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0000897069-07-001446.txt : 20070626
0000897069-07-001446.hdr.sgml : 20070626
20070626130638
ACCESSION NUMBER: 0000897069-07-001446
CONFORMED SUBMISSION TYPE: 20-F
PUBLIC DOCUMENT COUNT: 6
CONFORMED PERIOD OF REPORT: 20061231
FILED AS OF DATE: 20070626
DATE AS OF CHANGE: 20070626
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: NYMOX PHARMACEUTICAL CORP
CENTRAL INDEX KEY: 0001018735
STANDARD INDUSTRIAL CLASSIFICATION: IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES [2835]
IRS NUMBER: 000000000
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 20-F
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-12033
FILM NUMBER: 07940622
BUSINESS ADDRESS:
STREET 1: 9900 CAVENDISH BLVD., SUITE 306
STREET 2: ST. LAURENT
CITY: QUEBEC CANADA
STATE: A8
ZIP: H4M 2V2
BUSINESS PHONE: 514-332-32
MAIL ADDRESS:
STREET 1: 9900 CAVENDISH BLVD., SUITE 306
STREET 2: ST. LAURENT
CITY: QUEBEC CANADA
STATE: A8
ZIP: H4M 2V2
20-F
1
cmw2903.htm
ANNUAL REPORT
Form 20F
[ ] |
Registration
Statement pursuant to section 12(b) or (g) of the Securities Exchange Act
of 1934 |
[X] |
Annual
Report pursuant to section 13 or 15(d) of the Securities Exchange Act of
1934 For the fiscal year ended December 31, 2006 |
[ ] |
Transition
Report pursuant to section 13 or 15(d) of the Securities Exchange Act of
1934 For the transition period from to |
[ ] |
Shell
Company Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 Date of event requiring this Shell Company Report from to |
Commission File Number:
001-12033
NYMOX PHARMACEUTICAL
CORPORATION
(Exact name of registrant as specified in its charter)
Canada
(Jurisdiction
of incorporation or organization)
9900 Cavendish Blvd.,
Suite 306
St. Laurent, Quebec, Canada, H4M 2V2
(Address of principal executive offices)
Securities registered or to be
registered pursuant to section 12(b) of the Act.
Title of each class |
Name of each exchange on which registered |
None |
Not Applicable |
Securities registered or to be registered
pursuant to section 12(g) of the Act
Common Stock
Securities registered or to be
registered pursuant to section 15(d) of the Act
None
Indicate the number of outstanding
shares of each of the issuers classes of capital or common stock as of the close of
the period covered by the annual report.
28,322,253 shares as of
December 31, 2006
Indicate by check mark if the
registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Exchange Act of 1934
Yes [ ]
No [X]
If this is a transition report,
indicate by check mark if the registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934
Yes [ ]
No
[ ]
Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No
[ ]
Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.
See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the
Exchange Act. (Check one):
Large accelerated filer [ ]
Accelerated filer [ ] Non-accelerated filer [X]
Indicate by check mark which
financial statement item the registrant has elected to follow.
Item 17 [X] Item
18 [ ]
If this is an annual report, indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).
Yes [ ]
No
[X]
2
In this annual report, the term
Nymox refers to both Nymox Pharmaceutical Corporation and its subsidiaries,
Nymox Corporation and Serex Inc., and, where applicable, a predecessor private
corporation, DMS Pharmaceuticals Inc. Unless otherwise indicated all dollar amounts
are in United States Dollars.
CAUTIONARY STATEMENT
REGARDING FORWARD-LOOKING STATEMENTS
You should be aware that this report
contains forward-looking statements about, among other things, the anticipated operations,
product development, financial condition and operating results of Nymox, proposed clinical
trials and proposed transactions, including collaboration agreements.
By forward-looking statements, we
mean any statements that are not statements of historical fact, including (but not limited
to) statements preceded by or that include the words, believes,
expects, anticipates, hopes, targets or
similar expressions.
In connection with the safe
harbor provisions in the Private Securities Litigation Reform Act of 1995, we are
including this cautionary statement to identify some of the important factors that could
cause Nymoxs actual results or plans to differ materially from those projected in
forward-looking statements made by, or on behalf of, Nymox. These factors, many of which
are beyond the control of Nymox, include Nymoxs ability to:
|
|
identify
and capitalize on possible collaboration, strategic partnering or divestiture
opportunities, |
|
|
obtain
suitable financing to support its operations and clinical trials, |
|
|
manage
its growth and the commercialization of its products, |
|
|
achieve
operating efficiencies as it progresses from a development-stage to a later-stage
biotechnology company, |
|
|
successfully
compete in its markets, |
|
|
realize
the results it anticipates from the clinical trials of its products, |
|
|
succeed
in finding and retaining joint venture and collaboration partners to assist it
in the successful marketing, distribution and commercialization of
its products, |
|
|
achieve
regulatory clearances for its products, |
|
|
obtain
on commercially reasonable terms adequate product liability insurance for its
commercialized products, |
|
|
adequately
protect its proprietary information and technology from competitors and avoid
infringement of proprietary information and technology of its
competitors, |
|
|
assure
that its products, if successfully developed and commercialized following
regulatory approval, are not rendered obsolete by products or
technologies of competitors and |
|
|
not
encounter problems with third parties, including key personnel, upon whom it is dependent. |
Although Nymox believes that the
forward-looking statements contained in this annual report are reasonable, it cannot
ensure that its expectations will be met. These statements involve risks and
uncertainties. Actual results may differ materially from those expressed or implied in
these statements. Factors that could cause such differences include, but are not limited
to, those discussed under Risk Factors.
3
PART I
ITEM 1. IDENTITY OF
DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not Applicable
ITEM 2. OFFER STATISTICS
AND EXPECTED TIMETABLE
Not Applicable
ITEM 3. KEY INFORMATION
Selected Financial Data
The following table sets forth
selected consolidated financial data for Nymox for the periods indicated, derived from
financial statements prepared in accordance with generally accepted accounting principles
(GAAP). We prepare our basic financial statements in accordance with Canadian
GAAP and include, as a note to the statements, a reconciliation of material differences to
United States GAAP. The financial statements have been audited by KPMG LLP, Montreal,
Canada as at and for the years ended December 31, 2002, 2003, 2004, 2005 and 2006. The
data set forth below should be read in conjunction with the Companys consolidated
financial statements and notes thereto included in Part I, Item 8 of this report.
NYMOX PHARMACEUTICAL CORPORATION
Selected Consolidated Financial Data
(In U.S. dollars (1))
|
Dec. 31,
2006 |
Dec. 31,
2005 |
Dec. 31,
2004 |
Dec. 31,
2003 |
Dec. 31,
2002 |
CANADIAN GAAP |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
Current Assets | | |
$ | 379,194 |
|
$ | 291,454 |
|
$ | 699,074 |
|
$ | 747,672 |
|
$ | 862,366 |
|
Property & Equipment | | |
| 7,839 |
|
| 11,463 |
|
| 25,348 |
|
| 133,161 |
|
| 185,293 |
|
Patents & Intellectual Property | | |
| 3,477,819 |
|
| 3,310,129 |
|
| 3,271,599 |
|
| 3,034,529 |
|
| 3,223,498 |
|
Total Assets | | |
| 3,970,845 |
|
| 3,719,039 |
|
| 4,066,021 |
|
| 4,022,862 |
|
| 4,358,657 |
|
Total Liabilities | | |
| 2,144,312 |
|
| 2,506,902 |
|
| 2,053,634 |
|
| 1,724,164 |
|
| 1,471,727 |
|
Share Capital | | |
| 44,443,350 |
|
| 39,488,350 |
|
| 36,553,350 |
|
| 32,503,600 |
|
| 28,407,600 |
|
Shareholders Equity | | |
| 1,026,533 |
|
| 412,137 |
|
| 1,212,387 |
|
| 1,478,698 |
|
| 2,086,930 |
|
Total Revenues | | |
| 442,861 |
|
| 426,282 |
|
| 321,948 |
|
| 200,132 |
|
| 361,748 |
|
Sales | | |
| 437,440 |
|
| 424,506 |
|
| 321,895 |
|
| 199,217 |
|
| 356,162 |
|
Research & Development Expenditures(2) | | |
| 2,541,096 |
|
| 1,828,516 |
|
| 1,851,881 |
|
| 2,477,032 |
|
| 1,689,430 |
|
Net Loss | | |
| 4,893,685 |
|
| 3,584,528 |
|
| 3,745,625 |
|
| 4,354,288 |
|
| 3,412,609 |
|
Loss per Share (basic & diluted) | | |
$ | 0.18 |
|
$ | 0.14 |
|
$ | 0.15 |
|
$ | 0.18 |
|
$ | 0.15 |
|
Weighted Avg. No. of Common Shares | | |
| 27,644,749 |
|
| 26,080,470 |
|
| 24,924,674 |
|
| 23,669,852 |
|
| 22,651,639 |
|
U.S. GAAP(3) | | |
Net Loss | | |
$ | 4,893,685 |
|
$ | 3,609,448 |
|
$ | 3,770,545 |
|
$ | 4,395,428 |
|
$ | 3,453,749 |
|
Loss per Share | | |
| 0.18 |
|
| 0.14 |
|
| 0.15 |
|
| 0.19 |
|
| 0.15 |
|
Shareholders Equity | | |
$ | 1,016,424 |
|
$ | 402,028 |
|
$ | 1,202,278 |
|
$ | 1,468,589 |
|
$ | 1,947,696 |
|
(1) |
Effective
January 1, 2000, the Corporation adopted the United States dollar as its
measurement currency as a result of the increasing proportion of operating,
financing and investing transactions in the Canadian operations that are
denominated in U.S. dollars. Reference is made to note 2(g) of the
consolidated financial statements. |
4
(2) |
We
earn investment tax credits by making qualifying research and development
expenditures. These amounts shown are net of investment tax credits. |
(3) |
Reference
is made to Note 12 of Nymoxs audited financial statements as at and
for the years ended December 31, 2006, 2005 and 2004 for a reconciliation of
differences between Canadian and U.S. GAAP. |
Risk Factors
Investing in our securities involves
a significant degree of risk. You should carefully consider the risks described below,
together with all of the other information in our publicly filed documents, before making
an investment decision. If any of the following risks actually occurs, our business,
financial condition or results of operations could be adversely affected. In such an
event, the trading price of our Common Shares could decline and shareholders may lose part
or all of their investment in our securities.
Our clinical trials for
our therapeutic products in development, such as NX-1207, may not be successful and we
may not receive the required regulatory approvals necessary to commercialize these
products
Products requiring regulatory
approval, such as NX-1207, will be approved for commercial sale only if governmental
regulatory authorities are satisfied that our clinical trials are properly designed and
conducted and that the results of those trials provide valid and acceptable evidence that
the product is safe and effective for the conditions or diseases it is intended to treat.
We do not know whether our pending or any future clinical trials will demonstrate
sufficient safety and efficacy to obtain the requisite regulatory approvals or will result
in marketable products. Clinical trials are lengthy, complex, expensive and uncertain
processes and failure can occur at any stage of testing. Results attained in pre-clinical
testing or in early clinical trials may not be indicative of results that are obtained in
later studies. We may suffer significant setbacks in advanced clinical trials, even after
promising results in earlier studies. Based on results at any stage of clinical trials, we
may decide to repeat or redesign a trial or discontinue development of one or more of our
product candidates. If we fail to adequately demonstrate the safety and efficacy of our
products under development, we will not be able to obtain the required regulatory
approvals to commercialize our product candidates. Failure to obtain such approval could
cause the price of our shares to decline and adversely affect our business, operations,
product development programs and financial condition.
Our clinical trials for
our therapeutic products, such as NX-1027, may be delayed, making it impossible to
achieve anticipated development or commercialization timelines
Delays in the initiation, conduct or
completion of clinical trials are not uncommon. If one or more of our clinical trials is
delayed, we may not unable to meet our anticipated development or commercialization
timelines. Either circumstance could cause the price of our shares to decline, increase
clinical trial and product development costs, and affect the companys business,
operations, product development programs and financial condition.
The design, conduct and completion of
clinical trials is a complex process involving many third parties, including governmental
authorities, institutional review boards, contract manufacturers, contract research
organizations (CROs), consultants, investigators, patients, and data monitoring
committees. The initiation, progress, completion and success of a clinical trial is in
part dependent on third parties providing necessary approvals, agreements and consents,
performing necessary tasks in a timely, competent manner, and complying with protocols,
good clinical practices and applicable laws, rules and regulations. Failure of a third
party to perform as expected or agreed upon may result in delays or failure in initiating
or completing a clinical trial.
5
Our clinical trials are subject to
prior approvals and continuing oversight by governmental regulatory authorities and
institutional review boards. We must meet and comply with their requirements in order to
start, continue and successfully complete a clinical trial. We may not be able to comply
with one or more of these requirements or there may be delays in doing so. A clinical
trial may be put on hold or halted altogether due to concerns about patient safety.
Governmental regulatory authorities may change approvals or requirements, resulting in
changes to the design or conduct of a clinical trial or the need for new or further
clinical trials.
Clinical trials for our product
candidates require that we identify and enroll a large number of patients with the
disorder under investigation. We may not be able to enroll a sufficient number of patients
to complete our clinical trials in a timely manner. Patient enrollment is a function of
many factors including:
|
|
design
of the protocol; |
|
|
the
size of the patient population; |
|
|
eligibility
criteria for the study in question; |
|
|
perceived
risks and benefits of the drug under study; |
|
|
availability
of competing therapies; |
|
|
efforts
to facilitate timely enrollment in clinical trials; |
|
|
patient
referral practices of physicians; and |
|
|
availability
of clinical trial sites. |
If we have difficulty enrolling a
sufficient number of patients to conduct our clinical trials as planned, we may need to
delay or terminate ongoing clinical trials.
A setback in any of our
clinical trials would likely cause a drop in the price of our shares
We successfully completed a Phase 2
U.S. multi-center, double-blind, placebo-controlled Phase 2 trial for NX-1207, our drug
candidate for the treatment of enlarged prostate (benign prostatic hyperplasia or BPH).
The clinical testing of drug candidates is fraught with uncertainties and positive results
from earlier clinical trials may not be repeated in later trials. As well, government
regulators such as the U.S. Food and Drug Administration, or FDA, may require additional
testing or further documentation relating to the preclinical testing, clinical studies,
manufacturing or other issues at any time. These requirements may result in substantial
delays in obtaining regulatory approval or make obtaining such approval much more
difficult. Setbacks in any phase of the clinical development of our product candidates
could have a negative impact on our business, operations, product development programs and
financial condition, could jeopardize FDA or other regulatory approval and would likely
cause a drop in the price of our shares.
We may not be able to
make adequate arrangements with third parties for the commercialization of our product
candidates, such as NX-1207
In order to commercialize our product
candidates successfully, we intend, on a product-by-product basis, either to make
arrangements with third parties to perform some or all of these services or to expand our
existing sales, marketing and distribution capabilities. We currently have limited sales
and marketing capabilities and limited experience in developing, training or managing a
large marketing or sales force. We currently rely primarily upon distributors for the
sales of our existing products. The cost of establishing and maintaining a larger sales
force would be substantial and may exceed its cost effectiveness. In addition, in
marketing our products, we would likely compete with many companies that currently have
extensive and well-funded marketing and sales operations. Despite our marketing and sales
efforts, we may be unable to compete successfully against these companies. We may make
arrangements with third parties to market and sell some or all of our products under
development in certain territories, rather than establish our own sales force. We may not
be able to do so on favorable terms. If we contract with third parties for the sales and
marketing of our products, our revenues will depend upon the efforts of these third
parties, whose efforts may not be successful.
6
We anticipate entering into
co-development and co-marketing agreements with one or more partners with established
sales, marketing and regulatory capabilities in order to assist in the completion of the
development and commercialization of NX-1207. We may not be able to do so on favorable
terms. If we fail to establish or make adequate arrangements with third parties for such
purposes, our business, operations, product development programs and financial condition
will be materially adversely affected.
We may not achieve our
projected development goals in the time frames we announce and expect
We make public statements regarding
our estimates and projections for meeting milestones, such as the commencement and
completion of clinical trials, anticipated regulatory submission and approval dates and
time of product launch. The actual timing of these events can vary dramatically due to
factors such as delays or failures in our clinical trials, the uncertainties inherent in
the regulatory approval process and delays in achieving manufacturing or marketing
arrangements sufficient to commercialize our products. There can be no assurance that our
clinical trials will be completed, that we will make regulatory submissions or receive
regulatory approvals as planned or that we will be able to adhere to our current schedule
for the launch of any of our products. If we fail to achieve one or more of these
milestones as planned, the price of our shares could decline.
Even if we obtain
regulatory approvals for our product candidates, we will be subject to stringent ongoing
government regulation
Even if regulatory authorities
approve any of our product candidates, the manufacture, marketing and sale of such
products will be subject to strict and ongoing regulation. Compliance with such regulation
will be expensive and consume substantial financial and management resources. For example,
an approval for a product may be conditioned on our conducting costly post-marketing
follow-up studies. In addition, if based on these studies, a regulatory authority does not
believe that the product demonstrates a benefit to patients, such authority could limit
the indications for which the product may be sold or revoke the products regulatory
approval.
We and our contract manufacturers
will be required to comply with applicable current Good Manufacturing Practice
(cGMP) regulations for the manufacture of our products. These regulations
include requirements relating to quality assurance, as well as the corresponding
maintenance of records and documentation. Manufacturing facilities must be approved before
we can use them in commercial manufacturing of our products and are subject to subsequent
periodic inspection by regulatory authorities. In addition, material changes in the
methods of manufacturing or changes in the suppliers of raw materials are subject to
further regulatory review and approval.
If we or any marketing collaborators
or contract manufacturers fail to comply with applicable regulatory requirements, we may
be subject to sanctions including fines, product recalls or seizures, injunctions, total
or partial suspension of production, civil penalties, withdrawals of previously granted
regulatory approvals and criminal prosecution. Any of these penalties could delay or
prevent the development, marketing or sale of our products.
It is Uncertain When, if
Ever, We Will Make a Profit
We first began operations in 1995 and
are only in the early stages of commercial marketing of our diagnostic products,
AlzheimAlert, NicAlert and TobacAlert. We have never made a profit. We
incurred a net loss of $4.3 million in 2003, $3.7 million in 2004, $3.6 million in 2005
and $4.9 million in 2006. As of December 31, 2006, Nymoxs accumulated deficit was
$44.9 million.
7
We cannot say when, if ever, Nymox
will become profitable. Profitability will depend on our uncertain ability to generate
revenues from the sale of our products and the licensing of our technology that will
offset the significant expenditures required for us to advance our research, protect and
extend our intellectual property and develop, manufacture, license, market, distribute and
sell our technology and products successfully. Similar types of expenditures in the past
have helped produce the net losses reported above.
We May Not Be Able to
Raise Enough Capital to Develop and Market Our Products
Nymox has funded its operations
primarily by selling shares of its common stock. Since late 1998, a small portion of the
funds came from sales. However, sales have not been, and may not be in the foreseeable
future, sufficient to meet our anticipated financial requirements.
We will continue to need to raise
substantial amounts of capital for our business activities including our research and
development programs, the conduct of clinical trials needed to obtain regulatory approvals
and the marketing and sales of our products. We anticipate being able to fund our current
total annual budgeted expenditures of approximately $3.5 5 million per year
over the next year through our current cash position and additional financing, including
draw downs through our common stock private purchase agreement with Lorros-Greyse
Investments, Inc. Clinical trials will substantially increase cash requirements. We
anticipate being able to meet these requirements as they arise. We plan to raise capital
either through a new round of financing and/or through partnering with a major
pharmaceutical company. Additional financing may not be available when needed, or, if
available, may not be available on acceptable terms. If adequate funds on acceptable terms
are not available, we may have to curtail or eliminate expenditures for research and
development, testing, clinical trials, promotion and marketing for some or all of our
products.
We Face Challenges in
Developing, Manufacturing and Improving Our Products
Our success depends on our ability to
develop or acquire rights to new products or to improve our existing products. We are
still developing many of our products and have not yet brought them to market. We cannot
assure you that we will be able to develop or acquire rights to such products and to
market them successfully.
Developing a treatment for
Alzheimers disease is particularly challenging. Many pharmaceutical companies,
institutions and researchers are working on many different approaches and treatments.
There is no consensus among researchers about the cause of this fatal illness and no
guarantee that our drug development programs in this area are targeting significant
factors in its cause, progression or symptoms. It is difficult to design drug candidates
that can cross from the bloodstream into the brain, where the damage from Alzheimers
disease is occurring. Clinical trials to establish efficacy for drugs that slow down the
progression of Alzheimers disease over a period of months or years often require
that a large number of subjects be tracked over many months or years, making them very
expensive to conduct. The potentially long period from discovery and patenting through
development and regulatory approval to the market can significantly reduce the patent life
of an Alzheimers disease treatment. Any marketed treatment in this area may well
eventually face competition from me-too drugs developed by other
pharmaceutical companies based on our research. We will be under constant competitive
pressure to improve our products and to develop new treatments in order to protect our
position in the field.
Developing and improving our
diagnostic products is also challenging. The science and technology of the detection and
measurement of very small amounts of biochemicals in bodily fluids and tissue is evolving
rapidly. We may need to make significant expenditures in research and development costs
and licensing fees in order to take advantage of new technologies. If any major changes to
our testing technologies used in our AlzheimAlert and NicAlert and
TobacAlert tests are made, further validation studies will be required. Developing
new diagnostic products is more challenging, requiring identification and validation of
the biochemical marker being detected by the new product in the clinical context and the
development and validation of the product designed to detect the marker.
8
We anticipate outsourcing at least
some of the manufacturing required for new products we may develop in order to control
start-up and operating costs and to take advantage of the existing manufacturing
capabilities and capacity in the large contract manufacturing sectors in the
pharmaceutical and diagnostic industries. There are risks associated with this strategy,
including difficulties in the transfer of manufacturing, the possibility of production
interruption due to causes beyond our control and the need to arrange alternative
suppliers. We currently out-source some of the manufacturing services required for our
NicAlert and TobacAlert products to a contract manufacturer. We do not
anticipate any significant risk of long-term interruption of manufacture due to this
arrangement. The services supplied are not unique or unduly complicated and other contract
manufacturers are available to provide similar services. The manufacture of therapeutics
is more challenging and capital-intensive and may require us to partner with a major
pharmaceutical company or other partner in order to manufacture a therapeutic for market.
Our Products and
Services May Not Receive Necessary Regulatory Approvals
Our diagnostic products,
AlzheimAlert, NicAlert and TobacAlert, and our products in development,
are subject to a wide range of government regulation governing laboratory standards,
product safety and efficacy. The actual regulatory schemes in place vary from country to
country and regulatory compliance can take several years and involve substantial
expenditures.
We cannot be sure that we can obtain
necessary regulatory approvals on a timely basis, if at all, for our products in
development and all of the following could have a material adverse effect on our business:
|
|
failure
to obtain or significant delays in obtaining requisite approvals; |
|
|
loss
of or changes to previously obtained approvals; and |
|
|
failure
to comply with existing or future regulatory requirements. |
We currently market
AlzheimAlert as a clinical reference laboratory service provided by our government
inspected clinical reference laboratory in New Jersey. Physicians send us urine samples
from their patients to our laboratory where the AlzheimAlert test is performed and
the results are reported back to the physicians. A clinical laboratory test like
AlzheimAlert does not require approval from the United States Food and Drug
Administration (FDA). Our laboratory is regulated by the Centers for Medicare &
Medicaid Services (CMS) under the Clinical Laboratory Improvement Amendments (CLIA) and is
subject to inspection and certification. In addition, individual states like New York and
Florida have their own requirements for reference laboratories like ours that offer
diagnostic services. In addition, the FDA has its own regulations governing in vitro
diagnostic products, including some of the reagents used in clinical reference
laboratories. Any changes in CMS or state law requirements or in the FDA regulations could
have a detrimental impact on our ability to offer or market any reference laboratory
services and/or on our ability to obtain reimbursement from the Medicare and Medicaid
programs and providers.
We have developed a diagnostic kit
based on AlzheimAlert for sale to third parties. We will require prior approval from
the FDA before we can market, distribute or sell this product in the United States. In
2005, an FDA advisory panel voted 5-2 against recommending approval of our premarket
approval application for the kit, citing the need for further studies, such as long term
follow-up and autopsy confirmation. The Company continues to pursue kit development and
approval. We cannot predict with any certainty when or if FDA approval will be forthcoming
and we anticipate that more clinical testing and further documentation will be required
before approval. If approved, the diagnostic kit would then be subject to postmarketing
record and reporting obligations and manufacturing requirements.
9
Similar requirements exist in many
other countries. Obtaining these approvals and complying with the subsequent regulatory
requirements can be both time-consuming and expensive. In November 2004, Nymox
satisfactorily completed the testing and registration required by European regulatory,
environmental and quality standards in order to obtain a CE Mark for the
AlzheimAlert kit. The CE Mark makes the AlzheimAlert kit eligible for sale in
the European Union and will allow European clinical and hospital laboratories to perform
the AlzheimAlert test in their own facilities in Europe.
We currently sell NicAlert and
TobacAlert as tests for tobacco product use and exposure and for research use. In
October, 2002, we received 510(k) clearance from the U.S. Food and Drug Administration for
our NicAlert product for medical uses. In January, 2006, we announced the
certification of the urine-based version of NicAlert with a CE Mark making it
eligible for sale in the European Union and in May, 2006 the certification of the
saliva-based version of NicAlert with a CE Mark. In September, 2003, Nymox launched
TobacAlert for nonmedical testing for second hand smoke exposure in the U.S.
In the United States, our drugs in
development will require final FDA approval before their sale or distribution. Such
approval comes only at the end of a lengthy, expensive and often arduous process. On
September, 2006, we announced the successful completion of a multi-center, double-blind,
placebo-controlled Phase 2 trial of N-1207, our lead candidate for the treatment of benign
prostatic hyperplasia (BPH), a common disorder of older men. We cannot predict with any
certainty the outcome of this trial, what further steps may be required in order to apply
for final FDA approval for this drug or whether the FDA will ultimately grant us such
approval. Similar requirements exist in many other countries.
We Face Significant and
Growing Competition
The modern pharmaceutical and
biotechnology industries are intensely competitive, particularly in the field of
Alzheimers disease where there is a large unmet need for an effective treatment.
Currently there are five drugs with similar mechanisms of action approved for sale in the
United States (Aricept®, Cognex®, Exelon®, Razadyne® and Namenda).
These drugs offer some relatively short-term symptomatic relief, but do not treat the
underlying causes of the illness. Over the past decade, there has been an intense research
effort both in the non-profit sectors such as universities, government agencies and
research institutes and in the pharmaceutical and biotechnology industry to develop new
treatments for Alzheimers disease. Treatment candidates under development include:
|
|
vaccines
for Alzheimers disease. Companies with vaccines under development include Wyeth,
Elan Pharmaceuticals, Merck and Novartis. |
|
|
enzyme-blocking
therapies intended to block the production of the protein found in the senile plaques
characteristic of Alzheimers disease. A number of pharmaceutical and biotechnology
companies including Wyeth, Elan, and Eli Lilly are working on such therapies. |
|
|
drugs
aimed at reducing, blocking or clearing the aggregation or accumulation of the protein
found in senile plaques. A number of pharmaceutical and biotechnology companies including
Neurochem, Wyeth, Elan, Roche Pharmaceuticals, Myriad Genetics and Prana Biotechnology
are working on such therapies. |
|
|
memory
enhancing compounds from Debiopharm, Athenagen, Neuro-Hitech, Cortex Pharmaceuticals and
Helicon Therapeutics among others. |
10
There is also ongoing research into
possible methods of preventing Alzheimers disease such as taking certain
cholesterol-lowering drugs called statins, estrogen replacement therapies, anti-oxidants
such as vitamin E and ginkgo biloba or anti-inflammatory drugs such as ibuprofen
(e.g., Advil® or Motrin®). The successful development of a treatment or
method of preventing Alzheimers disease could significantly impact on our ability to
develop or market a competing treatment for Alzheimers disease.
Our treatments under development for
enlarged prostate (benign prostatic hyperplasia or BPH) face significant competition from
existing products. There are seven drugs approved for treatment of BPH: finasteride
(Proscar®), dutasteride (Avodart®), terazozin (Hytrin®), doxazozin
(Cardura®), tamsulosin (Flomax®), prazosin (Minipres®) and alfusozin
(Uroxatral®). There are a number of thermal treatments on the market designed to
shrink the enlarged prostate by heating its tissue with a device inserted through the
urethra (the tube leading from the bladder through the penis through which men urinate) or
through the abdomen. The devices on the market use microwave energy (Prostatron®,
Targis Therapy® or TherMatrx®), low level radiowaves (TUNA System®), lasers
(Indigo LaserOptic Treatment System® or Laserscope GreenLight PVP), direct heat,
energy or hot water to heat or burn away prostate tissue. A variety of surgical procedures
exist to surgically reduce or remove the prostate or to widen the urethra. These include
procedures to cut away prostate tissue such as TURP (transurethral resection of the
prostate) and using a resectoscope with an electrical loop inserted through the penis to
cut the prostate tissue. A small device used to widen the constricted urethra called a
prostatic stent can also be inserted.
The diagnostic testing industry is
also highly competitive. In the area of Alzheimers disease, Athena Diagnostics, Inc.
markets diagnostic tests for different biochemical indicators found in blood and spinal
fluid and for genetic predispositions for the illness. Other companies are attempting to
develop and market other diagnostic products in this area. The introduction of other
diagnostics products for Alzheimers disease or tobacco product use that are cheaper,
easier to perform, more accurate or otherwise more attractive to the physicians, health
care payers or other potential customers would have a significant impact on the sales of
our AlzheimAlert, NicAlert or TobacAlert products.
We May Not Be Able to
Successfully Market Our Products
To increase our marketing, distribution
and sales capabilities both in the United States and around the world, we will need to
enter into licensing arrangements, contract sales agreements and co-marketing deals. We
cannot assure you that we will be able to enter into agreements with other companies on
terms acceptable to us, that any licensing arrangement will generate any revenue for the
company or that the costs of engaging and retaining the services of a contract sales
organization will not exceed the revenues generated.
Protecting Our Patents
and Proprietary Information is Costly and Difficult
We believe that patent and trade
secret protection is important to our business, and that our success will depend, in part,
on our ability to obtain strong patents, to maintain trade secret protection and to
operate without infringing the proprietary rights of others.
Obtaining and maintaining our patent
position is costly. We pay for the filing, prosecution and fees of several
hundred patents and patent applications in countries around the world, including the
United States, Europe, Japan, Canada, Australia, New Zealand and South Korea. In the
United States alone, Nymox has nineteen patents issued or allowed and thirteen patent
applications pending relating to its technology. Our subsidiary, Serex, Inc. has eleven
patents.
We believe that we have strong patent
protection for the products we sell and for our product development programs and are in
the process of extending that patent protection to cover more countries or new discoveries
or products. We cannot assure you that additional patents covering new products or
improvements will be issued or that any new or existing patents will be of commercial
benefit or be valid and enforceable if challenged.
11
Many companies have patents covering
various drugs, methods and discoveries in the fields of diagnostics and therapeutics for
Alzheimers disease and related conditions and of new anti-infective agents. We
believe that the patents issued to date will not preclude Nymox from developing and
marketing our products; however, it is impossible to predict the extent to which licenses
from third parties will be necessary. If Nymox were to need licenses from third parties
there can be no assurance that we could obtain such licenses on commercially reasonable
terms, if at all.
In the fields of diagnostic methods
and diagnostic tests for common human diseases and conditions, where Serex has many of its
patents, there are many patents issued covering many areas of diagnostic methods, tests
and technologies. We believe that these patents issued to date to other companies will not
preclude Serex from developing and marketing its products but you should be aware that it
is often difficult to determine the nature, breadth and validity of competing patent
claims in these fields, that there has been significant litigation in some of these areas
(not involving Serex) and that, if and when Serexs products become more commercially
successful, Serexs products or patents may become the subject matter of litigation.
If Serex were to need licenses from third parties there can be no assurance that it could
obtain such license on commercially reasonable terms, if at all.
We are not currently involved in
patent litigation. In the pharmaceutical and biotechnology industry patent disputes are
frequent and can preclude the commercialization of products. Patent litigation is costly
and the outcome often difficult to predict. It can expose us to significant liabilities to
third parties and may require us to obtain third-party licenses at a material cost or
cease using the technology or product in dispute.
We Face Changing Market
Conditions
The healthcare industry is in
transition with a number of changes that affect the market for therapeutic and diagnostic
test products. The U.S. government recently added insurance coverage to help pay for
prescription drugs to Medicare, the federal health insurance program for people 65 and
older (and for younger people with disabilities). The U.S. Federal and various state
governments have under consideration a number of proposals that may have the effect of
directly or indirectly limiting drug prices in the U.S. markets. Such changes may
adversely affect the prices we may charge for any therapeutic drug we develop. Funding
changes and budgetary considerations can lead major health care payers and providers to
make changes in reimbursement policies for our AlzheimAlert product. These changes
can seriously impact the potential for growth for the market for AlzheimAlert,
either favorably when the decision is to offer broad coverage for our test at a reasonable
price or negatively when the decision is to deny coverage altogether. Changes in the
healthcare delivery system have resulted in major consolidation among reference
laboratories and in the formation of multi-hospital alliances, reducing the number of
institutional customers for therapeutic and diagnostic test products. There can be no
assurance that Nymox will be able to enter into and/or sustain contractual or other
marketing or distribution arrangements on a satisfactory commercial basis with these
institutional customers.
Health Care Plans May
Not Cover or Adequately Pay for our Products and Services
Throughout the developed world, both
public and private health care plans are under considerable financial and political
pressure to contain their costs. The two principal methods of restricting expenditures on
drugs and diagnostic products and services are to deny coverage or, if coverage is
granted, to limit reimbursement. For single-payer government health care systems, a
decision to deny coverage or to severely restrict reimbursement for one of our products
can have an adverse effect on our business and revenues.
12
In the United States, where, to a
significant degree, the patient population for our products is elderly, Medicare and
Medicaid are sources of reimbursement. In general, any restriction on reimbursement,
coverage or eligibility under either program could adversely affect reimbursement to Nymox
for products and services provided to beneficiaries of the Medicare and/or Medicaid
programs. Many elderly people are covered by a variety of private health care
organizations either operating private health care plans or Medicare or Medicaid programs
subject to government regulation. These organizations are also under considerable
financial constraints and we may not be able to secure coverage or adequate reimbursement
from these organizations. Without coverage, we will have to look to the patients
themselves who may be unwilling or unable to pay for the product; in turn, doctors may be
reluctant to order or prescribe our products in the absence of coverage of the product for
the patient.
The Issuance of New
Shares May Dilute Nymoxs Stock
The issuance of further shares and
the eligibility of issued shares for sale will dilute our common stock and may lower its
share price. There were 29,166,924 common shares of Nymox issued and outstanding as of
June 22, 2007. All of these shares are eligible for sale under Rule 144 or are otherwise
freely tradable. In addition, 1,818,500 share options are outstanding, all of which are
currently vested. Expiry dates for Nymox options range from 8 months to 9 years (see note
7(c) to our consolidated financial statements). These options have been granted to
employees, officers, directors and consultants of the company. Moreover, Nymox may use its
shares as currency in acquisitions.
We Face Potential Losses
Due to Foreign Currency Exchange Risks
Nymox incurs certain expenses,
principally relating to salaries and operating expenses at its Canadian head office, in
Canadian dollars. All other expenses are derived in U.S. dollars. As a result, we are
exposed to the risk of losses due to fluctuations in the exchange rates between the
U.S. dollar and the Canadian dollar. We protect ourselves against this risk by
maintaining cash balances in both currencies. We do not currently engage in hedging
activities. We cannot say with any assurance that the Company will not suffer losses as a
result of unfavorable fluctuations in the exchange rates between the United States dollar
and Canadian dollar.
We Have Never Paid a
Dividend and are Unlikely to do so in the Foreseeable Future
Nymox has never paid any dividends
and does not expect to do so in the foreseeable future. We expect to retain any earnings
or positive cash flow in order to finance and develop Nymoxs business.
ITEM 4. INFORMATION ON
THE COMPANY
History of the Company
Nymox was incorporated under the
Canada Business Corporations Act in May, 1995 to acquire all of the common shares of DMS
Pharmaceutical Inc., a private company which had been carrying on research and development
since 1989 on diagnostics and drugs for brain disorders and diseases of the aged with an
emphasis on Alzheimers disease. Nymox has two subsidiaries: one wholly-owned
subsidiary named Nymox Corporation and the other a majority owned subsidiary named Serex,
Inc., acquired in 2000. Both subsidiaries are based in the same building in Hasbrouck
Heights, New Jersey. Nymox Corporation operates our certified clinical reference
laboratory where our AlzheimAlert test is performed, and conducts some research and
development, while Serex conducts research and development, and some of the manufacturing
for NicAlert and TobacAlert.
13
Nymoxs principal executive
offices are located at:
|
Nymox
Pharmaceutical Corporation 9900 Cavendish Boulevard, Suite 306
St. Laurent, Quebec, Canada, H4M 2V2 Phone: (800)
936-9669 Fax: (514) 332-2227 |
Nymoxs registered agent in the
United States is:
|
CT
Corporation System 111 Eighth Avenue, 13th Floor New
York, NY, 10011 |
Nymoxs two subsidiaries are
located at:
|
Nymox
Corporation 777 Terrace Avenue Hasbrouck Heights, NJ,
USA 07604 |
|
Serex,
Inc. 777 Terrace Avenue Hasbrouck Heights, NJ, USA
07604 |
Nymox Pharmaceutical Corporation is a
biopharmaceutical company with three unique proprietary products on the market, and a
significant R&D pipeline of drug and diagnostic products in development for the
treatment of such conditions and diseases as enlarged prostate (benign prostatic
hyperplasia or BPH), Alzheimers disease (AD), E. coli O157:H7 contamination
of food and drink products, and bacterial infections and for the diagnosis of AD and other
indications. Nymox has also U.S. and global patent rights for the use of statin drugs for
the treatment and prevention of Alzheimers disease.
Acquisition of a
Majority Interest in Serex, Inc.
In March 2000, we acquired a
controlling interest in Serex, Inc., a privately held diagnostic company based in New
Jersey and now own approximately 99% of its common stock.
Serexs patented diagnostic
technologies include its particle valence technology, a unique, highly sensitive, new
method to detect very small amounts of biochemical indicators in body fluids such as
blood, urine and saliva. This technology can be adapted to detect a wide range of
biochemical indicators for diseases, conditions and drug use. Our NicAlert and
TobacAlert employ this technology to measure levels of one of the metabolic products
of nicotine in human urine, in order to determine whether a person is using or has been
exposed to a tobacco product. NicAlert and TobacAlert are currently being
distributed by Nymox, drugstore.com and Jant Pharmacal Corporation.
14
Products
NicAlert for
Tobacco Product Use and TobacAlert for Second-Hand Smoke Exposure
Nymox markets NicAlert and
TobacAlert, which are inexpensive, simple-to-use test strips for determining whether
a person is using tobacco products (NicAlert) or has been recently exposed to
second-hand smoke (TobacAlert). Both NicAlert and TobacAlert employ
Serex, Inc.s patented technology to provide an accurate read-out of levels of
cotinine, a by-product of the bodys breakdown of nicotine and generally regarded as
the best indicator of tobacco exposure for smokers and nonsmokers. The technology can be
used with saliva as well as urine samples in order to detect tobacco product use.
NicAlert and TobacAlert do not require instruments or special training to use
and offer a quick, convenient means to test on-site whether a person, such as a child,
teenager, student athlete or insurance applicant, is using a tobacco product or has been
exposed to second-hand smoke.
Smoking and other tobacco product use
is a serious public health problem around the world. Smoking kills. According to the
Centers for Disease Control and Prevention, cigarette smoking is responsible for more than
430,000 deaths per year in the United States alone. Smoking can cause cancer of the lung,
mouth, bladder, larynx, esophagus and other organs, as well as heart disease and stroke
and chronic lung disease. Every year, exposure to second-hand smoke (environmental tobacco
smoke or ETS) causes an estimated 3,000 nonsmoking Americans to die of lung cancer and up
to 300,000 American infants and small children to suffer from lower respiratory tract
infections.
NicAlert received clearance
from the U.S. Food and Drug Administration (FDA) in October 2002 for medical use to
determine if an individual has been exposed to tobacco products. In January, 2006, Nymox
announced the certification of the urine-based version of NicAlert with a CE Mark
making it eligible for sale in the European Union and in May, 2006 the certification of
the saliva-based version of NicAlert with a CE Mark. In September, 2003, Nymox
launched TobacAlert for nonmedical testing for second hand smoke exposure in the
U.S.
We market the NicAlert and
TobacAlert tests through our own marketing arm and distributors in North America,
Europe and Asia. Nymox has entered into distribution and marketing agreements with
companies and organizations in the U.S., the U.K., and Spain for these products.
TobacAlert is also available online at www.drugstore.com.
Our NicAlert and
TobacAlert products face competition from clinical laboratories such as Lab One,
LabCorp, and Quest Diagnostics which provide off-site lab testing for cotinine, the
by-product of the bodys breakdown of nicotine measured by NicAlert and
TobacAlert, and from assay suppliers, including immunoassay developers such as
Orasure Techologies Inc. and Cozart Bioscience Ltd, and diagnostic system manufacturers
such as Roche Diagnostics, Abbott and Diagnostic Products Corporation. NicAlert and
TobacAlert also face competition from distributors who supply yes-no smoking status
tests such as SmokeCheck, NicQuick, and QuickScreen, from NicCheck I, an FDA-cleared
smoking status test being marketed by Mossman & Associates Ltd, from SmokeScreen, a
chemical color-based tobacco test being marketed by Mermaid Diagnostics, Ltd. in the
United Kingdom, and from carbon monoxide (CO) monitors such as SmokeCheck.
NicAlert and TobacAlert
products are currently partly manufactured through out-sourcing arrangements with contract
manufacturers. To date, we have not experienced any significant interruptions in the
manufacture of these products and the cost of the manufacturing services has not been
volatile. The manufacturing services supplied by our current contract manufacturers are
not unique or unduly complicated and other contract manufacturers are available to provide
similar services in the event that our current contract manufacturers fail to meet our
needs.
15
The technology used in these products
is covered by patents and patent applications held by Nymoxs subsidiary, Serex,
Inc., both in the U.S. and elsewhere in the world with expiry dates no earlier than 2012.
AlzheimAlert: An
Aid to the Diagnosis of Alzheimers Disease
We offer AlzheimAlert, a
proprietary diagnostic aid for Alzheimers disease, through our government inspected
clinical reference laboratory in New Jersey. AlzheimAlert is an improved version of
our AD7C test, which has been on the market since 1997. AlzheimAlert offers a
more technically advanced means to detect elevated levels of NTP in urine. It is a
proprietary assay in the competitive affinity format and has significant advantages of
easy adaptability to systems and equipment present in all modern clinical laboratories. It
is a urine test, where the patient provides a first-morning urine sample for testing. The
patients doctor then forwards the sample to our laboratory where our technical staff
performs the test. We then report the results to the doctor. The AlzheimAlert test
is intended as an aid to diagnosis, to be considered together with patient history,
physical examination and other relevant medical data. The test does not replace a
physicians diagnosis.
AlzheimAlert measures the level
of a brain protein called neural thread protein (NTP) which is elevated early in
Alzheimers disease as reported both in the scientific literature and at scientific
conferences. Researchers at the Massachusetts General Hospital and Brown University led by
Doctors Suzanne de la Monte and Jack Wands first found large amounts of the protein in the
brain tissue of patients known to have died with Alzheimers disease. Subsequent
research led to the characterization of NTP and the gene that produces it. Nymox succeeded
in developing a highly sensitive test to detect the presence of NTP in the spinal fluid
and, most recently, in the urine of patients with Alzheimers disease. Recent studies
(J. Neuropathol Exp Neurol (2001; 60: 195-207) Journal of Alzheimers
Disease (2004; 231-242)) have provided further evidence that increased production of
NTP leads to a marked increase in nerve cell death and have shown that the cells subjected
to NTP died in a programmed fashion similar to the way the nerve cells in the brains of
patients with Alzheimers disease die. One of the characteristic signs of
Alzheimers disease is widespread brain cell loss.
Nymox believes that its
AlzheimAlert test can assist a physician faced with the task of diagnosing whether a
patient has Alzheimers disease. A recently published independent peer-reviewed
double blind study from 8 prestigious centers across the U.S. found the level of accuracy
of the AlzheimAlert urine test to be over 90% (Goodman I et al., A
multi-center blinded prospective study of urine neural thread protein measurements in
patients with suspected Alzheimers disease, Journal of the American Medical
Directors Association Jan 2007; 8:21-30). This study confirmed earlier company funded
trials of its NTP testing technology to date, involving over 500 clinical samples. There
can be no assurance that further studies will repeat the same level of success experienced
to date.
Other studies published in scientific
publications or presented at scientific conferences over the past decade concerning the
accuracy of NTP testing as an aid to the diagnosis of Alzheimers disease include,
for example, the Journal of Clinical Investigation (1997; 100: 3093-3104);
Journal of Contemporary Neurology (1998; art. 4a); Journal of Clinical
Laboratory Analysis (1998; 12: 285-288) and (1998; 12: 223-226); Alzheimers
Reports (1999; 2: 327-332), (2000; 3: 177-184), (2001; 4: 61-65) and (2002; 5: 1-6);
Neurology (2000; 54: 1498-1504) and (2000; 55: 1068); Journal of
Alzheimers Disease (2001; 3: 345-353) and (2004; 6(3): 231-42); Cellular and
Molecular Life Sciences (2001; 58: 844-849) and (2003; 60: 2679-91); Neurology and
Clinical Neurophysiology (2002; 1: 2-7); Journal of Neuropathology and Experimental
Neurology (2001; 60: 195-207) and (1996; 55: 1038-1050), Frontiers in Bioscience
(2002; 7: d989-96) and Journal of Clinical Laboratory Analysis (Jan
2007;21:24-33).
16
There is a large unmet need for a
simple, non-invasive test that can aid in the diagnosis of Alzheimers disease.
Alzheimers disease is the most common cause of dementia in persons 65 years of age
and older and is the fourth leading cause of death among the elderly. There are an
estimated 4.5 million people with Alzheimers disease in the United States alone; by
2050 this number is projected to increase almost three times to 13.2 million. Worldwide
estimates of the current number of people with Alzheimers disease range from 15 to
20 million. The annual national direct and indirect costs of caring for Alzheimer patients
in the U.S. alone are estimated at $100 billion. The human toll on patients, families and
caregivers is incalculable. Despite the need for an accurate clinical test, the definitive
diagnosis of the disease is possible only after the death of the patient by expert,
pathologic examination of brain tissue.
The U.S. Surgeon Generals
Report on Mental Health, released on December 13, 1999, identified the importance and the
need for the early detection and diagnosis of Alzheimers disease. The report
described the current approach to Alzheimers disease diagnosis, clinical examination
and the exclusion of other common causes of its symptoms, as time- and labor-intensive,
costly and largely dependent on the expertise of the examiner. As a result, the illness is
currently under-recognized, especially in primary care settings, where most older patients
seek care. The report joined other experts writing in the field in recognizing the need
for a better, more reliable method for diagnosing the disease in living patients and in
particular, the need of a simple, accurate and convenient test that could detect a
biochemical change early in patients with Alzheimers disease. We believe our
AlzheimAlert product provides such a test.
The early diagnosis of
Alzheimers disease is important to physicians, patients and their families and
enables them to make informed and early social, legal and medical decisions about
treatment and care. Early diagnosis of Alzheimers disease has become increasingly
important with new improvements in drug treatment and care. Even a modest delay in
institutionalization can mean substantial social and financial savings. Conversely, any
testing procedure that could rule out Alzheimers disease would eliminate the
tremendous uncertainty and anxiety patients and their families otherwise face and would
allow physicians to focus on the other, often reversible, causes of cognitive changes.
Early diagnosis as facilitated by the
AlzheimAlert test represents a potentially large cost-savings in the form of a
reduced number of office visits, lab tests, scans and other procedures required by the
traditional methods of diagnosis.
We currently market our
AlzheimAlert test as a clinical reference laboratory service primarily in the United
States. In November 2004, our AlzheimAlert test was certified with a CE Mark, making
the device eligible for sale in the European Union. Nymox has signed distribution deals
for AlzheimAlert with companies in Italy, Spain, Greece, U.K. and the Czech
Republic.
In the field of Alzheimers
disease diagnosis, our AlzheimAlert test faces growing competition which could
detrimentally impact on our ability to successfully market and sell our diagnostic test.
Our competitors include:
|
|
Athena
Diagnostics, Inc. which is currently marketing three tests claimed to aid in the
diagnosis of Alzheimers disease: a genetic test for the rare cases of familial,
early-onset Alzheimers disease; a genetic test for a relatively common mutation of
a gene said to increase the likelihood of a person with at least one of the genes
contracting the disease; and a test for two proteins in the spinal fluid of patients. In
March 2006, Fisher Scientific International announced that it acquired Athena
Diagnostics. |
|
|
Innogenetics
NV which currently markets tests and kits for two proteins and a variant of one of these
proteins in the spinal fluid of patients and a genetic test for a relatively common
mutation of a gene said to increase the likelihood of a person developing the disease. |
|
|
Applied
NeuroSolutions, Inc. currently markets a research test for a variant of a protein in the
spinal fluid of patients. |
17
There are also a number of other
proposed biochemical signs of the disease that could potentially be developed into a
commercial diagnostic test as well as various scanning and imaging technologies which
compete for a portion of the diagnostic market for Alzheimers disease. In June 2004,
the Centers for Medicare and Medicaid Services (CMS) approved limited coverage of a
Positron Emission Tomography (PET) imaging procedure for helping to more precisely
distinguish Alzheimers disease from a rarer type of dementia when clinical
evaluation has been inconclusive. In October 2004, the National Institute on Aging in
conjunction with other Federal agencies, private companies and organizations launched the
Alzheimers Disease Neuroimaging Initiative, a $60 million initiative to test whether
various scanning and imaging technologies, biochemical markers, and clinical and
neuropsychological testing can be combined to help diagnose early Alzheimers
disease. A number of companies, including GE, are actively working to develop imaging
technologies for the diagnosis of Alzheimers disease.
We have developed a diagnostic kit
version of the AlzheimAlert test, which would permit the testing of patient samples
in a general purpose medical laboratory. The sale of such a kit is subject to any
necessary regulatory approvals on a country-by-country basis. Approval of a diagnostic kit
version of AlzheimAlert kit will increase the availability and acceptance of our
test while lowering its cost to the patient or health care payor. In November 2004, Nymox
satisfactorily completed the testing and registration required by European regulatory,
environmental and quality standards in order to obtain a CE Mark for the
AlzheimAlert kit. The CE Mark makes the AlzheimAlert kit eligible for sale in
the European Union and allows European clinical and hospital laboratories to perform the
AlzheimAlert test in their own facilities in Europe. Nymox has signed distribution
deals for AlzheimAlert with companies in Italy, Spain, Greece, U.K. and the Czech
Republic.
AlzheimAlert is available in
the U.S. as a laboratory testing service through the Companys clinical reference
laboratory in New Jersey. The U.S. FDA has not approved the sale of the diagnostic kit
version of the AlzheimAlert test in the U.S. We cannot predict with any certainty
when or if such approval for the kit will be forthcoming and we anticipate that more
clinical testing and further documentation will be required before approval. If approved,
the diagnostic kit would then be subject to postmarketing record and reporting obligations
and manufacturing requirements.
Nymox provides its AlzheimAlert
testing service through its government certified laboratory facilities in Hasbrouck
Heights, New Jersey. The Company also manufactures the AlzheimAlert kit there for
sale in Europe and elsewhere.
Nymox licensed the NTP testing
technology in 1997 from Harvard University and the Massachusetts General Hospital as part
of a sponsored research and licensing agreement, under which Nymox sponsored the research
of the principal investigators, Dr. Suzanne de la Monte and Dr. Jack Wands, into the use
of neural thread protein, its antibodies or genes for diagnostic or therapeutic purposes.
Nymox also paid the patent costs for the patent applications filed arising out of this
research. In return, Nymox received an exclusive worldwide license of the patents to sell
products and to use processes encompassed by them. Nymox is to pay the Massachusetts
General Hospital a 4% royalty of the net sales price of any product developed and sold
under the license. Nymox currently pays this royalty on its sales of its
AlzheimAlert product. The license and the obligation to pay patent costs and
royalties continue for the life of the patents, which run until November 2014 at the
earliest. The Massachusetts General Hospital has the right to terminate the license in any
country where, after the first commercial sale of the product in the country, there is a
continuous two year period in which no product is sold in such country. There are seven
issued U.S. patents and two outstanding U.S. patent applications under license and a
correspondingly larger number of patents and patent applications in Europe, Japan, Canada,
Australia, New Zealand and South Korea. The sponsored research portion of this agreement
terminated in March 1999, when Dr. de la Monte and Dr. Wands moved to Brown University.
Nymox retained the exclusive license to the rights to the NTP-related patents owned by the
Massachusetts General Hospital.
18
Effective March 1999, Nymox entered
into a similar sponsored research and licensing agreement with Brown University and the
Rhode Island Hospital. Under the terms of this agreement, Nymox continued to sponsor
research of Dr. de la Monte and Dr. Wands, into the uses of neural thread proteins, their
antibodies or genes for diagnostic, therapeutic and research purposes and to pay the
patent costs for any patent applications filed arising out of this research. In return,
Nymox received an exclusive worldwide license of any such patents to sell products and to
use processes encompassed by them. The Rhode Island Hospital has the right to terminate
the license in any country where, after the first commercial sale of the product in the
country, there is a continuous two year period in which no product is sold in such
country. Nymox is to pay the Rhode Island Hospital a 4% royalty of the net sales price of
any product developed and sold under the license. The sponsored research portion of this
agreement expired in March 2005; however, Nymox retains the exclusive license to patent
rights on certain NTP-based technology including a license to an issued U.S. patent and to
a pending patent application.
Products in Development:
NX-1207 for Enlarged
Prostate (BPH)
We are developing treatments for
enlarged prostate (benign prostatic hyperplasia or BPH), using novel compounds. Our lead
candidate is NX-1207, which successfully completed a multi-center, double-blind,
placebo-controlled Phase 2 trial in September 2006. We cannot predict with any certainty
what further steps may be required in order to apply for final FDA approval for this drug
or whether the FDA will ultimately grant us such approval.
There is a significant unmet need for
an effective treatment for BPH. More than half of men in their sixties and as many as 90%
of men in their seventies and eighties have some symptoms of BPH. Symptoms include more
frequent urination (especially at night), difficulty urinating, incomplete emptying of the
bladder and sometimes complete inability to urinate. More serious cases may require
surgical intervention to reduce the size of the prostate. There is a need for a simple,
effective treatment for BPH, particularly in cases where existing drug treatments have
proven to be ineffective and where more intrusive procedures such as surgery may be
inadvisable or bring unacceptable risks.
In September, 2006, Nymox announced
positive efficacy and safety results from the completed multi-center, double-blind,
placebo-controlled Phase 2 clinical trial of NX-1207. 43 clinical trial sites across the
U.S. and 175 subjects participated in the Phase 2 trial.
Overall, patients treated with
NX-1207 showed a total pooled mean improvement of 9.35 points in the primary outcome
endpoint of AUA Symptom Score values, a standardized measurement of BPH symptoms used to
evaluate the effectiveness of treatments for BPH. This total mean improvement for NX-1207
treatment reached statistical significance when compared with the placebo control
(p=.017). The mean improvements in AUA Symptom Score for each of the 3 doses used in the
trial ranged from 8.10 to 11.03 points with statistical significance measures of p=.0076
to 0.17. Published studies of currently approved drugs for BPH show AUA Symptom Score
improvement in the 3.5 to 5 point range. The treated subjects also showed an overall
significant reduction in mean prostate volume (secondary outcome) of 11.7% (6.84 grams;
p=.02).
The results of the trial demonstrated
an excellent safety and side effect profile for NX-1207. Subjects treated with NX-1207 had
no serious side effects. In particular, patients given NX-1207 had no (0%) significant
sexual side effects.
19
The Phase 2 study confirmed earlier
positive and safety data for NX-1207 from earlier Phase 1 and Phase 2 clinical trials in
the U.S. In January, 2004, Nymox reported that the results of the first two Phase 1 and
Phase 1-2 U.S. clinical trials of NX-1207 demonstrated the good safety profile of NX-1207.
In July, 2004, Nymox released data from the Phase 1-2 U.S. clinical trials of NX-1207
showing a statistically significant improvement in symptom scores and shrinkage in
prostate size in the 30 day studies following treatment with NX-1207 with no significant
adverse side effects. In September, 2004 Nymox released one year follow-up results from
Phase 2 testing of NX-1207 showing a statistically significant symptomatic improvement in
the individuals treated with NX-1207 that exceeded results from the Phase 1-2 30 day study
of NX-1207 reported earlier.
Our treatments under development for
enlarged prostate (benign prostatic hyperplasia or BPH) face significant competition from
existing products. There are seven drugs approved for treatment of BPH: finasteride
(Proscar®), dutasteride (Avodart®), terazozin (Hytrin®), doxazozin
(Cardura®), tamsulosin (Flomax®), prazosin (Minipres®) and alfusozin
(Uroxatral®). There are a number of thermal treatments on the market designed to
shrink the enlarged prostate by heating its tissue with a device inserted through the
urethra (the tube leading from the bladder through the penis through which men urinate) or
through the abdomen. The devices on the market use microwave energy (Prostatron®,
Targis Therapy® or TherMatrx®), low level radiowaves (TUNA System®), lasers
(Indigo LaserOptic Treatment System® or Laserscope GreenLight PVP), direct heat
or hot water to heat or burn away prostate tissue. A variety of surgical procedures exist
to surgically reduce or remove the prostate or to widen the urethra. These include
procedures to cut away prostate tissue such as TURP (transurethral resection of the
prostate) and using a resectoscope with an electrical loop inserted through the penis to
cut the prostate tissue. A small device used to widen the constricted urethra called a
prostatic stent can also be inserted.
NXC-4720 for E. coli
Contamination of Meat
We are developing novel antibacterial
agents for the treatment of E. coli O157:H7 bacterial contamination in hamburger
meat and other food and drink products and for the treatment of urinary tract and other
bacterial infections in humans which have proved highly resistant to conventional
antibiotic treatments.
E. coli contamination
of food and drink is a serious public health problem worldwide and a major
concern for meat processors in particular. E. coli bacteria occur
normally and usually harmlessly in the gastrointestinal tracts of humans, cows
and other animals. However, one mutant variety of the E. coli bacteria, E.
coli O157:H7, can cause life-threatening illness and has been implicated in
cases of severe diarrhea, intestinal bleeding and kidney failure, leading, in
some cases, to death in children and the elderly. E. coli contamination
in hamburger meat and other food products and in drinking water affects about
70,000 people in the United States a year.
There is a well-recognized need in
the beef industry to address the problem of E. coli contamination in meat
processing and in livestock. E. coli contamination has triggered massive recalls of
ground beef in the U.S. Cattle are a natural reservoir for the deadly strain of E.
coli. Water contamination from cattle operations have led to public health tragedies.
Nymox developed a potent new
antibacterial agent, NXC-4720. Tests of NXC-4720 show it to be highly effective against
all known substrains of E. coli O157:H7, destroying the bacteria efficiently,
rapidly and at a very low dose. In 1999, we began further laboratory trials for this agent
as a treatment for food and drink contamination and entered into agreements with various
collaborators. NXC-4720, which is being developed as a treatment of meat at the processing
stage, has been shown to be capable of substantially reducing the level of potentially
fatal E. coli O157:H7 contamination on fresh beef according to laboratory studies.
Other projects in this area, such as treating E. coli O157:H7 infection in
livestock, are in preliminary stages of development. Further pre-clinical testing and
development is required before we can apply for regulatory approval for use of this agent
on the processing of food and drink for human consumption.
20
The problem of E. coli O157:H7
contamination of hamburger meat and other food products is also well-known and a number of
companies and researchers have been pursuing various potential solutions, including
irradiation with x-rays, better detection of contamination, electronic pasteurization,
vaccination and competitive exclusion of the pathogenic E. coli bacteria by
harmless bacteria. The development of alternative solutions to the problem of E. coli
infection may adversely affect the market for our treatment for E. coli O157:H7
infection in cattle and contamination of food products.
Nymox has also developed three other
novel antibacterial agents, NXB-4221 for the treatment of difficult chronic and persistent
urinary tract infections; NXB-5886 for the treatment of streptococcal infection; and
NXT-1021 for the treatment of staphylococcal infection. Urinary tract infections in women
caused by bacteria such as E. coli are a common and significant infection often
resistant to conventional antibiotic treatment. Some varieties of streptococcus and
staphylococcus bacteria, a common source of infection in humans, have acquired a broad
immunity to antibiotic treatments. Infections from these antibiotic resistant bacteria are
difficult to treat and can be life threatening.
Nymoxs three antibacterial
agents for the treatment of infectious disease have all shown the ability to kill their
bacterial targets in culture with no signs of toxicity. Further pre-clinical testing and
development is required before we can apply for regulatory approval to begin initial
testing in humans.
A similar competitive reality
prevails in the field of novel anti-infectives. Over the past ten years, there has been an
increasing awareness of the medical need and of emerging market opportunities for new
treatments for antibiotic resistant bacterial infections. Many of the major pharmaceutical
companies are developing anti-infective drugs that either modify their existing drugs or
involve new anti-bacterial properties. Many biotechnology companies are developing new
classes of anti-bacterial drugs. At least three major pharmaceutical companies have
vaccines against bacterial infections in development. To the extent that these companies
are able to develop drugs or vaccines that offer treatment for some or all of the
indications for our anti-infectives, the market for our products may be adversely
affected.
Nymox has patent rights to these and
other antibacterial agents.
The Use of Statin Drugs
for the Treatment or Prevention of Alzheimers Disease
In October 2002, we were issued a
United States patent for the use of statin drugs to treat, prevent or reduce the risk of
the onset of Alzheimers disease and have issued patents or pending patent
applications elsewhere, including Europe, Japan, Canada and Australia. Statins are a class
of commonly prescribed cholesterol lowering drugs that have a well-established safety
record and are widely available. The potential of statin drugs for AD has been featured in
a cover story in Newsweek, as well as in the New York Times, Fortune,
Los Angeles Times, and The Wall Street Journal. Some of the recent
scientific studies and reviews concerning the potential for statin drugs to treat or
reduce the risk of AD or loss of cognitive function include Neurol Res. 2006;
28:630-6, Acta Neurol Scand 2006; 114 (Suppl. 185): 78-86, Acta Neurol Scand
2006; 114 (Suppl. 185): 37, J.Neurochem. 2006; 97:716-723; Restor.
Neurol. Neurosci 2006; 24:79-95; Neuromolecular Med. 2006; 8:319-328,
Neurology 2005; 65:1388-1394, J. Neurol. Neurosurg. Psychiatry 2005;
76:1624-1629, The American Journal of Medicine 2005; 118: 48S-53S; The Lancet
Neurology 2005; 4:841-852; Current Opinions in Lipidology 2005;16: 619-623;
The Lancet Neurology 2005; 4: 521-2, Arch Neurol 2005; 62:1047-51,
Neurology 2005; 64:1531-8, Arch Neurol 2005; 62:753-7, J Neurol Sci
2005; 229-230:147-50, Arch Gen Psychiatry 2005; 62:217-24. International
Journal of Geriatric Psychiatry (2004; 19:327-32), Neuroepidemiology (2004;
23:94-8); Neuron (2004; 41:7-10); Archives of Neurology (2000;
57:1439-1443); Lancet (2000; 356:1627-1631); Archives of Neurology (2002;
59:223-227); Journals of Gerontology: Biological Sciences and Medical Sciences
(2002; 57:M414-M418); and Journal of the American Geriatrics Society
(2002;50:1852-1856). Some studies, however, have not found evidence that statins may help
treat or prevent Alzheimers disease and research in this area is ongoing. No statin
drug has been approved for use in the treatment or prevention of Alzheimers disease.
21
Research and Development
of New Products
New Therapeutics for
Alzheimers Disease
Nymox has a number of proprietary
drug development programs aimed at treatments for Alzheimers disease and other
indications. One program targets neural thread protein (NTP) and its role in the extensive
brain cell loss associated with AD. Another program is based on spherons, which Nymox
researchers regard as a source of senile plaques, the characteristic abnormality found in
abundance in the brains of patients with AD and widely believed to play a major role in
the cause and course of the illness. A third program is based on a novel drug candidate,
NXD-5150, for neurodegenerative disease.
At present, there is no cure for
Alzheimers disease. There are five drugs approved by the FDA, tacrine (brand-name
Cognex®), donepezil HCI (brand-name Aricept®), rivastigmine (brand-name
Exelon®), galantamine hydrobromide (brand name Razadyne®) and memantine (brand
name Namenda) for the treatment of Alzheimers disease. However, at most these
drugs offer symptomatic relief for the loss of mental function associated with the disease
and possibly help to delay the progression. There is no consensus as to the cause of
Alzheimers disease or even whether it is one disease or many.
There is an urgent need for an
effective treatment for the illness, caused in part by the rising health care,
institutional and social costs for the treatment and care of Alzheimers disease
sufferers. The Surgeon Generals Report on Mental Health released on December 13,
1999, put the direct health care costs for the illness in the United States at almost $18
billion for 1996. In April 2002, the National Institute on Aging reported that the cost of
care to family, caregivers and society in general was estimated to exceed $100 billion per
year.
These costs are expected to rise
sharply as the baby boom generation ages and more people become at risk for the disease.
According to the National Institute on Agings Progress Report on Alzheimers
Disease, 2004-2005, by 2050, researchers estimate that 13.2 million Americans will
have Alzheimers disease if current population trends continue and no preventive
treatments become available. The age group of Americans over the age of 85 is one of the
fastest growing segments of the population. As people live longer, they become more at
risk of developing Alzheimers disease.
Nymoxs research into drug
treatments for Alzheimers disease is aimed at compounds that could arrest the
progression of the disease and therefore are targeted for long term use.
Drugs Targeting Spherons
We are a leader in research and
development into drugs for the treatment of Alzheimers disease that target spherons.
Nymox researchers believe that spherons are a cause of senile plaques, the characteristic
lesion found abundantly in the brains of patients with Alzheimers disease and
believed by many researchers to play a pivotal role in the fatal illness. Spherons are
tiny balls of densely packed protein found in brain cells scattered throughout the brains
of all humans from age one. Nymox researchers have found that as humans age the spherons
grow up to a hundred times larger until they become too large for the cells that hold
them. Once released from the cells, the researchers believe that the spherons burst,
creating senile plaques, contributing to the cellular damage and biochemical changes
pivotal to the symptoms and signs of Alzheimers disease.
22
The substantial evidence linking
spherons to senile plaques and Alzheimers disease has been published in journals
such as the Journal of Alzheimers Disease, Drug News &
Perspectives and Alzheimer Reports. There are 20 important criteria of validity
which have been set forth correlating the disappearance of spherons in old age with the
appearance of senile plaques and implicating spherons as a major cause in Alzheimers
disease. In 2000, Nymox researchers published important findings in Alzheimer
Reports (2000; 3: 177-184) confirming that spherons contain key proteins that are also
known to be in senile plaques and showing that, like senile plaques, spherons contain
unusually old proteins in terms of the human bodys metabolism, with an average age
of 20 to 40 years. In 2003, Nymox announced the discovery that spherons contain toxic
molecules termed spherotoxins which its researchers believe contribute significantly to
the cell death and symptoms characteristic of Alzheimers disease.
Nymox researchers believe that
stopping or inhibiting the transformation of spherons into senile plaques will help stop
or slow the progress of this illness. However, there is no consensus among researchers
about the causes or possible treatments of Alzheimers disease and not all
researchers share this belief that spherons are a causative factor in Alzheimers
disease or are a target for the development of treatments for the disease.
Based on the research findings
discussed above and the spheron-based approach to the treatment of the disease, we have
developed novel, proprietary drug screening methods based on spherons and used them to
discover, develop and test drug candidates to inhibit the formation of Alzheimer plaques
from spherons. These candidates have the potential to slow or stop the progression of the
disease.
We have two distinct new drug
candidates, NXD-3109 and NXD-1191, neither of which demonstrate significant toxicity and
both of which had positive animal testing results. These candidates are at the stage of
pre-clinical testing.
Such drug candidates will require
regulatory approval in order to begin clinical studies for humans, but there is no
guarantee that any of these drug candidates will ever be approved for marketing as a
treatment for Alzheimers disease. Drug candidates that look promising in early
studies in the laboratory or with animals often prove on further testing to be unsafe,
ineffective or impractical to use with human patients. The cost of bringing a drug
candidate through the necessary clinical trial and regulatory approvals is very high and
may require us to seek substantial financing through various sources including the issuing
of more stock, the borrowing of funds secured by financial instruments such as bonds or
agreements with major pharmaceutical companies. We risk not being able to secure such
funding in the necessary amounts or on sufficiently favorable terms.
Nymox holds global patent rights
covering both methods for using spherons as targets for developing drugs and for the
actual drug candidates discovered.
Neural Thread Protein
Based Drugs
Nymox developed a unique drug
screening system, based on the research that led to its AlzheimAlert test, to
identify other potential drug candidates for the treatment of Alzheimers disease.
There is a substantial body of evidence showing that NTP may play a key role in
Alzheimers disease, including such published studies as Journal of the
Neurological Sciences (1996; 138: 26-35), Journal of Neuropathology and
Experimental Neurology (1996; 55: 1038-50) and (2001; 60: 195-207), Journal of
Clinical Investigation (1997; 100: 3093-3104), Alzheimers Reports (1999;
2: 327-332), Journal of Alzheimers Disease (2001; 3: 345-353) and (2005;
7(1): 45-61), and Cellular and Molecular Life Sciences (2001; 58: 844-849) and
(2003; 60:2679-91).
Nymox has screened compounds for
their ability to impede the process of premature cell death and thus potentially help slow
or halt the loss of brain cells in the Alzheimers disease brain. This screening
process identified promising drug candidates. The Company has targeted the candidate,
NXD-9062, for human trials. NXD-9062 has shown significant progress in key preclinical
studies but successful completion of pre-clinical studies is necessary before it can move
into formal regulatory studies.
23
The companys third program is
based on a new drug candidate for neurodegenerative disease, NXD-5150, which successfully
completed important pre-clinical milestones. Nymox has exclusive rights to two patent
applications covering NXD-5150 as well as other related drug candidates for
neurodegenerative disorders.
Nymox faces intense competition for
the development of an effective treatment for Alzheimers disease. The market
conditions for an Alzheimers disease drug strongly favor the entry of other
corporations into the area. The current market for therapeutic drugs for Alzheimers
disease is an estimated $2 billion. This market is expected to grow rapidly as new drugs
enter the market and as the baby boom generation becomes more at risk for developing
Alzheimers disease. As a result, most of the major pharmaceutical companies and many
biotechnology companies have ongoing research and development programs for drugs and
treatments for Alzheimers disease. Many of these companies have much greater
scientific, financial and marketing resources than we have and may succeed in developing
and introducing effective treatments for Alzheimers disease before we can. At
present, five drugs for Alzheimers disease are being widely marketed in the United
States, tacrine (brand-name Cognex®), Aricept®), rivastigmine (brand-name
Exelon®), galantamine hydrobromide (brand name Razadyne®) and memantine (brand
name Namenda) These five drugs only treat some of the symptoms of Alzheimers
disease by enhancing memory and other mental functions and not the underlying causes of
the illness.
Oncology products
We are in the preclinical stage of
developing therapeutic products for oncological indications based on technology licensed
from the Massachusetts General Hospital. We cannot predict with any certainty whether any
such product will successfully complete preclinical testing, whether government regulatory
agencies, such as the FDA, will permit such products to proceed to human trials, or
whether ultimately any such product will be granted approval for sale and marketing in the
U.S., Canada, or elsewhere in the world.
New Diagnostic Products
Nymox has a number of proprietary
diagnostic markers and technologies, including a patented platform for point-of-care
testing, and has tests utilizing these technologies in the early stages of development.
Nymox also has U.S. patents for a unique method and device for using saliva to determine
cholesterol levels and for a method of testing for osteoporosis. The company also owns
patent rights to several novel biochemical indicators for Alzheimers disease.
Manufacturing
Arrangements
Our NicAlert and
TobacAlert products and AlzheimAlert kits are currently partly manufactured
through out-sourcing arrangements with contract manufacturers. To date, we have not
experienced any significant interruptions in the manufacture of these products and the
cost of the manufacturing services has not been volatile. The manufacturing services
supplied by our current contract manufacturer are not unique or unduly complicated and
other contract manufacturers are available to provide similar services in the event that
our current contract manufacturer fails to meet our needs.
24
Property, Plant And
Equipment
Nymox and Serex laboratory facilities
in Hasbrouck Heights, New Jersey comprise 4,799 square feet of leased space. That lease
agreement expires August 31, 2010. Nymox office and research facilities in St. Laurent,
Quebec, Canada comprise 6,923 square feet of leased space. The lease agreement expires on
August 31, 2010. Nymox Pharmaceutical Corp. and its two US subsidiaries Nymox Corp. and
Serex, Inc. own a full complement of equipment used in all aspects of their research and
development work and the Nymox reference laboratory. Nymox believes that its facilities
are adequate for its current needs and that additional space, if required, would be
available on commercially reasonable terms.
Governmental Regulation
Our AlzheimAlert test which we
provide as a service through our clinical reference laboratory in New Jersey is subject to
extensive government regulation in the United States. Our clinical reference laboratory
and its performance of the AlzheimAlert must be certified by the Centers for
Medicare & Medicaid Services (CMS) under the Clinical Laboratory Improvement
Amendments (CLIA), which establishes quality standards for the laboratory tests being
performed to ensure the accuracy, reliability and timeliness of patient test results. In
addition, some individual states such as New York, Florida and New Jersey have their own
requirements for the inspection and certification of reference laboratories which offer
diagnostic services for patients within the state. Finally, the FDA has its own
regulations governing in vitro diagnostic products, including analyte-specific
reagents used in clinical reference laboratories. Any changes in our current certification
status, CMS or state law requirements or in the FDA regulations could have an impact on
our future ability to offer or market any reference laboratory services and/or on our
ability to obtain reimbursement from the Medicare and Medicaid programs and providers.
We have developed a diagnostic kit
version of the AlzheimAlert test. We will need to obtain FDA approval before we can
market or sell such a diagnostic kit version outside of the clinical reference laboratory
setting in the United States. Such approval for this type of commercial development is
necessary for all in vitro diagnostic kits.
In February 2004, we filed a
premarket approval application (PMA) with the FDA for the AlzheimAlert kit version
following the completion of clinical testing. In July 2004, we received a letter from the
FDA raising issues of clinical study methodology and stating that the PMA was not
approvable in its current form. We subsequently met with the FDA and submitted further
data and analyses in October and December 2004 and March and April 2005. On July 15, 2005,
an FDA advisory panel voted 5-2 against recommending approval of our PMA application for
the kit, citing the need for further studies, such as long term follow-up and autopsy
confirmation. Subsequently, the FDA advised us that our PMA application was not
approvable. The Company filed further proposals with the FDA concerning meeting
requirements for approval of the kit and continues to pursue kit development and approval.
We cannot predict with any certainty when or if FDA approval will be forthcoming and we
anticipate that more clinical testing or further documentation will be required before
approval. If approved, the diagnostic kit would then be subject to postmarketing record
and reporting obligations and manufacturing requirements.
Similar requirements exist in many
other countries. In November 2004, Nymox satisfactorily completed the testing and
registration required by European regulatory, environmental and quality standards in order
to obtain a CE Mark for the AlzheimAlert kit. The CE Mark makes the
AlzheimAlert kit eligible for sale in the European Union and will allow European
clinical and hospital laboratories to perform the AlzheimAlert test in their own
facilities in Europe.
The regulatory process leading to
such approval can be time-consuming and expensive and can result in an outright denial or
a very limited approval only. Our product will be subject to premarketing and
postmarketing requirements applicable to such devices, including those governing:
25
|
|
design
control procedures; |
|
|
prior
FDA approval of a 510(k) application, where the FDA has determined that our diagnostic
device is substantial equivalent to a marketed device, or a premarket approval
application, where the FDA has been satisfied with clinical studies demonstrating the
safety and efficacy of our device; |
|
|
postmarketing
record and reporting obligations; and |
|
|
good
manufacturing practices. |
The requirements for a premarket
approval application are analogous to those for the approval of a new drug and include
four categories of information: indications for use, device description and manufacturing
methods, alternative practices and procedures for the diagnosis of the disease and
clinical and nonclinical studies. The requirements for a 510(k) application are generally
less onerous but still include indications for use, safety and effectiveness data as well
as manufacturing and quality assurance data and information. There can be no assurance
that the AlzheimAlert test or any other medical device that we may develop in the
future will obtain the necessary approvals within a specified time framework, if ever. In
addition, the FDA may impose certain postmarketing requirements that may significantly
increase the regulatory costs associated with our product. The FDA has recourse to a wide
range of administrative sanctions and civil and criminal penalties in order to enforce the
applicable laws, rules and regulations.
Our therapeutic products under
development by Nymox would also have to receive regulatory approval. This is a costly,
lengthy and risky process. In the United States, in order for a product to be marketed, it
must go through four distinct development and evaluation stages:
We must conduct preliminary studies
of potential drug candidates using various screening methods to evaluate them for further
testing, development and marketing.
|
Optimization
of Product Formulation |
The activities in this stage of
development involve consultations between us and investigators and scientific personnel.
Preliminary selection of screening candidates to become product candidates for further
development and further evaluation of drug efficacy is based on a panel of research based
biochemical measurements. Extensive formulation work and in vitro testing are conducted
for each of various selected screening candidates and/or product candidates.
|
Clinical
Screening and Evaluation |
During this phase of development,
portions of which may overlap with product evaluation and optimization of product
formulation, initial clinical screening of product candidates is undertaken and full scale
clinical trials commence. The FDA must approve any clinical testing on healthy subjects
(Phase 1) and on patients (Phase 2 and 3).
|
Final
Product Development |
The activities to be undertaken in
final product development include performing final clinical evaluations, conducting
large-scale experiments to confirm the reproducibility of clinical responses, making
clinical lots for any additional extensive clinical testing that may be required,
performing any further safety studies required by the FDA, carrying out process
development work to allow pilot scale production of the product, completing production
demonstration runs for each potential product, filing new drug applications, product
license applications, investigational device exemptions (and any necessary supplements or
amendments) and undergoing comprehensive regulatory approval programs and processes.
26
We cannot assure you that we will
successfully complete the development and commercialization of any therapeutic products.
In the United States, obtaining the
necessary FDA approval for any drug is a lengthy, expensive and often arduous process. We
cannot predict with any certainty the amount of time the FDA will take to approve one of
our drugs or even whether any such approval will be forthcoming. Similar requirements
exist in many other countries.
In the United States, the FDA
approval procedure is a two-step process. We must file an investigational new drug (IND)
application for each product with the FDA before beginning the initial (Phase I) clinical
testing of the new drug in healthy subjects. If the FDA has not commented on or questioned
the application within 30 days of its filing, initial clinical studies may begin. If,
however, the FDA has comments or questions, the questions must be answered to the
satisfaction of the FDA before initial clinical testing can begin. In some instances, this
process could result in substantial delay and expense. Phase I studies are intended to
demonstrate the functional characteristics and safety of a product.
After Phase I testing, we must
conduct extensive clinical trials with patients in order to establish the efficacy and
safety of our drug. Once we complete the required clinical testing, we expect to have to
file a new drug application for FDA approval in order to market most, if not all, of our
new drugs. The application is complicated and detailed and must include the results of
extensive clinical and other testing, the cost of which is substantial. The FDA conducts
an extensive and often lengthy review of such applications. The agency is required to
review applications within 180 days of their filing, but, during the review, frequently
requests that additional information be submitted. This starts the 180-day regulatory
review period anew when the requested additional information is submitted and, as a
result, can significantly extend the review period. Until the FDA actually approves the
new drug application, there can be no assurance that the agency will consider the
information requested and submitted to justify approval. The packaging and labeling of
products are also subject to FDA regulation. Accordingly, it is impossible to anticipate
when the FDA will approve a new drug application.
Our lead candidate is NX-1207, which
successfully completed a multi-center, double-blind, placebo-controlled Phase 2 trial in
September 2006. We cannot predict with any certainty the outcome of this trial, what
further steps may be required in order to apply for final FDA approval for this drug or
whether the FDA will ultimately grant us such approval.
We must also obtain approval for our
drugs or diagnostic devices from the comparable regulatory authority in other countries
before we can begin marketing our product in that country. The approval procedure varies
from country to country and can involve additional testing. The time required may differ
from that required for FDA approval. Although there are some procedures for unified
filings for certain European countries, in general each country has its own procedures and
requirements, many of which are time-consuming and expensive. Thus, there can be
substantial delays in obtaining required approvals from both the FDA and foreign
regulatory authorities after the relevant applications are filed.
After such approvals are obtained,
further delays may be encountered before the products become commercially available. If,
subsequent to approval, new information becomes available concerning the safety or
effectiveness of any approved product, the regulatory authority may require the labeling
for the affected product to be revised or the product to be withdrawn. Our manufacturing
of any approved drug must conform with the FDAs good manufacturing practice
regulations which govern the production of pharmaceutical products and be subject to
inspections and compliance orders.
Government regulation also affects
our ability to receive an appropriate level of reimbursement for our products. Throughout
the developed world, both public and private health care plans are under considerable
financial and political pressure to contain their costs. The two principal methods of
restricting expenditures on drugs and diagnostic products and services are to deny
coverage or, if coverage is granted, to limit reimbursement. For single-payer government
health care systems, a decision to deny coverage or to severely restrict reimbursement for
one of our products can have an adverse effect on our business and revenues.
27
In the United States, where, to a
significant degree, the patient population for our products is elderly, Medicare and
Medicaid are sources of reimbursement. In general, any restriction on reimbursement,
coverage or eligibility under either program could adversely affect reimbursement to Nymox
for products and services provided to beneficiaries of the Medicare and/or Medicaid
programs. Many elderly people are covered by a variety of private health care
organizations either operating private health care plans or Medicare or Medicaid programs
subject to government regulation. These organizations are also under considerable
financial constraints and we may not be able to secure coverage or adequate reimbursement
from these organizations. Without coverage, we will have to look to the patients
themselves who may be unwilling or unable to pay for the product; in turn, doctors may be
reluctant to order or prescribe our products in the absence of coverage of the product for
the patient.
In response to rising health care
costs, there have been a number of legislative and administrative proposals in the U.S.
for the reform of the heathcare system. In 1997 the U.S. Congress implemented sweeping
changes to the U.S. Medicare and Medicaid systems. Under Part C: Medicare + Choice
programs, beneficiaries can opt for a variety of health delivery models, including
coordinated care plans, HMOs, preferred provider organizations and provider sponsored
organizations, private fee-for-service plans and medical savings account plans. In
addition, states have the option to require Medicaid recipients to enroll with managed
health care plans without first obtaining a waiver, making it substantially easier for the
states to meet their Medicaid obligations through private managed care organizations. All
these health care delivery systems, including the original Medicare and Medicaid systems,
are subject to funding formulas and spending caps and may compensate for these
restrictions by limiting coverage, eligibility and/or payments. In 2003, the U.S.
government added insurance coverage to help pay for prescription drugs to Medicare.
Legislative proposals before Congress to change the pricing mechanism for the prescription
drugs available through that program, if passed, may have the effect of reducing the
prices and profitability of such drugs. The long-term impact of legislative changes in
terms of their efficiency, effectiveness and financial viability in delivering health care
services to an aging population is uncertain at present. Any legislative or regulatory
actions to reduce or contain federal spending under either the Medicare or Medicaid
programs could adversely affect our ability to participate in either program as a provider
or supplier of services or products and the amount of reimbursement under these programs
potentially available to us.
Our AlzheimAlert test, and any
of the new diagnostic and therapeutic products and services that we may develop, will be
subject to coverage determinations by health care providers and payers. Federal and state
regulations and law and internal coverage policies of health care organizations affect our
ability to obtain payments for our products and services. The Medicare program will not
pay for any expenses incurred for items or services that are not reasonable and necessary
for the diagnosis or treatment of illness or injury or to improve the functioning of a
malformed body member. Historically, CMS interpreted this provision in order to exclude
from Medicare coverage those medical and health care services that are not demonstrated to
be safe and effective by acceptable clinical evidence. CMS recently revised both its
national coverage policies and procedures in general and specifically its coverage of
diagnostic laboratory tests and constituted a Medicare Coverage Advisory Committee to
provide advice on the effectiveness and appropriateness of medical items and services that
are eligible for coverage under Medicare. It is unknown how these changes will affect our
ability to obtain Medicare coverage for its products and services. However, an adverse
national coverage decision with respect to one of our products or services will make it
impossible to receive reimbursement from Medicare for that product and more difficult to
convince private health care organizations to provide coverage for it. Even if we receive
a favorable coverage decision for one of our products or services, there is no guarantee
that the level of reimbursement for it will be close to our retail price for it or
commensurate with the costs of developing and marketing it.
28
Patents And Proprietary
Information
We believe that patent and trade
secret protection is important to our business, and that our success will depend, in part,
on our ability to obtain strong patents, to maintain trade secret protection and to
operate without infringing the proprietary rights of others.
The commercial success of products
incorporating our technologies may depend, in part, upon our ability to obtain strong
patent protection. We cannot assure you that additional patents covering new products or
improvements will be issued or that any new or existing patents will be of commercial
benefit or be valid and enforceable if challenged.
We pursue a policy of seeking patent
protection for valuable patentable subject matter of our proprietary technology and
require all employees, consultants and other persons who may have access to its
proprietary technology to sign confidentiality agreements.
The Company currently owns or has
licensed exclusive rights to several hundred patents and patent applications in the U.S.
and other countries around the world in support of its proprietary product development
programs. Nymox has nineteen U.S. patents issued or allowed and thirteen U.S. patent
applications pending and a corresponding larger number of patents and patent applications
worldwide relating to the inventions and discoveries in those patents and patent
applications. Nymox has issued patents in the main European markets, including Great
Britain, Germany, France, Italy, The Netherlands, Sweden and Spain among others and in
other countries such as Japan, Canada and Australia. These patents and patent applications
cover much of our current product development and technologies, including new drug
candidates, proprietary screening technologies for finding drugs, promising diagnostic
markers, new diagnostic assay methods, methods of treating meat and other food products;
and anti-infective agents. The earliest expiry date for its issued patents is February,
2009 and the rest range from 2010 through 2021.
Nymoxs subsidiary, Serex, has
eleven patents issued and three patent applications pending in the United States and a
corresponding larger number of patents and patent applications worldwide. These patents
and patent applications cover such areas as Serexs proprietary diagnostic
technologies and methodologies. The expiry dates for its patents range from 2012 to 2017.
Nymox also has exclusive rights to
ten issued U.S. patents and five pending U.S. patent applications as well as a
corresponding larger number of patents and patent applications worldwide through research
and license agreements. The earliest of these patents expires in 2014.
Many companies have patents covering
various drugs, methods and discoveries in the fields of diagnostics and therapeutics for
Alzheimers disease and related conditions and of new anti-infective agents. We
believe that the patents issued to date will not preclude Nymox from developing and
marketing our products; however, it is impossible to predict the extent to which licenses
from third parties will be necessary. If Nymox were to need licenses from third parties
there can be no assurance that we could obtain such licenses on commercially reasonable
terms, if at all.
In the fields of diagnostic methods
and diagnostic tests for common human diseases and conditions, where Serex has many of its
patents, there are many patents issued covering many areas of diagnostic methods, tests
and technologies. We believe that these patents issued to date to other companies will not
preclude Serex from developing and marketing its products but you should be aware that it
is often difficult to determine the nature, breadth and validity of competing patent
claims in these fields, that there has been significant litigation in some of these areas
(not involving Serex) and that, if and when Serexs products become more commercially
successful, Serexs products or patents may become the subject matter of litigation.
If Serex were to need licenses from third parties there can be no assurance that it could
obtain such license on commercially reasonable terms, if at all.
29
Neither Nymox nor Serex are currently
involved in litigation over patent and other intellectual property rights but significant
litigation over these matters in the pharmaceutical and biotechnology industry is not
uncommon. The validity and extent of patent rights can be very difficult to determine and
involve complex legal, factual and scientific questions. Important legal issues about
patent protection in the field of biotechnology have not been resolved. Patent litigation
is costly and time-consuming and can consume substantial resources. An adverse decision
can preclude the marketing of a product, expose us to significant liabilities or require
us to obtain third party licenses, which may not be available at commercially reasonable
prices.
We also rely upon trade secrets,
know-how, and continuing technological advancement to develop and maintain our competitive
position. We control the disclosure and use of our know-how and confidential information
through agreements with the parties involved. In addition, we have confidentiality
agreements with our key employees, consultants, officers and directors. There can be no
assurance, however, that all confidentiality agreements will be honored, that others will
not independently develop equivalent technology, that disputes will not arise as to the
ownership of intellectual property, or that disclosure of our trade secrets will not
occur. Furthermore, there can be no assurance that others have not obtained or will not
obtain patent protection that will exclude us from using our trade secrets and
confidential information. To the extent that consultants or research collaborators use
intellectual property owned by others in their work with us, disputes may also arise as to
the rights to related or resulting know-how or inventions.
Competition
Rapidly evolving technology and
intense competition are the hallmarks of modern pharmaceutical and biotechnology
industries. Our competitors include:
|
|
major
pharmaceutical, diagnostic, chemical and biotechnology companies, many of which have
financial, technical and marketing resources significantly greater than ours; |
|
|
biotechnology
companies, either alone or in collaborations with large, established pharmaceutical
companies to support research, development and commercialization of products that may be
competitive with ours; and |
|
|
academic
institutions, government agencies and other public and private research organizations
which are conducting research into Alzheimers disease and which increasingly are
patenting, licensing and commercializing their products either on their own or through
joint ventures. |
In the field of Alzheimers
disease diagnosis, our AlzheimAlert test faces growing competition which could
detrimentally impact on our ability to successfully market and sell our diagnostic test.
Our competitors include:
|
|
Athena
Diagnostics, Inc. which is currently marketing three tests claimed to aid in the
diagnosis of Alzheimers disease: a genetic test for the rare cases of familial,
early-onset Alzheimers disease; a genetic test for a relatively common mutation of
a gene said to increase the likelihood of a person with at least one of the genes
contracting the disease; and a test for two proteins in the spinal fluid of patients. In
March, 2006, Fisher Scientific International announced that it acquired Athena
Diagnostics. |
30
|
|
Innogenetics
NV which currently markets tests and kits for two proteins and a variant of one of these
proteins in the spinal fluid of patients and a genetic test for a relatively common
mutation of a gene said to increase the likelihood of a person developing the disease. |
|
|
Applied
NeuroSolutions, Inc. currently markets a research test for a variant of a protein in the
spinal fluid of patients. |
There are also a number of other
proposed biochemical signs of the disease that could potentially be developed into a
commercial diagnostic test as well as various scanning and imaging technologies which
compete for a portion of the diagnostic market for Alzheimers disease. In June 2004,
the Centers for Medicare and Medicaid Services (CMS) approved limited coverage of a
Positron Emission Tomography (PET) imaging procedure for helping to more precisely
distinguish Alzheimers disease from a rarer type of dementia when clinical
evaluation has been inconclusive. In October 2004, the National Institute of Aging in
conjunction with other Federal agencies, private companies and organizations launched the
Alzheimers Disease Neuroimaging Initiative, a $60 million initiative to test whether
various scanning and imaging technologies, biochemical markers, and clinical and
neuropsychological testing can be combined to help diagnose early Alzheimers
disease. A number of companies, including GE, are actively working to develop imaging
technologies for the diagnosis of Alzheimers disease.
Our NicAlert and
TobacAlert products face competition from clinical laboratories such as Lab One,
LabCorp, and Quest Diagnostics which provide off-site lab testing for cotinine, the
by-product of the bodys breakdown of nicotine measured by NicAlert and
TobacAlert, and from assay suppliers, including immunoassay developers such as
Orasure Techologies Inc. and Cozart Bioscience Ltd, and diagnostic system manufacturers
such as Roche Diagnostics, Abbott and Diagnostic Products Corporation. NicAlert and
TobacAlert also face competition from distributors who supply simple yes-no smoking
status tests such as SmokeCheck, NicQuick, and QuickScreen, from NicCheck I, an
FDA-cleared smoking status test being marketed by Mossman & Associates Ltd, from
SmokeScreen, a chemical color-based tobacco test being marketed by Mermaid Diagnostics,
Ltd. in the United Kingdom, and from carbon monoxide (CO) monitors such as SmokeCheck.
We also face intense competition for
the development of an effective treatment for Alzheimers disease. The market
conditions for an Alzheimers disease drug strongly favor the entry of other
corporations into the area. The current market for therapeutic drugs for Alzheimers
disease is an estimated $2 billion. This market is expected to grow rapidly as new drugs
enter the market and as the baby boom generation becomes more at risk for developing
Alzheimers disease. As a result, most of the major pharmaceutical companies and many
biotechnology companies have ongoing research and development programs for drugs and
treatments for Alzheimers disease. Many of these companies have much greater
scientific, financial and marketing resources than we have and may succeed in developing
and introducing effective treatments for Alzheimers disease before we can. At
present, five drugs for Alzheimers disease are being widely marketed in the United
States, tacrine (brand-name Cognex®), Aricept®), rivastigmine (brand-name
Exelon®), galantamine hydrobromide (brand name Razadyne®) and memantine (brand
name Namenda). These five drugs only treat some of the symptoms of Alzheimers
disease by enhancing memory and other mental functions and not the underlying causes of
the illness.
A similar competitive reality
prevails in the field of novel anti-infectives. Over the past ten years, there has been an
increasing awareness of the medical need and of emerging market opportunities for new
treatments for antibiotic resistant bacterial infections. Many of the major pharmaceutical
companies are developing anti-infective drugs that either modify their existing drugs or
involve new anti-bacterial properties. Many biotechnology companies are developing new
classes of anti-bacterial drugs. At least three major pharmaceutical companies have
vaccines against bacterial infections in development. To the extent that these companies
are able to develop drugs or vaccines that offer treatment for some or all of the
indications for our anti-infectives, the market for our products may be adversely
affected.
31
Our treatments under development for
enlarged prostate (benign prostatic hyperplasia or BPH) face significant competition from
existing products. There are seven drugs approved for treatment of BPH: finasteride
(Proscar®), dutasteride (Avodart®), terazozin (Hytrin®), doxazozin
(Cardura®), tamsulosin (Flomax®), prazosin (Minipres®) and alfusozin
(Uroxatral®). There are a number of thermal treatments on the market designed to
shrink the enlarged prostate by heating its tissue with a device inserted through the
urethra (the tube leading from the bladder through the penis through which men urinate) or
through the abdomen. The devices on the market use microwave energy (Prostatron®,
Targis Therapy® or TherMatrx®), low level radiowaves (TUNA System®), lasers
(Indigo LaserOptic Treatment System® or Laserscope GreenLight PVP), direct heat
or hot water to heat or burn away prostate tissue. A variety of surgical procedures exist
to surgically reduce or remove the prostate or to widen the urethra. These include
procedures to cut away prostate tissue such as TURP (transurethral resection of the
prostate) and using a resectoscope with an electrical loop inserted through the penis to
cut the prostate tissue. A small device used to widen the constricted urethra called a
prostatic stent can also be inserted.
The problem of E. coli O157:H7
contamination of hamburger meat and other food products is also well-known and a number of
companies and researchers have been pursuing various potential solutions, including
irradiation with x-rays, better detection of contamination, electronic pasteurization,
vaccination and competitive exclusion of the pathogenic E. coli bacteria by
harmless bacteria. The development of alternative solutions to the problem of E. coli
infection may adversely affect the market for our treatment for E. coli O157:H7
infection in cattle and contamination of food products.
Marketing
We currently market our
AlzheimAlert test as a clinical reference laboratory service primarily in the United
States. In November 2004, our AlzheimAlert test was certified with a CE Mark, making
the device eligible for sale in the European Union. Nymox has signed distribution
agreements for AlzheimAlert in Italy, the Czech Republic, Spain, Greece, Italy and
the United Kingdom. We also market our NicAlert and TobacAlert products
through our own marketing arm and distributors in the United States, Europe and Asia.
Nymox has entered into distribution and marketing agreements with companies and
organizations in the U.S., the U.K., and Spain for these products.
At present, we do most of our
marketing ourselves. To increase our marketing, distribution and sales capabilities both
in the United States and around the world, we will need to enter into licensing
arrangements, contract sales agreements and co-marketing deals. We cannot assure you that
we will be able to enter into agreements with other companies on terms acceptable to us,
that any licensing arrangement will generate any revenue for the company or that the costs
of engaging and retaining the services of a contract sales organization will not exceed
the revenues generated.
If successfully developed and
approved, we plan to market and sell our therapeutic and diagnostic products directly or
through co-promotion arrangements or other licensing arrangements with third parties. In
cases where we have sole or shared marketing rights, we plan to build a small, focused
sales force if and when such products approach marketing approval in some markets,
including Europe. Implementation of this strategy will depend on many factors, including
the market potential of any products we develop as well as on our financial resources. To
the extent we will enter into co-promotion or other licensing arrangements, any revenues
received by us will be dependent on the efforts of third parties.
ITEM 4A. UNRESOLVED
STAFF COMMENTS
None.
32
ITEM 5. OPERATING AND
FINANCIAL REVIEW AND PROSPECTS
General
Nymox Pharmaceutical Corporation is a
biopharmaceutical company with three unique proprietary products on the market, and an
R&D pipeline of drug and diagnostic products in development.
We market the AlzheimAlert test
as an aid to the diagnosis of Alzheimers disease. The test is available as a testing
service through our clinical reference laboratory in New Jersey. The kit version of the
AlzheimAlert test is also certified with a CE Mark, making the device eligible for
sale in the European Union. AlzheimAlert is an improved version of our AD7C
test, from which we began generating revenue from sales in 1997.
We also market NicAlert and
TobacAlert, our two products, which determine a persons level of exposure to
tobacco products. These products are also certified with a CE Mark, making the devices
eligible for sale in the European Union.
We have under development therapeutic
agents for the treatment of Alzheimers disease, for the treatment of enlarged
prostate (BPH) and of certain antibiotic-resistant infections as well as antibacterial
agents for E. coli contamination of food and drink products.
We also have the rights to a U.S.
patent for the use of statin drugs for the treatment or prevention of Alzheimers
Disease.
We have incurred operating losses
throughout our history. Management believes that such operating losses will continue for
the next few years. The costs relating to clinical trials for our potential therapeutic
products will increase expenditures and delay profitability, despite anticipated increases
in sales revenue in the coming years.
All figures are presented in U.S.
dollars, unless otherwise stated.
History of Capital
Funding
We fund our operations and projects primarily
by selling shares of Nymoxs common stock. However, since 1997, a small portion of
our funding also comes from sales. This source of funding became more significant in late
1998, following the launch of our urinary version of the AD7C test. Since its
incorporation in May, 1995, Nymox raised the capital necessary to fund its on-going
research and development work and its marketing and sales operations primarily through
private placements of its shares.
On December 1, 1997, our common
shares began trading on the Nasdaq Stock Market. Nymoxs common shares also traded on
the Montreal Exchange from December 18, 1995 to November 19,1999.
Private placements completed by Nymox
since December, 1995 are as follows:
|
December
1995, 1,578,635 common shares at a price of CAN$2.00 (US$1.38) per share for total
proceeds of CAN$3,157,270 (US$2,187,536); |
|
April
1996, 877,300 common shares at a price of CAN$6.00 (US$4.15) per share for total proceeds
of CAN$5,263,800 (US$3,647,059); |
|
May
1997, 696,491 common shares at a price of CAN$6.50 (US$4.50) and warrants exercisable at
a price of CAN$8.50 (US$5.88) per share for total proceeds of CAN$4,527,191
(US$3,136,694). In 1998, all 696,491 of these warrants were exercised for additional
proceeds to Nymox of CAN$5,920,174 (US$4,101,832); |
33
|
May
1998, 231,630 common shares at a price of CAN$8.50 (US$5.88) for total proceeds of
CAN$1,968,855 (US$1,364,134). A total of 110,000 warrants were issued as well,
exercisable at a price of CAN$8.50 (US$5.88) per share (50,000) and CAN$10.00 (US$6.93)
per share (60,000). These warrants have since expired; |
|
December
1998, 135,000 common shares and January 1999, 55,000 common shares at CAN$8.50 (US$5.88)
per share, for total proceeds of CAN$1,615,000 (US$1,118,963). A total of 95,000 warrants
were issued as well, exercisable at the price of CAN$10.00 (US$6.93) per share. These
warrants have since expired; |
|
September
1999, 122,000 common shares at CAN$5.00 (US$3.46) per share, for total proceeds of
CAN$610,000 (US$422,642). |
|
March
2000, 821,637 common shares at an average price of $4.87 per share, for total proceeds of
$4,000,000. A total of 93,334 warrants were issued as well, exercisable at a price of
$9.375 per share (66,667) and $7.8125 per share (26,667). These warrants expired on March
6, 2004. |
|
March,
2001, 200,000 common shares at $2.06 per share, for total proceeds of $412,000. A total
of 100,000 warrants were issued as well, exercisable at a price of $2.06. These warrants
were exercised on February 17, 2003. |
|
August
3, 2001, 80,000 common shares at $2.50 per share for total proceeds of $200,000. |
|
August
22, 2001, 140,000 common shares at $3.75 per share for total proceeds of $525,000. |
|
October
3, 2001, 110,000 common shares at $3.75 per share for total proceeds of $412,500. |
|
November
14, 2001, 64,100 common shares at $3.90 per share for total proceeds of $250,000. |
|
January
24, 2002, 74,074 common shares at $4.05 per share for total proceeds of $300,000. |
|
March
18, 2002, 195,000 common shares at $4.20 per share for total proceeds of $819,000. |
|
June
18, 2002, 90,000 common shares at $4.00 per share for total proceeds of $360,000. |
|
July
17, 2002, 86,000 common shares at $4.68 per share for total proceeds of $403,000. |
|
September
9, 2002, 91,000 common shares at $4.40 per share for total proceeds of $400,400. |
|
November
27, 2002, 53,500 common shares at $3.75 per share for total proceeds of $200,625. |
|
December
17, 2002, 125,000 common shares at $4.10 per share for total proceeds of $512,500. |
|
February
17, 2003, 100,000 warrants were exercised at a price of $2.06 per share for total
proceeds of $206,000. |
From March 2000 to January 2003, we
received a total of $1,327,273 for the following sales of our shares pursuant to a common
stock purchase agreement with an investment company.
|
August
16, 2000, 152,616 common shares at a volume weighted average price of $3.2924 per share; |
|
October
12, 2000, 137,889 common shares at a volume weighted average price of $3.6261 per share; |
|
February
7, 2001, 161,696 common shares at a volume weighted average price of $2.0240 per share; |
|
May
31, 2001, 56,108 common shares at a volume weighted average price of $1.9466 per share. |
This common stock purchase agreement expired
in January 2003. As part of the agreement we issued to the investment company a stock
purchase warrant, which expired November 30, 2004, permitting it to purchase up to 200,000
shares of our common stock at an exercise price of $4.53 per share.
On January 27, 2003 we entered into a
Common Stock Private Purchase Agreement with an investment company, Lorros-Greyse
Investments, Ltd., for the future issuance and purchase of Nymoxs common shares. In
general, the agreement provided Nymox with a commitment from the investment company to
purchase up to $5 million of Nymoxs common shares over the twenty-four month period
beginning in January 2003.
Under the terms of this agreement,
which has since been replaced annually by new agreements with the same investor, we may
give notice to the investment company requiring it to purchase a specified dollar amount
of our shares. The amount specified in any one notice may be up to $500,000 but not less
than $100,000. The maximum amount can be higher if both parties agree. The number of
shares Nymox will issue to the investment company in return for that money will be equal
to the amount specified in the notice divided by 97% of the average market price of our
common shares for the five trading days preceding the giving of the notice.
34
Under the agreement dated January 27,
2003, we received a total of $2,360,000 for the following shares under this common stock
private purchase agreement:
|
January
30, 2003, 107,382 common shares at a price of $3.725 per share. |
|
March
3, 2003, 245,098 common shares at a price of $4.08 per share. |
|
June
6, 2003, 167,224 common shares at a price of $2.99 per share. |
|
July
8, 2003, 80,128 common shares at a price of $3.12 per share. |
|
August
8, 2003, 77,778 common shares at a price of $2.70 per share. |
On August 25, 2003, we signed a new
Common Stock Private Purchase Agreement, whereby the same investor was committed to
purchase up to $12 million of Nymoxs common shares over the twenty-four month period
beginning in August 2003, subject to the same terms and conditions as before.
Under the agreement dated August 25,
2003, we received a total of $4,350,000 for the following shares under this common stock
private purchase agreement:
|
September
30, 2003, 204,918 common shares at a price of $2.44 per share. |
|
October
21, 2003, 182,203 common shares at a price of $2.36 per share. |
|
December
8, 2003, 106,383 common shares at a price of $2.82 per share. |
|
December
22, 2003, 109,091 common shares at a price of $2.75 per share. |
|
January
14, 2004, 102,041 common shares at a price of $3.92 per share. |
|
February
27, 2004, 69,284 common shares at a price of $4.33 per share. |
|
March
10, 2004, 100,402 common shares at a price of $4.98 per share. |
|
April
30, 2004, 92,807 common shares at a price of $4.31 per share. |
|
June
22, 2004, 69,444 common shares at a price of $2.88 per share. |
|
July
7, 2004, 140,056 common shares at a price of $3.57 per share. |
|
August
3, 2004, 130,990 common shares at a price of $3.13 per share. |
|
September
27, 2004, 52,885 common shares at a price of $2.08 per share. |
On October 6, 2004, we signed a new Common
Stock Private Purchase Agreement, whereby the same investor was committed to purchase up
to $13 million of Nymoxs common shares over the twenty-four month period beginning
in October 2004, subject to the same terms and conditions as before.
Under the agreement dated October 6,
2004, we received a total of $3,485,000 for the following shares under this common stock
private purchase agreement:
|
October
25, 2004, 95,238 common shares at a price of $2.10 per share. |
|
December
14, 2004, 148,699 common shares at a price of $2.69 per share. |
|
December
22, 2004, 78,616 common shares at a price of $3.18 per share. |
|
February
9, 2005, 82,474 common shares at a price of $2.91 per share. |
|
February
22, 2005, 50,676 common shares at a price of $2.96 per share. |
|
March
17, 2005, 51,136 common shares at a price of $2.64 per share. |
|
April
25, 2005, 127,119 common shares at a price of $2.36 per share. |
|
May
24, 2005, 109,489 common shares at a price of $2.74 per share. |
|
June
9, 2005, 95,339 common shares at a price of $2.36 per share. |
|
June
17, 2005, 58,333 common shares at a price of $2.40 per share. |
|
July
15, 2005, 92,437 common shares at a price of $2.38 per share. |
|
August
2, 2005, 98,684 common shares at a price of $2.28 per share. |
|
August
18, 2005, 83,333 common shares at a price of $2.40 per share. |
|
September
26, 2005, 110,619 common shares at a price of $2.26 per share. |
|
October
11, 2005, 72,464 common shares at a price of $2.07 per share. |
|
November
10, 2005, 49,020 common shares at a price of $2.04 per share. |
35
On October 21, 2005, we signed a new
Common Stock Private Purchase Agreement, whereby the same investor was committed to
purchase up to $13 million of Nymoxs common shares over the twenty-four month period
beginning in October 2005, subject to the same terms and conditions as before.
Under this agreement dated October
21, 2005, we received a total of $4,655,000 for the following shares under this common
stock private purchase agreement:
|
November
18, 2005, 49,020 common shares at a price of $2.04 per share. |
|
December
8, 2005, 46,729 common shares at a price of $2.14 per share. |
|
December
14, 2006, 47,847 common shares at a price of $2.09 per share. |
|
January
10, 2006, 50,000 common shares at a price of $2.00 per share. |
|
January
18, 2006, 51,020 common shares at a price of $1.96 per share. |
|
January
24, 2006, 52,083 common shares at a price of $1.92 per share. |
|
February
3, 2006, 51,020 common shares at a price of $1.96 per share. |
|
February
10, 2006, 51,546 common shares at a price of $1.94 per share. |
|
February
25, 2006, 103,093 common shares at a price of $1.94 per share. |
|
March
6, 2006, 52,632 common shares at a price of $1.90 per share. |
|
March
16, 2006, 51,813 common shares at a price of $1.93 per share. |
|
March
27, 2006, 246,914 common shares at a price of $4.05 per share. |
|
April
12, 2006, 188,917 common shares at a price of $3.97 per share. |
|
May
2, 2006, 82,645 common shares at a price of $3.63 per share. |
|
July
25, 2006, 37,488 common shares were issued at a price of $2.67 per share. |
|
August
7, 2006, 37,879 common shares were issued at a price of $2.64 per share. |
|
August
24, 2006, 39,063 common shares were issued at a price of $2.56 per share. |
|
September
12, 2006, 40,000 common shares were issued at a price of $2.50 per share. |
|
September
26, 2006, 73,260 common shares were issued at a price of $2.73 per share. |
|
October
3, 2006, 56,022 common shares were issued at a price of $3.57 per share. |
|
October
18, 2006, 33,943 common shares were issued at a price of $3.83 per share. |
|
October
25, 2006, 73,529 common shares were issued at a price of $4.08 per share. |
|
November
20, 2006, 43,103 common shares were issued at a price of $4.06 per share. |
On November 13, 2006, we signed a new
Common Stock Private Purchase Agreement, whereby the same investor is committed to
purchase up to $13 million of Nymoxs common shares over the twenty-four month period
beginning in November 2006, subject to the same terms and conditions as before.
Under this agreement dated November
13, 2006, we have received to date a total of $4,750,000 for the following shares under
this common stock private purchase agreement:
|
December
6, 2006, 29,499 common shares were issued at a price of $3.39 per share. |
|
December
13, 2006, 56,818 common shares were issued at a price of $3.52 per share. |
|
December
20, 2006, 91,185 common shares were issued at a price of $3.29 per share. |
|
January
24, 2007, 121,294 common shares were issued at a price of $3.71 per share. |
|
February
14, 2007, 181,087 common shares were issued at a price of $4.97 per share. |
|
March
26, 2007, 67,869 common shares were issued at a price of $5.89 per share. |
|
April
26, 2007, 97,276 common shares were issued at a price of $5.14 per share. |
|
May
9, 2007, 286,145 common shares were issued at a price of $6.64 per share. |
As of June 22, 2007, Nymox had
approximately $8.25 million of financing available under the facility. We expect this
stock purchase agreement to provide sufficient financing to enable us to advance our
research and product development for the next two years.
Also, the Company has received total
proceeds of $1,029,828.63 from the exercise of 347,900 options since 1995 as follows:
36
|
$355,536
for 158,900 shares at a per share price of $2.25 |
|
$258,858
for 83,000 shares at a per share price of $3.12 |
|
$16,000
for 5,000 shares at a per share price of $3.20 |
|
$38,750
for 10,000 shares at a per share price of $3.875 |
|
$2,620
for 1,000 shares at a per share price of $2.62 |
|
$96,289.63
for 25,000 shares at a per share price of $3.852 |
|
$9,650
for 5,000 shares at a per share price of $1.93 |
|
$47,000
for 10,000 shares at a per share price of $4.70 |
|
$96,875
for 25,000 shares at a per share price of $3.875 |
|
$108,250
for 25,000 shares at a price per share of $4.33 |
Pursuant to the share purchase
agreement we entered into in March 2000 to acquire a controlling interest of Serex, Inc.,
a total of 257,607 additional shares and 158,526 warrants were issued in exchange for the
shares of Serex. Since January 2004, 131,940 of these warrants have been exercised under a
cashless exercise, whereby the warrant holder receives a number of shares
equivalent in value to the net difference between the strike price on the warrant and the
average market price on the day before the date of the cashless exercise,
according to a formula contained in the warrant agreement. The net effect of these
cashless exercises has been the issuance of 22,061 shares of Nymox common
stock. Another 1,090 of these warrants were exercised resulting in the issuance of 1,090
shares of Nymox, for proceeds of $4,033.
In total, Nymox has raised over $48.9
million through the issuance of common stock or securities exercisable for shares of
common stock, since its incorporation in May 1995.
We have no financial obligations of
significance other than long-term lease commitments for our premises in the United States
and Canada of $19,669 per month in 2007. Total commitments in 2007 and beyond are
summarized in note 8 to the consolidated financial statements.
The demand note payable by the
Company to a third party of $500,000, as at December 31, 2006 was paid in full in May
2007.
Managements
Discussion and Analysis
Results Of Operations
The business activities of Nymox
since inception have been devoted principally to research and development. Accordingly, we
have limited revenue from sales and have not been profitable to date. We refer to Part I,
Item 4 of this Form 20-F for a discussion of our research and development projects and our
product pipeline. We refer to the Risk Factors included in Part I, Item 3 of this Form
20-F for a discussion of the management and investment issues that could affect Nymox and
our industry.
Critical Accounting
Policies
In December 2001, the Securities and
Exchange Commission (SEC) released Cautionary Advice Regarding
Disclosure About Critical Accounting Policies. According to the SEC release,
accounting policies are among the most critical if they are, in
managements view, most important to the portrayal of the companys financial
condition and most demanding on their calls for judgment.
Our accounting policies are described
in the notes to our annual audited consolidated financial statements. We consider the
following policies to be the most critical in understanding the judgments that are
involved in preparing our financial statements and the matters that could impact our
results of operations, financial condition and cash flows.
37
Nymox has generally derived its
revenue from product sales, research contracts, license fees and interest. Revenue from
product sales is recognized when the product or service has been delivered or obligations
as defined in the agreement are performed. Revenue from research contracts is recognized
at the time research activities are performed under the agreement. Revenue from license
fees, royalties and milestone payments is recognized upon the fulfillment of all
obligations under the terms of the related agreement. These agreements may include upfront
payments we receive. Upfront payments are recognized as revenue on a systematic basis over
the period that the related services or obligations as defined in the agreement are
performed. Interest is recognized on an accrual basis. Deferred revenue presented in the
balance sheet represents amounts billed to and received from customers in advance of
revenue recognition.
We currently market
AlzheimAlert as a service provided by our CLIA certified reference laboratory in New
Jersey. Physicians send urine samples taken from their patients to our laboratory where
the AlzheimAlert test is performed. The results are then reported back to the
physicians. We recognize the revenues when the test has been performed. We sometimes enter
into bulk sales of our diagnostic services to customers under which it has a future
obligation to perform related testing services at its laboratory. Although we receive
non-refundable upfront payments under these agreements, revenue is recognized in the
period that we fulfill our obligation or over the term of the arrangement. For research
contracts and licensing revenues, we usually enter into an agreement specifying the terms
and obligations of the parties. Revenues from these sources are only recognized when there
are no longer any obligations to be performed by Nymox under the terms of the agreement.
|
Valuation
of Capital Assets |
We review the unamortized balance of
property and equipment, intellectual property rights and patents on an annual basis and
recognize any impairment in carrying value when it is identified. Factors we consider
important, which could trigger an impairment review include:
|
Significant
changes in the manner of our use of the acquired assets or the strategy for our overall
business; and |
|
Significant
negative industry or economic trends. |
|
Valuation
of Future Income Tax Assets |
Management judgement is required in
determining the valuation allowance recorded against net future tax assets. We have
recorded a valuation allowance of $13.5 million as of December 31, 2006, due to
uncertainties related to our ability to utilize some of our future tax assets, primarily
consisting of net operating losses carried forward and other unclaimed deductions, before
they expire. In assessing the realizability of future tax assets, we consider whether it
is more likely than not that some portion or all of the future tax assets will not be
realized. The ultimate realization of future tax assets is dependent upon the generation
of future taxable income and tax planning strategies. The generation of future taxable
income is dependent on the successful commercialization of our products and technologies.
Results of Operations
|
Selected Annual Information
|
2006
|
2005
|
2004
|
Total Revenues |
|
|
| $442,861 |
|
| $426,282 |
|
| $321,948 |
|
|
Net Loss | | |
| $(4,893,685 |
) |
| $(3,584,528 |
) |
| $(3,745,625 |
) |
|
Loss per share (basic & diluted) | | |
| $(0.18 |
) |
| $(0.14 |
) |
| $(0.15 |
) |
|
Total Assets | | |
| $3,970,845 |
|
| $3,719,039 |
|
| $4,066,021 |
|
|
38
|
Quarterly Results 2006
|
Q1
|
Q2
|
Q3
|
Q4
|
Total Revenues |
|
|
| $96,009 |
|
| $120,360 |
|
| $141,817 |
|
| $84,675 |
|
|
Net Loss | | |
| $(1,059,246 |
) |
| $(1,360,621 |
) |
| $(1,238,833 |
) |
| $(1,234,985 |
) |
|
Loss per share (basic & diluted) | | |
| $(0.04 |
) |
| $(0.05 |
) |
| $(0.04 |
) |
| $(0.04 |
) |
|
|
Quarterly Results 2005
|
Q1
|
Q2
|
Q3
|
Q4
|
Total Revenues |
|
|
| $101,931 |
|
| $117,067 |
|
| $100,757 |
|
| $106,527 |
|
|
Net Loss | | |
| $(957,677 |
) |
| $(847,299 |
) |
| $(958,464 |
) |
| $(821,088 |
) |
|
Loss per share (basic & diluted) | | |
| $(0.04 |
) |
| $(0.03 |
) |
| $(0.04 |
) |
| $(0.03 |
) |
|
Results of Operations 2006
compared to 2005o
Net losses were $1,234,985, or $0.04
per share, for the quarter ended December 31, 2006 and $4,893,685, or $0.18 per share, for
the year ended December 31, 2006, compared to $821,088, or $0.03 per share, and
$3,584,528, or $0.14 per share, respectively, for the corresponding periods in 2005.
Increases in research and development expenditures in 2006 compared to 2005, partially
offset by decreases in marketing and administrative expenses, were the primary factors
contributing to the increased loss. The weighted, diluted, average number of common shares
outstanding for the year ended December 31, 2006 was 27,644,749 compared to 26,080,470 for
the same period in 2005.
Revenues from sales amounted to
$83,478 for the quarter and $437,440 for the year ended December 31, 2006, compared with
$106,082 for the quarter and $424,506 for the year ended December 31, 2005. Higher sales
of AlzheimAlert (increase of 29%) accounted for the increase in 2006 compared to
2005. We anticipate that revenues will increase if and when product candidates pass
regulatory milestones and are launched on the market.
Research and development expenditures
were $2,594,714 for the year ended December 31, 2006, compared with $1,831,591 for the
year ended December 31, 2005. Increased expenses relating to moving product candidates
through clinical trials explains the increase. In 2006, research tax credits amounted to
$53,618 compared to $3,075 in 2005 as a result of additional expenditures claimed for
refundable tax credits in 2006 compared to 2005. We anticipate that our research and
development expenditures will not increase significantly as product candidates finish
development and clinical trials. However, because of the early stage of development of our
R&D projects, it is impossible to outline the nature, timing or estimated costs of the
efforts necessary to complete these projects, nor the anticipated completion dates for
these projects. The facts and circumstances indicating the uncertainties that preclude us
from making a reasonable estimate of the costs and timing necessary to complete projects
include the risks inherent in any field trials, the uncertainty as to the nature and
extent of regulatory requirements both for safety and efficacy, and the ability to
manufacture the products in accordance with current good manufacturing requirements (cGMP)
and in sufficient quantities both for large scale trials and for commercial use. A drug
candidate that shows efficacy can take a long period (7 years or more) to achieve
regulatory approval. There is also uncertainty whether we will be able to successfully
adapt our patented technologies or whether any new products we develop will pass
proof-of-principle testing both in the laboratory and in clinical trials, and whether we
will be able to manufacture such products at a commercially competitive price. In
addition, given the very high costs of development of therapeutic products, we anticipate
having to partner with larger pharmaceutical companies to conduct and finance clinical
trials. The terms of such partnership arrangements along with our related financial
obligations cannot be determined at this time and the timing of completion of the approval
of such products will likely not be within our sole control.
39
Marketing expenditures were $236,054
for the year ended December 31, 2006, in comparison to expenditures of $273,392 for the
year ended December 31, 2005 due to a reduction in advertising expenses. We anticipate
that marketing expenditures will increase if and when new products are launched on the
market.
General and administrative expenses
amounted to $954,397 for the year ended December 31, 2006, compared with $1,202,080 in the
year ended December 31, 2005, due to lower expenditures for salaries (decrease of 17.6%),
shareholder relations (decrease of 35.6%), insurance (decrease of 37.9%), and courier and
shipping charges (decrease of 61.7%). We anticipate that general and administrative
expenditures will increase as new product development leads to expanded operations.
In 2006, we granted 840,500 stock
options having a weighted average grant-date fair value per share of $1.47. The weighted
average fair value was determined using the Black-Scholes pricing model. Stock-based
compensation related to these grants amounted to $837,308 in 2006, compared to $16,220 in
2005. No stock options were granted in 2005. Stock-based compensation in 2005 relates to
the amortization of compensation cost for options granted in 2003 over the vesting
periods. Refer to note 7 (e) and 10 (b) to our annual consolidated financial statements.
Results of Operations 2005
compared to 2004
Net losses were $821,088, or $0.03
per share, for the quarter and $3,584,528, or $0.14 per share, for the year ended December
31, 2005, compared to $944,272, or $0.04 per share, and $3,745,625, or $0.15 per share,
respectively, for the corresponding periods in 2004. The decrease in the net loss in 2005
compared to 2006 is the result of increased revenues from sales of our NicAlert /
TobacAlert products. The weighted, diluted, average number of common shares
outstanding for the year ended December 31, 2005 were 26,080,470 compared to 24,924,674
for the same period in 2004.
Revenues from sales amounted to
$106,082 for the quarter and $424,506 for the year ended December 31, 2005, compared with
$78,316 for the quarter and $321,895 for the year ended December 31, 2004. A steady rise
in the number of new clients ordering the NicAlert / TobacAlert product
(increase of 31%) and the launch of the AlzheimAlert product in Europe (increase of
40%) account for the increase in sales.
Research and development expenditures
remained constant at $1,831,591 for the year ended December 31, 2005, compared with
$1,861,239 for the year ended December 31, 2004. In 2005, research tax credits amounted to
$3,075 compared to $9,358 in 2004.
Marketing expenditures were $273,392
for the year ended December 31, 2005, in comparison to expenditures of $291,429 for the
year ended December 31, 2004. The slight reduction was due to reduced advertising
expenses.
40
General and administrative expenses
remained relatively constant at $1,202,080 for the year ended December 31, 2005, compared
with $1,158,750 in the year ended December 31, 2004.
Foreign Exchange
We incur expenses in the local
currency of the countries in which we operate, which include the United States and Canada.
Approximately 75% of 2006 expenses (70% in 2005) were in U.S. dollars. Foreign exchange
fluctuations had no meaningful impact on our results in 2006 or 2005.
Inflation
We do not believe that inflation has
had a significant impact on its results of operations.
Long-Term Commitments
Nymox has no financial obligations of
significance other than long-term lease commitments for its premises in the United States
and Canada of $19,582 per month.
|
Contractual Obligations
|
Total
|
Current
|
2-4 years
|
5+ years
|
Rent |
|
|
| $852,630 |
|
| $225,991 |
|
| $626,639 |
|
| $0 |
|
|
Operating Leases | | |
| $54,679 |
|
| $20,067 |
|
| $34,612 |
|
| $0 |
|
|
Total Contractual Obligations | | |
| $907,309 |
|
| $246,058 |
|
| $661,251 |
|
| $0 |
|
|
Liquidity and Capital
Resources
As of December 31, 2006, cash totaled
$235,124 and receivables including tax credits totaled $99,925. In October 2005, Nymox
signed a common stock private purchase agreement, whereby an investor committed to
purchase up to $13 million of our common shares over a twenty-four month period commencing
October 21, 2005. As at December 31, 2006, 23 drawings were made under this purchase
agreement, for total proceeds of $4,655,000. On November 18, 2005, 49,020 common shares
were issued at a price of $2.04 per share. On December 8, 2005, 46,729 common shares were
issued at a price of $2.14 per share. On December 14, 2005, 47,847 common shares were
issued at a price of $2.09 per share. On January 10, 2006, 50,000 common shares were
issued at a price of $2.00 per share. On January 18, 2006, 51,020 common shares were
issued at a price of $1.96 per share. On January 24, 2006, 52,083 common shares were
issued at a price of $1.92 per share. On February 3, 2006, 51,020 common shares were
issued at a price of $1.96 per share. On February 10, 2006, 51,546 common shares were
issued at a price of $1.94 per share. On February 16, 2006, 103,093 common shares were
issued at a price of $1.94 per share. On March 6, 2006, 52,632 common shares were issued
at a price of $1.90 per share. On March 16, 2006, 51,813 common shares were issued at a
price of $1.93 per share. On March 27, 2006, 246,914 common shares were issued at a price
of $4.05 per share. On April 12, 2006, 188,917 common shares were issued at a price of
$3.97 per share. On May 2, 2006, 82,645 common shares were issued at a price of $3.63 per
share. On July 25, 2006, 37,488 common shares were issued at a price of $2.67 per share.
On August 7, 2006, 37,879 common shares were issued at a price of $2.64 per share. On
August 24, 2006, 39,063 common shares were issued at a price of $2.56 per share. On
September 12, 2006, 40,000 common shares were issued at a price of $2.50 per share. On
September 26, 2006, 73,260 common shares were issued at a price of $2.73 per share. On
October 3, 2006, 56,022 common shares were issued at a price of $3.57 per share. On
October 18, 2006, 33,943 common shares were issued at a price of $3.83 per share. On
October 25, 2006, 73,529 common shares were issued at a price of $4.08 per share. On
November 20, 2006, 43,103 common shares were issued at a price of $4.06 per share.
41
We negotiated a new agreement with
the same investor on November 13, 2006, under the same terms and conditions of the
previous agreement. Nymox can draw down up to $13,000,000 over 24 months under the new
agreement. As at December 31, 2006, three drawings were made under this purchase
agreement, for total proceeds of $600,000. On December 6, 2006, 29,499 common shares were
issued at a price of $3.39 per share. On December 13, 2006, 56,818 common shares were
issued at a price of $3.52 per share. On December 20, 2006, 91,185 common shares were
issued at a price of $3.29 per share.
Subsequent Events
Between December 31, 2006 and June
11, 2007, five drawings have been made under this purchase agreement, for total proceeds
of $4,150,000. On January 24, 2007, 121,294 common shares were issued at a price of $3.71
per share. On February 14, 2007, 181,087 common shares were issued at a price of $4.97 per
share. On March 26, 2006, 67,869 common shares were issued at a price of $5.89 per share.
On April 26, 2007, 97,276 common shares were issued at a price of $5.14 per share. On May
9, 2007, 286,145 common shares were issued at a price of $6.64 per share. The Company can
draw down a further $8,250,000 over the remaining 17 months under the agreement. The
Company intends to access financing under this agreement when appropriate to fund its
research and development. The Company believes that funds from operations as well as from
existing financing agreements will be sufficient to meet the Companys cash
requirements for the next twelve months.
Recent Accounting
Pronouncements
Financial instruments
On January 1, 2007, Nymox adopted
CICA Handbook Section 1530, Comprehensive Income, CICA Handbook Section 3251,
Equity, CICA Handbook Section 3855, Financial Instruments Recognition and
Measurement, CICA Handbook Section 3862, Financial Instruments
Disclosures, and CICA Handbook Section 3865, Hedges. The Corporation does not
expect the adoption of the standards to have a material effect on its financial
statements.
Accounting for
uncertainty in income taxes
In June 2006, the Financial
Accounting Standards Board, or FASB, issued FASB Interpretation No. 48, Accounting for
Uncertainty in Income Taxes an interpretation of FASB Statement No. 109 (FIN
48), which clarifies the accounting for uncertainty in income taxes recognized
in an entitys financial statements. The Interpretation prescribes a recognition
threshold and measurement attribute for the financial statement recognition and
measurement of a tax position taken or expected to be taken on a tax return. This FASB
interpretation became effective for Nymox beginning January 1, 2007. The adoption of FIN
48 is not expected to have a material effect on our financial condition or results of
operation.
Fair value measurements
In September 2006, the FASB issued
Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value
Measurements. SFAS No. 157 clarifies the principle that fair value should be based on
the assumptions market participants would use when pricing an asset or liability and
establishes a fair value hierarchy that prioritizes the information used to develop those
assumptions. Under the standard, fair value measurements would be separately disclosed by
level within the fair value hierarchy. SFAS No. 157 is effective for financial statements
issued for fiscal years beginning after November 15, 2007 and interim periods within those
fiscal years, with early adoption permitted. Nymox does not expect the adoption of SFAS
No. 157 to materially impact its financial statements.
Research and
Development, Patents and Licensees
42
Nymoxs research and development
policies are targeted at the development of novel therapeutic and diagnostic proprietary
products that are subject to patent rights either directly owned by the company or
licensed to the company through exclusive licensing agreements of patent rights. Over the
last three financial years, the companys major research and development activities
were in the following program areas:
|
|
Diagnostic
products for Alzheimers disease. The major project in this area, the development
and validation of a kit version of our AlzheimAlert product for sale to
laboratories and hospitals was completed in 2004. We are currently marketing the kit in
Europe under the CE mark. We also provide AlzheimAlert as a laboratory testing
services through our CLIA-certified clinical reference laboratory in New Jersey. The FDA
has not approved our kit version for sale in the U.S. We are continuing to pursue further
kit development and regulatory approvals. At this time, we cannot provide an estimate of
the costs and timing to obtain FDA approval for such a kit as it is uncertain at this
stage the nature and extent of FDA requirements for approval based on discussions with
us. |
|
|
Therapeutic
products for enlarged prostate (benign prostatic hyperplasia or BPH). We have
successfully completed a Phase 2 U.S. multi-center, double-blind, placebo-controlled
Phase 2 trial for NX-1207, our drug candidate for the treatment of enlarged prostate
(benign prostatic hyperplasia or BPH). We cannot predict with any certainty the outcome
of any future trials nor estimate the costs of completing such trials, given the inherent
uncertainties in conducting clinical trials, including as yet unknown response rates to
our treatment candidate, unforeseeable safety issues, patient enrollment rates,
manufacturing costs, and regulatory requirements. We anticipate starting a Phase 3 trial
in 2007 or 2008 and subsequently filing a New Drug Application (NDA) with the FDA. Given
the inherent uncertainties with any Phase 3 clinical trial, we cannot provide a more
precise estimate of the costs and timing of the completion of this project. These
uncertainties include the chances of success of any phase of the clinical trials, the
nature and extent of FDA requirements to proceed with a Phase 3 and for filing an NDA,
our ability to scale up manufacture in accordance with current good manufacturing
requirements (cGMP) and in sufficient quantities for commercial use, and whether or when
the FDA will ultimately grant us such approval. |
|
|
Anti-infectives.
Our anti-bacterial agent, NXC-4720, which is being developed as a treatment of meat at
the processing stage, has shown to be capable of substantially reducing the level of
potentially fatal E. coli O157:H7 contamination on fresh beef according to
laboratory studies. Other projects in this area, such as treating E. coli O157:H7
infection in livestock and treating bacterial infections in humans, are in preliminary
stages of development with more uncertain prospects and timing and course of development.
Because of the early stage of development of this project, it is impossible to outline
the nature, timing or estimated costs of the efforts necessary to complete this project
nor the anticipated completion dates for this project. The facts and circumstances
indicating the uncertainties that preclude use from making a reasonable estimate of the
costs and timing necessary to complete this project include the risks inherent in any
field trials of NXC-4720, the uncertainty as to the nature and extent of regulatory
requirements both for safety and efficacy, and the ability to manufacture NXC-4720 in
accordance with current good manufacturing requirements (cGMP) and in sufficient
quantities both for large scale trials and for commercial use. In addition, we anticipate
that we may partner with a larger company in the food or agricultural sectors in order to
finance and conduct field trials and to market any approved product; thus the timing of
completion of the regulatory approval of such a product will not likely be within our
sole control. |
|
|
Tobacco
exposure and other diagnostic tests. We developed and validated NicAlert, which is
an FDA-cleared test for tobacco product use, and TobacAlert, which is an
over-the-counter test for second-hand smoke exposure. These are completed projects with
any further research and development costs being related to product improvement and
obtaining regulatory approvals where required in order to expand the market for these
products. The development of other new diagnostic tests using our patented diagnostic
technologies are in early stage development. Because of the early stage of development of
these projects, it is not possible to outline the nature, timing or estimated costs of
the efforts necessary to complete any of them nor their anticipated completion dates. The
facts and circumstances indicating the uncertainties that preclude us from making a
reasonable estimate include the uncertainty whether we will be able to successfully adapt
our patented diagnostic technologies to these new diagnostic indicators, whether any new
diagnostic tests we develop will pass proof-of-principle testing both in the laboratory
and in clinical trials, and whether we will be able to manufacture such tests at a
commercially competitive price. |
43
|
|
Therapeutic
products for Alzheimers disease. We are conducting early stage research and
development work into preclinical development of novel drug candidates and original
research into the role spherons play in the Alzheimers disease process in order to
pursue spheron-based therapeutics. Because of the early stage of development of this
project, it is impossible to outline the nature, timing or estimated costs of the efforts
necessary to complete this project nor the anticipated completion dates for this project.
The facts and circumstances indicating the uncertainties that preclude us from making a
reasonable estimate include the inherent uncertainties in the pre-clinical and clinical
development of therapeutic candidates. In addition, given the very high costs of
development of a drug for Alzheimers disease, we anticipate having to partner with
a larger pharmaceutical company to conduct and finance clinical trials. The terms of such
a partnership arrangement along with our related financial obligations cannot be
determined at this time and the timing of completion of the approval of such a drug will
likely not be within our sole control. Most pre-clinical drug candidates do not meet
necessary milestones to enter clinical trials; of those which do, only a small percentage
ultimately achieve regulatory approval and enter the marketplace. We also have global
patent rights to the use of statins in the prevention or treatment of Alzheimers
disease. Various published epidemiological and other research studies have shown evidence
that statins may help in the prevention or treatment of Alzheimers disease; other
studies have shown otherwise. Other companies and organizations are currently carrying
out clinical trials into the use of statin drugs for Alzheimers disease. We do not
anticipate that the results of such trials will be available before 2006. The effect of
the results of such trials on this program is uncertain. |
|
|
Oncology
products. We are in the early stages of developing therapeutic products for oncological
indications. Because of the early stage of development of this project, it is impossible
to outline the nature, timing or estimated costs of the efforts necessary to complete
this project nor its anticipated completion dates. The development of cancer therapeutics
in particular is associated with high risks and many uncertainties and a drug candidate
that shows efficacy can take a long period (7 years or more) to achieve regulatory
approval. |
Research and development expenses
allocated to our major research and development programs are as follows:
|
|
Year ending
Dec.31, 2006
|
Year
ending
Dec 31,
2005
|
Year
ending
Dec 31,
2004
|
Year
ending
Dec
31, 2003
|
Year
ending Dec
31, 2002
|
Year ending
Dec 31, 2001
|
Year ending
Dec 31, 2000
|
Year ending
Dec 31, 1999
|
Total for
Periods
Presented
|
Alzheimers |
|
|
|
|
|
|
|
|
|
Disease: |
$520,855 |
$488,361 |
$691,183 |
$779,305 |
$332,254 |
$491,051 |
$657,924 |
$253,015 |
$4,213,948 |
Diagnostics |
|
Alzheimers |
Disease: |
$98,056 |
$2,866 |
$282,205 |
$496,658 |
$463,182 |
$528,230 |
$404,850 |
$501,685 |
$2,777,732 |
Therapeutics |
|
Anti-Infectives |
$25,899 |
$28,934 |
$22,224 |
$24,793 |
$1,563 |
$134,098 |
$313,884 |
$195,427 |
$746,822 |
|
BPH (Enlarged |
Prostate) |
$1,739,183 |
$1,018,266 |
$615,454 |
$548,064 |
$523,926 |
See General |
See General |
See General |
$4,444,893 |
Therapeutics |
|
|
|
|
|
Research |
Research |
Research |
|
|
Tobacco Exposure |
Tests: |
NicAlert and |
$108,119 |
$67,164 |
$118,636 |
$292,692 |
$308,161 |
$122,159 |
$116,872 |
-- |
$1,133,803 |
TobacAlert |
|
Oncology |
$102,602 |
$226,000 |
$131,537 |
$368,539 |
$77,000 |
|
|
|
$905,678 |
|
General Research |
(BPH Therapeutics |
-- |
-- |
-- |
-- |
-- |
$224,116 |
$590,702 |
$186,995 |
$1,001,813 |
Included) |
|
Total |
$2,594,714 |
$1,831,591 |
$1,861,239 |
$2,510,051 |
$1,706,086 |
$1,499,654 |
$2,084,232 |
$1,137,122 |
$15,224,689 |
|
44
For the earlier periods from 1995 to
1998, the Company did not maintain a cost accounting system that tracked research and
development costs on a project-by-project basis. During the initial discovery stages,
research and development is more general in nature and cannot be specifically categorized.
During the periods 1995 to 1998, the general research expenses included primarily work on
the Alzheimers diagnostic and therapeutic candidates. The breakdown of research and
development costs for these periods is as follows: 1998: $ 2,091,745; 1997 $ 1,775,340;
1996 $ 1,632,370; and 1995 $ 395,770. The total research and development expenditure for
the 1995 to 1998 period was $ 6,323,696. Total research and development expenditures to
date are $ 21,548,385.
The Company expenses all research and
development costs as incurred but does not currently maintain a cost accounting system to
track, record and allocate staffing time on a specific project-by-project basis. We manage
our ongoing research and development projects and programs in a dynamic, flexible manner.
Our researchers, staff and management are typically involved in more than one of our
research and development projects and the percentage of time an employee may be involved
in a project varies according to the changing needs and progress of that project. As well,
a significant portion of the Companys research and development expenses, such as
laboratory supplies, travel, information systems and services and facilities costs,
benefit multiple projects and are not necessarily individually tracked or allocated to a
specific project when incurred. Research and development costs are allocated in reasonable
and realistic proportion to the projects that benefited from those costs.
According to industry statistics, on
average it takes 10 to 15 years to research, develop and bring to market a new
prescription medicine in the United States. In light of the steps and complexities
involved, the successful development of our product candidates is highly uncertain. Actual
product timelines and costs are subject to enormous variability and are very difficult to
predict. Accordingly, we cannot provide reliable estimates of the nature, timing and
estimated costs of the efforts necessary to complete our programs. This is particularly
the case for our programs in early stage development. The risk of failure to complete any
such program is high because of uncertain feasibility and commercial viability, long lead
times to program completion and potentially high costs in relation to anticipated returns.
We update and change our product development programs to reflect the most recent
preclinical and clinical data and other relevant information. Many of our products under
development require regulatory approval before being sold. The process of obtaining such
approvals is often lengthy and uncertain and requires the expenditure of substantial
resources. Any failure by us to obtain, or any delay in obtaining, regulatory approvals
could materially adversely affect our business. We cannot assure you that any such
approvals required will be obtained on a timely basis, if at all.
Trend Information
The Company does not currently know
of any material trends that would be material to our operations.
Off-Balance Sheet
Arrangements
The Company has no existing
off-balance sheet arrangements.
45
ITEM 6. DIRECTORS,
SENIOR MANAGEMENT AND EMPLOYEES
Directors and Senior
Management
Paul Averback, M.D., D.A.B.P., 56,
President and Director since September 1995 and Chairman since June of 2001, is the
founder of Nymox and the inventor of much of its initial technology. Prior to founding
Nymox, Dr. Averback served as President of Nymoxs predecessor, DMS Pharmaceuticals
Inc. He received his M.D. in 1975 and taught pathology at universities, including
Cambridge University, England (1977-1980), during which time he initiated his research on
Alzheimers disease. He has practiced medicine in numerous institutions as well as in
private practice. Dr. Averback has published extensively in the scientific and medical
literature.
Randall Lanham, Esquire, 43, has been
a director since June 8, 2006. He attained his Juris Doctor from Whittier College School
of Law in 1991 and a Bachelor of Science degree from the University of Delaware 1987. Mr.
Lanham has vast experience in both domestic and international corporate legal matters.
Currently Mr. Lanham manages his own law office specializing in corporate mergers and
acquisitions. In addition, Mr. Lanham has a broad base of entrepreneurial experience
and currently owns and operates several small entertainment companies.
Paul F. McDonald, 81, has been a
director since June 8, 2006. A graduate in law of McGill University, he has had a long and
varied career as a member of the Canadian investment industry. Mr. McDonald was previously
Vice-President of the Montreal Exchange, and he was principal owner and president of a
stock exchange firm. His principal focus has been in the financing and development of
growth companies, in the high-tech and resources sectors, and he has had numerous
appointments to corporate boards. He has devoted much time to committee work in the
investment sector, as well as to public affairs, including a lengthy tenure as a director
of the Quebec Industrial Development Corporation. Mr. McDonald currently works as a
private consultant.
Professor David Morse, Ph.D., 50, has
been a director since June 8, 2006. He is a world expert in the biochemistry, proteomics
and genomics of cell function particularly as it relates to circadian regulation in single
cell organisms. He received a Ph.D. from McGill University in 1984, completed a
post-doctoral fellowship at Harvard University in 1989 and has been a Full Professor at
the University of Montreal since 2001. He has published extensively in the peer-reviewed
scientific literature, including papers in journals such as Science, Cell, Proceedings of
the National Academy of Science, Journal of Biological Chemistry, and Nature. Dr. Morse
has previously collaborated with Nymox scientists in research and development projects.
Roger Guy, M.D., 56, has been a
director since June 8, 2006. He received his B.Sc., M.Sc. and M.D degrees from Memorial
University of Newfoundland. He is a highly experienced medical doctor who has served as a
national examiner. Dr. Guy has broad human clinical trial and business experience.
Jack Gemmell, 55, has been a Director
since June, 2001 and is Nymoxs General Counsel and Chief Information Officer. He
graduated from the Faculty of Law at the University of Toronto in 1977 and was called to
the bar in 1979. He practiced in private practice primarily in the area of litigation for
over 19 years before joining Nymox in July, 1998.
Roy M. Wolvin, 52, has been
Secretary-Treasurer and Chief Financial Officer since September 1995. Prior to September
1995, Mr. Wolvin was Account Manager, private business, for a Canadian chartered bank. Mr.
Wolvin holds a degree in Economics from the University of Western Ontario.
46
Brian Doyle, B.Sc., M.B.A., 52, has
been Senior Manager Global Sales and Marketing since May 2003. He received his B.Sc. in
Microbiology and Immunology from McGill University, in 1979. He worked in the Experimental
Surgery department at McGill in cancer research, before completing his MBA at Concordia
University, in 1983. He has wide sales, marketing and merchandising experience and spent
the last 15 years at a technical sales representative firm, where he was National Sales
Manager before joining Nymox.
Celine Dupuis, MD, CMSQ, DABP, 48,
Chief Clinical Officer since October 2004, received her MD from Laval University in 1982,
and completed her residency in Anatomical Pathology at McGill University and the
University of Montreal in 1987. Dr. Dupuis has practiced family medicine, as well as
pathology, managed medical and laboratory facilities, and has publications in the
scientific and patent literature.
Compensation
The table below provides compensation
information for the fiscal year ended December 31, 2006 for each executive officer of
Nymox and for the directors and executive officers as a group.
Summary Compensation Table
|
Fiscal Year ending
Dec. 31, 2006 |
NAME AND PRINCIPAL POSITION |
SALARY |
OTHER CASH
COMPENSATION |
Dr. Paul Averback - President and C.E.O. |
CAN$62,556 (US$55,159) |
-- |
Mr. Roy Wolvin - Secretary-Treasurer |
CAN$100,000 (US$88,176) |
-- |
Mr. Jack Gemmell - General Counsel |
CAN$120,138 (US$105,933) |
-- |
Mr. Brian Doyle - Global Sales Manager |
CAN$155,696 (US$137,286) |
-- |
Dr. Celine Dupuis - Clinical Trial Officer |
CAN$91,667 (US$80,828) |
-- |
All directors and senior management as a group |
CAN$530,057 (US$467,382) |
-- |
Nymox does not have written
employment contracts with any of the senior management named above except Brian Doyle.
Directors of Nymox, with the exception of the President and our General Counsel, are paid
a fee of $1,000 for each board meeting attendance, $500 for each audit committee
attendance and are reimbursed for expenses incurred in connection with their office.
The Company does not have any pension
plans or other type of plans providing retirement or similar benefits for senior
management.
Board Practices
Directors are elected at each annual
meeting for a term of office until the next annual meeting. Executive officers are
appointed by the board of directors and serve at the pleasure of the board. Other than Dr.
Averback, no other officer or director previously was affiliated with DMS Pharmaceuticals
Inc.
Dr. Celine Dupuis is the
wife of Dr. Paul Averback. Otherwise, there are no family relationships between
any director or executive officer and any other director or executive officer.
Nymox does not have written contracts
with any of the directors named above. We do not have any pension plans or other type of
plans providing retirement or similar benefits for directors, nor any benefits upon
termination of service as a director.
47
Nymoxs Audit Committee consists
of three directors appointed by the Board who are independent of management and who are
generally knowledgeable in financial and auditing matters. The Chairman of the Audit
Committee is Paul McDonald; the other members are Randall Lanham and Roger Guy.
The primary role of the Audit
Committee is to provide independent oversight of the quality and integrity of the
accounting, auditing, and reporting practices of Nymox with a particular focus on
financial statements and financial reporting to shareholders.
The Committee is responsible for the
appointment, compensation, and oversight of the public accounting firm engaged to prepare
or issue an audit report on our financial statements. It oversees all relationships
between Nymox and the auditor, including reviewing on an ongoing basis any non-audit
services and special engagements that may impact the objectivity or independence of the
auditors. The auditors report directly to the Audit Committee. The Audit Committee reviews
the scope and results of the audit with the independent auditors.
The Audit Committee meets at least
four times a year to review with management and the independent auditors the
companys interim and year-end financial condition and results of operations. Its
review includes an assessment of the adequacy of the internal accounting, bookkeeping and
control procedures of the company.
The Audit Committee also has the
responsibility for reviewing on an ongoing basis all material transactions between Nymox
and its affiliates and other related parties such as officers, directors, other key
management personnel, major shareholders and their close family members, affiliated
companies or associated enterprises.
The Audit Committee has the power to
conduct or authorize investigations into any matters within the Committees scope of
responsibilities, including the power and authority to retain and determine funding for
independent counsel, accountants, or other advisors as it determines necessary to carry
out its duties.
The Human Resources and Compensation
Committee consists of the independent directors of the Board. The Chairman of the
Committee is Roger Guy; the other members are Randall Lanham and Paul McDonald.
The Committee establishes and reviews
overall policy and structure with respect to compensation and employment matters,
including the determination of compensation arrangements for directors, executive officers
and key employees of the company. The Committee is also responsible for the administration
and award of options to purchase shares pursuant to our option and share purchase plans.
The Corporate Governance Committee
consists of the independent directors of the Board. The Chairman of the Committee is
Randall Lanham; the other members are Paul McDonald and David Morse. This Committee has
the general mandate of providing an independent and regular review of the management,
business and affairs of Nymox, including our corporate governance. This Committee also
reviews and approves director nominations to ensure each nominee meets the requisite
requirements under applicable corporate and securities laws, rules and regulations and
otherwise possesses the skills, judgment and independence appropriate for a director of a
public corporation.
Employees
In addition to the employees in its
Hasbrouck Heights and St.-Laurent laboratories and offices, Nymox carries out its work
with the assistance of an extensive group of research collaborators, out-sourced
manufacturing teams, research suppliers, research institutions, service providers and
research consultants. To help carrying out its marketing, Nymox has independent medical
representatives detailing its products.
48
In its Hasbrouck Heights and
St.-Laurent laboratories and offices, for the year 2006, the Company employed on the
average nineteen persons with fifteen in research and development and four in
administration and marketing; for the year 2005, sixteen persons (twelve in research and
development and four in administration and marketing); and for the year 2004, sixteen
persons (twelve in research and development and four in administration and marketing).
Share Ownership
As of June 22, 2007, the number of
common shares owned or controlled by, and options granted to directors and senior officers
of the Corporation were as follows:
Name |
Common Shares Owned
and Controlled |
Percentage of
Common Shares
Owned |
Options
Vested |
Options Not
Vested |
Exercise
Price |
Expiry Date
M/D/Y |
Paul Averback, M.D. |
|
|
| 13,115,395 |
|
| 45.7 |
% |
| 500,000 |
|
| 0 |
|
| $3.00 |
|
| 10/24/13 |
|
| | |
| |
|
| |
|
| 500,000 |
|
| 0 |
|
| $3.00 |
|
| 08/24/16 |
|
Randall Lanham | | |
| 0 |
|
| * |
|
| 10,000 |
|
| 0 |
|
| $2.75 |
|
| 07/17/16 |
|
Paul McDonald | | |
| 0 |
|
| * |
|
| 10,000 |
|
| 0 |
|
| $2.75 |
|
| 07/17/16 |
|
David Morse, Ph.D. | | |
| 462 |
|
| * |
|
| 10,000 |
|
| 0 |
|
| $2.75 |
|
| 07/17/16 |
|
Roger Guy, MD | | |
| 51,979 |
|
| * |
|
| 10,000 |
|
| 0 |
|
| $2.75 |
|
| 07/17/16 |
|
Jack Gemmell | | |
| 13,725 |
|
| * |
|
| 50,000 |
|
| 0 |
|
| $6.93 |
|
| 01/22/09 |
|
| | |
| |
|
| |
|
| |
|
| |
|
| (C$10.00 |
) |
| |
|
| | |
| |
|
| |
|
| 25,000 |
|
| 0 |
|
| $3.875 |
|
| 05/01/10 |
|
| | |
| |
|
| |
|
| 25,000 |
|
| 0 |
|
| $1.93 |
|
| 04/23/11 |
|
| | |
| |
|
| |
|
| 20,000 |
|
| 0 |
|
| $2.62 |
|
| 09/09/13 |
|
| | |
| |
|
| |
|
| 35,000 |
|
| 0 |
|
| $3.00 |
|
| 08/24/16 |
|
Roy Wolvin | | |
| 9,966 |
|
| * |
|
| 20,000 |
|
| 0 |
|
| $3.12 |
|
| 05/13/09 |
|
| | |
| |
|
| |
|
| |
|
| |
|
| (C$4.50 |
) |
| |
|
| | |
| |
|
| |
|
| 5,000 |
|
| 0 |
|
| $2.62 |
|
| 09/09/13 |
|
| | |
| |
|
| |
|
| 50,000 |
|
| 0 |
|
| $2.82 |
|
| 06/09/16 |
|
| | |
| |
|
| |
|
| 25,000 |
|
| 0 |
|
| $3.00 |
|
| 08/24/16 |
|
Brian Doyle | | |
| 10,000 |
|
| * |
|
| 50,000 |
|
| 0 |
|
| $3.75 |
|
| 04/28/13 |
|
| | |
| |
|
| |
|
| 10,000 |
|
| 0 |
|
| $3.00 |
|
| 08/24/16 |
|
Celine Dupuis, MD | | |
| 848,172 |
|
| 3.0 % |
|
| 25,000 |
|
| 0 |
|
| $3.00 |
|
| 08/24/16 |
|
* Denotes less than 1%.
Options
Nymox has created a stock option plan
for its employees, officers and directors, and for consultants. The board of directors of
Nymox administers the stock option plan and authorizes the granting of options in
accordance with the terms of the plan. Each option gives the individual granted the option
the right to purchase a common share of the Company at a fixed price during a specified
period of no more than ten years. The board may also make all or a portion of the options
granted effective only as of a specific future date or dates. The option price must not be
less than the market price of the common shares when the option is granted. The total
number of shares under option to any one individual may not exceed fifteen percent of the
total number of issued common shares of the Company. The options may not be assigned,
transferred or pledged, and expire within three months of the termination of employment or
office with the Company and six months of the death of the individual.
49
No more than 5,500,000 common shares
may be under option at any time and a maximum of 5,500,000 common shares are available to
be issued under the stock option plan as the result of the exercise of options. Options
that expire or terminate without being exercised become available to be granted again.
Material changes to the stock option plan such as the number of shares available to be
optioned require shareholder approval. On June 21, 2007, the shareholders approved
amendments to the plan that included increasing the maximum number of shares that could be
issued in total under the plan from 2,500,000 to 5,500,000, and to any one individual from
5% to 15% of the total number of issued shares. Since the inception of the stock option
plan in 1995, 347,900 common shares have been issued as a result of the exercise of
options granted under the plan.
ITEM 7. MAJOR
SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
Major Shareholders
The following table sets out as of
June 22, 2007, the number of common shares owned and controlled by Dr. Paul Averback, the
President and CEO of Nymox and a member of the Nymox board of directors, and by all
directors and officers as a group.
Name of Shareholder
|
Number of Common Shares owned by Shareholder
|
Percent of Class of Common Shares
|
Dr. Paul Averback |
13,115,395 |
45.7 % |
All directors and officers as a group |
14,049,699 |
48.9 % |
As of June 22, 2007, Dr. Celine
Dupuis, Dr. Averbacks wife, owned 848,172 common shares (3.0 %).
The above shareholders have the same
voting rights as all other shareholders. There has been no significant change in ownership
for any of the persons listed above over the past three years.
Southpoint Capital Advisors reported
in a May 15, 2007 filing that, as of March 31, 2007, it had dispositive power over
2,597,380 shares of Nymox or approximately 9.1 % of Nymox shares.
Nymox does not know of any other
shareholders that beneficially own or hold dispositive power over more than 5% of its
shares.
According to information furnished to
Nymox by the transfer agent for the common shares, as of June 22, 2007, total shares
outstanding were 29,166,924. There were 206 holders of record of the common shares and
4,527 beneficial shareholders in total. Of these, 78 were holders of record of the common
shares and 3,651 were beneficial shareholders with addresses in the United States and such
holders owned an aggregate of 11,953,836 shares, representing approximately 41 % of the
outstanding shares of common stock.
Related Party
Transactions
The Company did not have any related
party transactions for the year ended December 31, 2006.
ITEM 8. FINANCIAL
INFORMATION
In 2006, sales by Nymox
Pharmaceutical Corporations US company were $313,148 and sales by its Canadian
company were $129,713. We refer to Note 13 of the financial statements below.
50
kpmg
|
Consolidated
Financial Statements of |
|
NYMOX
PHARMACEUTICAL CORPORATION |
|
Years
ended December 31, 2006, 2005 and 2004 |
51
![](kpmg.gif)
|
|
|
|
|
KPMG LLP |
Telephone |
(514) 840-2100 |
|
Chartered Accountants |
Fax |
(514) 840-2187 |
|
600 de Maisonneuve Blvd. West |
Internet |
www.kpmg.ca |
|
Suite 1500 |
|
Tour KPMG |
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Montréal Québec H3A 03A |
REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
To the Directors of
Nymox Pharmaceutical Corporation
We have audited the accompanying
consolidated balance sheets of Nymox Pharmaceutical Corporation as at December 31,
2006 and 2005 and the consolidated statements of operations, deficit and cash flows for
each of the years in the three-year period ended December 31, 2006. These consolidated
financial statements are the responsibility of the Corporations management. Our
responsibility is to express an opinion on these consolidated financial statements based
on our audits.
We conducted our audits in accordance
with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform an audit to obtain reasonable assurance whether
the financial statements are free of material misstatement. The Corporation is not
required to have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of
the Corporations internal control over financial reporting. Accordingly, we express
no such opinion. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our audit opinion.
In our opinion, the consolidated
financial statements referred to above present fairly, in all material respects, the
financial position of the Nymox Pharmaceutical Corporation as at December 31, 2006
and 2005 and the results of its operations and its cash flows for each of the years in the
three-year period ended December 31, 2006, in accordance with Canadian generally accepted
accounting principles.
Canadian generally accepted
accounting principles vary in certain significant respects from accounting principles
generally accepted in the United States of America. Information relating to the nature and
effect of such differences is presented in note 12 to the consolidated financial
statements.
(signed) KPMG LLP
Chartered Accountants
Montréal, Canada
February 16, 2007 (except as to notes
15 (c), (d) and (e),
which are as of June 21, 2007)
52
|
KPMG
LLP is a Canadian limited liability partnership and a member firm of the KPMG network of
independent member firms affiliated with KPMG International, a Swiss cooperative. KPMG
Canada provides services to KPMG LLP. |
NYMOX PHARMACEUTICAL CORPORATION
Consolidated Financial Statements
Years ended December 31, 2006, 2005
and 2004
Financial Statements |
|
Consolidated Balance Sheets |
54 |
Consolidated Statements of Operations |
55 |
Consolidated Statements of Deficit |
56 |
Consolidated Statements of Cash Flows |
57 |
Notes to Consolidated Financial Statements |
58 |
53
NYMOX PHARMACEUTICAL CORPORATION
Consolidated Balance Sheets
December 31, 2006 and 2005
(in US dollars)
|
|
2006
|
|
2005
|
|
Assets |
|
|
| |
|
| |
|
Current assets: | | |
Cash | | |
$ | 235,124 |
|
$ | 151,476 |
|
Accounts receivable | | |
| 46,307 |
|
| 62,721 |
|
Research tax credits receivable | | |
| 53,618 |
|
| 3,075 |
|
Inventories | | |
| 44,145 |
|
| 74,182 |
|
|
| | |
| 379,194 |
|
| 291,454 |
|
Long-term security deposit | | |
| 35,993 |
|
| 35,993 |
|
Long-term receivables (note 6) | | |
| 70,000 |
|
| 70,000 |
|
Property and equipment (note 3) | | |
| 7,839 |
|
| 11,463 |
|
Patents and intellectual property (note 4) | | |
| 3,477,819 |
|
| 3,310,129 |
|
|
| | |
$ | 3,970,845 |
|
$ | 3,719,039 |
|
|
Liabilities and Shareholders Equity | | |
Current liabilities: | | |
Accounts payable | | |
$ | 1,430,987 |
|
$ | 1,704,369 |
|
Accrued liabilities | | |
| 158,801 |
|
| 205,424 |
|
Deferred lease inducement (note 8 (a)) | | |
| 9,623 |
|
| 9,576 |
|
Notes payable (note 5) | | |
| 500,000 |
|
| 500,000 |
|
Deferred revenue | | |
| 15,907 |
|
| 42,202 |
|
|
| | |
| 2,115,318 |
|
| 2,461,571 |
|
Long-term deferred revenue | | |
| 3,333 |
|
| 10,000 |
|
Deferred lease inducement (note 8 (a)) | | |
| 25,661 |
|
| 35,331 |
|
Non-controlling interest (note 6) | | |
| 800,000 |
|
| 800,000 |
|
Shareholders equity: | | |
Share capital (note 7) | | |
| 44,443,350 |
|
| 39,488,350 |
|
Additional paid-in capital (note 7 (d)) | | |
| 1,463,833 |
|
| 626,525 |
|
Deficit | | |
| (44,880,650 |
) |
| (39,702,738 |
) |
|
| | |
| 1,026,533 |
|
| 412,137 |
|
Commitments and contingencies (note 8) | | |
Subsequent events (note 15) | | |
|
| | |
$ | 3,970,845 |
|
$ | 3,719,039 |
|
|
See accompanying notes to consolidated
financial statements.
On behalf of the Board:
(signed) Paul Averback
Director
(signed) Paul McDonald Director
54
NYMOX PHARMACEUTICAL CORPORATION
Consolidated Statements of Operations
Years ended December 31, 2006, 2005 and 2004
(in US dollars)
|
|
2006
|
|
2005
|
|
2004
|
|
Revenues: |
|
|
| |
|
| |
|
| |
|
Sales | | |
$ | 437,440 |
|
$ | 424,506 |
|
$ | 321,895 |
|
Interest | | |
| 5,421 |
|
| 1,776 |
|
| 53 |
|
|
| | |
| 442,861 |
|
| 426,282 |
|
| 321,948 |
|
Expenses: | | |
Research and development | | |
| 2,594,714 |
|
| 1,831,591 |
|
| 1,861,239 |
|
Less research tax credits | | |
| (53,618 |
) |
| (3,075 |
) |
| (9,358 |
) |
|
| | |
| 2,541,096 |
|
| 1,828,516 |
|
| 1,851,881 |
|
General and administrative | | |
| 954,397 |
|
| 1,202,080 |
|
| 1,158,750 |
|
Marketing | | |
| 236,054 |
|
| 273,392 |
|
| 291,429 |
|
Cost of sales | | |
| 241,398 |
|
| 207,344 |
|
| 185,567 |
|
Depreciation of property and equipment | | |
| 3,624 |
|
| 13,885 |
|
| 33,708 |
|
Amortization of patents and intellectual | | |
property | | |
| 462,642 |
|
| 425,562 |
|
| 398,853 |
|
Stock-based compensation (note 7 (e)) | | |
| 837,308 |
|
| 16,220 |
|
| 16,220 |
|
Write-down of equipment | | |
| -- |
|
| -- |
|
| 89,254 |
|
Interest and bank charges | | |
| 60,027 |
|
| 43,811 |
|
| 41,911 |
|
|
| | |
| 5,336,546 |
|
| 4,010,810 |
|
| 4,067,573 |
|
|
Net loss | | |
$ | (4,893,685 |
) |
$ | (3,584,528 |
) |
$ | (3,745,625 |
) |
|
|
Basic and diluted loss per share (note 10) | | |
$ | (0.18 |
) |
$ | (0.14 |
) |
$ | (0.15 |
) |
|
See accompanying notes to
consolidated financial statements.
55
NYMOX PHARMACEUTICAL CORPORATION
Consolidated Statements of Deficit
Years ended December 31, 2006, 2005 and 2004
(in US dollars)
|
|
2006
|
|
2005
|
|
2004
|
|
Deficit, beginning of year |
|
|
$ | (39,702,738 |
) |
$ | (35,951,268 |
) |
$ | (31,326,826 |
) |
Adjustment to reflect change in accounting | | |
for amortization of patents (note 2 (c)) | | |
| -- |
|
| -- |
|
| (119,714 |
) |
Adjustment to reflect adoption of fair value | | |
for employee stock options (note 2 (h)) | | |
| -- |
|
| -- |
|
| (548,164 |
) |
|
Deficit, beginning of year, restated | | |
| (39,702,738 |
) |
| (35,951,268 |
) |
| (31,994,704 |
) |
Net loss | | |
| (4,893,685 |
) |
| (3,584,528 |
) |
| (3,745,625 |
) |
Share issue costs | | |
| (284,227 |
) |
| (166,942 |
) |
| (210,939 |
) |
|
Deficit, end of year | | |
$ | (44,880,650 |
) |
$ | (39,702,738 |
) |
$ | (35,951,268 |
) |
|
See accompanying notes to
consolidated financial statements.
56
NYMOX PHARMACEUTICAL CORPORATION
Consolidated Statements of Cash Flows
Years ended December 31, 2006, 2005 and 2004
(in US dollars)
|
|
2006
|
|
2005
|
|
2004
|
|
Cash flows from operating activities: |
|
|
| |
|
| |
|
| |
|
Net loss | | |
$ | (4,893,685 |
) |
$ | (3,584,528 |
) |
$ | (3,745,625 |
) |
Adjustments for: | | |
Depreciation of property and equipment | | |
| 3,624 |
|
| 13,885 |
|
| 33,708 |
|
Amortization of patents and intellectual | | |
property | | |
| 462,642 |
|
| 425,562 |
|
| 398,853 |
|
Stock-based compensation | | |
| 837,308 |
|
| 16,220 |
|
| 16,220 |
|
Write-down of equipment | | |
| -- |
|
| -- |
|
| 89,254 |
|
Amortization of lease inducement | | |
| (9,623 |
) |
| (3,194 |
) |
| -- |
|
Changes in operating assets and liabilities: | | |
Accounts receivable | | |
| 16,414 |
|
| (11,304 |
) |
| (23,914 |
) |
Research tax credits receivable | | |
| (50,543 |
) |
| 39,302 |
|
| (9,358 |
) |
Inventories | | |
| 30,037 |
|
| (42,683 |
) |
| 35,048 |
|
Prepaid expenses | | |
| -- |
|
| 8,146 |
|
| (11,639 |
) |
Accounts payable and accrued liabilities | | |
| (577,356 |
) |
| 586,361 |
|
| (38,160 |
) |
Deferred revenue | | |
| (32,962 |
) |
| 23,667 |
|
| 22,605 |
|
|
| | |
| (4,214,144 |
) |
| (2,528,566 |
) |
| (3,233,008 |
) |
Cash flows from financing activities: | | |
Proceeds from issuance of share capital | | |
| 4,955,000 |
|
| 2,935,000 |
|
| 3,674,033 |
|
Share issue costs | | |
| (284,227 |
) |
| (166,942 |
) |
| (210,939 |
) |
Proceeds from notes payable | | |
| -- |
|
| -- |
|
| 100,000 |
|
Repayment of notes payable | | |
| -- |
|
| (100,000 |
) |
| -- |
|
Proceeds from lease inducement | | |
| -- |
|
| 48,101 |
|
| -- |
|
|
| | |
| 4,670,773 |
|
| 2,716,159 |
|
| 3,563,094 |
|
Cash flows from investing activities: | | |
Additions to property and equipment | | |
| -- |
|
| -- |
|
| (15,149 |
) |
Additions to patent costs | | |
| (372,981 |
) |
| (565,759 |
) |
| (390,898 |
) |
|
| | |
| (372,981 |
) |
| (565,759 |
) |
| (406,047 |
) |
|
Net increase (decrease) in cash | | |
| 83,648 |
|
| (378,166 |
) |
| (75,961 |
) |
Cash, beginning of year | | |
| 151,476 |
|
| 529,642 |
|
| 605,603 |
|
|
Cash, end of year | | |
$ | 235,124 |
|
$ | 151,476 |
|
$ | 529,642 |
|
|
Supplemental disclosure to statements of cash flows: | | |
(a) Interest paid | | |
$ | 50,289 |
|
$ | 31,993 |
|
$ | 30,101 |
|
(b) Non-cash transactions: | | |
Additions to patent costs included in | | |
accounts payable and accrued liabilities | | |
at year-end | | |
| 582,854 |
|
| 325,503 |
|
| 427,170 |
|
|
See accompanying notes to
consolidated financial statements.
57
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements
Years ended December 31, 2006, 2005
and 2004
(in US dollars)
|
Nymox
Pharmaceutical Corporation (the Corporation), incorporated under the Canada
Business Corporations Act, including its subsidiaries, Nymox Corporation, a Delaware
Corporation, and Serex Inc. of New Jersey, is a biopharmaceutical corporation which
specializes in the research and development of products for the aging population. The
Corporation is currently marketing AlzheimAlertTM, a urinary test that aids
physicians in the diagnosis of Alzheimers disease. The Corporation also markets
NicAlertTM and TobacAlertTM, tests that use urine or saliva to
detect use of tobacco products. The Corporation is also developing therapeutics for the
treatment of Alzheimers disease, new treatments for benign prostate hyperplasia, and
new anti-bacterial agents for the treatment of urinary tract and other bacterial
infections in humans, including a treatment for E-coli O157:H7 bacterial contamination in
meat and other food and drink products. |
|
Since
1989, the Corporations activities and resources have been primarily focused on
developing certain pharmaceutical technologies. The Corporation is subject to a number of
risks, including the successful development and marketing of its technologies. In order to
achieve its business plan and the realization of its assets and liabilities in the normal
course of operations, the Corporation anticipates the need to raise additional capital
and/or achieve sales and other revenue generating activities. Management believes that
funds from operations as well as existing financing facilities will be sufficient to meet
the Corporations requirements for the next year. |
|
The
Corporation is listed on the NASDAQ Stock Market. |
2. |
Significant
accounting policies: |
|
The
consolidated financial statements of the Corporation have been prepared under Canadian
generally accepted accounting principles (GAAP) and include the accounts of
its US subsidiaries, Nymox Corporation and Serex Inc. Intercompany balances and
transactions have been eliminated on consolidation. |
|
Consolidated
financial statements prepared under US GAAP would differ in some respects from those
prepared in Canada. A reconciliation of earnings and shareholders equity reported in
accordance with Canadian GAAP and with US GAAP is presented in note 12. |
|
Inventories
consist of finished goods and are carried at the lower of cost and net realizable value.
Cost is determined on the basis of weighted average cost. |
58
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements
Years ended December 31, 2006, 2005
and 2004
(in US dollars)
2. |
Significant
accounting policies (continued): |
|
(c) |
Property
and equipment, patents and intellectual property: |
|
Property
and equipment, patents and intellectual property are recorded at cost. Depreciation and
amortization are provided using the straight-line method at the following rates: |
|
Asset
|
Rate
|
|
Laboratory equipment |
|
|
| 20 |
% |
Computer equipment | | |
| 20 |
% |
Office equipment and fixtures | | |
| 20 |
% |
Intellectual property rights acquired | | |
| 10 |
% |
|
|
Direct
costs incurred in connection with securing the patents are capitalized. Patents are being
amortized using the straight-line method over the shorter of their economic useful lives
or their legal terms of existence ranging from 17 to 20 years. |
|
In
2004, the Corporation amended its method of amortizing patent costs to be consistent with
the treatment followed by the Corporation under United States generally accepted
accounting principles (GAAP). Certain patents were initially amortized by the
Corporation commencing in the year of commercialization of the developed products for
Canadian GAAP purposes. The Corporation now amortizes all patents over the legal life of
the patents from the date the patent is secured. This change was applied retroactively and
decreased amounts previously reported for patents and intellectual property on the
consolidated balance sheet at December 31, 2003 by $119,714 and increased the
accumulated deficit at December 31, 2003 by $119,714. The change did not have a material
impact on the statements of operations for the periods presented. |
|
(d) |
Impairment
and disposal of long-lived assets: |
|
Long-lived
assets, consisting of property and equipment and intangible assets with definite useful
lives, are tested for recoverability whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. An impairment loss is recognized for
long-lived assets, when the carrying amount of an asset to be held and used exceeds the
sum of the undiscounted cash flows expected from its use and disposal; the impairment
recognized is measured as the amount by which the carrying amount of the net asset exceeds
its fair value. |
59
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements
Years ended December 31, 2006, 2005
and 2004
(in US dollars)
2. |
Significant
accounting policies (continued): |
|
Revenue
from product sales is recognized when the product or service has been delivered or
obligations as defined in the agreement are performed. Revenue from research contracts is
recognized at the time research activities are performed under the agreement. Revenue from
license fees, royalties and milestone payments is recognized upon the fulfillment of all
obligations under the terms of the related agreement. These agreements may include upfront
payments to be received by the Corporation. Upfront payments are recognized as revenue on
a systematic basis over the period that the related services or obligations as defined in
the agreement are performed. Interest is recognized on an accrual basis. |
|
Revenues
from agreements that include multiple elements are considered to be a revenue arrangement
with multiple deliverables. Under this type of arrangement, the identification of separate
units of accounting is required and revenue is recognized for each unit as described
above. |
|
Deferred
revenue represents amounts billed to and received from customers in advance of revenue
recognition. |
|
(f) |
Research
and development expenditures: |
|
Research
expenditures, net of research tax credits, are expensed as incurred. Development
expenditures, net of tax credits, are expensed as incurred, except if they meet the
criteria for deferral in accordance with generally accepted accounting principles. |
|
(g) |
Foreign
currency translation: |
|
The
Corporations measurement currency is the United States dollar. Monetary assets and
liabilities of the Canadian and foreign operations denominated in currencies other than
the United States dollar are translated at the rates of exchange prevailing at the balance
sheet dates. Other assets and liabilities denominated in currencies other than the United
States dollar are translated at the exchange rates prevailing when the assets were
acquired or the liabilities incurred. Revenues and expenses denominated in currencies
other than the United States dollar are translated at the average exchange rate prevailing
during the year, except for depreciation and amortization which are translated at the same
rates as those used in the translation of the corresponding assets. Foreign exchange gains
and losses resulting from the translation are included in the determination of net
earnings. |
|
Foreign
exchange gains included in the consolidated statements of operations for fiscal 2006
amounted to $8,092 (2005 $32,243; 2004 $10,279). |
60
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements
Years ended December 31, 2006, 2005
and 2004
(in US dollars)
2. |
Significant
accounting policies (continued): |
|
(h) |
Stock-based
compensation plan: |
|
Effective
January 1, 2004, the Corporation adopted the recommendations of the CICA which require
entities to account for employee stock options using the fair value based method beginning
January 1, 2004. Under the fair value based method, compensation cost is measured at fair
value at the date of grant and is expensed over the awards vesting period. In
accordance with one of the transitional options permitted under the standard, the
Corporation has retroactively applied the fair value based method to all employee stock
options granted on or after January 1, 2002 without restatement of prior periods. The
cumulative effect of the change in accounting policy of $548,164 has been recorded as an
increase in the opening deficit and additional paid-in capital at January 1, 2004. |
|
Prior
to January 1, 2004, the Corporation applied the fair value based method of accounting
prescribed by the CICA only to stock-based payments to non-employees, employee awards that
were direct awards of stock, call for settlement in cash or other assets, and to employee
stock appreciation rights; the Corporation applied the settlement method of accounting to
employee stock options. Under the settlement method, any consideration paid by employees
on the exercise of stock options was credited to share capital and no compensation cost
was recognized. |
|
The
Corporation accounts for income taxes using the asset and liability method of accounting
for income taxes. Under this method, future income tax assets and liabilities are
determined based on temporary differences (differences between the accounting
basis and the tax basis of the assets and liabilities), and are measured using the
currently enacted, or substantively enacted, tax rates and laws expected to apply when
these differences reverse. A valuation allowance is recorded against any future income tax
asset, if it is more likely than not that the asset will not be realized. |
|
Basic
earnings per share are determined using the weighted average number of common shares
outstanding during the period. Diluted earnings per share are computed in a manner
consistent with basic earnings per share, except that the weighted average shares
outstanding are increased to include additional shares from the assumed exercise of
options and warrants, if dilutive. The number of additional shares is calculated by
assuming that outstanding options and warrants were exercised, and that the proceeds from
such exercises were used to acquire shares of common stock at the average market price
during the reporting period. |
61
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements
Years ended December 31, 2006, 2005
and 2004
(in US dollars)
2. |
Significant
accounting policies (continued): |
|
In
the normal course of business, the Corporation enters into various agreements that may
contain features that meet the definition of a guarantee. A guarantee is defined to be a
contract (including an indemnity) that contingently requires the Corporation to make
payments to a third party based on (i) changes in an underlying interest rate, foreign
exchange rate, equity or commodity instrument, index or other variable, that is related to
an asset, a liability or an equity security of the counterparty, (ii) failure of another
party to perform under an obligating agreement or (iii) failure of another party to pay
its indebtedness when due. |
|
A
liability is recorded when the Corporation considers probable that a payment relating to a
guarantee has to be made to the other party of the contract or agreements. |
|
The
preparation of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and expenses
during the reporting periods. Significant areas requiring the use of management estimates
include estimating the useful lives of long-lived assets, including property and equipment
and intangible assets, as well as estimating the recoverability of research tax credits
receivable and future tax assets. The reported amounts and note disclosure are determined
to reflect the most probable set of economic conditions and planned courses of action.
Actual results could differ from those estimates. |
3. |
Property
and equipment: |
|
2006
|
|
|
Cost
|
|
Accumulated
depreciation
and amortization
|
|
Net book
value
|
|
Laboratory equipment |
|
|
$ | 416,208 |
|
$ | 413,819 |
|
$ | 2,389 |
|
Computer equipment | | |
| 18,602 |
|
| 13,152 |
|
| 5,450 |
|
Office equipment and fixtures | | |
| 88,560 |
|
| 88,560 |
|
| -- |
|
|
| | |
$ | 523,370 |
|
$ | 515,531 |
|
$ | 7,839 |
|
|
62
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements
Years ended December 31, 2006, 2005
and 2004
(in US dollars)
3. |
Property
and equipment (continued): |
|
2005
|
|
|
Cost
|
|
Accumulated
depreciation
and amortization
|
|
Net book
value
|
|
Laboratory equipment |
|
|
$ | 416,208 |
|
$ | 412,374 |
|
$ | 3,834 |
|
Computer equipment | | |
| 23,652 |
|
| 16,023 |
|
| 7,629 |
|
Office equipment and fixtures | | |
| 88,560 |
|
| 88,560 |
|
| -- |
|
|
| | |
$ | 528,420 |
|
$ | 516,957 |
|
$ | 11,463 |
|
|
4. |
Patents
and intellectual property: |
|
2006
|
|
|
Cost
|
|
Accumulated
amortization
|
|
Net book
value
|
|
Patent costs |
|
|
$ | 3,954,170 |
|
$ | 1,138,915 |
|
$ | 2,815,255 |
|
Intellectual property rights acquired | | |
| 2,222,661 |
|
| 1,560,097 |
|
| 662,564 |
|
|
| | |
$ | 6,176,831 |
|
$ | 2,699,012 |
|
$ | 3,477,819 |
|
|
|
2005
|
|
|
Cost
|
|
Accumulated
amortization
|
|
Net book
value
|
|
Patent costs |
|
|
$ | 3,480,024 |
|
$ | 1,053,315 |
|
$ | 2,426,709 |
|
Intellectual property rights acquired | | |
| 2,222,661 |
|
| 1,339,241 |
|
| 883,420 |
|
|
| | |
$ | 5,702,685 |
|
$ | 2,392,556 |
|
$ | 3,310,129 |
|
|
|
The
estimated aggregate amortization expense for each of the next five years is approximately
$453,000 per year. |
63
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements
Years ended December 31, 2006, 2005
and 2004
(in US dollars)
|
|
2006
|
|
2005
|
|
Notes payable, bearing interest at the prime rate plus 2%, due on |
|
|
| |
|
| |
|
or before July 31, 2007 | | |
$ | 500,000 |
|
$ | 500,000 |
|
|
|
During
the year, the maturity dates of notes payable in the amount of $500,000 outstanding at
December 31, 2006 were extended from July 31, 2006 to July 31, 2007. |
6. |
Non-controlling
interest: |
|
Non-controlling
interest includes redeemable, convertible preferred shares of Serex in the amount of
$800,000. Up to 50% of the preferred shares are redeemable at any time at the option of
the preferred shareholders for their issue price, subject to holders with at least 51% of
the face value of the preferred shares asking for redemption, and sufficient funds being
available in Serex. The preferred shares are also convertible into common shares of Serex
at a price of $3.946 per share. |
|
The
long-term receivables are due from the preferred shareholders and will be settled when
the preferred shares are redeemed. |
|
|
2006
|
|
2005
|
|
Authorized: |
|
|
| |
|
| |
|
An unlimited number of common shares | | |
Issued and outstanding: | | |
28,322,253 common shares (2005 - 26,728,781 shares) | | |
$ | 44,443,350 |
|
$ | 39,488,350 |
|
|
64
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements
Years ended December 31, 2006, 2005
and 2004
(in US dollars)
7. |
Share
capital (continued): |
|
(a) |
Changes
in the Corporations outstanding common shares are presented below: |
|
|
Shares
|
|
Dollars
|
|
Issued and outstanding, December 31, 2004 |
|
|
| 25,504,062 |
|
$ | 36,553,350 |
|
Issue of common shares under common stock private | | |
purchase agreements (b) | | |
| 1,224,719 |
|
| 2,935,000 |
|
|
Balance, December 31, 2005 | | |
| 26,728,781 |
|
| 39,488,350 |
|
Issue of common shares for cash under common | | |
stock private purchase agreements (b) | | |
| 1,593,472 |
|
| 4,955,000 |
|
|
Balance, December 31, 2006 | | |
| 28,322,253 |
|
$ | 44,443,350 |
|
|
|
(b) |
Common
Stock Private Purchase Agreement: |
|
In
October 2005, the Corporation entered into a Common Stock Private Purchase Agreement with
an investment company (the Purchaser) that established the terms and
conditions for the purchase of common shares by the Purchaser. In November 2006, this
agreement was terminated and a new agreement was concluded with the Purchaser. In general,
the Corporation can, at its discretion, require the Purchaser to purchase up to $13
million of common shares over a twenty-four-month period based on notices given by the
Corporation. |
|
The
number of shares to be issued in connection with each notice shall be equal to the amount
specified in the notice, divided by 97% of the average price of the Corporations
common shares for the five days preceding the giving of the notice. The maximum amount of
each notice is $500,000 and the minimum amount is $100,000. The Corporation may terminate
the agreement before the 24-month term, if it has issued at least $8 million of
common shares under the agreement. |
|
In
2006, the Corporation issued 1,593,472 (2005 1,224,719) common shares to the
Purchaser for aggregate proceeds of $4,955,000 (2005 $2,935,000) under the
agreements. At December 31, 2006, the Corporation can require the Purchaser to purchase up
to $12,400,000 of common shares over the remaining 22 months of the agreement. |
65
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements
Years ended December 31, 2006, 2005
and 2004
(in US dollars)
7. |
Share
capital (continued): |
|
The
Corporation has established a stock option plan (the Plan) for its key
employees, its officers and directors, and certain consultants. The Plan is administered
by the Board of Directors of the Corporation. The Board may from time to time designate
individuals to whom options to purchase common shares of the Corporation may be granted,
the number of shares to be optioned to each, and the option price per share. The option
price per share cannot involve a discount to the market price at the time the option is
granted. The total number of shares to be optioned to any one individual cannot exceed 5%
of the total issued and outstanding shares, and the maximum number of shares which may be
optioned under the Plan cannot exceed 2,500,000 common shares without shareholder
approval. Options under the Plan expire ten years after grant and vest either immediately
or over periods up to five years. |
|
Changes
in outstanding options were as follows for the last two fiscal periods: |
|
|
Number
|
|
Weighted average
exercise price
|
|
Balance, December 31, 2004 and 2005 |
|
|
| 1,811,500 |
|
$ | 3.86 |
|
Granted | | |
| 840,500 |
|
| 2.94 |
|
Expired/cancelled | | |
| (450,000 |
) |
| 4.35 |
|
|
Balance, December 31, 2006 | | |
| 2,202,000 |
|
$ | 3.41 |
|
|
|
At
December 31, 2006, options outstanding and exercisable were as follows: |
|
Options outstanding
|
Options exercisable
|
Exercise price per share
|
Expiry date
|
4,500 |
|
4,500 |
|
$6.41 |
|
December 19, 2007 |
|
50,000 |
|
50,000 |
|
6.93 |
|
January 22, 2009 |
|
2,000 |
|
2,000 |
|
6.41 |
|
March 23, 2009 |
|
45,000 |
|
45,000 |
|
3.12 |
|
May 13, 2009 |
|
75,000 |
|
75,000 |
|
3.12 |
|
June 1, 2009 |
|
250,000 |
|
250,000 |
|
3.88 |
|
May 1, 2010 |
|
50,000 |
|
50,000 |
|
6.93 |
|
May 1, 2010 |
|
10,000 |
|
10,000 |
|
4.70 |
|
June 15, 2010 |
|
10,000 |
|
10,000 |
|
3.20 |
|
August 14, 2010 |
|
5,000 |
|
5,000 |
|
3.15 |
|
August 16, 2010 |
|
10,000 |
|
10,000 |
|
2.21 |
|
January 16, 2011 |
|
35,500 |
|
35,500 |
|
1.93 |
|
April 23, 2011 |
|
1,500 |
|
1,500 |
|
4.20 |
|
November 8, 2011 |
|
225,000 |
|
225,000 |
|
4.33 |
|
November 13, 2011 |
|
50,000 |
|
40,000 |
|
3.75 |
|
April 28, 2013 |
|
38,000 |
|
38,000 |
|
2.62 |
|
September 9, 2013 |
|
500,000 |
|
500,000 |
|
3.00 |
|
October 24, 2013 |
|
200,000 |
|
200,000 |
|
2.82 |
|
June 9, 2016 |
|
40,000 |
|
40,000 |
|
2.74 |
|
July 17, 2016 |
|
600,500 |
|
303,000 |
|
3.00 |
|
August 24, 2016 |
|
|
2,202,000 |
|
1,894,500 |
|
$3.41 |
|
|
66
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements
Years ended December 31, 2006, 2005
and 2004
(in US dollars)
7. |
Share
capital (continued): |
|
(c) |
Stock
options (continued): |
|
The
Company has also contingently granted 2,965,000 options to senior executives at an
exercise price of $3 per share. These options are subject to approval by the shareholders
of the Company. These options will begin to vest quarterly over a period of 5 years after
approval is obtained. Compensation cost will be recognized for these options once approval
is obtained. |
|
(d) |
Changes
in additional paid-in capital were as follows: |
|
Balance, December 31, 2004 |
|
|
$ | 554,921 |
|
Expiry of warrants | | |
| 55,384 |
|
Stock-based compensation | | |
| 16,220 |
|
|
Balance, December 31, 2005 | | |
| 626,525 |
|
Stock-based compensation | | |
| 837,308 |
|
|
Balance, December 31, 2006 | | |
$ | 1,463,833 |
|
|
|
(e) |
Stock-based
compensation: |
|
|
2006
|
|
2005
|
|
2004
|
|
Stock-based compensation |
|
|
| |
|
| |
|
| |
|
pertaining to general | | |
and administrative | | |
$ | 360,840 |
|
$ | -- |
|
$ | -- |
|
Stock-based compensation | | |
pertaining to marketing | | |
| 107,700 |
|
| 16,220 |
|
| 16,220 |
|
Stock-based compensation | | |
pertaining to research and | | |
development | | |
| 368,768 |
|
| -- |
|
| -- |
|
|
| | |
$ | 837,308 |
|
$ | 16,220 |
|
$ | 16,220 |
|
|
67
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements
Years ended December 31, 2006, 2005
and 2004
(in US dollars)
8. |
Commitments
and contingencies: |
|
Minimum
lease payments under operating leases that were entered into by the Corporation for the
next four years are as follows: |
|
2007 |
|
|
$ | 246,000 |
|
2008 | | |
| 251,000 |
|
2009 | | |
| 247,000 |
|
2010 | | |
| 163,000 |
|
|
| | |
$ | 907,000 |
|
|
|
In
2005, the Corporation entered into new operating lease agreements for its Canadian and US
premises, both of which will expire on August 31, 2010. In connection with these
agreements, the Company received lease inducements totaling $48,101. These amounts are
being taken into income on a straight-line basis as a reduction of rental expense over the
term of the leases. At December 31, 2006, the remaining deferred lease inducement was
$35,284, of which $9,623 has been classified in current liabilities and $25,661 has been
classified as long-term. |
|
In
2005 and 2006, the Corporation received proposed notices of assessments relating to its
2001, 2002 and 2003 taxation years from the Canadian taxation authorities reducing the
Corporations claim for research and development tax credits in those taxation years.
The reductions include refundable tax credits totaling $66,864, which were previously
received by the Corporation, and non-refundable tax credits totaling $122,121, which are
available to reduce future federal income taxes payable over the carryforward period to
2013. The non-refundable credits were not previously recognized for financial statement
purposes. The Corporation has filed a notice of objection to the assessments with the
taxation authorities since it believes it meets the criteria for claiming the tax credits
and that the taxation authorities erred in their assessments. The Corporation has not
recorded a provision for this matter. |
68
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements
Years ended December 31, 2006, 2005
and 2004
(in US dollars)
|
Details
of the components of income taxes are as follows: |
|
|
2006
|
|
2005
|
|
2004
|
|
Loss before income taxes: |
|
|
| |
|
| |
|
| |
|
Canadian operations | | |
$ | (4,316,579 |
) |
$ | (3,094,941 |
) |
$ | (3,121,170 |
) |
U.S. operations | | |
| (577,106 |
) |
| (489,587 |
) |
| (624,455 |
) |
|
| | |
| (4,893,685 |
) |
| (3,584,528 |
) |
| (3,745,625 |
) |
Basic income tax rate | | |
| 32 |
% |
| 31 |
% |
| 31 |
% |
|
Income tax recovery at statutory rates | | |
| (1,565,979 |
) |
| (1,111,204 |
) |
| (1,162,000 |
) |
Adjustments in income taxes resulting from: | | |
Non-recognition of losses and other | | |
unclaimed deductions | | |
| 1,565,979 |
|
| 1,111,204 |
|
| 1,162,000 |
|
Effect of change in rates: | | |
(Decrease) increase in future tax asset | | |
| (964,000 |
) |
| 552,000 |
|
| -- |
|
Decrease (increase) in valuation allowance | | |
| 964,000 |
|
| (552,000 |
) |
| -- |
|
|
Income taxes | | |
$ | -- |
|
$ | -- |
|
$ | -- |
|
|
|
The
income tax effect of temporary differences that give rise to the net future tax asset is
presented below: |
|
|
2006
|
|
2005
|
|
Future tax assets: |
|
|
| |
|
| |
|
Non-capital losses | | |
$ | 11,227,000 |
|
$ | 10,355,000 |
|
Scientific research and experimental development | | |
expenditures | | |
| 1,168,000 |
|
| 1,013,000 |
|
Foreign exchange | | |
| 596,000 |
|
| 657,000 |
|
Property and equipment and patents | | |
| 529,000 |
|
| 424,000 |
|
Share issue costs | | |
| 146,000 |
|
| 134,000 |
|
|
| | |
| 13,666,000 |
|
| 12,583,000 |
|
Less valuation allowance | | |
| (13,461,000 |
) |
| (12,122,000 |
) |
|
| | |
| 205,000 |
|
| 461,000 |
|
Future tax liabilities: | | |
Intellectual property rights | | |
| (205,000 |
) |
| (274,000 |
) |
Investment tax credits | | |
| -- |
|
| (187,000 |
) |
|
| | |
| (205,000 |
) |
| (461,000 |
) |
|
Net future tax asset | | |
$ | -- |
|
$ | -- |
|
|
69
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements
Years ended December 31, 2006, 2005
and 2004
(in US dollars)
9. |
Income
taxes (continued): |
|
In
assessing the realizability of future tax assets, management considers whether it is more
likely than not that some portion or all of the future tax assets will not be realized.
The ultimate realization of future tax assets is dependent upon the generation of future
taxable income and tax planning strategies. The generation of future taxable income is
dependent on the successful commercialization of the Companys products and
technologies. |
|
The
Corporation has non-capital losses carried forward and accumulated scientific research and
development expenditures which are available to reduce future years taxable income.
These expire as follows: |
|
|
Federal
|
|
Provincial
|
|
Non-capital losses: |
|
|
| |
|
| |
|
2007 | | |
$ | 3,653,000 |
|
$ | 3,586,000 |
|
2008 | | |
| 2,607,000 |
|
| 2,607,000 |
|
2009 | | |
| 3,213,000 |
|
| 3,177,000 |
|
2010 | | |
| 3,502,000 |
|
| 3,452,000 |
|
2014 | | |
| 3,749,000 |
|
| 3,733,000 |
|
2015 | | |
| 4,019,000 |
|
| 3,966,000 |
|
2016 | | |
| 3,222,000 |
|
| 3,169,000 |
|
Scientific research and development expenditures: | | |
(Indefinitely) | | |
| 2,808,000 |
|
| 5,332,000 |
|
|
|
The
Corporation also has investment tax credits available in the amount of approximately
$467,000 to reduce future years Canadian federal taxes payable. These credits expire
as follows: |
|
2007 |
|
|
$ | 128,000 |
|
2008 | | |
| 4,000 |
|
2009 | | |
| 9,000 |
|
2010 | | |
| 20,000 |
|
2011 | | |
| 75,000 |
|
2012 | | |
| 64,000 |
|
2013 | | |
| 59,000 |
|
2014 | | |
| 19,000 |
|
2015 | | |
| 24,000 |
|
2026 | | |
| 65,000 |
|
|
| | |
$ | 467,000 |
|
|
70
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements
Years ended December 31, 2006, 2005
and 2004
(in US dollars)
9. |
Income
taxes (continued): |
|
In
addition, the Corporations US subsidiaries have losses carried forward of
approximately $10,392,000 which expire as follows: |
|
2010 |
|
|
$ | 51,000 |
|
2011 | | |
| 1,029,000 |
|
2012 | | |
| 1,932,000 |
|
2018 | | |
| 2,781,000 |
|
2019 | | |
| 1,078,000 |
|
2020 | | |
| 813,000 |
|
2021 | | |
| 664,000 |
|
2022 | | |
| 522,000 |
|
2023 | | |
| 565,000 |
|
2024 | | |
| 353,000 |
|
2025 | | |
| 264,000 |
|
2026 | | |
| 340,000 |
|
|
| | |
$ | 10,392,000 |
|
|
|
(a) |
Basic
and diluted earnings per share: |
|
The
reconciliation between basic and diluted earnings per share is as follows: |
|
|
2006
|
|
2005
|
|
2004
|
|
Basic: |
|
|
| |
|
| |
|
| |
|
Basic weighted average number of | | |
common shares outstanding | | |
| 27,644,749 |
|
| 26,080,470 |
|
| 24,924,674 |
|
|
Basic loss per share | | |
$ | (0.18 |
) |
$ | (0.14 |
) |
$ | (0.15 |
) |
|
Diluted: | | |
Basic weighted average number | | |
of common shares outstanding | | |
| 27,644,749 |
|
| 26,080,470 |
|
| 24,924,674 |
|
Plus impact of stock options and | | |
warrants (1) | | |
| 67,232 |
|
| 23,234 |
|
| 178,578 |
|
|
Diluted common shares | | |
| 27,711,981 |
|
| 26,103,704 |
|
| 25,103,252 |
|
|
Diluted loss per share | | |
$ | (0.18 |
) |
$ | (0.14 |
) |
$ | (0.15 |
) |
|
|
(1) |
The
impact of these stock options and warrants is anti-dilutive because the
Corporation incurred losses in 2006, 2005 and 2004. |
71
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements
Years ended December 31, 2006, 2005
and 2004
(in US dollars)
10. |
Earnings
per share (continued): |
|
(a) |
Basic
and diluted earnings per share (continued): |
|
Excluded
from the above calculations are 900,500 stock options which were deemed to be
anti-dilutive because the exercise prices were greater than the average market price of
the common shares (2005 1,518,000 options; 2004 409,500 options and 293,334
warrants). |
|
(b) |
Stock-based
compensation: |
|
The
weighted average fair value of each option granted in 2006 was estimated on the date of
grant using the Black-Scholes pricing model. The following weighted average assumptions
used in 2006 were as follows: |
|
|
2006
|
|
2005
|
|
2004
|
|
Risk-free interest rate |
|
|
| 4.14 |
% |
| -- |
|
| -- |
|
Expected volatility | | |
| 66.04 |
% |
| -- |
|
| -- |
|
Expected life in years | | |
| 5 |
|
| -- |
|
| -- |
|
Dividend yield | | |
| 0 |
% |
| -- |
|
| -- |
|
|
|
Dividend
yield was excluded from the calculation, since it is the present policy of the Corporation
to retain all earnings to finance operations. |
|
The
following table summarizes the weighted average grant-date fair value per share for
options granted during the year ended December 31, 2006: |
|
|
Year
|
|
Number of
options
|
|
Weighted
average
grant-date
fair value
per share
|
|
Exercise price per share equal to |
|
|
| |
|
| |
|
| |
|
market price per share at date of grant | | |
| 2006 |
|
| 840,500 |
|
$ | 1.47 |
|
|
|
No
options were granted by the Corporation in 2005 and 2004. Stock-based compensation in
fiscal 2005 and 2004 relates to the amortization of compensation cost for options granted
in 2003 over the vesting periods. |
72
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements
Years ended December 31, 2006, 2005
and 2004
(in US dollars)
11. |
Financial
instruments: |
|
(a) |
Foreign
currency risk management: |
|
Effective
January 1, 2000, the Corporation adopted the US dollar as its measurement currency because
a substantial portion of revenues, expenses, assets and liabilities of its Canadian and US
operations are denominated in US dollars. The Canadian operation also has transactions
denominated in Canadian dollars, principally relating to salaries and rent. Fluctuations
in the currency used for the payment of the Corporations expenses denominated in
currencies other than the US dollar could cause unanticipated fluctuations in the
Corporations operating results. The Corporation does not engage in the use of
derivative financial instruments to manage its currency exposures. |
|
(b) |
Fair
value disclosure: |
|
Fair
value estimates are made as of a specific point in time using available information about
the financial instrument. These estimates are subjective in nature and often cannot be
determined with precision. |
|
The
Corporation has determined that the carrying value of its short-term financial assets and
liabilities approximates their fair value due to the immediate or short-term maturity of
these financial instruments. The fair value of the long-term receivables cannot be
determined because settlement is tied to the redemption of the preferred shares. See note
6. |
|
Credit
risk results from the possibility that a loss may occur from the failure of another party
to perform according to the terms of the contract. Financial instruments that potentially
subject the Corporation to concentrations of credit risk consist primarily of cash and
accounts receivable. Cash is maintained with a high-credit quality financial institution.
For accounts receivable, the Corporation performs periodic credit evaluations and
typically does not require collateral. Allowances are maintained for potential credit
losses consistent with the credit risk, historical trends, general economic conditions and
other information. |
|
The
Companys exposure to interest rate risk is as follows: |
|
Cash |
Fixed interest rate |
Notes payable |
Floating interest rate |
|
73
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements
Years ended December 31, 2006, 2005
and 2004
(in US dollars)
12. |
Canadian/U.S.
Reporting Differences: |
|
(a) |
Consolidated
statements of earnings: |
|
The
reconciliation of earnings reported in accordance with Canadian GAAP and with U.S. GAAP
is as follows: |
|
|
2006
|
|
2005
|
|
2004
|
|
Net loss, Canadian GAAP |
|
|
$ | (4,893,685 |
) |
$ | (3,584,528 |
) |
$ | (3,745,625 |
) |
Adjustments: | | |
Stock-based compensation - options | | |
granted to employees (b) (ii) | | |
| -- |
|
| 16,220 |
|
| 16,220 |
|
Stock-based compensation - options | | |
granted to non-employees (b) (ii) | | |
| -- |
|
| (41,140 |
) |
| (41,140 |
) |
|
Net loss, U.S. GAAP | | |
$ | (4,893,685 |
) |
$ | (3,609,448 |
) |
$ | (3,770,545 |
) |
|
Loss per share, U.S. GAAP | | |
$ | (0.18 |
) |
$ | (0.14 |
) |
$ | (0.15 |
) |
|
|
The
weighted average number of common shares outstanding for purposes of determining basic and
diluted loss per share are the same amounts as those for Canadian GAAP purposes. |
|
(b) |
Consolidated
shareholders equity: |
|
The
reconciliation of shareholders equity reported in accordance with Canadian GAAP and
with U.S. GAAP is as follows: |
|
|
2006
|
|
2005
|
|
2004
|
|
Shareholders equity, Canadian GAAP |
|
|
$ | 1,026,533 |
|
$ | 412,137 |
|
$ | 1,212,387 |
|
Adjustments: | | |
Stock-based compensation - options | | |
granted to non-employees (ii): | | |
Cumulative compensation expense | | |
| (1,425,143 |
) |
| (1,425,143 |
) |
| (1,384,003 |
) |
Additional paid-in capital | | |
| 1,477,706 |
|
| 1,477,706 |
|
| 1,436,566 |
|
Change in reporting currency (i) | | |
| (62,672 |
) |
| (62,672 |
) |
| (62,672 |
) |
|
| | |
| (10,109 |
) |
| (10,109 |
) |
| (10,109 |
) |
|
Shareholders equity, U.S. GAAP | | |
$ | 1,016,424 |
|
$ | 402,028 |
|
$ | 1,202,278 |
|
|
74
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements
Years ended December 31, 2006, 2005
and 2004
(in US dollars)
12. |
Canadian/U.S.
Reporting Differences (continued): |
|
(b) |
Consolidated
shareholders equity (continued): |
|
(i) |
Change
in reporting currency: |
|
The
Corporation adopted the US dollar as its reporting currency effective January 1, 2000. For
Canadian GAAP purposes, the financial information for 1999 has been translated into US
dollars at the December 31, 1999 exchange rate. For United States GAAP reporting
purposes, assets and liabilities for all years presented have been translated into US
dollars at the ending exchange rate for the respective year, and the statement of
earnings, at the average exchange rate for the respective year. |
|
(ii) |
Stock-based
compensation: |
|
For
US GAAP purposes, the Corporation adopted Statement of Financial Accounting Standards
(SFAS) No-123R, Share-Based Payments, on January 1, 2006, which requires
the expensing of all options issued, modified or settled based on the grant date fair
value over the period during which the employee is required to provide service. The
Corporation adopted SFAS 123R using the modified prospective approach, which requires
application of the standard to all awards granted, modified or cancelled after
January 1, 2006 and to all awards for which the requisite service has not been
rendered as at such date. |
|
Previously,
the Corporation elected to follow the intrinsic value method of accounting under ABP 25,
Accounting for Stock Issued to Employees, in accounting for stock options
granted to employees and directors. Under the intrinsic value method, compensation cost is
recognized for the difference between the quoted market price of the stock at the grant
date and the amount the individual must pay to acquire the stock. In addition, in
accordance with FAS 123, Accounting for Stock-Based Compensation,
compensation related to the stock options granted to non-employees prior to January 1,
2002 has been recorded in the accounts based on the fair value of the stock options at the
grant date. |
|
For
Canadian GAAP purposes, the Corporation uses the fair value method of accounting for stock
options granted to employees after January 1, 2004. |
75
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements
Years ended December 31, 2006, 2005
and 2004
(in US dollars)
12. |
Canadian/U.S.
Reporting Differences (continued): |
|
(b) |
Consolidated
shareholders equity (continued): |
|
(ii) |
Stock-based
compensation (continued): |
|
The
following table provides the activity of stock option awards during the year and for
options outstanding and exercisable at the end of the year, the weighted average exercise
price, the weighted average years to expiration and the aggregate intrinsic value. The
aggregate intrinsic value represented the pre-tax intrinsic value based on the
Companys closing stock price at December 31, 2006 of $3.40, which would have been
received by option holders had they exercised their options at that date. |
|
|
Options outstanding
| |
Non-vested options
| |
|
Number
|
|
Weighted
average
exercise
price
|
|
Weighted
average
years to
expiration
|
|
Aggregate
intrinsic
value
|
|
Number
|
|
Weighted
average
grant date
fair value
|
|
Outstanding, |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
December 31, | | |
2005 | | |
| 1,811,500 |
|
$ | 3.86 |
|
| |
|
| |
|
| 20,000 |
|
$ | 1.62 |
|
Expired/cancelled | | |
| (450,000 |
) |
| 4.35 |
|
| |
|
| |
|
| -- |
|
| -- |
|
Granted | | |
| 840,500 |
|
| 2.94 |
|
| |
|
| |
|
| 600,500 |
|
| 3.00 |
|
Vested | | |
| -- |
|
| -- |
|
| |
|
| |
|
| (313,000 |
) |
| 3.02 |
|
|
Outstanding, | | |
December 31, | | |
2006 | | |
| 2,202,000 |
|
$ | 3.47 |
|
| 6.2 |
|
$ | 713,000 |
|
| 307,500 |
|
$ | 3.02 |
|
|
Options exercisable | | |
| 1,894,500 |
|
$ | 3.47 |
|
| 7.2 |
|
$ | 594,000 |
|
| N/A |
|
$ | N/A |
|
|
|
At
December 31, 2006, the unrecognized compensation cost related to non-vested awards was
$425,580 and the remaining weighted average recognition period is 6.23 months. |
|
(c) |
Consolidated
comprehensive income: |
|
FAS
130, Reporting Comprehensive Income, requires the Corporation to report and display
certain information related to comprehensive income for the Corporation. There were no
adjustments to the net loss under US GAAP required to reconcile to the comprehensive loss. |
76
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements
Years ended December 31, 2006, 2005
and 2004
(in US dollars)
12. |
Canadian/U.S.
Reporting Differences (continued): |
|
(d) |
Other
disclosures required by United States GAAP: |
|
(1) |
Development
stage company: |
|
The
Corporation is in the process of developing unique patented products which are subject to
approval by the regulatory authorities. The Corporation has had limited revenues to date
on the sale of its products under development. Accordingly, the Corporation is a
development stage company as defined in Statement of Financial Accounting Standards
No. 7, and the following additional disclosures under US GAAP are provided: |
|
|
Cumulative
since the date of
inception of
the Corporation
to December 31,
2006
|
|
Cumulative
since the date of
inception of
the Corporation
to December 31,
2005
|
|
Revenues: |
|
|
| |
|
| |
|
Sales | | |
$ | 2,407,284 |
|
$ | 1,969,844 |
|
Interest revenue | | |
| 515,819 |
|
| 510,398 |
|
License revenue | | |
| 97,403 |
|
| 97,403 |
|
Research contract | | |
| 30,000 |
|
| 30,000 |
|
Expenses: | | |
Gross research and development expenditures | | |
| 21,548,385 |
|
| 18,953,671 |
|
Other expenses | | |
| 24,716,434 |
|
| 21,974,602 |
|
Cash inflows (outflows): | | |
Operating activities | | |
| (38,448,247 |
) |
| (34,234,103 |
) |
Investing activities | | |
| (3,357,603 |
) |
| (2,984,622 |
) |
Financing activities | | |
| 42,040,975 |
|
| 37,370,202 |
|
|
77
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements
Years ended December 31, 2006, 2005
and 2004
(in US dollars)
12. |
Canadian/U.S.
Reporting Differences (continued): |
|
(d) |
Other
disclosures required by United States GAAP (continued): |
|
(1) |
Development
stage company (continued): |
|
The
statement of shareholders equity since date of inception under US GAAP is presented
below: |
|
|
Number of
shares
|
|
Consi-
deration
|
|
Additional
paid-in
capital
|
|
Accumulated
deficit
|
|
Total
|
|
Year ended July 31, 1990: |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
Common shares issued | | |
| 2,500,000 |
|
$ | 172,414 |
|
$ | -- |
|
$ | -- |
|
$ | 172,414 |
|
Net loss | | |
| -- |
|
| -- |
|
| -- |
|
| (109,241 |
) |
| (109,241 |
) |
|
Balance, July 31, 1990 | | |
| 2,500,000 |
|
| 172,414 |
|
| -- |
|
| (109,241 |
) |
| 63,173 |
|
Year ended July 31, 1991: | | |
Net loss | | |
| -- |
|
| -- |
|
| -- |
|
| (21,588 |
) |
| (21,588 |
) |
Cumulative translation adjustment | | |
| -- |
|
| 1,499 |
|
| -- |
|
| (950 |
) |
| 549 |
|
|
Balance, July 31, 1991 | | |
| 2,500,000 |
|
| 173,913 |
|
| -- |
|
| (131,779 |
) |
| 42,134 |
|
Year ended July 31, 1992: | | |
Common shares issued | | |
| 9,375 |
|
| 31,468 |
|
| -- |
|
| -- |
|
| 31,468 |
|
Net loss | | |
| -- |
|
| -- |
|
| -- |
|
| (45,555 |
) |
| (45,555 |
) |
Cumulative translation adjustment | | |
| -- |
|
| (6,086 |
) |
| -- |
|
| 5,598 |
|
| (488 |
) |
|
Balance, July 31, 1992 | | |
| 2,509,375 |
|
| 199,295 |
|
| -- |
|
| (171,736 |
) |
| 27,559 |
|
Year ended July 31, 1993: | | |
Common shares issued | | |
| 201,250 |
|
| 159,944 |
|
| -- |
|
| -- |
|
| 159,944 |
|
Common shares cancelled | | |
| (500,000 |
) |
| -- |
|
| -- |
|
| -- |
|
| -- |
|
Net loss | | |
| -- |
|
| -- |
|
| -- |
|
| (38,894 |
) |
| (38,894 |
) |
Cumulative translation adjustment | | |
| -- |
|
| (13,994 |
) |
| -- |
|
| 12,830 |
|
| (1,164 |
) |
|
Balance, July 31, 1993 | | |
| 2,210,625 |
|
| 345,245 |
|
| -- |
|
| (197,800 |
) |
| 147,445 |
|
Year ended July 31, 1994: | | |
Common shares issued | | |
| 2,500 |
|
| 7,233 |
|
| -- |
|
| -- |
|
| 7,233 |
|
Net loss | | |
| -- |
|
| -- |
|
| -- |
|
| (53,225 |
) |
| (53,225 |
) |
Cumulative translation adjustment | | |
| -- |
|
| (25,173 |
) |
| -- |
|
| 15,808 |
|
| (9,365 |
) |
|
Balance, July 31, 1994 | | |
| 2,213,125 |
|
| 327,305 |
|
| -- |
|
| (235,217 |
) |
| 92,088 |
|
Year ended July 31, 1995: | | |
Common shares issued | | |
| 78,078 |
|
| 303,380 |
|
| -- |
|
| -- |
|
| 303,380 |
|
Net loss | | |
| -- |
|
| -- |
|
| -- |
|
| (285,910 |
) |
| (285,910 |
) |
Cumulative translation adjustment | | |
| -- |
|
| 5,196 |
|
| -- |
|
| (7,221 |
) |
| (2,025 |
) |
|
Balance, July 31, 1995 | | |
carried forward | | |
| 2,291,203 |
|
| 635,881 |
|
| -- |
|
| (528,348 |
) |
| 107,533 |
|
78
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements
Years ended December 31, 2006, 2005
and 2004
(in US dollars)
12. |
Canadian/U.S.
Reporting Differences (continued): |
|
(d) |
Other
disclosures required by United States GAAP (continued): |
|
(1) |
Development
stage company (continued): |
|
The
statement of shareholders equity since date of inception under US GAAP is presented
below (continued): |
|
|
Number of
shares
|
|
Consi-
deration
|
|
Additional
paid-in
capital
|
|
Accumulated
deficit
|
|
Total
|
|
Balance, July 31, 1995 |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
brought forward | | |
| 2,291,203 |
|
$ | 635,881 |
|
$ | -- |
|
$ | (528,348 |
) |
$ | 107,533 |
|
Period ended December 31, 1995: | | |
Adjustment necessary to | | |
increase the number of | | |
common shares | | |
| 12,708,797 |
|
| -- |
|
| -- |
|
| -- |
|
| -- |
|
|
Adjusted number of | | |
common shares | | |
| 15,000,000 |
|
| 635,881 |
|
| -- |
|
| (528,348 |
) |
| 107,533 |
|
Common shares issued | | |
| 2,047,082 |
|
| 2,997,284 |
|
| -- |
|
| -- |
|
| 2,997,284 |
|
Net loss | | |
| -- |
|
| -- |
|
| -- |
|
| (1,194,226 |
) |
| (1,194,226 |
) |
Share issue costs | | |
| -- |
|
| (153,810 |
) |
| -- |
|
| -- |
|
| (153,810 |
) |
Cumulative translation adjustment | | |
| -- |
|
| 2,858 |
|
| -- |
|
| (6,328 |
) |
| (3,470 |
) |
|
Balance, December 31, 1995 | | |
| 17,047,082 |
|
| 3,482,213 |
|
| -- |
|
| (1,728,902 |
) |
| 1,753,311 |
|
Year ended December 31, 1996: | | |
Common shares issued | | |
| 882,300 |
|
| 3,852,364 |
|
| -- |
|
| -- |
|
| 3,852,364 |
|
Net loss | | |
| -- |
|
| -- |
|
| -- |
|
| (3,175,587 |
) |
| (3,175,587 |
) |
Share issue costs | | |
| -- |
|
| (170,699 |
) |
| -- |
|
| -- |
|
| (170,699 |
) |
Stock-based compensation | | |
| -- |
|
| -- |
|
| 434,145 |
|
| -- |
|
| 434,145 |
|
Cumulative translation adjustment | | |
| -- |
|
| (16,769 |
) |
| (2,217 |
) |
| 24,544 |
|
| 5,558 |
|
|
Balance, December 31, 1996 | | |
| 17,929,382 |
|
| 7,147,109 |
|
| 431,928 |
|
| (4,879,945 |
) |
| 2,699,092 |
|
Year ended December 31, 1997: | | |
Common shares issued | | |
| 703,491 |
|
| 3,180,666 |
|
| -- |
|
| -- |
|
| 3,180,666 |
|
Net loss | | |
| -- |
|
| -- |
|
| -- |
|
| (3,755,409 |
) |
| (3,755,409 |
) |
Share issue costs | | |
| -- |
|
| (161,482 |
) |
| -- |
|
| -- |
|
| (161,482 |
) |
Capital stock subscription | | |
| -- |
|
| 352,324 |
|
| -- |
|
| -- |
|
| 352,324 |
|
Stock-based compensation | | |
| -- |
|
| -- |
|
| 108,350 |
|
| -- |
|
| 108,350 |
|
Cumulative translation adjustment | | |
| -- |
|
| (299,275 |
) |
| (21,578 |
) |
| 325,364 |
|
| 4,511 |
|
|
Balance, December 31, 1997 | | |
| 18,632,873 |
|
| 10,219,342 |
|
| 518,700 |
|
| (8,309,990 |
) |
| 2,428,052 |
|
Year ended December 31, 1998: | | |
Common shares issued | | |
| 1,095,031 |
|
| 5,644,638 |
|
| -- |
|
| -- |
|
| 5,644,638 |
|
Net loss | | |
| -- |
|
| -- |
|
| -- |
|
| (4,979,562 |
) |
| (4,979,562 |
) |
Share issue costs | | |
| -- |
|
| (54,131 |
) |
| -- |
|
| -- |
|
| (54,131 |
) |
Stock-based compensation | | |
| -- |
|
| -- |
|
| 274,088 |
|
| -- |
|
| 274,088 |
|
Cumulative translation adjustment | | |
| -- |
|
| (685,156 |
) |
| (43,750 |
) |
| 720,173 |
|
| (8,733 |
) |
|
Balance, December 31, 1998 | | |
carried forward | | |
| 19,727,904 |
|
| 15,124,693 |
|
| 749,038 |
|
| (12,569,379 |
) |
| 3,304,352 |
|
79
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements
Years ended December 31, 2006, 2005
and 2004
(in US dollars)
12. |
Canadian/U.S.
Reporting Differences (continued): |
|
(d) |
Other
disclosures required by United States GAAP (continued): |
|
(1) |
Development
stage company (continued): |
|
The
statement of shareholders equity since date of inception under US GAAP is presented
below (continued): |
|
|
Number of
shares
|
|
Consi-
deration
|
|
Additional
paid-in
capital
|
|
Accumulated
deficit
|
|
Total
|
|
Balance, December 31, 1998 |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
brought forward | | |
| 19,727,904 |
|
$ | 15,124,693 |
|
$ | 749,038 |
|
$ | (12,569,379 |
) |
$ | 3,304,352 |
|
Year ended December 31, 1999: | | |
Common shares issued | | |
| 275,900 |
|
| 969,253 |
|
| -- |
|
| -- |
|
| 969,253 |
|
Net loss | | |
| -- |
|
| -- |
|
| -- |
|
| (3,409,166 |
) |
| (3,409,166 |
) |
Share issue costs | | |
| -- |
|
| (35,041 |
) |
| -- |
|
| -- |
|
| (35,041 |
) |
Stock-based compensation | | |
| -- |
|
| -- |
|
| 198,815 |
|
| -- |
|
| 198,815 |
|
Cumulative translation adjustment | | |
| -- |
|
| 943,133 |
|
| 52,563 |
|
| (884,178 |
) |
| 111,518 |
|
|
Balance, December 31, 1999 | | |
| 20,003,804 |
|
| 17,002,038 |
|
| 1,000,416 |
|
| (16,862,723 |
) |
| 1,139,731 |
|
Year ended December 31, 2000: | | |
Common shares issued | | |
| 1,373,817 |
|
| 5,909,340 |
|
| -- |
|
| -- |
|
| 5,909,340 |
|
Warrants and options | | |
| -- |
|
| 421,638 |
|
| -- |
|
| -- |
|
| 421,638 |
|
Net loss | | |
| -- |
|
| -- |
|
| -- |
|
| (4,272,308 |
) |
| (4,272,308 |
) |
Share issue costs | | |
| -- |
|
| (353,204 |
) |
| -- |
|
| -- |
|
| (353,204 |
) |
Stock-based compensation | | |
| -- |
|
| -- |
|
| 257,690 |
|
| -- |
|
| 257,690 |
|
|
Balance, December 31, 2000 | | |
| 21,377,621 |
|
| 22,979,812 |
|
| 1,258,106 |
|
| (21,135,031 |
) |
| 3,102,887 |
|
Year ended December 31, 2001: | | |
Common shares issued | | |
| 919,904 |
|
| 2,554,254 |
|
| -- |
|
| -- |
|
| 2,554,254 |
|
Net loss | | |
| -- |
|
| -- |
|
| -- |
|
| (3,095,133 |
) |
| (3,095,133 |
) |
Share issue costs | | |
| -- |
|
| (120,944 |
) |
| -- |
|
| -- |
|
| (120,944 |
) |
Stock-based compensation | | |
| -- |
|
| -- |
|
| 55,040 |
|
| -- |
|
| 55,040 |
|
|
Balance, December 31, 2001 | | |
| 22,297,525 |
|
| 25,413,122 |
|
| 1,313,146 |
|
| (24,230,164 |
) |
| 2,496,104 |
|
Year ended December 31, 2002: | | |
Common shares issued | | |
| 723,429 |
|
| 3,031,043 |
|
| -- |
|
| -- |
|
| 3,031,043 |
|
Net loss | | |
| -- |
|
| -- |
|
| -- |
|
| (3,453,749 |
) |
| (3,453,749 |
) |
Share issue costs | | |
| -- |
|
| (166,842 |
) |
| -- |
|
| -- |
|
| (166,842 |
) |
Stock-based compensation | | |
| -- |
|
| -- |
|
| 41,140 |
|
| -- |
|
| 41,140 |
|
|
Balance, December 31, 2002 | | |
| 23,020,954 |
|
| 28,277,323 |
|
| 1,354,286 |
|
| (27,683,913 |
) |
| 1,947,696 |
|
Year ended December 31, 2003: | | |
Common shares issued | | |
| 1,380,205 |
|
| 4,096,000 |
|
| -- |
|
| -- |
|
| 4,096,000 |
|
Net loss | | |
| -- |
|
| -- |
|
| -- |
|
| (4,395,428 |
) |
| (4,395,428 |
) |
Share issue costs | | |
| -- |
|
| (220,819 |
) |
| -- |
|
| -- |
|
| (220,819 |
) |
Stock-based compensation | | |
| -- |
|
| -- |
|
| 41,140 |
|
| -- |
|
| 41,140 |
|
|
Balance, December 31, 2003 | | |
| 24,401,159 |
|
| 32,152,504 |
|
| 1,395,426 |
|
| (32,079,341 |
) |
| 1,468,589 |
|
Year ended December 31, 2004: | | |
Common shares issued | | |
| 1,102,903 |
|
| 4,049,750 |
|
| (375,717 |
) |
| -- |
|
| 3,674,033 |
|
Net loss | | |
| -- |
|
| -- |
|
| -- |
|
| (3,770,545 |
) |
| (3,770,545 |
) |
Share issue costs | | |
| -- |
|
| (210,939 |
) |
| -- |
|
| -- |
|
| (210,939 |
) |
Stock-based compensation | | |
| -- |
|
| -- |
|
| 41,140 |
|
| -- |
|
| 41,140 |
|
|
Balance, December 31, 2004 | | |
carried forward | | |
| 25,504,062 |
|
| 35,991,315 |
|
| 1,060,849 |
|
| (35,849,886 |
) |
| 1,202,278 |
|
80
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements
Years ended December 31, 2006, 2005
and 2004
(in US dollars)
12. |
Canadian/U.S.
Reporting Differences (continued): |
|
(d) |
Other
disclosures required by United States GAAP (continued): |
|
(1) |
Development
stage company (continued): |
|
The
statement of shareholders equity since date of inception under US GAAP is presented
below (continued): |
|
|
Number of
shares
|
|
Consi-
deration
|
|
Additional
paid-in
capital
|
|
Accumulated
deficit
|
|
Total
|
|
Balance, December 31, 2004 |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
brought forward | | |
| 25,504,062 |
|
$ | 35,991,315 |
|
$ | 1,060,849 |
|
$ | (35,849,886 |
) |
$ | 1,202,278 |
|
Year ended December 31, | | |
2005: | | |
Common shares issued | | |
| 1,224,719 |
|
| 2,935,000 |
|
| -- |
|
| -- |
|
| 2,935,000 |
|
Net loss | | |
| -- |
|
| -- |
|
| -- |
|
| (3,609,448 |
) |
| (3,609,448 |
) |
Share issue costs | | |
| -- |
|
| (166,942 |
) |
| -- |
|
| -- |
|
| (166,942 |
) |
Stock-based compensation | | |
| -- |
|
| -- |
|
| 41,140 |
|
| -- |
|
| 41,140 |
|
|
Balance, December 31, 2005 | | |
| 26,728,781 |
|
| 38,759,373 |
|
| 1,101,989 |
|
| (39,459,334 |
) |
| 402,028 |
|
Year ended December 31, 2006: | | |
Common shares issued | | |
| 1,593,472 |
|
| 4,955,000 |
|
| -- |
|
| -- |
|
| 4,955,000 |
|
Net loss | | |
| -- |
|
| -- |
|
| -- |
|
| (4,893,685 |
) |
| (4,893,685 |
) |
Share issue costs | | |
| -- |
|
| (284,227 |
) |
| -- |
|
| -- |
|
| (284,227 |
) |
Stock-based compensation | | |
| -- |
|
| -- |
|
| 837,308 |
|
| -- |
|
| 837,308 |
|
|
Balance, December 31, 2006 | | |
| 28,322,253 |
|
$ | 43,430,146 |
|
$ | 1,939,297 |
|
$ | (44,353,019 |
) |
$ | 1,016,424 |
|
|
|
(e) |
Recent
accounting pronouncements: |
|
(1) |
Financial
instruments: |
|
On
January 1, 2007, the Corporation will adopt CICA Handbook Section 1530, Comprehensive
Income, CICA Handbook Section 3251, Equity, CICA Handbook Section 3855,
Financial Instruments Recognition and Measurement, CICA Handbook
Section 3862, Financial Instruments Disclosures, and CICA Handbook
Section 3865, Hedges. The Corporation does not expect the adoption of the standards
to have a material effect on its financial statements. |
|
(2) |
Accounting
for uncertainty in income taxes: |
|
In
June 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in
Income Taxes an Interpretation of FASB Statement No. 109 (FIN
48), which clarifies the accounting for uncertainty in income taxes recognized
in an entitys financial statements. The Interpretation prescribes a recognition
threshold and measurement attribute for the financial statement recognition and
measurement of a tax position taken or expected to be taken on a tax return. This FASB
interpretation is effective for the Company beginning January 1, 2007. The adoption of FIN
48 is not expected to have a material effect on the Companys financial condition or
results of operation. |
81
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements
Years ended December 31, 2006, 2005
and 2004
(in US dollars)
12. |
Canadian/U.S.
Reporting Differences (continued): |
|
(e) |
Recent
accounting pronouncements (continued): |
|
(3) |
Fair
value measurements: |
|
In
September 2006, the FASB issued Statement of Financial Accounting Standards
(SFAS) No. 157, Fair Value Measurements. SFAS No. 157 clarifies the
principle that fair value should be based on the assumptions market participants would use
when pricing an asset or liability and establishes a fair value hierarchy that prioritizes
the information used to develop those assumptions. Under the standard, fair value
measurements would be separately disclosed by level within the fair value hierarchy. SFAS
No. 157 is effective for financial statements issued for fiscal years beginning after
November 15, 2007 and interim periods within those fiscal years, with early adoption
permitted. The Company does not expect the adoption of SFAS No. 157 to materially impact
its financial statements. |
|
The
Corporation operates in one reporting segment the research and development of
products for the treatment of Alzheimers and other diseases. Geographic segment
information is as follows: |
|
|
Canada
|
|
United
States
|
|
Europe
and other
|
|
Revenues: |
|
|
| |
|
| |
|
| |
|
2006 | | |
$ | 26,370 |
|
$ | 313,148 |
|
$ | 103,343 |
|
2005 | | |
| 79,667 |
|
| 346,615 |
|
| -- |
|
2004 | | |
| 2,855 |
|
| 319,093 |
|
| -- |
|
Net loss: | | |
| |
|
| |
|
2006 | | |
| (4,210,561 |
) |
| (683,124 |
) |
| -- |
|
2005 | | |
| (3,035,837 |
) |
| (548,691 |
) |
| -- |
|
2004 | | |
| (3,121,170 |
) |
| (624,455 |
) |
| -- |
|
Property and equipment, patents and | | |
| |
|
| |
|
| |
|
intellectual property: | | |
| |
|
| |
|
2006 | | |
| 3,229,093 |
|
| 256,565 |
|
| -- |
|
2005 | | |
| 3,072,345 |
|
| 249,247 |
|
| -- |
|
Total assets: | | |
| |
|
| |
|
2006 | | |
| 3,526,987 |
|
| 443,858 |
|
| -- |
|
2005 | | |
| 3,251,683 |
|
| 467,356 |
|
| -- |
|
|
|
Revenues
are attributed to geographic locations based on location of customers. |
82
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements
Years ended December 31, 2006, 2005
and 2004
(in US dollars)
13. |
Segment
disclosures (continued): |
|
Customers
that accounted for greater than 10% of revenues were as follows: |
|
|
2006
|
|
2005
|
|
2004
|
|
Customer A |
|
|
| 35 |
% |
| 36 |
% |
| 33 |
% |
|
|
Certain
of the comparative figures have been reclassified to conform to the presentation adopted
in the current year. |
|
(a) |
On
January 24, 2007, the Corporation issued 121,294 common shares for aggregate
proceeds of $450,000 under the Common Stock Private Purchase Agreement
referred to in note 7 (b). |
|
(b) |
On
February 14, 2007, the Corporation issued 181,087 common shares for aggregate
proceeds of $900,000 under the Common Stock Private Purchase Agreement
referred to in note 7 (b). |
|
(c) |
In
March, April and May 2007, the Corporation issued 451,290 common shares for
aggregate proceeds of $2,800,000 under the Common Stock Private Purchase
Agreement referred to in note 7 (b). |
|
(d) |
The
Corporation issued 60,000 common shares for aggregate proceeds of $252,125
pursuant to the exercise of stock options. |
|
(e) |
On
June 21, 2007, the shareholders approved a resolution to increase the maximum
number of shares which may be optioned under the stock option plan from
2,500,000 to 5,500,000, and increased the maximum number which may be
optioned to any one individual from 5% to 15% of the total issued and
outstanding common shares. In addition, the grant of 2,965,000 options
to senior executives at an exercise price of $3 per share referred to in
note 7 (c) became effective. |
83
ITEM 9. OFFER AND
LISTING DETAILS
Nymoxs common shares trade on
the NASDAQ Stock Market. Nymoxs common shares traded on the NASDAQ National Market
from December 1, 1997 until September 16, 1999 when they began trading on the NASDAQ
SmallCap Market, now called the NASDAQ Capital Market. Nymoxs common shares also
traded on the Montreal Exchange from December 18, 1995 until November 19, 1999.
The following tables set out the high
and low reported trading prices of the common shares on the NASDAQ Stock Market during the
periods indicated.
Annual High and Low
Market Prices Past Five Years
YEAR |
ANNUAL HIGH |
ANNUAL LOW |
2002 |
$5.750 |
$2.800 |
2003 |
$4.400 |
$2.360 |
2004 |
$5.250 |
$1.890 |
2005 |
$3.250 |
$1.550 |
2006 |
$5.950 |
$1.810 |
Quarterly High and Low
Market Prices Past Two Years
YEAR |
QUARTERLY PERIOD |
HIGH SALES PRICE |
LOW SALES PRICE |
2005 |
1st Quarter |
$3.250 |
$1.960 |
|
2nd Quarter |
$3.000 |
$2.000 |
|
3rd Quarter |
$2.920 |
$1.550 |
|
4th Quarter |
$2.450 |
$1.860 |
2005 |
1st Quarter |
$5.950 |
$1.810 |
|
2nd Quarter |
$4.470 |
$2.240 |
|
3rd Quarter |
$4.580 |
$2.470 |
|
4th Quarter |
$4.770 |
$3.210 |
Monthly High and Low
Market Prices Most Recent Six Months
DATE |
MONTHLY HIGH |
MONTHLY LOW |
January, 2007 |
$4.140 |
$3.370 |
February, 2007 |
$6.990 |
$3.580 |
March, 2007 |
$6.750 |
$5.250 |
April, 2007 |
$6.700 |
$5.070 |
May, 2007 |
$7.500 |
$5.400 |
June, 2007 (through June 11 , 2007) |
$6.080 |
$5.670 |
ITEM 10. ADDITIONAL
INFORMATION
Memorandum and Articles
of Association
Bylaws And Articles Of
Incorporation
The companys Articles of
Incorporation as amended, which we refer to as our articles of incorporation, are on file
with the Corporations Directorate of Industry Canada under Corporation Number 315235-9.
Our articles of incorporation do not include a stated purpose and do not place any
restrictions on the business that the company may carry on.
84
Directors
A director of our company need not be
a shareholder. In accordance with our bylaws and the Canada Business Corporations Act, at
least 25% of our directors must be residents of Canada. In order to serve as a director, a
person must be a natural person at least 18 years of age, of sound mind and not bankrupt.
Neither our articles of incorporation or by-laws, nor the Canada Business Corporations
Act, impose any mandatory retirement requirements for directors.
Our bylaws and the Canada Business
Corporations Act authorize the directors from time to time to determine the remuneration
for their services. There is no requirement for an independent quorum.
A director who is a party to, or who
is a director or officer of or has a material interest in any person who is a party to, a
material contract or transaction or proposed material contract or transaction with our
company must disclose to the company the nature and extent of his or her interest at the
time and in the manner provided by the Canada Business Corporations Act. The Canada
Business Corporations Act prohibits such a director from voting on any resolution to
approve the contract or transaction unless the contract or transaction:
|
|
is
an arrangement by way of security for money lent to or obligations undertaken by
the director for the benefit of the Company or an affiliate; |
|
|
relates
primarily to his or her remuneration as a director, officer, employee or agent of the
Company or an affiliate; |
|
|
is
for indemnity or insurance for director's liability as permitted by the Act; or |
Our board of directors may, on behalf
of the Company and without authorization of our shareholders:
|
|
borrow
money upon the credit of the Company; |
|
|
issue,
reissue, sell or pledge debt obligations of the Company; |
|
|
give
a guarantee on behalf of the Company to secure performance of an obligation of any
person; and |
|
|
mortgage,
hypothecate, pledge or otherwise create a security interest in all or any property of the
Company, owned or subsequently acquired, to secure any obligation of the Company. |
The Canada Business Corporations Act
prohibits the giving of a guarantee to any shareholder, director, officer or employee of
the Company or of an affiliated corporation or to an associate of any such person for any
purpose or to any person for the purpose of or in connection with a purchase of a share
issued or to be issued by the Company or its affiliates, where there are reasonable
grounds for believing that the Company is or, after giving the guarantee, would be unable
to pay its liabilities as they become due, or the realizable value of the Companys
assets in the form of assets pledged or encumbered to secure a guarantee, after giving the
guarantee, would be less than the aggregate of the Companys liabilities and stated
capital of all classes.
These borrowing powers may be varied
by the Companys bylaws or its articles of incorporation. However, our bylaws and
articles of incorporation do not contain any restrictions on or variations of these
borrowing powers.
85
Common Shares
Our articles of incorporation
authorize the issuance of an unlimited number of common shares. They do not authorize the
issuance of any other class of shares.
The holders of the common shares of
our Company are entitled to receive notice of and to attend all meetings of the
shareholders of our Company and have one vote for each common share held at all meetings
of the shareholders of our Company. Our directors are elected at each annual meeting of
shareholders and do not stand for reelection at staggered intervals.
The holders of common shares are
entitled to receive dividends and the Company will pay dividends, as and when declared by
our board of directors, out of moneys properly applicable to the payment of dividends, in
such amount and in such form as our board of directors may from time to time determine,
and all dividends which our board of directors may declare on the common shares shall be
declared and paid in equal amounts per share on all common shares at the time outstanding.
In the event of the dissolution,
liquidation or winding-up of the Company, whether voluntary or involuntary, or any other
distribution of assets of the Company among its shareholders for the purpose of winding up
its affairs, the holders of the common shares will be entitled to receive the remaining
property and assets of the Company.
There are no redemption provisions
and no liability for further capital calls associated with the Companys common
stock.
Action Necessary To
Change Rights Of Shareholders
In order to change the rights of our
shareholders, we would need to amend our articles of incorporation to effect the change.
Such an amendment would require the approval of holders of two-thirds of the shares cast
at a duly called special meeting. For certain amendments such as those creating of a class
of preferred shares, a shareholder is entitled to dissent in respect of such a resolution
amending our articles and, if the resolution is adopted and the Company implements such
changes, demand payment of the fair value of its shares.
Meetings of Shareholders
An annual meeting of shareholders is
held each year for the purpose of considering the financial statements and reports,
electing directors, appointing auditors and for the transaction of other business as may
be brought before the meeting. The board of directors has the power to call a special
meeting of shareholders at any time.
Notice of the time and place of each
meeting of shareholders must be given not less than 21 days, nor more than 60 days, before
the date of each meeting to each director, to the auditor and to each shareholder who at
the close of business on the record date for notice is entered in the securities register
as the holder of one or more shares carrying the right to vote at the meeting. Notice of
meeting of shareholders called for any other purpose other than consideration of the
minutes of an earlier meeting, financial statements and auditors report, election of
directors and reappointment of the incumbent auditor, must state the nature of the
business in sufficient detail to permit the shareholder to form a reasoned judgment on and
must state the text of any special resolution or by-law to be submitted to the meeting.
The only persons entitled to be
present at a meeting of shareholders are those entitled to vote, the directors of the
Company and the auditor of the Company. Any other person may be admitted only on the
invitation of the chairman of the meeting or with the consent of the meeting. In
circumstances where a court orders a meeting of shareholders, the court may direct how the
meeting may be held, including who may attend the meeting.
86
Limitations On Right To
Own Securities
Neither Canadian law nor our articles
or by-laws limit the right of a nonresident to hold or vote our shares, other than as
provided in the Investment Canada Act (the Investment Act), as amended by the
World Trade Organization Agreement Implementation Act. The Investment Act generally
prohibits implementation of a direct reviewable investment by an individual, government or
agency thereof, corporation, partnership, trust or joint venture that is not a
Canadian, as defined in the Investment Act (a non-Canadian),
unless, after review, the minister responsible for the Investment Act is satisfied that
the investment is likely to be of net benefit to Canada. An investment in our shares by a
non-Canadian (other than a WTO Investor, as defined below) would be reviewable
under the Investment Act if it were an investment to acquire direct control of our
company, and the value of the assets of our company were CDN$5.0 million or more (provided
that immediately prior to the implementation of the investment the Company was not
controlled by WTO Investors). An investment in our shares by a WTO Investor (or by a
non-Canadian other than a WTO Investor if, immediately prior to the implementation of the
investment the Company was controlled by WTO Investors) would be reviewable under the
Investment Act if it were an investment to acquire direct control of the Company and the
value of the assets of the Company equaled or exceeded a specified amount (the
Review Threshold). The Review Threshold in 2005 was CDN$250 million, in 2006
CDN$265 million, and in 2007 CDN$281 million. A non-Canadian, whether a WTO Investor or
otherwise, would be deemed to acquire control of the Company for purposes of the
Investment Act if he or she acquired a majority of our shares. The acquisition of less
than a majority, but at least one-third of our shares, would be presumed to be an
acquisition of control of the Company, unless it could be established that we were not
controlled in fact by the acquirer through the ownership of our shares. In general, an
individual is a WTO Investor if he or she is a national of a country (other
than Canada) that is a member of the World Trade Organization (WTO Member) or
has a right of permanent residence in a WTO Member. A corporation or other entity will be
a WTO Investor if it is a WTO investor-controlled entity, pursuant
to detailed rules set out in the Investment Act. The United States is a WTO Member.
Certain transactions involving our shares would be exempt from the Investment Act,
including:
(a) |
an
acquisition of our shares if the acquisition were made in the ordinary course
of that persons business as a trader or dealer in securities; |
(b) |
an
acquisition of control of the Company in connection with the foreclosure of a
security interest granted for a loan or other assistance and not for any
purpose related to the provisions the Investment Act; and |
(c) |
an
acquisition of control of the Company by reason of an amalgamation,
consolidation or corporate reorganization, following which the direct or
indirect control in fact of the Company, through ownership of voting
interests, remains unchanged. |
Change of Control
There are no provisions of our bylaws
or articles of incorporation that would have an effect of delaying, deferring or
preventing a change in control of the Company and that would operate only with respect to
a merger, acquisition or corporate restructuring involving the Company. Our bylaws do not
contain a provision governing the ownership threshold above which shareholder ownership
must be disclosed.
87
Material Contracts
The following is a summary of the
material contracts to which the Company is a party, for the two years ended June 22, 2007
..
1. |
The
Common Stock Private Purchase Agreement between Nymox Pharmaceutical
Corporation and Lorros-Greyse Investments Limited November 13, 2006. This
agreement established a financing commitment for $13 million over a
twenty-four month period starting November 13, 2006. The terms and
conditions of this commitment are further described in Liquidity and
Capital Resources section in Item 5 of this report. |
2. |
The
Common Stock Private Purchase Agreement between Nymox Pharmaceutical
Corporation and Lorros-Greyse Investments Limited October 21, 2005. This
agreement established a financing commitment for $13 million over a
twenty-four month period starting October 21, 2005. This agreement was
replaced by the new agreement above on November 13, 2006. |
3. |
The
Common Stock Private Purchase Agreement between Nymox Pharmaceutical
Corporation and Lorros-Greyse Investments Limited October 6, 2004. This
agreement established a financing commitment for $13 million over a
twenty-four month period starting October 6, 2004. This agreement was
replaced by the new agreement above on October 21, 2005. |
Exchange Controls
Canada has no system of exchange
controls. There are no exchange restrictions on borrowing from foreign countries or on the
remittance of dividends, interest, royalties and similar payments, management fees, loan
repayments, settlement of trade debts or the repatriation of capital.
There are no limitations on the
rights of non-Canadians to exercise voting rights on their shares of Nymox.
Taxation
U.S. Federal Income
Tax Considerations for U.S. Persons
This section contains a summary of
certain U.S. federal income tax considerations for U.S. Persons (as defined below) who
hold common shares of Nymox. This summary is based upon the Internal Revenue Code of 1986,
as amended (the Code), Treasury regulations, rulings of the Internal Revenue
Service (the IRS), and judicial decisions in existence on the date hereof, all
of which are subject to change. Any such change could apply retroactively and could have
adverse consequences to Nymox and its shareholders. This summary is necessarily general
and does not attempt to summarize all aspects of the federal tax laws (and does not
attempt to summarize any state or local laws) that may affect an investors
acquisition of an interest in Nymox. No ruling from the IRS will be requested and no
assurance can be given that the IRS will agree with the tax consequences described in this
summary.
For purposes of this discussion, the
term U.S. Person means (a) an individual who is a citizen of the United
States or who is resident in the United States for United States federal income tax
purposes, (b) a corporation or a partnership that is organized under the laws of the
United States or any state thereof, (c) an estate the income of which is subject to United
States federal income taxation regardless of its source, or (d) a trust (i) that is
subject to the supervision of a court within the United States and is subject to the
control of one or more United States persons as described in the Code, or (ii) that has a
valid election in effect under applicable Treasury regulations to be treated as a United
States person. The term U.S. Holder means a shareholder of Nymox who is a U.S.
Person. The term foreign corporation means an entity that is classified as a
corporation for U.S. federal income tax purposes and that is not organized under the laws
of the United States or any state thereof.
88
This summary does not discuss all
United States federal income tax considerations that may be relevant to U.S. Holders in
light of their particular circumstances or to certain holders that may be subject to
special treatment under United States federal income tax law (for example, insurance
companies, tax-exempt organizations, financial institutions, dealers in securities,
persons who hold shares as part of a straddle, hedging, constructive sale, or conversion
transaction, U.S. Holders whose functional currency is not the U.S. dollar, and U.S.
Holders who acquired shares through exercise of employee stock options or otherwise as
compensation for services). Furthermore, this summary does not address any aspects of
state or local taxation.
The tax consequences of an
investment in Nymox are complex and based on tax provisions that are subject to change.
Prospective investors are urged to consult with, and must depend upon, their own tax
advisors with specific reference to their own tax situations as to the income and other
tax consequences of an investment in Nymox.
Dividends and gains on sale.
Except as described below with respect to the passive foreign investment
company rules, dividends paid by Nymox to a U.S. Holder, without reduction for
Canadian withholding taxes, will be taxed for U.S. federal income tax purposes at recently
enacted lower rates applicable to certain qualified dividends. Such dividends will not be
eligible for the dividend-received deduction generally allowed under the Code to dividend
recipients that are U.S. corporations. The amount of any distribution in excess of
Nymoxs current and accumulated earnings and profits will first be applied to reduce
the U.S. Holders tax basis in its Nymox common shares, and any amount in excess of
tax basis will be treated as gain from the sale or exchange of the common shares. For
taxable years beginning after December 31, 2002 and before January 1, 2009, a dividend
paid by Nymox generally will be taxed at the preferential tax rates applicable to
long-term capital gains (where the maximum federal rate is 15%) if (a) Nymox is a
qualified foreign corporation as defined in Section 1(h)(11) of the Code, (a
QFC), (b) the U.S. Holder receiving such dividend is an individual, estate, or
trust, and (c) such dividend is paid on common shares that have been held by such U.S.
Holder for at least 61 days during the 121-day period beginning 60 days before the
ex-dividend date (i.e., the first date that a purchaser of such common shares
will not be entitled to receive such dividend). Nymox currently meets the definition of a
QFC because its common shares are readily tradable on The Nasdaq SmallCap Market, an
established securities market in the United States, provided that Nymox is not a
passive foreign investment company (as described below) for the taxable year
during which Nymox pays a dividend or for the preceding taxable year. If Nymox is not a
QFC, a dividend paid by Nymox to a U.S. Holder that is an individual, estate, or trust
generally will be taxed at ordinary income tax rates (and not at the preferential tax
rates applicable to long-term capital gains). The dividend rules are complex, and each
U.S. Holder should consult its own financial advisor, legal counsel, or accountant
regarding the dividend rules.
Except as described below with
respect to the passive foreign investment company rules, any gain recognized
by a U.S. Holder on a sale or exchange of Nymox common shares (or on a distribution
treated as a sale or exchange) generally will be treated as capital gain. Capital gains of
corporations are taxable at the same rate as ordinary income. With respect to
non-corporate taxpayers, the excess of net long-term capital gain over net short term
capital loss may be taxed at a substantially lower rate than is ordinary income. A capital
gain or loss is long-term if the asset has been held for more than one year and short-term
if held for one year or less. In addition, the distinction between capital gain or loss
and ordinary income or loss is relevant for purposes of limitations on the deductibility
of capital losses.
A U.S. Holder generally may claim a
credit against its U.S. federal income tax liability for Canadian income tax withheld from
dividends received on Nymox common shares. The amount of this credit is subject to several
limitations under the Code.
89
Controlled foreign corporation
rules. A foreign corporation generally is classified as a controlled foreign
corporation (a CFC) if more than 50% of the corporations shares
(by vote or value) are owned, directly or indirectly, by 10% U.S.
Shareholders. For this purpose, a 10% U.S. Shareholder is a U.S. Person
that owns, directly or indirectly, shares possessing 10% or more of the voting power in
the foreign corporation. Nymox believes that it is not a CFC at the present time. If Nymox
were a CFC, each 10% U.S. Shareholder that owns, directly or indirectly through foreign
entities, an interest in Nymox generally would be required to include in its gross income
for U.S. federal income tax purposes a pro-rata share of any Subpart F income
earned by Nymox, whether or not such income is distributed by Nymox. Subpart F income
generally includes interest, dividends, royalties, and gain on the sale of stock or
securities.
Foreign personal holding company
rules. In general, a foreign corporation is a foreign personal holding
company (a FPHC) during a taxable year if (i) at any time during
the taxable year, more than 50% of the shares (by vote or value) of the corporation are
owned, directly or indirectly, by five or fewer individuals who are U.S. Persons, and
(ii) at least 50% of the gross income of the corporation for the taxable year
consists of foreign personal holding company income (such as dividends,
interest, royalties, and gains on the sale of stock or securities).
Nymox believes that it is not a FPHC
at the present time. If Nymox were a FPHC, each U.S. Person that owns, directly or
indirectly through foreign entities, an interest in Nymox generally would be required to
recognize, as a dividend, the U.S. Persons share of the undistributed annual income
of Nymox.
Passive foreign investment company
rules. In general, a foreign corporation is a passive foreign investment
company (a PFIC) during a taxable year if 75% or more of its gross
income for the taxable year constitutes passive income or if 50% or more of
its assets (by average fair market value) held during the taxable year produce, or are
held for the production of, passive income. In general, any U.S. Person that owns,
directly or indirectly, an interest in a foreign corporation will be subject to an
interest charge (in addition to regular U.S. federal income tax) upon the disposition by
the U.S. Person of, or receipt by the U.S. Person of excess distributions with
respect to, any shares of the foreign corporation if: (i) the foreign corporation is
a PFIC during the taxable year in which such income is realized by the U.S. Person; or
(ii) the foreign corporation was a PFIC during any prior taxable year that is
included in whole or in part in the U.S. Persons holding period (within
the meaning of Section 1223 of the Code) with respect to its interest in the shares of the
foreign corporation. Furthermore, the U.S. Persons share of such gain or
excess distribution will be taxable as ordinary income. There exist several
other adverse tax consequences that may apply to any U.S. Person that owns, directly or
indirectly, an interest in a PFIC.
A U.S. Person that owns, directly or
indirectly, an interest in a PFIC can elect to treat such PFIC as a qualified
electing fund (a QEF) with respect to the U.S. Person. In general, the
effect of a QEF election with respect to a PFIC is that, beginning with the first taxable
year to which the election applies and in all succeeding taxable years during which the
foreign corporation is a PFIC, the U.S. Person is required to include in its income its
share of the ordinary earnings and net capital gains of the PFIC. The U.S. Person is not
taxable with respect to any distribution by the PFIC from earnings that have been included
previously in the U.S. Persons income under the QEF provisions. If the QEF election
is made with respect to the first taxable year in which a U.S. Person owns, directly or
indirectly, an interest in the particular PFIC, the adverse tax consequences described in
the immediately preceding paragraph (including the interest charge and the treatment of
gains as ordinary income) would not apply to the U.S. Persons interest in that PFIC.
In order to make a QEF election, a U.S. Person is required to provide to the IRS certain
information furnished by the PFIC.
Nymox believes that it has not been a
PFIC during any taxable year ending on or before December 31, 2005. It is not possible to
express an opinion as to whether or not Nymox is or will be a PFIC during its current
taxable year or future taxable years. Nymox intends to notify its U.S. Holders within 45
days after the end of the taxable year for which Nymox believes it might be a PFIC. Nymox
has further undertaken (i) to provide its U.S. Holders with timely and accurate
information as to its status as a PFIC and the manner in which the QEF election can be
made and (ii) to comply with all record-keeping, reporting and other requirements so that
the U.S. Holders, at their option, may make a QEF election.
90
Each U.S. Person who owns, directly
or indirectly, common shares of Nymox is urged to consult its own tax advisor with respect
to the advantages and disadvantages of making a QEF election with respect to Nymox.
Backup withholding.
Information reporting to the IRS may be required with respect to payments of dividends on
the Nymox common shares to U.S. Holders, and with respect to proceeds received by U.S.
Holders on the sale of Nymox common shares. A U.S. Holder may be subject to backup
withholding at a 30% rate with respect to dividends received with respect to Nymox common
shares, or proceeds received on the sale of Nymox common shares through a broker, unless
the U.S. Holder (i) demonstrates that it qualifies for an applicable exemption (such
as the exemption for holders that are corporations), or (ii) provides a taxpayer
identification number and complies with certain other requirements. Any amount withheld
from payment to a U.S. Holder under the backup withholding rules generally will be allowed
as credit against the U.S. Holders U.S. federal income tax liability, if any, and
may entitle the U.S. Holder to a refund, provided that the required information is
furnished to the IRS.
Canadian Federal
Income Taxation
The following is, as of the date of
this report, a summary of the principal Canadian federal income tax considerations
generally applicable to shareholders who receive a dividend from Nymox and who, at all
relevant times, for purposes of the Income Tax Act (Canada) the (Tax Act),
hold and will hold Nymox common shares as capital property and deal with Nymox at
arms length.
Nymoxs common shares will
generally constitute capital property to a holder unless the holder holds such shares in
the course of carrying on a business or the holder has acquired such shares in a
transaction or transactions considered to be an adventure in the nature of trade. This
summary is based on the current provisions of the Tax Act, the regulations under that act,
counsels understanding of current administrative and assessing policies of the
Canada Customs and Revenue Agency and all specific proposals to amend the Tax Act publicly
announced or released by or on behalf of the Minister of Finance (Canada) before the date
of this report (Tax Proposals).
The Tax Act contains certain
provisions relating to securities held by certain financial institutions (the
Mark-to-Market Rules). This summary does not take into account these
Mark-to-Market Rules or any amendments to them contained in the Tax Proposals and
taxpayers that are financial institutions for purposes of those rules should
consult their own tax advisors.
This summary is not exhaustive of all
possible Canadian federal income tax considerations and, except for the Tax Proposals,
does not take into account or anticipate any changes in law, whether by legislative,
governmental or judicial action, nor does it take into account tax legislation of any
province, territory or foreign jurisdiction. This summary is of a general nature only and
is not intended to be, nor should it be construed as, legal or tax advice to any
particular holder of Nymox common shares.
Canadian Residents
The following summary is relevant to
a holder of Nymox common shares who, for purposes of the Tax Act and any applicable tax
treaty or convention, is resident in Canada at all relevant times.
Tax Treatment of Capital
Gains and Capital Losses for Canadian Residents
91
On a disposition or deemed
disposition of a Nymox common share, the holder will realize a capital gain (or capital
loss) equal to the amount by which the proceeds of disposition for the Nymox common share
exceed (or are less than) the aggregate of any costs of disposition and the adjusted cost
base to the holder of the Nymox common share immediately before the disposition.
Pursuant to the Tax Act and subject
to certain transitional rules which apply in certain circumstances, a holder of Nymox
common shares will be required to include in income one-half of the amount of any capital
gain (a Taxable capital gain) and may deduct one-half of the amount of any
capital loss (an Allowable capital loss) against Taxable capital gains
realized by the holder in the year of the disposition. Allowable capital losses in excess
of Taxable capital gains may be carried back and deducted in any of the three preceding
years or carried forward and deducted in any following year against taxable capital gains
realized in such years to the extent and under the circumstances described in the Tax Act.
A capital loss realized by a holder
of Nymox common shares that is a corporation, a partnership of which a corporation is a
member or a trust of which a corporation is a beneficiary may be reduced by the amount of
dividends received in certain circumstances. Capital gains realized by an individual may
give rise to a liability for alternative minimum tax.
Tax Treatment of
Dividends Received by Canadian Residents
In the case of a holder of Nymox
common shares who is an individual, any dividends received on the common shares will be
included in computing his income and will be subject to the gross-up and dividend tax
credit rules normally applicable to taxable dividends paid by taxable Canadian
corporations. A holder that is a corporation may be liable to pay refundable tax under
Part IV of the Tax Act. However, a public corporation which is not controlled, whether
because of a beneficial interest in one or more trusts or otherwise, by or for the benefit
of an individual (other than a trust) or a related group of individuals (other than
trusts) will not be liable to pay refundable tax under Part IV of the Tax Act.
In the case of a holder of Nymox
common shares that is a corporation, the amount of any capital loss otherwise determined
resulting from the disposition of a Nymox common share may be reduced by the amount of
dividends previously received or deemed to have been received thereon. Any such
restriction will not occur where the corporate holder owned the Nymox common share for 365
days or longer and such holder (together with any persons with whom it did not deal at
arms length) did not own more than 5% of the shares of any class or series of Nymox
at the time the relevant dividends were received or deemed to have been received.
Analogous rules apply where a corporation is a member of a partnership or a beneficiary of
a trust, which owns Nymox common shares.
Shareholders Who Are
Not Residents of Canada
The following summary is relevant to
a holder of Nymox common shares, who, at all relevant times, for purposes of the Tax Act
and any applicable tax treaty or convention, is a non-resident or is deemed to be a
non-resident of Canada and does not use and is not deemed to use or hold Nymox common
shares in the course of carrying on a business in Canada. Special rules, which are not
discussed below, may apply to a non-resident that is an insurer which carries on business
in Canada and elsewhere.
Dividends Paid To
Non-Residents of Canada
Under the Tax Act, dividends paid or
credited to a non-resident are subject to withholding tax at the rate of 25% of the gross
amount of the dividends. This withholding tax may be reduced or eliminated pursuant to the
terms of an applicable tax treaty between Canada and the country of residence of the
non-resident. For example, for persons who are resident in the United States for purposes
of the Canada-United States Income Tax Convention, (the Convention) the rate
of withholding tax on dividends is reduced to 15% generally and 5% when the United States
resident is a company that beneficially owns at least 10% of the voting stock of the
company paying the dividends.
92
Under the Convention, dividends paid
to certain religious, scientific, charitable and other similar tax-exempt organizations
and certain organizations that are resident in, and exempt from tax in, the United States
are exempt from Canadian non-resident withholding tax. Provided that certain
administrative procedures designed to establish with the Canadian tax authorities the
right of such entities to benefit from this withholding tax exemption are complied with by
the tax-exempt entities prior to the Distribution, Nymox would not be required to withhold
such tax on such payment. Alternatively, the above-described tax-exempt entities may claim
a refund of Canadian withholding tax otherwise withheld by Nymox on the distribution of
dividends.
Tax Treatment of Capital
Gains of Non-Residents of Canada
On a disposition or deemed
disposition of a Nymox common share, a non-resident holder will realize a capital gain (or
capital loss) equal to the amount by which the proceeds of disposition for the Nymox
common share exceed (or are less than) the aggregate of any costs of disposition and the
adjusted cost base to the non-resident holder of the Nymox common share immediately before
the disposition.
A non-resident of Canada is liable
for Canadian income tax on a capital gain realized on the disposition of property only
where that property constitutes taxable Canadian property. Pursuant to the Tax
Act and subject to certain transitional rules which apply in certain circumstances,
one-half of any capital gain from the disposition of taxable Canadian property is subject
to Canadian tax.
Under the Tax Act, shares of Nymox
will not constitute taxable Canadian property unless, at any time, in the five years
immediately preceding the disposition, the non-resident holder, persons with whom the
non-resident holder did not deal at arms length, or the non-resident holder together with
all such persons owned (or had a right to acquire) 25% or more of the shares of any class
of Nymox. Even in circumstances where shares of Nymox are taxable Canadian property to a
non-resident holder, the non-resident holder may be entitled to relief from Canadian tax
on any capital gain realized on the disposition thereof pursuant to the terms of an
applicable tax treaty between Canada and the country of residence of the non-resident. For
example, the Convention provides that gains realized by a resident of the United States on
the disposition or deemed disposition of shares of a company will generally not be subject
to tax under the Tax Act, provided that the value of the shares is not derived principally
from real property situated in Canada. Nymox believes that the value of its shares is not
currently derived principally from real property situated in Canada and it does not expect
this to change in the foreseeable future.
Provided that the Nymox common shares
remain listed on a prescribed stock exchange, which includes the NASDAQ SmallCap Market
System, a non-resident holder who disposes of Nymox common shares will not be required to
comply with the Canadian notification procedures generally applicable to dispositions of
taxable Canadian property.
Documents on Display
Nymox is subject to the informational
requirements of the Securities Exchange Act of 1934, as amended. In accordance with these
requirements, the company files reports and other information with the Securities and
Exchange Commission. These materials, including this Annual Report on Form 20-F and the
exhibits hereto, may be inspected and copied at the Commissions Public Reference
Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of the materials may be
obtained from the Commissions Public Reference Room at prescribed rates.
93
We are required to file reports and
other information with the securities commissions in all provinces of Canada. You also are
invited to read and copy any reports, statements or other information, other than
confidential filings, that we file with the provincial securities commissions. These
filings are also electronically available from the Canadian System for Electronic Document
Analysis and Retrieval (SEDAR) (http://www.sedar.com), the Canadian equivalent
of the SECs electronic document gathering and retrieval system. This material
includes our Management Information Circular for the most recent annual meeting, which
provides information including directors and officers, remuneration and
indebtedness, principal holders of securities and securities authorized for issuance under
equity compensation plans. Additional financial information is provided in our annual
financial statements and our Managements Discussion and Analysis relating to these
statements. These documents are also accessible on SEDAR (www.sedar.com).
We will provide without charge to
each person, including any beneficial owner, on the written or oral request of such
person, a copy of any or all documents referred to above which have been or may be
incorporated by reference in this Annual Report on Form 20-F (not including exhibits to
such incorporated information that are not specifically incorporated by reference into
such information). Requests for such copies should be directed to us at the following
address: Nymox Pharmaceutical Corporation, 9900 Cavendish Blvd. Suite 306, St.-Laurent,
Quebec, Canada, H4M 2V2, Attention: Investor Relations. Telephone (800) 936-9669.
Facsimile (514) 332-2227 EMAIL: info@nymox.com
ITEM 11. QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our principal exposure to market risk
relates to changes in interest rates. As of December 31, 2006, we had a cash flow exposure
to the changing interest rates on notes payable, bearing interest at the prime rate plus
2%, in the amount of $500,000. These notes payable were paid in full in May 2007.
ITEM 12. DESCRIPTION OF
SECURITIES OTHER THAN EQUITY SECURITIES
Not applicable.
PART II
ITEM 13. DEFAULTS,
DIVIDEND ARREARAGES AND DELINQUENCIES
None.
ITEM 14. MATERIAL
MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
Not applicable.
ITEM 15. CONTROLS AND
PROCEDURES
(a) Evaluation
of Disclosure Controls and Procedures. In accordance with Rule 13a-15(b) of
the Securities Exchange Act of 1934 (the Exchange Act), the Companys
management, including the Companys Chief Executive Officer and President,
and the Chief Financial Officer and Secretary-Treasurer, evaluated the
effectiveness of the design and operation of the Companys disclosure
controls and procedures (as defined in Rule 13a-14(c) under the Exchange Act)
as of the end of the period covered by this Annual Report on Form 20-F and the
Chief Executive Officer and President, and the Chief Financial Officer and
Secretary-Treasurer concluded that the disclosure controls and procedures were
effective.
(b) Changes
in Internal Controls over Financial Reporting. There were no significant
changes in the Companys internal controls over financial reporting or
other factors during the period covered by this report that could significantly
affect these controls subsequent to the date of their evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
94
Item 16A.
AUDIT COMMITTEE FINANCIAL EXPERT
Our board of directors has determined
that Paul McDonald, the Chairman of our Audit Committee, is an audit committee financial
expert and is an independent director under the applicable listing rules of the Nasdaq
Stock Market.
Item 16B.
CODE OF ETHICS
We have adopted a code of ethics that
is applicable to our officers, directors and employees in general and our principal
executive officer, principal financial officer, principal accounting officer or controller
and persons performing similar functions in particular. The code of ethics can be found on
our website, www.nymox.com.
Item 16C.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
Our principal independent auditor is
KPMG LLP.
Fees and Services
During the years ended December 31,
2006 and 2005, we paid the following fees for professional services to KPMG LLP:
|
2006
|
2005
|
|
(CAN$)
|
|
Audit Services |
|
|
| 112,000 |
|
| 107,000 |
|
Audit-Related Services | | |
| 6,000 |
|
| 6,000 |
|
Tax Services | | |
| 18,200 |
|
| 14,000 |
|
Other Services | | |
| 0 |
|
| 0 |
|
|
| |
| |
Total | | |
| 136,200 |
|
| 127,000 |
|
Audit Services are defined as
the standard audit work that needs to be performed each year in order to issue an opinion
on our consolidated financial statements and to issue reports on our statutory financial
statements. It also includes services that can only be provided by the auditor signing the
audit report such as auditing of non-recurring transactions and application of new
accounting policies, audits of significant and newly implemented system controls,
pre-issuance reviews of quarterly financial results, consents and comfort letters and any
other audit services required for U.S. Securities and Exchange Commission or other
regulatory filings.
Audit-Related Services include
those other assurance services provided by auditors but not restricted to those that can
only be provided by the auditor signing the audit report. They include amounts for
services such as acquisition due diligence, audits of pension and benefit plans,
contractual audits of third party arrangements, assurance services on corporate
citizenship reporting, and consultation regarding new accounting pronouncements.
95
Tax Services represent tax
compliance and other services and expatriate and executive tax return services.
Policy on Pre-Approval of Audit
and Non-Audit Services of Independent Auditors
Our Audit Committee is responsible for
the oversight of our independent auditors work. Our Audit Committees policy is
to pre-approve all audit and non-audit services provided by KPMG. These services may
include audit services, audit-related services, tax services and other services. The Audit
Committee appoints the auditors and oversees and fixes the compensation for all such
services. KPMG and our management report to the Audit Committee on a quarterly basis
regarding the extent of services actually provided in accordance with the applicable
pre-approval, and regarding the fees for the services performed. The Audit Committee
approved 100% of the fees listed on the table above.
ITEM 16D. EXEMPTIONS
FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
Not applicable.
ITEM 16E. PURCHASES OF
EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
None.
PART III
ITEM 17. FINANCIAL
STATEMENTS
The financial statements identified below
are included in Item 8 of this report and are incorporated by reference in this item.
|
At
and for the year ended December 31, 2006: Consolidated Balance Sheets
Consolidated Statements of Operations and Deficit
Consolidated Statements of Cash Flows Notes |
|
At
and for the year ended December 31, 2005: Consolidated Balance Sheets
Consolidated Statements of Operations and Deficit
Consolidated Statements of Cash Flows Notes |
|
For
the year ended December 31, 2004: Consolidated Statement of Operations
and Deficit Consolidated Statements of Cash Flows
Notes |
ITEM 18. FINANCIAL
STATEMENTS
Not applicable.
96
ITEM 19. EXHIBITS
The
following exhibits are included with or incorporated by reference into this report:
1(a) |
Articles
of Incorporation, as amended. (incorporated by reference to Exhibit 3.1 to the
Companys Form 20-F filed with the Commission December 9, 1996) |
1(b) |
Bylaws
of the Company (incorporated by reference to Exhibit 3.2 to the Companys Form 20-F
filed with the Commission December 9, 1996) |
4(a) |
Memorandum
of Agreement between Paul Averback and the Company (incorporated by reference to
Exhibit 10.1 to the Companys Form 20-F filed with the Commission
December 9, 1996) |
4(b) |
Share
Option Plan of the Company (incorporated by reference to Exhibit 10.2 to the Companys
Form 20-F filed with the Commission December 9, 1996) |
4(c) |
Research
and License Agreement between the Massachusetts General Hospital Corporation and the
Company (incorporated by reference to Exhibit 10.3 to the
Companys Form 20-F filed with the Commission December 9, 1996) |
4(d) |
Research
and License Amendment between the Massachusetts General Hospital Corporation and the
Company (incorporated by reference to Exhibit 10.5 to the
Companys Form 20-F filed with the Commission February 21, 1997) |
4(e) |
Common
Stock Purchase Agreement between Nymox Pharmaceutical Corporation and Jaspas
Investments Limited dated November 1, 1999 (incorporated by
reference to Exhibit 2.0 to the Companys Form F-1 Registration Statement filed with
the Commission February 29, 2000) |
4(f) |
Registration
Rights Agreement between Nymox Pharmaceutical Corporation and Jaspas Investments
Limited dated November 1, 1999 (incorporated by reference to
Exhibit 2.1 to the Companys Form F-1 Registration Statement filed with the Commission
February 29, 2000) |
4(g) |
Escrow
Agreement among Nymox Pharmaceutical Corporation, Jaspas Investments Limited and
Epstein, Becker & Green, P.C. dated November 1, 1999
(incorporated by reference to Exhibit 2.2 to the Companys Form F-1 Registration
Statement filed with the Commission February 29, 2000) |
4(h) |
Stock
Purchase Warrant to purchase common shares issued to Jaspas Investments Limited
dated November 1, 1999 (incorporated by reference to Exhibit
2.3 to the Companys Form F-1 Registration Statement filed with the Commission February
29, 2000) |
4(i) |
Research
and License Agreement between the Rhode Island Hospital Corporation and the Company
dated May 14, 1999 (incorporated by reference to Exhibit 10.10
to the Companys Form 20-F filed with the Commission May 15, 2000). |
4(j) |
Research
and License Amendment between the Rhode Island Hospital Corporation and the Company
dated November 19, 2001 (incorporated by reference to Exhibit
10.10 to the Companys Form 20-F filed with the Commission June 28, 2002). |
4(k) |
Common
Stock Private Purchase Agreement between Nymox Pharmaceutical Corporation and
Lorros-Greyse Investments Limited dated January 27, 2003
(incorporated by reference to Exhibit 10.0 to the Companys F-3 Registration Statement
filed with the Commission on March 12, 2003). |
4(l) |
Common
Stock Private Purchase Agreement between Nymox Pharmaceutical Corporation and
Lorros-Greyse Investments Limited dated August 25, 2003
(incorporated by reference to Exhibit 10.1 to the Companys 6-K Report filed with the
Commission on November 13, 2003). |
4(m) |
Common
Stock Private Purchase Agreement between Nymox Pharmaceutical Corporation and
Lorros-Greyse Investments Limited dated October 6, 2004
(incorporated by reference to Exhibit 10.1 to the Companys 6-K Report filed with the
Commission on November 15, 2004). |
4(n) |
Common
Stock Private Purchase Agreement between Nymox Pharmaceutical Corporation and
Lorros-Greyse Investments Limited dated October 21, 2005.
(incorporated by reference to Exhibit 10.1 to the Companys 20-F Report filed with the
Commission on June 29, 2006). |
4(o) |
Common
Stock Private Purchase Agreement between Nymox Pharmaceutical Corporation and
Lorros-Greyse Investments Limited dated November 13, 2006.
(incorporated by reference to Exhibit 10.1 to the Companys 6-K Report filed with the
Commission on March 15, 2007). |
8 |
List
of Subsidiaries of Nymox Pharmaceutical Corporation (incorporated by reference to
Exhibit 8 to the Companys Form 20-F filed with the Commission
June 30, 2004) |
11 |
Code
of Business Conduct for the Officers, Directors and Employees of Nymox Pharmaceutical
Corporation (incorporated by reference to Exhibit 11 to the
Companys Form 20-F filed with the Commission June 30, 2004) |
12(a) |
Certification
of Principal Executive Officer Pursuant to Rule 13a-14(a) or 15d-14(a) |
12(b) |
Certification
of Principal Financial Officer Pursuant to Rule 13a-14(a) or 15d-14(a) |
13(a) |
Certification
of Chief Executive Officer Pursuant to 18 U.S.C. 1350, As Adopted Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002 |
13(a) |
Certification
of Chief Financial Officer Pursuant to 18 U.S.C. 1350, As Adopted Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002 |
97
SIGNATURES
The registrant hereby certifies that
it meets all of the requirements for filing on Form 20-F and that it has duly caused and
authorized the undersigned to sign this annual report on its behalf .
|
NYMOX PHARMACEUTICAL CORPORATION |
|
(Registrant) |
|
/S/ Paul Averback |
|
Paul Averback |
|
Title: President |
Date: June 26, 2007
98
EXHIBIT INDEX
NYMOX PHARMACEUTICAL
CORPORATION
Form 20-F Annual Report
1(a) |
Articles
of Incorporation, as amended. (incorporated by reference to Exhibit 3.1 to the
Companys Form 20-F filed with the Commission December 9, 1996) |
1(b) |
Bylaws
of the Company (incorporated by reference to Exhibit 3.2 to the Companys Form 20-F
filed with the Commission December 9, 1996) |
4(a) |
Memorandum
of Agreement between Paul Averback and the Company (incorporated by reference to
Exhibit 10.1 to the Companys Form 20-F filed with the Commission
December 9, 1996) |
4(b) |
Share
Option Plan of the Company (incorporated by reference to Exhibit 10.2 to the Companys
Form 20-F filed with the Commission December 9, 1996) |
4(c) |
Research
and License Agreement between the Massachusetts General Hospital Corporation and the
Company (incorporated by reference to Exhibit 10.3 to the
Companys Form 20-F filed with the Commission December 9, 1996) |
4(d) |
Research
and License Amendment between the Massachusetts General Hospital Corporation and the
Company (incorporated by reference to Exhibit 10.5 to the
Companys Form 20-F filed with the Commission February 21, 1997) |
4(e) |
Common
Stock Purchase Agreement between Nymox Pharmaceutical Corporation and Jaspas
Investments Limited dated November 1, 1999 (incorporated by
reference to Exhibit 2.0 to the Companys Form F-1 Registration Statement filed with
the Commission February 29, 2000) |
4(f) |
Registration
Rights Agreement between Nymox Pharmaceutical Corporation and Jaspas Investments
Limited dated November 1, 1999 (incorporated by reference to
Exhibit 2.1 to the Companys Form F-1 Registration Statement filed with the Commission
February 29, 2000) |
4(g) |
Escrow
Agreement among Nymox Pharmaceutical Corporation, Jaspas Investments Limited and
Epstein, Becker & Green, P.C. dated November 1, 1999
(incorporated by reference to Exhibit 2.2 to the Companys Form F-1 Registration
Statement filed with the Commission February 29, 2000) |
4(h) |
Stock
Purchase Warrant to purchase common shares issued to Jaspas Investments Limited
dated November 1, 1999 (incorporated by reference to Exhibit
2.3 to the Companys Form F-1 Registration Statement filed with the Commission February
29, 2000) |
4(i) |
Research
and License Agreement between the Rhode Island Hospital Corporation and the Company
dated May 14, 1999 (incorporated by reference to Exhibit 10.10
to the Companys Form 20-F filed with the Commission May 15, 2000). |
4(j) |
Research
and License Amendment between the Rhode Island Hospital Corporation and the Company
dated November 19, 2001 (incorporated by reference to Exhibit
10.10 to the Companys Form 20-F filed with the Commission June 28, 2002). |
4(k) |
Common
Stock Private Purchase Agreement between Nymox Pharmaceutical Corporation and
Lorros-Greyse Investments Limited dated January 27, 2003
(incorporated by reference to Exhibit 10.0 to the Companys F-3 Registration Statement
filed with the Commission on March 12, 2003). |
4(l) |
Common
Stock Private Purchase Agreement between Nymox Pharmaceutical Corporation and
Lorros-Greyse Investments Limited dated August 25, 2003
(incorporated by reference to Exhibit 10.1 to the Companys 6-K Report filed with the
Commission on November 13, 2003). |
4(m) |
Common
Stock Private Purchase Agreement between Nymox Pharmaceutical Corporation and
Lorros-Greyse Investments Limited dated October 6, 2004
(incorporated by reference to Exhibit 10.1 to the Companys 6-K Report filed with the
Commission on November 15, 2004). |
4(n) |
Common
Stock Private Purchase Agreement between Nymox Pharmaceutical Corporation and
Lorros-Greyse Investments Limited dated October 21, 2005.
(incorporated by reference to Exhibit 10.1 to the Companys 20-F Report filed with the
Commission on June 29, 2006). |
4(o) |
Common
Stock Private Purchase Agreement between Nymox Pharmaceutical Corporation and
Lorros-Greyse Investments Limited dated November 13, 2006.
(incorporated by reference to Exhibit 10.1 to the Companys 6-K Report filed with the
Commission on March 15, 2007). |
8 |
List
of Subsidiaries of Nymox Pharmaceutical Corporation (incorporated by reference to
Exhibit 8 to the Companys Form 20-F filed with the Commission
June 30, 2004) |
11 |
Code
of Business Conduct for the Officers, Directors and Employees of Nymox Pharmaceutical
Corporation (incorporated by reference to Exhibit 11 to the
Companys Form 20-F filed with the Commission June 30, 2004) |
12(a) |
Certification
of Principal Executive Officer Pursuant to Rule 13a-14(a) or 15d-14(a) |
12(b) |
Certification
of Principal Financial Officer Pursuant to Rule 13a-14(a) or 15d-14(a) |
13(a) |
Certification
of Chief Executive Officer Pursuant to 18 U.S.C. 1350, As Adopted Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002 |
13(b) |
Certification
of Chief Financial Officer Pursuant to 18 U.S.C. 1350, As Adopted Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002 |
99
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2
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`
end
EX-12.(A)
3
cmw2903a.htm
CERTIFICATION
CERTIFICATION
I, Paul Averback, certify
that:
1. |
I
have reviewed this annual report on Form 20-F of Nymox Pharmaceutical
Corporation; |
2. |
Based
on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report; |
3. |
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the company
as of, and for, the periods presented in this report; |
4. |
The
companys other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a 15(e) and 15d 15(e)) for
the company and we have: |
|
a)
designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
company, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in
which this report is being prepared; |
|
b)
evaluated the effectiveness of the companys disclosure
controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosures and procedures, as of the
end of the period covered by this report based on such evaluation;
and |
|
c)
disclosed in this report any change in the companys internal
control over financial reporting that occurred during the period
covered by the annual report that has materially affected, or is
reasonably likely to materially affect, the companys internal
control over financial reporting; and |
5. |
The
companys other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting,
to the companys auditors and the audit committee of companys
board of directors (or persons performing the equivalent function): |
|
a)
All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the companys ability to
record, process, summarize and report financial information; and |
|
b)
Any fraud, whether or not material, that involves management or
other employees who have a significant role in the companys
internal control over financial reporting. |
Date: June 26, 2007
|
/s/
Paul Averback, MD Paul Averback, MD President and Chief Executive Officer Nymox
Pharmaceutical Corporation |
EX-12.(B)
4
cmw2903b.htm
CERTIFICATION
CERTIFICATION
I, Roy Wolvin, certify
that:
1. |
I
have reviewed this annual report on Form 20-F of Nymox Pharmaceutical
Corporation; |
2. |
Based
on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report; |
3. |
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the company
as of, and for, the periods presented in this report; |
4. |
The
companys other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a 15(e) and 15d 15(e)) for
the company and we have: |
|
a)
designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
company, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in
which this report is being prepared; |
|
b)
evaluated the effectiveness of the companys disclosure
controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosures and procedures, as of the
end of the period covered by this report based on such evaluation;
and |
|
c)
disclosed in this report any change in the companys internal
control over financial reporting that occurred during the period
covered by the annual report that has materially affected, or is
reasonably likely to materially affect, the companys internal
control over financial reporting; and |
5. |
The
companys other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting,
to the companys auditors and the audit committee of companys
board of directors (or persons performing the equivalent function): |
|
a)
All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the companys ability to
record, process, summarize and report financial information; and |
|
b)
Any fraud, whether or not material, that involves management or
other employees who have a significant role in the companys
internal control over financial reporting. |
Date: June 26, 2007
|
/s/
Roy Wolvin Roy Wolvin Chief Financial Officer Nymox Pharmaceutical Corporation |
EX-13.(A)
5
cmw2903c.htm
CERTIFICATION
CERTIFICATION PURSUANT
TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
I, Paul Averback, President and CEO
of Nymox Pharmaceutical Corporation, do hereby certify that, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the
information contained in the Annual Report on Form 20-F for the year ended December 31,
2006 of Nymox Pharmaceutical Corporation and filed with the Securities and Exchange
Commission, fully complies with the requirements of Section 13 (a) or 15 (d) of the
Securities Exchange Act of 1934 and the information contained in such report fairly
presents, in all material respects, the financial condition and results of operations on
Nymox Pharmaceutical Corporation
Date: June 26, 2007
|
/s/
Paul Averback, MD Paul Averback, MD President and Chief Executive Officer Nymox
Pharmaceutical Corporation |
EX-13.(B)
6
cmw2903d.htm
CERTIFICATION
CERTIFICATION PURSUANT
TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
I, Roy Wolvin, CFO of Nymox
Pharmaceutical Corporation, do hereby certify that, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the information
contained in the Annual Report on Form 20-F for the year ended December 31, 2006 of Nymox
Pharmaceutical Corporation and filed with the Securities and Exchange Commission, fully
complies with the requirements of Section 13 (a) or 15 (d) of the Securities Exchange Act
of 1934 and the information contained in such report fairly presents, in all material
respects, the financial condition and results of operations on Nymox Pharmaceutical
Corporation
Date: June 26, 2007
|
/s/
Roy Wolvin Roy Wolvin Chief Financial Officer Nymox Pharmaceutical Corporation |
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