to
reduce deferred tax assets to the amount expected to be realized.
As of December 31, 2016 and 2015, all deferred tax assets were
fully offset by a valuation allowance.
The Company accrues interest and penalties, if any, on underpayment
of income taxes related to unrecognized tax benefits as a component
of income tax expense in its consolidated statements of
operations.
Fair Value Measurements
Level 1 fair value inputs are quoted prices for identical items in
active, liquid and visible markets such as stock exchanges.
Level 2 fair value inputs are observable information for
similar items in active or inactive markets, and appropriately
consider counterparty creditworthiness in the valuations. Level 3
fair value inputs reflect our best estimate of inputs and
assumptions market participants would use in pricing an asset or
liability at the measurement date. The inputs are unobservable in
the market and significant to the valuation estimate.
3. Recent Accounting Pronouncements
In November 2015, the FASB issued Accounting Standards Update No.
2015-17, Income Taxes. Current GAAP requires an entity to separate
deferred income tax liabilities and assets into current and
noncurrent amounts in a classified balance sheet. The new standard
simplifies the presentation of deferred tax assets and liabilities
and requires that deferred tax assets and liabilities be classified
as noncurrent in a classified balance sheet. This ASU is effective
for financial statements issued for fiscal years beginning after
December 15, 2015, with early adoption permitted. This ASU affected
our disclosures relating to deferred tax assets and liabilities.
The Company has applied this guidance prospectively and it did not
have a material impact on the consolidated balance
sheets.
In February 2016, the FASB issued ASU 2016-2,"Leases (Topic
842)." This update will increase transparency and
comparability by recognizing lease assets and lease liabilities on
the balance sheet and disclosing key information about leasing
arrangements. Under the new guidance, lessees will be
required to recognize the following for all leases (with the
exception of short-term leases) at the commencement date (i) a
lease liability, which is a lessee’s obligation to make lease
payments arising from a lease, measured on a discounted basis; and
(ii) a right-of-use asset, which is an asset that represents the
lessee’s right to use, or control the use of, a specified
asset for the lease term. Under the new guidance, lessor accounting
is largely unchanged, and it simplified the accounting for sale and
leaseback transactions. Lessees will no longer be provided with a
source of off-balance sheet financing. Lessees (for capital and
operating leases) and lessors (for sales-type, direct financing,
and operating leases) must apply a modified retrospective
transition approach for leases existing at, or entered into after,
the beginning of the earliest comparative period presented in the
financial statements. The modified retrospective approach would not
require any transition accounting for leases that expired before
the earliest comparative period presented. Lessees and lessors may
not apply a full retrospective transition approach. The standard is
effective for fiscal years beginning after December 15, 2018,
including interim periods within those fiscal years. We are
currently in the process of assessing what impact this new standard
may have on our consolidated financial statements.
In March 2016, the FASB issued ASU 2016-09,
“Compensation—Stock Compensation (Topic 718):
Improvements to Employee Share-Based Payment Accounting.”
This update includes multiple provisions intended to simplify
various aspects of the accounting for share-based payment
transactions including accounting for excess tax benefits and tax
deficiencies, classification of excess tax benefits in the
statement of cash flows and accounting for award forfeitures. This
update is effective for annual and interim reporting periods of
public entities beginning after December 15, 2016, with early
adoption permitted. We do not expect the adoption of this
new standard to have a material impact on our consolidated
financial statements.
In
August 2016, the FASB issued ASU No. 2016-15 (“ASU
2016-15”), “Statement of Cash Flows (Topic 230):
Classification of Certain Cash Receipts and Cash Payments.”
The standard provides guidance on eight (8) cash flow issues: (1)
debt prepayment or debt extinguishment costs; (2) settlement of
zero-coupon bonds; (3) contingent consideration payments after a
business combination; (4) proceeds from the settlement of insurance
claims; (5) proceeds from the settlement of corporate-owned life
insurance policies; (6) distributions received from equity method
investees; (7) beneficial interests in securitization transactions;
and (8) separately identifiable cash flows and application of the
predominance principle. ASU 2016-15 addresses how certain cash
receipts and cash payments are presented and classified in the
statement of cash flows. ASU 2016-15 is effective for fiscal years,
and interim periods within those years, beginning after December
15, 2017 with early adoption permitted. We do not expect the
adoption of this new standard to have a material impact on our
consolidated financial statements.
In August 2014, the FASB issued ASU No. 2014-15 ("ASU
2014-15"), “Disclosure of Uncertainties about an
Entity’s Ability to Continue as a Going Concern.”
This standard provides guidance on management’s
responsibility in evaluating whether there is substantial doubt
about a company’s ability to continue as a going
concern and to provide related footnote disclosures. ASU No.
2014-15 is effective for fiscal years ending after December 15,
2016 and for interim and annual periods therein with early adoption
permitted. The adoption of this new standard did not have a
material impact on our consolidated financial
statements.
Management does not believe that any other recently issued, but not
yet effective, accounting standards if currently adopted would have
a material effect on the accompanying consolidated financial
statements.
4. Property and Equipment, Net
Property and equipment consisted of the following as of
December 31, 2016 and 2015:
|
December 31,
|
|
|
2016
|
2015
|
Furniture
and fixtures
|
$51,909
|
$8,979
|
Office
equipment
|
52,547
|
52,547
|
Lab
equipment
|
894,942
|
400,301
|
Capital
lease equipment
|
95,657
|
—
|
Leasehold
improvement
|
59,555
|
—
|
|
1,154,610
|
461,827
|
Less
accumulated depreciation and amortization
|
(422,898)
|
(326,341)
|
Totals
|
$731,712
|
$135,486
|
Depreciation expense for the years ended December 31, 2016 and
2015 was $96,553 and $21,360, respectively.
5. Reverse Stock Split
On
August 16, 2016, we filed a certificate of amendment to our Amended
and Restated Certificate of Incorporation with the Secretary of
State of the State of Delaware in order to effectuate a reverse
stock split of our issued and outstanding common stock on a 1 for
7.4 basis, effective on August 16, 2016 (the “Reverse Stock
Split”). The Reverse Stock Split was effective with FINRA and
the Company’s common stock began trading on The NASDAQ
Capital Market at the open of business on August 17, 2016.
All share and per share amounts, and
number of shares of common stock into which each share of preferred
stock will convert, in the financial statements and notes hereto
have been retroactively adjusted for all periods presented to give
effect to the Reverse Stock Split, including reclassifying an
amount equal to the reduction in par value of common stock to
additional paid-in capital.
6. Notes Payable, Net
On
January 15, 2016, we entered into a loan and security agreement
with Oxford Finance LLC pursuant to which we had the option to
borrow $10,000,000 in two equal tranches of $5,000,000 each (the
“Loan Agreement”). The first tranche of
$5,000,000 was funded at close on January 15, 2016 (the “Term
A Loan”). The option to fund the second tranche of $5,000,000
(the “Term B Loan”) was upon the Company achieving
positive interim data on the Phase 1 HuMab-5B1 antibody trial in
pancreatic cancer and successfully uplisting to either the NASDAQ
Capital Market or NYSE MKT on or before September 30,
2016. The option for the Term B Loan expired on
September 30, 2016. The Company is not pursuing completion of any
additional debt financing with Oxford Finance LLC at the present
time. The interest rate for the Term A Loan is set on a monthly
basis at a rate equal to the greater of: the index rate plus
11.29%, where the index rate is the 30-day LIBOR rate; or 11.5%.
Interest is due on the first day of each month, in arrears,
calculated based on a 360-day year. The loan is interest
only for the first year after funding, and the principal amount of
the loan is amortized in equal principal payments, plus period
interest, over the next 36 months. A facility fee of
1.0% or $100,000 was due at closing of the transaction, and was
incurred and paid by the Company on January 15,
2016. The Company is obligated to pay a $150,000 final
payment upon completion of the term of the loan, and this amount is
being accreted using the effective interest rate method over the
term of the loan. The amount being accreted is included in the
long-term portion of notes payable, net, on the balance sheet Each
of the term loans can be prepaid subject to a graduated prepayment
fee, depending on the timing of the prepayment.
Concurrent
with the closing of the transaction, the Company issued 225,226
common stock purchase warrants to Oxford Finance LLC with an
exercise price of $5.55 per share. The warrants are
exercisable for five years and may be exercised on a cashless
basis, and expire on January 15, 2021. The Company recorded
$607,338 for the fair value of the warrants as a debt discount
within notes payable and an increase to additional paid-in capital
on the Company’s balance sheet. We used the
Black-Scholes-Merton valuation method to calculate the value of the
warrants. The debt discount is being amortized as interest expense
over the term of the loan using the effective interest
method.
We
granted Oxford Finance LLC a perfected first priority lien on all
of the Company’s assets with a negative pledge on
intellectual property. The Company paid Oxford Finance LLC a good
faith deposit of $50,000, which was applied towards the facility
fee at closing. The Company agreed to pay all costs,
fees and expenses incurred by Oxford Finance LLC in the initiation
and administration of the facilities including the cost of loan
documentation.
At
the initial funding, the Company received net proceeds of
approximately $4,610,000 after fees and expenses. These fees and
expenses are being accounted for as a debt discount and classified
within notes payable on the Company’s consolidated balance
sheet as a direct deduction from the carrying amount of the notes
payable, consistent with debt discounts. Debt discounts, issuance
costs and the final payment are being amortized or accreted as
interest expense over the term of the loan using the effective
interest method.
The
Loan Agreement also contains customary indemnification obligations
and customary events of default, including, among other things, our
failure to fulfill certain of the Company's obligations under the
Loan Agreement, the occurrence of a material adverse change, which
is defined as a material adverse change in the Company's business,
operations, or condition (financial or otherwise), a material
impairment of the prospect of repayment of any portion of the loan,
or a material impairment in the perfection or priority of the
Lenders’ lien in the collateral or in the value of such
collateral. In the event of default by the Company under the
Loan Agreement, the Lenders would be entitled to exercise their
remedies thereunder, including the right to accelerate payment of
the debt, upon which we may be required to repay all amounts then
outstanding under the Loan Agreement, which could harm the
Company's financial condition.
The
Company was in compliance with all applicable covenants set forth
in the Loan Agreement as of December 31, 2016.
The
Company recorded interest expense related to the term loan of
$997,389 for the year ended December 31, 2016. The annual effective
interest rate on the note payable, including the amortization of
the debt discounts and accretion of the final payment, but
excluding the warrant amortization, is approximately
12.4%.
As
of December 31, 2016, the Company has one insurance premium
note outstanding with a balance totaling $61,883, which
matures in April 2017. This note bears interest at a
rate of 4.5% per annum, and the monthly payments are
$20,783.
Future
principal payments under the Loan Agreement and insurance premium
note as of December 31, 2016 are as follows:
Years
ending December 31:
|
|
2017
|
$1,589,661
|
2018
|
1,666,667
|
2019
|
1,666,667
|
2020
|
138,889
|
Notes
payable, balance as of December 31, 2016
|
5,061,884
|
Unamortized
discount on notes payable
|
(697,596)
|
Notes
payable, net, balance as of December 31, 2016
|
4,364,288
|
Current
portion of notes payable, net
|
(1,589,661)
|
Long-term
portion of notes payable, net
|
$2,774,627
|
7. Redeemable Convertible Preferred Stock, Convertible Preferred
Stock, Common Stock and Warrants
MabVax Therapeutics Holdings Series B Redeemable Convertible
Preferred Stock and Warrants (Pre-Merger MabVax Therapeutics
Issuances)
On May 12, 2014, MabVax Therapeutics Holdings entered into a
securities purchase agreement with certain purchasers pursuant to
which MabVax Therapeutics Holdings agreed to issue and sell,
subject to customary closing conditions, an aggregate of 1,250,000
shares of MabVax Therapeutics Series B Preferred Stock and warrants
(the “Series B Common Warrants”) to purchase up to an
additional 10,557 shares of MabVax Therapeutics Holdings common
stock, with an aggregate purchase price of $2,500,000, or $2.00 for
each share of our Series B Preferred Stock and related Series B
Common Warrants.
As a result of the Series B Common Warrants’ anti-dilution
provision, the Series B Common Warrants were recorded as a current
liability in the amount of $92,463 on our consolidated balance
sheet as of December 31, 2014. On March 25, 2015, the Series B
Common Warrants were re-valued at $72,656 prior to being exchanged
into shares of common stock and Series D Preferred Stock and the
warrant liability was eliminated and the Company recorded a gain of
$19,807 for the year ended December 31, 2015.
The changes in the value of the warrant liability during the year
ended December 31, 2015 were as follows:
Fair
value – beginning of year
|
$92,463
|
Change
in fair value
|
(19,807)
|
Cancellation
of warrants
|
(72,656)
|
Fair
value – end of year
|
$—
|
At December 31, 2016 and 2015, there were no financial instruments
requiring fair value measurement.
Dividends on Preferred Stock
The Company immediately recognizes the changes in the redemption
value on preferred stock as they occur and the carrying value of
the security is adjusted to equal what the redemption amount would
be as if redemption were to occur at the end of the reporting
period based on the conditions that exist as of that date. The
value adjustment made to the redemption value and preferred stock
dividends on the Series A-1 Preferred Stock and Series B Preferred
Stock for the year ended December 31, 2016 and 2015, was an
increase of none and $93,234, respectively.
Since
the Company’s inception, no dividends were ever declared or
paid by the Company’s Board of Directors on either of the
Company’s Series A Preferred Stock or Series B Preferred
Stock.
Conversion of Preferred Stock into Common Stock
During
quarter ended March 31, 2015, holders of Series A-1 Preferred
Stock, Series B Preferred Stock, and Series C Preferred Stock
converted 64,019, 106,437, and 96,571 shares into 5,197, 37,417,
and 16,313 shares of common stock, respectively; such conversions
eliminated all outstanding Series A-1 Preferred Stock, Series B
Preferred Stock, and Series C Preferred Stock
outstanding.
Exchange of Series A-1 Preferred
Stock and Series B Preferred Stock and Warrants into Common Stock
and Series D Preferred Stock
On
March 25, 2015, the Company entered into separate exchange
agreements with certain holders of the Company’s Series A-1
Preferred Stock and Merger warrants (the “Series A-1 Exchange
Securities”) and holders of the Company’s Series B
Preferred Stock and Series B warrants (the “Series B Exchange
Securities” and, collectively with the Series A-1 Exchange
Securities, the “Exchange Securities”), all previously
issued by the Company. Pursuant to the exchange agreements, the
holders exchanged the Exchange Securities and relinquished any and
all other rights they may have had pursuant to the Exchange
Securities, their respective governing agreements and certificates
of designation, including any related registration rights, in
exchange for an aggregate of 342,906 shares of the Company’s
common stock and an aggregate of 238,156 shares of the
Company’s newly designated Series D Preferred Stock ,
convertible into 3,218,325 shares of common stock. No
cash was exchanged in the transaction. The Company
recorded deemed dividends of $9,017,512, $8,655,998 and $179,411
representing the excess fair value of the common stock issued over
the original conversion terms of the Series A-1 Preferred Stock and
B Preferred Stock as part of the consideration for elimination of
the Series A-1 Preferred Stock, Series B Preferred Stock and Series
A-1 warrant, respectively.
As
of March 25, 2015, pursuant to the terms of the exchange
agreements, the Series A-1 Purchase Agreement, dated February 12,
2014; the Series A-1 Registration Rights Agreement, dated February
12, 2014; the Series B Purchase Agreement, dated May 12, 2014; and
the Series B Registration Rights Agreement, dated May 12, 2014; all
of which have been described as part of the Company’s annual
report on Form 10-K, were terminated, and all rights covenants,
agreements and obligations contained therein, are of no further
force or effect.
No commission or other payment was received by the Company in
connection with the exchange agreements.
Series D Preferred Stock
As
of December 31, 2016, there were 132,489 shares of Series D
Preferred Stock issued and outstanding that are convertible into an
aggregate of 1,790,392 shares of common stock, as compared to
191,490 that were convertible into 2,587,703 shares of common stock
as of December 31, 2015.
As contemplated by the exchange agreements and as approved by the
Company’s Board of Directors, the Company filed with the
Secretary of State of the State of Delaware a Certificate of
Designation of Preferences, Rights and Limitations of Series D
Convertible Preferred Stock (the “Series D Certificate of
Designations”), on March 25, 2015. Pursuant to the
Series D Certificate of Designations, the Company designated
1,000,000 shares of its blank check preferred stock as Series D
Preferred Stock. Each share of Series D Preferred Stock has a
stated value of $0.01 per share. In the event of a
liquidation, dissolution or winding up of the Company, each share
of Series D Preferred Stock will be entitled to a per share
preferential payment equal to the par value. Each share of Series D
Preferred Stock is convertible into 13.5135 shares of common
stock. The conversion ratio is subject to adjustment in the
event of stock splits, stock dividends, combination of shares and
similar recapitalization transactions. The Company is
prohibited from effecting the conversion of the Series D Preferred
Stock to the extent that, as a result of such conversion, the
holder beneficially would own more than 4.99% (provided that
certain investors elected to block their beneficial ownership
initially at 2.49% in the exchange agreements), in the aggregate,
of the issued and outstanding shares of the Company’s common
stock calculated immediately after giving effect to the issuance of
shares of common stock upon the conversion of the Series D
Preferred Stock. Each share of Series D Preferred Stock
entitles the holder to vote on all matters voted on by holders of
common stock. With respect to any such vote, each share of Series D
Preferred Stock entitles the holder to cast such number of votes
equal to the number of shares of common stock such shares of Series
D Preferred Stock are convertible into at such time, but not in
excess of the beneficial ownership limitations.
Series E Preferred Stock
As
of December 31, 2016 and December 31, 2015, there were 33,333
shares of Series E Preferred Stock issued and outstanding,
convertible into 519,751 and 450,446 shares of common stock,
respectively.
On
March 30, 2015, the Company filed with the Secretary of State of
the State of Delaware a Certificate of Designation of Preferences,
Rights and Limitations of Series E Convertible Preferred Stock (the
“Series E Certificate of Designations”) to designate
100,000 shares of its blank check preferred stock as Series E
Preferred Stock.
The
shares of Series E Preferred Stock are convertible into shares of
common stock based on a conversion calculation equal to the stated
value of such preferred share, plus all accrued and unpaid
dividends, if any, on such share of Series E Preferred Stock, as of
such date of determination, divided by the conversion price. The
stated value of each share of Series E Preferred Stock is $75 and
the initial conversion price is $5.55 per share, each subject to
adjustment for stock splits, stock dividends, recapitalizations,
combinations, subdivisions or other similar events. In addition,
during the period proscribed for in the Series E Certificate of
Designations, in the event the Company issues or sells, or is
deemed to issue or sell, shares of common stock at a per share
price that is less than the conversion price then in effect, the
conversion price shall be reduced to such lower price, subject to
certain exceptions. The Company is prohibited from effecting a
conversion of the share of Series E Preferred Stock to the extent
that, as a result of such conversion, such holder would
beneficially own more than 4.99% of the number of shares of common
stock outstanding immediately after giving effect to the issuance
of shares of common stock upon conversion of the Series E Preferred
Stock, which beneficial ownership limitation may be increased by
the holder up to, but not exceeding, 9.99%. Each holder is entitled
to vote on all matters submitted to stockholders of the Company,
and shall have the number of votes equal to the number of shares of
common stock issuable upon conversion of such holder’s share
of Series E Preferred Stock, but not in excess of beneficial
ownership limitations. The shares of Series E Preferred Stock bear
no interest.
On August 22, 2016, when the Company closed on the August 2016
Public Offering, the current Series E Preferred Stock conversion
price of $5.55 per share was reduced to $4.81 per share under the
terms of the Series E Certificate of Designations, resulting in an
increase in the number of shares of common stock to 519,751 that
the Series E Preferred Stock may be converted into. In the event of
a liquidation, dissolution or winding up of the Company, each share
of Series E preferred stock will be entitled to a per share
preferential payment equal to the stated value. There is no further
adjustment required by the Series E Certificate of Designations in
the event of an offering of shares below $4.81 per share by the
Company.
Series F Preferred Stock
As
of December 31, 2016 and December 31, 2015, there were 665,281 and
0 shares of Series F Preferred Stock issued and outstanding,
convertible into 665,281 and 0 shares of common stock,
respectively. In the event of a liquidation, dissolution or winding
up of the Company, each share of Series F Preferred Stock will be
entitled to a per share preferential payment equal to the par
value.
On
August 16, 2016, we filed a Certificate of Designations,
Preferences and Rights of the 0% Series F Convertible Preferred
Stock with the Delaware Secretary of State, designating 1,559,252
shares of preferred stock as 0% Series F Preferred Stock.
The
shares of Series F Preferred
Stock are convertible into shares of common stock based on a
conversion calculation equal to the stated value of such Series F
Preferred Stock, plus all
accrued and unpaid dividends, if any, on such Series F Preferred Stock, as of such date of
determination, divided by the conversion price. The stated value of
each share of Series F Preferred
Stock is $4.81 and the initial conversion price is $4.81 per
share, each subject to adjustment for stock splits, stock
dividends, recapitalizations, combinations, subdivisions or other
similar events. In the event of a liquidation, dissolution or
winding up of the Company, each share of Series F Preferred Stock will be entitled to a per
share preferential payment equal to the par value. All shares of
the Company’s capital stock will be junior in rank to Series
F Preferred Stock with respect
to the preferences as to dividends, distributions and payments upon
the liquidation, dissolution and winding-up of the Company, except
for the Company’s Series D Preferred Stock and Series E Preferred Stock.
The
holders of Series F Preferred
Stock will be entitled to receive dividends if and when
declared by our board of directors. The Series F Preferred Stock shall participate on an
“as converted” basis, with all dividends declared on
the Company’s common stock. In addition, if we grant, issue
or sell any rights to purchase our securities pro rata to all our
record holders of our common stock, each holder will be entitled to
acquire such securities applicable to the granted purchase rights
as if the holder had held the number of shares of common stock
acquirable upon complete conversion of all Series F Preferred Stock then held.
We are
prohibited from effecting a conversion of the Series F Preferred Stock to the extent that, as a
result of such conversion, the holder would beneficially own more
than 4.99% of the number of shares of common stock outstanding
immediately after giving effect to the issuance of shares of common
stock upon conversion of the Series F Preferred Stock, which beneficial ownership
limitation may be increased by the holder up to, but not exceeding,
9.99%. Each holder is entitled to vote on all matters submitted to
stockholders of the Company, and shall have the number of votes
equal to the number of shares of common stock issuable upon
conversion of such holder’s Series F Preferred Stock, but not in excess of the
beneficial ownership limitations.
April 2015 Private Placement
On
March 31, 2015, the Company consummated the first closing of a
private offering (the “April 2015 Private Placement”)
and sold $4,714,726 worth of units (the “Unit(s)”), net
of $281,023 in issuance costs. The Units consisted of 900,136
shares of common stock and warrants to purchase 450,068 shares of
common stock with an exercise price of $11.10 per
share. The Units were sold at a price of $5.55 per
Unit.
On
April 10, 2015, the Company consummated the second and final
closing of the April 2015 Private Placement and sold $3,831,622
worth of Units, net of $387,127 in issuance costs, of which
$2,500,000 of the Units consisted of Series E Preferred Stock and
the balance of it consisting of 760,135 shares of common stock,
together with warrants to all investors to purchase 605,293 shares
of common stock at $11.10 per share. Each Unit was sold
at a purchase price of $5.55 per Unit.
The
Company paid commissions to broker-dealers in the aggregate amount
of approximately $574,000 in the April 2015 Private
Placement.
OPKO
Health, Inc., or OPKO, was the lead investor in the April 2015
Private Placement, purchasing $2,500,000 worth of Units consisting
of Series E Preferred Stock.
As
a condition to OPKO’s and Frost Gama Investment
Trust’s, or FGIT’s, participation in the April 2015
Private Placement, each of the other investors in the April 2015
Private Placement agreed to execute lockup agreements restricting
the sale of 50% of the securities underlying the Units purchased by
them for a period of six months and the remaining 50% prior to the
expiration of one year following the final closing date of the
April 2015 Private Placement.
On
April 10, 2015, the Company agreed that $3.5 million of the net
proceeds of such closing would be paid into and held under the
terms of an escrow agreement with Signature Bank, N.A. pending the
approval of a representative of OPKO or 10 weeks thereafter, unless
released sooner or extended by the Company and OPKO. On
June 22, 2015, the Company and OPKO extended the termination date
of the escrow to 16 weeks from the final closing of the April 2015
Private Placement. In connection with the OPKO investment, Steven
Rubin, Esq. was appointed advisor to the Company. The escrowed
funds were to be returned to the applicable investors and the
Company shall have no further obligation to issue Units to such
investors in the event certain release conditions are not met. On
June 30, 2015, the Company and OPKO entered into a letter agreement
pursuant to which the Company granted the representative the right,
but not the obligation, until June 30, 2016, to nominate and
appoint up to two additional members of the Company’s Board
of Directors, or to approve the person(s) nominated by the Company
pursuant to the agreement in consideration for the release of the
escrowed funds. The nominees will be subject to the satisfaction of
standard corporate governance practices and any applicable national
securities exchange requirements. Upon signing the
agreement, the escrowed funds were released to the
Company.
The
warrants are exercisable upon issuance and expire October 10, 2017,
and may be exercised for cash or on a cashless basis. The warrants
have a per share exercise price of $11.10, subject to certain
adjustments including stock splits, dividends and reverse-splits.
The Company is prohibited from effecting the exercise of the
warrants to the extent that, as a result of such exercise, the
holder beneficially would own more than 4.99% in the aggregate, of
the issued and outstanding shares of the Company’s common
stock calculated immediately after giving effect to the issuance of
shares of common stock upon the exercise of the
warrants.
In
connection with the April 2015 Private Placement, the Company also
entered into registration rights agreements (the
“Registration Rights Agreements”) with the investors in
the April 2015 Private Placement pursuant to which the Company
agreed to file a registration statement with the SEC covering the
resale of 25% of common stock issued pursuant to the subscription
agreements including 25% of the common stock issuable upon
conversion of the Series E Preferred Stock, in the event the
investors elect to receive Series E Preferred Stock instead of
common stock (together, the “Registrable Securities”),
no later than 60 days following the final closing date of the April
2015 Private Placement, and to use its commercially reasonable best
efforts to have such registration statement declared effective
within 120 days after filing. Investors in the April 2015
Private Placement also may be required under certain circumstances
to agree to refrain from selling securities underlying the
purchased Units. The liquidated damages for failure to achieve
effectiveness of the Registerable Securities is 1% per month
beginning 120 days after filing, and provided management has not
used commercially reasonable best efforts to have the registration
statement declared effective within that time
frame.
On
June 9, 2015, the Company and investors holding over 60% of the
outstanding Registrable Securities entered into an amendment
agreement to the Registration Rights Agreements in order to extend
the filing date of the registration statement to waive any payments
that may be due to the investors as a result of the Company not
filing a registration statement on or before the original filing
date. On August 4, 2015, the Company and investors
holding over 70% of the outstanding Registrable Securities entered
into a second amendment agreement to further extend the filing date
to October 9, 2015.
On
October 12, 2015, the Company and investors holding over 60% of the
outstanding Registerable Securities entered into a third amendment
agreement to the Registration Rights Agreements to suspend the
Company’s registration obligations under the Registration
Rights Agreements and related subscription agreements during any
period when the “standstill” provision set forth in the
subscription agreements is in effect.
On
January 28, 2016, the Company filed a Registration Statement on
Form S-1, registering 527,680 shares of common stock for resale,
including 112,613 shares of common stock, which are issuable upon
conversion of the Company’s Series E Preferred Stock issued
in the April 2015 Private Placement.
Except
for certain issuances, for a period beginning on the closing date
of the April 2015 Private Placement and ending on the date that is
the earlier of (i) 24 months from the final closing date of the
April 2015 Private Placement, (ii) the date the Company consummates
a financing (excluding proceeds from the April 2015 Private
Placement) in which the Company receives gross proceeds of at least
$10,000,000 and (iii) the date the common stock is listed for
trading on a national securities exchange (such period until the
earlier date, the “Price Protection Period”), in the
event that the Company issues any shares of common stock or
securities convertible into common stock at a price per share or
conversion price or exercise price per share that is less than
$5.55, the Company shall issue to the investors in the April 2015
Private Placement such additional number of shares of common stock
such that the investor shall own an aggregate total number of
shares of common stock as if they had purchased the Units at the
price of the lower price issuance. No adjustment in the warrants is
required in connection with a lower price issuance.
Effective
with the Company’s entry into an agreement with the
underwriter for the Company’s August 2016 Public Offering,
which closed on August 22, 2016, the Company issued 255,459 shares
of common stock to the holders of record of the shares purchased in
the Company’s April 2015 Private Placement under the Price
Protection Period, representing the shares the investors would have
received had they purchased their shares at $4.81 per share,
instead of $5.55 per share. Effective August 17, 2016, the date of
listing of the Company’s stock on the Nasdaq Capital Market,
the Price Protection Period came to an end.
The
Company has also granted each investor a right of participation in
the Company’s financings for a period of 24
months.
Between
April 13, 2015, and April 14, 2015, certain holders of warrants
issued in the April 2015 Private Placement to purchase an aggregate
of 250,000 shares of common stock exercised such warrants on a
cashless basis for an aggregate issuance of 164,835 shares of
common stock. As of December 31, 2016, there were 805,361 warrants
outstanding from the April 2015 Private Placement to purchase
common stock at $11.10 per share.
October 2015 Public Offering
On
October 5, 2015, the Company closed a public offering of 337,838
shares of common stock and warrants to purchase 168,919 shares of
common stock, at an offering price of $8.14 per share. For
every two shares of common stock sold, the Company issued one
warrant to purchase one share of common stock. The Company
received $2,750,000 in gross proceeds, before underwriting
discounts and commissions and offering expenses totaling
approximately $586,608, and without giving effect to any exercise
of the underwriters’ over-allotment option. The Company
used the net proceeds from this offering to fund the HuMab-5B1
human antibody program preclinical development and for
working capital and general corporate purposes.
The
shares and warrants were separately issued and sold in equal
proportions. The warrants are immediately exercisable, expire
September 30, 2018, and have an exercise price of $9.77 per
share. The warrants are not listed on any securities
exchange or other trading market. As of December 31,
2016, there were warrants to purchase 168,919 shares of common
stock outstanding. The Company granted the underwriters a 30-day
option to purchase up to an additional 50,676 shares of common
stock and up to an additional 25,338 warrants at the same price to
cover over-allotments, if any.
Under
the terms of the underwriting agreement entered into between the
Company and the underwriter in the public offering, the Company,
without the prior written consent of the underwriter, was
prohibited, for a period of 90 days after execution of the
underwriting agreement, from issuing any equity securities, subject
to certain exceptions.
August 2016 Public Offering
On
August 22, 2016, we closed a public offering of 1,297,038 shares of
common stock and 665,281 shares of Series F Preferred Stock
convertible into 665,281 shares of common stock, and warrants to
purchase 1,962,319 shares of common stock at $5.55 per share and
warrants to purchase 1,962,319 shares of common stock at $6.29 per
share, at an offering price of $4.81 per share. For every one
share of common stock or Series F Preferred Stock sold, we issued
one warrant to purchase one share of common stock at $5.55 per
share and one warrant to purchase one share of common stock at
$6.29 per share. We received $9,438,753 in gross proceeds,
before underwriting discounts and commissions and offering expenses
totaling $871,305. The gross proceeds include the
underwriter’s over-allotment option, which they exercised on
the closing date.
Issuance of Common Stock under a 2014 Common Stock Purchase
Agreement
In
connection with a financing by the Company in July 2014 (the
“July 2014 Financing Transaction”), the Company assumed
certain obligations as per the original agreement to issue
additional shares to investors in the July 2014 Financing
Transaction if a subsequent financing or issuance of shares was at
a price per share lower than the price per share in the July 2014
Financing Transaction. The Company issued on March 31, 2015, an
aggregate of 11,904 shares of common stock that were required to be
issued in connection with the July 2014 Financing Transaction as a
result of the issuance of shares at a lower share price than in the
July 2014 Financing Transaction.
Grant of Restricted Shares
Rubin Grant
On April 3, 2015, the Company entered into a consulting agreement
with Steve Rubin pursuant to which he agreed to provide advisory
services in connection with corporate strategy, licensing and
business development estimated to be for a period of 12
months. In exchange for his services, the Company
provided him with a one-time grant of 27,027 shares of the
Company’s restricted common stock, valued at $17.02 per
share. As the shares granted were fully vested upon
grant and the Company has no legal recourse to recover the shares
in the event of nonperformance, the Company recognized the grant
date fair value of the shares as consulting expense upon grant
during the second quarter of 2015.
Ravetch Grant
On
April 4, 2015, the Board of Directors approved the issuance of an
additional restricted stock award of 17,770 shares to Jeffrey
Ravetch, M.D., Ph. D, who is one of the Company’s board
members. This award is for future services covering at
least a one-year period. The award was granted in addition to the
prior award to Dr. Ravetch on April 2, 2015 of (i) 4,628 restricted
shares and (ii) options to purchase 4,628 shares of common stock
with an exercise price of $17.02 per share, for a total grant of
27,028 restricted shares and options. As the 17,770 shares granted
were fully vested upon grant and the Company has no legal recourse
to recover the shares in the event of nonperformance, the Company
recognized the grant date fair value of the shares as consulting
expense upon grant during the second quarter of 2015.
Livingston Grant
On
April 4, 2015, the Board of Directors approved the issuance of a
restricted stock award by the Company of 135,135 shares of common
stock, valued at $17.02 per share, to Philip Livingston, Ph.D. for
his continuing service to the Company. On May 13, 2015,
the Compensation Committee of the Board of Directors clarified that
the award was being granted in consideration for at least one year
of Dr. Livingston’s services. The committee
further clarified that the vesting of the common stock shall be on
the one-year anniversary of the Board of Directors’ approval
of the award, or April 4, 2016. The Company expensed the
grant date fair value of the award over the vesting period of one
year.
Consultant Grants
On
April 5, 2015, the Company entered into consulting agreements with
two investor relations consultants to provide relations services to
the Company in consideration for an immediate grant of 40,541
shares of the Company’s restricted common stock and a monthly
cash retainer of $12,000 a month for ongoing services for a period
of one year. The consultants also received an additional 27,027
shares of the Company’s restricted common stock upon the
Company’s achieving a milestone based on its fully-diluted
market capitalization. As the shares granted were fully vested upon
grant and the Company has no legal recourse to recover the shares
in the event of nonperformance, the Company recognized the grant
date fair value of the 40,541 shares or $690,000, as investor
relations expense upon grant during the second quarter of 2015. The
performance condition for the 27,027 shares became probable and the
market capitalization metric was met during the second quarter;
therefore, the Company recognized an additional $460,000 of expense
during the second quarter of 2015.
Also
during 2015, the Board of Directors approved the issuance of
restricted stock awards to two other consultants totaling 16,217
shares with vesting terms ranging from one to three years, valued
from $13.10 to $15.76 per share. The Company is
expensing each of the grant date fair value of the awards over the
performance period for the award, which will be re-measured at the
end of each quarter until the performance is complete. As of
December 31, 2016, the Company expensed $32,569 related to these
grants. As of December 31, 2016, the expected future compensation
expense related to these grants is $24,571 based upon the
Company’s stock price on December 31, 2016.
On
January 13, 2016, the Board of Directors approved the issuance of
13,514 shares of restricted stock valued at $64,000 to a consultant
for advisory services to the Company that was fully recognized upon
issuance.
On
September 1, 2016, the Board of Directors approved the issuance of
22,130 shares of common stock with a date of issuance fair value of
$100,000 to an investor relations consulting firm. In exchange for
the shares granted and a monthly retainer, the consulting firm will
perform investor relations services on behalf of the Company. As
the shares granted were fully vested upon grant and the Company has
no legal recourse to recover the shares in the event of
nonperformance, the Company recognized the grant date fair value of
the 22,130 shares of $100,000 as investor relations expense upon
grant during the third quarter of 2016.
8. Related Party Transactions
On November 3, 2016, the Company granted 17,500 stock options to
Jeffrey Ravetch, M.D., Ph.D., a Board member, for his ongoing
consulting services to the Company. The option award vests over a
three-year period.
On April 1, 2016, the Company entered into a two-year consulting
agreement with Jeffrey Ravetch, M.D., Ph.D., a Board member, for
work beginning January 1, 2016 through December 31, 2017, at a rate
of $100,000 a year, in support of scientific and technical advice
on the discovery and development of technology and products for the
Company primarily related to monoclonal antibodies, corporate
development, and corporate partnering efforts. In April
2016, the Company paid Dr. Ravetch $100,000 for services to be
performed in 2016, and will pay quarterly thereafter beginning
January 1, 2017.
In April 2015, the Company granted a restricted stock award of
135,135 shares to Phil Livingston, Ph.D., an employee and Board
member, for his continuing services to the Company. In
addition, in April 2015, the Company has granted a restricted stock
award of 17,770 shares for Jeffrey Ravetch, M.D., Ph.D., a Board
member, for consulting services.
9. Stock-based Compensation
Stock Incentive Plan
In
September 2008, the Company’s stockholders approved the 2008
Stock Incentive Plan (the “2008 Plan”) which became
effective in September 2008 and under which 8,853 shares of the
Company’s common stock were initially reserved for issuance
to employees, non-employee directors and consultants of the
Company. In November 2012, the Company increased the authorized
shares under the plan to 21,067. On February 14, 2013, the
2008 Plan terminated and no further grants of equity may be made
thereunder.
In
June 2014, MabVax Therapeutics Inc.’s stockholders approved
the amended 2014 Stock Incentive Plan (the “2014 Plan”)
which became effective and was adopted by the Company in the Merger
in July 2014. The 2014 Plan authorized the issuance of up to 47,493
shares, 20,543 of which are contingent upon the forfeiture,
expiration or cancellation of the 2008 Reserved
Shares.
The
2014 Plan provided for the grant of incentive stock options,
non-incentive stock options, stock appreciation rights, restricted
stock awards, and restricted stock unit awards to eligible
recipients. The maximum term of options granted under the Stock
Plan is ten years.
Employee option grants generally vest 25% on the first anniversary
of the original vesting date, and the balance vests monthly over
the following three years. The vesting schedules for grants to
non-employee directors and consultants is determined by the
Company’s Compensation Committee. Stock options are generally
not exercisable prior to the applicable vesting date, unless
otherwise accelerated under the terms of the applicable stock plan
agreement.
Amendment of Equity Incentive Plan
On March 31, 2015, the Company approved a Second Amended and
Restated 2014 Employee, Director and Consultant Equity Incentive
Plan (the “Plan”), effective as of and contingent upon
the consummation of the initial closing of the April Private
Placement, to increase the number of shares reserved for issuance
under the Plan from 21,361 to 1,129,837 shares of common stock.
Additional changes to the Plan include:
●
An “evergreen” provision to reserve additional shares
for issuance under the Plan on an annual basis commencing on the
first day of fiscal 2016 and ending on the second day of fiscal
2024, such that the number of shares that may be issued under the
Plan shall be increased by an amount equal to the lesser of: (i)
1,081,082 or the equivalent of such number of shares after the
administrator, in its sole discretion, has interpreted the effect
of any stock split, stock dividend, combination, recapitalization
or similar transaction in accordance with the Plan; (ii) the number
of shares necessary such that the total shares reserved under the
Plan equals (x) 15% of the number of outstanding shares of
common stock on such date (assuming the conversion of all
outstanding shares of Preferred Stock (as defined in the Plan) and
other outstanding convertible securities and exercise of all
outstanding warrants to purchase common stock) plus
(y) 30,946; and (iii) an amount determined by the
Board.
●
Provision that no more than 405,406 shares may be granted to any
participant in any fiscal year.
●
Provisions to allow for performance based equity awards to be
issued by the Company in accordance with Section 162(m) of the
Internal Revenue Code.
●
On September 22,
2016, the Board of Directors ratified an automatic increase in the
number of shares reserved for issuance under the Plan, increasing
the total shares reserved from 1,129,837 to 1,208,307 shares of
common stock, under the annual evergreen provision for the
Plan.
Stock-based Compensation
Total estimated stock-based compensation expense, related to all of
the Company’s stock-based payment awards recognized under ASC
718, “Compensation—Stock Compensation” and
ASC 505, “Equity” was comprised of the
following:
|
Years Ended December 31,
|
|
|
2016
|
2015
|
Research
and development
|
$1,192,126
|
$929,633
|
General
and administrative
|
3,211,152
|
3,534,062
|
Total
stock-based compensation expense
|
$4,403,278
|
$4,463,695
|
Stock-based Award Activity
The following table summarizes the Company’s stock option
activity for the years ended December 31, 2016 and
2015:
|
Options
Outstanding
|
Weighted
Average
Exercise Price
|
Outstanding
at December 31, 2014
|
32,823
|
$29.00
|
Granted
|
407,547
|
16.50
|
Exercised
|
(376)
|
2.15
|
Forfeited/cancelled/expired
|
(1,746)
|
54.91
|
Outstanding
and expected to vest at December 31, 2015
|
438,248
|
$17.46
|
Granted
|
449,542
|
5.13
|
Exercised
|
—
|
—
|
Forfeited/cancelled/expired
|
(36,415)
|
15.28
|
Outstanding
and expected to vest at December 31, 2016
|
851,375
|
$10.94
|
Vested
and exercisable at December 31, 2016
|
167,291
|
$17.29
|
The total unrecognized compensation cost related to unvested stock
option grants as of December 31, 2016 was $3,007,785 and the
weighted average period over which these grants are expected to
vest is 1.96 years. Due to limited activity in 2016, the Company
has assumed a forfeiture rate of zero. The weighted average
remaining contractual life of stock options outstanding at
December 31, 2016 and 2015 is 8.82 years and 9.13 years,
respectively.
Stock options granted to employees generally vest over a three-year
period with one third of the grants vesting at each one-year
anniversary of the grant date.
During 2016, the Company granted 449,542 options to its directors,
officers, employees with a weighted average exercise price of $5.13
and vesting over a three-year period with vesting starting at the
one-year anniversary of the grant date. During 2015,
there were 407,547 options and 310,926 shares of restricted stock
granted to directors, officers, employees and consultants from the
2014 Plan. During the year ended December 31, 2016,
105,448 shares of restricted stock units have vested and the
balance will vest in two equal installments on the anniversary of
the grant date over the next two years. During the year ended
December 31, 2016, the Company has recognized $1,628,405 in stock
based compensation expense related to restricted stock units. In
addition, the Company granted 250,203 shares of restricted stock
outside of the plan for consulting and investor relation services
during the second quarter of 2015.
A summary of activity related to restricted stock grants under the
Plan for the years December 31, 2016 and 2015 is presented
below:
|
Shares
|
Weighted Average Grant-Date Fair Value
|
Non-vested
at December 31, 2014
|
—
|
$—
|
Granted
|
310,926
|
16.84
|
Vested
|
—
|
—
|
Forfeited
|
—
|
—
|
Non-vested
at December 31, 2015
|
310,926
|
16.84
|
Granted
|
—
|
—
|
Vested
|
(105,448)
|
$16.84
|
Forfeited
|
—
|
—
|
Non-vested
at December 31, 2016
|
205,478
|
|
On
April 2 and April 3, 2016, 98,237 shares of restricted stock units
vested upon the one-year anniversary of restricted stock units
granted. Accordingly, 64,392 shares were issued to the
Company’s directors and officers, and the Company withheld
33,848 shares for the employee portion of taxes and remitted
$177,823 to the tax authorities in order to satisfy tax liabilities
related to this issuance on behalf of the officers. In
addition, in July and August of 2016, 7,208 shares were issued to
outside consultants upon vesting of previously issued restricted
stock units. As of December 31, 2016, there were
205,478 nonvested restricted stock units remaining
outstanding.
As of December 31, 2016 and 2015, unamortized compensation expense
related to restricted stock grants amounted to $2,214,859 and
$3,843,264, which is expected to be recognized over a weighted
average period of 1.27 and 2.27 years, respectively.
Valuation Assumptions
The Company used the Black-Scholes-Merton option valuation model,
or the Black-Scholes model, to determine the stock-based
compensation expense for stock options recognized under ASC 718 and
ASC 505. The Company’s expected stock-price volatility
assumption was based solely on the weighted average of the
historical and implied volatility of comparable companies whose
share prices are publicly available. The expected term of stock
options granted was based on the simplified method in accordance
with Staff Accounting Bulletin No. 110, or SAB 110, as the
Company’s historical share option exercise experience did not
provide a reasonable basis for estimation. The risk-free interest
rate was based on the U.S. Treasury yield for a period consistent
with the expected term of the stock award in effect at the time of
the grant.
|
Years Ended December 31,
|
|
|
2016
|
2015
|
Risk-free
interest rate
|
0.9 to 1.4 %
|
0.9 to 1.8 %
|
Dividend
yield
|
0%
|
0%
|
Expected
volatility
|
71 to 86%
|
81 to 87%
|
Expected
life of options, in years
|
1.61 to 6.0
|
5.5 and
6.0
|
Weighted
average grant date fair value
|
$3.16
|
$1.56
|
Because the Company had a net operating loss carryforward as of
December 31, 2015 and 2016, no tax benefits for the tax
deductions related to stock-based compensation expense were
recognized in the Company’s consolidated statements of
operations. Additionally, there were 376 stock options exercised
during the year ended December 31, 2015, and there were no stock
option exercises in the corresponding period of 2016.
Management Bonus Plan
On April 2, 2015, the Compensation Committee of the Board of
Directors approved the 2015 Management Bonus Plan (the
“Management Plan”) outlining maximum target bonuses of
the base salaries of certain of the Company’s executive
officers. Under the terms of the Management Plan, the
Company’s Chief Executive Officer shall receive a maximum
target bonus of up to 50% of his annual base salary, the Chief
Financial Officer shall receive a maximum target bonus of up to 35%
of his annual base salary and the Company’s Vice President
shall receive a maximum target bonus of up to 25% of his annual
base salary. During the year ended December 31, 2016 and 2015, the
Company accrued and expensed $458,586 and $323,363, respectively
related to the Management Plan.
On April 4, 2015, the Board approved the following Non-Employee
Director Policy (the “Incumbent Director Policy”) with
respect to incumbent non-employee members of the Board in the event
that they are replaced before their term expires:
●
A one-time issuance of 2,703 restricted shares of common
stock;
●
The vesting of all options and restricted stock grants held on such
date; and
●
The payment of all earned but unpaid cash compensation for their
services on the Board and its committees, as of such
date.
On April 4, 2015, in connection with his resignation from the
Board, Michael Wick received a one-time restricted stock grant of
2,703 shares under the Incumbent Director Policy.
On
February 16, 2016, our Compensation Committee approved a 2016
Management Bonus Plan (the “2016 Management Plan”)
outlining maximum target bonuses of the base salaries of certain of
our executive officers. Under the terms of the 2016 Management
Plan, the Company's Chief Executive Officer shall receive a maximum
target bonus of up to 50% of his annual base salary, and the Chief
Financial Officer and each of the Company's Vice Presidents shall
receive a maximum target bonus of up to 30% of their annual base
salary.
On February 16, 2016, the Compensation Committee of the Board of
Directors of the Company approved the following
amendments to Company's policy for compensating non-employee
members of the Board:
●
The initial equity grant upon first appointment (or election) of
future non-employee directors to the Board shall be a 10-year
option to purchase 6,757 shares of the Company's common stock,
under the Company's Second Amended and Restated 2014 Equity
Incentive Plan with 3-year annual vesting and a strike price equal
the closing price of the Company's common stock on the effective
date of the appointment (or election);
●
The annual cash retainer for each non-employee director, paid
quarterly, is increased by $1,000 per calendar quarter to a total
of $7,000 per quarter, effective April 1, 2016; and
●
The additional annual cash retainer for the chairperson of each of
the Audit, Compensation, and Nominating and Governance Committees,
paid quarterly, is increased by $1,000 per calendar year, such that
each chairperson retainer shall be as follows, effective April 1,
2016: Audit Committee: $13,000; Compensation Committee: $9,000;
Nominating and Governance Committee: $6,000.
On
August 25, 2016, the Compensation Committee of the Board of
Directors of the Company approved the following amendments to
Company's policy for compensating non-employee members of the
Board:
●
The initial equity
grant upon first appointment (or election) of future non-employee
directors to the Board shall be a 10-year option to purchase 25,000
shares of the Company's common stock, under the Company's Second
Amended and Restated 2014 Equity Incentive Plan with 3-year annual
vesting and a strike price equal to the closing price of the
Company's common stock on the effective date of the appointment (or
election); and
●
The additional
automatic annual option grant to each non-employee director on the
date of the Company's annual meeting shall be a 10-year option to
purchase 17,500 shares of the Company's common stock, under the
Company's Second Amended and Restated 2014 Equity Incentive Plan
with 1-year vesting and a strike price equal to the closing price
of the Company's common stock on the date of the annual
meeting.
Common Stock Reserved for Future Issuance
Common stock reserved for future issuance consists of the following
at December 31, 2016:
Common
stock reserved for conversion of preferred stock and
warrants
|
8,099,568
|
Common
stock options outstanding
|
851,375
|
Authorized
for future grant or issuance under the Stock Plan
|
66,693
|
Unvested
restricted stock
|
205,478
|
Total
|
9,223,114
|
10. Net Loss per Share
The Company calculates basic and diluted net loss per share using
the weighted average number of shares of common stock outstanding
during the period.
When the Company is in a net loss position, it excludes from the
calculation of diluted net loss per share all potentially dilutive
stock options, preferred stock and warrants, and the diluted net
loss per share is the same as the basic net loss per share for such
periods. If the Company was to be in a net income position, the
weighted average number of shares used to calculate the diluted net
income per share would include the potential dilutive effect of
in-the-money securities, as determined using the treasury stock
method.
The table below presents the potentially dilutive securities that
would have been included in the calculation of diluted net loss per
share if they were not antidilutive for the periods
presented.
|
Years Ended December 31,
|
|
|
2016
|
2015
|
Stock
options
|
851,375
|
438,248
|
Preferred
stock
|
2,975,424
|
3,038,163
|
Unvested
restricted stock
|
205,478
|
310,926
|
Warrants
to purchase common stock
|
5,124,144
|
974,280
|
Total
|
9,156,421
|
4,761,617
|
11. Contracts and Agreements
Memorial Sloan Kettering Cancer Center, or MSK
Since 2008 the Company has engaged in various
research agreements and collaborations with MSK including licensed
rights to cancer vaccines and the blood samples from patients who
have been vaccinated with MSK’s cancer vaccines. Total
sponsored research contracts outstanding in 2016 amounting to
approximately $800,000 in 2016 were approximately 100% complete as
of the year ended December 31, 2016. Such sponsored research
agreements provide support for preclinical work on the
Company’s product development programs. The work includes
preparing radioimmunoconjugates of the Company’s antibodies
and performing in vitro and in vivo pharmacology studies for our therapeutic antibody
product, imaging agent product and radioimmunotherapy product
programs.
Life Technologies Licensing Agreement
On September 24, 2015, the Company entered into a licensing
agreement with Life Technologies Corporation (“Life
Technologies”), a subsidiary of ThermoFisher
Scientific. Under the agreement, MabVax agreed to
license certain cell lines from Life Technologies to be used in the
production of recombinant proteins for the Company’s clinical
trials. The amount of the contract is for $450,000 and
was fully expensed during the year ended December 31, 2015. In each
of the years ended December 31, 2015 and 2016, the Company paid
$225,000 and $225,000, respectively, related to this
contract.
Rockefeller University Collaboration
In July 2015, the Company entered into a research collaboration
agreement with Rockefeller University's Laboratory of Molecular
Genetics and Immunology. The Company provided antibody material to
Rockefeller University, which is exploring the mechanism of action
of constant region (Fc) variants of the HuMab-5B1 in the role of
tumor clearance. The Company will supply additional research
materials as requested by the university, which is evaluating ways
to optimize the function.
Patheon Biologics LLC Agreement
On
April 14, 2014, the Company entered into a development and
manufacturing services agreement (the “Services
Agreement”) with Patheon (f.k.a. Gallus Biopharmaceuticals)
to provide a full range of manufacturing and bioprocessing
services, including cell line development, process development,
protein production, cell culture, protein purification,
bio-analytical chemistry and quality control, or QC,
testing. Total amount of the contract is estimated at
approximately $3.0 million. For the years ended December
31, 2016 and 2015, the Company recorded $0 and $2,556,278 of
expense, respectively, associated with the Services Agreement.
During the third quarter of 2016, the Company negotiated a
reduction in the amount previously recorded and owed to Patheon
related to manufacturing batches that have failed, resulting in the
reduction in R&D expenses of approximately $363,000 during the
quarter.
NCI PET Imaging Agent Grant
In September 2013, the NCI awarded the Company a SBIR Program
Contract to support the Company’s program to develop a PET
imaging agent for pancreatic cancer using a fragment of the
Company’s HuMab-5B1 antibody (the “NCI PET Imaging
Agent Grant”). The project period for Phase I of the grant
award of approximately $250,000 covered a nine-month period which
commenced in September 2013 and ended in June 2014.
On August 25, 2014, the Company was awarded a $1.5 million
contract for the Phase II portion of the NCI PET Imaging Agent
Grant. The contract is intended to support a major portion of
the preclinical work being conducted by the Company, together with
its collaboration partner, MSK, to develop a novel Positron
Emission Tomography (“PET”) imaging agent for detection
and assessment of pancreatic cancer. The total contract amount for
Phase I and Phase II was approximately $1,749,000. The Company
recorded revenue associated with the NCI PET Imaging Agent Grant as
the related costs and expenses were incurred. For the years ended
December 31, 2016 and 2015, the Company recorded $148,054 and
$1,141,451 of revenue associated with the NCI PET Imaging Agent
Grant, respectively. No additional activities are required or
planned under the contract and all monies available under the
contract have been requested and received.
Juno Therapeutics Option Agreement
On
August 29, 2014, the Company entered into an option agreement (the
“Option Agreement”) with Juno Therapeutics, Inc.
(“Juno”) in exchange for a one-time up-front option fee
in the low five figures. Pursuant to the Option Agreement, the
Company granted Juno the option to obtain an exclusive, world-wide,
royalty-bearing license authorizing Juno to develop, make, have
made, use, import, have imported, sell, have sold, offer for sale
and otherwise exploit certain patents the Company developed with
respect to fully human antibodies with binding specificity against
human GD2 or sialyl-Lewis A antigens and certain Company controlled
biologic materials. As of June 30, 2016, the Option Agreement
expired and Juno no longer has a contractual right for use of
Company binding domains for use in the construction of CAR
T-cells.
During the years ended December 31, 2016 and 2015, no revenues had
been earned under the Option Agreement.
12. Commitments and contingencies
Litigation
On
September 18, 2015, an Order and Final Judgment was entered by the
Superior Court of the State of California, approving a settlement
of a class action lawsuit commenced on May 30, 2014, in Santa Clara
County Superior Court, State of California, on behalf of Cadillac
Partners and others similarly situated, naming as defendants,
MabVax Therapeutics, the Company and the Company’s directors,
Hudson Bay Capital Management LP, Bio IP Ventures LLC, Hudson Bay
Master Fund Ltd., and Hudson Bay IP Opportunities Master Fund LP,
together the “Parties,” alleging the defendants
breached certain fiduciary duties, or aided and abetted a breach of
fiduciary duties, in connection with the Company’s Merger
with MabVax Therapeutics. The plaintiff sought to enjoin the Merger
and obtain damages as well as attorneys’ and expert fees and
costs. We expect to incur no expenses in 2016 or
thereafter in connection with this lawsuit or
settlement.
Capital Leases
On
March 21, 2016, the Company entered into a lease agreement with
ThermoFisher Scientific (“Lessor”). Under the terms of
the agreement, the Company agreed to lease two pieces of equipment
from the Lessor, a liquid chromatography system and an incubator,
totaling in cost $95,656. The term of the lease is five years (60
months), and the monthly lease payment is $1,942. In addition,
there is a $1.00 buyout option at the end of the lease
term.
Minimum future annual capital lease obligations are as follows as
of December 31, 2016:
2017
|
$23,306
|
2018
|
23,306
|
2019
|
23,306
|
2020
|
23,306
|
2021
|
7,769
|
Less
interest
|
(15,876)
|
Principal
|
85,117
|
Less
current portion
|
(17,004)
|
Noncurrent
portion
|
$68,113
|
Operating Leases
In connection with the Merger, the Company recorded a $590,504
contingent lease termination fee, related to the termination of the
master lease and sublease of the Porter Drive Facility by MabVax
Therapeutics Holdings (f.k.a. Telik, Inc.), which is payable to
ARE-San Francisco No. 24 (“ARE”) if the Company
receives $15 million or more in additional financing in the
aggregate. The additional financing was achieved in 2015 and the
termination fee is reflected on the balance sheet as an accrued
lease contingency fee.
On September 2, 2015, the Company
entered into a lease (the
“Lease”) with AGP Sorrento Business Complex, L.P., for
certain premises of office and laboratory space in buildings
located at 11535 Sorrento Valley Rd., San Diego, California, to
serve as the Company’s corporate offices and laboratories
(the “New Premises”). Due to the fact that
certain tenant improvements needed to be made to the New Premises
before the Company could take occupancy, the term of the Lease did
not commence until the New Premises were ready for occupancy, on
February 4, 2016. The Lease terminates six years after
such term commencement date, unless earlier terminated in
accordance with the Lease. Pursuant to the terms of the Lease, the
monthly base rent will be $35,631, subject to annual increases as
set forth in the Lease.
The Company has an option to extend the Lease term for a single,
five-year period. If the Lease term is extended for the
optional five-year period, the monthly base rent will be adjusted
based on fair market rental value. In addition to rent,
the Company agreed to pay a portion of the taxes and utility,
maintenance and other operating costs paid or accrued in connection
with the ownership and operation of the property.
The Company previously leased its corporate office and laboratory
space under an operating lease that, as amended on August 1,
2010, expired on July 31, 2015.
We recognize rent expense on a straight-line basis over the term
the lease. Rent expense of $433,397 and $122,236 was recognized in
the years ended December 31, 2016 and 2015,
respectively.
Minimum future annual operating lease obligations are as follows as
of December 31, 2016:
2017
|
|
$
|
439,330
|
|
2018
|
|
|
452,510
|
|
2019
|
|
|
466,085
|
|
2020
|
|
|
480,068
|
|
2021
|
|
|
494,469
|
|
Thereafter
|
|
|
41,306
|
|
Total
|
|
$
|
2,373,768
|
|
|
|
|
|
|
13. Income Taxes
During the years ended December 31, 2016 and 2015, the Company did
not record a provision or benefit for current or deferred income
taxes in the consolidated statement of operations due to its
cumulative net losses.
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income
tax purposes. Significant components of the Company’s net
deferred tax assets are as follows as of December 31, 2016 and
2015:
|
2016
|
2015
|
Deferred
tax assets:
|
|
|
Net
operating loss carryforwards
|
$20,169,000
|
$14,502,000
|
Tax
credits
|
5,065,000
|
4,803,000
|
Accrued
expenses and other
|
2,667,900
|
1,861,300
|
Total
deferred tax assets
|
27,901,900
|
21,166,300
|
Less
valuation allowance
|
(27,901,900)
|
(21,166,300)
|
Net
deferred tax assets
|
$—
|
$—
|
The Company has evaluated the available evidence supporting the
realization of its gross deferred tax assets, including the amount
and timing of future taxable income, and has determined that it is
more likely than not that the deferred tax assets will not be
realized. Due to such uncertainties surrounding the realization of
the Company’s deferred tax assets, the Company maintains a
valuation allowance of $27,901,900 against its deferred tax assets
as of December 31, 2016. Realization of the deferred tax assets
will be primarily dependent upon the Company’s ability to
generate sufficient taxable income prior to the expiration of its
net operating losses.
During the year ended December 31, 2014, MabVax Therapeutics, Inc.
merged with Telik, Inc. in a tax-free reorganization. As a result
of the merger, all components of Telik’s deferred tax assets
are now included as deferred tax assets of MabVax Therapeutics,
Inc. These pre-merger deferred tax assets are net operating loss
carryforwards of $1,588,000, research and development credit
carryforwards of $4,457,000, in total equaling $6,045,000. The
current year change in these assets has been reflected in the
provision for income taxes.
As of December 31, 2016, the Company had net operating loss
carryforwards of approximately $50,576,000 and $50,994,000 for
federal and state income tax purposes, respectively. These may be
used to offset future taxable income and will begin to expire in
varying amounts in 2028 to 2035. The Company also has research and
development credits of approximately $525,500 and $6,878,000 for
federal and state income tax purposes, respectively. The federal
credits may be used to offset future taxable income and will begin
to expire at various dates beginning in 2030 through 2035. The
state credits may be used to offset future taxable income, and such
credits carry forward indefinitely.
The Company is subject to taxation in the U.S. and California
jurisdictions. Currently, no historical years are under
examination. The Company’s tax years ending December 31, 2016
and 2015 are subject to examination by the U.S. and state taxing
authorities due to the carryforward of unutilized net operating
losses and research and development credits.
Utilization of the Company’s net operating loss carryforwards
and research and development credit carryforwards may be subject to
a substantial annual limitation due to an “ownership
change” that may have occurred, or that could occur in the
future, as defined and required by Section 382 of the Internal
Revenue Code of 1986, as amended, as well as similar state
provisions. These ownership changes may limit the amount of net
operating loss carryforwards and research and development credit
carryforwards, and other tax attributes that can be utilized
annually to offset future taxable income and tax, respectively. Any
limitation may result in the expiration of a portion of the net
operating loss carryforwards or research and development credit
carryforwards before utilization. The net operating loss
carryforwards and research and development credit carryforwards
inherited as a result of the merger with Telik, Inc. have been
severely limited under these rules and will likely not be
realized.
In general, an “ownership change” results from a
transaction or series of transactions over a three-year period
resulting in an ownership change of more than 50% of the
outstanding stock of a company by certain stockholders or public
groups. The Company intends to complete a study in the future to
assess whether an ownership change has occurred or whether there
have been multiple ownership changes since the Company’s
formation, and will complete such study before the use of any of
the aforementioned attributes.
The provision for income taxes differs from the amount computed by
applying the U.S. federal statutory tax rate (34% in 2016 and 2015)
to income taxes as follows:
|
2016
|
2015
|
Tax
benefit computed at 34%
|
$(6,004,000)
|
$(6,155,300)
|
State
tax provision, net of federal tax benefit
|
(989,344)
|
(1,551,444)
|
Change
in valuation allowance
|
6,735,600
|
7,335,300
|
Other
|
257,744
|
371,444
|
Tax
provision (benefit)
|
$—
|
$—
|
The Company has adopted ASC 740-10-25. This interpretation
clarifies the criteria for recognizing income tax benefits under
ASC 740, “Accounting for Income
Taxes,” and requires
additional disclosures about uncertain tax positions. Under ASC
740-10-25 the financial statement recognition of the benefit for a
tax position is dependent upon the benefit being more likely than
not to be sustainable upon audit by the applicable taxing
authority. If this threshold is met, the tax benefit is then
measured and recognized at the largest amount that is greater than
50 percent likely of being realized upon ultimate
settlement.
F-30