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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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94-3171943
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification Number)
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Large accelerated filer
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o
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Accelerated filer
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o
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Non-accelerated filer
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(Do not check if a smaller reporting company)
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Smaller reporting company
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x
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Page | |
| Item 1. | 1 | |
| 1 | ||
| 2 | ||
| 3 | ||
| 4 | ||
| Item 2. | 11 | |
| Item 4. | 24 | |
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PART II - OTHER INFORMATION
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| Item 1. | 24 | |
| Item 1A. | 25 | |
| Item 2. | 34 | |
| Item 6. | 34 | |
| Signatures |
35
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●
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the risk that, if we fail to successfully commercialize SURFAXIN and AFECTAIR, or if SURFAXIN and AFECTAIR do not gain market acceptance for any reason, our revenues would be limited, which could have a material adverse effect on our business, financial condition and results of operations;
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●
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the risk that, if we are unable for any reason to introduce, or if there is a significant delay in the commercial introduction of, SURFAXIN and AFECTAIR in the U.S. and other markets as planned, we may have difficulty securing additional capital to sustain our operations, which could have a material adverse effect on our ability to continue our marketing and distribution efforts, research and development programs and operations;
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●
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risks relating to our plans to develop and secure marketing and distribution capabilities internally and otherwise through third-party strategic alliances and/or marketing alliances and/or distribution arrangements, that could require us to give up rights to our drug products, drug product candidates and drug delivery technologies;
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●
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the risk that we may be unable to enter into strategic alliances or collaboration agreements to support the development of our KL
4
surfactant pipeline products, beginning with AEROSURF
®
(our aerosolized KL
4
surfactant using our CAG technology) and SURFAXIN LS™ (our lyophilized (freeze-dried) dosage form of SURFAXIN), and, if approved, commercialization of these products in markets outside the United States;
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●
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risks relating to our ability to develop a successful sales and marketing organization to market SURFAXIN and AFECTAIR and our other product candidates, if approved, in a timely manner, if at all, and that we or our marketing and advertising consultants will not succeed in developing market awareness of our products or that our product candidates will not gain market acceptance by physicians, patients, healthcare payers and others in the medical community;
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●
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risks relating to our ability to develop and manufacture drug products based on our KL
4
surfactant technology, drug-device combination products that use our capillary aerosol generator (CAG) technology, and medical devices, including our CAG and novel ventilator circuit / patient interface connectors, for preclinical and clinical studies of our product candidates and for commercialization of our approved products;
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●
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risks relating to the transfer of our manufacturing technology to third-party contract manufacturers and assemblers;
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●
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the risk that we, our contract manufacturers or any of our third-party suppliers, many of which are single-source providers, may encounter problems or delays in manufacturing our drug products, drug product substances, CAG devices and ventilator circuit / patient interface connectors and related componentry, and other materials on a timely basis or in an amount sufficient to support the commercial introduction of SURFAXIN and AFECTAIR devices, as well as our research and development activities for our other product candidates;
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●
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risks relating to the rigorous regulatory approval processes, including pre-filing activities, required for approval of any drug, combination drug-device product or medical device that we may develop, whether independently, with strategic development partners or pursuant to collaboration arrangements;
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risks related to our efforts to gain regulatory approval, in the United States and elsewhere, for our drug product and medical device candidates, including (i) drug and drug-device combination products that we are developing to address RDS in premature infants: AEROSURF and SURFAXIN LS; and (ii) AFECTAIR, our novel ventilator circuit / patient interface connectors;
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the risk that we and the FDA or other regulatory authorities will not be able to agree on matters raised during the regulatory review process, or that we may be required to conduct significant additional activities to potentially gain approval of our product candidates, if ever;
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the risk that the FDA or other regulatory authorities may not accept, or may withhold or delay consideration of, any applications that we may file, or may not approve our applications or may limit approval of our products to particular indications or impose unanticipated label limitations;
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risks relating to our research and development activities, which among other things involve time-consuming and expensive preclinical studies and potentially multiple clinical trials that may be subject to potentially significant delays or regulatory holds or fail, and that must be conducted using sophisticated and extensive analytical methodologies and quality control release and stability tests to satisfy the requirements of the regulatory authorities;
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the risk that we may be unable to identify potential strategic partners or collaborators with whom we can develop and, if approved, commercialize our products in a timely manner, if at all;
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the risk that we or our strategic partners or collaborators will not be able to attract or retain qualified personnel, which could affect our ability to develop and market our products;
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the risk that market conditions, the competitive landscape or other factors may make it difficult to launch and profitably sell our products;
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risks that reimbursement and health care reform may adversely affect us or that our products will not be accepted by physicians and others in the medical community;
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the risk that changes in the national or international political and regulatory environment may make it more difficult to gain FDA or other regulatory approval of our drug product and medical device candidates;
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the risk that we may be unable to maintain compliance with continued listing requirements of The Nasdaq Capital Market
®
(Nasdaq), which could increase the probability that our stock will be delisted, which could cause our stock price to decline;
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●
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risks that the unfavorable credit and economic environment will adversely affect our ability to fund our activities, that our Committed Equity Financing Facility (CEFF) may be unavailable, for any reason, or may expire or be exhausted, and that additional equity financings could result in substantial equity dilution or result in a downward adjustment to the exercise price of five-year warrants that we issued in February 2011 (which contain price-based anti-dilution revisions);
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the risks that we may be unable to maintain and protect the patents and licenses related to our products and that other companies may develop competing therapies and/or technologies;
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the risks that we may become involved in securities, product liability and other litigation and that our insurance may be insufficient to cover costs of damages and defense; and
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other risks and uncertainties detailed in “Risk Factors” and in the documents incorporated by reference in this report.
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ITEM 1.
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June 30,
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December 31,
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|||||||
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2012
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2011
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|||||||
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(Unaudited)
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||||||||
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ASSETS
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Current Assets:
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||||||||
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Cash and cash equivalents
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$ | 46,008 | $ | 10,189 | ||||
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Inventory
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105 | – | ||||||
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Prepaid expenses and other current assets
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433 | 442 | ||||||
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Total Current Assets
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46,546 | 10,631 | ||||||
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Property and equipment, net
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2,235 | 2,293 | ||||||
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Restricted cash
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400 | 400 | ||||||
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Total Assets
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$ | 49,181 | $ | 13,324 | ||||
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LIABILITIES & STOCKHOLDERS’ EQUITY
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Current Liabilities:
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Accounts payable
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$ | 1,335 | $ | 1,111 | ||||
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Accrued expenses
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2,592 | 2,972 | ||||||
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Common stock warrant liability
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8,614 | 6,996 | ||||||
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Equipment loans and capitalized leases, current portion
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67 | 68 | ||||||
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Total Current Liabilities
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12,608 | 11,147 | ||||||
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Equipment loans and capitalized leases, non-current portion
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186 | 224 | ||||||
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Other liabilities
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686 | 689 | ||||||
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Total Liabilities
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13,480 | 12,060 | ||||||
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Stockholders’ Equity:
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Preferred stock, $0.001 par value; 5,000 shares authorized; no shares issued or outstanding
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– | – | ||||||
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Common stock, $0.001 par value; 100,000 shares authorized; 43,462 and 24,603 shares issued, 43,441 and 24,582 shares outstanding at June 30, 2012 and December 31, 2011, respectively
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43 | 25 | ||||||
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Additional paid-in capital
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453,286 | 401,713 | ||||||
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Accumulated deficit
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(414,574 | ) | (397,420 | ) | ||||
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Treasury stock (at cost); 21 shares at June 30, 2012 and December 31, 2011, respectively
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(3,054 | ) | (3,054 | ) | ||||
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Total Stockholders’ Equity
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35,701 | 1,264 | ||||||
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Total Liabilities & Stockholders’ Equity
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$ | 49,181 | $ | 13,324 | ||||
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Three Months Ended
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Six Months Ended
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|||||||||||||||
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June 30,
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June 30,
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|||||||||||||||
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2012
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2011
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2012
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2011
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Grant Revenue
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$ | – | $ | 201 | $ | – | $ | 582 | ||||||||
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Expenses:
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Research and development
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5,206 | 4,615 | 9,739 | 9,235 | ||||||||||||
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Selling, general and administrative
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3,610 | 1,966 | 5,657 | 3,786 | ||||||||||||
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Total expenses
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8,816 | 6,581 | 15,396 | 13,021 | ||||||||||||
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Operating loss
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(8,816 | ) | (6,380 | ) | (15,396 | ) | (12,439 | ) | ||||||||
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Change in fair value of common stock warrant liability
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1,680 | (1,693 | ) | (1,754 | ) | 535 | ||||||||||
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Other income / (expense):
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Interest and other income
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2 | 3 | 4 | 7 | ||||||||||||
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Interest and other expense
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(4 | ) | (6 | ) | (8 | ) | (16 | ) | ||||||||
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Other income / (expense), net
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(2 | ) | (3 | ) | (4 | ) | (9 | ) | ||||||||
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Net loss
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$ | (7,138 | ) | $ | (8,076 | ) | $ | (17,154 | ) | $ | (11,913 | ) | ||||
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Net loss per common share – Basic and diluted
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$ | (0.16 | ) | $ | (0.34 | ) | $ | (0.49 | ) | $ | (0.56 | ) | ||||
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Weighted average number of common shares outstanding – basic and diluted
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43,369 | 24,027 | 35,325 | 21,086 | ||||||||||||
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Six Months Ended
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||||||||
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June 30,
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||||||||
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2012
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2011
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|||||||
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Cash flows from operating activities:
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Net loss
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$ | (17,154 | ) | $ | (11,913 | ) | ||
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Adjustments to reconcile net loss to net cash used in operating activities:
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Depreciation and amortization
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576 | 644 | ||||||
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Stock-based compensation and 401(k) match
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1,109 | 599 | ||||||
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Fair value adjustment of common stock warrants
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1,754 | (535 | ) | |||||
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Loss on sale of equipment
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– | 10 | ||||||
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Changes in:
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Inventory
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(105 | ) | – | |||||
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Prepaid expenses and other current assets
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9 | (14 | ) | |||||
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Accounts payable
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224 | 301 | ||||||
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Accrued expenses
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(380 | ) | (313 | ) | ||||
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Other assets
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– | 6 | ||||||
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Other liabilities and accrued interest
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(3 | ) | 73 | |||||
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Net cash used in operating activities
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(13,970 | ) | (11,142 | ) | ||||
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Cash flows from investing activities:
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Purchase of property and equipment
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(518 | ) | (26 | ) | ||||
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Net cash used in investing activities
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(518 | ) | (26 | ) | ||||
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Cash flows from financing activities:
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Proceeds from issuance of securities, net of expenses
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43,605 | 22,583 | ||||||
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Proceeds from exercise of common stock warrants
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6,741 | – | ||||||
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Repayment of equipment loans and capital lease obligations
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(39 | ) | (84 | ) | ||||
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Net cash provided by financing activities
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50,307 | 22,499 | ||||||
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Net increase in cash and cash equivalents
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35,819 | 11,331 | ||||||
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Cash and cash equivalents – beginning of period
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10,189 | 10,211 | ||||||
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Cash and cash equivalents – end of period
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$ | 46,008 | $ | 21,542 | ||||
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Supplementary disclosure of cash flows information:
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Interest paid
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$ | 7 | $ | 11 | ||||
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●
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On March 21, 2012, we completed a public offering of 16,071,429 shares of common stock, resulting in net proceeds to us (after underwriter fees and anticipated expenses) of approximately $42.1 million.
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●
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On March 7, 2012, we delivered a sales notice under our ATM Program to sell shares of common stock. We terminated the offering on March 8, 2012. In connection with that offering, we issued 350,374 shares of our common stock at an aggregate purchase price of approximately $1.6 million, resulting in net proceeds to us of approximately $1.5 million, after deducting commissions due to the sales agent.
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●
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Holders of the 15-month warrants that we issued in February 2011 exercised warrants to purchase 2,238,000 shares of our common stock at an exercise price of $2.94 per share, resulting in proceeds to us of $6.6 million. The remaining 15-month warrants to purchase 2,762,000 shares expired unexercised on May 22, 2012.
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|
●
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Holders of the five-year warrants that we issued in February 2011 (February 2011 five-year warrants) exercised warrants to purchase 51,250 shares of our common stock at an exercise prices ranging from $2.80 to $3.20 per share, resulting in proceeds to us of $162,000.
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●
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We are engaged in discussions with potential strategic partners who could provide development and commercial expertise as well as financial resources (potentially in the form of upfront payments, milestone payments, commercialization royalties and a sharing of research and development expenses) to support the development of AEROSURF and SURFAXIN LS and, if approved, the introduction of these products in the European Union and various markets outside the United States.
|
|
●
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In the future, if our efforts are successful, we believe that debt could potentially be a component of our capital structure and financing plans. We could potentially enter into capital equipment financing facilities, revolving working capital lines of credit, term loans and other similar transactions to satisfy our working capital requirements.
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●
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We have a CEFF with Kingsbridge Capital Ltd. (Kingsbridge) that allows us, in our discretion, to raise capital (subject to certain conditions, including volume limitations) at a time and in amounts we deem suitable to support our business plans. Based on the closing market price of our common stock on July 31, 2012 ($2.53) and assuming that all available shares are issued, the potential availability under our CEFF is approximately $2.6 million. There can be no assurance, however, that the CEFF will be available at any time, or, even if available, that we will utilize the CEFF prior to its expiration in June 2013, or that we will undertake any financings or similar transactions, on favorable terms or otherwise.
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·
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Level 1 – Quoted prices in active markets for identical assets and liabilities.
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·
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Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
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·
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Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
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Fair Value
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Fair value measurement using
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|||||||||||||||
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June 30, 2012
|
Level 1
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Level 2
|
Level 3
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|||||||||||||
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Assets:
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Money Market
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$ | 39,377 | $ | 39,377 | $ | – | $ | – | ||||||||
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Certificate of Deposit
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400 | 400 | – | – | ||||||||||||
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Total Assets
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$ | 39,777 | $ | 39,377 | $ | – | $ | – | ||||||||
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Liabilities:
|
||||||||||||||||
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Common stock warrant liability
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$ | 8,614 | $ | – | $ | – | $ | 8,614 | ||||||||
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Fair Value
|
Fair value measurement using
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|||||||||||||||
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December 31,
2011
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Level 1
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Level 2
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Level 3
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|||||||||||||
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Assets:
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||||||||||||||||
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Money Market
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$ | 9,377 | $ | 9,377 | $ | – | $ | – | ||||||||
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Certificate of Deposit
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400 | 400 | – | – | ||||||||||||
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Total Assets
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$ | 9,777 | $ | 9,477 | $ | – | $ | – | ||||||||
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Liabilities:
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Common stock warrant liability
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$ | 6,996 | $ | – | $ | – | $ | 6,996 | ||||||||
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(in thousands)
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Fair Value Measurements of
Common Stock Warrants Using
Significant Unobservable Inputs
(Level 3)
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Balance at December 31, 2011
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$ | 6,996 | ||
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Exercise of warrants
(1)
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(136 | ) | ||
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Change in fair value of common stock warrant liability
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1,754 | |||
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Balance at June 30, 2012
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$ | 8,614 | ||
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(1)
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See,
Note 6 – Common Stock Warrant Liability.
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(in thousands)
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Fair Value Measurements of
Common Stock Warrants Using
Significant Unobservable Inputs
(Level 3)
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Balance at December 31, 2010
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$ | 2,469 | ||
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Issuance of common stock warrants
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8,087 | |||
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Change in fair value of common stock warrant liability
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(535 | ) | ||
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Balance at June 30, 2011
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$ | 10,021 | ||
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Significant Unobservable Input
Assumptions of Level 3 Valuations
|
June 30, 2012
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December 31, 2011
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Historical Volatility
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79% - 113 | % | 98% - 116 | % | ||||
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Expected Term (in years)
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1.9 - 3.6 | 2.4 - 4.2 | ||||||
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Risk-free interest rate
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0.33% - 0.57 | % | 0.31% - 0.60 | % | ||||
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Fair Value of Warrants
(in thousands)
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|||||||||||||||
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Issuance
Date
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Number of
Warrant Shares
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Exercise Price
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Warrant
Expiration
Date
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Issuance
Date
|
June 30, 2012
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||||||||||
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5/13/2009
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466,667
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$ |
17.25
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5/13/2014
|
$ |
3,360
|
$ |
37
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|||||||
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2/23/2010
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916,669
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12.75
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2/23/2015
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5,701
|
301
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||||||||||
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2/22/2011
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4,948,750
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2.80
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2/22/2016
|
8,004
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8,276
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||||||||||
|
June 30,
|
||||||||
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2012
|
2011
|
|||||||
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Weighted average expected volatility
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110 | % | 112 | % | ||||
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Weighted average expected term
|
4.8 years
|
4.9 years
|
||||||
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Weighted average risk-free interest rate
|
0.79 | % | 1.47 | % | ||||
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Expected dividends
|
– | – | ||||||
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(in thousands)
|
Three Months Ended
|
Six Months Ended
|
||||||||||||||
|
June 30,
|
June 30,
|
|||||||||||||||
|
2012
|
2011
|
2012
|
2011
|
|||||||||||||
|
Research & Development
|
$ | 118 | $ | 73 | $ | 238 | $ | 136 | ||||||||
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Selling, General & Administrative
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288 | 110 | 566 | 228 | ||||||||||||
|
Total
|
$ | 406 | $ | 183 | $ | 804 | $ | 364 | ||||||||
|
ITEM 2.
|
MANAGE
MENT
’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
|
●
|
SURFAXIN for the Prevention of Respiratory Distress Syndrome (RDS) in Premature Infants at High Risk for RDS
|
|
|
We
are focused on preparations for the commercial introduction of SURFAXIN and remain on track to initiate the launch in the fourth quarter 2012. We have made progress in establishing our own commercial and medical affairs organizations to execute the launch of SURFAXIN in the United States and are in the process of hiring our field-based and other personnel. We plan to work with hospitals that have NICUs to include SURFAXIN on each hospital’s formulary (the approved list of drugs and therapeutics that the hospital will purchase). A hospital’s formulary is usually determined under procedures established by the medical staff and pharmacy department. To maximize formulary adoption, we are also performing development activities to manufacture a second SURFAXIN vial size. In addition, to facilitate proper preparation and administration of SURFAXIN drug product, we plan to make available to hospitals a dry block-warming device called a WARMING CRADLE
®
that is designed to warm drug vials at the same temperature that is designated in the SURFAXIN prescribing information. Accordingly, we are also working with hospitals to make WARMING CRADLE devices available for use in the NICU.
|
|
●
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AFECTAIR |
|
|
AFECTAIR is our disposable ventilator circuit / patient interface connector and related componentry that introduces inhaled therapies directly to the patient interface and minimizes the number of connections in the regulatory circuit without compromising ventilatory support. We have registered our initial AFECTAIR device in the United States and plan to introduce the AFECTAIR neonatal device in the fourth quarter of 2012. We expect that our commercial and medical affairs organizations will support the planned commercial introduction of AFECTAIR in the United States (
see,
SURFAXIN, above). Because we generally expect to market the AFECTAIR neonatal device to the same hospitals to which we plan to market SURFAXIN, we currently expect that our in-house commercial organization will be primarily responsible for the commercial introduction of that device in the Unites States. When other AFECTAIR devices are available for commercial sale, we plan to assess various methods of distributing those products and will determine at that time which approach would be more likely to maximize returns and result in the successful introduction of AFECTAIR. We also continue our efforts to complete development of the follow-on AFECTAIR and AFECTAIR DUO devices, as well as the registration of the initial AFECTAIR device in the European Union. We plan in the future to register our AFECTAIR devices in other major markets worldwide.
|
|
●
|
AEROSURF |
|
|
To advance our AEROSURF program, we continue our efforts to optimize the design of our CAG with our own engineering staff and third-party medical device experts. On June 22, 2012, we entered into a Research and Development Services Agreement (“Agreement”) with Battelle Memorial Institute (“Battelle”). Battelle is the world’s largest nonprofit research and development organization, with over 20,000 employees at more than 100 locations globally, with a particular expertise in developing and integrating aerosol devices using innovative and advanced technologies. Pursuant to the Agreement,
Battelle will provide technical support and expertise and assist in the development of device components in a series of phased programs focused on design, testing, and manufacturing of clinic-ready CAG devices for our planned AEROSURF phase 2 clinical trials, which we expect to initiate in late 2013.
We have retained the authority for all final decisions and all responsibility for the formulation, design, manufacture, assembly, packaging, marketing, distribution and sale of our products.
The initial term of the Agreement is two years, unless terminated earlier pursuant to its terms. Either party may terminate the Agreement upon 15 days’ written notice to the other party for any good-faith reason, provided, that Battelle does not have the right to terminate the Agreement until it has substantially completed the then-current phase of the project. In addition, Battelle has the right to terminate the Agreement upon 15 days’ written notice to us if we are in material breach under the Agreement and the breach is not cured within the 15-day notice period. If fully implemented through all proposed phases, the Agreement could involve an investment by us of up to approximately $4.6 million. If our development work is successful, we plan to seek regulatory guidance for AEROSURF for the United States and Europe, finalize our development strategy and potentially initiate our Phase 2 clinical program after we have secured the necessary strategic alliances and/or capital.
|
|
●
|
SURFAXIN LS |
|
|
We are also continuing our development activities for our lyophilized KL
4
surfactant, SURFAXIN LS, and plan to advance the technology transfer of our manufacturing process to a third-party contract manufacturer with expertise in lyophilized formulations. We expect to have further interactions with the FDA regarding our SURFAXIN LS development program as well as obtain regulatory guidance with respect to our planned development program in Europe. We expect to initiate our clinical programs for SURFAXIN LS in late 2013, but only after we have developed a final development and regulatory strategy and after we have secured the necessary strategic alliances and/or capital.
|
|
( in thousands)
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
||||||||||||||
|
Research and Development Expenses
(1)
|
2012
|
2011
|
2012
|
2011
|
||||||||||||
|
Product development and manufacturing
|
$ | 3,938 | $ | 3,271 | $ | 7,041 | $ | 6,318 | ||||||||
|
Medical and regulatory operations
|
1,251 | 869 | 2,074 | 1,773 | ||||||||||||
|
Direct preclinical and clinical programs
|
17 | 475 | 624 | 1,144 | ||||||||||||
|
Total Research & Development Expenses
|
$ | 5,206 | $ | 4,615 | $ | 9,739 | $ | 9,235 | ||||||||
|
(1)
|
Certain 2011 expenses have been reclassified to conform to 2012 presentation.
|
|
●
|
With respect to SURFAXIN drug product, data from a new pharmacoeconomic analysis were presented at the 2012 Pediatric Academies Society Annual Conference (2012 PAS, April 28 – May 1, 2012) in Boston, MA. The analysis demonstrates that the previously-reported lower rate of reintubation observed in infants treated with SURFAXIN, when compared with infants treated with Curosurf ® and Survanta ® , also resulted in a potential hospital cost savings of $160,000 to $252,000 per 100 infants. As previously reported in the Journal of Neonatal- Perinatal Medicine (Volume 4, Number 2, 2011) in a manuscript entitled “Reintubation and risk of morbidity and mortality in preterm infants after surfactant replacement therapy” (Guardia et al.), retrospective analysis of data from our two large phase 3 trials, which involved a total of 1546 patients, shows that the reintubation rate in SURFAXIN-treated infants ranged from 33 to 35 percent and was significantly lower ( p < 0.05) than Curosurf-treated infants (47 percent), the current global market leader, and Survanta-treated infants (43 percent). Although the retrospective analysis also demonstrates that reintubation results in an increase in morbidities, such as bronchopulmonary dysplasia and air leak, the estimated cost savings from the pharmacoeconomic modeling reported at the 2012 PAS Conference does not include the additional costs associated with these morbidities. We anticipate that additional studies will be conducted and potentially presented at congresses in 2012 and 2013. |
|
●
|
With respect to SURFAXIN LS, data from a preclinical study of SURFAXIN LS were recently published in the May issue of Pediatric Research. The objective of the study was to compare the effects of SURFAXIN LS and Curosurf on pulmonary function, as well as the physiologic reactions to surfactant administration in preterm lambs with RDS. The results of this study, which were previously presented at the 2010 Pediatric Academic Societies Annual Congress in May 2010, demonstrate that both surfactants significantly improved pulmonary function (p < 0.05). However, lambs treated with SURFAXIN LS required significantly lower mechanical ventilator pressures to maintain pulmonary function compared with Curosurf-treated lambs (p < 0.05); in contrast to lambs treated with SURFAXIN LS, lambs treated with Curosurf experienced significant reductions in heart rate and rapidly increased brain oxygenation during the peridosing period (p < 0.05); and the investigators concluded that SURFAXIN LS may enable ventilation at lower mean airway pressures, thereby potentially reducing the incidence of chronic lung disease, and as such may be an effective substitute for the currently-marketed surfactant products. |
|
●
|
With respect to the AFECTAIR series of devices, data from performance studies conducted using the AFECTAIR neonatal device have been presented at 2012 PAS. The study evaluated the difference between the calculated inhaled dose and the actual delivered dose in an in vitro simulated infant ventilation system using the AFECTAIR neonatal device as compared to standard of care. Albuterol was aerosolized with a jet nebulizer and delivered using both the AFECTAIR neonatal device and standard of care. The investigators observed a 10-14 fold increase in the in vitro inhaled dose of albuterol at various ventilation conditions when using the AFECTAIR neonatal device compared with standard of care. The study concluded that the AFECTAIR neonatal device delivered a higher amount of albuterol in vitro that was more representative of the calculated inhaled dose of albuterol compared with standard of care, and that clinical use of the AFECTAIR neonatal device may allow for a more accurate approximation of actual delivered dose of inhaled therapies when targeting a calculated inhaled dose for critical care patients. Data from two studies were presented at the 11 th European Congress on Pediatric and Neonatal Ventilation in Switzerland in June 2012. The first study simulated neonatal mechanical ventilation conditions using an in vitro model and compared delivery of aerosolized inhaled nitrous oxide using the AFECTAIR neonatal device with standard of care. The study concluded that use of the AFECTAIR neonatal device resulted in the achievement of target nitric oxide concentrations using less nitric oxide when compared to the SoC delivery apparatus. The second study was conducted in an in vitro model of neonatal mechanical ventilation conditions and compared the AFECTAIR neonatal device with a conventional wye connector. The study found that use of the AFECTAIR neonatal device resulted in improved delivery of aerosolized albuterol sulfate, including a nine-fold increase in delivered dose under simulated CPAP conditions, a 14-fold increase in delivered dose under simulated mechanical ventilation conditions, and a smaller difference in particle size distribution between aerosol output from the nebulizer and aerosol output from the patient interface. |
|
|
With respect to our KL
4
surfactant technology, the United States Patent and Trademark Office (USPTO) granted us a patent entitled “Pulmonary Surfactant Formulations and Methods for Promoting Mucus Clearance.” The claims of the patent (U.S. Patent Number 8,221,772) provide coverage for a method for promoting mucus clearance in a patient with a pulmonary condition characterized by excessive mucus secretion or impaired mucus clearance such as CF, COPD, bronchiectasis, ciliary diskinesia, and sinusitis. The patent term expires in September 2027.
|
|
●
|
On March 21, 2012, we completed a public offering of 16,071,429 shares of common stock, resulting in net proceeds to us (after underwriter fees and anticipated expenses) of approximately $42.1 million.
|
|
●
|
On March 7, 2012, we delivered a sales notice under our ATM Program to sell shares of common stock. We terminated the offering on March 8, 2012. In connection with that offering, we issued 350,374 shares of our common stock at an aggregate purchase price of approximately $1.6 million, resulting in net proceeds to us of approximately $1.5 million, after deducting commissions due to the sales agent.
|
|
●
|
Holders of the 15-month warrants that we issued in February 2011 exercised warrants to purchase 2,238,000 shares of our common stock at an exercise price of $2.94 per share, resulting in proceeds to us of $6.6 million. The remaining 15-month warrants to purchase 2,762,000 shares expired unexercised on May 22, 2012.
|
|
●
|
Holders of the five-year warrants that we issued in February 2011 (February 2011 five-year warrants) exercised warrants to purchase 51,250 shares of our common stock at an exercise prices ranging from $2.80 to $3.20 per share, resulting in proceeds to us of $162,000.
|
|
●
|
We are engaged in discussions with potential strategic partners who could provide development and commercial expertise as well as financial resources (potentially in the form of upfront payments, milestone payments, commercialization royalties and a sharing of research and development expenses) to support the development of AEROSURF and SURFAXIN LS and, if approved, the introduction of these products in the European Union and various markets outside the United States.
|
|
●
|
In the future, if our efforts are successful, we believe that debt could potentially be a component of our capital structure and financing plans. We could potentially enter into capital equipment financing facilities, revolving working capital lines of credit, term loans and other similar transactions to satisfy our working capital requirements.
|
|
●
|
We have a CEFF with Kingsbridge Capital Ltd. (Kingsbridge) that allows us, in our discretion, to raise capital (subject to certain conditions, including volume limitations) at a time and in amounts we deem suitable to support our business plans. Based on the closing market price of our common stock on July 31, 2012 ($2.53) and assuming that all available shares are issued, the potential availability under our CEFF is approximately $2.6 million. There can be no assurance, however, that the CEFF will be available at any time, or, even if available, that we will utilize the CEFF prior to its expiration in June 2013, or that we will undertake any financings or similar transactions, on favorable terms or otherwise.
|
|
(In millions)
|
Six Months Ended June 31,
|
|||||||
|
2012
|
2011
|
|||||||
|
Financings pursuant to common stock offerings
|
$ | 42.1 | $ | 21.6 | ||||
|
Financings under the ATM Program
|
1.5 | – | ||||||
|
Exercise of warrants
|
6.7 | – | ||||||
|
Financings under the CEFF
|
– | 1.0 | ||||||
|
Debt service payments
|
(0.0 | ) | (0.1 | ) | ||||
|
Cash flows from financing activities, net
|
$ | 50.3 | $ | 22.5 | ||||
|
ITEM 4.
|
CONTROLS AND
PROCEDURES
|
|
Changes in internal controls
|
|
ITEM 1.
|
LEGAL P
ROCEEDINGS
|
|
ITEM 1A.
|
RISK FA CTORS |
|
|
·
|
the number of infants diagnosed with respiratory distress syndrome (“RDS”), and those that may be treated with SURFAXIN over time;
|
|
|
·
|
the number of hospitals and critical care centers that will use AFECTAIR devices for critical care patients;
|
|
|
·
|
the safety and efficacy of SURFAXIN, our ability to provide acceptable evidence of safety and efficacy, and the perceived safety and efficacy of SURFAXIN by the medical community, regulatory agencies and insurers and other payers, on both a short and long-term basis;
|
|
|
·
|
perception of our products and devices by members of the healthcare community, including physicians;
|
|
|
·
|
perceived advantages of SURFAXIN and AFECTAIR over alternative treatment methods (including relative convenience and ease of administration and prevalence and severity of any adverse events, including any unexpected adverse events of which we become aware);
|
|
|
·
|
the acceptance of AFECTAIR devices as the standard of care for delivery of inhaled therapies for patients requiring ventilatory support;
|
|
|
·
|
our ability to finalize our development activities for the pediatric and adult size AFECTAIR devices, and for various types of aerosol generating devices;
|
|
|
·
|
budget impact of adoption of our products and devices on relevant formularies and the availability, cost and potential advantages of alternative treatments, including less expensive generic drugs and other competitive products;
|
|
|
·
|
the claims, limitations, warnings and other information in labeling of SURFAXIN;
|
|
|
·
|
our establishment of an effective sales force and the ability of our sales, marketing and other representatives to (a) accurately describe SURFAXIN consistent with its approved labeling and (b) educate critical care providers and hospitals regarding the potential utility of AFECTAIR devices;
|
|
|
·
|
the ability of patients and physicians and other providers to obtain and maintain sufficient coverage and reimbursement by third-party payers, including government payers;
|
|
|
·
|
the receipt and maintenance of marketing approvals from the United States and foreign regulatory authorities;
|
|
|
·
|
the growth of commercial sales in the United States and other countries; and
|
|
|
·
|
the establishment and maintenance of commercial manufacturing capabilities by ourselves or through third-party manufacturers, and our ability to meet commercial demand for SURFAXIN.
|
|
|
·
|
the degree to which the market accepts that we are able to manufacture our products and continually supply the market to meet demand;
|
|
|
·
|
the perceived safety and efficacy of our products;
|
|
|
·
|
the potential advantages over alternative treatments;
|
|
|
·
|
the prevalence and severity of any side effects;
|
|
|
·
|
the relative convenience and ease of administration;
|
|
|
·
|
our ability to gain access to the entire market through our distributor arrangements;
|
|
|
·
|
the rate of preterm births;
|
|
|
·
|
the willingness of physicians to utilize our products;
|
|
|
·
|
the availability of different size drug vials and medical devices to meet the specific needs of healthcare practitioners;
|
|
|
·
|
the pharmacoeconomic benefits (which are determined by comparing, among other things, the cost and effects of a product when compared to different treatment options) and cost-effectiveness of our products;
|
|
|
·
|
the willingness of the target hospitals to accept and employ the WARMING CRADLE dry block heater;
|
|
|
·
|
the effectiveness of our marketing strategy and distribution support; and
|
|
|
·
|
the sufficiency of coverage or reimbursement by third parties.
|
|
|
·
|
the number of clinical sites;
|
|
|
·
|
the size of the patient population;
|
|
|
·
|
the proximity of patients to the clinical sites;
|
|
|
·
|
the eligibility and enrollment criteria for the study;
|
|
|
·
|
the willingness of patients or their parents or guardians to participate in the clinical trial;
|
|
|
·
|
the existence of competing clinical trials;
|
|
|
·
|
the existence of alternative available products; and
|
|
|
·
|
geographical and geopolitical considerations.
|
|
|
·
|
developing products;
|
|
|
·
|
undertaking preclinical testing and human clinical trials;
|
|
|
·
|
obtaining FDA and other regulatory approvals or products; and
|
|
|
·
|
manufacturing and marketing products.
|
|
ITEM 2.
|
UNREGISTERED SAL
ES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
|
ITEM 6.
|
EXHIBI
TS
|
|
Discovery Laboratories, Inc.
|
|||
|
(Registrant)
|
|||
|
Date: August 14, 2012
|
By: | /s/ W. Thomas Amick | |
|
W. Thomas Amick, Chairman of the Board and Chief
|
|||
| Executive Officer | |||
|
Date: August 14, 2012
|
By: | /s/ John G. Cooper | |
|
John G. Cooper
|
|||
|
President and Chief Financial Officer (Principal Financial Officer)
|
|||
|
Exhibit No.
|
Description
|
Method of Filing
|
|
|
3.1
|
Amended and Restated Certificate of Incorporation of Discovery Laboratories, Inc. (Discovery),
as amended as of and October 3, 2011
|
Incorporated by reference to Exhibit 3.1 to Discovery's Form 8-K, as filed with
the SEC on October 3, 2011.
|
|
|
3.2
|
Certificate of Designations, Preferences and Rights of Series A Junior Participating Cumulative
Preferred Stock of Discovery, dated February 6, 2004
|
Incorporated by reference to Exhibit 2.2 to Discovery’s Form 8-A,
as filed with the SEC on February 6, 2004.
|
|
|
3.3
|
Amended and Restated By-Laws of Discovery, as amended effective September 3, 2009
|
Incorporated by reference to Exhibit 3.1 to Discovery’s Current Report on Form 8-K, as filed with the SEC on September 4, 2009.
|
|
|
4.1
|
Shareholder Rights Agreement, dated as of February 6, 2004, by and between Discovery and Continental Stock Transfer & Trust Company
|
Incorporated by reference to Exhibit 10.1 to Discovery’s Current Report on Form 8-K, as filed with the SEC on February 6, 2004.
|
|
|
4.2
|
Warrant Agreement dated May 22, 2008 by and between Kingsbridge Capital Limited and Discovery
|
Incorporated by reference to Exhibit 4.1 to Discovery’s Current Report on Form 8-K as filed with the SEC on May 28, 2008.
|
|
|
4.3
|
Warrant Agreement dated December 12, 2008 by and between Kingsbridge Capital Limited and Discovery
|
Incorporated by reference to Exhibit 4.1 to Discovery’s Current Report on Form 8-K, as filed with the SEC on December 15, 2008.
|
|
|
4.4
|
Form of Stock Purchase Warrant issued in May 2009
|
Incorporated by reference to Exhibit 10.3 to Discovery’s Current Report on Form 8-K, as filed with the SEC on May 8, 2009.
|
|
|
4.5
|
Form of Stock Purchase Warrant issued in February 2010
|
Incorporated by reference to Exhibit 4.1 to Discovery’s Current Report on Form 8-K, as filed with the SEC on February 18, 2010.
|
|
|
4.6
|
Warrant Agreement, dated as of April 30, 2010, by and between Discovery and PharmaBio
|
Incorporated by reference to Exhibit 4.1 to Discovery’s Current Report on Form 8-K, as filed with the SEC on April 28, 2010.
|
|
|
4.7
|
Warrant Agreement dated June 11, 2010 by and between Kingsbridge Capital Limited and Discovery
|
Incorporated by reference to Exhibit 4.1 to Discovery’s Current Report on Form 8-K, as filed with the SEC on June 14, 2010.
|
|
|
4.8
|
Form of Five-Year Warrant issued on June 22, 2010
|
Incorporated by reference to Exhibit 4.1 to Discovery’s Current Report on Form 8-K, as filed with the SEC on June 17, 2010.
|
|
Exhibit No.
|
Description
|
Method of Filing | |
|
4.9
|
Warrant Agreement, dated as of October 12, 2010, by and between Discovery and PharmaBio
|
Incorporated by reference to Exhibit 4.1 to Discovery’s Current Report on Form 8-K, as filed with the SEC on October 13, 2010.
|
|
|
4.10
|
Form of Voting Agreement between RSA Holders and Discovery dated November 12, 2010
|
Incorporated by reference to Exhibit 4.13 to Discovery’s Annual Report on Form 10-KSB for the year ended December 31, 2010, as filed with the SEC on March 31, 2011.
|
|
|
4.11
|
Form of Five-Year Warrant issued on February 22, 2011
|
Incorporated by reference to Exhibit 4.1 to Discovery’s Current Report on Form 8-K, as filed with the SEC on February 16, 2011.
|
|
|
4.12
|
Form of Short Term Warrant issued on February 22, 2011
|
Incorporated by reference to Exhibit 4.2 to Discovery’s Current Report on Form 8-K, as filed with the SEC on February 16, 2011.
|
|
|
10.1*
|
Employment Agreement dated as of May 4, 2012 between Discovery and W. Thomas Amick
|
Incorporated by reference to Exhibit 10.1 to Discovery’s Current Report on Form 8-K, as filed with the SEC on May 10, 2012.
|
|
|
10.2*
|
Employment Agreement dated as of May 4, 2012 between Discovery and John G. Cooper
|
Incorporated by reference to Exhibit 10.2 to Discovery’s Current Report on Form 8-K, as filed with the SEC on May 10, 2012.
|
|
|
10.3*
|
Employment Agreement dated as of May 4, 2012 between Discovery and Thomas F. Miller
|
Incorporated by reference to Exhibit 10.3 to Discovery’s Current Report on Form 8-K, as filed with the SEC on May 10, 2012, as amended by Exhibit 10.1 to Discovery’s Current Report on Form 8-K/A, as filed with the SEC on May 11, 2012.
|
|
|
10.4+
|
Research and Development Services Agreement dated June 22, 2010 between Discovery and Battelle Memorial Institute
|
Filed herewith.
|
|
|
Certification of Chief Executive Officer and Principal Executive Officer pursuant to Rule 13a-14(a) of the Exchange Act
|
Filed herewith.
|
||
|
Certification of Chief Financial Officer and Principal Accounting Officer pursuant to Rule 13a-14(a) of the Exchange Act
|
Filed herewith.
|
||
|
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
Filed herewith.
|
|
Exhibit No.
|
Description
|
Method of Filing | |
|
101.1
|
The following consolidated financial
statements from the Discovery Laboratories,
Inc. Quarterly Report on Form 10-Q for the
quarter ended June 30, 2012, formatted in
Extensive Business Reporting Language
(“XBRL”): (i) Balance Sheets as of
June 30, 2012 (unaudited) and December 31, 2011, (ii) Statements of Operations (unaudited) for the three and six months ended June 30. 2012 and June 30, 2011, (iii) Statements of Cash Flows (unaudited) for the six months ended June 30, 2012 and June 30, 2011, and (v) Notes to consolidated financial statements.
|
||
|
101.INS
|
Instance Document
|
Filed herewith.
|
|
|
101.SCH
|
XBRL Taxonomy Extension Schema Document
|
Filed herewith.
|
|
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
Filed herewith.
|
|
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document
|
Filed herewith.
|
|
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document
|
Filed herewith.
|
|
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
Filed herewith.
|
No information found
* THE VALUE IS THE MARKET VALUE AS OF THE LAST DAY OF THE QUARTER FOR WHICH THE 13F WAS FILED.
| FUND | NUMBER OF SHARES | VALUE ($) | PUT OR CALL |
|---|
| DIRECTORS | AGE | BIO | OTHER DIRECTOR MEMBERSHIPS |
|---|
No information found
No Customers Found
No Suppliers Found
Price
Yield
| Owner | Position | Direct Shares | Indirect Shares |
|---|