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x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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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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52-2154066
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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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2910 Seventh Street, Berkeley,
California 94710
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(510) 204-7200
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(Address of principal executive offices,
including zip code)
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(Telephone Number)
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Large accelerated filer
o
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Accelerated filer
x
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Non-accelerated filer
o
(Do not check if a smaller
reporting company)
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Smaller reporting company
o
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Class
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Outstanding at May 4, 2012
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Common Stock, $0.0075 par value
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68,083,980
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Page
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| PART I FINANCIAL INFORMATION | ||
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Item 1.
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1
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2
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3
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4
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Item 2.
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16
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Item 3.
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25
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Item 4.
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26
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| PART II OTHER INFORMATION | ||
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Item 1.
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26
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Item 1A.
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27
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Item 2.
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46
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Item 3.
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46
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Item 4.
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46
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Item 5.
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46
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Item 6.
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47
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| Signatures |
48
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March 31,
2012
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December 31,
2011
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|||||||
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(unaudited)
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(Note 1)
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|||||||
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ASSETS
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||||||||
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Current assets:
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||||||||
| $ | 74,887 | $ | 48,344 | |||||
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Trade and other receivables, net
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10,164 | 12,332 | ||||||
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Prepaid expenses and other current assets
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3,674 | 2,019 | ||||||
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Total current assets
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88,725 | 62,695 | ||||||
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Property and equipment, net
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10,329 | 12,709 | ||||||
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Other assets
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2,268 | 2,632 | ||||||
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Total assets
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$ | 101,322 | $ | 78,036 | ||||
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LIABILITIES AND STOCKHOLDERS’ EQUITY
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||||||||
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Current liabilities:
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||||||||
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Accounts payable
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$ | 2,852 | $ | 2,128 | ||||
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Accrued and other liabilities
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6,297 | 10,012 | ||||||
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Deferred revenue
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6,912 | 5,695 | ||||||
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Interest bearing obligation – current
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2,796 | 2,796 | ||||||
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Total current liabilities
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18,857 | 20,631 | ||||||
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Deferred revenue – long-term
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7,207 | 7,539 | ||||||
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Interest bearing obligations – long-term
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33,569 | 33,524 | ||||||
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Contingent warrant liabilities
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21,122 | 379 | ||||||
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Other liabilities - long term
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1,079 | 952 | ||||||
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Total liabilities
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81,834 | 63,025 | ||||||
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Stockholders’ equity:
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||||||||
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Preferred stock, $0.05 par value, 1,000,000 shares authorized
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- | - | ||||||
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Common stock, $0.0075 par value, 92,666,666 shares authorized, 68,076,152 and 35,107,007 shares outstanding at March 31, 2012 and December 31, 2011, respectively
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511 | 263 | ||||||
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Additional paid-in capital
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935,455 | 900,801 | ||||||
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Accumulated deficit
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(916,478 | ) | (886,053 | ) | ||||
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Total stockholders’ equity
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19,488 | 15,011 | ||||||
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Total liabilities and stockholders’ equity
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$ | 101,322 | $ | 78,036 | ||||
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Three months ended March 31,
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||||||||
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2012
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2011
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|||||||
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Revenues:
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||||||||
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License and collaborative fees
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$ | 1,014 | $ | 5,827 | ||||
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Contract and other
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8,851 | 9,768 | ||||||
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Total revenues
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9,865 | 15,595 | ||||||
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Operating expenses:
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||||||||
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Research and development
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15,771 | 17,347 | ||||||
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Selling, general and administrative
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4,679 | 5,369 | ||||||
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Restructuring
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3,777 | - | ||||||
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Total operating expenses
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24,227 | 22,716 | ||||||
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Loss from operations
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(14,362 | ) | (7,121 | ) | ||||
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Other income (expense):
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||||||||
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Interest expense
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(1,042 | ) | (532 | ) | ||||
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Other expense
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(664 | ) | (1,057 | ) | ||||
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Revaluation of contingent warrant liabilities
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(14,357 | ) | 2,390 | |||||
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Net loss before taxes
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(30,425 | ) | (6,320 | ) | ||||
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Provision for income tax expense
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- | (15 | ) | |||||
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Net loss
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$ | (30,425 | ) | $ | (6,335 | ) | ||
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Basic and diluted net loss per share of common stock
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$ | (0.69 | ) | $ | (0.22 | ) | ||
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Shares used in computing basic and diluted net loss per share of common stock
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44,353 | 29,180 | ||||||
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Three Months Ended March 31,
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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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||||||||
| $ | (30,425 | ) | $ | (6,335 | ) | |||
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Adjustments to reconcile net loss to net cash used in operating activities:
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Depreciation
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1,265 | 1,346 | ||||||
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Common stock contribution to 401(k)
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1,134 | 1,046 | ||||||
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Stock-based compensation expense
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674 | 1,772 | ||||||
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Accrued interest on interest bearing obligations
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394 | 231 | ||||||
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Revaluation of contingent warrant liabilities
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14,357 | (2,390 | ) | |||||
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Restructuring charge related to long-lived assets
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1,707 | - | ||||||
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Amortization of discount and final payment fee on debt and debt issuance costs
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467 | 298 | ||||||
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Unrealized loss on foreign currency exchange
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376 | 1,619 | ||||||
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Unrealized loss on foreign exchange options
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276 | - | ||||||
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Other non-cash adjustments
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(43 | ) | 10 | |||||
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Changes in assets and liabilities:
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||||||||
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Trade and other receivables, net
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2,168 | 10,631 | ||||||
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Prepaid expenses and other assets
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(1,651 | ) | 247 | |||||
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Accounts payable and accrued liabilities
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(3,221 | ) | (5,429 | ) | ||||
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Deferred revenue
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884 | (6,156 | ) | |||||
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Other liabilities
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(37 | ) | (90 | ) | ||||
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Net cash used in operating activities
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(11,675 | ) | (3,200 | ) | ||||
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Cash flows from investing activities:
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||||||||
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Purchase of property and equipment
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(548 | ) | (888 | ) | ||||
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Net cash used in investing activities
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(548 | ) | (888 | ) | ||||
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Cash flows from financing activities:
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||||||||
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Proceeds from issuance of common stock, net of issuance costs
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39,480 | 4,129 | ||||||
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Proceeds from issuance of long-term debt
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- | 20,102 | ||||||
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Principal payments of debt
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(714 | ) | - | |||||
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Net cash provided by financing activities
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38,766 | 24,231 | ||||||
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Effect of exchange rate changes on cash
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- | (573 | ) | |||||
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Net increase in cash and cash equivalents
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26,543 | 20,143 | ||||||
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Cash and cash equivalents at the beginning of the period
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48,344 | 37,304 | ||||||
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Cash and cash equivalents at the end of the period
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$ | 74,887 | $ | 56,874 | ||||
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Supplemental Cash Flow Information:
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||||||||
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Cash paid during the quarter for:
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||||||||
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Income taxes
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$ | - | $ | 15 | ||||
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Non-cash investing and financing activities:
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||||||||
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Discount on long-term debt
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$ | (8,899 | ) | |||||
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Issuance of contingent warrant liabilities
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$ | 6,386 | $ | - | ||||
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Interest added to principal balances on long-term debt
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$ | 398 | $ | - | ||||
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1.
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Description of Business
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2.
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Basis of Presentation and Significant Accounting Policies
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3.
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Condensed Consolidated Financial Statement Detail
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Three Months Ended March 31,
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||||||||
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2012
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2011
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|||||||
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Common stock options and restricted stock units
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5,722 | 2,638 | ||||||
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Convertible preferred stock
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- | 254 | ||||||
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Warrants for common stock
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5,457 | 1,607 | ||||||
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Total
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11,179 | 4,499 | ||||||
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March 31,
2012
|
December 31,
2011
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|||||||
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Accrued payroll and other benefits
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$ | 2,155 | $ | 3,007 | ||||
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Accrued management incentive compensation
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996 | 4,096 | ||||||
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Accrued restructuring costs
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891 | 70 | ||||||
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Accrued professional fees
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760 | 917 | ||||||
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Accrued severance payments
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551 | 1,207 | ||||||
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Other
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944 | 715 | ||||||
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Total
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$ | 6,297 | $ | 10,012 | ||||
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4.
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Fair Value Measurements
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Level 1 –
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Quoted prices in active markets for identical assets or liabilities.
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Level 2 –
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Observable inputs other than quoted prices in active markets for similar assets or liabilities.
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Level 3 –
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Unobservable inputs.
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Fair Value Measurements at March 31, 2012 Using
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||||||||||||||||
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Quoted Prices in
Active Markets for
Identical Assets
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Significant
Other
Observable
Inputs
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Significant
Unobservable
Inputs
|
||||||||||||||
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(Level 1)
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(Level 2)
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(Level 3)
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Total
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|||||||||||||
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Assets:
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||||||||||||||||
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Money market funds
(1)
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$ | 50,523 | $ | - | $ | - | $ | 50,523 | ||||||||
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U.S. government securities
(1)
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9,999 | - | - | 9,999 | ||||||||||||
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Foreign exchange options
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926 | - | 926 | |||||||||||||
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Total
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$ | 60,522 | $ | 926 | $ | - | $ | 61,448 | ||||||||
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Liabilities:
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||||||||||||||||
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Contingent warrant liabilities
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$ | - | $ | - | $ | 21,122 | $ | 21,122 | ||||||||
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Fair Value Measurements at December 31, 2011 Using
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||||||||||||||||
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Quoted Prices in
Active Markets for
Identical Assets
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Significant
Other
Observable
Inputs
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Significant
Unobservable
Inputs
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||||||||||||||
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(Level 1)
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(Level 2)
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(Level 3)
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Total
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|||||||||||||
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Assets:
|
||||||||||||||||
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Money market funds
(1)
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$ | 27,222 | $ | - | $ | - | $ | 27,222 | ||||||||
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Foreign exchange options
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- | 1,202 | - | 1,202 | ||||||||||||
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Total
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$ | 27,222 | $ | 1,202 | $ | - | $ | 28,424 | ||||||||
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Liabilities:
|
||||||||||||||||
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Contingent warrant liabilities
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$ | - | $ | - | $ | 379 | $ | 379 | ||||||||
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March 31,
2012
|
December 31,
2011
|
|||||||
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Expected volatility
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40 | % | 102.1% - 103.2 | % | ||||
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Risk-free interest rate
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0.5% - 1.05 | % | 0.4 | % | ||||
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Expected term
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2.7 - 4.9 years
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2.9 - 3.1 years
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||||||
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Contingent warrant liabilities
|
March 31, 2012
|
|||
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Balance at December 31, 2011
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$ | 379 | ||
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Initial fair value of warrants issued in March 2012
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6,390 | |||
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Reclassification of contingent warrant liability to equity upon exercise of warrants
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(4 | ) | ||
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Net increase in fair value of contingent warrant liabilities upon revaluation
|
14,357 | |||
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Balance at March 31, 2012
|
$ | 21,122 | ||
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5.
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Licensing, Collaborative and Other Arrangements
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6.
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Streamlining and Restructuring Charges
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Employee Severance
and Other Benefits
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Facility Charges
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Asset
Impairment
(1)
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Total
|
|||||||||||||
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Balance at December 31, 2011
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$ | - | $ | 162 | $ | - | $ | 162 | ||||||||
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Restructuring charges
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2,070 | - | 1,707 | 3,777 | ||||||||||||
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Cash payments
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(1,258 | ) | (23 | ) | - | (1,281 | ) | |||||||||
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Adjustments
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- | 8 | (1,707 | ) | (1,699 | ) | ||||||||||
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Balance at March 31, 2012
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$ | 812 | $ | 147 | $ | - | $ | 959 | ||||||||
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7.
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Long-Term Debt and Other Financings
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Three Months Ended March 31,
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||||||||
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2012
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2011
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Interest expense
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||||||||
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Servier loan
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$ | 516 | $ | 442 | ||||
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GECC term loan
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417 | - | ||||||
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Novartis note
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99 | 84 | ||||||
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Other
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10 | 6 | ||||||
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Total interest expense
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$ | 1,042 | $ | 532 | ||||
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8.
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Income Taxes
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9.
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Stock-based Compensation
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Three Months Ended March 31,
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||||||||
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2012
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2011
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|||||||
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Dividend yield
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0 | % | 0 | % | ||||
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Expected volatility
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92 | % | 86 | % | ||||
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Risk-free interest rate
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1.05 | % | 2.20 | % | ||||
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Expected term
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5.6 years
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5.6 years
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||||||
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Options
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Weighted
Average
Exercise Price
Per Share
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Weighted
Average
Remaining
Contractual Life
(in years)
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Aggregate
Intrinsic Value
(in thousands)
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|||||||||||||
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Options outstanding at December 31, 2011
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5,053,435 | $ | 12.55 | 6.89 | $ | - | ||||||||||
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Granted
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940,900 | 1.45 | ||||||||||||||
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Exercised
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(24,730 | ) | 1.69 | |||||||||||||
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Forfeited, expired or cancelled
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(167,484 | ) | 21.65 | |||||||||||||
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Options outstanding at March 31, 2012
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5,802,121 | $ | 10.53 | 7.28 | $ | 2,375 | ||||||||||
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Options exercisable at March 31, 2012
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3,567,292 | $ | 14.96 | 6.45 | $ | 867 | ||||||||||
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Weighted-
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||||||||
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Number of
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Average Grant-
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|||||||
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Shares
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Date Fair Value
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|||||||
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Unvested balance at December 31, 2011
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903,874 | $ | 1.69 | |||||
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Granted
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343,115 | 1.29 | ||||||
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Vested
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- | - | ||||||
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Forfeited
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(132,575 | ) | 1.69 | |||||
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Unvested balance at March 31, 2012
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1,114,414 | $ | 1.57 | |||||
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Three Months Ended March 31,
|
||||||||
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2012
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2011
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|||||||
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Research and development
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$ | 385 | $ | 1,061 | ||||
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Selling, general and administrative
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289 | 711 | ||||||
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Total stock-based compensation expense
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$ | 674 | $ | 1,772 | ||||
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10.
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Legal Proceedings, Commitments and Contingencies
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●
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On January 17, 2012, we announced that we had acquired certain U.S. rights to a portfolio of antihypertensive products from Servier. The portfolio includes ACEON®, a currently marketed ACE inhibitor, and three FDC product candidates where a proprietary form of perindopril (perindopril arginine) is combined with another active ingredient(s), such as a calcium channel blocker. We assumed commercialization activities for ACEON® in January 2012 following the transfer from Servier’s previous licensee.
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●
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In February 2012, we initiated enrollment in a Phase 3 trial for perindopril arginine and amlodipine besylate, the first FDC product candidate. The trial is expected to enroll approximately 816 patients with hypertension to determine the safety and efficacy of the FDC versus either perindopril or amlodipine alone. Based on regulatory interaction to date, if the trial generates positive results, it is expected to be the only efficacy trial needed to complement existing clinical data and will support the submission of an application to the FDA seeking approval for this product candidate. Partial funding for the PATH trial was provided by Servier; the balance of study expenses, consisting primarily of costs generated by our contract research organization, are expected to be paid over time from the profits generated by our ACEON® sales.
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●
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On January 5, 2012, we implemented a streamlining of operations, which resulted in a restructuring designed to sharpen our focus on value-creating opportunities led by gevokizumab and our unique antibody discovery and development capabilities. The restructuring plan included a reduction of our personnel by 84 positions, or 34%, of which 52 were eliminated immediately and the remainder eliminated as of April 6, 2012. These staff reductions resulted primarily from our decisions to utilize a contract manufacturing organization for Phase 3 and commercial antibody production and to eliminate internal research functions that are non-differentiating or that can be obtained cost-effectively by contract service providers. As a result, we expect to reduce ongoing internal spending by approximately $14 million in 2012 compared to the 2011 level. In connection with the streamlining of operations, we incurred restructuring charges of $2.1 million related to severance, other termination benefits and outplacement services and $1.7 million related to the impairment and accelerated depreciation of various assets and leasehold improvements in the first quarter of 2012. In the remainder of 2012, we anticipate incurring an additional $0.1 million in severance charges and approximately $1.2 million in facility charges related to this streamlining of operations.
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|
●
|
On January 4, 2012, the Company’s Board of Directors appointed John Varian, a current Board member and the interim Chief Executive Officer, as Chief Executive Officer. W. Denman Van Ness continues to serve as Chairman of the Board.
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|
●
|
In the first quarter of 2012, we sold 2,285,375 shares of common stock through McNicoll, Lewis & Vlak LLC (now known as MLV & Co. LLC, “MLV”), under our At Market Issuance Sales Agreement dated February 4, 2011 (the “2011 ATM Agreement”), for aggregate gross proceeds of $3.3 million.
|
|
●
|
In March 2012, we completed an underwritten public offering of 29,669,154 shares of our common stock, and accompanying warrants to purchase one half of a share of common stock for each share purchased, for gross proceeds of $39.2 million.
|
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Three Months Ended March 31,
|
||||||||||||
|
2012
|
2011
|
Increase
(Decrease)
|
||||||||||
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License and collaborative fees
|
$ | 1,014 | $ | 5,827 | $ | (4,813 | ) | |||||
|
Contract and other
|
8,851 | 9,768 | (917 | ) | ||||||||
|
Total revenues
|
$ | 9,865 | $ | 15,595 | $ | (5,730 | ) | |||||
|
Three Months Ended March 31,
|
||||||||||||
|
2012
|
2011
|
Increase
(Decrease)
|
||||||||||
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NIAID
|
$ | 4,837 | $ | 6,884 | $ | (2,047 | ) | |||||
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Servier
|
3,649 | 2,082 | 1,567 | |||||||||
|
Other
|
365 | 802 | (437 | ) | ||||||||
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Total contract and other
|
$ | 8,851 | $ | 9,768 | $ | (917 | ) | |||||
|
Three Months Ended March 31,
|
||||||||
|
2012
|
2011
|
|||||||
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Earlier stage programs
|
$ | 8,333 | $ | 11,383 | ||||
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Later stage programs
|
7,438 | 5,964 | ||||||
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Total
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$ | 15,771 | $ | 17,347 | ||||
|
Three Months Ended March 31,
|
||||||||
|
2012
|
2011
|
|||||||
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Internal projects
|
$ | 6,682 | $ | 7,408 | ||||
|
Collaborative and contract arrangements
|
9,089 | 9,939 | ||||||
|
Total
|
$ | 15,771 | $ | 17,347 | ||||
|
Three Months Ended March 31,
|
||||||||||||
|
2012
|
2011
|
Increase
(Decrease)
|
||||||||||
|
Interest expense
|
||||||||||||
|
Servier loan
|
$ | 516 | $ | 442 | $ | 74 | ||||||
|
GECC term loan
|
417 | - | 417 | |||||||||
|
Novartis note
|
99 | 84 | 15 | |||||||||
|
Other
|
10 | 6 | 4 | |||||||||
|
Total interest expense
|
$ | 1,042 | $ | 532 | $ | 510 | ||||||
|
Three Months Ended March 31,
|
||||||||||||
|
2012
|
2011
|
Increase
(Decrease)
|
||||||||||
|
Other expense
|
||||||||||||
|
Unrealized foreign exchange loss
(1)
|
$ | (402 | ) | $ | (1,617 | ) | $ | 1,215 | ||||
|
Realized foreign exchange gain
(2)
|
10 | 560 | (550 | ) | ||||||||
|
Unrealized loss on foreign exchange options
|
(276 | ) | - | (276 | ) | |||||||
|
Other
|
4 | - | 4 | |||||||||
|
Total other expense
|
$ | (664 | ) | $ | (1,057 | ) | $ | 393 | ||||
|
(1)
|
Unrealized foreign exchange gain (loss) for the three months ended March 31, 2012 and 2011 primarily relates to gains (losses) on the re-measurement of the €15 million Servier loan.
|
|
(2)
|
Realized foreign exchange gain for the three months ended March 31, 2011 primarily relates to the conversion into U.S. dollars of the €15 million cash proceeds received from Servier in January of 2011.
|
|
Contingent warrant liabilities
|
March 31, 2012
|
|||
|
Balance at December 31, 2011
|
$ | 379 | ||
|
Initial fair value of warrants issued in March 2012
|
6,390 | |||
|
Reclassification of contingent warrant liability to equity upon exercise of warrants
|
(4 | ) | ||
|
Net increase in fair value of contingent warrant liabilities upon revaluation
|
14,357 | |||
|
Balance at March 31, 2012
|
$ | 21,122 | ||
|
March 31,
2012
|
December 31,
2011
|
Change
|
||||||||||
|
Cash and cash equivalents
|
$ | 74,887 | $ | 48,344 | $ | 26,543 | ||||||
|
Working Capital
|
$ | 69,868 | $ | 42,064 | $ | 27,804 | ||||||
|
Three Months Ended March 31,
|
||||||||||||
|
2012
|
2011
|
Change
|
||||||||||
|
Net cash used in operating activities
|
$ | (11,675 | ) | $ | (3,200 | ) | $ | (8,475 | ) | |||
|
Net cash used in investing activities
|
(548 | ) | (888 | ) | 340 | |||||||
|
Net cash provided by financing activities
|
38,766 | 24,231 | 14,535 | |||||||||
|
Effect of exchange rate changes on cash
|
- | (573 | ) | 573 | ||||||||
|
Net increase in cash and cash equivalents
|
$ | 26,543 | $ | 19,570 | $ | 6,973 | ||||||
|
Maturity
|
Carrying
Amount
(in thousands)
|
Fair Value
(in thousands)
|
Average
Interest Rate
|
||||||||||
|
March 31, 2012
|
|||||||||||||
|
Cash and cash equivalents
|
Daily to 90 days
|
$ | 74,887 | $ | 74,887 | 0.07 | % | ||||||
|
December 31, 2011
|
|||||||||||||
|
Cash and cash equivalents
|
Daily to 90 days
|
$ | 48,344 | $ | 48,344 | 0.25 | % | ||||||
|
ITEM 1.
|
LE
GAL
PROCEEDINGS
|
|
ITEM 1A.
|
RISK FA
CTO
RS
|
|
●
|
terminate or delay clinical trials for one or more of our product candidates;
|
|
●
|
further reduce our headcount and capital or operating expenditures; or
|
|
●
|
curtail our spending on protecting our intellectual property.
|
|
|
●
|
|
operations will generate meaningful funds,
|
|
|
●
|
|
additional agreements for product development funding can be reached,
|
|
|
●
|
|
strategic alliances can be negotiated, or
|
|
|
●
|
|
adequate additional financing will be available for us to finance our own development on acceptable terms, or at all.
|
|
●
|
our future filings will be delayed,
|
|
●
|
our preclinical and clinical studies will be successful,
|
|
●
|
we will be successful in generating viable product candidates to targets,
|
|
●
|
we will be able to provide necessary additional data,
|
|
●
|
results of future clinical trials will justify further development, or
|
|
●
|
we will ultimately achieve regulatory approval for any of these product candidates.
|
|
●
|
testing,
|
|
●
|
manufacturing,
|
|
●
|
promotion and marketing, and
|
|
●
|
exporting.
|
|
●
|
results of preclinical studies and clinical trials,
|
|
●
|
information relating to the safety or efficacy of products or product candidates,
|
|
●
|
developments regarding regulatory filings,
|
|
●
|
announcements of new collaborations,
|
|
●
|
failure to enter into collaborations,
|
|
●
|
developments in existing collaborations,
|
|
●
|
our funding requirements and the terms of our financing arrangements,
|
|
●
|
technological innovations or new indications for our therapeutic products and product candidates,
|
|
●
|
introduction of new products or technologies by us or our competitors,
|
|
●
|
sales and estimated or forecasted sales of products for which we receive royalties, if any,
|
|
●
|
government regulations,
|
|
●
|
developments in patent or other proprietary rights,
|
|
●
|
the number of shares issued and outstanding,
|
|
●
|
the number of shares trading on an average trading day,
|
|
●
|
announcements regarding other participants in the biotechnology and pharmaceutical industries, and
|
|
●
|
market speculation regarding any of the foregoing.
|
|
●
|
In April 1996, we entered into an agreement with Genentech whereby we agreed to co-develop Genentech’s humanized monoclonal antibody product RAPTIVA®. In April 1999, March 2003, and January 2005, the companies amended the agreement. In October 2003, RAPTIVA® was approved by the FDA for the treatment of adults with chronic moderate-to-severe plaque psoriasis who are candidates for systemic therapy or phototherapy and, in September 2004, Merck Serono announced the product’s approval in the European Union. In January 2005, we entered into a restructuring of our collaboration agreement with Genentech which ended our existing cost and profit sharing arrangement related to RAPTIVA® in the United States and entitled us to a royalty interest on worldwide net sales. In February 2009, the EMA announced that it had recommended suspension of the marketing authorization of RAPTIVA® in the European Union and EMD Serono announced that, in consultation with Health Canada, it would suspend marketing of RAPTIVA® in Canada. In March 2009, Merck Serono Australia, following a recommendation from the TGA, announced that it was withdrawing RAPTIVA® from the Australian market. In the second quarter of 2009, Genentech announced and carried out a phased voluntary withdrawal of RAPTIVA® from the U.S. market, based on the association of RAPTIVA® with an increased risk of PML. As a result, sales of RAPTIVA® ceased in the second quarter of 2009.
|
|
●
|
In March 2004, we announced we had agreed to collaborate with Chiron Corporation (now Novartis) for the development and commercialization of antibody products for the treatment of cancer. In April 2005, we announced the initiation of clinical testing of the first product candidate out of the collaboration, HCD122, an anti-CD40 antibody, in patients with advanced chronic lymphocytic leukemia. In October 2005, we announced the initiation of the second clinical trial of HCD122 in patients with multiple myeloma. In November 2008, we announced the restructuring of this product development collaboration, which involved six development programs including the ongoing HCD122 and LFA102 programs. In exchange for cash and debt reduction on our existing loan facility with Novartis, Novartis has control over the HCD122 and LFA102 programs and the additional ongoing program, as well as the right to expand the development of these programs into additional indications outside of oncology.
|
|
|
|
|
●
|
In March 2005, we entered into a contract with the National Institute of Allergy and Infectious Diseases (“NIAID”) to produce three monoclonal antibodies designed to protect United States citizens against the harmful effects of botulinum neurotoxin used in bioterrorism. In July 2006, we entered into an additional contract with NIAID for the development of an appropriate formulation for human administration of these three antibodies in a single injection. In September 2008, we announced that we were awarded an additional contract with NIAID to support our on-going development of drug candidates toward clinical trials in the treatment of botulism poisoning. In October 2011, we announced we had been awarded an additional contract with NIAID to develop broad-spectrum antitoxins for the treatment of human botulism poisoning.
|
|
|
|
|
●
|
In December 2010, we entered into a license and collaboration agreement with Servier, to jointly develop and commercialize gevokizumab in multiple indications. Under the terms of the agreement, Servier has worldwide rights to diabetes and cardiovascular disease indications and rights outside the U.S. and Japan to Behçet’s uveitis and other inflammatory and oncology indications. We retain development and commercialization rights for Behçet’s uveitis and other inflammatory disease and oncology indications in the U.S. and Japan, and have an option to reacquire rights to diabetes and cardiovascular disease indications from Servier in these territories. Should we exercise this option, we will be required to pay Servier an option fee and partially reimburse their incurred development expenses. The agreement contains customary termination rights relating to matters such as material breach by either party, safety issues and patents. Servier also has a unilateral right to terminate the agreement on a country-by-country basis or in its entirety on six months’ notice.
|
|
|
|
|
●
|
In December 2010, we also entered into a loan agreement with Servier, which provides for an advance of up to €15.0 million and was fully funded in January 2011 with the proceeds converting to approximately $19.5 million using the January 13, 2011 Euro to USD exchange rate. This loan is secured by an interest in our intellectual property rights to all gevokizumab indications worldwide, excluding the U.S. and Japan. The loan has a final maturity date in 2016; however, after a specified period prior to final maturity, the loan is required to be repaid (i) at Servier’s option, by applying up to a significant percentage of any milestone or royalty payments owed by Servier under our collaboration agreement and (ii) using a significant percentage of any upfront, milestone or royalty payments we receive from any third party collaboration or development partner for rights to gevokizumab in the U.S. and/or Japan. In addition, the loan becomes immediately due and payable upon certain customary events of default. At March 31, 2012, the €15.0 million outstanding principal balance under this loan agreement would have equaled approximately $20.0 million using the March 31, 2012 Euro to USD exchange rate.
|
|
●
|
In December 2011, we entered into a loan agreement with GECC, under which GECC agreed to make a term loan in an aggregate principal amount of $10 million to XOMA (US) LLC, our wholly owned subsidiary, and upon execution of the loan agreement, GECC funded the term loan. The term loan is guaranteed by us and our two other principal subsidiaries, XOMA Ireland Limited and XOMA Technology Ltd. As security for our obligations under the loan agreement, we, XOMA (US) LLC, XOMA Ireland Limited and XOMA Technology Ltd. each granted a security interest pursuant to a guaranty, pledge and security agreement in substantially all of our existing and after-acquired assets, excluding our intellectual property assets (such as those relating to our gevokizumab and anti-botulism products). We are required to repay the principal amount of the Term Loan over a period of 42 consecutive equal monthly installments of principal and accrued interest. The term loan matures on June 30, 2015, and at maturity, we will make an additional payment equal to 5% of the term loan (“Final Payment Fee”). The loan agreement contains customary representations and warranties and customary affirmative and negative covenants, including restrictions on the ability to incur indebtedness, grant liens, make investments, dispose of assets, enter into transactions with affiliates and amend existing material agreements, in each case subject to various exceptions. In addition, the loan agreement contains customary events of default that entitle GECC to cause any or all of the indebtedness under the loan agreement to become immediately due and payable. The events of default include any event of default under a material agreement or certain other indebtedness. We may voluntarily prepay the term loan in full, but not in part, and any voluntary and certain mandatory prepayments are subject to a prepayment premium of 3% in the first year of the loan, 2% in the second year and 1% thereafter, with certain exceptions. We will also be required to pay the Final Payment Fee in connection with any voluntary or mandatory prepayment. Pursuant to the loan agreement, we issued to GECC unregistered stock purchase warrants, which entitle GECC to purchase up to an aggregate of 263,158 unregistered shares of XOMA common stock at an exercise price equal to $1.14 per share, are immediately exercisable and expire on December 30, 2016.
|
|
●
|
Effective in January 2012, we entered into an amended and restated agreement with Servier for the U.S. commercialization rights to ACEON® and the development and commercialization in the U.S. of up to three products combining perindopril with other cardiovascular drugs in fixed-dose combinations, or FDCs. This agreement, together with a related trademark license agreement, provides us with exclusive U.S. rights to ACEON® and the first FDC product, and options on two additional FDCs. The arrangement also provides that Servier will supply to us, and we will purchase exclusively from Servier, the active ingredients in ACEON® and the FDCs, in some cases for a limited period. The agreement contains customary termination rights relating to matters such as material breach by either party, insolvency of either party or safety issues. Each party also has the right to terminate the arrangement if the first FDC product does not receive FDA approval by December 31, 2014. Servier also has the right to terminate the arrangement if certain aspects of our commercialization strategy are not successful and Servier does not consent to an alternative strategy or, as to the FDCs, if we breach our obligations to certain of our service providers.
|
|
●
|
We have licensed our bacterial cell expression technology, an enabling technology used to discover and screen, as well as develop and manufacture, recombinant antibodies and other proteins for commercial purposes, to over 60 companies. As of May 4, 2012, we were aware of two antibody products manufactured using this technology that have received FDA approval, Genentech’s LUCENTIS® (ranibizumab injection) for treatment of neovascular wet age-related macular degeneration and UCB’s CIMZIA® (certolizumab pegol) for treatment of Crohn’s disease and rheumatoid arthritis. In the third quarter of 2009, we sold our LUCENTIS® royalty interest to Genentech. In the third quarter of 2010, we sold our CIMZIA® royalty interest.
|
|
●
|
significantly greater financial resources,
|
|
●
|
larger research and development and marketing staffs,
|
|
●
|
larger production facilities,
|
|
●
|
entered into arrangements with, or acquired, biotechnology companies to enhance their capabilities, or
|
|
●
|
extensive experience in preclinical testing and human clinical trials.
|
|
●
|
|
Novartis markets and is developing Ilaris® (canakinumab, ACZ885), a fully human monoclonal antibody that selectively binds to and neutralizes IL-1 beta. Since 2009, canakinumab has been approved in over 50 countries for the treatment of children and adults suffering from Cryopyrin-Associated Periodic Syndrome (“CAPS”). Novartis has filed for regulatory approval of canakinumab in the U.S. and Europe for the treatment acute attacks in gouty arthritis. In August 2011, Novartis announced that the FDA had issued a Complete Response letter requesting additional information, including clinical data to evaluate the benefit risk profile of canakinumab in refractory gouty arthritis patients. In September 2011, Novartis announced positive results of a pivotal Phase 3 trial of canakinumab in patients with systemic juvenile idiopathic arthritis and that it plans to seek regulatory approval for this indication in 2012. Novartis is also pursuing other diseases in which IL-1 beta may play a prominent role, such as systemic secondary prevention of cardiovascular events.
|
|
●
|
|
Eli Lilly and Company (“Lilly”) is developing a monoclonal antibody to IL-1 beta in Phase 1 development for the treatment of cardiovascular disease. In June 2011, Lilly reported results from a Phase 2 study of LY2189102 in 106 patients with Type 2 diabetes, showing a significant (p<0.05), early reduction in C reactive protein, moderate reduction in HbA1c and anti-inflammatory effects. We do not know whether LY2189102 remains in development.
|
|
●
|
|
In 2008, Swedish Orphan Biovitrum obtained from Amgen the global exclusive rights to Kineret® (anakinra) for rheumatoid arthritis as currently indicated in its label. In November 2009, the agreement regarding Swedish Orphan Biovitrum’s Kineret® license was expanded to include certain orphan indications. Kineret® is an IL-1 receptor antagonist (IL-1ra) which has been evaluated in multiple IL-1 mediated diseases, including indications we are considering for gevokizumab. In addition to other on-going studies, a proof-of-concept clinical trial in the United Kingdom investigating Kineret® in patients with a certain type of myocardial infarction, or heart attack, has been completed. In August 2010, Biovitrum announced that the FDA had granted orphan drug designation to Kineret® for the treatment of CAPS.
|
|
●
|
|
In February 2008, Regeneron Pharmaceuticals, Inc. (“Regeneron”) announced it had received marketing approval from the FDA for ARCALYST® (rilonacept) Injection for Subcutaneous Use, an interleukin-1 blocker or IL-1 Trap, for the treatment of CAPS, including Familial Cold Auto-inflammatory Syndrome and Muckle-Wells Syndrome in adults and children 12 and older. In September 2009, Regeneron announced that rilonacept was approved in the European Union for CAPS. In June 2010 and February 2011, Regeneron announced positive results of two Phase 3 clinical trials of rilonacept in gout. In November 2011, Regeneron announced that the FDA had accepted for review Regeneron’s supplemental BLA for ARCALYST® for the prevention and treatment of gout. A meeting of an FDA advisory panel to review this supplemental BLA is scheduled for May 2012.
|
|
●
|
|
Amgen has been developing AMG 108, a fully-human monoclonal antibody that targets inhibition of the action of IL-1. In April 2008, Amgen discussed results from a Phase 2 study in rheumatoid arthritis. AMG 108 showed statistically significant improvement in the signs and symptoms of rheumatoid arthritis and was well tolerated. In January 2011, MedImmune, the worldwide biologics unit for AstraZeneca PLC, announced that Amgen granted it rights to develop AMG 108 worldwide except in Japan.
|
|
●
|
|
In June 2009, Cytos Biotechnology AG announced the initiation of an ascending dose Phase 1/2a study of CYT013-IL1bQb, a therapeutic vaccine targeting IL-1 beta, in Type 2 diabetes. In 2010, this study was extended to include two additional groups of patients.
|
|
●
|
|
We are aware that the following companies have completed or are conducting or planning Phase 3 clinical trials of the following products for the treatment of uveitis: Abbott - HUMIRA® (adalimumab); Lux Biosciences, Inc. - LUVENIQ (voclosporin); Novartis - Myfortic® (mycophenalate sodium) and Santen Pharmaceutical Co., Ltd. - Sirolimus (rapamycin).
|
|
●
|
The number one product (based on annual sales) within the ACE inhibitor category is lisinopril, formerly marketed by Astra-Zeneca Pharmaceuticals LP under the brand ZESTRIL® and by Merck & Co. under the brand Prinivil®.
|
|
●
|
There are multiple options in the fixed-dose combination market combining ACE inhibitors with diuretics, and two options combining an ACE inhibitor with a calcium channel blocker. Current options with a calcium channel blocker are benazepril/amlodipine, formerly marketed by Novartis Pharmaceuticals as Lotrel®, and trandolapril/verapamil, formerly marketed by Abbot Laboratories as Tarka®.
|
|
●
|
The most successful of the ARBs (in terms of annual sales) is valsartan, trade name Diovan®, which is marketed by Novartis. This compound, along with other ARBs, has been developed in multiple fixed-dose combination products: with a diuretic, a calcium channel blocker (amlodipine) and as a triple combining all three.
|
|
●
|
Cangene Corporation has a contract with the U.S. Department of Health & Human Services, expected to be for $423.0 million, to manufacture and supply an equine heptavalent botulism anti-toxin.
|
|
●
|
Emergent BioSolutions, Inc. is currently in development of a botulism immunoglobulin candidate that may compete with our anti-botulinum neurotoxin monoclonal antibodies.
|
|
●
|
imposition of government controls,
|
|
●
|
export license requirements,
|
|
●
|
political or economic instability,
|
|
●
|
trade restrictions,
|
|
●
|
changes in tariffs,
|
|
●
|
restrictions on repatriating profits,
|
|
●
|
exchange rate fluctuations,
|
|
●
|
withholding and other taxation, and
|
|
●
|
difficulties in staffing and managing international operations.
|
|
●
|
prevent our competitors from duplicating our products,
|
|
●
|
prevent our competitors from gaining access to our proprietary information and technology, or
|
|
●
|
permit us to gain or maintain a competitive advantage.
|
|
●
|
whether any pending or future patent applications held by us will result in an issued patent, or that if patents are issued to us, that such patents will provide meaningful protection against competitors or competitive technologies,
|
|
●
|
whether competitors will be able to design around our patents or develop and obtain patent protection for technologies, designs or methods that are more effective than those covered by our patents and patent applications, or
|
|
●
|
the extent to which our product candidates could infringe on the intellectual property rights of others, which may lead to costly litigation, result in the payment of substantial damages or royalties, and/or prevent us from using technology that is essential to our business.
|
|
●
|
require certain procedures to be followed and time periods to be met for any stockholder to propose matters to be considered at annual meetings of stockholders, including nominating directors for election at those meetings; and
|
|
●
|
authorize our Board of Directors to issue up to 1,000,000 shares of preferred stock without stockholder approval and to set the rights, preferences and other designations, including voting rights, of those shares as the Board of Directors may determine.
|
|
ITEM 2.
|
UNREGISTE
RED
SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
|
DEFAULTS
UPON SENIOR
SECURITIES
|
|
MINE SAFE
TY
DISCLOSURES
|
|
ITEM 5.
|
OTHER INFORMATION
|
|
ITEM 6.
|
EXHIB ITS | |
|
Exhibit
|
||
|
Number
|
||
|
Certification of John Varian, filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
||
|
Certification of Fred Kurland, filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
||
|
Certification of John Varian, furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
||
|
Certification of Fred Kurland, furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
||
|
Press Release dated May 8, 2012, furnished herewith
|
||
|
101.INS
|
XBRL Instance Document
|
|
|
101.SCH
|
XBRL Schema Document
|
|
|
101.CAL
|
XBRL Calculation Linkbase Document
|
|
|
101.DEF
|
XBRL Definition Linkbase Document
|
|
|
101.LAB
|
XBRL Label Linkbase Document
|
|
|
101.PRE
|
XBRL Presentation Linkbase Document
|
|
XOMA Corporation
|
|||
|
Date: May 8, 2012
|
By:
|
/s/ JOHN VARIAN | |
|
John Varian
|
|||
|
Chief Executive Officer (principal executive officer) and
|
|||
| Director | |||
| Date: May 8, 2012 |
By:
|
/s/ FRED KURLAND
|
|
|
Fred Kurland
|
|||
|
Vice President, Finance and Chief Financial Officer
|
|||
|
(principal financial and principal accounting officer)
|
|||
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 |
|---|